Font Size: AAA // Print // Bookmark

2014-06426

  • Federal Register, Volume 79 Issue 58 (Wednesday, March 26, 2014)[Federal Register Volume 79, Number 58 (Wednesday, March 26, 2014)]

    [Proposed Rules]

    [Pages 16689-16698]

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

    [FR Doc No: 2014-06426]

    ========================================================================

    Proposed Rules

    Federal Register

    ________________________________________________________________________

    This section of the FEDERAL REGISTER contains notices to the public of

    the proposed issuance of rules and regulations. The purpose of these

    notices is to give interested persons an opportunity to participate in

    the rule making prior to the adoption of the final rules.

    ========================================================================

    Federal Register / Vol. 79, No. 58 / Wednesday, March 26, 2014 /

    Proposed Rules

    [[Page 16689]]

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

    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Chapter I

    RIN 3038-AE12

    Review of Swap Data Recordkeeping and Reporting Requirements

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Request for comment.

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

    SUMMARY: On January 21, 2014, the Commodity Futures Trading Commission

    (``Commission'' or ``CFTC'') announced the formation of an

    interdivisional staff working group (``Working Group'') \1\ to review

    its swap data reporting rules and related provisions set forth in part

    45 of the Commission's regulations.\2\ Among other objectives, the

    Working Group was asked to identify and make recommendations to resolve

    reporting challenges, and to consider data field standardization and

    consistency in reporting by market participants. Consistent with those

    efforts, and informed by the Working Group's analysis to date, the

    Commission today requests comment on specific swap data reporting and

    recordkeeping rules to help determine how such rules are being applied

    and to determine whether or what clarifications, enhancements or

    guidance may be appropriate. This request for comment is limited to

    part 45 and related provisions.

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

    \1\ The group includes staff from the Division of Market

    Oversight, the Division of Clearing and Risk, the Division of Swap

    Dealer and Intermediary Oversight, the Division of Enforcement, the

    Office of the Chief Economist, the Office of Data and Technology,

    and the Office of General Counsel.

    \2\ Press Release, CFTC to Form an Interdivisional Working Group

    to Review Regulatory Reporting (Jan. 21, 2014), available at http://www.cftc.gov/PressRoom/PressReleases/pr6837-14.

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

    DATES: Comments must be received on or before May 27, 2014.

    ADDRESSES: You may submit comments, identified by RIN 3038-AE12, by any

    of the following methods:

    CFTC Web site: Via Comments Online, at http://comments.cftc.gov. Follow the instructions for submitting comments

    through the Web site.

    Mail: Melissa D. Jurgens, 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.

    Please submit your comments using only one method. All comments

    must be submitted in English, or if not, accompanied by an English

    translation. Comments may 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, a

    petition for confidential treatment of the exempt information may be

    submitted according to the established procedures 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 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: Vincent McGonagle, Director, 202-418-

    5387, vmcgonagle@cftc.gov, Stuart Armstrong, Special Counsel, 202-418-

    5095, sarmstrong@cftc.gov, Laurie Gussow, Special Counsel, 202-418-

    7623, lgussow@cftc.gov, Sebastian Pujol Schott, Associate Director,

    202-418-5641, sps@cftc.gov, Daniel Bucsa, Associate Director, 202-418-

    5435, dbucsa@cftc.gov, Division of Market Oversight; Brian O'Keefe,

    Deputy Director, 202-418-5658, bokeefe@cftc.gov, Eric Lashner, Special

    Counsel, 202-418-5393, elashner@cftc.gov, Division of Clearing and

    Risk; Rajal Patel, Special Counsel, 202-418-5261, rpatel@cftc.gov,

    Division of Swap Dealer and Intermediary Oversight; Jeffrey Burns,

    Assistant General Counsel, 202-418-5051, jburns@cftc.gov, Office of

    General Counsel, Commodity Futures Trading Commission, Three Lafayette

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

    SUPPLEMENTARY INFORMATION:

    Table of Contents

    I. Introduction

    II. Request for Comment

    III. Issues and Questions

    A. Confirmation Data

    B. Continuation Data

    C. Transaction Types, Entities, and Workflows

    D. PET Data and Appendix 1

    E. Reporting of Cleared Swaps

    F. Other SDR and Counterparty Obligations

    G. Swap Dealer/Major Swap Participant Registration and

    Compliance

    H. Risk

    I. Ownership of Swap Data and Transfer of Data Across SDRs

    J. Additional Comment

    I. Introduction

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

    Protection Act (the ``Dodd-Frank Act'') \3\ amended the Commodity

    Exchange Act (``CEA'' or ``Act'') to establish a comprehensive new

    regulatory framework for swaps. Amendments to the CEA included the

    addition of provisions requiring the retention and reporting of data

    regarding swap transactions, including provisions designed 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), which establishes requirements for the real-time reporting

    and public availability of swap transaction data, and requires all

    swaps, whether cleared or uncleared, to be reported to registered swap

    data repositories (``SDRs'').\4\ Sections 723 and 729 of the Dodd-Frank

    Act added to the CEA, respectively, sections 2(h)(5) and 4r, which,

    among other things, establish reporting requirements for swaps in

    effect as of the enactment of the Dodd-Frank Act, as well as swaps

    entered into after such enactment but prior to the effective date for

    compliance with final swap data

    [[Page 16690]]

    recordkeeping and reporting rules prescribed by the Commission.

