2010-31579

FR Doc 2010-31579[Federal Register: December 17, 2010 (Volume 75, Number 242)]

[Rules and Regulations]

[Page 78892-78896]

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

[DOCID:fr17de10-5]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 44

RIN 3038-AD29

Reporting Certain Post-Enactment Swap Transactions

AGENCY: Commodity Futures Trading Commission.

ACTION: Interim final rule; request for comment.

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

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

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

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

723 of the Dodd-Frank Act amends Section 2 of the Commodity Exchange

Act (``CEA'' or the ``Act'') by adding new Section 2(h)(5)(B), which

directs that rules adopted by the Commission under this section shall

provide for the reporting of ``transition'' swaps--that is, swaps

entered into on or after the date of enactment of the Dodd-Frank Act

and prior to the effective date of swap data reporting rules to

implement Section 2(h)(5)(B)--to a registered swap data repository

(``SDR'') or to the Commission. Each category of data is subject to a

reporting timetable specified in Section 2(h)(5). The Commission

intends shortly to notice for comment substantive rules implementing

the swap data reporting provisions of Section 2(h)(5)(B). In order to

ensure the preservation of data pending implementation of such rules,

the Commission is today adopting an interim final rule directing

specified counterparties to post-enactment, or transition, swap

transactions entered into prior to the effective date of the swap data

reporting and recordkeeping rules implementing Section 2(h)(5)(B) of

the CEA to retain information pertaining to the terms of such swaps.

DATES: This interim final rule is effective December 17, 2010. Comments

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

January 18, 2011.

ADDRESSES: You may submit comments, identified by RIN number 3038-AD29,

by any of the following methods:

Agency Web Site: via its Comments Online process: http://

comments.cftc.gov. Follow the instructions for submitting comments

through the Web site.

Mail: Address to 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.

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

Follow the instructions for submitting comments.

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 procedures established in Sec. 145.9 of the

Commission's Regulations.\1\

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\1\ 17 CFR 145.9.

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

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

submission from 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: Susan Nathan, Senior Special Counsel,

Division of Market Oversight, Commodity Futures Trading Commission,

1155 21st Street, NW., Washington, DC 20581, at (202) 418-5133.

SUPPLEMENTARY INFORMATION: The Commission is adopting an interim final

rule under part 44 of its regulations under the Commodity Exchange Act

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

will carefully consider all comments received and will address them, as

applicable, in connection with the permanent reporting rules to be

adopted under the Dodd-Frank Act.

I. Background

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

Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'').\2\

Title VII of the Dodd-Frank Act \3\ amended the Commodity Exchange Act

(``CEA'' or the ``Act'') \4\ to establish a comprehensive new

regulatory framework for swaps and security-based swaps. The

legislation was enacted to reduce risk, increase transparency, and

promote market integrity within the financial system by, among other

things: (1) Providing for the registration and comprehensive regulation

of swap dealers and major swap participants; (2) imposing clearing and

trade execution requirements on standardized derivative products; (3)

creating robust recordkeeping and real-time reporting regimes; and (4)

enhancing the Commission's rulemaking and enforcement authorities with

respect to, among others, all registered entities and intermediaries

subject to the Commission's oversight.

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\2\ See Dodd-Frank Wall Street Reform and Consumer Protection

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

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

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

\3\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may

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

2010.''

\4\ 7 U.S.C. 1 et seq.

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

reported to a registered SDR \5\ or to the Commission if there is no

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

Frank Act adds to the CEA new Section 2(h)(5)(B), to require that

transition swaps be reported to a registered SDR or the Commission

according to specified timetables. As described below, pursuant to its

authority under Sections 4r and 2(h)(5)(A) of the CEA the Commission

previously has adopted an interim final rule addressing the reporting

timetable for swaps entered into prior to the enactment of the Dodd-

Frank Act the terms of which had not expired by that date.

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\5\ The term ``swap data repository'' is defined in Section

1a(48) of the CEA to mean ``any person that collects and maintains

information or records with respect to transactions or positions in,

or the terms and conductions of, swaps entered into by third parties

for the purpose of providing a centralized recordkeeping facility

for swaps.''

