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2010-25325

  • FR Doc 2010-25325[Federal Register: October 14, 2010 (Volume 75, Number 198)]

    [Rules and Regulations]

    [Page 63080-63085]

    From the Federal Register Online via GPO Access [wais.access.gpo.gov]

    [DOCID:fr14oc10-15]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 44

    RIN 3038-AD24

    Interim Final Rule for Reporting Pre-Enactment Swap Transactions

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Interim final rule; request for public comment.

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

    ``CFTC'') is publishing for comment an interim final rule to implement

    new statutory provisions introduced by Title VII of the Dodd-Frank Wall

    Street Reform and Consumer Protection Act (``Dodd-Frank Act''). Section

    729 of the Dodd-Frank Act requires the CFTC to adopt, within 90 days of

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

    reporting of swap transactions entered into before July 21, 2010 whose

    terms had not expired as of that date (``pre-enactment unexpired

    swaps''). Pursuant to this mandate, the CFTC is today adopting an

    interim final rule requiring specified counterparties to pre-enactment

    unexpired swap transactions to report certain information related to

    such transactions to a registered swap data repository (``SDR'') \1\ or

    to the Commission by the compliance date to be established in reporting

    rules required under Section2(h)(5) of the CEA, or within 60 days after

    an SDR becomes registered under Section 21 of the CEA, whichever occurs

    first. An interpretive note to the rule advises that counterparties

    that may be required to report to an SDR or the CFTC will need to

    preserve information pertaining to the terms of such swaps.

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    \1\ The term ``swap data repository'' is defined in Section

    1a(48) of the Commodity Exchange Act (``CEA'' or the ``Act'') to

    mean ``any person that collects and maintains information or records

    with respect to transactions or positions in, or the terms and

    conditions of, swaps entered into by third parties for the purpose

    of providing a centralized recordkeeping facility for swaps.''

    DATES: This interim final rule is effective October 14, 2010. Comments

    [[Page 63081]]

    on all aspects of the interim final rule must be received on or before

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    November 15, 2010.

    ADDRESSES: Comments may be submitted by any of the following methods:

    Agency Web Site: Follow the instructions for submitting

    comments at http://www.federalregister.gov/agencies/commodity-futures-

    trading-commission.

    E-mail: peswapreport@cftc.gov.

    Mail: Address to David A. Stawick, Secretary, Commodity

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

    NW., Washington, DC 20581.

    All comments must be submitted in English, or if not, accompanied

    by an English translation. Comments will be posted as received to

    http://www.cftc.gov. You should submit only information that you wish

    to make available publicly. If you wish the Commission to consider

    information that is exempt from disclosure under the Freedom of

    Information Act, a petition for confidential treatment of the exempt

    information may be submitted according to the established procedures in

    CFTC Regulation 145.9.\2\

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    \2\ 17 CFR 145.9.

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    The Commission reserves the right, but shall have no obligation, to

    review, pre-screen, filter, redact, refuse or remove any or all of your

    submission from www.cftc.gov that it may deem to be inappropriate for

    publication, such as obscene language. All submissions that have been

    redacted or removed that contain comments on the merits of the

    rulemaking will be retained in the public comment file and will be

    considered as required under the Administrative Procedure Act and other

    applicable laws, and may be accessible under the Freedom of Information

    Act.

    FOR FURTHER INFORMATION CONTACT: Susan Nathan, Senior Special Counsel,

    Division of Market Oversight, Commodity Futures Trading Commission,

    Washington, DC 20581, at (202) 418.5133.

    SUPPLEMENTARY INFORMATION: The Commission is adopting Part 44 to its

    Regulations under the Commodity Exchange Act as an interim final rule

    and is soliciting comment on all aspects of the rule. The Commission

    will carefully consider all comments received and will address them,

    where applicable, in connection with the permanent reporting rules

    required to be adopted by the Dodd-Frank Act.

    I. Background

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

    Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'').\3\

    Title VII of the Dodd-Frank Act \4\ amended the Commodity Exchange Act

    (``CEA'') \5\ 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: (1) Providing for the

    registration and comprehensive regulation of swap dealers and major

    swap participants; (2) imposing clearing and trade execution

    requirements on standardized derivative products; (3) creating robust

    recordkeeping and real-time reporting regimes; and (4) enhancing the

    Commission's rulemaking and enforcement authorities with respect to,

    among others, all registered entities and intermediaries subject to the

    Commission's oversight.

