2012-12531

Federal Register, Volume 77 Issue 113 (Tuesday, June 12, 2012)[Federal Register Volume 77, Number 113 (Tuesday, June 12, 2012)]

[Rules and Regulations]

[Pages 35200-35239]

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

[FR Doc No: 2012-12531]

[[Page 35199]]

Vol. 77

Tuesday,

No. 113

June 12, 2012

Part IV

Commodity Futures Trading Commission

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17 CFR Part 46

Swap Data Recordkeeping and Reporting Requirements: Pre-Enactment and

Transition Swaps; Final Rule

Federal Register / Vol. 77, No. 113 / Tuesday, June 12, 2012 / Rules

and Regulations

[[Page 35200]]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 46

[3038-AD48]

Swap Data Recordkeeping and Reporting Requirements: Pre-Enactment

and Transition Swaps

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or

``CFTC'') is adopting rules to further implement the Commodity Exchange

Act (``CEA'' or ``Act'') with respect to the new statutory framework

regarding swap data recordkeeping and reporting established by the

Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-Frank

Act''). The Dodd-Frank Act, which amended the CEA, directs that rules

adopted by the Commission shall provide for the reporting of data

relating to swaps entered into before the date of enactment of the

Dodd-Frank Act, the terms of which have not expired as of the date of

enactment of the Dodd-Frank Act (``pre-enactment swaps'') and data

relating to swaps entered into on or after the date of enactment of the

Dodd-Frank Act and prior to the compliance date specified in the

Commission's final swap data reporting rules (``transition swaps'').

These final rules establish swap data recordkeeping and reporting

requirements for pre-enactment swaps and transition swaps.

DATES: The effective date of this part is August 13, 2012. Compliance

dates: (1) Swap dealers and major swap participants shall commence full

compliance with this part with respect to credit swaps and interest

rate swaps on the later of: July 16, 2012; or 60 calendar days after

publication in the Federal Register of the later of the Commission's

final rule defining the term ``swap'' or the Commission's final rule

defining the terms ``swap dealer'' and ``major swap participant;'' (2)

Swap dealers and major swap participants shall commence full compliance

with this part with respect to equity swaps, foreign exchange swaps,

and other commodity swaps on or before 90 days after the compliance

date for credit swaps and interest rate swaps; (3) Non-SD/MSP

counterparties shall commence full compliance with this part with

respect to all swaps on or before 90 days after the compliance date

applicable to swap dealers and major swap participants with respect to

equity swaps, foreign exchange swaps, and other commodity swaps.

FOR FURTHER INFORMATION CONTACT: David Taylor, Associate Director,

Division of Market Oversight, 202-418-5488, [email protected]; Commodity

Futures Trading Commission, Three Lafayette Centre, 1155 21st Street

NW., Washington, DC 20851.

SUPPLEMENTARY INFORMATION: The Commission is adopting new part 46 of

its regulations relating to recordkeeping and reporting requirements

applicable to both pre-enactment and transition swaps. These rules,

when adopted, will supersede interim final rules previously adopted by

the Commission in part 44 of its regulations.

Table of Contents

I. Background.............................................. ...........

A. Introduction........................................ ...........

B. Swap Data Provisions of the Dodd-Frank Act.......... ...........

C. The Commission's Part 45 Rules on Swap Data ...........

Recordkeeping and Reporting Requirements..............

D. The Interim Final Rules for Pre-Enactment and ...........

Transition Swaps......................................

E. Summary of the Proposed Part 46 Rule................ ...........

1. Fundamental Goals............................... ...........

2. Historical Swap Recordkeeping................... ...........

3. Historical Swap Data Reporting.................. ...........

4. Unique Identifiers.............................. ...........

5. Determination of Which Counterparty Must Report. ...........

6. Third-Party Facilitation of Reporting........... ...........

7. Reporting a Swap to a Single SDR................ ...........

8. Reporting Swaps in an Asset Class Not Accepted ...........

By Any SDR........................................

9. Data Standards.................................. ...........

10. Reporting Errors in Previously Reported Data... ...........

F. Overview of Comments Received....................... ...........

II. Part 46 of the Commission's Regulations................ ...........

A. Recordkeeping Requirements.......................... ...........

1. Proposed Rule................................... ...........

2. Comments Received............................... ...........

3. Final Rule...................................... ...........

B. Swap Data Reporting................................. ...........

1. Proposed Rule................................... ...........

2. Comments Received............................... ...........

3. Final Rule...................................... ...........

C. Unique Identifiers.................................. ...........

1. Proposed Rule................................... ...........

2. Comments Received............................... ...........

3. Final Rule...................................... ...........

D. Determination of the Reporting Counterparty......... ...........

1. Proposed Rule................................... ...........

2. Comments Received............................... ...........

3. Final Rule...................................... ...........

E. Third-Party Facilitation of Data Reporting.......... ...........

1. Proposed Rule................................... ...........

2. Comments Received............................... ...........

3. Final Rule...................................... ...........

F. Reporting to a Single Swap Data Repository.......... ...........

1. Proposed Rule................................... ...........

2. Comments Received............................... ...........

[[Page 35201]]

3. Final Rule...................................... ...........

G. Data Reporting for Swaps in a Swap Asset Class Not ...........

Accepted by any Swap Data Repository..................

1. Proposed Rule................................... ...........

2. Comments Received............................... ...........

3. Final Rule...................................... ...........

H. Required Data Standards............................. ...........

1. Proposed Rule................................... ...........

2. Comments Received............................... ...........

3. Final Rule...................................... ...........

I. Reporting of Errors and Omissions in Previously ...........

Reported Data.........................................

1. Proposed Rule................................... ...........

2. Comments Received............................... ...........

3. Final Rule...................................... ...........

J. Compliance Dates.................................... ...........

1. Proposed Rule................................... ...........

2. Comments Received............................... ...........

3. Final Rule...................................... ...........

III. Related Matters....................................... ...........

A. Regulatory Flexibility Act.......................... ...........

B. Paperwork Reduction Act............................. ...........

1. Introduction.................................... ...........

2. Need for Information Collection................. ...........

3. Comment on proposed information collection...... ...........

4. Recordkeeping burdens........................... ...........

5. Reporting Burdens............................... ...........

C. Consideration of Costs and Benefits................. ...........

1. Introduction.................................... ...........

2. Recordkeeping................................... ...........

3. Reporting....................................... ...........

IV. Compliance Dates....................................... ...........

A. Introduction........................................ ...........

B. Compliance dates for swap dealers and major swap ...........

participants..........................................

C. Compliance date for non-SD/MSP counterparties....... ...........

Final Rules................................................ ...........

I. Background

A. Introduction

On July 21, 2010, President Obama signed into law the Dodd-Frank

Act.\1\ Title VII of the Dodd-Frank Act \2\ amended the CEA \3\ to

establish a comprehensive new regulatory framework for swaps and

security-based swaps. The legislation was enacted to reduce risk,

increase transparency, and promote market integrity within the

financial system by, among other things: providing for the registration

and comprehensive regulation of swap dealers (``SDs'') and major swap

participants (``MSPs''); imposing clearing and trade execution

requirements on standardized derivatives products; creating robust

recordkeeping and reporting regimes with respect to swaps, including

real time reporting; and enhancing the Commission's rulemaking and

enforcement authorities with respect to, among others, all registered

entities, intermediaries and swap counterparties subject to the

Commission's jurisdiction.

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\1\ Dodd-Frank Wall Street Reform and Consumer Protection Act,

Public Law 111-203, 124 Stat. 1376 (2010). The text of the Dodd-

Frank Act may be accessed at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.

\2\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may

be cited as the ``Wall Street Transparency and Accountability Act of

2010.''

\3\ 7 U.S.C. 1 et seq.

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B. Swap Data Provisions of the Dodd-Frank Act

To enhance transparency, promote standardization, and reduce

systemic risk, Section 727 of the Dodd-Frank Act added to the CEA new

section 2(a)(13)(G), which requires all swaps, whether cleared or

uncleared, to be reported to swap data repositories (``SDRs''),\4\

which are new registered entities created by section 728 of the Dodd-

Frank Act to collect and maintain data related to swap transactions as

prescribed by the Commission, and to make such data electronically

available to regulators.\5\ New section 21(b) of the CEA, added by

section 728 of the Dodd-Frank Act, directs the Commission to prescribe

standards for swap data recordkeeping and reporting. Specifically, CEA

section 21(b)(1)(A) provides that:

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\4\ See also CEA Sec. 1a(40)(E).

\5\ Regulations governing core principles and registration

requirements for, and the duties of, SDRs are the subject of part 49

of this chapter.

The Commission shall prescribe standards that specify the data

elements for each swap that shall be collected and maintained by

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each registered swap data repository.

These standards are to apply to both registered entities and

counterparties involved with swaps. CEA section 21(b)(1)(B) provides

that:

In carrying out [the duty to prescribe data element standards],

the Commission shall prescribe consistent data element standards

applicable to registered entities and reporting counterparties.

CEA section 21 also directs the Commission to prescribe data standards

for SDRs. Specifically, CEA section 21(b)(2) provides that:

The Commission shall prescribe data collection and data

maintenance standards for swap data repositories.

These standards are to be comparable to those for clearing

organizations. CEA section 21(b)(3) provides that:

The [data] standards prescribed by the Commission under this

subsection shall be comparable to the data standards imposed by the

Commission on derivatives clearing organizations in connection with

their clearing of swaps.

In addition, CEA section 21(c)(3) provides that, once the data elements

prescribed by the Commission are reported to an SDR, the SDR shall:

maintain the data [prescribed by the Commission for each swap] in

such form, in such manner, and for such period as may be required by

the Commission.

[[Page 35202]]

Section 727 of the Dodd-Frank Act, which added to the CEA new

section 2(a)(13)(G), provides that ``Each swap (whether cleared or

uncleared) shall be reported to a registered swap data repository.''

Section 729 of the Dodd-Frank Act added to the CEA new section 4r,

which addresses reporting and recordkeeping requirements for uncleared

swaps. Pursuant to this section, each swap not accepted for clearing by

any derivatives clearing organization (``DCO'') must be reported to an

SDR (or to the Commission if no repository will accept the swap). In a

July 15, 2010 floor statement concerning swap data reporting as well as

other aspects of the Dodd-Frank Act, Senator Blanche Lincoln emphasized

that these provisions should be interpreted as complementary to one

another to assure consistency between them, stating that: ``All swap

trades, even those which are not cleared, would still be reported to

regulators, a swap data repository, and subject to the public reporting

requirements under the legislation.'' \6\

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\6\ Senator Blanche Lincoln, ``Wall Street Transparency and

Accountability Act,'' Congressional Record, July 15, 2010, at S5905.

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CEA Section 4r(a)(3) ensures that at least one counterparty to a

swap has an obligation to report data concerning that swap. The

determination of this reporting counterparty depends on the status of

the counterparties involved. If only one counterparty is an SD, the SD

is required to report the swap. If one counterparty is an MSP, and the

other counterparty is neither an SD nor an MSP (``non-SD/MSP

counterparty''), the MSP must report. For any other swap, CEA section

4r(a)(3)(C) provides that the counterparties to the swap shall select a

counterparty to report the swap as specified in section 4r.7

In addition, CEA section 4r provides for reporting to the

Commission of swaps neither cleared nor accepted by any SDR. Under this

provision, counterparties to such swaps must maintain books and records

pertaining to their swaps in the manner and for the time required by

the Commission, and must make these books and records available for

inspection by the Commission or other specified regulators if requested

to do so.\8\ It also requires counterparties to such swaps to provide

reports concerning such swaps to the Commission upon its request, in

the form and manner specified by the Commission.\9\ Such reports must

be as comprehensive as the data required to be collected by SDRs.\10\

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\8\ CEA Sec. 4r(c)(2) requires individuals or entities that

enter into a swap transaction that is neither cleared nor accepted

by an SDR to make required books and records open to inspection by

any representative of the Commission; an appropriate prudential

regulator; the Securities and Exchange Commission; the Financial

Stability Oversight Council; and the Department of Justice.

\9\ CEA Sec. 4r(a)(1)(B) and Sec. 4r(c).

\10\ CEA Sec. 4r(d).

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Section 729 of the Dodd-Frank Act establishes in new CEA section

4r(a)(2)(A) a transitional rule applicable to pre-enactment swaps.

Section 4r(a)(2)(A) provides for the reporting of pre-enactment swaps

the terms of which have not expired as of the enactment of the Dodd-

Frank Act to an SDR or the Commission, by a date that the Commission

determines to be appropriate.\11\ Section 4r(a)(2)(B) directed the

Commission to promulgate an interim final rule within 90 days of the

date of enactment of the Dodd-Frank Act providing for the reporting of

such pre-enactment swaps.\12\

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\11\ Subsection (A) of CEA Section 4r(a)(2) provides: ``Each

swap entered into before the date of enactment of the Wall Street

Transparency and Accountability Act of 2010, the terms of which have

not expired as of the date of enactment of that Act, shall be

reported to a registered swap data repository or the Commission by a

date that is not later than--(i) 30 days after issuance of the

interim final rule; or (ii) such other period as the Commission

determines to be appropriate.''

\12\ Pursuant to Section 4r(a)(2)(B), the Commission on October

14, 2010 published in part 44 of its regulations an interim final

rule instructing specified counterparties to pre-enactment swaps to

report data to a registered SDR or to the Commission by a compliance

date to be established in reporting rules to be promulgated under

Section 2(h)(5)(A) of the CEA and advising counterparties of the

necessity, inherent in the reporting requirement, to retain

information pertaining to the terms of such swaps until reporting

can be effectuated under permanent rules. See CFTC Interim Final

Rule for Reporting Pre-Enactment Swap Transactions (``Pre-Enactment

Swaps IFR''), 75 FR 63080 (Oct. 14, 2010).

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Section 723 of the Dodd-Frank Act, which added to the CEA new

Section 2(h)(5), addressed the reporting of swap data for both swaps

executed before the enactment of the Dodd-Frank Act \13\ and swaps

executed on or after the date of that enactment but before the

compliance date specified in the Commission's final swap data

recordkeeping and reporting rules.\14\ As discussed above, in a July

15, 2010 floor statement concerning swap data reporting as well as

other aspects of the Dodd-Frank Act, Senator Lincoln emphasized that

these provisions should be interpreted as complementary in order to

assure consistency between them, and emphasized that ``[T]his is

particularly true with respect to issues such as the effective dates of

these reporting requirements, the applicability of these provisions to

cleared and/or uncleared swaps, and their applicability--or non-

applicability--to swaps whose terms have expired at the date of

enactment.'' \15\

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\13\ See Pre-Enactment Swaps IFR.

\14\ See CFTC Interim Final Rule for Reporting Post-Enactment

Swap Transactions (``Post-Enactment Swaps IFR'' or ``Transition

Swaps IFR''), 75 FR 78892 (Dec. 17, 2010).

\15\ Senator Blanche Lincoln, ``Wall Street Transparency and

Accountability Act,'' Congressional Record, July 15, 2010, at S5923.

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This part refers to the two types of swaps addressed in CEA Section

2(h)(5) as follows. ``Pre-enactment swap'' means a swap executed before

date of enactment of the Dodd-Frank Act (i.e., before July 21, 2010)

the terms of which have not expired as of the date of enactment of

Dodd-Frank Act.\16\ ``Transition swap'' means a swap executed on or

after the date of enactment of the Dodd-Frank Act (i.e., July 21, 2010)

and before the applicable compliance date set forth in this part and

also specified in the final swap data reporting and recordkeeping

requirements regulations in part 45 of this chapter.\17\ Collectively,

this part refers to pre-enactment swaps and transition swaps as

``historical swaps.''

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\16\ Subsection (A) of CEA Section 2(h)(5) Reporting Transition

Rules provides: ``Swaps entered into before the date of the

enactment of this subsection shall be reported to a registered swap

data repository or the Commission no later than 180 days after the

effective date of this subsection.''

\17\ Subsection (B) of CEA Section 2(h)(5) Reporting Transition

Rules provides: ``Swaps entered into on or after such date of

enactment shall be reported to a registered swap data repository or

the Commission no later than the later of (i) 90 days after [the]

effective date [of Section 2(h)(5)] or (ii) such other time after

entering into the swap as the Commission may prescribe by rule or

regulation.''

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C. The Commission's Part 45 Rules on Swap Data Recordkeeping and

Reporting Requirements

On January 13, 2012, the Commission published in new part 45 of its

regulations final rules establishing swap data recordkeeping and

reporting requirements applicable to SDs, MSPs, and non-SD/MSP

counterparties,\18\ as well as to registered SDRs, DCOs, designated

contract markets (``DCMs''), and swap execution facilities

(``SEFs'').\19\

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\18\ The category of non-SD/MSP counterparties includes but is

not limited to counterparties who are entitled, with respect to any

swap, to elect the clearing requirement exception pursuant to CEA

section 2(h)(7) with respect to particular swaps.

\19\ 77 FR 2136 (February 13, 2012).

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With respect to recordkeeping, part 45 requires SDs and MSPs to

keep records of all activities relating to their business with respect

to swaps, and requires non-SD/MSP counterparties to keep records with

respect to each swap in which they are a counterparty. Required records

must be kept by all swap counterparties throughout the existence of a

swap and for five years following termination of the swap. In the case

of an SD or MSP, the records must be readily accessible

[[Page 35203]]

throughout the life of the swap and for two years following its

termination, and retrievable by the SD or MSP within three business

days during the remainder of the retention period. In the case of a

non-SD/MSP counterparty, the records must be retrievable by the

counterparty within five business days throughout the retention period.

In order to ensure that complete data concerning swaps is available

to regulators, part 45 calls for electronic reporting to an SDR of swap

data from each of two important stages of the existence of a swap: the

creation of the swap, and the continuation of the swap over its

existence until its final termination or expiration. Creation data

required to be reported pursuant to part 45 includes both primary

economic terms (``PET'') data and confirmation data for a swap.

Continuation data required to be reported includes all changes to

primary economic terms and all required valuation data. For swaps

executed on or after the applicable compliance date, part 45

establishes a streamlined reporting regime calling for reporting by the

entity or reporting counterparty the Commission believes has the

easiest, fastest, and cheapest access to the data. For all swaps

executed on a SEF or DCM, all required creation data is reported by the

SEF or DCM. For off-facility swaps accepted for clearing within the

applicable deadline for reporting PET data, all required swap creation

data is reported by the DCO. For off-facility swaps not cleared or not

accepted for clearing within the applicable deadline, required swap

creation data is reported by the reporting counterparty. Continuation

data for cleared swaps is reported by the DCO, though SD and MSP

reporting counterparties must also report valuation data. For uncleared

swaps, all continuation data is reported by the reporting counterparty.

Part 45 notes that the obligations of swap counterparties with

respect to historical swaps, i.e., swaps executed prior to the

applicable compliance date and in existence on or after the date of

enactment of the Dodd-Frank Act, will be as provided in part 46.

D. The Interim Final Rules for Pre-Enactment and Transition Swaps

Interim Final Rule for Pre-Enactment Swaps. New section 4r(a)(2) to

the CEA, added by the Dodd-Frank Act, provided for the reporting of

pre-enactment swaps and directed that the Commission promulgate, within

90 days of enactment of the Dodd-Frank Act, an interim final rule

(``IFR'') providing for the reporting of such swaps. On October 14,

2010, pursuant to the mandate of section 4r(a)(2)(B), the Commission

published in new part 44 of its regulations an IFR advising specified

counterparties to pre-enactment of the Commission's intent to

promulgate rules pursuant to CEA sections 2(h)(5) and 4r requiring that

such data be reported to a registered SDR or to the Commission by a

compliance date to be established in those rules, and advising such

counterparties of the necessity, inherent in the reporting requirement,

to preserve information pertaining to the terms of such swaps until

reporting was effectuated under permanent rules.\20\ This Pre-Enactment

Swaps IFR stated that the reporting and recordkeeping provisions

established by Section 4r and sections 44.00-44.02 of the Commission's

regulations would remain in effect until the effective date of the

permanent reporting rules to be adopted by the Commission pursuant to

Section 2(h)(5) of the CEA.\21\ A principal purpose of this IFR was to

advise counterparties of the need to retain data related to swap

transactions so that reporting could be effectuated under permanent

rules subsequently to be adopted.

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\20\ See Pre-Enactment Swaps IFR, supra note 17, at 63083.

\21\ See Pre-Enactment Swaps IFR, supra note 17.

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With respect to the scope and coverage of the Pre-Enactment Swaps

IFR, the Commission acknowledged that while new CEA Section 4r(a)(2)

limits reportable pre-enactment swaps to those whose terms have not

expired on the date of enactment of the Dodd-Frank Act, Section 2(h)(5)

does not contain the same qualifying language. As discussed in the Pre-

Enactment Swaps IFR, the Commission believes that failure to limit the

term ``pre-enactment swap'' to unexpired swaps would require reporting

of every swap that has ever been entered into; accordingly, the

Commission concluded that reportable pre-enactment swaps should be

limited to those whose terms had not expired at the time of

enactment.\22\

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\22\ Id. at 63082.

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Interim Final Rule for Transition Swaps. Section 2(h)(5) also

prescribes reporting requirements applicable to swaps entered into on

or after the date of enactment (``Transition Swaps''). To provide

clarity and guidance with respect to such swaps, the Commission

promulgated an IFR for transition swaps to establish that these swaps

will be subject to Commission regulations to be promulgated under

Section 2(h)(5)(B). The Commission also believed it was prudent to

advise potential counterparties to such swaps that implicit in this

prospective reporting requirement is the need to retain relevant data

until such time as reporting can be effected. Accordingly, on December

17, 2010 the Commission published under Part 44 of its regulations

interim final rules establishing that counterparties to transition

swaps will be subject to permanent recordkeeping and reporting

requirements to be adopted by the Commission pursuant to Section

2(h)(5)(B) of the CEA.\23\

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\23\ See Transition Swaps IFR, supra note 18.

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The Commission intended both the Pre-Enactment Swaps IFR and the

Transition Swaps IFR to put counterparties on notice that swap data

should be retained pending the adoption of permanent rules prescribing

recordkeeping and reporting requirements for pre-enactment and

transition swaps under part 46 of the Commission's regulations. With

respect to both pre-enactment and transition swaps, the Commission

stated that counterparties to these transactions should retain material

information about such transactions. The Commission emphasized,

however, that in the context of the interim rules, no counterparty was

being required to create new records with respect to transactions that

occurred in the past; instead, records relating to the terms of such

transactions could be retained in their existing format to the extent

and in such form as they presently exist.\24\

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\24\ See Pre-Enactment Swaps IFR, supra note 17, at 63086, and

Transition Swaps IFR, supra note 18, at 78894.

