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2010-27538

  • FR Doc 2010-27538[Federal Register: November 2, 2010 (Volume 75, Number 211)]

    [Proposed Rules]

    [Page 67258-67277]

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

    [DOCID:fr02no10-13]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Parts 15 and 20

    RIN 3038-AD17

    Position Reports for Physical Commodity Swaps

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Notice of proposed rulemaking.

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

    ``CFTC'') is proposing reporting regulations that are reasonably

    necessary for implementing and enforcing aggregate position limits for

    certain physical commodity derivatives. As a result of recent

    legislative reforms, the Commission may adopt regulations establishing

    aggregate position limits for designated contract market (``DCM'')

    physical commodity futures contracts and swaps that are economically

    equivalent to such contracts. The Commission currently receives, and

    uses for market surveillance purposes, including position limit

    enforcement, data on large positions in all physical commodity futures

    and option contracts traded on DCMs. However, there is no analogous

    reporting structure in place for economically equivalent swaps, which

    until recently were largely unregulated financial contracts. The

    Commission's proposal would require position reports on economically

    equivalent swaps from clearing organizations, their members and swap

    dealers. Notably, the proposed regulations also include a sunset

    provision. The sunset provision would render the regulations

    ineffective upon the Commission's issuance of an order finding that

    operating swap data repositories (``SDRs'') are capable of processing

    positional data in a manner that would enable the Commission to set and

    enforce aggregate position limits.

    DATES: Comments must be received on or before December 2, 2010.

    ADDRESSES: You may submit comments, identified by RIN number, by any of

    the following methods:

    Federal eRulemaking Portal: http://www.regulations.gov.

    Follow instructions for submitting comments.

    Agency Web Site: http://www.cftc.gov.

    E-mail: Swaps.Reporting@cftc.gov.

    Mail: David A. Stawick, Secretary of the Commission,

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

    Street, NW., Washington, DC 20581.

    Hand Delivery/Courier: Same as mail above.

    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 procedure established in

    CFTC regulation 145.9 (17 CFR 145.9). 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 http://

    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: Stephen Sherrod, Acting Deputy

    Director, Market Surveillance, (202) 418-5452, ssherrod@cftc.gov, or

    Bruce Fekrat, Senior Special Counsel, Office of the Director, (202)

    418-5578, bfekrat@cftc.gov, Division of Market Oversight, Commodity

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

    NW., Washington, DC 20581.

    SUPPLEMENTARY INFORMATION:

    I. Economically Equivalent Swaps

    A. Background

    The Commodity Exchange Act (``CEA or Act'') of 1936,\1\ as amended

    by Title VII of the Dodd-Frank Wall Street Reform and Consumer

    Protection Act of 2010 (``Dodd-Frank Act''),\2\ includes provisions

    imposing clearing and trade execution requirements on standardized

    derivatives as well as comprehensive recordkeeping and reporting

    requirements that extend to all swaps, a defined term in CEA section

    1a(47). New section 4a(a)(2) of the CEA, as introduced by section 737

    of the Dodd-Frank Act, charges the Commission with promulgating

    regulations, as appropriate, to limit the amount of positions, other

    than bona fide hedge positions, that may be held by any person with

    respect to commodity futures and option contracts in exempt and

    agricultural commodities \3\ traded on or subject to the rules of a DCM

    within 180 and 270 days, respectively, of the legislation's enactment

    on July 21, 2010. New section 4a(a)(6)(A) of the Act requires

    Commission-set position limits to apply aggregately across DCMs to

    contracts that are based on the same commodity. The exempt and

    agricultural commodity futures and option contracts for which the

    Commission may consider position limits are listed in proposed

    regulation 20.2 (``20.2 listed futures contracts'' or ``20.2

    contracts''). The list in proposed regulation 20.2, however, is non-

    exclusive and preliminary. Should the Commission propose regulations to

    establish position limits, it may decide not to propose position limits

    for all of the 20.2 listed futures contracts or, alternatively, may

    decide to propose

    [[Page 67259]]

    position limits for futures contracts other than the 20.2 contracts.

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

    \2\ See 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.

    \3\ Section 1a(20) of the Act defines the term ``exempt

    commodity'' to mean a commodity that is not an excluded commodity or

    an agricultural commodity. Section 1a(19) defines the term

    ``excluded commodity'' to mean, among other things, an interest

    rate, exchange rate, currency, credit risk or measure, debt or

    equity instrument, measure of inflation, or other macroeconomic

    index or measure. Although the term ``agricultural commodity'' is

    not defined in the Act, CEA section 1a(9) enumerates a non-exclusive

    list of several agricultural-based commodities. The Commission will

    consider the issuance of a notice of rulemaking proposing a

    definition for the term ``agricultural commodity'' in October of

    2010. Although broadly defined, exempt commodity futures contracts

    are often viewed as energy and metals products.

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    Similar to CEA section 4a(a)(2), new section 4a(a)(5) of the Act

    charges the Commission with establishing position limits, including

    aggregate position limits, as appropriate, for swaps that are

    economically equivalent to DCM contracts in exempt and agricultural

    commodities with CFTC-set position limits. The definition of the term

    ``paired swaps and swaptions'' in proposed regulation 20.1 attempts to

    recognize a readily identifiable and partial set of swaps and swaptions

    (for ease of reference, collectively ``swaps'') that could potentially

    be considered as economically equivalent to 20.2 listed futures

    contracts.

    As discussed in more detail below, proposed regulation 20.1 defines

    paired swaps, and hence economically equivalent swaps, in two ways.

    First, paired swaps are defined as swaps that are directly or

    indirectly linked to the price of one or more 20.2 listed futures

    contract. Second, paired swaps are defined as swaps that are based on

    the price of the same commodity for delivery at the same location(s) as

    that of a 20.2 listed futures contract, or another delivery location,

    with substantially the same supply and demand fundamentals as the

    delivery location(s) referenced by a 20.2 listed futures contract. The

    paired swap definition's second part therefore proposes to include

    swaps that are settled to a price series that is not based on, but is

    nonetheless highly correlated to, the price of a 20.2 listed futures

    contract.

    B. The Necessity of the Proposed Regulations

    New section 4a(a)(5) of the Act provides that position limits for

    economically equivalent swaps be developed concurrently with position

    limits established for DCM contracts in exempt and agricultural

    commodities. In order to have the ability to enforce market-specific

    and aggregate position limits for the relevant DCM contracts and

    economically equivalent swaps, the Commission would require positional

    data for DCM contracts and economically equivalent swaps. The

    Commission currently obtains DCM futures and option positional data

    under parts 15 through 19 and 21 of its regulations,\4\ which derive

    their statutory authority in significant part from sections 4a, 4g and

    4i of the CEA. In contrast, the Commission has limited access to swaps

    positional data. In this regard, the Commission receives positional

    data on swaps that are significant price discovery contracts

    (``SPDCs'') under part 36 of its regulations. Such contracts are

    executed through exempt commercial markets and typically cleared.

    SPDCs, however, do not encompass all economically equivalent swaps (as

    defined by proposed regulation 20.1 through the term paired swaps).

    SPDC positional data would therefore not supply sufficient information

    to the Commission to monitor all economically equivalent swaps for

    aggregate position limit violations, should such limits be adopted.

    Moreover, parts 15 through 19 and 21 of the Commission's regulations do

    not apply to uncleared swaps that may be SPDCs. To have consistency in

    reporting, regulation 20.2(a) would require SPDCs that are paired swaps

    to be reported under proposed part 20 instead of parts 15 through 19

    and 21 of the Commission's regulations (which include position

    reporting regulations for clearing organizations and futures

    intermediaries that are analogous to those proposed herein).

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    \4\ Commission regulations referred to herein are found at 17

    CFR chapter 1.

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    The Commission also receives positional data for some swaps that

    are cleared by certain clearing organizations but not listed for

    trading (``cleared-only swaps'').\5\ This positional data is received

    from a limited number of clearing organizations, and depending on the

    contract and the clearing organization, does not necessarily provide

    disaggregated data on swaps held by non-clearing member counterparties.

    As with SPDCs, cleared-only swaps positional data would not supply

    sufficient data to the Commission to monitor for aggregate position

    limit violations across DCM contracts with CFTC-set position limits and

    economically equivalent swaps. To the extent that cleared-only swaps

    are paired swaps, regulation 20.2(a) would require reporting under

    proposed part 20 instead of parts 15 through 19 and 21 of the

    Commission's regulations.

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    \5\ See, e.g., Order (1) Pursuant to Section 4(c) of the

    Commodity Exchange Act, Permitting the Chicago Mercantile Exchange

    to Clear Certain Over-the-Counter Agricultural Swaps and (2)

    Pursuant to Section 4d of the Commodity Exchange Act, Permitting

    Customer Positions in Such Cleared-Only Contracts and Associated

    Funds To Be Commingled With Other Positions and Funds Held in

    Customer Segregated Accounts, 74 FR 12316, 12320 (March 24, 2009)

    (requiring reporting under parts 15, 16 and 17 of the Commission's

    regulations for cleared-only swaps).

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    The Commission notes that the Dodd-Frank Act also provides for the

    establishment of SDRs. Once established and operationally able to

    receive swaps data, SDRs would have the potential to serve as the

    Commission's primary positional data source. The Congressionally

    mandated deadline for establishing position limits, however, predates

    the deadline for Commission regulations for SDR registration. Thus, the

    position reports for physical commodity swaps contemplated by these

    proposed regulations would function as a transitional tool until SDRs

    are in operation and able to provide the Commission with swap

    positional data. If implemented in whole or in part, the Commission may

    determine to continue or discontinue the proposed reporting system once

    SDRs are operational.

    CEA sections 4a and 8a(5), considered in tandem, provide the

    statutory authority for these proposed regulations. The Commission

    cannot fully effectuate the mandate of section 4a of the Act without an

    operational data collection system. In proposing these regulations, the

    Commission relies on its CEA section 8a(5) general rulemaking

    authority. Section 8a(5) authorizes the Commission ``to make and

    promulgate such rules and regulations as, in the judgment of the

    Commission, are reasonably necessary to effectuate any of the

    provisions or to accomplish any of the purposes of this Act.'' For the

    reasons discussed above, the proposed regulations, in the Commission's

    judgment, are reasonably necessary to effectuate CEA section 4a as

    amended by the Dodd-Frank Act.

    II. The Proposed Regulations

    A. Listed Futures Contracts

    Section 4a(a)(2) of the Act provides that the Commission shall set,

    as appropriate, position limits for exempt and agricultural DCM futures

    and option contracts.\6\ The Act also provides that the Commission

    shall establish position limits, including aggregate limits, as

    appropriate, for swaps that are economically equivalent to futures

    contracts (and options thereon or options on commodities) with CFTC-set

    position limits. Proposed regulation 20.2 lists a broad set of futures

    contracts and options thereon which may be the subject of CFTC-set

    position limits. These 20.2 listed futures contracts can be divided

    into two categories. The first category contains futures contracts that

    have high levels of open interest and significant notional value (and

    certain

    [[Page 67260]]

    related contracts).\7\ The contracts in this category are:

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    \6\ New section 4a(a)(2) by its terms also applies to options on

    physicals. With respect to options on physicals traded on DCMs, the

    current open interest levels in such DCM contracts on the

    commodities underlying the 20.2 listed futures contracts are

    minimal.

    \7\ These contracts can function as anchors to many other DCM

    contracts and therefore directly or indirectly correspond to a

    substantial fraction of open interest for listed physical commodity

    derivatives. See, e.g., Federal Speculative Position Limits for

    Referenced Energy Contracts and Associated Regulations, 75 FR 4133,

    4154 (January 26, 2010) (``January 2010 proposed regulations for

    major energy contracts'') (showing the spoke contracts linked to the

    physically delivered NYMEX Crude Oil, Light Sweet futures contract).

    Reference DCM Contracts With High Open Interest and Notional Value

    (Including Certain Related Contracts)

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

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    Chicago Board of Trade (``CBOT'') Corn.

    CBOT Rough Rice.

    CBOT Soybeans.

    CBOT Soybean Meal.

    CBOT Soybean Oil.

    CBOT Wheat.

    Chicago Mercantile Exchange (``CME'') Feeder Cattle.

    CME Live Cattle.

    CME Milk Class III.

    Comex (``CMX'') Copper Grade 1.

    CMX Gold.

    CMX Silver.

    ICE Futures US (``ICUS'') Cocoa.

    ICUS Coffee C.

    ICUS Cotton No. 2.

    ICUS Frozen Concentrated Orange Juice.

    ICUS Sugar No. 11.

    ICUS Sugar No. 16.

    Kansas City Board of Trade (``KCBT'') Wheat.

    Minneapolis Grain Exchange (``MGEX'') Wheat.

    NYSELiffe (``NYL'') Gold, 100 Troy Oz.

    NYL Silver, 5000 Troy Oz.

    New York Mercantile Exchange (``NYMEX'') Cocoa.

    NYMEX Coffee.

    NYMEX Cotton.

    NYMEX Crude Oil, Light Sweet (``WTI'').

    NYMEX Gasoline Blendstock (RBOB).

    NYMEX Natural Gas.

    NYMEX No. 2 Heating Oil, New York Harbor.

    NYMEX Palladium.

    NYMEX Platinum.

    NYMEX Sugar No. 11.