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    \3\ See Dodd-Frank Wall Street Reform and Consumer Protection

    Act, Public Law 111-203, 124 Stat. 1376 (2010), hereinafter cited as

    ``Dodd-Frank Act.'' The text of the Dodd-Frank Act may be accessed

    at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.

    \4\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may

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

    2010.''

    \5\ 7 U.S.C. 1 et seq.

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    Among other things, the Dodd-Frank Act requires that swaps be

    reported to a registered SDR or to the Commission if there is no

    registered SDR that would accept the swap. Section 723 of the Dodd-

    Frank Act adds Section 2(h)(5) to the CEA to require that pre-enactment

    swaps be reported to a registered SDR or to the Commission no later

    than 180 days after the effective date of that subsection.\6\ By its

    terms, the effectiveness of this rule is governed by the effective date

    of the Dodd-Frank Act--July 16, 2011. Section 729 of the Dodd-Frank Act

    establishes, in new Section 4r of the CEA, reporting requirements that

    will 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.

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    \6\ ``(5) Reporting Transition Rules.--Rules adopted by the

    Commission under this section shall provide for the reporting of

    data, as follows:

    (A) Swaps entered into on or 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.

    (B) 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 or--

    (i) 90 days after such effective date; or such other time after

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

    regulation.

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    Section 4r(a)(1) of the CEA, as amended, provides generally that

    each swap that is not accepted for clearing by any derivatives clearing

    organization (``DCO'') must be reported to a swap data repository

    (``SDR'') registered in accordance with new Section 21 of the CEA \7\

    or, where there is no SDR that would accept the swap, to the Commission

    within the time period prescribed by the Commission. Section 4r(a)(2)

    specifies that each swap entered into before the date of enactment of

    the Dodd-Frank Act, the terms of which had not expired by the date of

    enactment of that Act, must be reported to a registered SDR or to the

    Commission, and directs the Commission to promulgate, within 90 days of

    enactment of the Dodd-Frank Act, an interim final rule providing for

    the reporting of such swaps. Section 4r(a)(2)(A) directs that such

    swaps be reported by a date 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.

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    \7\ Section 21, added by Section 728 of the Dodd-Frank Act,

    requires that SDRs directly or indirectly making use of the mails or

    any means or instrumentality of interstate commerce to perform the

    functions of an SDR be registered with the Commission, and

    establishes statutory duties applicable to registered SDRs.

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    Consistent with this mandate, the Commission is adopting, in new

    Part 44 of the Commission's regulations, Rule 44.02 to (i) establish a

    reporting time frame for unexpired pre-enactment swaps that is no later

    than 60 days from the date the appropriate SDR is registered with the

    Commission or by the compliance date established in the swap reporting

    rules required by Section 2(h)(5) of the CEA, whichever comes first;

    and (ii) require that counterparties specified in Section 4r(a)(3)

    report information concerning pre-enactment unexpired swaps to the

    Commission on request during the interim period. Finally, the

    Commission is specifying in an interpretive note (``Note'') to Rule

    44.02(a) the information the Commission believes reporting entities

    should retain in order to comply with the reporting obligations in the

    rule.

    II. The Interim Final Rule

    A. Reconciling the Relevant Statutory Provisions

    Sections 723 and 729 of the Dodd-Frank Act establish requirements

    for the reporting of pre-enactment swaps to SDRs or to the Commission;

    each provides generally that swaps must be reported pursuant to such

    rules or regulations as the Commission prescribes. Section 729 provides

    that swaps entered into prior to the July 21, 2010 enactment date and

    outstanding on

    [[Page 63082]]

    that date (hereafter ``pre-enactment unexpired swaps'') must be

    reported to a registered SDR or the CFTC not later than 30 days after

    the CFTC issues an interim final rule \8\ or such other period

    determined by the CFTC. Section 723 similarly provides that the

    Commission must promulgate a rule that pre-enactment swaps must be

    reported to a registered SDR not later than 180 days after the

    effective date of the subsection.\9\ The inconsistencies between these

    two reporting provisions must be reconciled in order to eliminate

    uncertainty with respect to the actual reporting requirements for pre-

    enactment swaps.

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    \8\ The interim final rule must be promulgated within 90 days of

    enactment of the Dodd-Frank Act. See Section 4r(a)(2)(B).