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Comments Received. The Commission received a number of comments in

response to each of the IFRs and considered them all. Comments

generally fell into one or more of several broad categories and in a

number of instances were common to both IFRs. Some commenters observed

that issuance of IFRs in advance of regulations further defining the

term ``swap'' (or defining other key terms in the Dodd-Frank Act)

creates legal and regulatory uncertainty and increases compliance risk;

most of these commenters urged the Commission to further detail the

record retention aspects of the interim final rules.\25\ In this

connection, commenters requested that the Commission issue guidance

[[Page 35204]]

clarifying and limiting the information that must be retained,\26\ or

create a safe harbor for good faith compliance efforts.\27\ Several

commenters recommended that the Commission should ensure that end users

need only report basic data in a simplified reporting scheme, or should

outline categories of information that need not be retained by persons

who anticipate becoming eligible for the end user exemption under the

Dodd-Frank Act.\28\ One commenter urged greater specificity with

respect to the Pre-Enactment IFR's requirements, as well as consistency

with the standards adopted by the Securities and Exchange Commission

(``SEC'') and international regulators, and proposed alternatives to

the requirements adopted in the IFR for pre-enactment swaps,

particularly with respect to reporting protocols, record retention, and

confidentiality issues (notably, those confidentiality issues arising

in the context of cross-border transactions).\29\ Another commenter

urged that U.S. swap data reporting requirements should not apply with

respect to foreign swaps transactions, where counterparties are non-

U.S. entities.\30\

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\25\ See, e.g., letters dated November 15, 2010 and January 18,

2011 from the Working Group of Commercial Energy Firms (``Working

Group letters''); letter dated November 15, 2010 from Hess

Corporation (``Hess Corporation letter''); letter dated November 15,

2010 from the Edison Electric Institute (``EEI letter''); letters

dated November 15, 2010 and January 18, 2011 from the Not-for-Profit

Electric End User Coalition (``Coalition letters''); letter dated

January 18, 2011 from the American Gas Association (``AGA letter'').

\26\ EEI letter.

\27\ Working Group letters; EEI letter; Hess Corporation letter.

\28\ AGA letter; Coalition letters.

\29\ Letter dated November 12, 2010, from the International

Swaps and Derivatives Association, Inc. and the Futures Industry

Association.

\30\ Letter dated January 11, 2011, from Barclays Bank PLC, BNP

Paribas S.A., Deutsche Bank AG, Royal Bank of Canada, The Royal Bank

of Scotland Group PLC, Soci[eacute]t[eacute] G[eacute]n[eacute]rale

and UBS AG.

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The Commission considered these comments in preparing its part 46

Notice of Proposed Rulemaking (``NOPR'') with respect to historical

swaps.\31\

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\31\ See CFTC Swap Data Recordkeeping and Reporting

Requirements: Pre-Enactment and Transition Swaps, 76 FR 22833 (April

25, 2011).

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E. Summary of the Proposed Part 46 Rule

1. Fundamental Goals

The fundamental goals of the part 46 NOPR were to provide for

recordkeeping and reporting with respect to pre-enactment swaps and

transition swaps as required by the Dodd-Frank Act; to provide

specificity and clarity, to the extent possible, concerning what

records must be kept and what data must be reported with respect to

such historical swaps; and to ensure that data needed by regulators

concerning historical swaps is available to regulators through SDRs

when swap data reporting begins.

2. Historical Swap Recordkeeping

The NOPR proposed limited recordkeeping requirements for

counterparties to historical swaps. For swaps in existence on or after

April 25, 2011, the date of publication of the NOPR, counterparties

would be required to keep records of specified, minimum primary

economic terms for a swap of the asset class in question, listed in

Tables in the Appendix to the NOPR. In addition, if a historical swap

counterparty had a confirmation of the historical swap as of that date,

the NOPR called for the counterparty to keep it. For historical swaps

that expired or were terminated prior to April 25, 2011, the NOPR

provided that counterparties should keep the records they already have,

in the form they are already kept. For all historical swaps, the

required records would have to be kept throughout any remaining

existence of a historical swap and for five years following its final

termination or expiration.

3. Historical Swap Data Reporting

a. Historical swaps in existence on or after April 25, 2011. For

each historical swap in existence on or after April 25, 2011, the NOPR

called for an initial data report by the reporting counterparty on the

applicable compliance date, and for ongoing reporting of data from the

continuation of the historical swap during its remaining existence. As

proposed, the initial data report would include the minimum primary

economic terms for a historical swap of the asset class in question, as

specified in the appropriate Table in the Appendix to the rule. If the

reporting counterparty possessed a confirmation of the historical swap

on or after April 25, 2011, the confirmation terms recorded in the

automated system of the reporting counterparty would also be included

in the initial data report. For historical swaps already reported to an

existing repository prior to the effective date of the final reporting

rules, the NOPR would not require duplicate reporting. With respect to

ongoing reporting of continuation data during the remaining existence

of a historical swap, the NOPR aligned with the proposed part 45 rule

in following the life cycle approach for credit swaps and equity swaps,

and the state or snapshot approach for interest rate swaps, currency

swaps, and other commodity swaps.

b. Historical swaps expired or terminated prior to April 25, 2011.

For each historical swap which expired or was terminated prior to April

25, 2011, the NOPR called for the reporting counterparty to report such

information relating to the terms of the transaction as was in the

reporting counterparty's possession as of issuance of the interim final

rule, in either electronic or non-electronic form at the option of the

reporting counterparty.

4. Unique Identifiers

The NOPR called for the initial data report for each historical

swap in existence on or after April 25, 2011, to include the legal

entity identifier (``LEI''),\32\ as provided in part 45 of this

chapter, of the reporting counterparty. The NOPR proposed giving the

non-reporting counterparty for each such historical swap an additional

180 days after the applicable compliance date to obtain an LEI. Once

this LEI was obtained, the NOPR called for it to be provided to the

reporting counterparty and reported by the reporting counterparty to

the SDR. After LEIs were obtained for either counterparty, the NOPR

proposed requiring the counterparty identified by an LEI and the SDR to

comply with the LEI requirements of part 45 of this chapter with

respect to LEIs. The NOPR provided that the LEI requirements of parts

45 and 46 of this chapter would not apply to historical swaps expired

or terminated prior to April 25, 2011.

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\32\ The NOPRs for both parts 45 and 46 of this chapter used the

term ``unique counterparty identifier'' in this context. As

explained in the final part 45 rule, in response to comments the

Commission has decided to use the term ``legal entity identifier,''

which refers to the same identifier and is in common international

use, in order to prevent confusion.

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The NOPR proposed that the unique swap identifier and unique

product identifier requirements of part 45 of this chapter would not

apply to historical swaps.

5. Determination of Which Counterparty Must Report

The NOPR provided that determination of which counterparty is the

reporting counterparty for a historical swap would be made in the same

way provided in part 45 of this chapter. Counterparty reporting would

follow the hierarchy outlined in the statute, giving SDs or MSPs the

duty to report when possible, and limiting reporting by non-SD/MSP

counterparties to situations where there is no SD or MSP counterparty.

Where both counterparties have the same hierarchical status, the NOPR

required them to agree as one term of their swap which of them is to

report. Where only one counterparty to a historical swap is a U.S.

person, the NOPR called for that counterparty to be the reporting

[[Page 35205]]

counterparty. For historical swaps in existence as of the applicable

compliance date, the NOPR called for determination of the reporting

counterparty to be made by applying the above provisions to the current

counterparties to the swap as of the compliance date. For historical

swaps for which reporting is required, but which have terminated prior

to the compliance date, the NOPR called for determination of the

reporting counterparty to be made as of the date of the swap's

expiration or termination.

6. Third-Party Facilitation of Reporting

The NOPR proposed explicit permission for third-party facilitation

of data reporting with respect to historical swaps, without removing

the reporting responsibility from the appropriate reporting

counterparty.

7. Reporting a Swap To a Single SDR

To avoid fragmentation of data for a given historical swap across

multiple SDRs, the NOPR provided that all data for a particular

historical swap must be reported to the same SDR to which the initial

data report concerning the swap is made.

8. Reporting Swaps in an Asset Class Not Accepted by any SDR

As required by section 729 of the Dodd-Frank Act, the NOPR provided

that if there were an asset class for which no SDR currently accepted

data, registered entities or counterparties required to report

concerning historical swaps in such an asset class would be required to

report the same data to the Commission at a time and in a form and

manner determined by the Commission.

9. Data Standards

The NOPR required reporting counterparties for historical swaps to

use the facilities, methods, or data standards provided or required by

the SDR to which the counterparty reports swap data.

10. Reporting Errors in Previously Reported Data

Finally, the NOPR required reporting counterparties to report any

errors or omissions in reported data, in the same format as the

original data report, as soon as technologically practicable after

their discovery. Non-reporting counterparties discovering an error or

omission would be required to notify the reporting counterparty, who in

turn would be required to report them to the SDR.

F. Overview of Comments Received

The Commission received 12 comment letters in response to its

proposal. Commission staff also held three public roundtables relating

to swap data reporting, on September 14, 2010, January 28, 2011, and

June 6, 2011, which provided input from a broad cross-section of

industry and private sector experts concerning issues relating to the

NOPR. Comments are addressed in the discussion below. Some comments

received by the Commission requested further clarification relating to

definitions provided in the NOPR, or regarding the application of NOPR

provisions in various contexts. Additional or modified definitions

included in the final rule are provided for clarification and do not

impose new substantive requirements.

II. Part 46 of the Commission's Regulations

New part 46 contains provisions governing swap data recordkeeping

and reporting for pre-enactment swaps and transition swaps. Definitions

are set forth in Sec. 46.1. Section 46.2 establishes swap

recordkeeping requirements for swap counterparties subject to the

Commission's jurisdiction. Section 46.3 establishes swap data reporting

requirements. Required use of unique identifiers in swap data

recordkeeping and reporting for historical swaps is addressed in Sec.

46.4. Determination of which counterparty must report swap data for

each swap is established by Sec. 46.5. Third-party facilitation of

swap data reporting is addressed by Sec. 46.6. Section 46.7

establishes requirements for reporting all data concerning a swap to a

single SDR. Section 46.8 addresses data reporting for swaps in a swap

asset class not accepted by any SDR. Section 46.9 addresses voluntary

supplemental reporting. Section 46.10 establishes required data

standards for swap data reporting. Finally, Sec. 46.11 sets forth

requirements for reporting concerning errors and omissions in

previously reported swap data.

A. Recordkeeping Requirements

1. Proposed Rule

For historical swaps in existence on or after April 25, 2011, the

NOPR imposed limited, specific recordkeeping obligations.

Counterparties to such swaps would be required to keep records of an

asset class-specific set of specified, minimum primary economic terms.

They would also be required to keep records of a confirmation of their

swaps if they had that information in their possession on or after

April 25, 2011, the date from which public notice of specific

recordkeeping requirements for historical swaps was available. In

parallel with the proposed rules in part 45 of this chapter, the NOPR

also called for counterparties to such swaps to keep copies of any

master agreement or credit support agreement pertaining to the swap, if

such copies were in the counterparty's possession on or after April 25,

2011. For a historical swap in existence on or after April 25, 2011,

that remains in existence after the applicable compliance date,

counterparties would also be required to keep for that swap any records

required by Sec. 45.2 of this chapter, to the extent that such records

are created by or become available to the counterparty on or after the

compliance date.

For a pre-enactment swap expired or terminated prior to April 25,

2011, the NOPR called for counterparties to keep the information and

documents relating to the terms of the swap that were possessed by the

counterparty on or after October 15, 2010, the publication date for the

Interim Final Rule For Pre-Enactment Swaps. For a transition swap

expired or terminated prior to April 25, 2011, the NOPR called for

counterparties to keep the information and documents relating to the

terms of the swap that were possessed by the counterparty on or after

December 17, 2010, the date of publication of the Interim Final Rule

For Transition Swaps. For all such historical swaps, the NOPR provided

that counterparties could retain this information in the format in

which it existed on or after the relevant Interim Final Rule

publication date, or in such other format as the counterparty chooses

to retain it.

For all historical swaps, the NOPR called for retention of required

records through the life of the swap and for five years following its

termination. Records kept by SDs and MSPs would be required to be

readily accessible through the life of the swap and for two years

following its termination, and retrievable within three business days

during the remainder of the retention period. Records kept by non-SD/

MSP counterparties would be required to be retrievable within three

business days throughout the retention period.

2. Comments Received

a. Recordkeeping for historical swaps in existence on or after

April 25, 2011. The Coalition of Physical Energy Companies (``COPE'')

and the Electric Trade Association (``ETA'') supported limiting the

records required for historical swaps in existence on or after April

25, 2011, to minimum PET data and related documentation as proposed.

[[Page 35206]]

Both these commenters stated that such data includes commercially

relevant terms typically retained by most swap counterparties, although

both noted that small entities involved in few swaps might not retain

all such data. COPE also stated that requiring a counterparty to keep

records of ``all terms'' of any confirmation in its possession is too

vague, and that a counterparty could not be sure of meeting a

requirement to keep records of any modification of a master or credit

support agreement. The International Swaps and Derivatives Association

(``ISDA'') stated that the scope and nature of the required minimum PET

data, particularly time of trade data for credit swaps, could require

some retroactive data creation. The Financial Services Roundtable

(``FSR'') noted that its members might not necessarily have all the

specified minimum PET data, particularly in the context of mergers or

identification of settlement agents for historical currency swaps.

b. Recordkeeping for historical swaps expired prior to April 25,

2011. ISDA noted that, for historical swaps expired prior to April 25,

2011, the proposed rule did not require parties to alter the format in

which they already retain records, and requested clarification

concerning whether this conflicted with the NOPR's general requirement

for records to be kept in a form and manner acceptable to the

Commission. ISDA argued that reporting counterparties whose current

recordkeeping format would not enable making records electronically

accessible in real time should not have to meet this accessibility

requirement for historical swaps already reported to a repository that

registers as an SDR. ISDA further recommended that SDs and MSPs not be

required to keep records readily accessible during the first two years

of the five years following termination of the swap, but instead that

they should be required to make such records accessible within a

reasonable time during the five years following termination of the

swap. The Working Group of Commercial Energy Firms (``WGCEF'')

requested clarification that keeping records in the form in which they

are already retained would be acceptable to the Commission for all

historical swaps, and requested that its members be required to make

records available within three business days throughout the retention

period. COPE stated that the requirement for counterparties to keep

whatever information and documents they have relating to the terms of a

historical swap expired before April 25, 2011, is too vague and

overbroad, and asked that the requirement be limited to only the PET

data listed in the NOPR Appendix.

c. Records relating to credit support agreements. With respect to

the NOPR requiring for counterparties to keep records of credit support

agreements or ``equivalent documentation relating to the swap,'' WGCEF

commented that the term ``equivalent documentation'' was overbroad, and

asked for clarification of what constitutes such documentation.

3. Final Rule

a. Recordkeeping for historical swaps in existence on or after

April 25, 2011. The Commission has considered all of the comments,

including the comments stating that most counterparties to historical

swaps will have records of the commercially relevant, limited set of

minimum PET data called for in the NOPR. It has also considered the

comments stating that all counterparties to historical swaps in

existence on or after April 25, 2011, and particularly smaller

counterparties not involved in large numbers of swaps, might not have

records of all such terms for each such swap in which they were a

counterparty, and the comments noting the undesirability of retroactive

creation or recreation of records concerning historical swaps,

particularly records of execution times, which some counterparties may

not have. In light of these considerations, and in order to limit

burdens on counterparties to the extent consistent with the minimum

information the Commission will need concerning historical swaps, the

Commission has determined that the final rule will require

counterparties to historical swaps in existence on or after April 25,

2011 (the date on which publication of the NOPR provided notice of what

records would be required) to keep records of all information specified

in the minimum PET data tables included in Appendix 1 which was in

their possession on or after April 25, 2011. The NOPR provided that a

counterparty to such a swap must keep records of confirmation terms,

and of master or credit support agreements and modifications thereto,

only if such records are in the possession of the counterparty on or

after April 25, 2011. The Commission does not believe this requirement

is unclear or unduly burdensome, and has determined that it should be

retained in the final rule.

b. Recordkeeping for historical swaps expired prior to April 25,

2011. The Commission has considered these comments, and has determined

that the final rule should retain the NOPR provisions concerning

limited recordkeeping for historical swaps expired prior to April 25,

2011, which required counterparties to keep only the information and

documents concerning such swaps that were in their possession on or

after the date of the applicable Interim Final Rule. The final rule

provides that counterparties may keep these records in any format they

choose. The final rule calls for all counterparties to historical swaps

expired prior to April 25, 2011 to be able to retrieve such records

within five business days throughout the retention period, rather than

requiring counterparties to keep the records readily accessible for

part of the retention period or to be able to retrieve records within

three business days, as provided in the NOPR. This reduced

retrievability requirement is designed to mitigate costs for

counterparties to historical swaps expired prior to April 25, 2011,

while achieving the same regulatory objective.

c. Records relating to credit support agreements. The Commission

has considered the comment requesting clarification of the meaning of

``equivalent documentation'' in the context of records of credit

support agreements for historical swaps. The Commission recognizes

that, while some swap counterparties may enter into credit support

agreements, others may enter into other agreements that fulfill the

same function. The Commission believes that records of such agreements

can be important for market supervision and enforcement purposes as

well as for prudential supervision. To clarify the intent of the rule

in this regard, the final rule eliminates the phrase ``equivalent

documentation,'' and addresses records of credit support agreements or

other agreements between counterparties having the same function as a

credit support agreement.

B. Swap Data Reporting

1. Proposed Rule

a. Reporting for historical swaps in existence on or after April

25, 2011. For each pre-enactment or transition swap in existence on or

after April 25, 2011, the NOPR called for an initial data report on the

applicable compliance date; and, if the swap has not expired or been

terminated as of the compliance date, for ongoing reporting of required

swap continuation data, as defined in part 45 of this chapter, during

the remaining existence of the swap.

The NOPR called for the initial data report for such swaps to

include either all of the minimum primary economic terms specified in

the NOPR Appendix,

[[Page 35207]]

or all of the terms of the confirmation of the swap if those terms

include all of the minimum primary economic terms specified in the NOPR

Appendix. It also called for the initial data report to include: the

LEI of the reporting counterparty and the internal identifier used by

the automated systems of the reporting counterparty to identify the

non-reporting counterparty; \33\ the internal transaction identifier

used by the automated systems of the reporting counterparty to identify

the swap; and the internal master agreement identifier (if any) used by

the automated systems of the reporting counterparty to identify the

master agreement governing the swap.

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\33\ The NOPR also called for later reporting of the LEI of the

non-reporting counterparty, after that LEI was obtained as provided

in the NOPR.

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Where the reporting counterparty has reported any of the

information required as part of the initial data report to a trade

repository prior to the applicable compliance date, if that repository

has registered as an SDR by the compliance date the NOPR provided that

the reporting counterparty would not be required to report such

previously reported information again, and would be required to report

only such initial data report information as had not been previously

reported.

With respect to continuation data reporting, the NOPR followed the

proposed rules for part 45 of this chapter in calling for continuation

data reporting to follow the life cycle approach for credit swaps and

equity swaps, and the snapshot approach for interest rate swaps,

currency swaps, and other commodity swaps. Where the snapshot approach

was required, the NOPR called for SD and MSP reporting counterparties

to report all continuation data required under part 45, but limited

such reporting by non-SD/MSP reporting counterparties to the data

elements in the PET data tables in the Appendix to part 46 in cases

where they did not possess all continuation data specified in part 45

on the compliance date.

b. Reporting for historical swaps expired or terminated prior to

April 25, 2011. For historical swaps expired or terminated prior to

April 25, 2011, the NOPR proposed only a single data report, made on

the applicable compliance date. In the case of a pre-enactment swap,

this report would include such information relating to the terms of the

swap as was in the reporting counterparty's possession on or after

October 14, 2010, the date of publication of the Interim Final Rule for

Pre-Enactment Swaps. In the case of a transition swap, this report

would include such information relating to the terms of the swap as was

in the reporting counterparty's possession on or after December 17,

2010, the date of publication of the Interim Final Rule for Transition

Swaps. In both cases, the information would be permitted to be reported

via any method or in any format selected by the reporting counterparty.

2. Comments Received

a. PET data for historical swaps. Commenters made a number of

suggestions with respect to the PET data required to be reported for

historical swaps in existence on or after April 25, 2011. Commenters

generally viewed the NOPR requirement for reporting a specified,

limited set of minimum PET data for historical swaps as reasonable,

since they believed the specified PET data elements reflect the

commercially relevant terms typically retained by swap counterparties.

However, ETA, WGCEF, ISDA, and the Global Foreign Exchange Division

(``Global Forex'') recommended that the requirement to report PET data

should be limited to the data elements in the minimum PET data tables

that are in the possession of the reporting counterparty. They argued

that some counterparties, particularly smaller counterparties that may

not trade swaps frequently, may not have captured or retained all of

the specified data elements.

Three commenters, ISDA, ETA, and WGCEF, requested that the

Commission drop the catch-all category of ``any other primary economic

term'' verified or matched by the counterparties from the required PET

data for historical swaps, arguing that it would be better to define

PET data precisely for historical swaps. ETA stated that requiring such

information could require extensive text submissions of non-

standardized transaction terms, complicating the compilation task of

the SDRs.

Both ISDA and Global Forex requested that the Commission not

require reporting the time of trade for a historical swap, arguing that

in many cases counterparties may not have recorded this information

when a historical swap was executed.

ISDA recommended that the PET data tables should not include

indications of whether either or both counterparties are SDs or MSPs,

arguing that if the SDR already has this information from registration,

it would be simpler and more reliable for this indication to be

centrally supplied by the SDR. ISDA requested that reporting

counterparties be permitted to report the legally binding record

already present in an existing trade repository (called a ``gold

record'' by some existing trade repositories), in lieu of reporting the

required minimum PET data.

b. Master agreement identifiers. ISDA, ETA, Global Forex, and WGCEF

recommended eliminating the requirement to report master agreement

identifiers. Global Forex noted that providing this data would impose a

significant burden because such information is not routinely stored on

the same systems as the other PET data specified in the tables. WGCEF

argued that counterparties are in the best position to make exposure

calculations and that the Commission already has the ability to request

such information from them. The Coalition of Derivative End-Users

(``End-User Coalition'') requested that the Commission explain the use

and value of reporting master agreement identifiers.

c. Continuation data reporting. ETA requested that non-SD/MSP

reporting counterparties not be required to report continuation data,

arguing that transactions not involving SDs and MSPs represent only a

small portion of the swaps market, and that such a requirement would be

unduly burdensome. Alternatively, ETA asked that non-SD/MSP reporting

counterparties be permitted to report continuation data for historical

energy swaps on a quarterly basis.

d. Electronic images of swap documentation. WGCEF disagreed with

the Commission's proposed prohibition on the electronic transmission of

an image of a document to satisfy the electronic reporting requirements

of the proposed rule, arguing that by prohibiting the use of images for

reporting, the Commission is effectively requiring market participants

to rely on more burdensome, costly, and less efficient means of

gathering and submitting required data to SDRs. WGCEF asked the

Commission to allow reporting counterparties to submit images of

confirmations and other paper swap documentation in lieu of submission

of normalized data in data fields.

e. Reporting of data beyond specified PET data. WGCEF requested

that reporting counterparties be permitted to report data beyond the

data required in the proposed rules, including all data pertaining to

the swap if that is less burdensome for the reporting counterparty, as

long as the data required by the proposed rules is included in the data

reported.

f. Reporting by both counterparties to a swap. WGCEF asked the

Commission to allow both counterparties to a historical swap report the

data to an

[[Page 35208]]

SDR if they so choose. WGCEF argued that permitting such dual reporting

would avoid the need for counterparties of equal reporting hierarchy

status to negotiate which will be the reporting counterparty.\34\

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\34\ WGCEF also stated that dual reporting may be necessary if

the Commission has not issued a final rule on entity definitions

before data reporting begins, since in that event counterparties

would be unable to determine which of them has the obligation to

report. The compliance dates established in parts 45 and 46 for swap

data reporting eliminate this issue, since the initial compliance

date will be the later of July 16, 2012 or 60 days after issuance of

entity and product definitions.