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

    The contracts in the second category, listed below, do not have

    high levels of open interest or represent significant notional values.

    However, based on feedback from inquiries posed to swap market

    participants relating to the size and level of activity in certain

    markets, Commission staff recommended their inclusion in proposed

    regulation 20.2.\8\ Such contracts may serve as the pricing basis of a

    significant number of swap market transactions, thereby warranting some

    measure of Commission scrutiny.

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    \8\ Staff tasked with assisting the Commission in developing the

    proposed regulations made this recommendation after meeting with or

    speaking to 23 outside parties, representing commercial end-users,

    commercial merchants, commodity-based swap trading arms of large

    financial institutions, futures exchanges, swap data service

    providers, and our sister financial regulators. See http://

    www.cftc.gov/LawRegulation/ DoddFrankAct/ExternalMeetings/otc_

    meetings.html.

    Additional DCM Reference Contracts

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    CBOT Ethanol.

    CBOT Oats.

    CME Butter.

    CME Cheese.

    CME Dry Whey.

    CME Hardwood Pulp.

    CME Lean Hogs.

    CME Non Fat Dry Milk.

    CME Random Length Lumber.

    CME Softwood Pulp.

    NYMEX Brent Financial.

    NYMEX Central Appalachian Coal.

    NYMEX Hot Rolled Coil Steel.

    NYMEX Uranium.

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    B. Scope of Economically Equivalent Swaps

    The Commission, through the definition of paired swap or paired

    swaption (for ease of reference, collectively ``paired swaps'') in

    proposed regulation 20.1, defines a subset of swaps that may qualify as

    economically equivalent to the DCM contracts listed in proposed

    regulation 20.2. Proposed regulation 20.1 identifies paired swaps

    (i.e., economically equivalent swaps) in two paragraphs. The first

    paragraph of proposed regulation 20.1 defines paired swaps to include

    those that directly or indirectly are linked to the price of a 20.2

    listed futures contract. This category includes swaps that are

    partially or fully settled or priced at a differential to a 20.2 listed

    futures contract. The following list provides examples of the types of

    swaps that are intended to be covered under the first paragraph of the

    proposed definition of paired swap.

    1. Directly linked to a listed contract--A swap settled to the

    price of the NYMEX Heating Oil Calendar Swap Futures Contract is

    directly linked to a 20.2 listed DCM futures contract because the

    floating price of the futures contract is equal to the monthly average

    settlement price of the first nearby contract month for the NYMEX New

    York Harbor No. 2 Heating Oil Futures Contract.

    2. Indirectly linked to a listed contract--The ICE WTI Average

    Price Option is indirectly linked to a 20.2 listed futures contract

    because the floating price of the swap references the ICE WTI 1st Line

    Swap Contract which in turn is equal to the monthly average settlement

    price of the NYMEX Front Month WTI Crude Futures Contract.

    3. Partially settled to a listed contract--A swap settled to the

    Argus Sour Crude Index (``ASCI'') (which also underlies the CME Argus

    WTI Formula Basis Calendar Month Swap Futures Contract) is partially

    settled to a 20.2 listed futures contract.\9\ Because the ASCI index

    uses both a physical cash market component and the NYMEX WTI Futures

    Contract to establish the level of the index, it would partially settle

    to a 20.2 listed futures contract and would be a paired swap under the

    first paragraph of the proposed definition.\10\

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    \9\ The floating price of the CME futures contract is equal to

    the arithmetic average of the ASCI (1st month) outright price from

    Argus Media for each business day that the ASCI is determined during

    the contract month.

    \10\ For a description of the ASCI methodology, see, e.g.,

    http://web04.us.argusmedia.com/ArgusStaticContent//Meth/ASCI.pdf.

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    4. Priced at a differential to a listed contract--The ICE Henry

    Physical Basis LD1 Contract is priced at a differential to a 20.2

    listed futures contract because the settlement price is the final

    settlement price for natural gas futures (a listed 20.2 contract) as

    reported by NYMEX for the specified month plus the contract price.

    The second paragraph of the proposed definition of a paired swap

    includes swaps that directly or indirectly link to, including being

    partially or fully settled or priced at a differential to, the price of

    the same commodity for delivery at the same location or locations as

    that of a 20.2 listed futures contract. As opposed to paragraph one,

    the second paragraph of the definition of paired swap looks to a swap's

    connection to the commodity underlying a 20.2 listed futures contract,

    and to the delivery locations with a nexus to those delivery locations

    specified in a 20.2 listed contract, as opposed to the price of the of

    the contract itself. Therefore, in contrast to paragraph one, the

    linkage is to the price of the underlying commodity and its physical

    marketing channels.

    Under paragraph two, a paired swap would include swaps that are

    based on the same commodity\11\ as that of a 20.2 listed futures

    contract but deliverable at locations that are different than a 20.2

    listed futures contract's delivery locations, so long as such locations

    have substantially the same supply and demand fundamentals as that of a

    20.2

    [[Page 67261]]

    listed futures contract reference delivery location. The following list

    provides examples of the types of swaps that are reportable under the

    second paragraph of the definition.

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    \11\ As provided in the Commission's January 2010 proposed

    regulations for major energy contracts, a commodity will be

    considered to be the same (for the purposes of reporting under this

    regulation) if such commodity has the same economic characteristics

    with respect to grade and quality specifications as those referenced

    by a 20.2 listed futures contract.

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    1. Same commodity with a delivery point that shares substantially

    the same supply and demand fundamentals--An uncleared swap based on a

    NYMEX Columbia Gulf, Mainline Natural Gas Index Swap (Platts Gas Daily/

    Platts IFERC) Futures Contract provides an example of a futures

    contract which references an underlying spot market that is affected by

    substantially similar supply and demand forces as the pricing location

    to which the NYMEX Natural Gas Futures Contract references. In this

    case, the floating price of the NYMEX Columbia Gulf, Mainline Natural

    Gas Index Swap (Platts Gas Daily/Platts IFERC) Futures Contract is

    equal to the difference in the monthly average prices for Mainline

    Midpoint (Midpoint) and the Platts Inside FERC's Gas Market Report

    (Platts IFERC) Columbia Gulf Transmission Co., Mainline Index. This

    swap would be on based the same commodity as that of a 20.2 listed

    contract, but deliverable at a different location. The different

    location, however, shares substantially the same supply and demand

    fundamentals as the Henry Hub, which is the delivery location for the

    NYMEX Natural Gas contract. The swap's delivery location is in close

    proximity to the Henry Hub, and there is tight arbitrage between the

    two pricing hubs.

    2. Same commodity at different locations--The NYMEX Transco, Zone 6

    Natural Gas Index Swap (Platts Gas Daily/Platts IFERC) Futures Contract

    provides an example of a futures contract which references an

    underlying spot market that is interconnected with a spot market to

    which the NYMEX Natural Gas Futures Contract references. The floating

    price of the NYMEX Transco, Zone 6 Natural Gas Index Swap (Platts Gas

    Daily/Platts IFERC) Futures is equal to the difference in the monthly

    average prices for the Platts Gas Daily Transco, Zone 6 N.Y. Midpoint

    (Midpoint) and the Platts Inside FERC's Gas Market Report (Platts

    IFERC) Transco Zone 6 Index (Index) for the stipulated period within

    the contract specifications. The index price represents a natural gas

    spot market that is physically linked, via the Transco pipeline, to a

    spot market (Henry Hub) which is referenced by a 20.2 listed futures

    contract.

    C. Reporting Under the Proposed Regulations

    1. Reports by Clearing Organizations

    Regulation 20.3 proposes to collect paired swap reports from

    clearing organizations. Clearing organizations are defined in proposed

    regulation 20.1 as persons or organizations that act as a medium

    between clearing members for the purpose of clearing swaps or swaptions

    or effecting settlements of swaps or swaptions. The intent of the

    definition, which is modeled on the definition used in Commission

    regulation 15.00 (the definitional section for the Commission's large

    trader reporting rules), is to apply the reporting regulations only to

    entities that perform clearing functions as clearing intermediaries and

    counterparties to each side of a swap for the purpose of clearing the

    trade. The proposed definition is intended to cover entities that are

    commonly known as clearing organizations, regardless of their

    registration status with the Commission. It is not meant to apply to

    financial institutions or parties to swaps that provide counterparties

    with financing, credit support, or hold collateral to facilitate or to

    ensure that payments are made under the terms of a paired swap.

    Pursuant to proposed regulation 20.3, clearing organizations, for

    paired swap positions, would report the aggregate proprietary and

    aggregate customer accounts of each clearing member of that clearing

    organization. Proposed regulation 20.1 defines clearing member as any

    person who is a member of, or enjoys the privilege of clearing trades

    in its own name through, a clearing organization. The paired swap

    positions would be reported to the Commission as futures equivalent

    positions in terms of a swap's related 20.2 listed futures contract.

    Proposed Appendix A to this part provides several examples of the

    methods used for converting swap positions into futures equivalent

    positions. The proposed regulations would ask for reporting in futures

    equivalents because such conversions are made by entities that deal in

    swaps to effectively manage residual price risks by entering into 20.2

    listed futures contracts. Reporting in futures equivalents would result

    in a measure of equivalency between positions in paired swaps and their

    related 20.2 listed futures contracts, and it would allow for the

    enforcement of aggregate position limits across futures and swaps

    should the Commission adopt such limits.

    As required under paragraph (a) and (b) of proposed regulation

    20.3, each clearing organization would submit to the Commission a data

    record that identifies either gross long and gross short futures

    equivalent positions if the record corresponds to a paired swap

    position, or gross long and gross short futures equivalent positions on

    a non-delta-adjusted basis if the data record corresponds to a paired

    swaption position. A data record (for the purposes of this rulemaking)

    can be thought of as a grouped subset of the overall set of reported

    data elements that communicates a unique (non-repetitive) positional

    message to the Commission.

    Clearing organizations would be required to report a data record

    for each clearing member for each reporting day, which is defined in

    proposed regulation 20.1 as the daily period of time between a clearing

    organization or reporting entity's usual and customary last internal

    valuation of paired swaps or swaptions and the next such period. In

    order to provide clearing organizations with some flexibility in

    determining daily operational cycles that would coincide with their

    obligation to provide clearing member reports on a daily basis, the

    proposed definition would permit such cycles of time to vary for

    different clearing organizations, so long as the daily period of time

    is consistently observed and the Commission is notified, upon its

    request, of the manner by which a cycle is calculated. Data records

    would be reported electronically in a manner consistent with current

    Commission practice.

    The positional data elements in paragraphs (a) and (b) of proposed

    regulation 20.3 would require daily reports for each aggregated

    proprietary account and each aggregated customer account, by each

    cleared product, and by each futures equivalent month. Each data record

    would indicate the commodity reference price with which each cleared

    product is associated. As defined in proposed regulation 20.1, a

    commodity reference price is the price series used by the parties to a

    swap or swaption to determine payments made, exchanged, or accrued

    under the terms of that swap or swaption. In addition, data records for

    swaptions would be required to be broken down further by expiration

    date, put or call indicator, and strike price. Proposed Appendix B to

    part 20 includes examples of data records that would be required of

    clearing organizations. The examples in Appendix B are provided to

    facilitate the public's ability to comment on these reports, and if

    adopted as part of a final rulemaking, increase a clearing

    organization's familiarity with the type of reporting the regulations

    would require.

    [[Page 67262]]

    In addition to reports for clearing members, clearing organizations

    would, pursuant to proposed regulation 20.3(c), be required to provide

    to the Commission, for each futures equivalent month, end of reporting

    day settlement prices for each cleared product and deltas for every

    unique swaption put and call, expiration date, and strike price. This

    second daily report would provide the type of information that is

    necessary to assign a weight to a trader's positions.

    2. Reports by Reporting Entities

    Proposed regulation 20.4 would require reporting entities to report

    proprietary positions in paired swaps and their paired swap

    counterparty positions. Proposed regulation 20.1 identifies a reporting

    entity as a clearing member or a swap dealer as defined in section 1a

    of the CEA and as subject to definitional changes that may be made

    through the issuance of Commission regulations.

    The definition of reporting entity is intended to identify

    financial firms that regularly make markets in swaps, as well as

    divisions or subsidiaries of large commercial swap market participants

    that provide risk management services to other commercial entities in

    the normal course of their business operations. Proposed regulation

    20.4 is intended to require reports from such financial firms and not

    from commercial end-users with swaps activities of limited scope. By

    requiring reporting from these large market participants, proposed

    regulation 20.4 could provide visibility into the majority of paired

    swaps trading activity without burdening commercial entities that may

    have less experience with compliance and reporting requirements

    stemming from the regulation of financial institutions.\12\ The

    Commission solicits comment specifically on the proposed definition of

    reporting entity and the sufficiency of the market visibility gained by

    requiring reports only from a limited set of market participants.

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    \12\ The proposed definition of reporting entity includes an

    exemption from the definition of reporting entity for entities that

    are not commonly known as swap dealers.

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    Proposed regulation 20.4 would require reporting entities to

    provide the Commission with positional reports only if the reporting

    entities hold reportable paired swap positions. Proposed regulation

    20.1 defines a reportable position as a position, in any one futures

    equivalent month, comprised of fifty or more futures equivalent paired

    swaps or swaptions based on the same commodity. This proposed level is

    calibrated to capture data on a sufficiently large percentage of paired

    swap positions and was arrived at after consultation with multiple

    market participants.\13\ The Commission specifically requests comment

    on whether this reporting level is appropriate relative to the size of

    positions held by paired swap counterparties.