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

    \3\ Public Law 111-203, 124 Stat. 1376 (2010).

    \4\ See also CEA section 1a(40)(E), 7 U.S.C. 1a(40)(E).

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

    Section 728 of the Dodd-Frank Act added to the CEA new section 21,

    which established SDRs as a new category of registered entity in order

    to facilitate the collection and maintenance of swap data as prescribed

    by the Commission, and to facilitate access to such data by

    regulators.\5\ In addition, new section 21(b) directs the Commission to

    prescribe standards for swap data recordkeeping and reporting.\6\ These

    standards are to apply to both registered entities and counterparties

    involved with swaps.\7\ CEA section 21(b) further directs the

    Commission to prescribe data standards for SDRs \8\ and mandates that

    such standards be comparable to those for derivatives clearing

    organizations.\9\ CEA section 21(c)(3) provides that, once the data

    elements prescribed by the Commission are reported to an SDR, the SDR

    shall ``maintain the data [prescribed by the Commission for each swap]

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

    the Commission.''

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

    \5\ Regulations governing core principles and registration

    requirements for, and the duties of, SDRs are set forth in part 49

    the Commission's regulations. See Swap Data Repositories:

    Registration Standards, Duties and Core Principles, 76 FR 54538

    (Sept. 1, 2011).

    \6\ CEA section 21(b)(1)(A), 7 U.S.C. 24a(b)(1)(A), provides

    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.''

    \7\ CEA section 21(b)(1)(B), 7 U.S.C. 24a(b)(1)(B), provides

    that ``in carrying out [the duty to prescribe data element

    standards], the Commission shall prescribe consistent data element

    standards applicable to registered entities and reporting

    counterparties.''

    \8\ CEA section 21(b)(2), 7 U.S.C. 24a(b)(2), provides that

    ``the Commission shall prescribe data collection and data

    maintenance standards for swap data repositories.''

    \9\ CEA section 21(b)(3), 7 U.S.C. 24a(b)(3), provides that

    ``the [data] standards prescribed by the Commission under this

    subsection shall be comparable to the data standards imposed by the

    Commission on derivatives clearing organizations in connection with

    their clearing of swaps.''

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

    After extensive consultation, opportunities for public comment, and

    coordination with foreign and domestic regulators, the Commission added

    a new part 43 to its regulations,\10\ which sets forth rules for the

    free, real-time public reporting of swap transaction data; new part

    45,\11\ which establishes swap data recordkeeping rules, as well as

    rules for the reporting of swap transaction data to a registered SDR;

    new part 46,\12\ which sets forth swap data recordkeeping and reporting

    rules for pre-enactment swaps \13\ and transition swaps \14\

    (collectively, ``historical swaps''); \15\ and new part 49, which

    governs SDR operations and Commission access to SDR data (``SDR

    Rules'').\16\ Collectively, these provisions provide the public and

    market participants with an unprecedented level of transparency into

    swaps markets, create rigorous recordkeeping and data reporting regimes

    with respect to swaps, and enable Commission oversight of swap markets

    and market participants.

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

    \10\ Real-Time Public Reporting of Swap Transaction Data, 77 FR

    1182 (Jan. 9, 2012).

    \11\ Swap Data Recordkeeping and Reporting Requirements, 77 FR

    2136 (Jan. 13, 2012).

    \12\ Swap Data Recordkeeping and Reporting Requirements: Pre-

    Enactment and Transition Swaps, 77 FR 35200 (June 12, 2012)

    (``Historical Swap Reporting Rule'').

    \13\ A ``pre-enactment swap'' is a swap entered into prior to

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

    which have not expired as of the date of enactment of the Dodd-Frank

    Act. See Historical Swap Reporting Rule at 35226.

    \14\ A ``transition swap'' is a swap entered into on or after

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

    the applicable compliance date for reporting historical swaps data

    pursuant to part 46 of the Commission's regulations. See Historical

    Swap Reporting Rule at 35227.

    \15\ See also part 44 of the Commission's regulations (Interim

    Final Rule for Reporting Pre-Enactment Swap Transactions, 75 FR

    63080 (Oct. 14, 2010); and Reporting Certain Post-Enactment Swap

    Transactions, 75 FR 78892 (Dec. 17, 2010)), which established

    certain record retention requirements for historical swaps, pending

    the adoption of the Commission's final rules, set forth at part 46,

    regarding recordkeeping and reporting with respect to historical

    swaps.

    \16\ See SDR Rules, supra note 5.