    \9\ Section 774 of the Dodd-Frank Act describes the effective

    date as follows: ``unless otherwise provided,'' the provisions of

    Title VII shall take effect ``on the later of 360 days after the

    date of enactment'' or to the extent that a provision of Title VII

    requires a rulemaking, ``not less than 60 days after publication of

    the final rule or regulation implementing'' such provision of Title

    VII.

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    1. Section 729

    Section 4r(a)(1) of the CEA, added by section 729 of the Dodd-Frank

    Act, provides generally that each swap that is not accepted for

    clearing by any DCO must be reported to an SDR described in new Section

    21 of the CEA or, in the case where there is no SDR that would accept

    the swap,\10\ to the Commission within the time period prescribed by

    the Commission. Specifically, pre-enactment swaps must, pursuant to new

    CEA Section 4r(a)(2)(A), be reported to a registered SDR, or to the

    Commission if no SDR would accept the swap, by a date that is not later

    than 30 days after the issuance of the interim final rule prescribed in

    new Section 4r(a)(2)(B) \11\ or such other period as the Commission

    determines to be appropriate. Section 4r(a)(3) delineates the reporting

    obligations of the parties in specific circumstances.\12\

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    \10\ The Commission believes that this circumstance might occur

    where no SDR has yet been approved or where no SDR has been approved

    for a particular asset class. In addition, it is conceivable that an

    SDR's system might not be equipped to accept a particular bespoke

    swap transaction.

    \11\ Section 4r(a)(2)(B) provides that ``[t]he Commission shall

    promulgate an interim final rule within 90 days of the date of

    enactment of this section providing for the reporting of each swap

    entered into before the date of enactment as referenced in

    subparagraph (A).'' See Section 729 of the Dodd-Frank Act.

    \12\ For swaps in which only one counterparty is a swap dealer

    or major swap participant, that swap dealer or major swap

    participant shall report the swap (Section 4r(3)(A)); where one

    counterparty is a swap dealer and the other is a major swap

    participant, the swap dealer shall report the swap (Section

    4r(3)(B)). With respect to any other swap not described in

    subsections (A) and (B), the counterparties to the swap shall select

    a counterparty to report the swap (Section 4r(a)(3)(C)).

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    2. Section 723

    Section 723 of the Dodd-Frank Act adds to the CEA new Section

    2(h)(5), which similarly requires that the Commission adopt a reporting

    transition rule for swaps entered into before the date of enactment of

    that subsection. Section 2(h)(5) provides that such swaps shall be

    reported to a registered SDR or to the Commission no later than 180

    days after the effective date of that subsection--or approximately 540

    days after the date of enactment.

    3. Legislative Intent

    In a July 15, 2010 floor statement, Senator Lincoln addressed the

    inconsistencies between Sections 2(h)(5) and 4r(a)(2)(A) and emphasized

    that the provisions of these two sections ``should be interpreted as

    complementary to one another to assure consistency between them. This

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

    of these reporting requirements * * *.'' \13\

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    \13\ Lincoln, ``Wall Street Transparency and Accountability,''

    Congressional Record (July 15, 2010) at S5923.

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    B. Scope and Coverage of the Interim Final Rule

    As noted, new Section 2(h)(5) does not contain the same qualifying

    language found in Section 4r(a)(2)(A), which limits the swaps that must

    be reported to pre-enactment swaps whose terms have not expired as of

    the date of enactment. In the Commission's view, failure to limit the

    term ``pre-enactment swaps'' to ``pre-enactment unexpired swaps'' would

    require reporting of every swap that has ever been entered into.\14\

    There are obvious practical and operational difficulties in an

    interpretation that imposes reporting requirements on expired swaps:

    counterparties may not have kept thorough, complete--or indeed any--

    records of such transactions. Moreover, the argument can be made that a

    swap whose terms have expired is no longer a swap as defined in the

    Dodd-Frank Act. For these reasons, the Commission believes that the

    trades described in Section 2(h)(5) should be viewed as consistent with

    those described in Section 4r(a)(2); that is, limited to those pre-

    enactment trades whose terms had not expired at the time of enactment--

    i.e., July 21, 2010.