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Separately, Section 729 of the Dodd-Frank Act established in new

Section 4r(a)(2)(A) a transition rule applicable to pre-enactment

swaps, providing for the reporting, by a date certain, of each swap

entered into before the date of enactment of the Dodd-Frank Act, the

[[Page 78893]]

terms of which had not expired as of that date.\6\ Section 4r(a)(2)(B)

directs the Commission to promulgate an interim final rule within 90

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

reporting of each swap entered into before the date of enactment. On

October 14, 2010, the Commission published in part 44 of its

regulations an interim final rule instructing specified counterparties

to pre-enactment swaps to report data to a registered SDR or to the

Commission by the compliance date to be established in reporting rules

to be promulgated under CEA Section 2(h)(5), and advising such

counterparties of the necessity, inherent in the reporting requirement,

to preserve information pertaining to the terms of such swaps until

reporting can be effectuated under permanent rules. The reporting

requirements established by Section 4r and Sec. Sec. 44.00-44.02 of

the Commission's Regulations will remain in effect until the effective

date of the permanent reporting rules to be adopted by the Commission

pursuant to Section 2(h)(5) of the CEA.\7\

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\6\ The statute provides that reporting must occur either (i) 30

days after issuance of the interim final rule; or (ii) such other

date as the Commission determines to be appropriate.

\7\ See Interim Final Rule for Reporting Pre-Enactment Swap

Transactions, 75 FR 63080, Oct. 14, 2010.

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Section 4r did not mandate an interim final rulemaking addressing

reporting provisions for transition swap transactions entered into on

or after the date of enactment of the Dodd-Frank Act and prior to the

effective date of the swap data reporting rule to implement the

provisions of Section 2(h)(5)(B). The instant interim final rule is

intended to provide clarity and guidance with respect to such swaps by

(i) establishing that transition swaps \8\ be subject to Section

2(h)(5)(B)'s reporting requirements and to Commission regulations to be

promulgated thereunder; and (ii) advising potential counterparties to

such swaps that implicit in this reporting requirement is the need to

retain relevant data.

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\8\ The term ``transition swap'' refers to a swap executed on or

after the date of enactment of the Dodd-Frank Act and before the

effective date of the swap data reporting and recordkeeping rules

implementing Section 2(h)(5)(B) of the CEA. As discussed infra.,

Sections 2(h)(5)(A) and 4r describe as a separate category of swaps

those executed prior to the enactment of the Dodd-Frank Act, the

terms of which had not expired by that date (``pre-enactment

swaps'').

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The Commission intends to establish permanent data recordkeeping

and reporting requirements for transition swaps in a separate

rulemaking under Section 2(h)(5)(B) of the CEA.\9\ The Commission

anticipates that its rulemaking for transition swaps will address

specifically the records, information and data regarding transition

swaps that must be retained and the timeframe for reporting such

information to a registered SDR or to the Commission.

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\9\ See Notice of Proposed Rulemaking Relating to Swap Data

Recordkeeping and Reporting Requirements n. 10, approved for

publication by the Commission at an open meeting on November 19,

2010 and expected to be published shortly in the Federal Register

(to be codified at 17 CFR part 45). Rules adopted by the Commission

under this section shall provide for the reporting of swap data as

follows:

(A) Swaps entered into on or before the date of the enactment of

this subsection shall be reported to a registered swap data

repository or the Commission no later than 180 days after the

effective date of this subsection.

(B) Swaps entered into on or after such date of enactment shall

be reported to a registered swap data repository or the Commission

no later than the later of--

(i) 90 days after such effective date; or

(ii) Such other time after entering into the swap as the

Commission may prescribe by rule or regulation.

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II. The Scope of the Interim Final Rule

This interim final rule will apply to all swaps entered into on or

after the date of enactment of the Dodd-Frank Act and before the

effective date of the swap data reporting and recordkeeping rules

implementing Section 2(h)(5)(B) of the CEA.

1. Reporting Obligations

The Commission expects that the reporting obligations outlined in

Sec. 44.03 will implicate swap transaction information and data that

counterparties normally retain as sound business practice. Interim

Sec. 44.03 establishes that reporting requirements are applicable to

transition swaps and describes the information that would be reported

to a registered SDR or to the Commission with respect to such

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

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

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

additional information of the character described in Section 4

(``Record Preservation'') below.

