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2012-10918

  • Federal Register, Volume 77 Issue 88 (Monday, May 7, 2012)[Federal Register Volume 77, Number 88 (Monday, May 7, 2012)]

    [Proposed Rules]

    [Pages 26709-26713]

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

    [FR Doc No: 2012-10918]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 49

    RIN 3038-AD83

    Swap Data Repositories: Interpretative Statement Regarding the

    Confidentiality and Indemnification Provisions of Section 21(d) of the

    Commodity Exchange Act

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Proposed interpretative statement.

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

    ``CFTC'') is proposing this interpretative statement to provide

    guidance regarding the applicability of the confidentiality and

    indemnification provisions set forth in new section 21(d) of the

    Commodity Exchange Act (``CEA'') added by section 728 of the Dodd-Frank

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

    The Commission requests comment on all aspects of the proposed

    interpretative statement. The proposed interpretative statement

    clarifies that the provisions of section 21(d) should not operate to

    inhibit or prevent foreign regulatory authorities from accessing data

    in which they have an independent and sufficient regulatory interest,

    even if that data also has been reported pursuant to the CEA and

    Commission regulations.

    DATES: Comments must be received on or before June 6, 2012.

    ADDRESSES: Comments, identified by RIN number 3038-AD83, may be sent 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: David A. Stawick, Secretary of the Commission,

    Commodity Futures

    [[Page 26710]]

    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.

    FOR FURTHER INFORMATION CONTACT: Adedayo Banwo, Counsel, Office of the

    General Counsel, at (202) 418.6249, abanwo@cftc.gov; With respect to

    questions relating to international consultation and coordination:

    Jacqueline Mesa, Director, Office of International Affairs, at (202)

    418.5386, jmesa@cftc.gov, Commodity Futures Trading Commission, Three

    Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.

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

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

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

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

    information that may be exempt from disclosure under the Freedom of

    Information Act (``FOIA''),\1\ a petition for confidential treatment of

    the exempt information may be submitted according to the procedures

    established in Sec. 145.9 of the CFTC's regulations.\2\ The Commission

    reserves the right, but shall have no obligation, to review, prescreen,

    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 FOIA.

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    \1\ 5 U.S.C. 552.

    \2\ 17 CFR 145.9.

    SUPPLEMENTARY INFORMATION: In this release, the Commission addresses

    issues raised by foreign regulators with respect to the scope and

    application of the confidentiality and indemnification provisions of

    new section 21(d) of the CEA and proposes to clarify that these

    provisions should not operate to inhibit or prevent foreign regulatory

    authorities from accessing data in which they have an independent and

    sufficient regulatory interest.

    I. Background: Statutory and Regulatory Authorities

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

    Act.\3\ Title VIIamended the CEA to establish a comprehensive new

    regulatory framework for swaps and security-based swaps.\4\ The

    legislation was enacted to reduce risk, increase transparency and

    promote market integrity within the financial system by, among other

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

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

    trade execution requirements on standardized derivative products; (3)

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

    enhancing the Commission's rulemaking and enforcement authorities with

    respect to, among others, all registered entities and intermediaries

    subject to the Commission's oversight.

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

    Act, Pub. L. 111-203, 124 Stat. 1376 (2010), available at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.

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

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

    2010;'' 7 U.S.C. 1 et seq.

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    To enhance transparency, promote standardization and reduce

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

    section 2(a)(13)(G),\5\ which requires all swaps--whether cleared or

    uncleared--to be reported to swap data repositories (``SDRs'').SDRs are

    new registered entities created by section 728 of the Dodd-Frank

    Act.\6\ SDRs are required to perform specified functions related to the

    collection and maintenance of swap transaction data and information.\7\

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    \5\ 7 U.S.C. 2(a)(13)(G).

    \6\ Section 721 of the Dodd-Frank Act amends section 1a of the

    CEA to add a definition of the term ``swap data repository.''

    Pursuant to CEA section 1a(48), the term ``swap data repository

    means any person that collects and maintains information or records

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

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

    of providing a centralized recordkeeping facility for swaps.'' 7

    U.S.C. 1a(48).