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

    \13\ See http://www.cftc.gov/LawRegulation/DoddFrankAct/

    ExternalMeetings/otc_meetings.html.

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

    Once a reporting entity's paired swaps position meets or exceeds

    the fifty futures equivalent paired swaps or swaptions threshold,

    proposed regulation 20.1 defines all other paired swap positions held

    by the reporting entity (in the commodity that initially caused the

    reporting entity's positions to be deemed reportable) to be part of the

    entity's reportable position.\14\ Clearing members and other reporting

    entities would follow the same procedure for determining if their

    proprietary positions or any counterparty positions are reportable to

    the Commission. As with clearing member reports that would be provided

    by clearing organizations to the Commission under proposed regulation

    20.3, proposed regulation 20.4 would require paired swap positions to

    be represented and reported in futures equivalents. Without a common

    method of accounting for positions in swaps and futures, aggregate

    positions could potentially not be enforceable, should the Commission

    promulgate such limits.

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

    \14\ In order to verify that a reporting entity's paired swap

    positions are no longer above the threshold, the proposed definition

    of reportable position would also encompass positions in paired

    swaps held by the reporting entity on the first day after which the

    reporting entity's paired swap positions are no longer reportable.

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

    To determine what to report under proposed regulation 20.4,

    reporting entities would separately consider proprietary positions,

    counterparty positions, and positions in controlled accounts. For each

    actual swap or swaption account that includes a paired swap or swaption

    in which the reporting entity is reportable, such entities would be

    required to provide for each reporting day a data record that either

    identifies long and short paired swap positions (if the record pertains

    to swap positions) or long and short non-delta-adjusted paired swaption

    positions and long and short delta-adjusted swaption positions (if the

    record pertains to swaptions positions). For uncleared paired swaps,

    the proposed regulations would require a reporting entity to use

    economically reasonable and analytically supported deltas.

    As proposed under regulation 20.4, this information would be

    grouped separately by swap or swaption account that is a part of a

    reportable account, by futures equivalent month, by cleared or

    uncleared contracts, by commodity reference price, and by clearing

    organization, if the data record pertains to cleared swaps. Data

    records pertaining to cleared swaption positions under the proposed

    regulations would be further grouped by put or call, expiration date,

    and strike price. Uncleared swaption positions, however, would not be

    required to be grouped by put or call, expiration date, and strike

    price. The reports provided under proposed regulation 20.4 would also

    include identifiers for the commodity underlying the reportable

    position, the counterparties of the account and the 102S filing

    identifier, as described in more detail below, assigned by the

    reporting entity to the owner(s) of the account, as well as the

    controller(s) of the account. Proposed Appendix B to this part includes

    several examples of required records.

    3. Series S Filings

    Proposed regulation 20.5(a) would require a 102S filing for the

    identification of the direct owner or controller of a ``reportable

    account'' by the reporting entity holding or carrying the account. The

    102S filing would consist of the ``name, address, and contact

    information of the direct owner or controller of the reportable

    account'' and a ``brief description of the nature of such person's

    paired swaps and swaptions' market activity'' (e.g., whether it is an

    omnibus account for another broker or an individual account). The

    reporting entity is required to submit a 102S filing only once for each

    person associated with a reportable account.

    Once an account holder or controller is reportable, the Commission

    may contact the trader directly and require that the trader file a more

    detailed identification report, a 40S filing. The Commission would

    require a 40S filing if a trader has become reportable for the first

    time and is not known to the Commission. A 40S filing would consist of

    the submission of a CFTC Form 40 ``Statement of Reporting Trader.'' As

    the current version of Form 40 covers information on positions in

    futures and options, the trader would be required to complete the form

    as if the form covered

    [[Page 67263]]

    information related to positions in paired swaps and swaptions.\15\

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

    \15\ The Commission plans to revise Form 40 in the future so

    that the form would explicitly target information on paired swaps

    and swaptions positions as well as futures and options positions.

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

    The 102S filings and the 40S filing together would allow the

    Commission to identify the person(s) owning the account or controlling

    its trading, the person to contact regarding trading, the nature of the

    account, whether the reported account is related--by financial interest

    or control--to another account, and the principal occupation or

    business of the account owner. The filings also would provide the

    Commission information on whether the account is being used for hedging

    cash market exposure.

    Commission staff would use the information in these two filings to

    determine if the reported account corresponds to a new trader or is an

    additional account of an existing trader. If the account is an

    additional one of an existing trader, it would then be aggregated with

    that of other related accounts currently being reported. By properly

    identifying and aggregating accounts, Commission surveillance staff

    would be able to assess a trader's compliance with speculative position

    limits across futures and swaps markets, should the Commission adopt

    such limits.

    4. Maintenance of Books and Records

    Proposed regulation 20.6 would impose recordkeeping requirements on

    reporting clearing organizations, reporting entities, and persons with

    reportable swaps positions. Proposed regulation 20.6(a) would require

    clearing organizations to keep records of transactions in paired swaps

    or swaptions. Proposed regulation 20.6(b) would require reporting

    entities and persons with reportable positions to maintain ``books and

    records * * * showing all records for transactions concerning all

    reportable positions.'' In addition, reporting entities and persons

    with reportable positions would be required to keep books and records

    on ``transactions in the cash commodity'' and its products and

    byproducts, and ``all commercial activities'' that are hedged in 20.2

    listed futures contract, ``or options thereon,'' or paired swaps and

    swaptions. These recordkeeping requirements are very similar to those

    in current regulation 18.05.

    The recordkeeping duties imposed by proposed regulation 20.6 are to

    be in accordance with the requirements of regulation 1.31. Most

    pertinently, regulation 1.31(a)(1) requires that these transaction

    records be kept for five years, the first two of which they ``shall be

    readily accessible.'' Such books and records ``shall be open to

    inspection by any representative of the Commission.''

    These recordkeeping requirements would allow the Commission to have

    ready access to records that would enable Commission staff to

    reconstruct the transaction history of reported positions. These

    requirements would ensure that data records submitted to the Commission

    could be audited. In addition, these records would enable Commission

    staff to better reconstruct trading activity that may have had a

    material impact on the price discovery process.

    The recordkeeping burden imposed by proposed regulation 20.6 is not

    anticipated to be high. These requirements are not unlike the

    recordkeeping requirements imposed by Congress in new CEA section

    4r(c)(2) on all swap market participants, and by the Commission on

    those entities with reportable futures accounts under the existing

    recordkeeping provision of regulation 18.05.

    5. Form and Manner of Reporting

    Proposed regulation 20.7(a) provides that the Commission would

    specify, in writing to persons required to report, the format, coding

    structure, and electronic data transmission procedures for these

    reports and submissions. The purpose of this provision would be to

    provide notice on how the Commission would determine the means by which

    the part 20 reports are to be formatted and submitted.

    6. Delegation of Authority

    Proposed regulation 20.8 delegates certain of the Commission's

    proposed part 20 authority to the Director of the Division of Market

    Oversight and through the Director to other employee or employees as

    designated by the Director. The delegated authority extends to: (1)

    Issuing a special call for a 40S or 102S filing; and (2) providing

    instructions or determining the format, coding structure, and

    electronic data transmission procedures for submitting data records and

    any other information required under proposed part 20. The purpose of

    this delegation provision is to facilitate the ability of the

    Commission to respond to changing market and technological conditions

    for the purpose of ensuring timely and accurate data reporting.

    7. Sunset Provision

    Proposed regulation 20.9 includes a sunset provision. The sunset

    provision would render the proposed regulations ineffective and

    unenforceable upon the Commission's finding (through the issuance of an

    order) that operating SDRs are capable of processing positional data in

    a manner that would enable the Commission to effectively surveil paired

    swaps trading and paired swap markets. Proposed regulation 20.9 also

    provides the Commission with the authority to retain the effectiveness

    and enforceability of any requirement in part 20, such as the reporting

    of deltas for uncleared paired swaps or the reporting of paired swap

    positions in futures equivalents, should the Commission determine that

    such reporting is of material value to conducting market surveillance.

    D. Solicitation of Comments

    Pursuant to the Dodd-Frank Act, the Commission will refine the

    definition of swap dealer in CEA section 1a. The Commission solicits

    comments on whether it should delay the implementation of proposed part

    20 to sixty days following a final Commission rulemaking further

    defining the term swap dealer. The Commission also specifically

    requests comments on any role self-regulatory organizations could play

    in gathering positional data on paired swaps. In addition, the

    Commission solicits comments on alternative approaches that may be

    employed to gather positional data on paired swaps.

    III. Related Matters

    A. Cost-Benefit Analysis

    1. Introduction

    Section 15(a) of the Act requires that the Commission, before

    promulgating a regulation under the Act or issuing an order, consider

    the costs and benefits of its action. By its terms, CEA section 15(a)

    does not require the Commission to quantify the costs and benefits of a

    new regulation or determine whether the benefits of the regulation

    outweigh its costs. Rather, CEA section 15(a) simply requires the

    Commission to ``consider the costs and benefits'' of its action.

    CEA section 15(a) specifies that costs and benefits shall be

    evaluated in light of the following considerations: (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 could, in its discretion,

    give greater weight to any of the five considerations and could, in its

    discretion, determine that,

    [[Page 67264]]

    notwithstanding its costs, a particular regulation was necessary or

    appropriate to protect the public interest or to effectuate any of the

    provisions or to accomplish any of the purposes of the Act.

    2. Costs

    As mentioned above, under CEA section 4a(a)(2), the Commission has

    been directed to establish position limits, as appropriate, on traders

    in certain physical commodity futures and swaps markets within 180 or

    270 days of the enactment of the Dodd-Frank Act, for exempt and

    agricultural commodities, respectively. As explained in this release,

    the Commission lacks the information it needs with respect to paired

    swaps to be able to conduct surveillance for limits that may be

    established under CEA section 4a.

    In developing these proposed regulations, the Commission has aimed

    to minimize the cost and burden associated with reporting positional

    data to the Commission. As discussed above, the Commission has tailored

    the regulations to conform to the market structure for cleared and

    uncleared paired swaps. The cost of proposed part 20 regulations would

    be borne by firms that are clearing organizations reporting under

    proposed regulation 20.3 and clearing member reportable entities

    reporting under proposed regulation 20.4. For such firms, the

    additional cost to implement a reporting system is expected to be

    minimal since the Commission understands these firms track their own

    and their counterparties' positions for risk-management purposes.

    Although the Commission has proposed a reporting system for cleared

    paired swaps that resembles the large trader reporting system, the

    Commission proposes a structurally different reporting system for

    uncleared paired swaps. The structure of the uncleared paired swaps

    market is not as centralized as the cleared paired swaps market: There

    is no central counterparty that corresponds to a clearing organization

    in the uncleared paired swaps market. The Commission believes that swap

    dealers may be counterparties to a significant portion of the market

    for uncleared paired swaps and swaptions.

    Accordingly, the Commission has proposed to require position

    reporting from swap dealers. These firms are to report their positions

    as well as those of their counterparties, provided that they are above

    the ``reportable position'' level. These firms have the

    creditworthiness to be able to negotiate a substantial swaps portfolio

    in paired swaps across many counterparties. As is the case for clearing

    member reportable entities, it is likely that creating or purchasing an

    information technology system that can present such a firm's net

    position exposures on a daily basis would not be an overly burdensome

    marginal expense, since the Commission understands swap dealers track

    their exposures for risk management purposes.

    For counterparties that would be subject to the recordkeeping

    requirements of proposed regulation 20.6, it should be noted that these

    requirements would place new burdens (in terms of reporting and

    retaining information on cash market transactions) only on persons that

    are reportable solely in paired swaps. This is because recordkeeping

    requirements are imposed by Congress with respect to all swaps in new

    section 4r(c)(2) of the CEA. Likewise, counterparties that hold

    reportable futures positions (in addition to reportable paired swaps

    positions) are currently subject to existing recordkeeping requirements

    under regulation 18.05. Thus, the Commission believes that these

    additional burdens, in marginal terms, are not expected to be overly

    burdensome, given that firms collect information on their commercial

    activities in the normal course of business operations.

    3. Benefits

    As discussed above, implementing proposed part 20 would enable the

    Commission to monitor and enforce position limits, if established by

    the Commission, to diminish, eliminate, or prevent excessive

    speculation; to deter and prevent market manipulation; ensure

    sufficient market liquidity for bona fide hedgers; and to ensure that

    the price discovery function of the underlying market is not disrupted.

    By enabling the Commission to monitor compliance with position limits

    to address these concerns, the Commission would be better able to

    protect the price discovery process (CEA section 15(a)(2)(C)) and

    market participants and the public from the threats of excessive

    speculation and price manipulation (CEA section 15(a)(2)(A)).

    In addition to providing increased market transparency through the

    reporting of paired swap positions to the Commission, the Commission

    would be better able to first, protect market participants and the

    public (CEA section 15(a)(2)(A)) and second, increase the efficiency

    and competitiveness of the markets (CEA section 15(a)(2)(B)). The

    extension of the Commission's surveillance activities to these paired

    swap markets would help ensure the integrity of these markets and

    thereby protect market participants and the public from disruptive

    trading, price manipulation, and the effects of market congestion.