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g. Safe harbor for good faith reporting. Global Forex asked that

counterparties be allowed to meet their reporting and recordkeeping

obligations on a best efforts basis without the need to recreate or

report data that might have been lost. Global Forex expressed concerned

that parties to FX swaps who use the SWIFT Accord system or use paper

confirmations to keep records would need to transfer this information

to new systems to meet the proposed reporting and retrieval

requirements of the rules. It noted that in the time between the

enactment of the Dodd-Frank Act and the compliance date for reporting,

internal systems may have gone through a number of upgrades or

migrations, potentially resulting in loss of information and thus in

incomplete data. The Financial Services Roundtable (``FSR'') also

requested a safe harbor for institutions that have complied with the

previously issued interim-final rules by preserving all information on

file, yet do not have full records for pre-enactment swaps. ETA also

asked the Commission to create a safe harbor for non-financial entities

that keep records for historical swaps consisting of data elements

routinely captured prior to enactment of the Dodd-Frank Act, in the

format in which they are already kept, and report only such data,

whether or not it includes all of the data required by the final rules,

without having to gather any required data from paper records.

3. Final Rule

a. PET data for historical swaps. The Commission has considered the

comments stating that the minimum PET data proposed to be reported for

historical swaps reflects the commercially relevant terms typically

retained by swap counterparties. It has also considered the comments

noting that some counterparties, particularly smaller counterparties

that may not trade swaps frequently, may not have captured or retained

all of the specified data elements. In order to mitigate costs and

burdens for swap counterparties while achieving the same regulatory

objective, the Commission has determined that the final rule will

require reporting of all of the minimum primary economic terms

specified in Appendix 1 that were in the possession of the reporting

counterparty on or after April 25, 2011. The final rule will not

require reporting of unspecified, additional primary economic terms

matched or verified by the counterparties to such swaps. With respect

to execution times, the final rule will require reporting the date of

execution, and call for reporting the time of execution only if that

time was recorded when the trade was executed and is known to the

reporting counterparty on or after April 25, 2011.

The Commission believes that the minimum PET data for historical

swaps should include indications of whether either or both

counterparties are SDs or MSPs, and that this information should be

provided to SDRs. SDs and MSPs will register with the Commission, and

their status will be determined by Commission rules. SDs and MSP will

need to possess this information in order to comply with the final

rule, and the Commission believes they will have automated systems

capable of recording and reporting it. The Commission has also

determined that the final rule will not provide for reporting a legally

binding record already present in an existing trade repository in lieu

of reporting the required minimum PET data. Both the NOPR and the final

rule provide that reporting counterparties need not re-report required

PET data already reported to an existing trade repository that

registers with the Commission as an SDR prior to the applicable

compliance date for reporting.

b. Master agreement identifiers. The Commission has considered the

comments recommending elimination of the requirement to report master

agreement identifiers for historical swaps. In the final swap data

reporting rules in part 45 of this chapter, the Commission has already

determined that it should not require master agreement reporting in its

first swap data reporting final rules. As noted in the Joint Study on

the Feasibility of Mandating Algorithmic Descriptions for Derivatives

released by the CFTC and SEC in April 2011, at present the terms of

such agreements are not readily reportable in an electronic format, as

market participants have not developed electronic fields representing

terms of a master agreement.\35\ For these reasons, the Commission has

determined that the final rule will not require reporting of master

agreement identifiers. The Commission may choose to revisit this issue

at some point in the future, if and when market participants and SDRs

develop ways to represent the terms of such agreements electronically.

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\35\ Commodity Futures Trading Commission and Securities and

Exchange Commission, Joint Study on the Feasibility of Mandating

Algorithmic Descriptions for Derivatives, April 7, 2011, available

at http://www.sec.gov/news/studies/2011/719b-study.pdf.

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c. Continuation data reporting. The Commission believes that

continuation data reporting for uncleared historical swaps must be

retained to enable regulators to monitor exposures and systemic risk,

and to fulfill their market supervision and enforcement

responsibilities.\36\ Quarterly reports concerning changes to the

primary economic terms of such a swap would impede regulators' ability

to see a current and accurate picture of the swap market. To take just

one example, delaying reporting of a partial novation for a quarter

would give regulators an inaccurate picture of what counterparties are

exposed to the swap for a substantial period of time. The Commission

has therefore determined that the final rule will retain the NOPR

requirements with respect to continuation data reporting for uncleared

historical swaps.\37\

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\36\ The final part 45 rules, which apply to continuation data

reporting for uncleared historical swaps, extend and phase in

continuation data reporting for non-SD/MSP counterparties in order

to reduce burdens to the extent consistent with the purposes of such

reporting.

\37\ Section 46.3(a)(2) of this final rule provides that ``For

each uncleared pre-enactment or transition swap in existence on or

after April 25, 2011, throughout the existence of the swap following

the compliance date, the reporting counterparty must report all

required swap continuation data * * * .'' This means that reporting

counterparties for such swaps must report changes to primary

economic terms occurring after the applicable compliance date. It

does not require reporting of changes occurring after execution of

the historical swap but prior to the compliance date.

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Continuation data reporting for cleared historical swaps in

existence on or after April 25, 2011, is affected by the fact that such

swaps will have been cleared prior to the start of reporting on the

applicable compliance date. Part 45 requires DCOs to report

continuation data, including valuation data, for cleared swaps, and

limits continuation data reporting by reporting counterparties to

reporting of valuation data by SD or MSP reporting counterparties. For

swaps executed after the applicable compliance date, continuation data

reporting will be linked to the original swap through use of unique

swap identifiers. However, the Interim Final Rules for pre-enactment

and transition swaps and the

[[Page 35209]]

NOPR took the fundamental approach that the data reported for

historical swaps should be the data possessed by those involved in

originating such swaps. Neither the Interim Final Rules nor the NOPR

placed an obligation on DCOs to report to an SDR or to be able to trace

the link between a historical swap submitted for clearing on or after

April 25, 2011, and the transactions or positions resulting from

novation of such a historical swap to the clearing house.\38\ The

Commission understands that it therefore could be problematic for a DCO

to be able to report valuation data for historical swaps cleared prior

to the applicable compliance date. In addition, neither the Interim

Final Rules nor the NOPR directly addressed the effect of clearing on

the reporting requirements for the swap. In light of these factors, and

in order to reduce burdens to the extent consistent with the purposes

of the Dodd-Frank Act, the Commission has determined that this final

rule regarding swap data reporting for historical swaps will not

require reporting of continuation data for cleared historical swaps.

This determination is limited to the reporting of cleared historical

swaps pursuant to part 46 and has no effect on reporting required under

part 45. As noted above, all historical swaps in existence on or after

April 25, 2011 that have been accepted for clearing will be reported by

the reporting counterparty, and these reports will include an

indication that the swap has been accepted for clearing and the

identity of the DCO clearing the swap.\39\ Under part 46, a DCO will

have no duty to make an initial data report for the resulting novated

swaps. The Commission plans to further clarify how novated and cleared

historical swaps should be reported under the Commission's data

reporting rules

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\38\ Unique swap identifiers will not be available for such

swaps.

\39\ If further information concerning a cleared historical swap

is needed, the Commission will have ability to obtain it through its

special call authority.

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d. Electronic images of swap documentation. The Commission believes

that permitting reporting to be limited to submission of images would

prevent regulators from searching, retrieving, aggregating, and

manipulating historical swap data in SDRs for essential purposes,

including monitoring systemic risk, conducting market oversight and

enforcement, and calculating block trade sizes relevant to real time

reporting, among others. The NOPR proposed to reduce the reporting

burden to the extent possible in this respect, by allowing submission

of images to fulfill reporting requirements for historical swaps that

expired prior to April 25, 2011. The Commission is adopting the rule as

proposed and, in so doing, notes that a reporting counterparty that

maintained information concerning a historical swap in paper form could

fulfill the final rule electronic reporting requirements by entering

the minimum PET data from a paper confirmation into a web interface

provided by the SDR.

e. Reporting of data beyond specified PET data. With respect to the

comment requesting that reporting counterparties be permitted to report

data beyond the data required by the final rule, as long as the

required data is included in the data reported, the Commission notes

that neither the NOPR nor the final rule bars reporting of additional

data beyond the minimum required, provided that such additional data is

accepted by the SDR to which required swap data is reported. The

Commission also notes that it is a business decision of the SDR whether

to accept such additional data.

f. Reporting by both counterparties to a swap. The Commission has

considered the comment asking that the final rule permit voluntary

reporting for a historical swap by the non-reporting counterparty. The

Commission received a number of comments to the same effect in

connection with the swap data reporting rules in part 45 of this

chapter.

The Commission determined in part 45 that voluntary supplement

reporting is technologically feasible and may have benefits for both

data accuracy and counterparty business processes.\40\ As noted in part

45, while the Dodd-Frank Act requires swap data reporting by only one

counterparty and establishes a hierarchy for choosing the reporting

counterparty, it does not prohibit voluntary swap data reporting to an

SDR that supplements required reporting. The Commission's final part 49

rules permit counterparties to access to information in SDRs concerning

their own swaps, and notes that nothing forbids swap counterparties to

use an SDR as a provider of third-party services going beyond

acceptance of required swap data reports for regulatory purposes. For

these reasons, the final rules in part 45 provide for voluntary

supplemental reporting to any SDR by either counterparty of swap data

that part 45 does not require that counterparty to report.

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\40\ 77 FR 2136 (January 13, 2012), at 2171.

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The Commission also determined in part 45 that, to avoid double-

counting of the same swap due to voluntary supplemental reports, and to

ensure that data reported via a voluntary supplemental report (``VSR'')

to the same SDR to which required data is reported is integrated into

that SDR's record for the swap, each VSR must include minimum VSR

information that ensures achievement of these purposes. As provided in

part 45, this required VSR information includes: an indication that the

report is a VSR; the USI for the swap that has been created as required

by this part; the identity of the SDR to which all required creation

data and continuation data is reported for the swap, if the VSR is made

to a different SDR; the LEI of the counterparty making the VSR; and if

applicable, an indication that the VSR is made pursuant to the law of a

jurisdiction outside the U.S. To avoid confusion and double-counting,

and to ensure that each VSR includes the USI for the swap, part 45 also

provides that a VSR may not be made until after the USI for the swap

has been created as provided in Sec. 45.5 and transmitted to the

counterparty making the VSR.

In light of these comments and considerations, the Commission has

determined that the final rules in this part should align with part 45

and permit voluntary supplemental reporting for historical swaps in

existence on or after April 25, 2011. The Commission believes, for the

reasons noted above, and as provided in part 45, that appropriate

safeguards are needed with respect to such VSRs, to avoid confusion and

double counting with respect to these swaps. The final rule therefore

provides that a VSR concerning a historical swap may not be made until

after the initial data report required by part 46 concerning the swap

is made. The final rule also provides that a VSR concerning a

historical swap must include: an indication that the report is a VSR;

the identity of the SDR to which the required initial data report

concerning the swap has been made; the LEI of the counterparty making

the VSR; and, if applicable, an indication that the VSR is made

pursuant to the law of a jurisdiction outside the U.S.

One of the safeguards provided in part 45 is the inclusion in each

VSR of the USI for the swap in question. SDRs are required by part 45

to create USIs for swaps with a non-SD/MSP reporting counterparty

through what is known as the ``name space'' method, under which the

first characters of each USI created by an SDR will consist of a unique

code that identifies that SDR, given to the SDR by the Commission

during the SDR registration process. The automated systems of SDRs will

create an identifier for each historical swap reported in the normal

course of SDR operation. Due to the above-mentioned requirements of

part 45, SDRs will have the capacity to

[[Page 35210]]

create SDR identifiers for historical swaps using the name space

technique. This would make the SDR identifiers for historical swaps

functionally equivalent to USIs. The part 46 NOPR provided that the USI

requirements of part 45 would not apply to historical swaps, and the

final rule retains this provision. To provide for historical swaps an

essential safeguard against confusion and double-counting in the

context of VSRs similar to the safeguard provided for swaps reported

pursuant to part 45 by USIs, the final part 46 rule requires that each

VSR for a historical swap in existence on or after April 25, 2011, must

include the SDR identifier assigned to the swap by the automated

systems of the SDR to which the required initial data report concerning

the swap is made. The Commission strongly encourages all SDRs to use

the name space capability they are required to have pursuant to part 45

to create such SDR identifiers using the name space technique, making

them functionally equivalent to USIs.\41\ This would enhance the

safeguard provided by such SDR identifiers.

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\41\ The Commission is mindful in this connection of a comment

made by TriOptima in the context of part 45 of this chapter

concerning USIs. TriOptima noted that the swap market has a

relatively large outstanding stock of transactions, some quite long-

dated, and a relatively thin flow of new transactions, and stated

that having USIs for new transactions only would result in a long

transition period where there are live contracts both with and

without USIs, something TriOptima stated would be problematic from a

technology perspective. TriOptima recommended the creation of USIs

via the name-space technique as the best way to resolve the issue.

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g. Safe harbor for good faith reporting. The Commission has

considered the comments which addressed possible safe harbor

provisions. As discussed above, the Commission has determined in

response to comments that the final rule will only require

counterparties to historical swaps in existence on or after April 25,

2011, the publication date of the NOPR, to report specified information

in their possession as of that date. The final rule will only require

counterparties to historical swaps expired or terminated prior to April

25, 2011, to report whatever information was in their possession as of

publication of the relevant Interim Final Rule. The Commission believes

this is the appropriate way to address the fundamental concerns raised

in these comments, which centered on problems that could be caused by

requiring reporting of information not possessed by some counterparties

and on the technological burdens involved.

C. Unique Identifiers

1. Proposed Rule

The NOPR called for the initial data report for each historical

swap in existence on or after April 25, 2011, to include the legal

entity identifier (``LEI''),\42\ as provided in part 45 of this

chapter, of the reporting counterparty, as well as the reporting

counterparty's internal system identifiers for the non-reporting

counterparty and the particular swap transaction in question. The NOPR

proposed giving the non-reporting counterparty for each such historical

swap an additional 180 days after the applicable compliance date to

obtain an LEI. Once this LEI was obtained, the NOPR called for it to be

provided to the reporting counterparty and reported by the reporting

counterparty to the SDR. After LEIs were obtained for either

counterparty, the NOPR proposed requiring the counterparty identified

by an LEI and the SDR to to comply with the LEI requirements of part 45

of this chapter with respect to LEIs. The NOPR provided that the LEI

requirements of parts 45 and 46 would not apply to historical swaps

expired or terminated prior to April 25, 2011. The NOPR proposed that

the unique swap identifier and unique product identifier requirements

of part 45 of this chapter would not apply to historical swaps.

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\42\ The NOPRs for both parts 45 and 46 of this chapter used the

term ``unique counterparty identifier'' in this context. As

explained in the final part 45 rule, in response to comments the

Commission has decided to use the term ``legal entity identifier,''

which refers to the same identifier and is in common international

use, in order to prevent confusion.

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2. Comments Received

a. Obtaining LEIs by the compliance date. The End-User Coalition,

ETA, and ISDA raised concerns regarding whether counterparties will be

able to obtain LEIs by the compliance date. ISDA commented that the

requirement for reporting an LEI for each counterparty would require

finalization of parts 45 and 46 in advance of the compliance date to

allow the LEI system to be built. In the event that LEIs are not

available by the applicable compliance date, WGCEF asked that the final

rule LEI provisions not require re-reporting a historical swap in order

to include LEIs in the data for such a swap, but instead permit

submission of a cross-referenced table of counterparties' internal

counterparty identifiers matched with the new LEIs.

b. Non-SD/MSPs and LEIs. ETA asked that non-SD/MSP counterparties

be placed on a compliance schedule separate from SDs and MSPs to allow

time for entities to develop and implement the requisite systems and

procedures to input and report identifiers. The End-User Coalition

asked that non-SD/MSP counterparties be given at least 18 months after

the final rule is issued to obtain LEIs, stating that a potential

``logistical traffic jam'' of entities seeking LEIs, as well as the

currently undefined process for obtaining the identifiers, could make

obtaining LEIs difficult for non-SD/MSP counterparties.

3. Final Rule

a. Obtaining LEIs by the compliance date. The Commission has

determined that the final rule should maintain the NOPR provisions

requiring use of LEIs in data reporting for historical swaps in

existence on or after April 25, 2011. LEIs will be a crucial tool for

enabling the Commission and other regulators to search, aggregate, and

use the swap data reported to SDRs to fulfill the purposes of the Dodd-

Frank Act. Both the NOPR and the final rule address concerns regarding

whether a Commission-approved LEI will be available by the compliance

date by applying the provisions of part 45 of this chapter, including

the provision for use of a substitute counterparty identifier in the

event that an LEI is not available on the compliance date, until a

Commission-approved LEI is available.

b. Non-SD/MSPs and LEIs. The Commission has determined that the

final rule should maintain the NOPR provisions concerning LEIs for non-

SD/MSP counterparties. The applicable compliance date set in the final

rule for non-SD/MSP counterparties is 180 days after the compliance

date for SDs and MSPs, and the final rule provides an additional 180

days after the applicable compliance date for non-reporting

counterparties to obtain an LEI. The Commission believe this

appropriately addresses commenters' concerns relating to obtaining LEIs

for non-SD/MSP counterparties.

c. USIs and UPIs. The final rule retains the NOPR provision stating

that the USI and UPI requirements of part 45 do not apply to historical

swaps.

D. Determination of the Reporting Counterparty

1. Proposed Rule

The NOPR provided that determination of which counterparty is the

reporting counterparty for a historical swap would be made in the same

way provided in part 45 of this chapter. Counterparty reporting would

follow the hierarchy outlined in the

[[Page 35211]]

statute, giving SDs or MSPs the duty to report when possible, and

limiting reporting by non-SD/MSP counterparties to situations where

there is no SD or MSP counterparty. Where both counterparties have the

same hierarchical status, the NOPR required them to agree as one term

of their swap which of them is to report. Where only one counterparty

to a historical swap is a U.S. person, the NOPR called for that

counterparty to be the reporting counterparty. For historical swaps in

existence as of the applicable compliance date, the NOPR called for

determination of the reporting counterparty to be made by applying the

above provisions to the current counterparties to the swap as of the

compliance date. For historical swaps for which reporting is required,

but which have terminated prior to the compliance date, the NOPR called

for determination of the reporting counterparty to be made as of the

date of the swap's expiration or termination.

2. Comments Received

a. Non-agreement by counterparties at the same hierarchical level.

WGCEF, Global Forex, ISDA, ETA, and Encana Marketing (``Encana'') each

raised the issue of how to assign the reporting obligation in cases

where counterparties cannot come to an agreement. ETA recommended that

the Commission clarify that the parties are under no obligation to

renegotiate the transaction to provide for additional consideration,

and should structure its rules to assume that the transaction data will

be reported by one or both counterparties, or neither. WGCEF

recommended allowing both counterparties to report if they cannot

agree. ISDA stated that in cases where the hierarchy does not resolve

the issue, the final rules should designate the calculation agent as

the reporting counterparty. Global Forex recommended not requiring

reporting of historical swaps that expire prior to the compliance date,

to reduce the number of instances where counterparties would need to

agree on which of them should report.

b. Date for determining counterparty reporting obligations. For

historical swaps which must be reported but which have expired prior to

the compliance date, the proposed regulations called for determining

the reporting counterparty by applying the statutory reporting

hierarchy to the parties who were counterparties to the swap when it

expired. ISDA noted that it may be difficult or impossible to determine

whether a counterparty was an SD or MSP as of an expiration that

occurred before final SD or MSP definitions and a registration system

are put in place, and recommended that the reporting counterparty for

such swaps be determined as of the compliance date.

c. Non-U.S. counterparties. The End-User Coalition, ETA, WGCEF and

ISDA recommended that a foreign SD or MSP should be the reporting

counterparty for a historical swap in which the other counterparty is a

U.S. non-SD/MSP. ISDA argued that requiring a non-SD/MSP to report in

circumstances where the counterparty is a foreign SD could dissuade

U.S. parties from engaging in transactions with foreign SDs. In

contrast, Encana supported the proposed rule provision requiring the

U.S. person to be the reporting counterparty in circumstances where

only one of the parties is a U.S. person.

d. Historical swaps platform-executed or cleared prior to the

compliance date. ETA recommended that the final regulations should

provide that, if a reportable historical swap between non-SD/MSP

counterparties was executed prior to the compliance date on a platform

later registered as a SEF or DCM, or was cleared prior to the

compliance date by a DCO, the SEF, DCM, or DCO should be required to

make the initial data report for the swap, in lieu of a report by

either non-SD/MSP counterparty.

3. Final Rule

a. Non-agreement by counterparties at the same hierarchical level.

The Commission has determined that the final rule should substantially

maintain the NOPR provisions concerning determination of the reporting

counterparty. The Commission believes that requiring swap

counterparties to agree on which of them is the reporting counterparty

``as one term of their swap transaction'' could require potentially

problematic renegotiation of a pre-existing swap agreement.

Accordingly, the final regulations remove the phrase ``as one term of

their swap transaction'' from Sec. 46.5. The final rule requires

counterparties to a historical swap at the same hierarchical level to

agree prior to the applicable compliance date on which of them is the

reporting counterparty, but does not require them to do so as a term of

the swap.\43\ The final rule follows part 45 of this chapter in

providing an additional decision factor for determining the reporting

counterparty for a swap between two non-SD/MSP counterparties: in such

situations, if only one of the two non-SD/MSP counterparties is a

financial entity as defined in the Dodd-Frank Act, the financial entity

will be the reporting counterparty. The final rule addresses the

concern raised in one comment about the difficulty of determining the

reporting counterparty in the absence of definitions of swap dealer and

major swap participant, by providing that the compliance dates on which

historical swaps must be reported will come no less than 60 days after

publication of such definitions.

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\43\ The Commission expects to provide interpretative guidance

concerning determination of the reporting counterparty in situations

where a historical swap was executed and submitted for clearing via

a platform on which the counterparties to the swap do not know each

other's identity.

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b. Date for determining counterparty reporting obligations. The

Commission believes that it is prudent to determine the reporting

counterparty for a historical swap as of the applicable compliance date

where possible. The final rule provides that for historical swaps in

existence as of the applicable compliance date, the reporting

counterparty shall be determined by applying Sec. 46.5 to the current

counterparties as of that date. For historical swaps expired or

terminated prior to the compliance date, the final rule requires

determination of the reporting counterparty by applying Sec. 46.5 to

the counterparties to the swap as of the date of its expiration or

termination (except for determination of a counterparty's status as an

SD or MSP, which shall be determined as of the compliance date).

c. Non-U.S. counterparties. The Commission has considered the

comments recommending that a non-U.S. SD or MSP in a historical swap

with a U.S. counterparty at a lower hierarchical level should be the

reporting counterparty despite its status as a non-U.S. person. The

Commission received a large number of similar comments in connection

with its part 45 rules. It determined in part 45 in response to those

comments that, because non-U.S. SDs and MSPs will be required to

register with the Commission in this connection, the Commission will

have sufficient oversight and enforcement authority with respect to

such counterparties.\44\ The Commission therefore determined in part 45

that, with a single exception, the determination of the reporting

counterparty in situations where only one counterparty is a U.S. person

should be made by applying the normal counterparty determination

procedure. In cases where both counterparties are non-SD/MSP

counterparties and only one counterparty is a U.S. person, part 45

requires the U.S. person to be the reporting counterparty, which is

[[Page 35212]]

necessary in such situations because the non-U.S. non-SD/MSP

counterparty will not be required to register with the Commission.