In addition, Interim Sec. 44.03 provides that a designated

counterparty \10\ to a transition swap \11\ must provide to the

Commission on request any information relating to such transaction

during the time that this interim final rule is in effect. The

Commission expects that such information would vary depending upon the

needs of the Commission and may include actual as well as summary trade

data. Such summary data may include a description of a swap dealer's

counterparties or the total number of post-enactment pre-effective swap

transactions entered into by the dealer and some measure of the

frequency and duration of those contracts. The Commission believes that

this requirement will facilitate its ability to understand and evaluate

the current market for swaps and may inform its analysis of other

required rulemakings under the Dodd-Frank Act.

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\10\ The reporting obligations of specified counterparties are

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

certain other provisions of Section 4r, these obligations are not

limited to pre-enactment swaps.

\11\ The term ``transition swap'' is defined in Sec. 44.00(c)

of the Commission's Regulations to mean ``any swap entered into

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

and prior to the effective date of the swap data reporting and

recordkeeping rules implemented pursuant to Section 2(h)(5)(B)'' of

the CEA.

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2. Reporting Party

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

a particular swap transaction. Specifically, this section provides,

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

or major swap participant, that entity must report the swap. With

respect to a swap in which one counterparty is a swap dealer and the

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

responsible for reporting the swap. With respect to any other swap, the

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

Sec. 44.03 incorporates these provisions.

3. Effective Date for Reporting Transition Swaps

Section 2(h)(5)(B) of the CEA requires that rules adopted by the

Commission shall provide for the reporting of data for transition swaps

no later than the later of 90 days after the effective date of the

Dodd-Frank Act \12\ or such other time after entering into the swap as

the Commission may prescribe. Section 4r(a)(2)(C) establishes that the

reporting obligations described in Section 4r shall be effective on the

enactment of that section--July 21, 2010. In a July 15, 2010 floor

statement, Senator Lincoln addressed inconsistencies between Sections

4r and 2(h)(5), emphasizing that the provisions of these two sections

``should be interpreted as complementary to one another to assure

consistency between them. This is particularly true with respect to

issues such as the effective dates of these reporting requirements.''

\13\ Accordingly,

[[Page 78894]]

Section 4r(a)(2)(C) should be read to require that the reporting

obligations of Section 2(h)(5)(B) became effective on enactment of the

Dodd-Frank Act and that counterparties who are or may become subject to

this obligation should, as of that date, be prepared to report swap

data relating to post-enactment pre-effective swaps at such time as

reporting is required: the later of 90 days after July 15, 2011 or such

other time after entering into the swap as the Commission may

prescribed by rule. The Commission believes that this result achieves

Senator Lincoln's goal of assuring consistency between the legislative

provisions embodied in Sections 4r and 2(h)(5).

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\12\ As relevant here, the effective date is 360 days after the

enactment of the Dodd-Frank Act--July 15, 2011.

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

Congressional Record (July 15, 2010) at S5923.

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4. Record Preservation

While neither Section 4r nor Section 2(h)(5) expressly requires

that counterparties retain data related to transition swaps, implicit

in the reporting requirements established by these provisions is the

necessity for counterparties to these transactions to retain

information and data related to the terms of each transaction so that

it may subsequently be reported. In this regard, Sec. 44.03 includes a

Note to paragraphs (a)(1) and (a)(2) advising potential counterparties

to a post-enactment pre-effective swap transaction to retain all

information and documents relating to the terms of the transaction, to

the extent and in such form as they presently exist. The Commission

expects that counterparties to existing swaps routinely retain,

consistent with reasonable business practice, information including but

not limited to: (i) Any information necessary to identify and value the

transaction (e.g., underlying asset and tenor); (ii) the date and time

of execution of the transaction; (iii) volume (e.g., notional or

principal amount); (iv) information relevant to the price and payment

of the transaction until the swap is terminated, reaches maturity, or

is novated; (v) whether the transaction was accepted for clearing by

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

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

to the terms of the transaction; and (vii) the final confirmation of

the transaction.

The Commission believes that counterparties that may be required to

report transition swap transactions should preserve such information in

order to ensure that they will be able to comply with the reporting

requirements of Interim Sec. 44.03 as well as with permanent reporting

rules to be promulgated under CEA Section 2(h)(5). The Commission is

mindful that the data retention requirement may be perceived as

burdensome, and in that regard the Note attempts to limit the data to

material information that may be expected to assist the Commission in

performing its oversight functions under the CEA. In addition, to

ensure that important information relating to the terms of such swaps

may be retained with minimal burden on the counterparties, the Note

does not require any counterparty to a transition swap transaction to

create new records, and permits records to be retained in their

existing format. Similarly, the Commission recognizes that information

that the counterparty does not have prior to the effective date of the

interim final rule cannot be reported.