    Further, with the extension, the Commission would be able to expand its

    Commitments of Traders report to include aggregate position data on the

    paired swaps markets, and thus, would provide the public, including

    market participants, greater transparency into the constitution of

    markets covered by the proposed part. This increased transparency may

    reduce the informational asymmetries in the paired swap markets and

    thereby improve the efficiency of the market and promote competition.

    4. Conclusion

    The Commission, after considering the CEA section 15(a) factors,

    finds that the expected incremental cost imposed by proposed part 20 is

    outweighed by the expected benefit. Accordingly, the Commission has

    determined to propose part 20. The Commission invites public comment on

    its cost-benefit considerations. Commenters are also are invited to

    submit any data or other information that they may have quantifying or

    qualifying the costs and benefits of proposed part 20.

    B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') requires Federal agencies,

    in proposing regulations, to consider the impact of those regulations

    on ``small entities.'' \16\ The proposed regulations detailed in this

    release would affect organizations including registered derivatives

    clearing organization (``DCOs''), clearing members (many of whom would

    be registered with the Commission already as futures commission

    merchants (``FCMs'')), swap dealers, and persons who have reportable

    paired swaps positions and otherwise have not been reportable based on

    futures positions.

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

    \16\ 5 U.S.C. 601 et seq.

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

    The Commission has previously determined that DCOs \17\ and FCMs

    \18\ are not ``small entities'' for purposes of the RFA. As noted

    above, a reportable paired swaps position would include 50 or more

    paired swaps positions in a futures equivalent month. The Commission

    notes this threshold is higher than the minimum 25 contract reporting

    levels in effect for futures positions under regulation 15.03.

    Previously, the Commission had determined that the reporting levels in

    regulation 15.03 would not affect small

    [[Page 67265]]

    entities.\19\ The Commission does not believe that entities who meet

    the proposed larger quantitative threshold would constitute small

    entities for RFA purposes.

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

    \17\ 66 FR 45604, 45609 (August 29, 2001).

    \18\ Policy Statement and Establishment of Definitions of

    ``Small Entities'' for Purposes of the Regulatory Flexibility Act,

    47 FR 18618, 18619 (Apr. 30, 1982).

    \19\ Id. at 18620 (excluding large traders from the definition

    of small entity).

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

    Accordingly, the Commission does not expect the regulations, as

    proposed herein, to 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 the

    proposed regulations would not have a significant economic impact on a

    substantial number of small entities. The Commission invites the public

    to comment on whether the entities covered by these proposed

    regulations should be considered small entities for purposes of the

    RFA.

    C. Paperwork Reduction Act

    1. Overview

    The Paperwork Reduction Act (``PRA'') \20\ imposes certain

    requirements on Federal agencies in connection with their conducting or

    sponsoring any collection of information as defined by the PRA. This

    proposed rulemaking would result in new collection of information

    requirements within the meaning of the PRA. The Commission therefore is

    submitting this proposal to the Office of Management and Budget

    (``OMB'') for review in accordance with 44 U.S.C. 3507(d) and 5 CFR

    1320.11. The title for this collection of information is ``Part 20--

    Position Reports for Physical Commodity Swaps'' (OMB control number

    3038-NEW). If adopted, responses to this collection of information

    would be mandatory.

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

    \20\ 44 U.S.C. 3501 et seq.

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

    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. OMB has not yet assigned a control

    number to the new collection for proposed part 20. The requirements of

    new part 20 are not currently covered by any existing OMB control

    number.

    The Commission is submitting this proposal to OMB for review in

    accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11.

    As noted earlier, in section 737 of the Dodd-Frank Act, Congress

    amended section 4a of the CEA to require the Commission to establish,

    as appropriate, aggregate position limits for futures contracts traded

    on a DCM and for economically equivalent swaps. Pursuant to new section

    4a(a)(2)(B) of the CEA, Congress mandated that the Commission set these

    position limits within 180 days of enactment of the Dodd-Frank Act for

    exempt commodities and 270 days for agricultural commodities. In order

    to enforce regulations establishing position limits for economically

    equivalent swaps, the Commission has determined that it first needs to

    establish the reporting regulations proposed herein. Given the short

    timeframe in which the Commission must determine whether to set

    position limits under the Dodd-Frank Act, the Commission has determined

    that it needs to adopt a swaps reporting system on an expedited basis

    to comply with the statutory deadline contained in new section

    4a(a)(2)(B) of the CEA.

    2. Information Provided and Recordkeeping Duties

    As a result of the Dodd-Frank Act, new part 20 proposes putting

    into place reporting requirements for ``clearing organizations'' and

    ``reporting entities'' and recordkeeping requirements for these firms

    in addition to firms that become reportable because of a reportable

    paired swap or swaption positions. Accordingly, the Commission is

    seeking a new and separate control number for reporting from ``clearing

    organizations'' and ``reporting entities'' (collectively

    ``respondents'') and recordkeeping for firms that become reportable

    because of a reportable paired swap or swaption position operating in

    compliance with the requirements of proposed part 20. Upon OMB's

    approval and assignment of a new control number specifically for the

    collection of information and recordkeeping requirements of proposed

    part 20, the Commission intends to submit the necessary documentation

    to OMB to enable it to apply a new OMB control number exclusively for

    part 20 reports.

    Proposed part 20 would result in the collection of information on

    ``paired swaps and swaptions'' positions as defined in proposed

    regulation 20.1. Specifically, proposed part 20 provides for three new

    kinds of reports:

    1. Under proposed regulation 20.3, swap ``clearing organizations''

    would provide daily reports of relevant position and clearing data.

    2. Under proposed regulation 20.4, ``reporting entities'' would

    produce position reports on a daily basis on their own and individual

    counterparty accounts. Within this class of ``reporting entities,''

    there are two categories of ``reporting entities:'' (a) ``clearing

    members'' and (b) ``swap dealers'' that are not clearing members. The

    former category, ``clearing members,'' would include many firms that

    are currently registered as FCMs with the Commission. The Commission

    estimates that a total of 180 swap dealers transact in physical

    commodity swaps and thereby may be reporting entities under proposed

    part 20 (clearing members and non-clearing members combined).

    3. Finally, under proposed regulation 20.5, all ``reporting

    entities'' would submit identifying information to the Commission on

    new reportable accounts through a 102S filing.

    In addition to creating these reporting requirements, proposed

    regulation 20.6 would impose recordkeeping requirements for (1)

    clearing organizations, (2) reporting entities, and (3) persons with

    ``reportable positions'' in the covered futures contract listed in

    proposed regulation 20.2 or ``paired swaps or swaptions.'' Proposed

    regulation 20.6(a) would require clearing organizations to maintain

    ``all records of transactions in paired swaps or swaptions'' on

    clearing organizations. Proposed regulation 20.6(b) would require

    reporting entities and ``persons with reportable positions'' to

    maintain for all commodities in which it holds a reportable position

    ``all records for transactions * * * in the cash commodity * * * [and]

    its products and byproducts'' and in ``commercial activities''

    underlying a hedge in a covered futures contract or in paired swaps or

    swaptions. These provisions extend those recordkeeping requirements

    currently applicable to those traders holding reportable positions in

    futures contracts, as currently found in regulation 18.05, to those

    traders holding reportable positions in swaps.

    The Commission estimates that the recordkeeping requirements of

    proposed regulation 20.6 would not be overly burdensome. For the firms

    subject to the reporting and recordkeeping requirements of proposed

    regulation 20.6, it should be noted that these requirements are not

    unlike the recordkeeping requirements imposed by Congress in the new

    CEA section 4r(c)(2) of the CEA and by existing recordkeeping

    regulation 18.05. If a firm subject to these recordkeeping requirements

    was previously reportable due to a futures position in the relevant

    commodity above the ``reporting level'' (see regulation 15.03), then

    the proposed regulation 20.6(b) recordkeeping burdens would not be new,

    as that firm would already be subject to these requirements under

    regulation 18.05. If a firm becomes subject to the proposed regulation

    20.6 recordkeeping requirements only because of a reportable swaps

    position (not because of a futures position above

    [[Page 67266]]

    the reportable level) then the requirements contained in the proposal

    add only the duty to keep records on ``all commercial activities that a

    reporting entity or person hedges'' to the swaps-related recordkeeping

    duties imposed by CEA section 4r(c)(2). These additional burdens are

    not expected to be substantial, given that in the normal course of

    business firms would collect this information on their commercial

    activities.

    The Commission estimates that implementing proposed part 20 would

    create a total annual reporting and recordkeeping hour burden of 79,503

    hours across 705 firms. Based on a weighted average wage rate of

    $74.36,\21\ this would amount to an annualized labor cost of $5.9

    million. In addition, the Commission estimates that total annualized

    capital/start-up, operating, and maintenance costs \22\ would amount to

    a combined $32.7 million. This overall total reporting and

    recordkeeping hour burden is the sum of estimated burdens for the three

    reporting categories and the three recordkeeping categories mentioned

    above.

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

    \21\ The Commission staff's estimates concerning the wage rates

    are based on salary information for the securities industry compiled

    by the Securities Industry and Financial Markets Association

    (``SIFMA''). The $74.36 per hour is derived from figures from a

    weighted average of salaries and bonuses across different

    professions from the SIFMA Report on Management & Professional

    Earnings in the Securities Industry 2009, modified to account for an

    1,800-hour work-year and multiplied by 1.3 to account for overhead

    and other benefits. The wage rate is a weighted national average of

    salary and bonuses for professionals with the following titles (and

    their relative weight); ``programmer (senior)'' (60% weight),

    ``compliance advisor (intermediate)'' (20%), ``systems analyst''

    (10%), and ``assistant/associate general counsel'' (10%).

    \22\ The capital/start-up cost component of ``annualized

    capital/start-up, operating, and maintenance costs'' is based on an

    initial capital/start-up cost that is straight-line depreciated over

    five years.

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

    Reporting burdens:

    1. Proposed regulation 20.3 clearing organization reports would

    account for 938 of these annual reporting and recordkeeping hours.

    These hours would be spread across 5 respondents. Annualized capital/

    start-up, operating, and maintenance costs for all affected clearing

    organizations combined would be approximately $100,000.\23\

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

    \23\ All of the capital cost estimates in these estimates are

    based on a 5 year, straight-line depreciation.

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

    2. Proposed regulation 20.4 reporting entity reports would have two

    separate burden estimates based on the kind of reporting entity

    providing the report:

    a. Clearing member (80 clearing member/swap dealers plus 20

    clearing member/non-swap dealers) reporting entity reports would create

    an annual reporting and recordkeeping burden of 25,000 hours spread

    across 100 respondents. Annualized capital/start-up, operating, and

    maintenance costs for all firms in this category combined would be

    approximately $6 million.

    b. Swap dealer non-clearing member reporting entity reports would

    create an annual reporting and recordkeeping burden of 37,500 hours

    spread across 100 respondents. Annualized capital/start-up, operating,

    and maintenance costs for all firms in this category combined would be

    approximately $8 million.

    3. Proposed regulation 20.5 reporting entity 102S submissions would

    create an annual reporting and recordkeeping burden of 1,800 hours

    spread across 200 firms. Annualized capital/start-up, operating, and

    maintenance costs for all reporting entities combined providing these

    reports would be approximately $1 million.

    4. 40S submissions by persons with reportable positions under

    proposed regulation 20.5(b) in paired swaps would create an annual

    reporting and recordkeeping burden of 165 hours and would affect 500

    firms. Annualized capital/start-up, operating, and combined maintenance

    costs for all firms providing 40S filings would be approximately $4.5

    million.

    Recordkeeping burdens:

    1. Proposed regulation 20.6(a) recordkeeping duties for clearing

    organizations would account for 100 of these annual reporting and

    recordkeeping hours. These hours would be spread across 5 firms.

    Annualized capital/start-up, operating, and maintenance costs to meet

    the recordkeeping requirements of proposed regulation 20.6(a) would be

    approximately $100,000 spread across all affected clearing

    organizations.

    2. Proposed regulation 20.6(b) reporting entity recordkeeping

    duties would have two separate burden estimates based on the kind of

    reporting entity providing the report:

    a. Clearing member (80 clearing member/swap dealers plus 20

    clearing member/non-swap dealers) reporting entity recordkeeping would

    create an annual reporting and recordkeeping burden of 2,000 hours

    spread across 100 respondents. Annualized capital/start-up, operating,

    and maintenance costs for all firms in this category of recordkeeping

    reporting entities would be approximately $2 million.

    b. Swap dealer non-clearing member reporting entity recordkeeping

    would create an annual reporting and recordkeeping burden of 2000 hours

    spread across 100 respondents. Annualized capital/start-up, operating,

    and maintenance costs for all firms in this category of recordkeeping

    reporting entities would be approximately $2 million.

    3. Proposed regulation 20.6(b) recordkeeping duties for persons

    with reportable positions in swaps (these firms were previously not

    reportable) would create an annual reporting and recordkeeping burden

    of 10,000 hours spread across 500 firms. Annualized capital/start-up,

    operating, and maintenance costs for all traders in this category

    combined would be approximately $11.5 million.

    3. Confidentiality

    The Commission would 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.'' \24\ 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.

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

    \24\ 7 U.S.C. 12(a)(1).