Where neither counterparty to a swap executed on a SEF or DCM,

otherwise executed in the U.S., or cleared on a DCO is a U.S. person,

part 45 applies the same hierarchical selection criteria as for other

swaps. In response to the comments on this subject made in connection

with both parts 45 and 46, and for the same reasons, the Commission has

determined that this final rule will follow part 45, as set forth

above, with respect to determination of the reporting counterparty in

this context.

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\44\ 77 FR 22136 (January 13, 2012), at 2167.

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d. Historical swaps platform-executed or cleared prior to the

compliance date. The NOPR did not call for platform reporting of PET

data or DCO reporting of confirmation data with respect to historical

swaps, but mandated reporting by the reporting counterparty. The

Commission has determined that the final rule should maintain these

NOPR provisions. Counterparties to historical swaps in existence on or

after April 25, 2011, were put on notice by the NOPR to retain records

of the minimum PET data that will be required to be reported for such

swaps, and as discussed above, the final rule limits required reporting

for such swaps to the specified minimum PET data in the possession of

the reporting counterparty as of April 25, 2011. Such reporting by the

reporting counterparty should therefore be practicable. The Commission

believes it may be impracticable to require execution facilities or

DCOs to report data for swaps executed or cleared by them at a time

when they were neither required by a rule nor on notice pursuant to a

notice of proposed rulemaking to retain data for the purpose of making

such a report.\45\

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\45\ As discussed above at pages 31-33, the Commission plans to

further clarify how novated and cleared historical swaps should be

reported under the Commission's data reporting rules.

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E. Third-Party Facilitation of Data Reporting

1. Proposed Rule

The NOPR proposed explicit permission for third-party facilitation

of data reporting with respect to historical swaps, without removing

the reporting responsibility from the appropriate reporting

counterparty.

2. Comments Received

The Commission received no comments concerning this NOPR provision.

3. Final Rule

The Commission has determined that the final rule should maintain

this NOPR provision as proposed.

F. Reporting to a Single Swap Data Repository

1. Proposed Rule

To avoid fragmentation of data for a given historical swap across

multiple SDRs, the NOPR provided that all data for a particular

historical swap must be reported to the same SDR to which the initial

data report concerning the swap is made.

2. Comments Received

The Commission received no comments concerning this NOPR provision.

3. Final Rule

The Commission has determined that the final rule should maintain

this NOPR provision as proposed.

G. Data Reporting for Swaps in a Swap Asset Class Not Accepted by Any

Swap Data Repository

1. Proposed Rule

As required by section 729 of the Dodd-Frank Act, the NOPR provided

that if there were an asset class for which no SDR currently accepted

data, registered entities or counterparties required to report

concerning historical swaps in such an asset class would be required to

report the same data to the Commission at a time and in a form and

manner determined by the Commission.

2. Comments Received

The Commission received no comments concerning this NOPR provision.

3. Final Rule

The Commission determined in part 45 that, in this circumstance,

data should be reported at times announced by the Commission and in an

electronic format acceptable to the Commission. Part 45 delegates to

the Commission's Chief Information Officer the authority to determine

such times and formats. Since the part 46 NOPR called for reporting in

this context at a time and in a form and manner determined by the

Commission, the final rule must specify the Commission's requirements

in these respects. The Commission has determined that, for historical

swaps in existence on or after April 25, 2011, the final rule should

provide, in parallel with part 45, that in this circumstance, data must

be reported at times announced by the Commission and in an electronic

format acceptable to the Commission. The final rule delegates to the

Commission's Chief Information Officer, also in parallel with part 45,

the authority to determine such times, and to determine with respect to

historical swaps in existence on or after April 25, 2011, the

electronic format for making the report. For historical swaps expired

or terminated as of that date, the final rule permits reporting in any

format chosen by the reporting counterparty.

H. Required Data Standards

1. Proposed Rule

The NOPR required reporting counterparties for historical swaps to

use the facilities, methods, or data standards provided or required by

the SDR to which the counterparty reports swap data.

2. Comments Received

The Commission received no comments concerning this NOPR provision.

3. Final Rule

The Commission has determined that the final rule should maintain

these NOPR provisions as proposed.

I. Reporting of Errors and Omissions in Previously Reported Data

1. Proposed Rule

The NOPR required reporting counterparties to report any errors or

omissions in reported data, in the same format as the original data

report, as soon as technologically practicable after their discovery.

Non-reporting counterparties discovering an error or omission would be

required to notify the reporting counterparty, who in turn would be

required to report them to the SDR.

2. Comments Received

The Commission received no comments concerning this NOPR provision.

3. Final Rule

The Commission has determined that the final rule should maintain

these NOPR provisions as proposed.

J. Compliance Dates

1. Proposed Rule

The proposed rules require swap data reporting for historical swaps

to commence on the compliance date specified in the Commission's final

swap data recordkeeping and reporting regulations in part 45.

2. Comments Received

a. Compliance date on which reporting begins. Due to the dependence

[[Page 35213]]

of part 46 on other rulemakings, especially final rules defining

``swap,'' ``swap dealer,'' and ``major swap participant,'' several

commenters requested that Part 46 compliance and implementation take

place on a staggered basis that takes the need for such definitions

into account. Commenters stated that differences between asset classes

with respect to both existing automation and existing data

normalization are significant and should also be taken into account.

Commenters made several specific recommendations concerning compliance

dates and phasing also made by them in connection with part 45, which

the Commission has already considered and addressed in part 45, and

will not address again here.

b. Using the same compliance dates for parts 45 and 46. WGCEF

stated that the compliance date on which the initial data report for

historical swaps must be made should not be the same compliance date

provided for the beginning of swap data reporting pursuant to part 45,

in order to avoid subjecting SDRs to a logjam of data on that date, and

advocated setting the part 46 compliance date for historical swap data

reporting somewhat earlier than the part 45 compliance date.

3. Final Rule

a. Compliance date on which reporting begins. The Commission

believes that the compliance dates for swap data reporting under part

46 should take into account the need for Commission definitions of

``swap,'' ``swap dealer,'' and ``major swap participant.'' The

Commission also believes that the compliance dates for swap data

reporting should take both asset class differences and the needs of

non-SD/MSP reporting counterparties into account. As set forth in part

45, the compliance dates established in part 45 phase in compliance

dates in both these respects. Accordingly, the Commission has

determined that this final rule will maintain the NOPR provision

setting the same compliance dates for both parts 45 and 46. The

Commission believes that these compliance dates strike the appropriate

balance between the need for swaps data by the Commission charged with

achieving the purposes of the Dodd-Frank Act and potential costs and

burdens that may be imposed on market participants.

b. Using the same compliance dates for parts 45 and 46. Since

automated systems for swap data reporting must be developed, tested,

and used for reporting with respect to both historical and new swaps,

the Commission believes that setting the same compliance dates for data

reporting in both part 45 and part 46, as provided in the proposed

rules, remains appropriate. However, the Commission recognizes that

having some initial data reporting for historical swaps pursuant to

part 46 precede the start of data reporting for new swaps pursuant to

part 45 could have the practical benefit of reducing the volume of data

SDRs would have to receive on a single day if data reporting for all

historical swaps as well as new swaps began on the same date. In light

of comments and these considerations, the final rule will permit

voluntary initial data reporting for historical swaps prior to the

applicable compliance date, if a registered SDR is prepared to accept

the initial data report required by this part prior to the applicable

compliance date. Where such a voluntary early initial data report is

made, continuation data reporting for the swap in question will still

be required to commence as of the applicable compliance date.

III. Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq.,

requires that agencies consider the impact of their rules on ``small

entities.'' As provided in the NOPR, this part will have a direct

effect on SDs, MSPs, and non-SD/MSP counterparties who are

counterparties to one or more pre-enactment or transition swaps and

subject to the Commission's jurisdiction.

As stated in the NOPR,\46\ the Commission proposed that certain

entities for which the Commission had not previously made a

determination for RFA purposes--namely SDs, and MSPs--should not be

considered to be small entities, for reasons set forth in the NOPR.

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\46\ 76 FR 22833.

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As noted in the NOPR, this part requires limited swap data

reporting by a non-SD/MSP counterparty regarding pre-enactment and

transition swaps only with respect to the swaps in which neither

counterparty is an SD or MSP. With respect to such swaps, which

represent a minority of swap transactions, only one of the swap non-SD/

MSP counterparties will be required to report--the counterparty

designated as the reporting counterparty. In addition, the Commission

has determined that the final rule provides that for swaps between non-

SD/MSP counterparties where only one counterparty is a ``financial

entity'' as defined in CEA section 2(h)(7)(C), the financial entity

shall be the reporting counterparty. As the NOPR noted, most end users

and other non-SD/MSP counterparties who are regulated by the Employee

Retirement Income Security Act of 1974 (``ERISA''), such as pension

funds, which are among the most active participants in the swap market,

are prohibited from transacting directly with other ERISA-regulated

participants.\47\

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\47\ 29 U.S.C. 1106.

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With respect to SDs, the Commission previously has determined that

Futures Commission Merchants (``FCMs'') should not be considered to be

small entities for purposes of the RFA.\48\ Like FCMs, SDs will be

subject to minimum capital and margin requirements and are expected to

comprise the largest global financial firms.\49\ Similarly, with

respect to MSPs, the Commission has previously determined that large

traders are not ``small entities'' for RFA purposes.\50\ Like large

traders, MSPs will maintain substantial positions, creating substantial

counterparty exposure that could have serious adverse effects on the

financial stability of the U.S. banking system or financial markets.

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\48\ 47 FR 18618 (Apr. 30, 1982).

\49\ Additionally, the Commission is required to exempt from

designation entities that engage in a de minimis level of swaps. Id.

at 18619.

\50\ 47 FR at 18620.

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For these reasons, the Commission does not believe that the

regulations would have a significant economic impact on a substantial

number of small entities. The Commission believes these provisions of

the final rule reduce the economic impact on any non-SD/MSP

counterparties that may be considered to be small entities under the

RFA.

Due to the operation of certain provisions of the CEA and the final

rule, non-SD/MSP counterparties who may be considered small entities

for RFA purposes are never required to report any swap creation data.

Under the CEA, a non-SD/MSP counterparty is required to transact on a

SEF or DCM unless that non-SD/MSP is an Eligible Contract Participant

(``ECP'').\51\ The Commission

[[Page 35214]]

has previously determined that ECPs are not ``small entities'' for RFA

purposes.\52\ For all swaps executed on a SEF or DCM, the final rule

requires the SEF or DCM to report all required swap creation data.

Therefore, no ``small entities'' for RFA purposes are required to

report any swap creation data under the final rule.

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\51\ CEA section 2(e) provides that ``It shall be unlawful for

any person, other than an eligible contract participant, to enter

into a swap unless the swap is entered into on, or subject to the

rules of, a board of trade designated as a contract market under

section 5.'' Congress created the ECP category in the Commodity

Futures Modernization Act in 2000, to include individuals and

entities that Congress determined to be sufficiently sophisticated

in financial matters that they should be permitted to trade over-

the-counter swaps without the protection of federal regulation. See,

e.g., ``Report of the President's Working Group on Financial

Markets'' (Nov. 1999) at 16 (recommending that ``sophisticated

counterparties that use OTC derivatives simply do not require the

same protections under the CEA as those required by retail

investors''). In the Dodd-Frank Act, Congress made two changes to

the statutory ECP definition, both of which increased the thresholds

to qualify as an ECP, making it harder for some entities and

individuals to qualify. Compare CEA section 1a(12), 7 U.S.C. 1a(12)

(2009), with Sec. Sec. 721(a)(1) and (9) of the Dodd-Frank Act,

respectively redesignating section 1a(12) as section 1a(18) and

increasing thresholds for certain categories of ECP.

\52\ 66 FR 20740, 20743, Apr. 25, 2001.

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In the NOPR, the Chairman, on behalf of the Commission, certified

that the rulemaking would not have a significant economic effect on a

substantial number of small entities. Nonetheless, the Commission

specifically requested comment on the impact these proposed rules may

have on small entities. The Commission received one comment on its RFA

statement, from the Electric Coalition, stating that the vast majority

of members of the National Rural Electric Cooperative Association and

the American Public Power Association are considered small entities for

purposes of the RFA. The Electric Coalition recommended that the

Commission should consider the overall impact of its Dodd-Frank Act

rules on nonfinancial entities, including small entities, and conduct a

comprehensive analysis under the RFA.

In response to this comment, and to other comments by non-SD/MSP

counterparties, the Commission has adjusted the final reporting regime

to reduce burdens and costs for non-SD/MSP counterparties in a variety

of ways, as set forth in detail in the discussion above concerning

Sec. Sec. 45.3 and 45.4 of the final rule. The Commission notes that

the commenter did not dispute the reasons for the Commission's

conclusion that this part does not have a significant impact on a

substantial number of small entities. For these reasons, and for the

reasons stated above and in the NOPR, the Commission continues to

believe that this part will not have a significant impact on a

substantial number of small entities. Therefore, the Chairman, on

behalf of the Commission, hereby certifies, pursuant to 5 U.S.C.

605(b), that this part as finally adopted will not have a significant

economic impact on a substantial number of small entities.

B. Paperwork Reduction Act

1. Introduction

An agency may not conduct or sponsor, and a person is not required

to respond to, a collection of information unless it displays a

currently valid control number issued by the Office of Management and

Budget (``OMB''). Provisions of Commission Regulations 46.2, 46.3,

46.4, 45.8, 45.10 and 45.11 result in information collection

requirements within the meaning of the Paperwork Reduction Act

(``PRA'').\53\ The Commission submitted the NOPR and supporting

documentation to OMB for review in accordance with 44 U.S.C. 3507(d)

and 5 CFR 1320.11. The Commission requested that OMB approve, and

assign a new control number for, the collections of information covered

by the NOPR.

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\53\ 44 U.S.C. 3301 et. seq.

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The title for the proposed collection of information under part 46

is ``Swap Data Recordkeeping and Reporting: Pre-Enactment and

Transition Swaps.'' The OMB has assigned this collection control number

3038-0089. The responses to this new collection of information are

mandatory. The Commission will protect proprietary information

according to the Freedom of Information Act and 17 CFR part 145,

``Commission Records and Information.'' In addition, section 8(a)(1) of

the Act strictly prohibits the Commission, unless specifically

authorized by the Act, from making public ``data and information that

would separately disclose the business transactions or market positions

of any person and trade secrets or names of customers.'' The Commission

also is required to protect certain information contained in a

government system of records according to the Privacy Act of 1974, 5

U.S.C. 552a.

2. Need for Information Collection

To the extent that the recordkeeping and reporting requirements in

this rulemaking overlap with the requirements of other rulemakings for

which the Commission prepared and submitted an information collection

request to OMB, the burdens associated with those requirements are not

being accounted for in the information collection request for this

rulemaking, to avoid unnecessary duplication of information collection

burdens.

The collection of information under these regulations is necessary

to implement certain provisions of the CEA, as amended by the Dodd-

Frank Act. Specifically, it is essential to reducing risk, achieve

market transparency, and for market supervision purposes for which the

Dodd-Frank Act was enacted. Such data will be needed to give the

Commission a complete picture of the swap market. Data concerning

historical swaps also is necessary for the Commission to prepare the

semi-annual reports it is required to provide to Congress regarding the

swap market.

3. Comment on Proposed Information Collection

The Commission invited the public and other federal agencies to

comment on any aspect of the reporting and recordkeeping burdens

estimates. There was one comment from Encana relating to the collection

of information estimates. Encana commented that the 10 hour one-time

burden estimate in the proposal for non-reporting entities was too low.

The Commission addresses this and other related comments as follows.

Under the final rules, the Commission has revised its estimates

provided for in the proposal for reporting entities and persons who

will provide information under sections 46.2, 46.3, 46.4, 45.8, 45.10

and 45.11 of this part. The information provided under each regulation

is set forth below, together with burden estimates that were

calculated, through research and through consultation with the

Commission's technology staff, using wage rate estimates based on

salary information for the securities industry compiled by the

Securities Industry and Financial Markets Association (``SIFMA'').\54\

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\54\ These wage estimates are derived from an industry-wide

survey of participants and thus reflect an average across entities;

the Commission notes that the actual costs for any individual

company or sector may vary from the average. The Commission

estimated the dollar costs of hourly burdens for each type of

professional using the following calculations:

(1) [(2009 salary + bonus) * (salary growth per professional

type, 2009-2010)] = Estimated 2010 total annual compensation. The

most recent data provided by the SIFMA report describe the 2009

total compensation (salary + bonus) by professional type, the growth

in base salary from 2009 to 2010 for each professional type, and the

2010 base salary for each professional type; thus, the Commission

estimated the 2010 total compensation for each professional type,

but, in the absence of similarly granular data on salary growth or

compensation from 2010 to 2011 and beyond, did not estimate dollar

costs beyond 2010.

(2) [(Estimated 2010 total annual compensation)/(1,800 annual

work hours)] = Hourly wage per professional type.]

(3) [Hourly wage) * (Adjustment factor for overhead and other

benefits, which the Commission has estimated to be 1.3)] = Adjusted

hourly wage per professional type.]

(4) [(Adjusted hourly wage) * (Estimated hour burden for

compliance)] = Dollar cost of compliance for each hour burden

estimate per professional type.]

The sum of each of these calculations for all professional types

involved in compliance with a given element of the final rule

represents the total cost for each counterparty, reporting

counterparty, SD, MSP, SEF, DCM, or SDR, as applicable to that

element of the final rule.

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[[Page 35215]]

4. Recordkeeping Burdens

Section 46.2. Under Sec. 46.2, counterparties to a swap unexpired

on or after April 25, 2011 are required to keep records containing

minimum primary economic terms data, and (if they have them)

confirmation documentation, master agreements, credit support or

similar agreements, and any records required by Sec. 45.2 if the swap

remains unexpired after the compliance date. The final rules allow

counterparties to keep either paper or electronic records as long as

they are reportable but require swap dealers and major swap

participants to keep electronic records unless their paper records were

``originally created and exclusively maintained'' in paper form.

For historical swaps that expired prior to April 25, 2011, the

final rules require that each counterparty ``retain the information and

documents relating to the terms of the transaction that were possessed

by the counterparty on or after the publication date of the relevant

Interim Final Rule (October 14, 2010 for pre-enactment swaps and

December 17, 2010 for transition swaps). They do not require

counterparties to create or confirm any data that they possessed prior

to October 14, 2010 for pre-enactment swaps or December 17, 2010 for

transition swaps. The Commission has not calculated the burden for this

requirement to the extent the Commission has previously calculated such

burden in the PRA analyses for the Interim Final Rules covering ``pre-

enactment swaps'' and ``transition swaps.''

For historical swaps still in existence on or after April 25, 2011,

the final rules require that records kept by swap dealers or major swap

participants be readily accessible via real time electronic access

throughout the life of the swap and for two years following

termination. Following this two year-post expiration period, the final

rules require that records be retrievable within three business days

``through the remainder of the period following final termination of

the swap during which it is required to be kept.'' For records

maintained by non-SD/MSP counterparties the final rules require that

they be retrievable within five business days ``through the remainder

of the period following final termination of the swap during which it

is required to be kept.'' The Commission has calculated the

recordkeeping burden for the time period beginning on or after April

25, 2011, and ending on the compliance date; the burden occurring after

the compliance date having been already considered in the Commission's

final swap data rules.\55\

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\55\ These are one-time recordkeeping costs, which necessarily

take place in the period prior to the compliance date; therefore,

the applicable recordkeeping burden applies during the period

between the publication date and compliance date of Part 46, rather

than the one year noted in the proposal.

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The Commission believes that some percentage of the estimated

30,000 non-SD/MSP counterparties who would be subject to the

recordkeeping requirements of section 46.2 would contract with third-

party service providers to fulfill these requirements, and would

therefore pay some fee to such providers in lieu of incurring the

Commission's estimated costs of reporting. The identity of such third

parties, the composition of the marketplace for third party services,

and the costs to third parties to provide recordkeeping services given

the economies of scale and scope they may realize in providing those

services are all presently unknowable. Therefore, the Commission does

not believe it is feasible to quantify the fees charged by third

parties to non-SD/MSPs at the present time, but believes that they will

likely vary with the volume of records to be retained. The remaining

non-SD/MSP counterparties would elect to perform these functions

themselves and incur the costs enumerated below.\56\ The Commission

notes that this final rule allows non-SD/MSP counterparties to retain

records in either an electronic or paper form, which will facilitate

recordkeeping for less technologically resourced counterparties, who

will likely choose to retain the records in the form in which they

currently exist. For historical swaps still in existence on or after

April 25, 2011, non-SD/MSP counterparties will already be required to

normalize the data for those swaps to the minimum PET data tables, and

the burdens associated with this task are addressed in the discussion

of reporting burdens below; however, the recordkeeping requirements of

section 46.2 do not require non-SD/MSP counterparties to retroactively

revise or recreate data for those swaps. Non-SD/MSP counterparties will

therefore not be required to manipulate, move, or update swap records

in any way to comply with the recordkeeping requirements of the final

rule; accordingly, the Commission believes that the recordkeeping

requirements of this final rule will not impose costs on non-SD/MSP

counterparties.\57\

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\56\ The proposed rule estimated an average one-time per-entity

burden of 40 hours (for SD/MSP reporting counterparties) and 10

hours (for non-SD/MSP counterparties). These estimates have been

revised following additional research by OCE staff and consultation

with staff in the Commission's Office of Data and Technology.

\57\ The Commission estimates that the percentage of non-SD/MSP

counterparties that will contract with a third-party service

provider to perform this function will likely be very low, given

that the Commission has estimated that the recordkeeping

requirements of section 46.2 would not impose costs on non-SD/MSP

counterparties, which would not be required to manipulate, move, or

update records, and would therefore not present a burden that could

be more efficiently satisfied by contracting with a third-party

service provider. Nevertheless, the Commission recognizes that some

non-SD/MSP counterparties may contract with third-party service

providers for a variety of regulatory compliance services, and may

elect to engage a third-party service provider to manage its

historical swap records, either as an individual service to satisfy

the recordkeeping requirements of section 46.2, as part of a broader

set of data management services for regulatory compliance, or to

otherwise facilitate its own internal recordkeeping.