    \7\ See 7 U.S.C. 24a(c). See also Commission, Final Rulemaking:

    Swap Data Recordkeeping and Reporting Requirements, 77 FR 2136, Jan.

    13, 2012 (``Data Final Rules''). The Data Final Rules, among other

    things, set forth regulations governing SDR data collection and

    reporting responsibilities under part 45 of the Commission's

    regulations.

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    CEA section 21(c)(7) requires that SDRs make data available to

    certain domestic and foreign regulators \8\ under specified

    circumstances.\9\ Separately, section 21(d) mandates that prior to

    receipt of any requested data or information from an SDR, a regulatory

    authority described in section 21(c)(7) shall agree in writing to abide

    by the confidentiality requirements described in section 8 of the

    CEA,\10\ and to indemnify the SDR and the Commission for any expenses

    arising from litigation relating to the information provided under

    section 8 of the CEA.\11\

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    \8\ The Commission's regulations designate such regulators as

    either an ``Appropriate Domestic Regulator'' or an ``Appropriate

    Foreign Regulator'' in Sec. 49.17(b). See Commission, Final

    Rulemaking: Swap Data Repositories: Registration Standards, Duties

    and Core Principles, 76 FR 54538, 54554 Sept. 1, 2011 (``SDR Final

    Rules'').

    \9\ 7 U.S.C. 24a(c)(7).

    \10\ 7 U.S.C. 12.

    \11\ 7 U.S.C. 24a(d).

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    Section 752 of the Dodd-Frank Act seeks to ``promote effective and

    consistent global regulation of swaps,'' and provides that the CFTC and

    foreign regulators ``may agree to such information-sharing arrangements

    as may be deemed to be necessary or appropriate in the public interest.

    * * *'' \12\ In light of this statutory directive, the Commission has

    been working to provide sufficient access to SDR data to appropriate

    domestic and foreign regulatory authorities.

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    \12\ See section 752(a) of the Dodd-Frank Act.

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    On June 8, 2011, the Chairman of the CFTC and the Chairman of the

    Securities and Exchange Commission (``Chairmen'') jointly submitted a

    letter to Michel Barnier, European Commissioner for Internal Markets

    and Services,\13\ highlighting their desire for international

    cooperation. In the letter, the Chairmen expressed their belief that

    indemnification and notice requirements need not apply when a

    registered SDR is also registered in a foreign jurisdiction and the

    foreign regulator, acting within the scope of its jurisdiction, seeks

    information directly from the SDR.

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    \13\ See letter from Gary Gensler, Chairman of the Commission,

    and Mary Schapiro, Chairman of the SEC, to Michel Barnier, European

    Commissioner for Internal Markets and Services, European Commission,

    dated June 8, 2011.

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    On September 1, 2011, the Commission adopted regulations

    implementing CEA section 21's registration standards, duties, and core

    principles for SDRs. To implement the provisions of section 21(c)(7)

    and (d), the Commission adopted definitions and standards for

    determining access by domestic and foreign regulators to data

    maintained by SDRs.

    The Commission acknowledged in the SDR Final Rules that the CEA's

    indemnification requirement could have the unintended effect of

    inhibiting direct access by other regulators to data maintained by

    SDRsdue to various home country laws and regulations.\14\ The SDR Final

    Rulesprovided that

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    under specified circumstances, certain ``Appropriate Domestic

    Regulators'' \15\ may gain access to the swap data reported and

    maintained by SDRs without being subject to the notice and

    indemnification requirements of CEA sections 21(c)(7) and (d).\16\ In

    connection with foreign regulatory authorities, the Commission

    determined in the SDR Final Rules that confidential swap data reported

    to and maintained by an SDR may be accessed by an Appropriate Foreign

    Regulator \17\ without the execution of a confidentiality and

    indemnification agreement when the Appropriate Foreign Regulator has

    supervisory authority over an SDR registered with it pursuant to

    foreign law and/or regulation that is also registered with the

    Commission.

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    \14\ See SDR Final Rules at 54554.

    \15\ The term Appropriate Domestic Regulator is defined in 17

    CFR 49.17(b)(1) as the Securities and Exchange Commission; each

    prudential regulator identified in section 1a(39) of the CEA. 7

    U.S.C. 1a(39); the financial Stability Oversight Council; the

    Department of Justice; any Federal Reserve Bank; the Office of

    Financial Research; and any other person the Commission deems

    appropriate.