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

    4. Comments on Information Collection

    The Commission invites the public and other Federal agencies to

    comment on any aspect of the reporting and recordkeeping burdens

    discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission

    solicits comments in order to: (i) Evaluate whether the proposed

    collection of information is necessary for the proper performance of

    the functions of the Commission, including whether the information

    would have practical utility; (ii) evaluate the accuracy of the

    Commission's estimate of the burden of the proposed collection of

    information; (iii) determine whether there are ways to enhance the

    quality, utility, and clarity of the information to be collected; and

    (iv) minimize the burden of the collection of information on those who

    are to respond, including through the use of automated collection

    techniques or other forms of information technology.

    Comments may be submitted directly to the Office of Information and

    Regulatory Affairs, by fax at (202) 395-6566 or by e-mail at

    OIRAsubmissions@omb.eop.gov. Please provide the Commission with a copy

    of submitted comments so that all

    [[Page 67267]]

    comments can be summarized and addressed in the final regulation

    preamble. Refer to the Addresses section of this notice of proposed

    rulemaking for comment submission instructions to the Commission. A

    copy of the supporting statements for the collections of information

    discussed above may be obtained by visiting RegInfo.gov. OMB is

    required to make a decision concerning the collection of information

    between 30 and 60 days after publication of this release. Consequently,

    a comment to OMB is most assured of being fully effective if received

    by OMB (and the Commission) within 30 days after publication of this

    notice of proposed rulemaking.

    List of Subjects

    17 CFR Part 15

    Brokers, Commodity futures, Reporting and recordkeeping

    requirements.

    17 CFR Part 20

    Physical commodity swaps, Swap dealers, Reporting and recordkeeping

    requirements.

    For the reasons stated in the preamble, the Commodity Futures

    Trading Commission proposes to amend 17 CFR parts 15 and 20 as follows:

    PART 15--REPORTS--GENERAL PROVISIONS

    1. The authority citation for part 15 is revised to read as

    follows:

    Authority: 7 U.S.C. 2, 5, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 6n, 7,

    7a, 9, 12a, 19, and 21, as amended by Title VII of the Dodd-Frank

    Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124

    Stat. 1376 (2010).

    2. Revise the heading and introductory text in Sec. 15.00 to read

    as follows:

    Sec. 15.00 Definitions of terms used in parts 15 to 19, and 21 of

    this chapter.

    As used in parts 15 to 19, and 21 of this chapter:

    * * * * *

    3. Add part 20 to read as follows:

    PART 20--POSITION REPORTS FOR PHYSICAL COMMODITY SWAPS

    Sec.

    20.1 Definitions.

    20.2 Covered contracts.

    20.3 Clearing organizations.

    20.4 Reporting entities.

    20.5 Series S filings.

    20.6 Maintenance of books and records.

    20.7 Form and manner of reporting and submitting information or

    filings.

    20.8 Delegation of authority to the Director of the Division of

    Market Oversight.

    20.9 Sunset provision.

    Appendix A to Part 20--Guidelines on Futures Equivalancy

    Appendix B to Part 20--Explanatory Guidance on Data Record Layouts

    Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6c, 6f, 6g, 6t, 12a, 19, as

    amended by Title VII of the Dodd-Frank Wall Street Reform and

    Consumer Protection Act, Pub. L. 111-203, 124 Stat. 1376 (2010).

    Sec. 20.1 Definitions.

    As used in, and solely for the purposes of, this part:

    Account controller means a person that by power of attorney or

    otherwise directs trading for an account.

    Business day means ``business day'' as that term is defined in

    Sec. 1.3 of this chapter.

    Cleared product means a paired swap or swaption that a clearing

    organization offers or accepts for clearing.

    Clearing member means any person who is a member of, or enjoys the

    privilege of, clearing trades in its own name through a clearing

    organization.

    Clearing organization means the person or organization that acts as

    a medium between clearing members for the purpose of clearing swaps or

    swaptions or effecting settlements of swaps or swaptions.

    Closed swap or closed swaption means a swap or swaption that has

    been settled, exercised, closed out, or terminated.

    Commodity reference price means the price series (including

    derivatives contract and cash market prices or price indices) used by

    the parties to a swap or swaption to determine payments made,

    exchanged, or accrued under the terms of the contracts.

    Controlled account means ``controlled account'' as defined in Sec.

    1.3 of this chapter.

    Counterparty means, from the perspective of one side to a contract,

    the person that directly corresponds to the other side of the contract.

    Futures equivalent means an economically equivalent amount of one

    or more futures contracts that represents a position or transaction in

    one or more paired swaps or swaptions consistent with the conversion

    guidelines in Appendix A of this part.

    Open swap or swaption means a swap or swaption that has not been

    closed.

    Paired swap or paired swaption means an open swap that is:

    (1) Directly or indirectly linked, including being partially or

    fully settled on, or priced at a differential to, the price of any

    commodity futures contract listed in Sec. 20.2; or

    (2) Directly or indirectly linked, including being partially or

    fully settled on, or priced at a differential to, the price of the same

    commodity for delivery at the same location, or locations with

    substantially the same supply and demand fundamentals, as that of a

    commodity futures contract listed in Sec. 20.2.

    Person means any ``person'' as that term is defined in Sec. 1.3 of

    this chapter.

    Reportable account or consolidated account that is reportable means

    a consolidated account that includes a reportable position.

    Reportable position means:

    (1) A position, in any one futures equivalent month, comprised of

    fifty or more futures equivalent paired swaps or swaptions based on the

    same commodity underlying a futures contract listed in Sec. 20.2,

    grouped separately by swaps and swaptions, then grouped by gross long

    contracts on a futures equivalent basis or gross short contracts on a

    futures equivalent basis;

    (2) For a consolidated account (described in Sec. 20.4(a)) that

    includes a reportable position as defined in paragraph (1) of this

    definition, all other positions in that account that are based on the

    commodity that renders the account reportable; and

    (3) The first reporting day on which a consolidated account

    (described in Sec. 20.4(a)) no longer in fact includes a reportable

    position as described in paragraph (1) of this definition (because on

    such day, the reporting entity's consolidated account shall be

    considered and treated as if it in fact included reportable positions

    as described in paragraph (1) of this definition.

    Reporting day means the period of time between a clearing

    organization or reporting entity's usual and customary last internal

    valuation of paired swaps or swaptions and the next such period, so

    long as the period of time is consistently observed on a daily basis

    and the Commission is notified, upon its request, of the manner by

    which such period is calculated and any subsequent changes thereto.

    Reporting entity, means:

    (1) A clearing member; or

    (2) Swap dealer as that term is defined in section 1a of the Act

    and any Commission definitional regulations adopted thereunder, unless

    determined otherwise by the Commission for the purpose of excluding

    entities that are not commonly known as swap dealers from the reporting

    requirements of Sec. 20.4.

    Swap means (other than a swaption) ``swap'' as defined in section

    1a of the Act and any Commission definitional regulations adopted

    thereunder.

    Swaption means an option to enter into a swap or a physical

    commodity

    [[Page 67268]]

    option included in the definition of ``swap'' under section 1a of the

    Act and any Commission definitional regulations adopted thereunder.

    Swap or swaption account means an account for swaps or swaptions

    maintained at a clearing organization or reporting entity.

    Sec. 20.2 Covered contracts.

    (a) All paired swaps and swaptions, unless specifically provided

    otherwise, shall be reported pursuant to the requirements and

    conditions of this part and shall not be reported under parts 15

    through 19, or 21 of this chapter.

    (b) The futures and option contracts listed by designated contract

    markets for the purpose of reports filed and information provided under

    this part are as follows:

    Covered Agricultural and Exempt Futures Contracts

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

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

    Chicago Board of Trade (``CBOT'') Corn.

    CBOT Ethanol.

    CBOT Oats.

    CBOT Rough Rice.

    CBOT Soybean Meal.

    CBOT Soybean Oil.

    CBOT Soybeans.

    CBOT Wheat.

    Chicago Mercantile Exchange (``CME'') Butter.

    CME Cheese.

    CME Dry Whey.

    CME Feeder Cattle.

    CME Hardwood Pulp.

    CME Lean Hogs.

    CME Live Cattle.

    CME Milk Class III.

    CME Non Fat Dry Milk.

    CME Random Length Lumber.

    CME Softwood Pulp.

    COMEX (``CMX'') Copper Grade 1.

    CMX Gold.

    CMX Silver.

    ICE Futures U.S. (``ICUS'') Cocoa.

    ICUS Coffee C.

    ICUS Cotton No. 2.

    ICUS Frozen Concentrated Orange Juice.

    ICUS Sugar No. 11.

    ICUS Sugar No. 16.

    Kansas City Board of Trade (``KCBT'') Wheat.

    Minneapolis Grain Exchange (``MGEX'') Wheat.

    NYSELiffe (``NYL'') Gold, 100 Troy Oz.

    NYL Silver, 5000 Troy Oz.

    New York Mercantile Exchange (``NYMEX'') Cocoa.

    NYMEX Brent Financial.

    NYMEX Central Appalachian Coal.

    NYMEX Coffee.

    NYMEX Cotton.

    NYMEX Crude Oil, Light Sweet.

    NYMEX Gasoline Blendstock (RBOB).

    NYMEX Hot Rolled Coil Steel.

    NYMEX Natural Gas.

    NYMEX No. 2 Heating Oil, New York Harbor.

    NYMEX Palladium.

    NYMEX Platinum.

    NYMEX Sugar No. 11.

    NYMEX Uranium.

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

    Sec. 20.3 Clearing organizations.

    (a) Reporting data records. For each reporting day, with respect to

    paired swaps or swaptions, clearing organizations shall report to the

    Commission, separately for each clearing member's proprietary and

    customer account, unique groupings of the data elements in paragraph

    (b) of this section (to the extent that there are such corresponding

    elements), in a single data record, so that each reported record is

    distinguishable from every other reported record (because of differing

    data values, as opposed to the arrangement of the elements).

    (b) Populating reported data records with data elements. Data

    records reported under paragraph (a) of this section shall include the

    following data elements:

    (1) An identifier assigned by the Commission to the clearing

    organization;

    (2) The identifier assigned by the clearing organization to the

    clearing member;

    (3) The identifier assigned by the clearing organization for a

    cleared product;

    (4) The reporting day;

    (5) A proprietary or customer account indicator;

    (6) The futures equivalent month;

    (7) The commodity reference price;

    (8) Long swap positions;

    (9) Short swap positions;

    (10) A swaption put or call side indicator;

    (11) A swaption expiration date;

    (12) A swaption strike price;

    (13) Long non-delta-adjusted swaption positions; and

    (14) Short non-delta-adjusted swaption positions.

    (c) End of reporting day data. For all futures equivalent months,

    clearing organizations shall report end of reporting day settlement

    prices for each cleared product and deltas for every unique swaption

    put and call, expiration date, and strike price.

    Sec. 20.4 Reporting entities.

    (a) Consolidated accounts. Each reporting entity shall combine all

    paired swap and swaption positions:

    (1) That are proprietary positions (swaps and swaptions to which

    the reporting entity is a counterparty), in a single consolidated

    account that it shall attribute to itself;

    (2) That are positions directly owned by a reporting entity's

    counterparty, in a single consolidated account that it shall attribute

    to that specific counterparty; and

    (3) That are positions under the direction of an account

    controller, in a single consolidated account that it shall attribute to

    that specific account controller.

    (b) Reporting data records. Reporting entities shall report to the

    Commission, for each reporting day, and separately for each

    consolidated account described in paragraphs (a)(1) through (a)(3) of

    this section that is reportable, unique groupings of the data elements

    in paragraph (c) of this section (to the extent that there are such

    corresponding elements), in a single data record, so that each reported

    record is distinguishable from every other reported record (because of

    differing data values, as opposed to the arrangement of the elements).

    (c) Populating reported data records with data elements. Data

    records reported under paragraph (b) of this section shall include the

    following data elements:

    (1) An identifier assigned by the Commission to the reporting

    entity;

    (2) An identifier assigned by the reporting entity to each swap or

    swaption account;

    (3) A 102S identifier assigned by the reporting entity to the owner

    of such accounts;

    (4) A 102S identifier assigned by the reporting entity to the

    controller of such accounts;

    (5) The name of each owner of such accounts;

    (6) The name of each controller of such accounts;

    (7) The reporting day;

    (8) The identifier for the cleared product assigned by the clearing

    organization (cleared only);

    (9) The commodity underlying the reportable positions;

    (10) The futures equivalent month;

    (11) A cleared or uncleared indicator;

    (12) A clearing organization identifier;

    (13) The commodity reference price;

    (14) A bi-lateral trade indicator;

    (15) Long paired swap positions;

    (16) Short paired swap positions;

    (17) A swaption put or call side indicator (cleared only);

    (18) A swaption expiration date (cleared only);

    (19) A swaption strike price (cleared only);

    (20) Long non-delta-adjusted paired swaption positions;

    (21) Short non-delta-adjusted paired swaption positions;

    (22) Long delta-adjusted paired swaption positions (non-cleared

    only, using economically reasonable and analytically supported deltas);

    [[Page 67269]]

    (23) Short delta-adjusted paired swaption positions (non-cleared

    only, using economically reasonable and analytically supported deltas);

    (24) Long paired swap or swaption notional value (non-cleared

    only); and

    (25) Short paired swap or swaption notional value (non-cleared

    only).

    Sec. 20.5 Series S filings.

    (a) 102S filing.