III. Request for Comments

The Commission requests comments on the questions outlined below:

1. Should the date on which data concerning transition swaps is

required to be reported to a registered swap data repository or to the

Commission be more than 90 days following the July 15, 2011 effective

date of the Dodd-Frank Act? If so, what date(s) should the Commission

consider and why?

2. Should the date for such reporting be different for reporting

counterparties who are swap dealers or major swap participants than it

is for reporting counterparties who are not swap dealers or major swap

participants?

3. What information should be reported with respect to transition

swaps? Who would use this information, and for what purpose(s)?

4. Should data reporting for transition swaps be asset-class

specific?

5. What methods of data accuracy verification should be used for

transition swap data?

6. Should the Commission's permanent rules concerning data

reporting for transition swaps between counterparties who are not swap

dealers or swap participants specify how such counterparties should

determine which counterparty will report the swap data? If so, what

factors should govern this choice?

7. The Note to the interim final rule advises that counterparties

retain, in their existing format, all information and documents

relating to the terms of the transition swap, including but not limited

to certain data elements. What documents and data typically are kept by

swap market participants to memorialize their transactions? In what

format? How long are such records currently maintained by market

participants?

8. What additional records should be kept, if any, and what burdens

or costs would the retention of such information entail?

In addition to the specific requests for comment above, the

Commission welcomes comment on all aspects of the interim final rule

and invites interested persons to submit written presentations of

views, data and arguments on all aspects of the interim final rule.

IV. Related Matters

A. Administrative Procedure Act

The Administrative Procedure Act \14\ (``APA'') generally requires

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

Register.\15\ This requirement does not apply, however, when the agency

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

impracticable, unnecessary, or contrary to the public interest.'' \16\

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

adopted rule in the Federal Register 30 days before it becomes

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

cause to make the rule effective sooner.\17\

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\14\ 5 U.S.C. 553.

\15\ 5 U.S.C. 553(b).

\16\ Id.

\17\ 5 U.S.C. 553(d).

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By way of background, Section 729 of the Dodd-Frank Act amended the

CEA to add new Section 4r, which in turn requires the Commission to

adopt, within 90 days of enactment of the Dodd-Frank Act, an interim

final rule providing for the reporting of swaps entered into before the

date of enactment of the Dodd-Frank Act the terms of which had not

expired as of that date. In response to that mandate, the Commission

adopted in new part 44 of the CEA an interim final rule whose purpose

was to establish reporting requirements for pre-enactment unexpired

swaps and to serve as notice to potential reporting entities of a

subsequent requirement to report certain data \18\ associated with such

swaps. This interim rule provides notice to counterparties to preserve

data associated with transition swaps until the Commission issues

permanent reporting and recordkeeping rules for all swaps pursuant to

CEA Section 2(h)(5).\19\

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\18\ 75 FR 63080 (Oct. 14, 2010).

\19\ Id. at 63084.

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The Commission is mindful that the Dodd-Frank Act did not mandate

an interim final rule relating to transition swaps (those entered into

after the date of enactment of the Act and prior to its effective

date), although such swaps will in the future be subject to a permanent

reporting requirement

[[Page 78895]]

pursuant to new Section 2(h)(5)(B) of the CEA. The Commission believes

that these circumstances similarly warrant notice to potential

counterparties of a present obligation to retain data relating to such

swaps until the Commission issues permanent rules pursuant to Section

2(h)(5)(B). Moreover, the Commission believes that issuance of such a

rule as an interim final rule serves the public interest. The

availability of this data will facilitate the Commission's ability to

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

analysis of other required rulemaking under the Dodd-Frank Act; any

delay in adopting such rules likely will result in a substantial loss

of significant swap data. Accordingly, the Commission believes that

good cause exists under 5 U.S.C. 553(b) and (d) because delay in

clarifying the potential scope of Section 2(h)(5)'s reporting and

record preservation obligations likely will result in a substantial

loss of material data relating transition swaps that would assist the

Commission in performing its oversight and analytic functions under the

CEA.

B. Paperwork Reduction Act

The Paperwork Reduction Act (``PRA'') provides that 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 from the Office of Management and Budget (``OMB'').\20\ OMB has

not yet assigned a control number to the new collection. As described

below, the Interim Final Rule will result in new collection of

information requirements within the meaning of the PRA.