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With respect to SDs and MSPs (an estimated 125 entities or

persons),\58\ which will have higher levels of swap recording activity

\59\ than non-SD/MSP counterparties, the Commission estimates that this

requirement would impose an initial non-recurring burden of 335 hours

per SD/MSP reporting counterparty at a cost of $22,172, equating to an

aggregate estimated one-time burden of 41,875 hours at a cost of

$2,771,500 for all SD/MSP reporting counterparties. The Commission also

estimates that Sec. 46.2 will result in retrieval costs for swap

counterparties that do not currently have the ability to retrieve

records within the required timeframe. The Commission expects that this

requirement will present costs to registered entities and swap

counterparties in the form of non-recurring investments in

technological systems and personnel associated with establishing data

retrieval processes, and recurring expenses associated with the actual

retrieval of swap data records. These same costs (including non-

recurring investments in technological

[[Page 35216]]

systems and personnel associated with establishing data storage and

retrieval systems, and recurring expenses associated with data storage

and retrieval, and maintenance of data storage systems), however, are

required to comply with the requirements of part 45. Accordingly, they

are not incremental to, and inappropriate for, consideration in this

rulemaking.\60\

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\58\ The Commission previously estimated that as many as 250 SDs

and 50 MSPs would register. After recently receiving additional

information, particularly a letter from Thomas Sexton, NFA Senior

Vice President and General Counsel to Gary Barnett, Director of the

Division of Swap Dealer and Intermediary Oversight, the Commission

is revising its estimate downward. Accordingly, the Commission now

believes that approximately 125 Swaps Entities, including only a

handful of MSPs, will register with the Commission as SDs or MSPs.

\59\ For purposes of this Paperwork Reduction Act analysis, the

Commission estimates that ``high activity'' entities or persons are

those who process or enter into hundreds or thousands of swaps per

week that are subject to the jurisdiction of the Commission. Low

activity users would be those who process or enter into

substantially fewer than the high activity users.

\60\ These are one-time recordkeeping costs, which necessarily

take place in the period prior to the compliance date. For the

purposes of this rulemaking, the Commission has considered only the

one-time costs associated with recordkeeping; as noted in the Part

46 Consideration of Costs and Benefits section, the forward-looking

(recurring) costs associated with recordkeeping are already covered

by the recurring costs of recordkeeping enumerated in the Part 45

Consideration of Costs and Benefits section. See Final Data Rules,

77 FR 2136, 2171.

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5. Reporting Burdens

Sections 46.3, 46.4, 46.8, 46.10 and 46.11. Pursuant to Sec. Sec.

46.3 and 46.4, each historical swap in existence on or after April 25,

2011 will be reported to an SDR electronically [on or before the

applicable compliance date], or to the Commission if no SDR accepts

such a swap under Sec. 46.8. The initial data report must contain all

of the minimum primary economic terms data listed in Appendix 1 that

were in the possession of the reporting counterparty on or after April

25, 2011, the legal entity identifier of the reporting counterparty,

the internal counterparty identifier used by the reporting counterparty

to identify the non-reporting counterparty, and the internal

transaction identifier used by the reporting counterparty to identify

the swap. For each such swap that remains in existence after the

compliance date, the reporting counterparty must report swap

continuation data as provided in part 45 of this chapter, with the

exception that such reports need only include changes to the minimum

primary economic terms listed in Appendix 1 to this part, rather than

changes to the larger list of primary economic terms provided in part

45. Continuation data must be reported to the same SDR which received

the initial data report. In parallel with part 45 of this chapter, the

final rule provides that multi-asset historical swaps must be reported

to a single SDR that accepts swaps in the asset class that is treated

as the primary asset class involved in the swap by the reporting

counterparty; and provides that mixed historical swaps must be reported

to an SDR or security-based SDR registered with both the Commission and

the SEC.

For historical swaps that expired prior to April 25, 2011, the

final rules require that counterparties report to a SDR on the

compliance date such information relating to the terms of the

transaction as was in the counterparty's possession on or after the

publication date of the relevant Interim Final Rule (October 14, 2010

for pre-enactment swaps and December 17, 2010 in the case of transition

swaps.) This information may be reported via any method selected by the

reporting counterparty. The Commission has not calculated the burden

for this requirement to the extent the Commission has previously

calculated such burden in the PRA analyses for the Interim Final Rule

covering ``pre-enactment swaps'' and ``transition swaps.''

For historical swaps still in existence on or after April 25, 2011,

the Commission anticipates that the reporting required by Sec. Sec.

46.3 and 46.4 will to a significant extent be automatically completed

by electronic computer systems; the following burden hours are

calculated based on the annual burden hours necessary to oversee,

maintain, and utilize the reporting functionality. SDs and MSPs (an

estimated 125 entities or persons) are anticipated to have high levels

of reporting activity; the Commission estimates that their average one-

time burden may be approximately 285 hours per MSP or SD reporting

counterparty at a cost of $20,169,\61\ equating to an estimated one-

time aggregate burden of 35,625 hours at a cost of $2,521,125 for all

SD/MSP reporting counterparties. The Commission believes that this is a

reasonable assumption due to the volume of swap transactions that will

be processed or entered into by these entities, the varied nature of

the information required to be reported, and the frequency with which

information may be required to be reported.\62\

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\61\ The Commission obtained this estimate in consultation with

the Commission's information technology staff.

\62\ The estimated burden hours have been adjusted from the

proposal. The estimated burden hours were obtained in consultation

with the Commission's information technology staff.

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Non-SD/MSP counterparties who would be required to report--which

presently would include an estimated 1,000 entities \63\--are

anticipated to have lower levels of activity with respect to reporting.

Of those 1,000 non-SD/MSPs, the Commission believes that a majority,

estimated now at 75%, or 750 entities, will contract with third parties

to satisfy their reporting obligations. The identity of such third

parties, the composition of the marketplace for third party services,

and the costs to third parties to provide reporting services given the

economies of scale and scope they may realize in providing those

services are all presently unknowable. Therefore, the Commission does

not believe it is feasibly to quantify the fees charged by third

parties to non-SD/MSPs at the present time, but believes that they will

likely vary with the volume of reports to be made. For those estimated

250 non-SDs/non-MSPs who are required to report swap transaction and

pricing data to an SDR and do not contract with a third party, the

Commission estimates a one-time burden of 55 hours per non-SD/MSP

reporting counterparty at a cost of $4,191, equating to an aggregate

estimated one-time burden of 13,750 hours at a cost of $1,047,750 for

all non-SD/MSP reporting counterparties that do not contract with a

third party.\64\ For swaps unexpired on or after April 25, 2011, the

reporting counterparty shall obtain for itself an LEI as provided in

Sec. 45.6 (or substitute LEI if applicable) and include such

identifier in the relevant initial report. Within 180 days of the

compliance date non-reporting counterparties must provide their LEI (or

substitute if applicable) to the reporting counterparty, which then

must report it to the relevant SDR, as set forth in part 45. Final

Sec. 46.5 sets forth the criteria for determining which counterparty

must report. For unexpired swaps the provisions apply to the current

counterparties as of the compliance date, notwithstanding whether they

were the original counterparties.

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\63\ The estimated burden hours have been adjusted from the

proposal. This is the estimated number of non-SD/MSP counterparties

who will be required to report in a given year. Only one

counterparty to a swap is required to report, typically an SD or a

MSP as determined by Sec. 45.8. Therefore, a non-SD/MSP

counterparty that is in a swap with an SD or MSP counterparty will

not be subject to the reporting obligations of Sec. Sec. 45.3 and

45.4.

\64\ In the event that all estimated 1,000 non-SD/MSP reporting

counterparties elect to perform their reporting functions

themselves, rather than contract with a third-party service

provider, the aggregate burden would be 55,000 hours at a cost of

$4,191,000.

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Final Sec. 46.9 permits voluntary early submission of the initial

data report (and of subsequent continuation data reports) prior to the

applicable compliance date if a registered SDR is prepared to accept

the reports and Sec. 46.10 require that each counterparty use the

``facilities, methods, or data standards provided for or required by''

the SDR to which the counterparty reports the data. Final Sec. 46.11

also requires that corrections be reported ``as soon as technologically

practicable'' to the applicable SDR in the same format that data was

reported erroneously or omitted. It provides that reporting

counterparties who report state data can report error corrections by

updating

[[Page 35217]]

their next daily report. Recordkeeping and reporting requirements that

exist after compliance dates and those of Sec. Sec. 46.9, 46.10 and

46.11 are covered by other rulemakings for which the Commission

prepared and submitted an information collection request to OMB, the

burdens associated with those requirements are not being accounted for

in the information collection request for this rulemaking.\65\

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\65\ Costs associated with reporting are already covered by the

Part 45 rules. See Data Final Rules, 77 FR 2136, 2171.

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C. Consideration of Costs and Benefits

1. Introduction

The Dodd-Frank Act's swap reporting requirements apply to all swaps

in existence on or after the date of the legislation's enactment.

Previously, in its separate Part 45 rulemaking, the Commission adopted

final rules to implement the data reporting and recordkeeping

requirements for swaps entered into on or after the applicable

compliance date specified in Part 45. This final Part 46 rulemaking

implements the mandate of sections 723 and 729 of the Dodd-Frank Act

\66\ requiring that data be reported to SDRs for historical swaps. In

so doing, the final rule specifies the Commission's recordkeeping

requirements with respect to historical swaps; and specifies the manner

and form for reporting historical swap transaction data to an SDR,

including the identification of entities and transactions through

unique identifiers.

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\66\ These sections established new sections 2(h)(5) and

4r(a)(2)(A) of the CEA, respectively. This rulemaking is undertaken

to implement those two CEA sections. They are discussed in greater

detail in section [ ], supra, including their interrelationship and

the import of the Commission's October 14, 2010 and December 17,

2010 Part 44 interim final rules.

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As discussed in more detail below, the requirements of Part 46,

working in tandem with Part 45, will enhance swaps market transparency

beyond the level afforded by Part 45 alone; this enriches its value to

regulators for the ultimate benefit of swap market participants and the

general public. More specifically, the benefits of the improved

transparency engendered by this rule include improved regulatory

oversight of markets (with respect to surveillance, enforcement, and

analysis); improved regulatory understanding of the behavior of swap

market participants; improved regulatory understanding of the

concentrations of risk in swap markets; and greater market integrity.

In addition, the requirements of the regulation, in tandem with the

requirements of Part 45, promote the development of firm-level

infrastructure and practices well-suited to improve market

participants' risk management capabilities. Further, market

participants will be able to use data associated with their own

historical swaps for which continuation data reporting extends past the

Part 45 compliance date to better understand and manage the risk

associated with their swap exposure.

The Commission also recognizes that compliance with these rules

will impose costs. However, because certain non-SD/MSP counterparties

are subject to the Commission's part 45 regulations, which impose swap

data recordkeeping and reporting requirements similar in certain key

respects to those of part 46, the Commission does not consider

expenditures to be costs of this regulation if they are also required

to comply with part 45. These expenditures would only constitute costs

of this final rule, independent of the costs of part 45, in the case of

a market participant that exits the swap market entirely immediately

following the part 45 compliance date.\67\ Such an entity would not be

required to comply with part 45, having no active swap data to report,

but would still be required to report its historical swap data pursuant

to part 46, because it was active during the pre-compliance date time

period affected by this rule. The Commission cannot presently estimate

the number of entities that may exit the swap market immediately after

the compliance date.

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\67\ For discussion of costs of compliance with part 45, see 77

FR 2136 (January 13, 2012) at 2176 et seq.

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The two chief cost-driver categories in this final rulemaking are

recordkeeping and reporting (including unique identifier requirements).

For both categories, the Commission identifies the costs and benefits

of the final rule, discusses comments regarding them, and considers

them in relation to the five broad areas of market and public concern

as required by section 15(a) of the CEA.

a. Section 15(a) of the CEA

Section 15(a) of the CEA \68\ requires the Commission to consider

the costs and benefits of its actions before promulgating a regulation

under the CEA or issuing an order. Section 15(a) further specifies that

the costs and benefits shall be evaluated in light of the following

five broad areas of market and public concern: (1) Protection of market

participants and the public; (2) efficiency, competitiveness, and

financial integrity of futures markets; (3) price discovery; (4) sound

risk management practices; and (5) other public interest

considerations. Accordingly, the Commission considers is the costs and

benefits resulting from its discretionary determinations with respect

to the Section 15(a) factors.

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\68\ 7 U.S.C. 19(a).

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b. Cost Estimation Methodology

In the NOPR, the Commission asked for public comment on the costs

and benefits of the proposed regulations, and specifically invited

commenters ``to submit any data or other information that they may have

quantifying or qualifying the costs and benefits'' of the proposed

requirements.\69\ The Commission also asked for comments on the overall

costs and benefits of the proposed rules implementing the Dodd-Frank

Act.\70\ The Commission received numerous comments addressing various

cost and benefit considerations of the proposed rule, including several

that recommended alternatives, but none provided data from which the

costs and benefits of the rule could be quantified. Nevertheless, the

Commission has endeavored to estimate quantifiable costs and benefits

of the final rule where possible.\71\ Where estimation or

quantification is not feasible, the Commission provides a qualitative

assessment of the costs and benefits.

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\69\ 75 FR 76574 (December 8, 2010), at 76597.

\70\ Id.

\71\ The Commission made these estimates in consultation with

experts on its information technology staff through a collaborative

process that involved determining the types of personnel needed to

complete each aspect of the tasks necessary for compliance,

determining the number of hours required of each of those personnel

types, and comparing the burden estimates for separate tasks to

identify and eliminate any redundancies.

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The Part 46 final rules will affect three types of market

participants, including SD/MSP counterparties, non-SD/MSP

counterparties, and SDRs. To serve as the reference point for

estimating the costs of these rules to non-SD/MSP counterparties, the

Commission selected a non-SD/MSP counterparty that is not a financial

entity as defined in CEA section (2)(h)(7)(C).\72\

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\72\ To aid in cost estimates, the Commission at times has used

wage rate estimates compiled by the Securities Industry and

Financial Markets Association (``SIFMA''). These wage estimates are

derived from a securities industry-wide survey of participants and

thus reflect an average across entities; the Commission notes that

the actual costs for any individual company or sector may differ.

The Commission estimated the dollar costs of hourly burdens for

each type of professional using the following calculations:

(5) [(2009 salary + bonus) * (salary growth per professional

type, 2009-2010)] = Estimated 2010 total annual compensation. The

most recent data provided by the SIFMA report describe the 2009

total compensation (salary + bonus) by professional type, the growth

in base salary from 2009 to 2010 for each professional type, and the

2010 base salary for each professional type; using this, the

Commission estimated the 2010 total compensation for each

professional type. In the absence of similar data for 2011 and

beyond, the Commission did not estimate dollar costs beyond 2010.

(6) [(Estimated 2010 total annual compensation)/(1,800 annual

work hours)] = Hourly wage per professional type.

(7) [(Hourly wage) * (Adjustment factor for overhead and other

benefits, which the Commission has estimated to be 1.3)] = Adjusted

hourly wage per professional type.

(8) [(Adjusted hourly wage) * (Estimated hour burden for

compliance)] = Dollar cost of compliance for each hour burden

estimate per professional type.

The sum of each of these calculations for all professional types

involved in compliance with a given element of the final rule

represents the total cost for each counterparty, reporting party,

SD, MSP, SEF, DCM, or SDR, as applicable to that element of the

final rule.

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[[Page 35218]]

The Commission expects that the actual costs to established market

participants will often be lower than this reference point--perhaps

significantly so, depending on the extent to which swap counterparties

currently format, organize, and store swap transaction data that would

be reported as historical swap data pursuant to this final rule.

To address costs specific to SDRs, the Commission has estimated the

incremental costs SDRs would incur to comply with the reporting and

recordkeeping requirements of this rulemaking above the base operating

costs for SDRs to comply with part 45 regulations.\73\

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\73\ Again, because these costs have been considered in the

context of the part 45 rulemaking, to reconsider them in this

rulemaking would double-count them.

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2. Recordkeeping

a. Summary of Final Rule

The final rule requires counterparties to a historical swap in

existence on or after April 25, 2011 to keep records of the minimum

primary economic terms data specified in the Appendix to the rule, as

well as copies (if they have them) of confirmation documentation,

master agreements, credit support or similar agreements. If the swap

remains unexpired after the applicable compliance date, counterparties

must also keep any records required by section 45.2 of this chapter.

Non-SD counterparties may keep records in either paper or electronic

form so long as they are retrievable and reportable as required, while

SD or MSP counterparties must keep electronic records unless their

paper records were originally created and are exclusively maintained in

paper form. Records kept by SDs and MSPs must be readily accessible

during the existence of the swap and for two years thereafter, and be

retrievable within three business days during the remainder of the

retention period, while records kept by non-SD/MSP counterparties must

be retrievable within five business days throughout the retention

period.

For historical swaps that expired prior to April 25, 2011, each

counterparty must retain the information and documents relating to the

terms of the transaction that were in its possession on or after the

date of the relevant Interim Final Rule (October 14, 2010 for pre-

enactment swaps and December 17, 2010 for transition swaps). The final

rule does not require counterparties to create or retain records of

information regarding such swaps that was not in their possession as of

those dates, or to alter how the records are organized or stored.

For all historical swaps, the final rule requires retention of

records throughout the existence of the swap and for five years

following expiration of the swap.

b. Benefits

By providing for the collection and retention of historical swap

data (as well as its reporting), part 46 ensures the availability of

data that will enhance the transparency of the swap markets. The

Commission believes that improved swap market transparency (including

transparency with respect to the historical swap transaction activity

subject to Part 46's recordkeeping requirements) is important to the

Commission's efforts to better identify, assess, and respond to risks,

including systemic risks that swaps market may pose for market

participants and the public in the future. The recordkeeping

requirements of part 46 will increase the Commission's and other

regulatory agencies' visibility into the activities and exposures of

swap market participants and the dynamics of the swap market at large.

This serves the public interest in effective regulatory enforcement.

These recordkeeping requirements will enable Commission oversight and

enforcement staff to reconstruct a comprehensive, sequenced record of

swap transactions active between the enactment of the Dodd-Frank Act

and this final rule's compliance date. This data is necessary to

effectively monitor and investigate activities that could compromise

the integrity of swap markets. Additionally, the presence of an

effective monitoring and investigation regime may deter parties from

engaging in behavior that undermines the integrity of swap markets.

In addition, the requirement to retain historical swap records for

five years provides substantial benefit to market participants and the

public because it affords the Commission the capability to analyze

market trends through time-series analysis for a reasonable period of

time in the future. This in turn enhances the Commission's ability to

efficiently regulate the markets subject to its jurisdiction. A swap

can continue to exist for a substantial period of time prior to its

final termination or expiration, and key economic terms of the swap can

change during this time. Thus, recordkeeping requirements with respect

to a swap must necessarily cover the entire period of time during which

the swap exists, as well as an appropriate period following final

termination or expiration of the swap. A five-year retention period

following termination of the swap also will ensure document retention

consistent with the information that the Commission needs to carry out

its oversight and enforcement responsibilities. It parallels the

Commission's existing five-year record retention requirement in the

context of futures and is consistent with the Commission's final part

49 rules regarding SDR registration. The identical retention periods

provided in parts 45 and 46 will ensure that a single, comprehensive

record is produced in the event that regulators require a data set

spanning both Part 45 and Part 46 data. Additionally, data collected on

swap market activity both before and after the compliance date of part

45 and part 46 will be available to inform any pre/post-Dodd-Frank Act

comparative analysis that might be performed in the future. Part 46

data would provide the starting point for such an assessment.

c. Costs

The Commission believes that the incremental\74\ costs to comply

with the recordkeeping requirements of this part are limited to those

related to historical swap data storage. The rules do not require

counterparties to recreate data that does not presently exist, and thus

imposes no costs in this respect.\75\

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\74\ Swap counterparties that currently do not retain historical

swap records for the period of time and in the form required by this

final rule will incur costs to comply with these requirements. These

same costs (including non-recurring investments in technological

systems and personnel associated with establishing data storage and

retrieval systems, and recurring expenses associated with data

storage and retrieval, and maintenance of data storage systems),

however, are required to comply with the requirements of part 45.

Accordingly, they are not incremental to, and inappropriate for,

consideration in this rulemaking.

\75\ For pre-enactment swaps, the rule allows swap

counterparties to retain swap data in whatever form it currently

exists. For transition swaps, the rule only requires the retention

of data to populate the minimum PET data tables for swaps that were

in existence after the issuance of the proposed rule.

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[[Page 35219]]

The Commission believes that any incremental costs will be incurred

primarily by SD/MSP swap counterparties, which are required to retain

historical swap data according to the format and retrieval requirements

of Sec. 46.2. The costs to SDRs of retaining historical swap data

reported by swap counterparties pursuant to this final rule will be

addressed in the discussion of the costs and benefits of reporting

historical swap data in this Consideration of Costs and Benefits.

Historical swap data storage. The Commission believes that storing

historical swap data for the period of time required by this final rule

will impose a one-time burden on swap counterparties associated with

gathering and transferring the historical swap data onto a server for

secure storage.\76\

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\76\ While swap counterparties also may have costs to maintain

data storage infrastructure and/or costs to require the necessary

data retrieval ability, these costs duplicate those that would be

incurred to comply with part 45. Accordingly, they are not

incremental to, and appropriate for, consideration in this

rulemaking.

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Non-SD/MSP counterparties are permitted by the rule to keep records

in either electronic or paper form at their discretion, so as to

eliminate the burden of gathering and transferring historical swap data

for recordkeeping. To satisfy the recordkeeping provision of this final

rule, non-SD/MSP counterparties can simply retain their records as and

wherever they currently exist.

For SD/MSPs, the Commission estimates a one-time burden of 335

hours per SD/MSP counterparty\77\ at an estimated cost of $22,172.\78\

The Commission anticipates that SD/MSPs will likely be required to

process a larger volume of historical swap data than non-SD/MSPs,

though many may be able to leverage existing technology and personnel

expertise to reduce the burden to perform this function.

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\77\ The costs of historical swap data storage were estimated

based on the costs to SD/MSPs that decide not to contract with a

third party to comply with the recordkeeping requirements of Part

46. See ``Overview of Cost Calculations.'' This estimate is

calculated as follows: [(Computer Operations Supervisor at 80 hours)

+ (Computer Operations Group/Section Manager at 80 hours) +

(Computer Operations Department Manager at 40 hours) + (Sr. Database

Administrator at 40 hours) + (Programmer at 40 hours) + (Systems

Analyst at 20 hours) + (Compliance Manager at 10 hours) + (Director

of Compliance at 5 hours) + (Compliance Attorney at 20 hours)] = 335

hours per SD/MSP counterparty; [(335 hours per SD/MSP) x (125 SD/

MSPs) = 41,875 aggregate hours. The Commission believes that

information on swap transactions is currently being retained by many

market participants in the ordinary course of business, which may

result in lesser burden for those parties.

\78\ See Table 2.

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d. Comments, Alternatives, and Cost Mitigation

Recordkeeping for historical swaps in existence on or after April

25, 2011. The Commission received several comments related to the costs

of recordkeeping for swaps in existence on or after April 25, 2011.

COPE supported the NOPR provision that limited the records required to

be kept for such swaps to the minimum PET data specified in the NOPR

Appendix (plus any confirmation, master agreement, or credit support

agreement that the counterparty has), stating this is a reasonable

requirement. COPE added that the specified PET data elements reflect

the commercially relevant terms typically retained by swap

counterparties, although a counterparty involved in few swaps might not

retain all of this data in the ordinary course of its business. ETA

also supported the requirement to keep records of the specified minimum

PET data, stating that it believes all or most counterparties will have

this data, although it could not be certain that all smaller non-

financial entities in the energy sector will have all of it.

As noted above, ISDA and Global Forex requested that the Commission

eliminate the time of trade from the NOPR's required PET data, arguing

that including the time of trade would require some participants to

retroactively create data they do not possess. FSR stated that its

members have made best efforts to comply with the interim final rules

for historical swaps by retaining the records in their possession, but

that they do not necessarily have all of the required minimum PET data.