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    \14\ Financial historians believe that the first swap

    transaction was executed between the World Bank and IBM Corporation

    in 1981. See Paul C. Harding, Mastering the ISDA Master Agreements

    (1992 and 2002) (FT Prentice Hall, 3d Ed. 2010) at 9. As noted in

    the text accompanying this footnote, the operational difficulties in

    requiring reporting of all swaps executed since 1981 could be

    substantial, and the cost in terms of technology and human capital

    resources would far outweigh any potential benefits for swaps that

    have expired.

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    1. Reporting Obligations

    Rule 44.02(a) requires that the designated counterparty to a pre-

    enactment unexpired swap transaction \15\ submit, with respect to such

    transaction, the following information to a registered SDR or to the

    Commission: (i) A copy of the transaction confirmation in electronic

    form, if available, or in written form if there is no electronic copy;

    and (ii) if available, the time the transaction was executed. In

    addition, Rule 44.02(b) provides that a counterparty to a pre-enactment

    unexpired swap transaction must report to the Commission on request any

    information relating to such transaction during the time that this

    interim final rule is in effect. The Commission expects that such

    information would vary depending upon the needs of the Commission and

    may include actual as well as summary trade data. Such summary data may

    include a description of a swap dealer's counterparties or the total

    number of pre-enactment swap transactions entered into by the dealer

    and some measure of the frequency and duration of those contracts. The

    Commission believes that this requirement will facilitate its ability

    to understand and evaluate the current market for swaps and may inform

    its analysis of other required rulemakings under the Dodd-Frank Act.

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    \15\ The reporting obligations of specified counterparties are

    delineated in Section 4r(a)(3) of the CEA, as amended.

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    2. Reporting Party

    Section 4r(a)(3) of the CEA specifies the party obligated to report

    a swap transaction: either a swap dealer, a major swap participant, or

    a counterparty to the transactions. These provisions apply to reporting

    under the interim final rule. Specifically, Section 4r(a)(3) provides,

    with respect to a swap in which only one counterparty is a swap dealer

    or major swap participant, it is that entity's responsibility to report

    the swap. With respect to a swap in which one counterparty is a swap

    dealer and the other counterparty is a major swap participant, the swap

    dealer must report the swap; with respect to any other swap, the

    counterparties shall select one of them to report the swap. Rule

    44.02(b) incorporates these provisions.

    [[Page 63083]]

    3. Effective Date for Reporting Pre-Enactment Unexpired Swaps

    New CEA Section 4r(a)(2)(C) establishes that the reporting

    provisions of section 4r are effective immediately upon enactment of

    the Dodd-Frank Act, despite the fact that at this time (i) there are no

    registered SDRs to immediately accept the swap data; (ii) the

    Commission is not prepared to accept swap data; and (iii) the

    Commission has not adopted rules governing either the registration of

    swap dealers or major swap participants or the reporting and

    maintenance of such data and is not required to do so until 360 days

    after enactment of the Dodd-Frank Act.\16\ In these circumstances,

    Section 4r should be read to require that the reporting obligation

    became effective on enactment of the Dodd-Frank Act and that

    counterparties who are subject to this obligation should, as of the

    date of enactment, retain all data relating to pre-enactment unexpired

    swaps until such time as reporting can be effected--e.g., when swap

    dealers and major swap participants, as well as the appropriate SDRs,

    have been registered, or when permanent regulations are enacted

    pursuant to Section 2(h)(5) of the CEA, whichever occurs first.

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    \16\ Section 2(h)(5) does not specify an effective date. In

    these circumstances, the ``default'' effective date would be 360

    days after enactment of the Dodd-Frank Act or 60 days after

    publication of a final rule or regulation. Adoption of the effective

    date prescribed in Section 2(h)(5) permits the implementation of

    Section 4r and achieves Senator Lincoln's goal of assuring

    consistency between the two legislative provisions embodied in

    Sections 4r and 2(h)(5).