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

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1. Reporting Requirements

The Commission has determined that this interim final rulemaking

will not impose on swap counterparties any new reporting requirements

that would be collections of information requiring the approval of the

Office of Management and Budget (``OMB'') under the Paperwork Reduction

Act (``PRA'').\21\ The Commission intends to propose permanent

reporting requirements associated with Section 723 of the Dodd-Frank

Act, at which time the Commission will issue a notice of proposed

rulemaking, seek comments on the proposed reporting requirements, and

seek OMB approval for the collections of information as provided by 5

CFR 1320.8 and 1320.11.

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

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2. Recordkeeping Requirements

In order to comply with the reporting requirements contained in

Sec. 44.03, and in anticipation of permanent recordkeeping and

reporting requirements to be adopted by the Commission pursuant to

Section 2(h)(5)(B) of the CEA, each potential counterparty to a

transition swap that may be required to report such transaction should

retain information relating to the terms of the swap transaction. The

Commission believes that this recordkeeping element, while not

explicit, is considered to be a collection of information 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 ``Regulation 44.03--Interim Final Rule for

Reporting Certain Post-Enactment Swap Transactions. OMB control number

3038-NEW.''

The Commission will, by separate action, publish in the Federal

Register a notice and request for comment on the paperwork burden

associated with the recordkeeping element of this interim final rule in

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

information will be mandatory.

C. Cost-Benefit Analysis

Section 15(a) of the CEA requires the Commission to consider the

costs and benefits of its action before issuing a new regulation or

order under the Act. By its terms, Section 15(a) does not require the

Commission to quantify the costs and benefits of its action or to

determine whether the benefits of the action outweigh its costs.

Rather, Section 15(a) requires the Commission simply to ``consider the

costs and benefits'' of the subject rule or order. Section 15(a)

further specifies that the costs and benefits of Commission regulations

shall be evaluated in light of five broad areas of market and public

concern: (1) Protection of market participants and the public; (2)

efficiency, competitiveness, and financial integrity of the market for

listed derivatives; (3) price discovery; (4) sound risk management

practices; and (5) other public interest considerations. The Commission

may, in its discretion, give greater weight to any one of the five

enumerated areas of concern and may, in its discretion, determine that

notwithstanding its costs, a particular regulation is necessary or

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

provisions or accomplish any of the purposes of the CEA.

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

undertake a number of rulemakings to implement the regulatory framework

for swaps dictated by that Act, including the reporting of swap

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

providing clarity and guidance with respect to the reporting of

transition swaps by (i) establishing that transition swaps will be

subject to Section 2(h)(5)(B)'s reporting requirements and to

Commission regulations to be promulgated thereunder; and (ii) advising

potential counterparties to such transition swaps that implicit in this

reporting requirement is the present obligation to retain data for

reporting at a time to be determined by rules promulgated under Section

2(h)(5)(B). This interim final rule will enable the Commission to

obtain data on transition swaps and will also ensure the preservation

of such data until permanent recordkeeping and reporting rules are

issued by the Commission. The availability of data relating to

transition swaps will enable the Commission to gain a better

understanding of the swap market--including the size and scope of that

market. This understanding ultimately will lead to a more robust and

transparent environment for the swaps market. Further, the Commission

expects this rule to make available information that could inform the

Commission's decision-making with respect to the rules it is required

to implement under the Dodd-Frank Act.

The Note to Interim Sec. 44.03(a)(1) and (2) addresses the

retention of records relating to transition swaps. Although there are

recordkeeping costs associated with retention of existing swap

transaction information, the Commission has crafted the Interim Final

Rule to be efficient in terms of these costs. The Interim Rule does not

require market participants to modify data for retention purposes, and

the information that is to be reported should be information that is

already kept by swap counterparties in their normal course of

business--and it may be reported in the format in which it is kept.

Moreover, counterparties must report the time of execution only to the

extent such information is available.

The recordkeeping and reporting rules that the Commission is

required to adopt under new CEA Section 2(h)(5)(B) will apply to

transition swaps. Accordingly, in adopting this Interim Rule the

Commission has sought to limit the burden on market participants by

[[Page 78896]]

not imposing substantial or potentially conflicting reporting

requirements.