The specific concerns FSR raised include identifying the settlement

agent for pre-enactment currency swaps, and having data for pre-

enactment swaps that were acquired through merger or acquisition.

The Commission made two important modifications in the final rule

in an effort to address these comments and mitigate the costs of the

final rule while achieve the same regulatory benefits.

First, as discussed above, the final rule requires counterparties

to keep records of only the minimum PET data specified in Appendix 1

that was in their possession as of publication of the NOPR, which gave

notice of what records would be required. The Commission believes that

this will reduce costs and burdens associated with recordkeeping by

counterparties to historical swaps to the extent consistent with

ensuring the availability of swap data needed to fulfill the purposes

of the Dodd-Frank Act.

Second, as discussed above, the final rule will require reporting

the date of execution for a historical swap, and require reporting the

time of execution only if that time was recorded when the trade was

executed and is known to the reporting counterparty on or after April

25, 2011, the NOPR publication date. As noted above, the Commission

believes that it would be undesirable for counterparties who did not

record the execution time when a historical swap was executed to

attempt to assign an execution time retroactively.

Recordkeeping for historical swaps expired prior to April 25, 2011.

ISDA noted that, for historical swaps expired prior to the publication

date of the NOPR, the NOPR does not require parties to alter the format

in which they already retain records concerning such swaps. ISDA asked

the Commission to clarify whether this requirement allowed

counterparties to keep records in the form already used. Similarly,

WGCEF requested clarification that keeping records in the form in which

they are already retained will be acceptable to the Commission for all

historical swaps.

As discussed above, and in order to achieve the benefits of the

rule, the Commission has determined that the final rule should retain

the NOPR provisions concerning limited recordkeeping for such swaps,

which required counterparties to keep only the information and

documents concerning such swaps that were in their possession on or

after the publication date of the applicable Interim Final Rule. The

final rule provides that counterparties may keep such records in any

format they choose. The retrievability requirement for all

counterparties to such swaps will require counterparties to be able to

retrieve such records within five business days throughout the

retention period, rather than to keep records readily accessible for

part of the retention period or to be able to retrieve records within

three business days, as provided in the NOPR. This reduced

retrievability requirement is designed to further reduce costs and

burdens for counterparties to historical swaps that have expired prior

to April 25, 2011.

e. Recordkeeping in Light of CEA Section 15(a)

The Commission has evaluated the benefits of the recordkeeping

provisions of this part in light of the specific considerations

identified in section 15(a) of the CEA as follows:

Protection of market participants and the public. The Commission

believes that the recordkeeping requirements in

[[Page 35220]]

the final rule protect market participants and the public by improving

the ability of the Commission and other regulatory agencies to fulfill

their oversight and enforcement responsibilities, and contributing to

improved transparency necessary to identify and assess risks that swaps

markets may pose.

The record retention periods in the final rule are consistent with

both the Commission's existing retention requirement in the context of

futures, pursuant to Commission Regulation 1.31, and with applicable

statutes of limitation. A general five-year record retention

requirement helps assure the Commission ready access to records and

data essential to its mission to protect market participants and the

public from violations of the CEA and Commission regulations. For

example, records retained pursuant to Part 46 will enable Commission

staff to reconstruct a comprehensive, sequenced record of swap

transactions active during the window between statutory enactment and

the final rule's compliance date for purposes of analysis;

investigation; and, if appropriate, prosecution of an enforcement

action.

Moreover, by providing for the collection and retention of

historical swap data (as well as its reporting), Part 46 assures that

data valuable to enrich the depth and perspective of regulators'

understanding of swap markets over time is available for reporting and

regulatory analysis. In this way, historical recordkeeping requirements

serve an important role in counteracting the swap market opacity and

potential for under-appreciation of systemic risk that contributed to

the financial crisis of 2008. The Commission believes that improved

swap market transparency (including transparency with respect to the

historical swap transaction activity subject to Part 46's recordkeeping

requirements) is critical to the Commission's efforts to better

identify, assess, and respond to risks that swap markets may pose for

market participants and the public in the future.

Efficiency, competitiveness, and financial integrity. This rule

promotes efficiency and competitiveness. The historical swaps

transaction data subject to these recordkeeping requirements will

provide a basis for comparative assessments of the swap markets that

might be conducted in the future (including potential comparative

assessments of market efficiency and competitiveness \79\). In

addition, electronic recordkeeping, which will aid required electronic

reporting, may improve efficiency and reduce initiation and maintenance

costs in the future.

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\79\ For example, such assessments may compare measures such as

the concentration of swap activity by type of market participant,

the volumes of cleared and uncleared swap transactions, or the

effective cost to the user of engaging in similar swap transactions

in the pre- and post-compliance marketplace.

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Further, the Commission believes that the final Part 46

recordkeeping requirements promote swap market financial integrity. As

previously discussed, the Commission believes that historical swap

transaction data as collected and retained under these final rules will

aid it in effective swap market oversight and legal enforcement,

including by helping to assure the availability of records needed to

monitor and investigate market abuses. Also, by ensuring a data pool

that provides historical swap transaction transparency to better inform

regulators' swap market analysis, the recordkeeping requirements serve

an important role in counteracting swap market opacity that, as

evidenced in the 2008 financial crisis, may contribute to a loss of

confidence in market integrity.

The Commission does not believe that costs of these recordkeeping

requirements will impede swaps market efficiency, competitiveness, or

integrity.

Price discovery. The Commission does not believe that this

requirement has a significant effect on the price discovery process.

Sound risk management practices. The Commission believes that the

final rule's recordkeeping requirements, in tandem with the

recordkeeping requirements of Part 45, will serve to improve the

soundness of the risk management practices of market participants. The

Commission is essentially requiring the maintenance of accurate records

in a manner that makes them appropriately available for reproduction to

regulators. Market participants may leverage the highly organized and

streamlined internal records system they will possess in order to

comply with Parts 45 and 46 for an ancillary risk management benefit;

the system will be useful for analysis and for development of enhanced

risk management practices.\80\ The cost of implementation of the

recordkeeping rule may be partially compensated by error avoidance and

the mitigation of internal risk.

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\80\ The Commission notes that non-SD/MSP counterparties will be

able to retain either electronic or paper records at their

discretion; if paper rather than electronic records are retained,

this system will not be necessary for compliance, and thus this

ancillary risk management benefit will not apply.

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3. Reporting

a. Summary of Final Rule

The final rule requires that each historical swap in existence on

or after April 25, 2011 be reported to a SDR electronically on or

before the applicable compliance date. The initial data report must

contain all of the minimum primary economic terms data listed in

Appendix 1 that were in the possession of the reporting counterparty on

or after April 25, 2011, the legal entity identifier of the reporting

counterparty, the internal counterparty identifier used by the

reporting counterparty to identify the non-reporting counterparty, and

the internal transaction identifier used by the reporting counterparty

to identify the swap. For each such swap that remains in existence

after the compliance date, the reporting counterparty must report swap

continuation data as provided in part 45 of this chapter, with the

exception that such reports need only include changes to the minimum

primary economic terms listed in Appendix 1 to this part, rather than

change to the larger list of primary economic terms provided in part

45. Continuation data must be reported to the same SDR that received

the initial data report. In parallel with part 45 of this chapter, the

final rule provides that multi-asset historical swaps must be reported

to a single SDR that accepts swaps in the asset class that is treated

as the primary asset class involved in the swap by the reporting

counterparty, and that mixed historical swaps must be reported to an

SDR or security-based SDR registered with both the Commission and the

SEC.

For historical swaps that expired prior to April 25, 2011, the

final rule requires that counterparties report to an SDR on the

applicable compliance date such information relating to the terms of

the transaction as was in the counterparty's possession on or after the

publication date of the relevant Interim Final Rule (October 14, 2010

for pre-enactment swaps and December 17, 2010 in the case of transition

swaps). This information may be reported via any method selected by the

reporting counterparty.

The rule permits voluntary early submission of the initial data

report (and of subsequent continuation data reports) prior to the

applicable compliance date if a registered SDR is prepared to accept

the reports.

For historical swaps in existence on or after April 25, 2011, by

the applicable compliance date the reporting counterparty must obtain,

report, and provide to its counterparty an LEI as

[[Page 35221]]

provided in part 45. Within 180 days of the applicable compliance date,

the non-reporting counterparty must obtain an LEI and provide it to the

reporting counterparty, which then must report it to the relevant SDR.

The final rule sets forth the criteria for determining which

counterparty must report. For historical swaps in existence on the

applicable compliance date, these provisions apply to the current

counterparties as of the compliance date, notwithstanding whether they

were the original counterparties. If only one counterparty is an SD,

the SD reports. If neither counterparty is an SD and only one is an

MSP, the MSP reports. If both counterparties are non-SD/MSP

counterparties, and only one is a financial entity as defined in CEA

section 2(h)(7)(C), the financial entity reports. If the counterparties

share the same status, the rule requires them to agree which of them is

the reporting counterparty for that swap. If both counterparties are

non-SD/MSP counterparties but only one is a U.S. person, the U.S person

must report. After the initial data report is made, if the reporting

counterparty exits the original transaction (e.g., through an

assignment), the new reporting counterparty will be: The SD (or the MSP

if there is no SD) if only one is present; the U.S. person if both

counterparties are non-SD/MSP counterparties and only one is a U.S.

person; or, in all other cases, the counterparty that replaced the

previous reporting counterparty, unless otherwise agreed by the

counterparties.

The final rule provides for third-party facilitation of reporting.

It also requires that all data for a historical swap must be reported

to the same SDR to which the initial data report is made. It permits

either counterparty to make voluntary supplemental reports (``VSRs''),

to either the same or a different SDR. To provide minimum safeguards

against confusion or double-counting resulting from VSRs, the rule

requires that each VSR must include an indication that it is a VSR, as

well as the SDR identifier created for the swap by the automated

systems of the SDR to which the required, initial data report is made.

The final rule requires the reporting counterparty to use the

facilities, methods, or data standards provided or required by the SDR

to which it reports the data. Corrections must be reported, as soon as

technologically practicable after discovery of an error or omission, to

the same SDR that received the initial data report.

b. Benefits

The Commission believes that the part 46 reporting requirements

will improve regulatory oversight, enforcement, and understanding of

systemic risks.

The Commission's harmonization of the reporting requirements of

this part with those of part 45 will benefit market participants by

enabling reporting counterparties to satisfy the reporting requirements

of both parts in the same way, and avoiding redundant costs that could

be caused by differing reporting requirements.

Historical swap reporting under part 46 also benefits the general

public by supporting the Commission's supervision of the swaps market.

As considered above in the discussion of the benefits of historical

swap recordkeeping in this final rule, the reporting requirements

provide a means for the Commission to gain a better understanding of

the swaps market.

The incorporation of unique identifier requirements within the part

46 reporting regime also provides important benefits to market

participants and the public by enhancing the quality and usability of

the historical swap data that will be provided to the Commission.\81\

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\81\ Unique identifier use also reflects a harmonized approach

between the part 45 and part 46 regulations. Accordingly, historic

swaps will be reported in a consistent fashion with part 45 swaps,

ensuring comparable data for analysis. The use of unique identifiers

also enabled the Commission to allow for historical swap reporting

through a VSR; without unique identifiers, the value and usability

of the data reported in a VSR would be greatly diminished because of

potential double-counting (recording the same transaction from the

reporting counterparty and from the VSR reported by the non-

reporting counterparty), and would not be readily comparable to the

data reported pursuant to Part 45 after the compliance date (which

are required to incorporate unique identifiers).

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The beneficial contributions attributable to the specific unique

identifiers addressed in the final rule, including both SDR identifiers

for VSRs and LEIs, are as follows:

SDR identifiers will facilitate the collating of

various data reports concerning a swap into a single, accurate data

record. Through them it is possible to identify the origins of each

swap as well as events that affect the swap during its existence;

aggregate transaction information without double-counting swaps

reported to different SDRs or to foreign trade repositories, or

reported in VSRs; and create a clear and unified data stream that

spans the pre- and post-part 46 compliance date periods.

Accordingly, the Commission believes they provide a vital tool for

regulatory agencies' analysis of historical swap market data to

better protect market participants and the public from systemic

risk.

LEIs will enhance the ability of the Commission and

other regulatory agencies to oversee swap markets by providing

necessary clarity and cohesion to the swap data used for regulatory

analyses, particularly with regard to clearly understanding the

activities of participants in the pre- and post- part 46 compliance

date periods. Among the benefits of an LEI regime, GFMA identified

more efficient data aggregation; more powerful modeling and risk

analysis; facilitation of information sharing and reconciliation

between regulators; better supervision of cross-border firms and

firms whose business lines are overseen by multiple regulators; and

facilitating identification of affiliates and parent companies. GFMA

also called the LEI regime ``a powerful tool for regulators in

monitoring and managing systemic risks.'' \82\ As recognized in the

CPSS-IOSCO Report on OTC Derivatives Data Reporting and Aggregation

Requirement, which recommends expeditious development of a global

LEI:

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\82\ GFMA, Creating a Global Legal Entity Identifier (LEI)

Standard, September 21, 2001, p. 10. Publicly available at http://www.sifma.org/uploadedfiles/issues/technology_and_operations/legal_entity_identifier/lei-project-summary-slides.pdf.

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[A] standard system of LEIs is an essential tool for aggregation

of OTC derivatives data. An LEI would contribute to the ability of

authorities to fulfill the systemic risk mitigation, transparency,

and market abuse protection goals established by the G20 commitments

related to OTC derivatives, and would benefit efficiency and

transparency in many other areas. As a universally available system

for uniquely identifying legal entities in multiple financial data

applications, LEIs would constitute a global public good.\83\

\83\ CPSS-IOSCO Report on OTC Derivatives Data Reporting and

Aggregation Requirement, August 2011, p.36. Publicly available at

http://www.bis.org/publ/cpss96.pdf.

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c. Costs

Incremental \84\ costs to comply with the reporting requirements of

this part

[[Page 35222]]

will be incurred only by reporting counterparties for historical swaps,

most of whom will be SDs or MSPs. The reporting requirements of the

final rule apply only to reporting counterparties. They will incur

costs associated with normalizing required PET data for historical

swaps in existence on or after April 25, 2011 in data fields for

electronic reporting, and obtaining LEIs and including them in reported

data as required by the rule. SDRs will incur costs for data receipt

and storage. The SDR identifiers used to provide a safeguard against

confusion and double-counting of historical swaps in the context of

VSRs will be created automatically by the automated systems of SDRs

when they receive the initial data report for a historical swap and

transmit that identifier to the counterparties to the swap in the

normal course of their business. SDRs are already required by part 45

to have the systems and personnel necessary to create unique swap

identifiers, and the creation of SDR identifiers by SDR automated

systems will not impose any additional costs in these respects due to

the requirements of part 46.

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\84\ Swap counterparties that have not previously established a

reporting infrastructure, including connectivity to an SDR (or the

Commission in the absence of an SDR that collects data for a given

asset class), will incur costs to comply with these requirements.

The Commission anticipates, however, that swap counterparties will

satisfy the reporting requirements of part 46 with a single, non-

recurring transmission of data to an SDR occurring at the same time

and through the same mechanism as its initial transmission of swap

creation and continuation data pursuant to part 45. Thus, the costs

(including non-recurring investments to train personnel, implement

data reporting technology, and establish the required data

connectivity; and recurring expenses associated with personnel hours

and maintenance of the data reporting technology infrastructure), to

comply with part 46 are already necessitated by part 45 and were

considered in that rulemaking. Accordingly, they are not incremental

to, and inappropriate for, consideration in this rulemaking.

Similarly, swap counterparties will experience a one-time cost

to format swap records subject to part 46 and part 45 to the same

minimum PET data tables required in both regulations. Because these

costs were considered previously in the part 45 rulemaking, they are

not incremental to, and inappropriate for, consideration in this

rulemaking.

SDRs will also incur recurring costs to maintain their data

storage infrastructure. Since the same SDR infrastructure expectedly

will support storage activities under part 45, however, the

Commission believes that the same maintenance activities undertaken

to support part 45 will support part 46. Because these costs were

considered previously in the part 45 rulemaking, they are not

incremental to, and inappropriate for, consideration in this

rulemaking.

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Normalizing data for electronic reporting. The Commission

anticipates that formatting transition swaps to populate the minimum

PET data tables would impose a one-time burden on swap counterparties

associated with the manipulation of the electronic files from their

existing form to the form required by the final rule. For SDs and MSPs,

the Commission estimates a one-time burden of 285 hours per SD or MSP

counterparty \85\ at an estimated cost of $20,169.\86\ For non-SD/MSPs,

the Commission estimates a one-time burden of 55 hours per non-SD/MSP

counterparty \87\ at an estimated cost of $4,191.\88\ The Commission

estimates that this requirement will present a larger burden for SD and

MSP counterparties than for non-SD/MSP counterparties, because SDs and

MSPs are likely to be required to process a larger volume of historical

swap data. The Commission notes that this burden may be reduced for

swap counterparties, especially SDs or MSPs that are able to leverage

existing technology and personnel expertise to perform this function.

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\85\ The costs of normalizing data for historical swaps in

existence on or after April 25, 2011 in data fields for electronic

reporting were estimated based on the costs to SD/MSPs that decide

not to contract with a third party to comply with the recordkeeping

requirements of Part 46. See ``Overview of Cost Calculations.'' This

estimate is calculated as follows: [(Sr. Database Administrator at

80 hours) + (Programmer at 80 hours) + (Systems Analyst at 80 hours)

+ (Compliance Manager at 20 hours) + (Director of Compliance at 5

hours) + (Compliance Attorney at 20 hours)] = 285 hours per SD/MSP

counterparty; [(285 hours per SD/MSP) x (125 SD/MSPs) = 35,625

aggregate hours. The Commission believes that information on swap

transactions is currently being retained by many market participants

in the ordinary course of business, which may result in lesser

burden for those parties.

\86\ See Table 1.

\87\ The costs of formatting transition swaps for storage were

estimated based on the costs to non-SD/MSPs that decide not to

contract with a third party to comply with the recordkeeping

requirements of Part 46. See ``Overview of Cost Calculations.'' This

estimate is calculated as follows: [(Compliance Manager at 10 hours)

+ (Director of Compliance at 5 hours) + (Compliance Attorney at 20

hours) + (Compliance Clerk at 20 hours)] = 55 hours per non-SD/MSP

counterparty; [(55 hours per non-SD/MSP) x (1,000 non-SD/MSPs) =

55,000 aggregate hours. The Commission believes that information on

swap transactions is currently being retained by many market

participants in the ordinary course of business, which may result in

lesser burden for those parties.

\88\ See Table 1.

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Applying unique identifiers. The Commission anticipates that

including LEIs in historical swap data, as required by this final rule,

would impose a one-time burden on swap counterparties associated with

reviewing the subset of historical swap data and appending the LEIs.

The Commission believes that it may be possible to achieve a high

degree of automation or computer-assisted processing for the task of

reporting the LEI and adding it to the historical swap data files in

storage.

For SD and MSP reporting counterparties, the Commission estimates a

one-time burden of 440 hours per SD or MSP reporting counterparty \89\

at an estimated cost of $29,681.\90\ For non-SD/MSP reporting

counterparties, the Commission estimates a one-time burden of 220 hours

per non-SD/MSP reporting counterparty \91\ at an estimated cost of

$18,481.\92\ The Commission estimates that this requirement will

present a larger burden for SDs and MSPs than for non-SD/MSP reporting

counterparties because SDs and MSPs are likely to be required to

process a larger volume of historical swap data. The Commission notes

that this burden may be reduced for swap counterparties, especially SDs

or MSPs that are able to leverage existing technology and personnel

expertise to perform this function.

---------------------------------------------------------------------------

\89\ The costs of applying unique identifiers to historical swap

data were estimated based on the costs to SD/MSPs that decide not to

contract with a third party to comply with the recordkeeping/

reporting requirements of Part 46. See ``Overview of Cost

Calculations.'' This estimate is calculated as follows: [(Sr.

Database Administrator at 80 hours) + (Programmer at 160 hours) +

(Systems Analyst at 160 hours) + (Compliance Manager at 20 hours) +

(Director of Compliance at 10 hours) + (Compliance Attorney at 10

hours)] = 440 hours per SD/MSP counterparty; [(440 hours per SD/MSP)

x (125 SD/MSPs) = 55,000 aggregate hours. The Commission believes

that information on swap transactions is currently being retained by

many market participants in the ordinary course of business, which

may result in lesser burden for those parties.

\90\ See Table 3. The Commission notes that while tasks required

for compliance with the unique identifier requirements of this rule

may ultimately overlap to some extent with the tasks required for

compliance with the unique identifier requirements of part 45, the

Commission believes that the process of appending a unique

identifier to historical data submissions will be substantially

different than the process of incorporating a unique identifier into

the submissions of active swaps from a technological implementation

perspective, and has therefore estimated the burden of the two

processes separately. The Commission notes that, in the event that

SD/MSP counterparties find it practical to combine duplicative

elements of the two task (for example, writing a single program to

process both historical and active swaps), the burden of compliance

with the unique identifier requirements of this rule may be reduced

for those entities.

\91\ The costs of applying unique identifiers to historical swap

data were estimated based on the costs to non-SD/MSPs that decide

not to contract with a third party to comply with the recordkeeping

requirements of Part 46. See ``Overview of Cost Calculations.'' This

estimate is calculated as follows: [(Sr. Database Administrator at

40 hours) + (Programmer at 80 hours) + (Systems Analyst at 80 hours)

+ (Compliance Manager at 10 hours) + (Director of Compliance at 5

hours) + (Compliance Attorney at 5 hours)] = 220 hours per non-SD/

MSP counterparty; [(220 hours per non-SD/MSP) x (1,000 non-SD/MSPs)

= 220,000 aggregate hours. The Commission believes that information

on swap transactions is currently being retained by many market

participants in the ordinary course of business, which may result in

lesser burden for those parties.

\92\ See Table 3.

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Receiving and storing data. The Commission believes that receiving

and storing historical swap data, as required by this final rule, would

impose a one-time burden on SDRs associated with importing, examining/

approving, and organizing/storing the historical swap data. The

Commission anticipates that this incremental burden will involve the

additional usage of the processes and personnel time and expertise

necessary for receiving the stream of swap data reported by market

participants for Part 45 compliance.

The Commission anticipates that some aspects of this task, such as

programming a code to process historical swap data, will require manual

intervention; for other aspects of this task, such as submitting the

code and updating the historical swap data files in storage, it may be

possible to achieve a high degree of automation or computer-assisted

processing. Furthermore, the Commission notes that this burden may be

further reduced to an extent dependent on the ability of an

[[Page 35223]]

SDR to leverage existing technology and personnel expertise to perform

this function. Finally, the Commission notes that SDRs will be required

by Part 45 to have the automated technological systems in place to

assign SDR identifiers to swap data; therefore, assigning SDR

identifiers to VSRs should not impose costs on SDRS. The Commission

estimates a one-time burden of 460 hours per SDR \93\ at a cost of

$29,882 \94\ for receiving and storing historical swap data.