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    4. Record Retention

    The pre-enactment swap transactions that must be reported pursuant

    to Section 4r of the CEA, as amended, and the new interim final rule

    (Part 44 of the Commission's Regulations) occurred prior to enactment

    of the Dodd-Frank Act. Accordingly, implicit in the reporting

    requirements established by Section 4r and Rule 44 is the obligation of

    each counterparty to such transactions to retain information and

    documents relating to the terms of the transaction. Rule 44.02 includes

    a Note to paragraphs (a)(1) and (2) advising counterparties to a pre-

    enactment unexpired swap that may be required to report such

    transaction to retain in its existing format all information and

    documents, to the extent and in such form as they presently exist,

    relating to the terms of the transaction. This information includes,

    but is not limited to: (i) Any information necessary to identify and

    value the transaction; (ii) the date and time of execution of the

    transaction; (iii) information relevant to the price of the

    transaction; (iv) whether the transaction was accepted for clearing by

    any clearing agency or derivatives clearing organization, and if so the

    identity of such agency or organization; (v) any modification(s) to the

    terms of the transaction; and (vi) the final confirmation of the

    transaction. The Commission believes that counterparties that may be

    required to report such transactions should retain such information in

    order to comply with the reporting requirements of Rule 44.02. The

    information identified above and in the Note is designed to encompass

    material information about pre-enactment unexpired swap transactions

    that may be the subject of a request by the Commission to report

    pursuant to the interim final rule, as well as rules subsequently

    adopted pursuant to new Section 2(h)(5) of the CEA, and that will

    assist the Commission in performing its oversight functions under the

    CEA.

    The Note does not require any counterparty to a pre-enactment

    unexpired swap to create or retain new records with respect to

    transactions that occurred in the past. Permitting records to be

    retained in their existing format is designed to ensure that important

    information relating to the terms of pre-enactment unexpired swaps is

    preserved with minimal burden on the counterparties. Similarly, the

    Commission understands that information that the counterparty does not

    have prior to the effective date of the interim final rule cannot be

    reported.

    III. Related Matters

    A. Administrative Procedure Act

    The Administrative Procedure Act \17\ (``APA'') generally requires

    an agency to publish notice of a proposed rulemaking in the Federal

    Register.\18\ This requirement does not apply, however, when the agency

    ``for good cause finds * * * that notice and public procedure are

    impracticable, unnecessary, or contrary to the public interest.'' \19\

    Moreover, while the APA requires generally that an agency publish an

    adopted rule in the Federal Register 30 days before it becomes

    effective, this requirement does not apply if the agency finds good

    cause to make the rule effective sooner.\20\ Section 729 of the Dodd-

    Frank Act amended the CEA to add new Section 4r, which in turn requires

    the Commission to adopt, within 90 days of enactment of the Dodd-Frank

    Act, an interim final rule providing for the reporting of swaps entered

    into before the date of enactment of the Dodd-Frank Act the terms of

    which were not expired as of that date. The Commission is adopting Part

    44 to its Regulations in response to this mandate. In these

    circumstances, the Commission, for good cause, fines that notice and

    solicitation is impracticable, unnecessary or contrary to the public

    interest. This finding also satisfies the requirements of 5 U.S.C.

    808(2), permitting the rule to become effective notwithstanding the

    requirement of 5 U.S.C. 801 (if a federal agency finds that notice and

    public comment are ``impractical, unnecessary or contrary to the public

    interest,'' a rule ``shall take effect at such time as the federal

    agency promulgating the rule determines.'').

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    \17\ 5 U.S.C. 553.

    \18\ 5 U.S.C. 553(b).

    \19\ Id.

    \20\ 5 U.S.C. 553(d).

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    B. Paperwork Reduction Act

    1. Reporting Requirements

    The Commission has determined that these proposed orders will not

    impose on swap counterparties any new reporting requirements that would

    be collections of information requiring the approval of the Office of

    Management and Budget under the Paperwork Reduction Act.\21\ The

    reporting requirements associated with Section 723 of the Dodd-Frank

    Act will be adopted by the Commission, at which time the Commission

    will issue a notice and request comments on the reporting requirements

    and seek OMB approval as provided by 5 CFR 1320.8 and 1320.11.

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    \21\ 44 U.S.C. 3501 et seq.

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    2. Recordkeeping Requirements

    Proposed Commission Regulation 44.02 imposes a recordkeeping

    requirement on swap counterparties that is considered to be a

    collection of information within the meaning of the Paperwork Reduction

    Act (``PRA'').\22\ The Commission therefore is required to submit to

    the Office of Management and Budget (OMB) an information collection

    request for review and approval in accordance with 44 U.S.C. 3507(d)

    and 5 CFR 1320.8 an d1320.11. The Commission will, by separate action,

    publish in the Federal Register a notice and request for comments on

    the paperwork burden associated with these recordkeeping requirements

    in accordance with 5 CFR 1320.8. If approved, this new collection of

    information will be mandatory.