    \16\ In the Commission's view, it is appropriate to permit

    access to the swap data maintained by SDRs to Appropriate Domestic

    Regulators that have concurrent regulatory jurisdiction over such

    SDRs, without the application of the notice and indemnification

    provisions of sections 21(c)(7) and (d) of the CEA. See SDR Final

    Rules at 54554 n.163. Accordingly, these provisions do not apply to

    an Appropriate Domestic Regulator that has regulatory jurisdiction

    over an SDR registered with it pursuant to a separate statutory

    authority that is also registered with the Commission, if the

    Appropriate Domestic Regulator executes an MOU or similar

    information sharing arrangement with the Commission and the

    Commission, consistent with CEA section 21(c)(4)(A), designates the

    Appropriate Domestic Regulator to receive direct electronic access.

    See 17 CFR 17(d)(2).

    \17\ The term Appropriate Foreign Regulator is defined in 17 CFR

    49.17(b)(2) as a foreign regulator with an existing memorandum of

    understanding (``MOU'') or similar type of information sharing

    arrangement executed with the Commission, and/or a foreign regulator

    without an MOU as determined on a case-by-case basis by the

    Commission.

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    The confidentiality and indemnification provisions of new CEA

    section 21 apply only when a regulatory authority seeks access to data

    from an SDR. In the SDR Final Rules, the Commission noted that section

    8(e) of the CEA provides for the Commission (as opposed to an SDR) to

    share confidential information in its possession with any department or

    agency of the Government of the United States, or with any foreign

    futures authority, department or agency of any foreign government or

    political subdivision thereof,\18\ acting within the scope of its

    jurisdiction.\19\

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    \18\ Section 725(f) of the Dodd-Frank Act amended section 8(e)

    of the CEA to include foreign central banks and ministries.

    \19\ See SDR Final Rules at 54554.

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    The SDR Final Rules became effective on October 31, 2011.\20\ Under

    these rules, trade repositories may apply to the Commission for full

    registration as SDRs.Pending the adoption and effectiveness of other,

    related regulatory provisions and definitions, however, such

    registrations are deemed ``provisional.'' \21\

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    \20\ Id.

    \21\ See 17 CFR 49.3(b).

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    II. Considerations Relevant to the Commission's Proposed Interpretative

    Statement \22\

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    \22\ Legislation has been introduced in Congress that would

    amend the CEA to eliminate or substantially limit the SDR

    indemnification provision.

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    A. International Considerations

    As noted above, section 752(a) of the Dodd-Frank Act directs the

    Commission to consult and coordinate with foreign regulatory

    authorities regarding the establishment of consistent international

    standards for the regulation of swaps and various ``swap entities.''

    Section 752(a) also provides that the Commission ``may agree to such

    information-sharing arrangements [with foreign regulatory authorities]

    as may be deemed to be necessary or appropriate in the public

    interest'' or for the protection of investors and counterparties.\23\

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    \23\ See section 752(a) of the Dodd-Frank Act.

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    The Commission is committed to a cooperative international approach

    to the registration and regulation of SDRs, and consulted extensively

    with various foreign regulatory authorities in promulgating both its

    proposed and final regulations concerning SDRs.\24\ The Commission

    notes that the SDR Final Rules are largely consistent with the

    recommendations and goals of the May 2010 ``CPSS-IOSCO Consultative

    Report, Considerations for Trade Repositories in the OTC Derivatives

    Market'' (``Working Group Report'').\25\

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    \24\ See public comment file in response to the proposal for the

    SDR Final Rules, available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=939 and SDR Final Rules note 6 at

    54539, supra.

    \25\ This working group was jointly established by the Committee

    on Payment and Settlement Systems (``CPSS'') of the Bank of

    International Settlements and the Technical Committee of the

    International Organization of Securities Commissions (``IOSCO'').