---------------------------------------------------------------------------

\93\ The costs of receiving and storing historical swap data

were estimated based on the costs to SDRs. See ``Overview of Cost

Calculations.'' This estimate is calculated as follows: [(Computer

Operations Supervisor at 80 hours) + (Computer Operations Group/

Section Manager at 80 hours) + (Computer Operations Department

Manager at 20 hours) + (Sr. Database Administrator at 80 hours) +

(Programmer at 80 hours) + (Systems Analyst at 80 hours) +

(Compliance Manager at 20 hours) + (Director of Compliance at 10

hours) + (Compliance Attorney at 10 hours)] = 460 hours per SDR;

[(460 hours per SDR) x (15 SDRs) = 6,900 aggregate hours.

\94\ See Table 4.

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d. Comments, Alternatives, and Cost Mitigation

Parties required to report certain historical swap data. Numerous

commenters urged the Commission to phase in swap data reporting by both

asset class and counterparty type. The Financial Services Roundtable

recommended a phased implementation timeline based on a participant's

level of sophistication, resources and swap trading volume. Global

Forex advocated phased implementation of reporting that takes into

account both the readiness of a particular asset class for reporting

and the type of reporting counterparty involved. ETA urged that

reporting be phased in by asset class and product type, and noted that

one or more SDRs must be prepared to accept data for an asset class

before effective reporting can begin. ETA also advocated beginning

reporting by SDs and MSPs before non-SD/MSP counterparties are required

to report. ISDA called for reporting to be phased in based on the state

of readiness of different asset classes and market participant types.

After considering these comments, the Commission made a number of

modifications in the final rule. The final rule phases in the start of

reporting by counterparty type, by setting the compliance date for non-

SD/MSP reporting counterparties six months after the compliance date

for SDs and MSPs. The Commission believes that this approach reduces

the costs of compliance for reporting counterparties that are likely to

be smaller or less technologically sophisticated, while retaining the

essential benefits of receiving historical swap transaction data from

all swap market participants. This approach parallels that of the part

45 rulemaking, which recognized the appropriateness of a phase-in

period for non-SD/MSP counterparties.

ETA urged that non-SD/MSP reporting counterparties not be required

to report continuation data, arguing that transactions not involving

SDs and MSPs represent only a small portion of the swaps market, and

that such a requirement would be unduly burdensome. Alternatively, they

asked that non-SD/MSP reporting counterparties be permitted to report

continuation data for historical energy swaps on a quarterly basis.

The Commission has determined that the final rule will require

continuation data reporting as provided in part 45 of this chapter.

Timely reporting of changes to primary economic terms of all swaps,

including historical swaps, is necessary to give the Commission and

other regulators the ability to see a current and accurate picture of

the swap market as called for by the Dodd-Frank Act. In light of this

comment, and after further considering the costs to non-SD/MSP

counterparties, the Commission extended and phased in the continuation

data reporting deadlines for non-SD/MSP reporting counterparties. For

non-SD/MSP reporting counterparties, the NOPR applied the same

continuation data reporting deadlines found in Part 45. The final

rule's deadlines for continuation data reporting by non-SD/MSP

counterparties require such reporting no later than the end of the

first business day following a relevant change to a primary economic

term during the first year of reporting, and require such reporting no

later than the end of the second business day following a relevant

change to the primary economic terms of the swap thereafter. This

approach should reduce the costs of Part 46 compliance to non-SD/MSP

counterparties, while retaining the benefits of receiving continuation

data.

Scope of reporting requirements. ISDA and Global Forex requested

that the Commission not require reporting of the time of trade for a

historical swap, arguing that in many cases counterparties may not have

recorded this information when a historical swap was executed. ISDA

argues that it would be undesirable, if not impossible, for a

participant to attempt to recreate an execution time not previously

recorded.

The Commission believes that it would not be desirable for

counterparties to assign an execution time retroactively when no record

exists, and the Commission also recognizes that the costs of doing so

could be significant to reporting counterparties. To mitigate costs and

maintain the integrity of the historical swap data record, the final

rule limits the execution timestamp reporting requirement to the

transaction date, calling for reporting the time of the trade only if

the time was recorded when the trade was executed and is known to the

reporting counterparty when the report is made.

Three commenters, ISDA, ETA, and WGCEF, requested that the

Commission drop the catchall category of ``any other primary economic

term(s)'' from the required PET data for historical swaps, arguing that

it would be better to define PET data precisely. ETA stated reporting

such information could require extensive text submissions of non-

standardized transaction terms, complicating the compilation task of

the SDRs.

In response, the Commission has removed ``any other primary

economic term(s) of the swap matched by the counterparties in verifying

the swap'' from the minimum PET data tables. The Commission believes

the PET data in the NOPR tables provides the minimum information

regulators will need concerning historical swaps, information

counterparties almost surely will possess (e.g., trade date, price,

expiration date). Other primary economic terms that might be captured

by the catch-all category are not crucial to fulfill the purposes of

reporting data on historical swaps under Dodd-Frank, and the PET data

elements specified in the tables should be sufficient in this respect.

In addition, the burden of reporting data on swaps executed prior to

issuance of the Commission's final Dodd-Frank rules would be reduced by

limiting required PET data for historical swaps to specified data

elements.

The End User Coalition requested that the Commission explain the

use and value of reporting Master Agreement Identifiers. ISDA, ETA, and

Global Forex stated that eliminating the requirement to report such

identifiers, arguing that they would not necessarily allow regulators

to calculate net exposures. Global Forex stated that providing this

data would impose a significant burden because such information is not

routinely stored on the same systems as the other PET data specified in

the tables. WGCEF also asked that this requirement be eliminated,

arguing that counterparties are in the best position to make exposure

calculations and that the Commission already has the ability to request

such information from them.

[[Page 35224]]

In response, the Commission has eliminated the requirement to

report master agreement identifiers. The terms of master agreements are

not readily reportable in an electronic format, since no schema for

reporting these terms in data fields has yet been developed. In

addition, Dodd-Frank does not provide explicit authority for requiring

such reporting; Dodd-Frank authorizes transaction-based reporting of

the terms of a swap, and a master agreement is not a transactional

agreement. Furthermore, the Commission notes that reporting of master

agreements may eventually be initiated by the Office of Financial

Research under its statutory authority. Eliminating this requirement

therefore represents a reduction in the costs associated with Part 46

compliance. In addition, because master agreement identifiers are not

required to be reported pursuant to Part 45, eliminating this

requirement also represents improved harmonization between Parts 45 and

46.

Reporting of Valuation Information

ISDA recommended that data elements necessary for a person to

determine the market value of a transaction be dropped from the

proposed data reporting requirements for historical credit swaps. ISDA

stated that such a requirement would be overly burdensome in that it

would require a trader to retain a variety of information irrelevant to

the purposes of the rule, is not currently retained by traders, and may

be proprietary to the trader.

The Commission considered this comment, and does not require these

data elements in the final rule. The Commission eliminated the

requirement to report data elements necessary to value a swap from the

final Part 45 data reporting rule; for the same reasons explained in

that rulemaking, the Commission believes that such a requirement is not

appropriate for inclusion in the historical swaps data reporting rule.

Alternative Submission Formats

WGCEF requested that the Commission allow reporting counterparties

to submit images of confirmations and other paper swap documentation in

lieu of submission of normalized data in data fields, arguing that

prohibiting the use of images for reporting would make the requirement

more burdensome.

The Commission considered this comment, but determined to maintain

the NOPR's requirement for electronic reporting of normalized data for

historical swaps in existence on or after the date the NOPR was issued.

Permitting submission of images in lieu of submission of normalized

data in data fields would hinder regulators' ability to efficiently

search, retrieve, aggregate, and manipulate historical swap data in

SDRs for essential purposes intended in the Dodd-Frank Act, including

monitoring systemic risk and conducting market oversight and

enforcement. In light of these considerations, the Commission believes

that this final rule, by allowing submission of images to fulfill

reporting requirements for swaps that expired prior to issuance of the

NOPR on April 25, 2011 reduces the reporting burden to the extent

appropriate.

e. Reporting in Light of CEA Section 15(a)

The Commission has evaluated the costs and benefits of the

reporting provisions of this part in light of the specific

considerations identified in Section 15(a) of the CEA as follows.

Protection of market participants and the public. The Commission

believes that historical swap data reporting as provided in part 46

enhances protections for market participants and the public in

important ways. Information revealed through the requirements of Sec.

46.3 and the use of unique identifiers as provided in Sec. 46.4 will

provide the Commission with a significant body of previously

unavailable data in a cohesive form that will enhance oversight and

enforcement abilities to the benefit of both market participants and

the public. For reasons identified above in the discussion of reporting

requirement benefits, reporting of historical swap data in the manner

prescribed in part 46 promotes the Commission's market participant and

public protection goals by improving the ability to: (1) Detect and

protect market participants against fraud, manipulation, and abusive

trading practices; (2) conduct effective surveillance to oversee the

integrity and efficiency of market operation; and, (3) understand,

monitor, and appropriately react to systemic risk indicators.

Furthermore, the Commission believes that the requirements of this

final rule, and the associated compliance costs, represent a transfer

of the costs associated with the systemic risks inherent in transacting

in opaque swap markets from the public to private entities,

particularly to those that are better positioned to realize economies

of scale and scope in assuming those costs; the Commission believes

that because historical swap data could be used as a benchmark to

better understand systemic risks associated with swap market activity

in the future, the costs of reporting historical swap data relate to

the systemic risks of ongoing swap market activity, as well as

historical swap market activity.

Efficiency, competitiveness, and financial integrity. This rule

promotes efficiency and competitiveness in several ways. First, the

Commission has exercised its discretion to specify reporting

requirements in a manner designed to mitigate costs to the extent

consistent with statutory requirements and fulfillment of the purposes

of the Dodd-Frank Act.

Second, by allowing reporting parties to utilize third-party

service providers to transmit required data, the Commission provides

flexibility for reporting parties to utilize the most efficient means

for compliance. The Commission believes that, relative to the

capabilities of at least certain reporting parties, third-party

providers likely will have a comparative advantage in data processing

costs. The rule affords reporting parties the opportunity to avail

themselves of potential efficiencies that use of such a third-party

provider could provide.

Third, the reporting hierarchy employed in the final rule assigns

reporting responsibility based on factors including the relative size

and sophistication of market participants (for example, SD/MSP

counterparties, which are likely to have technological resources more

readily available for reporting than non-SD/MSP counterparties, will

serve as the reporting counterparty when facing a non-SD/MSP

counterparty in a swap). The Commission believes that this is an

efficient approach to swap reporting, as it provides the opportunity

for larger, more sophisticated entities to realize economies of scale

and scope in their reporting processes (for example, a swap dealer can

collect data from swaps to which it is a counterparty from a variety of

asset classes and send the data to an SDR in a single report; this

allows for the creation of fewer reports and a reduced burden vis-

[agrave]-vis a system in which numerous small non-SD/MSP counterparties

would need to collect and report data).

Fourth, the Commission believes that the provisions of the final

rule that relate to the format of the historical swap data to be

reported will serve to reduce costs and burdens for registered entities

and swap counterparties by (a) Allowing reporting counterparties to

report data for pre-enactment swaps in the form in which it currently

exists, thereby removing the need for (and costs associated with)

reformatting or recreating the data; (b) allowing reporting entities

and counterparties to

[[Page 35225]]

use whatever facilities, methods, or data standards are provided or

required by the SDR to which data is reported; (c) allowing SDRs to use

various facilities, methods, and data standards to receive data, so

long as the SDR can provide data to the Commission in the format

required by the Commission; and (d) allowing for the dual reporting,

additional information reporting, and early submission of historical

swap data in the form of a VSR. The Commission believes this approach

is preferable to having the Commission mandate that reporting entities

or counterparties adopt a particular format or data standard for

reporting historical swap data and/or a particular form for pre-

enactment swap data, which in some cases could impose the additional

burden of acquiring new technological capability different or more

extensive that what the entity or counterparty already possesses. The

Commission believes that, in light of this provision of the final rule,

market competition is likely to lead SDRs to allow reporting entities

and counterparties to report using data formats or standards that are

easiest and least costly for them. Costs for market participants may

also be lowered by the final rule provision authorizing the

Commission's Chief Information Officer to require use of a particular

data standard in order to accommodate the needs of different

communities of users.\95\

---------------------------------------------------------------------------

\95\ This authority could be used, for example, to require SDRs

to accept swap data reports using a particular computer language

already used by firms in a particular segment of the swap

marketplace, so that they are not forced to incur additional cost by

acquiring the capability needed to report using a different computer

language.

---------------------------------------------------------------------------

Furthermore, the Commission does not anticipate that the reporting

requirements (including unique identifier requirements) of this final

rule present costs that would impede the efficiency of swaps markets.

The Commission anticipates that the reporting requirements of this

final rule will work in concert with the recordkeeping requirements of

this final rule to improve the integrity of swap markets. Accordingly,

the manner in which these reporting requirements will aid market

integrity mirrors those considered in the preceding discussion of the

integrity benefits of recordkeeping-- namely, by aiding the prosecution

and deterrence of market abuses and assisting regulatory supervision of

markets through improved transparency.

Price discovery. The Commission does not believe that the

historical swap data reporting requirements (including unique

identifier requirements) of this final rule will impact the price

discovery process.

Sound risk management practices. The Commission does not believe

that the historical swap data reporting requirements (including unique

identifier requirements) of this final rule have a significant effect

on sound risk management practices.

Other public interest considerations. The Commission believes that

the data reporting requirements of this final rule will allow the

Commission to readily acquire and analyze market data, thus

streamlining the surveillance process. The Commission believes that by

receiving historical swap data from the same market participants that

will likely report a comparable stream of creation and continuation

data pursuant to part 45, part 46 will allow the economists and other

analysts employed by the Commission the opportunity to compare aspects

of the swap market before and after the effective date of parts 45 and

46. This will likely create the potential for an analysis of the

effects of implementing these rules.

With regard to unique identifiers, the Commission anticipates that

the unique identifier requirements of this final rule will facilitate

the Commission's efforts in the course of their investigations by

providing a clear framework for data aggregation and comparison across

financial instruments and between the pre- and post- part 46 compliance

date periods.

Table 1--Normalizing Data for Electronic Reporting

------------------------------------------------------------------------

Personnel

Hours cost

------------------------------------------------------------------------

SD/MSPs......................................... 285 $20,169

Non-SD/MSPs..................................... 55 4,191

------------------------------------------------------------------------

Table 2--Historical Swap Data Storage

------------------------------------------------------------------------

Personnel

Hours cost

------------------------------------------------------------------------

SD/MSPs......................................... 335 $22,172

------------------------------------------------------------------------

Table 3--Applying Unique Identifier

------------------------------------------------------------------------

Personnel

Hours cost

------------------------------------------------------------------------

SD/MSPs......................................... 440 $29,681

Non-SD/MSPs..................................... 220 18,481

------------------------------------------------------------------------

Table 4--Receiving and Storing Data

------------------------------------------------------------------------

Personnel

Hours cost

------------------------------------------------------------------------

SDRs............................................ 460 $29,882

------------------------------------------------------------------------

IV. Compliance Dates

A. Introduction

As discussed above, the final rule retains the NOPR provision

requiring compliance with recordkeeping and reporting requirements for

historical swaps to commence on the same compliance dates specified in

the Commission's final swap data recordkeeping and reporting

regulations in part 45 of this chapter. The provisions of both part 45

and part 46 phase in compliance dates by both asset class and

counterparty type. As noted above, this final rule permits voluntary

initial data reporting for historical swaps prior to the applicable

compliance date, if a registered SDR is prepared to accept the required

initial data report prior to the applicable compliance date. Where such

a voluntary early initial data report is made, continuation data

reporting for the swap in question, if applicable, is still required to

commence as of the applicable compliance date.

Accordingly, the Commission has determined that each swap dealer,

major swap participant, and non-SD/MSP counterparty subject to the

jurisdiction of the Commission shall commence full compliance with all

provisions of this part on the applicable compliance dates set forth

below.

B. Compliance Dates for Swap Dealers and Major Swap Participants

Swap dealers, and major swap participants shall commence full

compliance with all provisions of this part as follows:

Credit swaps and interest rate swaps. Compliance date 1, the

compliance date with respect to credit swaps and interest rate swaps,

shall be the later of: July 16, 2012; or 60 calendar days after the

publication in the Federal Register of the later of the Commission's

final rule defining the term ``swap'' or the Commission's final rule

defining the terms ``swap dealer'' and ``major swap participant.''

Equity swaps, foreign exchange swaps, and other commodity swaps.

Compliance date 2, the compliance date with respect to equity swaps,

foreign exchange swaps, and other commodity swaps, shall be 90 calendar

days after compliance date 1.

[[Page 35226]]

C. Compliance Date for Non-SD/MSP Counterparties

Non-SD/MSP counterparties shall commence full compliance with all

provisions of this part for all pre-enactment and transition swaps on

compliance date 3, which shall be 90 calendar days after compliance

date 2.

Final Rules

List of Subjects in 17 CFR Part 46

Swaps, data recordkeeping requirements and data reporting

requirements.

For the reasons set forth in the preamble, and pursuant to the

authority in the Commodity Exchange Act, as amended, and in particular

Sections 2(h)(5) and 4r(a), the Commission amends Chapter 1 of Title 17

of the Code of Federal Regulations by adding Part 46 to read as

follows:

PART 46--SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS: PRE-

ENACTMENT AND TRANSITION SWAPS

Sec.

46.1 Definitions.

46.2 Recordkeeping for pre-enactment swaps and transition swaps.

46.3 Swap data reporting for pre-enactment swaps and transition

swaps.

46.4 Unique identifiers.

46.5 Determination of which counterparty must report.

46.6 Third-party facilitation of data reporting.

46.7 Reporting to a single swap data repository.

46.8 Data reporting for swaps in a swap asset class not accepted by

any swap data repository.

46.9 Voluntary supplemental reporting

46.10 Required data standards.

46.11 Reporting of errors and omissions in previously reported data.

Appendix to Part 46--Tables of Minimum Primary Economic Terms Data

for Pre-Enactment and Transition Swaps.

Authority: Title VII, sections 723 and 729, Pub. L. 111-203,

124 Stat. 1738.

Sec. 46.1 Definitions.

Terms used in this part are defined as follows:

Asset class means the broad category of goods, services or

commodities, including any ``excluded commodity'' as defined in CEA

section 1a(19), with common characteristics underlying a swap. The

asset classes include credit, equity, foreign exchange (excluding

cross-currency), interest rate (including cross-currency), other

commodity, and such other asset classes as may be determined by the

Commission.

Compliance date means the applicable date, as specified in part 45

of this chapter, on which a registered entity or swap counterparty

subject to the jurisdiction of the Commission is required to commence

full compliance with all provisions of this part and with all

applicable provisions of part 45 of this chapter, as set forth in the

preamble to this part.

Confirmation (confirming) means the consummation (electronically or

otherwise) of legally binding documentation (electronic or otherwise)

that memorializes the agreement of the parties to all terms of a swap.

A confirmation must be in writing (whether electronic or otherwise) and

must legally supersede any previous agreement (electronically or

otherwise).

Confirmation data means all of the terms of a swap matched and

agreed upon by the counterparties in confirming the swap.

Credit swap means any swap that is primarily based on instruments

of indebtedness, including, without limitation: any swap primarily

based on one or more broad-based indices related to instruments of

indebtedness; and any swap that is an index credit swap or total return

swap on one or more indices of debt instruments.

Electronic reporting (``report electronically'') means the

reporting of data normalized in data fields as required by the data

standard or standards used by the swap data repository to which the

data is reported. Except where specifically otherwise provided in this

chapter, electronic reporting does not include submission of an image

of a document or text file.

Equity swap means any swap that is primarily based on equity

securities, including, without limitation: any swap primarily based on

one or more broad-based indices of equity securities; and any total

return swap on one or more equity indices.

Financial entity has the meaning set forth in CEA section

2(h)(7)(C).

Foreign exchange forward has the meaning set forth in CEA section

1a(24).

Foreign exchange instrument means an instrument that is both

defined as a swap in part 1 of this chapter and included in the foreign

exchange asset class. Instruments in the foreign exchange asset class

include: any currency option, foreign currency option, foreign exchange

option, or foreign exchange rate option; any foreign exchange forward

as defined in CEA section 1a(24); any foreign exchange swap as defined

in CEA section 1a(25); and any non-deliverable forward involving

foreign exchange.

Foreign exchange swap has the meaning set forth in CEA section

1a(25). It does not include swaps primarily based on rates of exchange

between different currencies, changes in such rates, or other aspects

of such rates (sometimes known as ``cross-currency swaps'').

Interest rate swap means any swap which is primarily based on one

or more interest rates, such as swaps of payments determined by fixed

and floating interest rates; or any swap which is primarily based on

rates of exchange between different currencies, changes in such rates,

or other aspects of such rates (sometimes known as ``cross-currency

swaps'').

International swap means a swap required by U.S. law and the law of

another jurisdiction to be reported both to a swap data repository and

to a different trade repository registered with the other jurisdiction.

Major swap participant has the meaning set forth in CEA section

1a(33) and in part 1 of this chapter.

Minimum primary economic terms means, with respect to a historical

swap, the terms included in the list of minimum primary economic terms

for swaps in each swap asset class found in Appendix 1 to this part.

Minimum primary economic terms data means all of the data elements

necessary to fully report all of the minimum primary economic terms

required by this part to be reported for a swap in the swap asset class

of the swap in question.

Mixed swap has the meaning set forth in CEA section 1a(47)(D), and

refers to an instrument that is in part a swap subject to the

jurisdiction of the Commission, and in part a security-based swap

subject to the jurisdiction of the SEC.

Multi-asset swap means a swap that does not have one easily

identifiable primary underlying notional item, but instead involves

multiple underlying notional items within the Commission's jurisdiction

that belong to different asset classes.

Non-SD/MSP counterparty means a swap counterparty that is neither a

swap dealer nor a major swap participant.

Other commodity swap means any swap not included in the credit,

equity, foreign exchange, or interest rate asset classes, including,

without limitation, any swap for which the primary underlying item is a

physical commodity or the price or any other aspect of a physical

commodity.

Pre-enactment swap means any swap entered into prior to enactment

of the Dodd-Frank Act of 2010 (July 21, 2010), the terms of which have

not expired as of the date of enactment of that Act.

Reporting counterparty means the counterparty required to report

swap

[[Page 35227]]

data pursuant to this part, selected as provided in Sec. 46.5.

Required swap continuation data means all of the data elements that

must be reported during the existence of a swap as required by part 45

of this chapter.

Swap data repository has the meaning set forth in CEA section

1a(48), and in part 49 of this chapter.

Swap dealer has the meaning set forth in CEA section 1a(49), and in

part 1 of this chapter.

Transition swap means any swap entered into on or after the

enactment of the Dodd-Frank Act of 2010 (July 21, 2010) and prior to

the applicable compliance date on which a registered entity or swap

counterparty subject to the jurisdiction of the Commission is required

to commence full compliance with all provisions of this part, as set

forth in the preamble to this part.

Sec. 46.2 Recordkeeping for pre-enactment swaps and transition swaps.

(a) Recordkeeping for pre-enactment and transition swaps in

existence on or after April 25, 2011. Each counterparty subject to the

jurisdiction of the Commission that is a counterparty to any pre-

enactment swap or transition swap that is in existence on or after

April 25, 2011 shall keep the following records concerning each such

swap:

(1) Minimum records required. Each counterparty shall keep records

of all of the minimum primary economic terms data specified in Appendix

1 to this part.