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    \22\ 44 U.S.C. 3501 et seq.

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    C. Cost-Benefit Analysis

    Section 15 of the CEA requires the Commission to consider the costs

    and

    [[Page 63084]]

    benefits of its action before issuing a new regulation or order under

    the Act. By its terms, Section 15(a) does not require the Commission to

    quantify the costs and benefits of its action or to determine whether

    the benefits of the action outweigh its costs. Rather, Section 15(a)

    requires the Commission simply to ``consider the costs and benefits''

    of the subject rule or order. Section 15(a) further specifies that the

    costs and benefits of Commission regulations shall be evaluated in

    light of five broad areas of market and public concern: (1) Protection

    of market participants and the public; (2) efficiency, competitiveness,

    and financial integrity of the market for listed derivatives; (3) price

    discovery; (4) sound risk management practices; and (5) other public

    interest considerations. The Commission may, in its discretion, give

    greater weight to any one of the five enumerated areas of concern and

    may, in its discretion, determine that notwithstanding its costs, a

    particular regulation is necessary or appropriate to protect the public

    interest or to effectuate any of the provisions or to accomplish any of

    the purposes of the CEA.

    Title VII of the Dodd-Frank Act requires the Commission to

    undertake a number of rulemakings to implement the regulatory framework

    for swaps set forth in that Act, including the reporting of swap

    transactions. This interim final rule implements the Dodd-Frank Act by

    establishing reporting requirements for pre-enactment unexpired swaps

    as required by Section 729 of that Act and serving as notice to

    reporting entities of a present obligation to retain data related to

    such swaps for reporting at a future date. The rule will enable the

    Commission to obtain data on pre-enactment swaps and will also provide

    for the preservation of data on such swaps until the Commission issues

    permanent recordkeeping and reporting rules for all swaps. By making

    available transaction data on pre-enactment swaps, this action will

    enable the Commission to gain a better understanding of the swap

    market--including the size and scope of that market; this understanding

    will ultimately lead to a more robust and transparent environment for

    the market for swaps. Further, the Commission expects this rule to make

    available information that could inform the Commission's decision-

    making with respect to the rules it is required to implement under the

    Dodd-Frank Act.

    The Note to Rule 44.02(a)(1) and (2) addresses the retention of

    records relating to swaps entered into before July 21, 2010, the terms

    of which had not expired as of that date. Although there are

    recordkeeping costs associated with retention of existing swap

    transaction information, the Commission does not believe those costs

    will be significant. The rule does not require market participants to

    modify the data they have for retention purposes, and the information

    that is required to be reported should be information that is already

    kept by swap counterparties in their normal course of business, and it

    may be reported in the format in which it is kept. Moreover,

    counterparties must report the time of execution only to the extent

    such information is available.

    The permanent reporting rules that the Commission is required to

    adopt under new CEA Section 2(h)(5) also will apply to pre-enactment

    swaps. Accordingly, in adopting this interim final rule, the Commission

    has sought to limit the burden on market participants by not imposing

    substantial or potentially conflicting reporting requirements.

    D. The Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq.,

    requires Federal agencies, in promulgating rules, to consider the

    impact of those rules on small entities. The term ``rule'' under the

    RFA is defined as ``any rule for which the agency publishes a general

    notice of proposed rulemaking pursuant to Section 553(B) of this title,

    or any other law * * *.'' \23\ However, a general notice of proposed

    rulemaking under Section 553(b) does not apply ``when the agency for

    good cause finds (and incorporates the finding and a brief statement of

    reasons therefor in the rules [issued] that notice and public procedure

    thereon are impracticable, unnecessary or contrary to the public

    interest.'' \24\ Congress in Section 4r(a)(2)(B) of the CEA directs the

    Commission to promulgate an interim final rule within 90 days of

    enactment of the Dodd-Frank Act to require the reporting of unexpired

    pre-enactment swaps. The Commission believes that the RFA does not

    apply to this interim final rule because ``good cause'' under 5 U.S.C.

    553(b) has been established by specific order of Congress in the Dodd-

    Frank Act.

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    \23\ 5 U.S.C. 601(2).

    \24\ 5 U.S.C. 553(b).