    The Working Group Report presented a set of factors to consider in

    connection with the design, operation and regulation of SDRs. A

    significant focus of the Working Group Report is access to SDR data

    by appropriate regulators. The Working Group Report urges that a

    trade repository ``should support market transparency by making data

    available to relevant authorities and the public in line with their

    respective information needs.'' The Working Group Report is

    available at http://www.bis.org/publ/cpss90.pdf. See also CPSS-IOSCO

    Consultative Report, Principles of Financial Market Infrastructures

    (March 2011) available at http://www.bis.org/publ/cpss94.pdf. See

    also Financial Stability Board (``FSB''), Implementing OTC

    Derivatives Market Reforms, Oct. 25, 2010 (``FSB Report''); FSB,

    Derivative Market Reforms, Progress Report on Implementation, Apr.

    15, 2010 (``FSB Progress Report'').

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    B. Public Comments on SDR Regulations

    In developing the SDR Final Rules, the Commission received several

    comments regarding access to SDR data by foreign regulatory authorities

    and the confidentiality and indemnification provisions of CEA section

    21(d). The Commission has considered these comments in formulating this

    proposed interpretation but requests further comment concerning the

    specific interpretative statement proposed.

    Managed Funds Association (``MFA'') requested that the Commission

    actively participate in facilitating foreign regulatory access and

    confirming a foreign regulator's authority in connection with any SDR

    data request.\26\ The CME Group Inc. (``CME'') argued against the

    Commission designating any third party to receive swap data, and

    TriOptima suggested that the Commission ``adopt as flexible an

    interpretation as possible'' regarding the indemnification provisions

    in CEA section 21(d).\27\

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    \26\ See comment letter from MFA.

    \27\ See comment letters from CME and TriOptima.

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    The Depository Trust & Clearing Corporation (``DTCC'') stated that

    the ``indemnification provisions should not apply in situations where

    regulators are carrying out regulatory responsibilities, acting in a

    manner consistent with international agreements and maintaining the

    confidentiality of data.'' \28\ Additionally, the Commission received a

    comment letter from the European Securities and Markets Authority

    (``ESMA'') \29\ stating that it believes the indemnification provision

    ``undermines'' principles of trust and consultation.

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    \28\ See comment letter from DTCC.

    \29\ See comment letter from ESMA.

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    C. Consultations With Foreign Regulatory Authorities

    Consistent with the international harmonization envisioned by

    section 752 of the Dodd-Frank Act, the Commission has engaged in

    consultations with foreign regulatory authorities regarding the

    Commission's regulations relating to the Dodd-Frank Act. During these

    consultations, many foreign regulatory authorities have expressed

    concern about the difficulty in complying with the indemnification

    provisions of CEA section 21(d).

    As a consequence of these consultations with foreign regulatory

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    authorities, and pursuant to the mandate for cooperation under section

    752, the Commission concludes that further guidance is necessary to

    ensure that appropriate access by foreign regulatory authorities is not

    unnecessarily inhibited. For example, the Commission has learned that

    foreign regulatory authorities have asked whether a recognition regime

    with respect to SDRs, and/or access by foreign authorities that do not

    regulate an SDR, would conflict with Sec. 49.17(d)(3) and Sec.

    49.18(c) of the SDR Final Rules, which refer to registration with

    Appropriate Foreign Regulators. Foreign regulatory authorities have

    also taken action to harmonize regulatory reporting rules.

    While the SDR Final Rules address foreign regulators with

    supervisory authority and regulatory responsibility, the Commission is

    proposing the following interpretative statement, pursuant to section

    752, to ensure that foreign regulators receive sufficient access to

    data reported to SDRs where such foreign regulators have an independent

    and sufficient regulatory interest.

    III. Commission Proposed Interpretative Statement

    In this proposed interpretative statement, the CFTC provides

    guidance regarding the confidentiality and indemnification provisions

    of CEA section 21(d). As noted above, the Commission seeks comment from

    interested members of the public on all aspects of this proposed

    interpretative statement.

    A. Data Reported to Registered SDRs

    The Commission understands that some registered SDRs also maybe

    registered, recognized or otherwise authorized in a foreign

    jurisdiction and may accept swap data reported pursuant to the foreign

    regulatory regime. The Commission concludes that the confidentiality

    and indemnification provisions of CEA section 21(d) generally apply

    only to such data reported pursuant to the CEA and Commission

    regulations.