D. Regulatory Flexibility Act

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

requires federal agencies, in promulgating rules, to consider the

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

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

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

or any other law * * *.'' \22\ However, a general notice of proposed

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

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

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

procedure thereon are impracticable, unnecessary or contrary to the

public interest.'' \23\ As noted above, the Commission believes that

good cause exists under 5 U.S.C. 553(b) because delay in clarifying the

scope of 2(h)(5)'s reporting and record preservation obligations will

likely result in a substantial loss of material data relating to post-

enactment pre-effective swaps that would assist the Commission in

performing its oversight functions under the CEA.

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\22\ 5 U.S.C. 601(2).

\23\ 5 U.S.C. 553(b).

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List of Subjects in 17 CFR Part 44

Swap markets, Counterparties, Reporting and Recordkeeping

requirements.

0

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

Commodity Exchange Act, as amended, and in particular Sections 2(h)(5),

4r(a) and 12a(5), the Commission hereby proposes to amend Chapter 1 of

Title 17 of the Code of Federal Regulations by amending part 44 as

follows:

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

Authority and Issuance

0

1. The authority citation for part 44 shall continue to read as

follows:

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

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

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

0

2. Section 44.00 is amended by redesignating paragraphs (c) through (e)

as paragraphs (d) through (f) and by revising paragraph (c) to read as

follows:

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

* * * * *

(c) Transition swap means any swap entered into after the enactment

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

effective date of the swap data reporting and recordkeeping rule

implemented under Section 2(h)(5)(B) of the CEA.

* * * * *

0

3. Section 44.03 is added to read as follows:

Sec. 44.03 Reporting transition swaps to a swap data repository or to

the Commission.

(a) A counterparty to a post-enactment pre-effective swap

transaction shall:

(1) As required by the reporting rules required to be adopted

pursuant to Section 2(h)(5)(B) of the Commodity Exchange Act, report

data related to a transition swap to a registered swap data repository

or the Commission by the compliance date established in such reporting

rules or within 60 days after an appropriate swap data repository

becomes registered with the Commission and commences operations to

receive and maintain data related to such swap, whichever occurs first,

the following information with respect to the swap transaction:

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

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

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

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

prescribed by the Commission, any information relating to the swap

transaction.

Note to Paragraphs (a). In order to comply with the reporting

requirements contained in paragraphs (a)(1) and (a)(2) of this

section, each counterparty to a post-enactment pre-effective swap

transaction that may be required to report such transaction should

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

the extent and in such form as they exist on the effective date of

this section, relating to: the terms of a swap transaction,

including but not limited to any information necessary to identify

and value the transaction (e.g., underlying asset and tenor); the

date and time of execution of the transaction; volume (e.g.,

notional or principal amount); information relevant to the price and

payment for the transaction until the swap is terminated, reaches

maturity or is novated; whether the transaction was accepted for

clearing and, if so, the identity of such clearing organization; any

modification(s) to the terms of the transaction; and the final

confirmation of the transaction.

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

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

follows:

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

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

participant shall report the transaction;

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

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

shall report the transaction; and

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

dealer or a major swap participant, the counterparties to the

transaction shall select the counterparty who will report the

transaction.

Issued in Washington, DC, on December 9, 2010, by the

Commission.

David A. Stawick,

Secretary of the Commission.

Appendices to Interim Final Rule for Reporting Certain Post-Enactment

Swap Transactions--Commission Voting Summary and Statements of

Commissioners

Note: The following appendices will not appear in the Code of

Federal Regulations.

Appendix 1--Commission Voting Summary

On this matter, Chairman Gensler and Commissioners Dunn, Sommers,

Chilton and O'Malia voted in the affirmative; no Commissioner voted in

the negative.

Appendix 2--Statement of Chairman Gary Gensler

I support the interim final rulemaking regarding the reporting

timetable for swaps entered into after the date of enactment of the

Dodd-Frank Act but prior to the effective date of swap data reporting

rules, or ``transition'' swaps. The interim final rule is intended to

ensure that data and information related those transition swaps will be

preserved until reporting to swap data repositories or regulators can

occur. The rule is indeed to prevent a substantial loss of data on

transition swaps and to assist the Commission in performing its

oversight functions under the Commodity Exchange Act.

[FR Doc. 2010-31579 Filed 12-16-10; 8:45 am]

BILLING CODE 6351-01-P

Last Updated: December 17, 2010