    (1) When a consolidated account first becomes reportable, the

    reporting entity holding or carrying the account shall submit a 102S

    filing, which shall consist of the name, address, and contact

    information of the direct owner or controller of the reportable account

    and a brief description of the nature of such person's paired swaps and

    swaptions market activity.

    (2) A reporting entity may submit a 102S filing only once for each

    person, even if such persons at various times have multiple reportable

    positions in the same or different paired swaps or swaptions; however,

    reporting entities must update a 102S filing if the information

    provided is no longer accurate.

    (3) Reporting entities shall submit a 102S filing within three days

    following the first day a consolidated account first becomes reportable

    or at such time as instructed by the Commission upon special call.

    (b) 40S filing. Every person who holds or controls a reportable

    position shall after a special call upon such person by the Commission

    file with the Commission a 40S filing at such time and place as

    directed in the call. A 40S filing shall consist of the submission of a

    Form 40, which shall be completed by such person as if any references

    to futures or option contracts were references to paired swaps or

    swaptions as defined in Sec. 20.1.

    Sec. 20.6 Maintenance of books and records.

    (a) Every clearing organization shall keep all records of

    transactions in paired swaps or swaptions in accordance with the

    requirements of Sec. 1.31 of this chapter.

    (b) Every reporting entity or person with reportable positions

    shall keep books and records, in accordance with the requirements of

    Sec. 1.31 of this chapter, showing all records for transactions

    concerning all reportable positions, including records for transactions

    in the cash commodity in which the reporting entity or other person is

    reportable, its products and byproducts, and all commercial activities

    that a reporting entity or person hedges by taking a position in the

    contracts listed in Sec. 20.2 or paired swaps and swaptions.

    Sec. 20.7 Form and manner of reporting and submitting information or

    filings.

    Unless otherwise instructed by the Commission, a clearing

    organization or reporting entity shall submit data records and any

    other information required under this part to the Commission as

    follows:

    (a) Using the format, coding structure, and electronic data

    transmission procedures approved in writing by the Commission; and

    (b) Not later than 9 a.m. eastern time on the next business day

    following the reporting day or at such other time as instructed by the

    Commission.

    Sec. 20.8 Delegation of authority to the Director of the Division of

    Market Oversight.

    (a) The Commission hereby delegates, until it orders otherwise, to

    the Director of the Division of Market Oversight or such other employee

    or employees as the Director may designate from time to time, the

    authority:

    (1) In Sec. 20.5(a)(3) for issuing a special call for a 102S

    filing;

    (2) In Sec. 20.5(b) for issuing a special call for a 40S filing;

    (3) In Sec. 20.7 for providing instructions or determining the

    format, coding structure, and electronic data transmission procedures

    for submitting data records and any other information required under

    this part.

    (b) The Director of the Division of Market Oversight may submit to

    the Commission for its consideration any matter which has been

    delegated in this section.

    (c) Nothing in this section prohibits the Commission, at its

    election, from exercising the authority delegated in this section.

    Sec. 20.9 Sunset provision.

    (a) Except as otherwise provided in paragraph (b) of this section,

    the sections of this part shall become ineffective and unenforceable

    upon a Commission finding that, through the issuance of an order,

    operating swap data repositories are processing positional data and

    that such processing will enable the Commission to effectively surveil

    trading in paired swaps and swaptions and paired swap and swaption

    markets.

    (b) The Commission may determine, in its discretion, to maintain

    the effectiveness and enforceability of any section of this part, or

    any requirement therein, in an order issued under paragraph (a) of this

    section, upon finding that such sections, or requirements therein,

    provide the Commission with positional data or data elements that

    materially improves the accuracy and surveillance utility of the

    positional data processed by swap data repositories.

    Appendix A to Part 20--Guidelines on Futures Equivalency

    The following examples illustrate how swaps should be converted

    into futures equivalents. In general the total notional quantity for

    each swap should be apportioned to referent futures months based on

    the fraction of days remaining in the life of the swap during each

    referent futures month to the total duration of the swap, measured

    in days. The terms used in the examples are to be understood in a

    manner that is consistent with industry practice.

    Example 1--Fixed for Floating WTI Crude Oil Swap Linked to a DCM

    Contract

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

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

    Reference price................... Daily official next to expire

    contract price for the NYMEX Light

    Sweet Crude Oil Futures Contract

    (``WTI'') in $/bbl through the

    NYMEX spot month.

    Fixed Price....................... $80.00 per barrel.

    Floating Price.................... The arithmetic average of the

    reference price during the pricing

    period.

    Notional Quantity................. 100,000 bbls/month.

    Calculation Period................ One month.

    Fixed Price Payer................. Company A.

    Floating Price Payer.............. Company B.

    Settlement Type................... Financial.

    Swap Term......................... Six full months from January 1 to

    June 30.

    Floating Amount................... Floating Price * Notional Quantity.

    Fixed Amount...................... Fixed Price * Notional Quantity.

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

    [[Page 67270]]

    NYMEX WTI trading in the next to expire futures contract ceases

    on the third business day prior to the 25th of the calendar month

    preceding the contract month. For simplicity in this example, the

    last trading day in each WTI futures contract is shown as the 22nd

    of the month.

    Futures equivalent position on January 1

    Total Notional Quantity = 6 months * 100,000 bbls/month = 600,000

    bbls

    1,000 bbl = 1 futures contract

    Therefore 600,000 bbls/1,000 bbls/contract = 600 futures equivalent

    contracts

    Total number of days in swap term = 31 + 28 + 31 + 30 + 31 + 30 =

    181

    Futures Equivalent Position of Swap on January 1

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

    Company A Company B

    Dates swap in force Referent futures Fraction of days position (long) position

    month [dagger] (short) [dagger]

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

    January 1-January 22............... February............. 22/181 73 73

    January 23-February 22............. March................ 31/181 103 103

    February 23-March 22............... April................ 28/181 93 93

    March 23-April 22.................. May.................. 31/181 103 103

    April 23-May 22.................... June................. 30/181 99 99

    May 23-June 22..................... July................. 31/181 103 103

    June 23-June 30th.................. August............... 8/181 27 27

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

    Total.......................... ..................... 181/181 601 601

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

    [dagger] Contracts rounded to the nearest integer.

    Futures equivalent position on January 2

    Total Notional Quantity = Remaining swap term * 100,000 bbls/month =

    596,685 bbls

    1,000 bbl = 1 futures contract

    Therefore 596,685 bbls/1,000 bbls/contract = 597 futures equivalent

    contracts

    Total number of days = 30 + 28 + 31 + 30 + 31 + 30 = 180

    Futures Equivalent Position of Swap on January 2

    [Example 1 continued]

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

    Company A Company B

    Dates swap in force Referent futures Fraction of days position (long) position

    month [dagger] (short) [dagger]

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

    January 2-January 22............... February............. 21/180 70 -70

    January 23-February 22............. March................ 31/180 103 -103

    February 23-March 22............... April................ 28/180 93 -93

    March 23-April 22.................. May.................. 31/180 103 -103

    April 23-May 22.................... June................. 30/180 99 -99

    May 23-June 22..................... July................. 31/180 103 -103

    June 23-June 30th.................. August............... 8/180 27 -27

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

    Total.......................... ..................... 180/180 597 -597

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

    [dagger] Contracts rounded to the nearest integer.

    Example 2--Fixed for Floating Corn Swap

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

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

    Reference price................... Daily official next to expire

    contract price for the CBOT Corn

    Futures Contract in $/bushel

    through the CBOT spot month.

    Fixed Price....................... $5.00 per bushel per month.

    Floating Price.................... The arithmetic average of the

    reference price during the pricing

    period.

    Calculation Period................ One month.

    Notional Quantity................. 1,000,000 bushels/month.

    Fixed Price Payer................. Company A.

    Floating Price Payer.............. Company B.

    Settlement Type................... Financial.

    Swap Term......................... Six full months from January 1 to

    June 30.

    Floating Amount................... Floating Price * Notional Quantity.

    Fixed Amount...................... Fixed Price * Notional Quantity.

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

    Last trading day in the nearby CBOT Corn futures contract is the

    business day preceding the 15th of the contract month. For

    simplicity in this example, the last trading day in each Corn

    futures contract is shown as the 14th of the month. Futures contract

    months for corn are March, May, July, September, and December.

    Futures equivalent position on January 1

    Total Notional Quantity = 6 contract months * 1,000,000 bushels/

    month = 6,000,000 bushels

    5,000 bushels = 1 futures contract

    Therefore 6,000,000 bushels/5,000 bushels/contract = 1,200 futures

    equivalent contracts

    Total days = 31 + 28 + 31 + 30 + 31 + 30 = 181

    [[Page 67271]]

    Futures Equivalent Position of Swap on January 1

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

    Company A Company B

    Dates swap in force Referent futures Fraction of days position position

    month (long)[dagger] (short)[dagger]

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

    January 1-March 14................. March................ 73/181 483 -483

    March 15-May 14.................... May.................. 61/181 404 -404

    May 15-June 30..................... July................. 47/181 311 -311

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

    Total.......................... ..................... 181/181 1,198 -1,198

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

    [dagger] Contracts rounded to the nearest integer.

    Example 3--Fixed For Floating NY RBOB (Platts) Calendar Swap Futures

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

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

    Reference price................... Platts Oilgram next to expire

    contract Price Report for New York

    RBOB (Barge) through the NYMEX spot

    month.

    Fixed Price....................... $1.8894 per gallon.

    Floating Price.................... For each contract month, the

    floating price is equal to the

    arithmetic average of the high and

    low quotations from Platts Oilgram

    Price Report for New York RBOB

    (Barge) for each business day that

    it is determined during the

    contract month.

    Calculation Period................ One quarter.

    Notional Quantity................. 84 million gallons/quarter.

    Fixed Price Payer................. Company A.

    Floating Price Payer.............. Company B.

    Settlement Type................... Financial.

    Swap Term......................... Six full months from January 1 to

    June 30.

    Floating Amount................... Floating Price * Notional Quantity.

    Fixed Amount...................... Fixed Price * Notional Quantity.

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

    NYMEX NY RBOB (Platts) Calendar Swap Futures Contract month ends

    on the final business day of the contract month. For simplicity in

    this example, the last trading day in each futures contract is shown

    as the final day of the month.

    Futures equivalent position on January 1

    Total Notional Quantity = 2 quarters * 84 million = 168 million

    gallons

    42,000 gallons = 1 futures contract

    Therefore 168 million/42,000 gallons/futures contract = 4,000

    futures equivalent contracts

    Total number of days = 31 + 28 + 31 + 30 + 31 + 30 = 181

    Futures Equivalent Position of Swap on January 1

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

    Company A Company B

    Dates swap in force Referent futures Fraction of days position position

    month (long)[dagger] (short)[dagger]

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

    January 1-March 31................. April................ 90/181 1989 -1989

    April 1-June 30.................... July................. 91/181 2011 -2011

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

    Total.......................... ..................... 181/181 4000 4000

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

    [dagger] Contracts rounded to the nearest integer.

    Example 4--Calendar Spread Swap

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

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

    Reference price................... The difference between the next to

    expire contract price for the NYMEX

    WTI Futures contract and the

    deferred contract price for the

    NYMEX WTI Futures contract.

    Fixed Price....................... $80 per barrel.

    Floating Price.................... The arithmetic average of the

    reference price during the pricing

    period.

    Calculation Period................ One month.

    Notional Quantity................. 100,000 bbls/month.

    Fixed Price Payer................. Company A.

    Floating Price Payer.............. Company B.

    Settlement Type................... Financial.

    Swap Term......................... Six full months from January 1 to

    June 30.

    Floating Amount................... Floating Price * Notional Quantity.

    Fixed Amount...................... Fixed Price * Notional Quantity.

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

    NYMEX WTI trading in the next to expire futures contract ceases

    on the third business day prior to the 25th of the calendar month

    preceding the contract month. For simplicity in this example, the

    last trading day in each WTI futures contract is shown as the 22nd

    of the month.

    Futures equivalent position on January 1

    Total Notional Quantity = 6 months * 100,000 bbls/month = 600,000

    bbls

    1,000 bbl = 1 futures contract

    Therefore 600,000 bbls/1,000 bbls/contract = 600 futures equivalent

    contracts

    Total number of days = 31 + 28 + 31 + 30 + 31 + 30 = 181

    [[Page 67272]]

    Futures Equivalent Position of Swap on January 1

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

    Applicable next to Company A Company B Applicable Company A Company B

    Dates swap in force Fraction of expire futures position position deferred futures position Position

    days month (long)[dagger] (short)[dagger] month (short)[dagger] (long)[dagger]

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

    January 1-January 22........... 22/181 February........... 73 -73 March............. -73 73

    January 23-February 22......... 31/181 March.............. 103 -103 April............. -103 103

    February 23-March 22........... 28/181 April.............. 93 -93 May............... -93 93

    March 23-April 22.............. 31/181 May................ 103 -103 June.............. -103 103

    April 23-May 22................ 30/181 June............... 99 -99 July.............. -99 99

    May 23-June 22................. 31/181 July............... 103 -103 August............ -103 103

    June 23-June 30th.............. 8/181 August............. 27 -27 September......... -27 27

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

    Total...................... 181/181 ................... 601 -601 .................. -601 601

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

    [dagger] Contracts rounded to the nearest integer.