    ---------------------------------------------------------------------------

    List of Subjects in 17 CFR Part 44

    Swap markets, Counterparties, Reporting and recordkeeping

    requirements.

    0

    In consideration of the foregoing, and pursuant to the authority in the

    Commodity Exchange Act, as amended, and in particular Section 4r (a)(2)

    of the Act, the Commission hereby proposes to amend Chapter I of Title

    17 of the Code of Federal Regulation by adding a new Part 44 as

    follows:

    PART 44--INTERIM FINAL RULE FOR PRE-ENACTMENT SWAP TRANSACTIONS

    Sec.

    44.00 Definition of terms used in Part 44 of this chapter.

    44.01 Effective date.

    44.02 Reporting pre-enactment swaps to a swap data repository or the

    Commission.

    Authority: 7 U.S.C. 2(h)(5), 4r, and 12a(5), as amended by Title

    VII of the Wall Street Reform and Consumer Protection Act (Dodd-

    Frank Act of 2010), Pub. L. 111-203, 124 Stat. 1376 (2010).

    Sec. 44.00 Definition of terms used in Part 44 of this chapter.

    (a) Major swap participant shall have the meaning provided in

    Section 1a(33) of the Commodity Exchange Act, as amended, and any rules

    or regulations thereunder.

    (b) Pre-enactment unexpired swap means any swap entered into prior

    to the enactment of the Dodd-Frank Act of 2010 (July 21, 2010) the

    terms of which had not expired as of the date of enactment of that Act;

    (c) Reporting entity, when used in this Part, means any

    counterparty referenced or identified in Section 4r(a)(3)(A)-(C) of the

    Commodity Exchange Act, as amended;

    (d) Swap Data Repository shall have the meaning provided in Section

    1a(48) of the Commodity Exchange Act, as amended, and any rules or

    regulations thereunder;

    (e) Swap Dealer shall have the meaning provided in Section 1(a)(49)

    of the Commodity Exchange Act, as amended, and any rules or regulations

    thereunder;

    Sec. 44.01 Effective date.

    The provisions of this Part are effective immediately on

    publication in the Federal Register.

    Sec. 44.02 Reporting pre-enactment swaps to a swap data repository or

    the Commission.

    (a) A counterparty to a pre-enactment unexpired swap transaction

    shall:

    (1) Report to a registered swap data repository or the Commission

    by the compliance date established in the reporting rules required

    under Section 2(h)(5) of the Commodity Exchange Act, or within 60 days

    after a swap data repository becomes registered with the Commission and

    commences operations to receive and maintain data related to such swap,

    whichever occurs first, the

    [[Page 63085]]

    following information with respect to the swap transaction:

    (i) A copy of the transaction confirmation, in electronic form if

    available, or in written form if there is no electronic copy; and

    (ii) The time, if available, that the transaction was executed; and

    (2) Report to the Commission on request, in a form and manner

    prescribed by the Commission, any information relating to the swap

    transaction.

    Note to Paragraphs (a)(1) and (a)(2). In order to comply with the

    reporting requirements contained in paragraph (a)(1) and (a)(2) of this

    section, each counterparty to a pre-enactment unexpired swap

    transaction that may be required to report such transaction should

    retain, in its existing format, all information and documents, to the

    extent and in such form as they presently exist, relating to the terms

    of a swap transaction, including but not limited to any information

    necessary to identify and value the transaction; the date and time of

    execution of the transaction; information relevant to the price of the

    transaction; whether the transaction was accepted for clearing and, if

    so, the identity of such clearing organization; any modification(s) to

    the terms of the transaction; and the final confirmation of the

    transaction.

    (b) Reporting party. The counterparties to a swap transaction shall

    report the information required under paragraph (a) of this section as

    follows:

    (1) Where only one counterparty to a swap transaction is a swap

    dealer or a major swap participant, the swap dealer or major swap

    participant shall report the transaction;

    (2) Where one counterparty to a swap transaction is a swap dealer

    and the other counterparty is a major swap participant, the swap dealer

    shall report the transaction; and

    (3) Where neither counterparty to a swap transaction is a swap

    dealer or a major swap participant, the counterparties to the

    transaction shall select the counterparty who will report the

    transaction.

    By the Commission.

    Dated: October 1, 2010.

    David A. Stawick,

    Secretary.

    [FR Doc. 2010-25325 Filed 10-13-10; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: October 14, 2010