    The Commission further concludes that the confidentiality and

    indemnification provisions should not operate to inhibit or prevent

    foreign regulatory authorities from accessing data in which they have

    an independent and sufficient regulatory interest (even if that data

    also has been reported pursuant to the CEA and Commission regulations).

    Accordingly, and consistent with the Commission's SDR Final Rules,

    the Commission proposes to interpret CEA section 21(d) such that a

    registered SDR would not be subject to the confidentiality and

    indemnification provisions of that section if:

    Such registered SDR also is registered, recognized or

    otherwise authorized in a foreign jurisdiction's regulatory regime; and

    The data sought to be accessed by a foreign regulatory

    authority has been reported to such registered SDR pursuant to the

    foreign jurisdiction's regulatory regime.

    This proposed interpretative guidance is grounded in principles of

    international law and comity. For example, in F. Hoffmann-La Roche Ltd.

    v. Empagran S.A., the U.S. Supreme Court, in reviewing the

    extraterritorial applicability of a different federal statute, stated

    that extraterritorial jurisdiction should be construed, where

    ambiguous, ``to avoid unreasonable interference with the sovereign

    authority of other nations.'' \30\ In cases considering concepts of

    international law and comity in evaluating the extraterritorial scope

    of federal statutes, the Supreme Court has noted that the principles in

    the Third Restatement of Foreign Relations Law are relevant to the

    interpretation of U.S. law.\31\

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    \30\ F. Hoffmann-LaRoche, Ltd. v. Empagran S.A., 542 U.S. 155,

    164 (2004). In Hoffmann-LaRoche, the Supreme Court also stated that

    canons of statutory construction ``assume that legislators take

    account of the legitimate sovereign interests of other nations when

    they write American laws.'' Id.

    \31\ Id. at 164-165.

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    Specifically, section 403 of the Third Restatement of Foreign

    Relations Law states, in relevant part:

    Whether exercise of jurisdiction over a person or activity is

    unreasonable is determined by evaluating all relevant factors,

    including, where appropriate:

    (a) The link of the activity to the territory of the regulating

    state, i.e., the extent to which the activity takes place within the

    territory, or has substantial, direct, and foreseeable effect upon

    or in the territory;

    (b) The connections, such as nationality, residence, or economic

    activity, between the regulating state and the person principally

    responsible for the activity to be regulated, or between that state

    and those whom the regulation is designed to protect;

    (c) The character of the activity to be regulated, the

    importance of regulation to the regulating state, the extent to

    which other states regulate such activities, and the degree to which

    the desirability of such regulation is generally accepted;

    (d) The existence of justified expectations that might be

    protected or hurt by the regulation;

    (e) The importance of the regulation to the international

    political, legal, or economic system;

    (f) The extent to which the regulation is consistent with the

    traditions of the international system;

    (g) The extent to which another state may have an interest in

    regulating the activity; and

    (h) The likelihood of conflict with regulation by another

    state.\32\

    \32\ Rest. 3d., Third Restatement Foreign Relations Law section

    403 (scope of a statutory grant of authority must be construed in

    the context of international law and comity including, as

    appropriate, the extent to which regulation is consistent with the

    traditions of the international system).

    To avoid unreasonable interference with the sovereign authority of

    foreign regulators, this proposed interpretative statement is supported

    and underpinned by principles of international law and comity.

    B. Foreign Regulatory Access

    In the Commission's view, a foreign regulator's access to data held

    in a registered SDR that also is registered, recognized, or otherwise

    authorized in a foreign jurisdiction's regulatory regime, where the

    data sought to be accessed has been reported pursuant to that

    regulatory regime, should be governed by such foreign jurisdiction's

    regulatory regime. The Commission concludes that application of the

    requirements of CEA section 21(d) in these circumstances is

    unreasonable in light of, among other things, the importance of such

    data to the foreign jurisdiction's regulatory regime, foreign

    regulators' interest in unfettered access to such data, and the

    traditions of mutual trust and cooperation among international

    regulators.\33\

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    \33\ The Commission notes that access to data held by trade

    repositories is a concept under discussion and development among

    international regulators. At the request of the FSB, CPSS and IOSCO

    have established a working group of relevant authorities to produce

    a forthcoming report regarding authorities' access to trade

    repository data.