    Example 5--Columbia Gulf Mainline Basis Swap (Platts IFERC) Futures

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

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

    Reference price................... The next issue of the Inside FERC's

    Gas Market Report (``Platts

    IFERC'') Columbia Gulf Transmission

    Co. Mainline Index (``Index'') and

    the next to expire NYMEX (Henry

    Hub) Natural Gas Futures contract

    final settlement price.

    Fixed Price....................... $0.05 per MMBtu per month.

    Floating Price.................... The Floating Price for each contract

    month will be equal to the Platts

    Inside FERC's Gas Market Report

    (``Platts IFERC'') Columbia Gulf

    Transmission Co. Mainline Index

    (``Index'') published in the table

    titled ``Prices of Spot Gas

    Delivered to Pipelines'' in the

    first regular issue of the contract

    month minus the NYMEX (Henry Hub)

    Natural Gas Futures contract final

    settlement price for the

    corresponding contract month.

    Calculation Period................ Monthly.

    Notional Quantity................. 10,000 MMBtu/calendar day.

    Fixed Price Payer................. Company A.

    Floating Price Payer.............. Company B.

    Settlement type................... Financial.

    Swap Term......................... One month from January 1 to January

    31.

    Floating Amount................... Floating Price * Notional Quantity *

    calendar days in the month.

    Fixed Amount...................... Fixed Price * Notional Quantity *

    calendar days in the month.

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

    NYMEX Henry Hub Natural Gas Futures Contract trading ceases

    three business days prior to the first day of the delivery month.

    For simplicity in this example, the last trading day in the futures

    contract is shown as the 28th of the month.

    Futures equivalent position on January 1

    Total Notional Quantity for each leg = 1 month * 31 days/month *

    10,000 MMBtu/day = 310,000 MMBtu

    10,000 MMBtu = 1 futures contract

    Therefore 310,000 MMBtu/10,000 MMBtu/contract = 31 futures

    equivalent contracts

    Total number of days = 31

    Futures Equivalent Position of Swap on January 1

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

    Company B

    Company A position in

    position in Company A Columbia Company B

    Columbia position in Gulf position in

    Dates swap in force Fraction of Referent futures month Gulf NYMEX (Henry Transmission NYMEX (Henry

    days Transmission Hub) natural Co. mainline Hub) natural

    Co. mainline gas futures natural gas gas futures

    natural gas (short) (short) (long)

    (long) MMBtu MMBtu

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

    January 1-January 28.......................... 28/31 February.......................... [dagger][dag -28 [dagger][dag 28

    ger][dagger] ger][dagger]

    January 29-January 31......................... 3/31 March............................. ............ -3 ............ 3

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

    Total..................................... 31/31 .................................. ............ -31 ............ 31

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

    [dagger][dagger][dagger] Note: Because there is no underlying position taken in a basis contract, for reporting purposes, only enter the futures

    equivalent contract quantities into the corresponding futures.

    Example 6--WTI Swaption (Call)

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

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

    Swaption Style.................... American.

    Option Type....................... Call.

    Swaption Start Date............... Jan 1 of the current year.

    Swaption End Date................. June 30 of the current year.

    Strike Price...................... $80.50/bbl.

    Notional Quantity................. 100,000 bbl/month.

    Calculation Period................ One month.

    [[Page 67273]]

    Reference Price................... Daily official next to expire

    contract price for WTI NYMEX Crude

    Oil Futures Contract in $/bbl

    through the NYMEX spot month.

    Fixed Price....................... $80.00 per barrel per month.

    Floating Price.................... The arithmetic average of the

    reference price during the pricing

    period.

    Settlement Type................... Financial.

    Swap Term......................... One month from July 1 to July 31 of

    the current year.

    Floating Amount................... Floating Price * Notional Quantity.

    Fixed Amount...................... Fixed Price * Notional Quantity.

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

    NYMEX WTI trading ceases on the third business day prior to the

    25th of the calendar month preceding the delivery month. For

    simplicity in this example, the last trading day in each WTI futures

    contract is shown as the 22nd of the month.

    Futures equivalent position on January 1

    Total Notional Quantity = 1 month * 100,000 bbls/month = 100,000

    bbls

    1,000 bbl = 1 futures contract

    Therefore 100,000 bbls/1,000 bbls/contract = 100 futures equivalent

    contracts

    Total number of days = 31

    Gross Position on January 1

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

    Company A Company B

    Dates swap in force Referent futures Fraction of days position position

    month (long)[dagger] (short)[dagger]

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

    July 1-July 22..................... August............... 22/31 70 -70

    July 23--July 31................... September............ 9/31 29 -29

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

    Total.......................... ..................... 31/31 99 99

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

    [dagger] Contracts rounded to the nearest integer.

    Delta [dagger][dagger] Adjusted Position and Futures Equivalent Position on January 1

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

    August September

    Date -----------------------------------------------------------------------

    Delta Position Delta Position

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

    January 1............................... .2 14 .2 5

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

    [dagger][dagger] Deltas should be calculated in an economically reasonable and analytically supportable basis.

    Example 7--WTI Collar Swap

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

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

    Swaption Style.................... American.

    Swaption Start Date............... Jan 1 of the current year.

    Swaption End Date................. June 30 of the current year.

    Call strike Price................. $70.00 per bbl.

    Put strike price.................. $90.00 per bbl.

    Notional Quantity................. 100,000 barrels per month.

    Calculation Period................ One month.

    Reference Price................... Daily official next to expire

    contract price for WTI NYMEX Crude

    Oil in $/bbl through the NYMEX spot

    month.

    Fixed Price....................... $80.00 per barrel.

    Floating Price.................... The arithmetic average of the

    reference price during the pricing

    period.

    Settlement Type................... Financial.

    Swap Term......................... One month from July 1 to July 31 of

    the current year.

    Floating Amount................... Floating Price * Notional Quantity.

    Fixed Amount...................... Fixed Price * Notional Quantity.

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

    NYMEX WTI trading ceases on the third business day prior to the

    25th of the calendar month preceding the delivery month. For

    simplicity in this example, the last trading day in each WTI futures

    contract is shown as the 22nd of the month.

    Futures equivalent position on January 1

    Total Notional Quantity = 1 month * 100,000 bbls/month = 100,000

    bbls

    1,000 bbl = 1 futures contract

    Therefore 100,000 bbls/1,000 bbls/contract = 100 futures equivalent

    contracts

    Total number of days = 31

    Gross Position on January 1

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

    Company A position Company B position

    Dates swap in force Referent futures month Fraction of ---------------------------------------------------------------

    days Call Put Call Put

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

    July 1-July 22............................ August...................... 22/31 70.97 70.97 -70.97 -70.97

    [[Page 67274]]

    July 23-July 31........................... September................... 9/31 29.03 29.03 -29.03 -29.03

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

    Total................................. ............................ 31/31 100 100 -100 -100

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

    Company (A) Delta[dagger] Adjusted Position on January 1

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

    August September

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

    Date Long call Short put Long call Short put

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

    Delta Position Delta Position Delta Position Delta Position

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

    January 1............................................... .7 49 .3 -21 .7 20 .3 -8

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

    [dagger] Deltas should be calculated in an economically reasonable and analytically supportable basis.

    Futures Equivalent Position on January 1

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

    August [dagger][dagger] September [dagger][dagger]

    Date -----------------------------------------------------------------------

    Long Short Long Short

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

    January 1............................... 70 0 28 0

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

    [dagger][dagger] Contracts rounded to the nearest integer.

    Appendix B to Part 20--Explanatory Guidance on Data Record Layouts

    Record Layout Examples for Sec. 20.3

    The following example (in Tables 1, 2 and 3) covers reporting

    for a particular clearing organization. ``Clearing Organization

    One'' would report, for the 27th of September 2010, the following

    eleven unique data record submissions. Each data record submission

    represents a unique position, as indicated by Sec. 20.3, held by a

    clearing member of Clearing Organization One. Paragraph (a) of Sec.

    20.3 broadly outlines the data elements that determine unique

    positions for reports on clearing member positions. Paragraphs (b)

    of Sec. 20.3 present all of the data elements that should be

    submitted in reference to a particular data record for a particular

    clearing member (in Table 1). Paragraph (c) identifies data elements

    that would comprise end of day record data on cleared products (in

    Tables 2 and 3). Therefore, paragraphs (b) and (c) of Sec. 20.3

    present all of the data elements that should be submitted in

    reference to a particular data record. Paragraphs (a) and (c) are

    reproduced below.

    (a) Reporting data records. For each reporting day, with respect

    to paired swaps or swaptions, clearing organizations shall report to

    the Commission, separately for each clearing member's proprietary

    and customer account, unique groupings of the data elements in

    paragraph (b) of this section (to the extent that there are such

    corresponding elements), in a single data record, so that each

    reported record is distinguishable from every other reported record

    (because of differing data values, as opposed to the arrangement of

    the elements).

    (c) End of reporting day data. For all futures equivalent

    months, clearing organizations shall report end of reporting day

    settlement prices for each cleared product and deltas for every

    unique swaption put and call, expiration date, and strike price.

    Because CFTC designated Clearing Organization One (in this

    example) currently has two clearing members, ``Clearing Members

    One'' and ``Clearing Member Two.'' positions cleared for these two

    distinct clearing members would be subdivided.

    In the following example it is assumed that the clearing member

    accounts are either proprietary or customer (but not both) and

    therefore data record submissions do not have to be delineated by

    these account types. However, if clearing members did have both

    proprietary and customer accounts, then a clearing organization

    would have to further subdivide these clearing member data records

    by these two account types.

    Clearing Member One currently has five positions with multiple

    cleared product IDs and futures equivalent months/years, and

    therefore these positions also constitute separate data records.

    Clearing Member Two currently has six positions with the

    following varying characteristics: Cleared product IDs; futures

    equivalent months/years; commodity reference prices; swaption

    positions that involve both puts and calls; and multiple strike

    prices. Accordingly, these positions must be reported in separate

    data records. An illustration of how these records would appear is

    included in Table 1 below. Clearing Organization One would also have

    to report the corresponding swaption position deltas, strike prices,

    expiration dates, and settlement prices and swap settlement prices.

    An illustration of these submissions is included in Tables 2 and 3

    below.

    Table 1--Data Records Reported Under Paragraphs (a) and (b) of Sec. 20.3

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

    Proprietary/ Futures

    Data records CFTC clearing org Clearing org Clearing org Reporting day customer account equivalent month Commodity reference price

    ID clearing member ID cleared product ID indicator and year

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

    Data record 1.................... CCI--ID--1........ CM--ID--2......... CP--04............ 9/27/2010......... C................... Nov-10........... NYMEX NY Harbor No. 2.

    Data record 2.................... CCO--ID--1........ CM--ID--2......... CP--04............ 9/27/2010......... C................... Oct-10........... NYMEX NY Harbor No. 2.

    Data record 3.................... CCI--ID--1........ CM--ID--2......... CP--02............ 9/27/2010......... C................... Nov-10........... NYMEX Henry Hub.

    Data record 4.................... CCO--ID--1........ CM--ID--2......... CP--02............ 9/27/2010......... C................... Oct-10........... NYMEX Henry Hub.

    Data record 5.................... CCI--ID--1........ CM--ID--2......... CP--02............ 9/27/2010......... C................... Nov-10........... NYMEX Henry Hub.

    Data record 6.................... CCO--ID--1........ CM--ID--2......... CP--02............ 9/27/2010......... C................... Oct-10........... NYMEX Henry Hub.

    Data record 7.................... CCO--ID--1........ CM--ID--1......... CP--03............ 9/27/2010......... P................... Mar-11........... NYMEX Light Sweet.

    [[Page 67275]]

    Data record 8.................... CCO--ID--1........ CM--ID--1......... CP--03............ 9/27/2010......... P................... Feb-11........... NYMEX Light Sweet.

    Data record 9.................... CCO--ID--1........ CM--ID--1......... CP--01............ 9/27/2010......... P................... Mar-11........... NYMEX Light Sweet.

    Data record 10................... CCO--ID--1........ CM--ID--1......... CP--01............ 9/27/2010......... P................... Feb-11........... NYMEX Light Sweet.

    Data record 11................... CCO--ID--1........ CM--ID--1......... CP--01............ 9/27/2010......... P................... Jan-11........... NYMEX Light Sweet.

    NDR.............................. Yes............... Yes............... Yes............... Yes............... Yes................. Yes.............. No.

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

    Non-delta

    Data records Long swap position Short swap Put/call Swaption Swaption strike adjusted long Non-delta adjusted short swaption

    position indicator expiration date price swaption position position

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

    Data record 1.................... 0 5000 .................. ................. ................. ................. ........................................

    Data record 2.................... 0 2000 .................. ................. ................. ................. ........................................

    Data record 3.................... .................. .................. C 7/29/2011 5.59 2000 0

    Data record 4.................... .................. .................. C 7/29/2011 5.59 18000 0

    Data record 5.................... .................. .................. P 7/29/2011 5.50 100 30

    Data record 6.................... .................. .................. P 7/29/2011 5.50 900 270

    Data record 7.................... 5000 0 .................. ................. ................. ................. ........................................

    Data record 8.................... 5000 0 .................. ................. ................. ................. ........................................

    Data record 9.................... 429 1286 .................. ................. ................. ................. ........................................

    Data record 10................... 2281 6843 .................. ................. ................. ................. ........................................