(2) Additional records required to be kept if possessed by a

counterparty. In addition to the minimum records required pursuant to

paragraph (a)(1) of this part, a counterparty that is in possession at

any time on or after April 25, 2011 of any of the following

documentation shall keep copies thereof:

(i) Any confirmation of the swap executed by the counterparties.

(ii) Any master agreement governing the swap, and any modification

or amendment thereof.

(iii) Any credit support agreement, or other agreement between the

counterparties having the same function as a credit support agreement,

relating to the swap, and any modification or amendment thereof.

(3) Records created or available after the compliance date. In

addition to the records required to be kept pursuant to paragraphs

(a)(1) and (2) of this section, each counterparty to any pre-enactment

swap or transition swap that remains in existence on the compliance

date shall keep for each such swap, from the compliance date forward,

all of the records required to be kept by section 45.2 of this chapter,

to the extent that any such records are created by or become available

to the counterparty on or after the compliance date.

(4) Retention form. Records required to be kept pursuant to this

section with respect to historical swaps in existence on or after April

25, 2011, must be kept as required by paragraph (a)(4)(i) or (ii) of

this section, as applicable.

(i) Records required to be kept by swap dealers or major swap

participants may be kept in electronic form, or kept in paper form if

originally created and exclusively maintained in paper form, so long as

they are retrievable, and information in them is reportable as required

by this part.

(ii) Records required to be kept by non-SD/MSP counterparties may

be kept in either electronic or paper form, so long as they are

retrievable, and information in them is reportable, as required by this

part.

(b) Recordkeeping for pre-enactment and transition swaps expired or

terminated prior to April 25, 2011. Each counterparty subject to the

jurisdiction of the Commission that is a counterparty to any pre-

enactment swap or transition swap that is expired or terminated prior

to April 25, 2011 shall keep the following records concerning each such

swap:

(1) Pre-enactment swaps expired prior to April 25, 2011. Each

counterparty to any pre-enactment swap that expired or was terminated

prior to April 25, 2011 shall retain the information and documents

relating to the terms of the transaction that were possessed by the

counterparty on or after October 14, 2010 (17 CFR 44.00 through 44.02).

Such information may be retained in the format in which it existed on

or after October 14, 2010, or in such other format as the counterparty

chooses to retain it. This paragraph (b)(1) does not require the

counterparty to create or retain records of information not in its

possession on or after October 14, 2010, or to alter the format, i.e.,

the method by which the information is organized and stored.

(2) Transition swaps expired prior to April 25, 2011. Each

counterparty to any transition swap that expired or was terminated

prior to April 25, 2011 shall retain the information and documents

relating to the terms of the transaction that were possessed by the

counterparty on or after December 17, 2010 (17 CFR 44.03). Such

information may be retained in the format in which it existed on or

after December 17, 2010, or in such other format as the counterparty

chooses to retain it. This paragraph (b)(2) does not require the

counterparty to create or retain records of information not in its

possession on or after December 17, 2010, or to alter the format, i.e.,

the method by which the information is organized and stored.

(c) Retention period. All records required to be kept by this

section shall be kept from the applicable dates specified in paragraphs

(a) or (b) of this section through the life of the swap, and for a

period of at least five years from the final termination of the swap.

(d) Retrieval. Records required to be kept pursuant to this section

shall be retrievable as follows.

(1) Retrieval for pre-enactment and transition swaps in existence

on or after April 25, 2011. Records concerning pre-enactment and

transition swaps in existence on or after April 25, 2011, shall be

retrievable as follows:

(i) Each record required to be kept by a counterparty that is a

swap dealer or major swap participant shall be readily accessible via

real time electronic access by the counterparty throughout the life of

the swap and for two years following the final termination of the swap,

and shall be retrievable by the registrant or its affiliates within

three business days through the remainder of the period following final

termination of the swap during which it is required to be kept.

(ii) Each record required to be kept by a non-SD/MSP counterparty

shall be retrievable by the counterparty within five business days

throughout the period during which it is required to be kept.

(2) Retrieval for pre-enactment and transition swaps expired or

terminated prior to April 25, 2011. Records concerning pre-enactment

and transition swaps expired or terminated prior to April 25, 2011,

shall be retrievable by the counterparty within five business days

throughout the period during which they are required to be kept.

(e) Inspection. All records required to be kept pursuant to this

section by any registrant or its affiliates or by any counterparty

subject to the jurisdiction of the Commission shall be open to

inspection upon request by any representative of the Commission, the

United States Department of Justice, or the Securities and Exchange

Commission, or by any representative of a prudential regulator as

authorized by the Commission. Copies of all such records shall be

provided, at the expense of the entity or person required to keep the

record, to any representative of the Commission upon request. With

respect to historical swaps in existence on or after April 25, 2011,

copies of records required to be kept by any swap dealer or major swap

participant shall

[[Page 35228]]

be provided either by electronic means, in hard copy, or both, as

requested by the Commission, with the sole exception that copies of

records originally created and exclusively maintained in paper form may

be provided in hard copy only; and copies of records required to be

kept by any non-SD/MSP counterparty shall be provided in the form,

whether electronic or paper, in which the records are kept. With

respect to historical swaps expired or terminated prior to April 25,

2011, records shall be provided in the form, whether electronic or

paper, in which the records are kept.

Sec. 46.3 Swap data reporting for pre-enactment swaps and transition

swaps.

(a) Reporting for pre-enactment and transition swaps in existence

on or after April 25, 2011. (1) Initial data report. For each pre-

enactment swap or transition swap in existence on or after April 25,

2011, the reporting counterparty shall report electronically to a swap

data repository (or to the Commission if no swap data repository for

swaps in the asset class in question is available), on the compliance

date, the following:

(i) All of the minimum primary economic terms data specified in

Appendix 1 to this part that were in the possession of the reporting

counterparty on or after April 25, 2011;

(ii) The legal entity identifier of the reporting counterparty

required pursuant to Sec. 46.4; and

(iii) The following additional identifiers:

(A) The internal counterparty identifier or legal entity identifier

used by the reporting counterparty to identify the non-reporting

counterparty; and

(B) The internal transaction identifier used by the reporting

counterparty to identify the swap.

(2) Reporting of required swap continuation data. (i) For each

uncleared pre-enactment or transition swap in existence on or after

April 25, 2011, throughout the existence of the swap following the

compliance date, the reporting counterparty must report all required

swap continuation data required to be reported pursuant to part 45 of

this chapter, with the exception that when a reporting counterparty

reports changes to minimum primary economic terms for a pre-enactment

or transition swap, the reporting counterparty is required to report

only changes to the minimum primary economic terms listed in Appendix 1

to this part and reported in the initial data report made pursuant to

paragraph (a)(1) of this section, rather than changes to all minimum

primary economic terms listed in Appendix 1 to part 45.

(ii) Swap continuation data reporting is not required for a pre-

enactment or transition swap in existence on or after April 25, 2011,

that has been cleared by a designated clearing organization.

(3) Data reporting for multi-asset swaps and mixed swaps. (i) For

each pre-enactment or transition swap in existence on or after April

25, 2011, that is a multi-asset swap, all data required to be reported

by this part shall be reported to a single swap data repository that

accepts swaps in the asset class treated as the primary asset class

involved in the swap by the reporting counterparty making the first

report of required swap creation data pursuant to this section.

(ii) For each pre-enactment or transition swap in existence on or

after April 25, 2011, that is a mixed swap, all data required to be

reported pursuant to this part shall be reported to a swap data

repository registered with the Commission and to a security-based swap

data repository registered with the Securities and Exchange Commission.

This requirement may be satisfied by reporting the mixed swap to a swap

data repository or security-based swap data repository registered with

both Commissions.

(b) Reporting for pre-enactment and transition swaps expired or

terminated prior to April 25, 2011. (1) Pre-enactment swaps expired or

terminated prior to April 25, 2011. For each pre-enactment swap which

expired or was terminated prior to April 25, 2011, the reporting

counterparty shall report to a swap data repository (or to the

Commission if no swap data repository for swaps in the asset class in

question is available), on the compliance date, such information

relating to the terms of the transaction as was in the reporting

counterparty's possession on or after October 14, 2010 (17 CFR 44.00

through 44.02). This information may be reported via any method

selected by the reporting counterparty.

(2) Transition swaps expired or terminated prior to April 25, 2011.

For each transition swap which expired or was terminated prior to April

25, 2011, the reporting counterparty shall report to a swap data

repository (or to the Commission if no swap data repository for swaps

in the asset class in question is available), on the compliance date,

such information relating to the terms of the transaction as was in the

reporting counterparty's possession on or after December 17, 2010 (17

CFR 44.03). This information may be reported via any method selected by

the reporting counterparty.

(c) Voluntary early submission of initial data report. For all pre-

enactment and transition swaps required to be reported pursuant to this

part, the reporting counterparty may make the initial data report

required by paragraph (a)(1) of this section, or the data report

required by paragraph (b) of this section, prior to the applicable

compliance date, if a swap data repository accepting swaps in the asset

class in question is prepared to accept the report. The obligation to

report continuation data as required by paragraph (a)(2) of this

section with respect to a swap for which a voluntary early submission

is made commences on the applicable compliance date. However, the

reporting counterparty may submit continuation data at any time after a

voluntary early submission made pursuant to this paragraph, if the swap

data repository is prepared to accept such continuation data, and if

that repository has registered with the Commission as a swap data

repository as of the applicable compliance date.

(d) Non-duplication of previous reporting. If the reporting

counterparty for a pre-enactment or transition swap has reported any of

the information required as paragraphs (a) or (b) of this section to a

trade repository prior to the compliance date, and if as of the

compliance date that repository has registered with the Commission as a

swap data repository, then:

(1) The counterparty shall not be required to report such

previously reported information to the swap data repository again;

(2) The counterparty shall be required to report to the swap data

repository on the compliance date any information required as part of

the initial data report by paragraph (a) of this section that has not

been reported prior to the compliance date: and

(3) In the case of pre-enactment and transition swaps in existence

on or after April 25, 2011, the initial data report required by

paragraph (a) of this section and all subsequent data reporting

concerning the swap shall be made to the same swap data repository to

which data concerning the swap was first reported prior to the

compliance date (or to its successor in the event that it ceases to

operate, as provided in part 49 of this chapter).

Sec. 46.4 Unique identifiers.

The unique identifier requirements for swap data reporting with

respect to pre-enactment or transition swaps shall be as follows:

(a) By the compliance date, the reporting counterparty (as defined

by part 45 of this chapter) for each pre-

[[Page 35229]]

enactment or transition swap in existence on or after April 25, 2011,

for which an initial data report is required by this part 46, shall

obtain for itself a legal entity identifier as provided in Sec. 45.6

of this chapter (or if the Commission has not yet designated a legal

entity identifier system, a substitute counterparty identifier as

provided in Sec. 45.6(f) of this chapter), and shall include its own

legal entity identifier (or substitute counterparty identifier) in the

initial data report concerning the swap. With respect to the legal

entity identifier (or substitute counterparty identifier) of the

reporting counterparty, the reporting counterparty and the swap data

repository to which the swap is reported shall comply thereafter with

all unique identifier requirements of Sec. 45.6 of this chapter.

(b) Within 180 days after the compliance date, the non-reporting

counterparty for each pre-enactment or transition swap in existence on

or after April 25, 2011, for which an initial data report is required

by this part 46, shall obtain a legal entity identifier as provided in

Sec. 45.6 of this chapter (or if the Commission has not yet designated

a legal entity identifier system, a substitute counterparty identifier

as provided in Sec. 45.6(f) of this chapter), and shall provide its

legal entity identifier (or substitute counterparty identifier) to the

reporting counterparty. Upon receipt of the non-reporting

counterparty's legal entity identifier (or substitute counterparty

identifier), the reporting counterparty shall provide it to the swap

data repository to which swap data for the swap was reported.

Thereafter, with respect to the legal entity identifier (or substitute

counterparty identifier) of the non-reporting counterparty, the

counterparties to the swap and the swap data repository to which it is

reported shall comply with all requirements of Sec. 45.6 of this

chapter.

(c) The legal entity identifier requirements of parts 46 and 45 of

this chapter shall not apply to pre-enactment or transition swaps

expired or terminated prior to April 25, 2011.

(d) The unique swap identifier and unique product identifier

requirements of part 45 of this chapter shall not apply to pre-

enactment or transition swaps.

Sec. 46.5 Determination of which counterparty must report.

(a) Determination of which counterparty must report swap data

concerning each pre-enactment or transition swap shall be made as

follows:

(1) If only one counterparty is a swap dealer, the swap dealer

shall fulfill all counterparty reporting obligations.

(2) If neither party is an swap dealer, and only one counterparty

is an major swap participant, the major swap participant shall fulfill

all counterparty reporting obligations.

(3) If both counterparties are non-SD/MSP counterparties, and only

one counterparty is a financial entity as defined in CEA section

2(h)(7)(C), the counterparty that is a financial entity shall be the

reporting counterparty.

(4) For each pre-enactment swap or transition swap for which both

counterparties are swap dealers, or both counterparties are major swap

participants, or both counterparties are non-SD/MSP counterparties that

are financial entities as defined in CEA section 2(h)(7)(C), or both

counterparties are non-SD/MSP counterparties and neither counterparty

is a financial entity as defined in CEA section 2(h)(7)(C), the

counterparties shall agree which counterparty shall fulfill reporting

obligations with respect to that swap; and the counterparty so selected

shall fulfill all counterparty reporting obligations.

(5) Notwithstanding the provisions of paragraphs (a)(1) through (3)

of this section, for pre-enactment or transition swaps for which both

counterparties are non-SD/MSP counterparties, if only one counterparty

is a U.S. person, that counterparty shall be the reporting counterparty

and shall fulfill all counterparty reporting obligations.

(b) For pre-enactment and transition swaps in existence as of the

compliance date, determination of the reporting counterparty shall be

made by applying the provisions of paragraph (a) of this section with

respect to the current counterparties to the swap as of the compliance

date, regardless of whether either or both were original counterparties

to the swap when it was first executed.

(c) For pre-enactment and transition swaps for which reporting is

required, but which have expired or been terminated prior to the

compliance date, determination of the reporting counterparty shall be

made by applying the provisions of paragraph (a) of this section to the

counterparties to the swap as of the date of its expiration or

termination (except for determination of a counterparty's status as an

SD or MSP, which shall be made as of the compliance date), regardless

of whether either or both were original counterparties to the swap when

it was first executed.

(d) After the initial report required by Sec. 46.3 is made, if a

reporting counterparty selected pursuant to this section ceases to be a

counterparty to a swap due to an assignment or novation, the reporting

counterparty for reporting of required swap continuation data following

the assignment or novation shall be selected from the two current

counterparties as provided in paragraphs (d)(1) through (4) of this

section.

(1) If only one counterparty is a swap dealer, the swap dealer

shall be the reporting counterparty and shall fulfill all counterparty

reporting obligations.

(2) If neither counterparty is a swap dealer, and only one

counterparty is a major swap participant, the major swap participant

shall be the reporting counterparty and shall fulfill all counterparty

reporting obligations.

(3) If both counterparties are non-SD/MSP counterparties, and only

one counterparty is a U.S. person, that counterparty shall be the

reporting counterparty and shall fulfill all counterparty reporting

obligations.

(4) In all other cases, the counterparty that replaced the previous

reporting counterparty by reason of the assignment or novation shall be

the reporting counterparty, unless otherwise agreed by the

counterparties.

Sec. 46.6 Third-party facilitation of data reporting.

Counterparties required by this part 46 to report swap data for any

pre-enactment or transition swap, while remaining fully responsible for

reporting as required by this part 46, may contract with third-party

service providers to facilitate reporting.

Sec. 46.7 Reporting to a single swap data repository.

All data reported for each pre-enactment or transition swap

pursuant to this part 46, and all corrections of errors and omissions

in previously reported data for the swap, shall be reported to the same

swap data repository to which the initial data report concerning the

swap is made (or to its successor in the event that it ceases to

operate, as provided in part 49 of this chapter).

Sec. 46.8 Data reporting for swaps in a swap asset class not accepted

by any swap data repository.

(a) Should there be a swap asset class for which no swap data

repository registered with the Commission currently accepts swap data,

each registered entity or counterparty required by this part to report

any required swap creation data or required swap continuation data with

respect to a swap in that asset class must report that same data to the

Commission.

[[Page 35230]]

(b) Data reported to the Commission pursuant to this section shall

be reported at times announced by the Commission. Data reported to the

Commission pursuant to this section with respect to pre-enactment and

transition swaps in existence on or after April 25, 2011 shall be

reported in an electronic format acceptable to the Commission.

(c) Delegation of authority to the Chief Information Officer: The

Commission hereby delegates to its Chief Information Officer, until the

Commission orders otherwise, the authority set forth in paragraph (c)

of this section, to be exercised by the Chief Information Officer or by

such other employee or employees of the Commission as may be designated

from time to time by the Chief Information Officer. The Chief

Information Officer may submit to the Commission for its consideration

any matter which has been delegated in this paragraph. Nothing in this

paragraph prohibits the Commission, at its election, from exercising

the authority delegated in this paragraph. The authority delegated to

the Chief Information Officer by paragraph (c) of this section shall

include:

(1) With respect to all pre-enactment and transition swaps required

to be reported by this part, the authority to determine the dates and

times at which data concerning such swaps shall be reported pursuant to

this part.

(2) With respect to all pre-enactment swaps or transition swaps in

existence on or after April 25, 2011:

(i) The authority to determine the manner, format, coding

structure, and electronic data transmission standards and procedures

acceptable to the Commission for the purposes of paragraphs (a) and (b)

of this section; and

(ii) The authority to determine whether the Commission may permit

or require use by reporting entities or counterparties in reporting

pre-enactment or transition swaps in existence on or after April 25,

2011, of one or more particular data standards (such as FIX, FpML, ISO

20022, or some other standard), in order to accommodate the needs of

different communities of users.

(d) The Chief Information Officer shall publish from time to time

in the Federal Register and on the Web site of the Commission the dates

and times, format, data schema, and electronic data transmission

methods and procedures for reporting acceptable to the Commission with

respect to swap data reporting pursuant to this section.

Sec. 46.9 Voluntary supplemental reporting

(a) For purposes of this section, the term voluntary, supplemental

report means any report of swap data for a pre-enactment or transition

swap to a swap data repository that is not required to be made pursuant

to this part or any other part in this chapter.

(b) A voluntary, supplemental report for a pre-enactment or

transition swap may be made only by a counterparty to the swap in

connection with which the voluntary, supplemental report is made, or by

a third-party service provider acting on behalf of a counterparty to

the swap.

(c) A voluntary, supplemental report for a pre-enactment or

transition swap may be made only after the initial data report for the

swap required by section 46.3(a) or the report required by section

46.3(b), as applicable, has been made.

(d) A voluntary, supplemental report for a pre-enactment or

transition swap may be made either to the swap data repository to which

the initial data report for the swap required by section 46.3(a) or the

report required by section 46.3(b), as applicable, has been made, or to

a different swap data repository.

(e) A voluntary, supplemental report for a pre-enactment or

transition swap must contain:

(1) An indication that the report is a voluntary, supplemental

report.

(2) The swap data repository identifier created for the swap by the

automated systems of the swap data repository to which the initial data

report required by section 46.3(a) or the report required by section

46.3(b), as applicable, has been made.

(3) An indication of the identity of the swap data repository to

which the initial data report required by section 46.3(a) or the report

required by section 46.3(b), as applicable, has been made, if the

voluntary supplemental report is made to a different swap data

repository.

(4) If the pre-enactment or transition swap was in existence on or

after April 25, 2011, the legal entity identifier (or substitute

identifier) of the counterparty making the voluntary, supplemental

report.

(5) If applicable, an indication that the voluntary, supplemental

report is made pursuant to the laws or regulations of any jurisdiction

outside the United States.

(f) If a counterparty that has made a voluntary, supplemental

report discovers any errors in the swap data included in the voluntary,

supplemental report, the counterparty must report a correction of each

such error to the swap data repository to which the voluntary,

supplemental report was made, as soon as technologically practicable

after discovery of any such error.

Sec. 46.10 Required data standards.

In reporting swap data to a swap data repository as required by

this part 46, each reporting counterparty shall use the facilities,

methods, or data standards provided or required by the swap data

repository to which counterparty reports the data.

Sec. 46.11 Reporting of errors and omissions in previously reported

data.

(a) Each swap counterparty required by this part 46 to report swap

data shall report any errors and omissions in the data so reported.

Corrections of errors or omissions shall be reported as soon as

technologically practicable after discovery of any such error or

omission.

(b) For pre-enactment or transition swaps for which this part

requires reporting of continuation data, reporting counterparties

reporting state data as provided in part 45 of this chapter may fulfill

the requirement to report errors or omissions by making appropriate

corrections in their next daily report of state data pursuant to part

45 of this chapter.

(c) Each counterparty to a pre-enactment or transition swap that is

not the reporting counterparty as determined pursuant to Sec. 46.5,

and that discovers any error or omission with respect to any swap data

reported to a swap data repository for that swap, shall promptly notify

the reporting counterparty of each such error or omission. As soon as

technologically practicable after receiving such notice, the reporting

counterparty shall report a correction of each such error or omission

to the swap data repository.

(d) Each swap counterparty reporting corrections to errors or

omissions in data previously reported as required by this part shall

report such corrections in the same format as it reported the erroneous

or omitted data.

Appendix 1 to Part 46--Tables of Minimum Primary Economic Terms Data

For Pre-Enactment and Transition Swaps

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Issued in Washington, DC on May 17, 2012 by the Commission.

David A. Stawick,

Secretary of the Commission.

Appendix to Swap Data Recordkeeping and Reporting Requirements:

Pre-Enactment and Transition Swaps--Commission Voting Summary and

Statement of Chairman Gensler

Note: The following appendix will not appear in the Code of

Federal Regulations.

On this matter, Chairman Gensler and Commissioner Sommers, Chilton,

O'Malia and Wetjen voted in the affirmative; no Commissioner voted in

the negative.

Appendix 2--Statement of Chairman Gary Gensler

I support the final rule establishing swap data recordkeeping

and reporting requirements for pre-enactment and transition swaps,

collectively called ``historical swaps.'' One of the main goals of

the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-

Frank Act) is to bring transparency to the unregulated swaps market.

Starting this summer, light will shine for the first time on this

market with the reporting both to the public and to regulators of

nearly every swap transaction.

The historical swaps rule builds on already completed swaps

market transparency rules. It will help give regulators a complete

picture of the swaps market, including data on swaps in existence at

the time of the Dodd-Frank Act's passage.

The rule provides market participants guidance on the reporting

requirements for pre-enactment swaps (those entered into before the

enactment of the Dodd-Frank Act) as well as transition swaps (those

entered into between the enactment date of the law and the

applicable compliance date for swap data reporting). The rule

specifies clearly what records must be kept and what data must be

reported to swap data repositories (SDRs) with respect to these

historical swaps. It ensures that the historical swaps data needed

by regulators is available through SDRs beginning on the compliance

date for swap data reporting.

The rule achieves the reporting benefits of Dodd-Frank while

reducing the costs and burdens associated with recordkeeping for

historical swaps. Recordkeeping requirements for these swaps are

minimized for counterparties who are not swap dealers or major swap

participants. These counterparties are permitted to maintain records

in any format they choose, and are allowed five days to retrieve

their records.

[FR Doc. 2012-12531 Filed 6-11-12; 8:45 am]

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Last Updated: June 12, 2012