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    Therefore, the Commission proposes that a foreign regulator's

    access to data from a registered SDR that also is registered,

    recognized, or otherwise authorized in a foreign jurisdiction's

    regulatory regime, where the data to be accessed has been reported

    pursuant to that regulatory regime, will be dictated by that foreign

    jurisdiction's regulatory regime and not by the CEA or Commission

    regulations. Such access is appropriate, in the Commission's view, even

    if the applicable data is also reported to the registered SDR pursuant

    to the Commission's Data Final Rules.\34\

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    \34\ Regarding the Commission's access to SDR data, section

    21(b)(1)(A) of the CEA states that the Commission ``shall prescribe

    standards that specify the data elements for each swap that shall be

    collected and maintained by each registered swap data repository.''

    Section 21(c)(1) of the CEA requires registered SDRs to ``accept

    data prescribed by the Commission for each swap under subsection

    (b).'' Therefore, with respect to Commission access to data held in

    registered SDRs, the Commission concludes that the direct electronic

    access provisions of CEA section 21(c)(4) apply only to such data

    that the SDR is required to accept under section 21(c)(1), which is

    further defined by part 45 of the Commission's regulations. In this

    respect, the Commission concludes that its direct electronic access

    applies only to such data reported pursuant to section 21 and

    Commission regulations promulgated thereunder.

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    [[Page 26713]]

    Additionally, the Commission reiterates that a foreign regulatory

    authority, like domestic regulators, can nonetheless receive

    confidential data, without the execution of a confidentiality and

    indemnification agreement, from the Commission (as opposed to an SDR)

    pursuant to section 8(e) of the CEA.\35\ Such data sharing and access

    would be governed by the confidentiality provisions of section 8 of the

    CEA.

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    \35\ As noted above, CEA section 8(e) allows the Commission to

    share confidential information in its possession obtained in

    connection with the administration of the CEA with ``any department

    or agency of the Government of the United States'' or with any

    foreign futures authority or a department, central bank or ministry,

    or agency of a foreign government or political subdivision thereof,

    acting within the scope of its jurisdiction. The Commission

    acknowledges the difficulty that registered SDRs may face in

    determining what data or reporting falls within the jurisdiction of

    a regulatory authority. In this regard, the Commission is

    considering a separate release regarding section 2(i) of the CEA.

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    C. Request for Comment

    The Commission requests comment on all aspects of its proposed

    interpretative statement. In particular, the Commission requests

    comment on the following issue: How would the timing and implementation

    of foreign jurisdictions' regulatory regimes affect the Commission's

    proposed interpretative guidance?

    By the Commission.

    Dated: Issued in Washington, DC, on April 30, 2012.

    David A. Stawick,

    Secretary of the Commission.

    Appendices To Swap Data Repositories: Interpretative Statement

    Regarding the Confidentiality and Indemnification Provisions of Section

    21(d) of the Commodity Exchange Act Interpretive Statement--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 Sommers,

    Chilton, O'Malia and Wetjen voted in the affirmative; no

    Commissioner votes in the negative.

    Appendix 2--Statement of Chairman Gary Gensler

    I support the proposed interpretative statement regarding the

    application of the Dodd-Frank Wall Street Reform and Consumer

    Protection Act (Dodd-Frank Act) indemnification provisions for swap

    data repositories (SDRs). The Commission is working closely with

    international regulators on a collaborative approach regarding how

    data may be accessed by regulators. The proposed guidance, which

    benefited from international input, states the Commission's view

    that foreign regulators will not be subject to the indemnification

    provisions in the Dodd-Frank Act if the SDR is registered,

    recognized or otherwise authorized by foreign law and the data to be

    accessed is reported to the SDR pursuant to foreign law. The public

    will now have an opportunity to comment on the proposed guidance,

    and I look forward to the public's input.

    Appendix 3--Statement of Commissioner Jill E. Sommers

    I concur in the issuance of this Proposed Interpretative

    Statement Regarding the Confidentiality and Indemnification

    Provisions of Section 21(d) of the Commodity Exchange Act (Proposed

    Interpretive Statement). It provides some additional clarification

    with respect to how the Commission intends to interpret the

    application of the Section 21(d) indemnification provisions beyond

    what the Commission stated when it finalized the swap data

    repository (SDR) rules. See Swap Data Repositories: Registration

    Standards, Duties and Core Principles, 76 FR 54,538 (Sept. 1, 2011).