    Data record 11................... 1290 3871 .................. ................. ................. ................. ........................................

    NDR.............................. No No Yes Yes Yes No No

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

    Note: The bottom row of Table 1 indicates whether data elements

    for which any difference in one of the elements constitutes a reason

    for a new data record (NDR).

    Table 2--Example of Data Records Required Under Sec. 20.3(c) for Cleared Swaption Products

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

    Swaption

    CFTC clearing Clearing org Reporting Futures Commodity reference Swaption Swaption Put/call daily

    Data records org ID cleared product day equivalent month price expiration strike price indicator Delta settlement

    ID and year date price

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

    Data record 1................... CCI--ID--1...... CP--02.......... 9/27/2010 Nov-10.......... NYMEX Henry Hub..... 7/29/2011 5.59.......... C............. .5............ 6.25

    Data record 2................... CCO--ID--1...... CP--02.......... 9/27/2010 Oct-10.......... NYMEX Henry Hub..... 7/29/2011 5.59.......... C............. .5............ 5.50

    Data record 3................... CCI--ID--1...... CP--02.......... 9/27/2010 Nov-10.......... NYMEX Henry Hub..... 7/29/2011 5.50.......... P............. .2............ 4.53

    Data record 4................... CCO--ID--1...... CP--02.......... 9/27/2010 Oct-10.......... NYMEX Henry Hub..... 7/29/2011 5.50.......... P............. .2............ 4.78

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

    Table 3--Example of Data Records Required Under Sec. 20.3(c) for Cleared Swap Products

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

    Swap daily

    Data records CFTC clearing org ID Clearing org cleared Reporting day Futures equivalent Commodity reference settlement

    product ID month and year price price

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

    Data record 1................... CCI--ID--1.......... CP--04.............. 9/27/2010 Nov-10.............. C................... 20.35

    Data record 2................... CCO--ID--1.......... CP--04.............. 9/27/2010 Oct-10.............. C................... 10.50

    Data record 3................... CCO--ID--1.......... CP--03.............. 9/27/2010 Mar-11.............. P................... 15.00

    Data record 4................... CCO--ID--1.......... CP--03.............. 9/27/2010 Feb-11.............. P................... 21.00

    Data record 5................... CCO--ID--1.......... CP--01.............. 9/27/2010 Mar-11.............. P................... 17.50

    Data record 6................... CCO--ID--1.......... CP--01.............. 9/27/2010 Feb-11.............. P................... 21.65

    Data record 7................... CCO--ID--1.......... CP--01.............. 9/27/2010 Jan-11.............. P................... 12.50

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

    Record Layout Example for Sec. 20.4

    In this example, ``Reporting Entity One'' would report for the

    27th of September 2010, the following twelve unique data records

    under Sec. 20.4. Each data record represents a unique part of a

    reportable position in the same commodity held by Reporting Entity

    One. Paragraph (b) of Sec. 20.4 outlines the data elements that

    determine unique positions; paragraph (b) is reproduced below.

    (b) Reporting data records. Reporting entities shall report to

    the Commission, for each reporting day, and separately for each

    consolidated account described in paragraphs (a)(1) through (a)(3)

    of this section that is reportable, unique groupings of the data

    elements in paragraph (c) of this section (to the extent that there

    are such corresponding elements), in a single data record, so that

    each reported record is distinguishable from every other reported

    record (because of differing data values, as opposed to the

    arrangement of the elements).

    In the following example it is assumed that Reporting Entity One

    currently clears with one clearing organization and therefore the

    [[Page 67276]]

    data records do not have to be delineated by clearing organization.

    However, if Reporting Entity One did use multiple clearing

    organizations, then it would have to further subdivide its data

    submissions by each clearing organization.

    Reporting Entity One currently has twelve positions with the

    following varying characteristics: account owners; account

    controllers; futures equivalent months/years; clearing organization

    cleared products; swaptions that were either cleared or uncleared;

    commodity reference prices; and whether the trade was entered into

    on or off execution facilities. Accordingly, these positions

    constitute separate data records. An illustration of how these

    records would appear is included in Table 4 below.

    Table 4--Example of Data Records Reported Under Sec. 20.4(c)

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

    Commission Reporting entity

    Data records reporting entity client account 102S Owner ID 102S Controller Account owner Account Reporting day Clearing org cleared

    ID number ID name controller name product ID

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

    Data record 1.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--04

    Data record 2.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--04

    Data record 3.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--04

    Data record 4.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--04

    Data record 5.................... CRE--ID--1........ ACCT--3........... CONTROL--2........ OWNER--1......... XYZ Corp......... FED Corp......... 9/27/2010......... CP--03

    Data record 6.................... CRE--ID--1........ ACCT--4........... CONTROL--2........ OWNER--2......... WVU Corp......... FED Corp......... 9/27/2010......... CP--03

    Data record 7.................... CRE--ID--1........ ACCT--2........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--03

    Data record 8.................... CRE--ID--1........ ACCT--5........... CONTROL--1........ OWNER--2......... WVU Corp......... ABC Corp......... 9/27/2010......... CP--03

    Data record 9.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... ....................

    Data record 10................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... ....................

    Data record 11................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--01

    Data record 12................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--01

    NDR Uncleared.................... Yes............... Yes............... No................ No............... No............... No............... Yes............... No

    NDR Cleared...................... Yes............... Yes............... No................ No............... No............... No............... Yes............... Yes

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

    Futures Cleared/

    Data records Commodity equivalent uncleared CFTC clearing Commodity Execution Long swap Short swap

    code month and year indicator org identifier reference price facility position position

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

    Data record 1................ HO1.......... Feb-11........ C.............. CCO--ID--1.... Platts Oilgram EX1.......... 1989....... 0

    Price Report

    for New York

    No. 2 (Barge).

    Data record 2................ HO1.......... Jan-11........ C.............. CCO--ID--1.... Platts Oilgram EX2.......... 2011....... 0

    Price Report

    for New York

    No. 2 (Barge).

    Data record 3................ HO1.......... Feb-11........ C.............. CCO--ID--1.... NYMEX NY Harbor EX1.......... 0.......... 5000

    No. 2.

    Data record 4................ CL........... Jan-11........ C.............. CCO--ID--1.... NYMEX NY Harbor EX3.......... 0.......... 2000

    No. 2.

    Data record 5................ CL........... Feb-11........ C.............. CCO--ID--1.... NYMEX Light EX1.......... 5000....... 0

    Sweet.

    Data record 6................ CL........... Feb-11........ C.............. CCO--ID--1.... NYMEX Light EX1.......... 5000....... 0

    Sweet.

    Data record 7................ CL........... Feb-11........ C.............. CCO--ID--1.... NYMEX Light EX7.......... 429........ 1286

    Sweet.

    Data record 8................ CL........... Feb-11........ C.............. CCO--ID--1.... NYMEX Light EX1.......... 1571....... 4714

    Sweet.

    Data record 9................ NG........... Nov-10........ U.............. U............. NYMEX Henry Hub. NOEX......... ........... ...........

    Data record 10............... NG........... Oct-10........ U.............. U............. NYMEX Henry Hub. NOEX......... ........... ...........

    Data record 11............... NG........... Nov-10........ C.............. CCO--ID--1.... NYMEX Henry Hub. EX1.......... ........... ...........

    Data record 12............... NG........... Oct-10........ C.............. CCO--ID--1.... NYMEX Henry Hub. EX1.......... ........... ...........

    NDR Uncleared................ No........... Yes........... Yes............ No............ Yes............. Yes.......... No......... No

    NDR Cleared.................. No........... Yes........... Yes............ Yes........... No.............. Yes.......... No......... No

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

    Short swap or

    Non-delta Non-delta Delta adjusted Delta adjusted Long swap or swaption

    Data records Put/call Swaption expiration Swaption adjusted long adjusted short long swaption short swaption swaption notional notional

    indicator date strike price swaption swaption position position value position value

    position position position

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

    Data record 1................... ................ ................... .............. ................ ................ .............. .............. .................... .............

    Data record 2................... ................ ................... .............. ................ ................ .............. .............. .................... .............

    Data record 3................... ................ ................... .............. ................ ................ .............. .............. .................... .............

    Data record 4................... ................ ................... .............. ................ ................ .............. .............. .................... .............

    Data record 5................... ................ ................... .............. ................ ................ .............. .............. .................... .............

    Data record 6................... ................ ................... .............. ................ ................ .............. .............. .................... .............

    Data record 7................... ................ ................... .............. ................ ................ .............. .............. .................... .............

    Data record 8................... ................ ................... .............. ................ ................ .............. .............. .................... .............

    Data record 9................... ................ ................... .............. 2000............ 0............... 1000.......... 0............. 111800000........... 0

    Data record 10.................. ................ ................... .............. 18000........... 0............... 9000.......... 0............. 1006200000.......... 0

    Data record 11.................. P............... 7/29/2011.......... 5.55.......... 100............. 30.............. 20............ 6............. .................... .............

    Data record 12.................. P............... 7/29/2011.......... 5.55.......... 900............. 270............. 180........... 54............ .................... .............

    NDR Uncleared................... No.............. Yes................ No............ No.............. No.............. No............ No............ No.................. No

    NDR Cleared..................... Yes............. Yes................ Yes........... No.............. No.............. No............ No............ No.................. No

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

    Note: The bottom two rows in Table 4 indicate whether, for

    uncleared and cleared swaps and swaptions, data elements for which

    any difference in one of the elements constitutes a reason for a new

    data record (NDR).

    Issued by the Commission this 19th day of October 2010 in

    Washington, DC.

    David Stawick,

    Secretary of the Commission.

    Note: The following attachments will not appear in the Code of

    Federal Regulations.

    Statement of Chairman Gary Gensler

    Position Reports for Physical Commodity Swaps

    October 19, 2010

    I support the proposed large trader reporting rulemaking for

    physical commodity swaps. The Commission currently receives data on

    large

    [[Page 67277]]

    positions in all physical commodity futures traded on DCMs and uses it

    for market surveillance purposes, including position limit enforcement.

    With today's proposed rule, we would have an analogous reporting system

    for swaps.

    The proposal would require position reports on economically

    equivalent swaps from clearing organizations, their members and swap

    dealers. This will enable the CFTC to receive such data until swap data

    repositories are in operation and capable of fulfilling the

    Commission's need for this information.

    Concurring Statement of Commissioner Jill E. Sommers

    Relating to the Commission's Proposal on Position Reports for Physical

    Commodity Swaps and Swaptions

    October 19, 2010

    I support this proposal to receive daily position reports for

    physical commodity swaps and swaptions because I believe it furthers

    our continued effort to expand transparency into swap markets and

    because I believe it is critical that the Commission receive this

    information as soon as possible. I recognize that this proposal is a

    precursor to the Commission moving forward with a proposal on the

    imposition of position limits. That said, my vote in support of this

    proposal today should not in any way be interpreted as expressing

    support for moving forward with the imposition of position limits by

    the deadlines set forth in Dodd-Frank.

    In July and August 2009, the Commission held three public hearings

    to discuss imposition of position limits in energy markets. Five months

    later, in January 2010, the Commission issued a proposed rule imposing

    position limits in four enumerated energy contracts. I had grave

    concerns about moving forward with position limits on those four

    contracts, and accordingly voted against the proposal. My grave

    concerns about moving forward with position limits have not been eased,

    and in fact, have only been heighted by certain provisions of Dodd-

    Frank.

    Section 737 of Dodd-Frank states that the Commission shall by rule,

    regulation, or order establish limits on the amount of positions, as

    appropriate, that may be held by any person. This section requires the

    limits to be aggregated across markets and related products and to be

    imposed within 180 days for energy and metals contracts, and 270 days

    for agricultural contracts.

    In my view, no position limit is appropriate if it is imposed

    without the benefit of receiving and fully analyzing complete data

    concerning the open interest in each market. Only then is the

    Commission able to properly consider the size of each market and

    calibrate a limit that is appropriate for each market. Currently, the

    Commission does not have complete data and will not have complete data

    until swap data repositories are up and running and all swap market

    data is reported to swap data repositories or to the Commission. I

    believe that, optimistically, the earliest this reporting can happen

    will be by the end of 2011. Again that is an optimistic estimate.

    Because of the 180 and 270 day requirements in Dodd-Frank, as we

    sit here today, the Commission is tentatively planning a November 30

    public meeting to vote on proposed speculative position limits for

    exempt and agricultural commodities. Mind you, by November 30 the

    Commission will not have garnered any data from the proposed rule we

    are discussing today, because it, or some modified version of it,

    probably will not be effective in final form by November 30. In

    addition, by November 30, swap data repositories will still be at least

    one year away from operating. Even if the proposed rule we are

    discussing today were effective by November 30, it will not provide

    complete information sufficient to impose position limits.

    Under these circumstances, when considering the imposition of

    aggregate position limits on exempt and agricultural commodities, I

    believe the Commission should find that imposing such limits is not

    appropriate in the absence of full and complete data and analysis on

    the open interest in each market. I believe it is a mistake to

    interpret the arbitrary 180 day and 270 day deadlines as somehow

    trumping the requirement that the Commission make an appropriateness

    determination before imposing any position limits.

    This is an issue that I will be following closely, and I look

    forward to hearing the views of the public and market participants on

    this issue.

    [FR Doc. 2010-27538 Filed 11-1-10; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: November 2, 2010