    However, a legislative fix is the only real solution to providing

    appropriate regulators, both foreign and domestic, with timely

    access to relevant data. I agree with Commissioner O'Malia that the

    Commission should publicly support repeal of the indemnification

    provisions, and note that the SEC has already done so.

    When finalizing the SDR rules, the Commission stated that a

    foreign regulator may have direct access to confidential swap data

    reported to and maintained by an SDR registered with the Commission

    without executing a Confidentiality and Indemnification Agreement

    when the SDR is also registered with the foreign regulator and the

    foreign regulator is acting in a regulatory capacity with respect to

    the SDR. See id. at 54,554. The Proposed Guidance clarifies that

    this should be the case even if the data the foreign regulator seeks

    also has been reported pursuant to the CEA and Commission

    regulations.

    Aside from making this point, the Proposed Interpretive

    Statement does not provide any information that cannot be otherwise

    gleaned from the SDR final rules, with one notable exception. The

    final SDR rules define an ``Appropriate Foreign Regulator'' as one

    that has supervisory authority over an SDR that is registered with

    the foreign regulator and with the CFTC. The Proposed Interpretive

    Statement expands this concept to SDRs that are registered,

    recognized, or otherwise authorized in a foreign jurisdiction's

    regulatory regime. Thus, registration and recognition are

    equivalent. This is a welcome clarification and a step in the right

    direction.

    I should note that the indemnification provisions of Section

    21(d) may have an adverse effect on U.S. regulators too. The

    Proposed Interpretive Statement touches on a distinction drawn in

    Part 49 between ``Appropriate Domestic Regulators,'' which include a

    number of domestic regulatory authorities, and an ``Appropriate

    Domestic Regulator with Regulatory Responsibility over a Swap Data

    Repository'' (a single entity subcategory of Appropriate Domestic

    Regulators, namely, the Securities and Exchange Commission (SEC)).

    Only the latter category of domestic regulator (i.e. the SEC) is

    exempt from the indemnification provisions of Section 21(d). While

    it makes sense that the SEC should be able to receive SDR data

    directly from an SDR absent an indemnification agreement, I

    encourage comments as to whether other Appropriate Domestic

    Regulators should have similar access.

    Appendix 4--Statement of Commissioner Scott D. O'Malia

    I concur in support of the Commission's proposed interpretative

    statement (``Proposed Interpretative Statement'') regarding the

    confidentiality and indemnification provisions of Section 21(d) of

    the Commodity Exchange Act (``CEA'').

    Ultimately, Congress should repeal the confidentiality and

    indemnification provisions of Section 21(d) of the CEA and the

    Commission should publicly support that repeal. Absent a legislative

    fix, however, I believe the Commission is taking the right step to

    allay the concerns expressed by many foreign regulatory authorities.

    I am somewhat concerned that the Proposed Interpretative

    Statement does not address one important issue. Specifically, the

    Proposed Interpretative Statement would not provide foreign

    regulatory authorities with access to swaps data if those

    authorities had not yet finalized their regulations. In order to

    better understand the public's view on this issue, I have added a

    question seeking comment on how the timing and implementation of

    foreign jurisdictions' regulatory regimes should affect the

    Commission's final interpretation.

    Lastly, I am pleased that this Proposed Interpretative Statement

    is based on principles of international harmonization and comity.

    The Commission should continue to consult with foreign regulatory

    authorities in a manner consistent with international agreements

    regarding the registration of swap data repositories and the sharing

    of swaps data. In my view, these principles should establish the

    foundation of the Commission's forthcoming rulemaking concerning the

    extraterritorial application of the Dodd-Frank Act to foreign-based

    entities. Several foreign jurisdictions are in the process of

    finalizing new rules for the regulation of swaps and it is important

    that those rules provide a level and competitive playing field for

    U.S. firms as well.

    [FR Doc. 2012-10918 Filed 5-4-12; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: May 7, 2012