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

    Swap counterparties, including those that are required to be

    registered with the Commission as swap dealers (``SD'') or as major

    swap participants (``MSP''), have swap data reporting obligations under

    part 43, part 45 and part 46 (collectively, the ``swap data reporting

    rules''). The swap data reporting rules also place reporting

    obligations on derivatives clearing organizations (``DCOs'') that clear

    swaps; designated contract markets (``DCMs'') that list swaps for

    trading; and swap execution facilities (``SEFs''). At present there are

    over 150 potential swap data reporting entities registered \17\ with

    the Commission, each of which will have its own business and data

    standards for listing, executing or clearing swaps in one or more of

    the five asset classes recognized for the purposes of the swap data

    reporting rules--interest rates, credit, equity, foreign exchange, and

    other commodity. In addition, swaps data may currently be reported to

    any registered SDR, each of which will also have its own data

    standards.

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

    \17\ For purposes of this request for comment, the Commission

    uses the term ``reporting entity'' to refer to any person,

    registrant or non-registrant that has an obligation to report data

    pursuant to part 45 of the Commission's regulations, including SDs,

    MSPs, unregistered swap counterparties, SEFs, DCMs, and DCOs. The

    Commission is also interested in receiving responses from persons

    that are complying with part 45 reporting requirements pursuant to

    the terms and conditions set forth in staff no-action relief such as

    clearinghouses with no-action relief (``no-action CCPs'') or

    qualified multilateral trading facilities (``QMTFs'') and foreign

    boards of trade (``FBOTs'') complying with FBOT registration

    regulations. See CFTC Division of Clearing and Risk, Letter to Eurex

    Clearing AG, No-Action Letter No. 14-27 (Mar. 10, 2014); CFTC

    Division of Market Oversight and Division of Swap Dealer and

    Intermediary Oversight, Conditional No-Action Relief with respect to

    Swaps Trading on Certain Multilateral Trading Facilities Overseen by

    Competent Authorities Designated by European Union Member States,

    No-Action Letter No. 14-16 (Feb. 12, 2014); CFTC Division of

    Clearing and Risk, Letter to ASX Clear (Futures) Pty Limited, No-

    Action Letter No. 14-07 (Feb. 6, 2014); CFTC Division of Clearing

    and Risk, Letter to Japan Securities Clearing Corporation, No-Action

    Letter No. 13-73 (Dec. 19, 2013); CFTC Division of Clearing and

    Risk, Letter to LCH.Clearnet SA, No-Action Letter No. 13-43 (July

    11, 2013), CFTC Division of Clearing and Risk, Letter to Singapore

    Exchange Derivatives Clearing Limited, No-Action Letter No. 12-63

    (Dec. 21, 2012); CFTC Division of Clearing and Risk, Letter to Japan

    Securities Clearing Corporation, No-Action Letter No.12-56 (Dec. 17,

    2012). Staff no-action letters (``NALs'') are available at http://www.cftc.gov/LawRegulation/DoddFrankAct/CurrentlyEffectiveStaffLetters/index.htm.

    The list of registered entities with reporting obligations

    includes reporting entities fully registered with the Commission and

    entities that have received provisional registration and/or

    temporary registration. Specifically, as of March 1, 2014, it

    includes 98 SDs; 23 SEFs; 18 DCMs; 15 DCOs; and two MSPs. Not all

    entities that are potential swap reporting entities currently

    execute or clear swaps. For example, 9 of the 15 registered DCOs

    currently clear swaps.

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

    The Commission remains committed to the regulatory objectives set

    forth and established in these rules. However, to ensure that the swap

    data reporting and SDR rules are effective, efficient, and provide the

    necessary regulatory information, the Commission requests public

    comment on the questions below, which focus on the swap data

    recordkeeping and reporting requirements of part 45 and related

    regulatory provisions.

    II. Request for Comment

    The Commission is soliciting comment from all interested parties

    regarding part 45 and related provisions of the swap data reporting and

    SDR rules. Questions are generally grouped according to the applicable

    regulatory provision. Each series of questions includes a brief

    explanatory paragraph intended to provide context for the questions

    presented. Relevant topics include, among other things, the reporting

    of primary economic terms (``PET''), confirmation, and continuation

    data; the manner in which the reporting rules address diversity of

    transaction types, business models, and data flows present in the swaps

    market; the reporting of cleared swaps; and data ownership issues and

    data harmonization.

    [[Page 16691]]

    Commenters' responses should identify the specific question or sub-

    question that they are addressing in each response. Responses should

    consider the oversight functions performed by the Commission,

    including, but not limited to, financial surveillance; market

    surveillance; risk monitoring; and trade practice surveillance.

    III. Issues and Questions

    A. Confirmation Data (Sec. 45.3): What terms of a confirmation of a

    swap transaction should be reported to an SDR as ``confirmation data''?

    Part 45 requires the reporting of required swap creation data,\18\

    which includes PET data \19\ and ``confirmation data,'' defined as

    ``all of the terms of a swap matched and agreed upon by the

    counterparties in confirming the swap.'' \20\ The Commission requests

    comment on the following questions regarding confirmation data that

    memorializes the agreement of the party to all terms of a swap.

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

    \18\ 17 CFR 45.1 (defining required swap creation data as ``all

    primary economic terms data for a swap in the swap asset class in

    question, and all confirmation data for the swap'').

    \19\ 17 CFR 45.1 (defining primary economic terms as ``all of

    the data elements necessary to fully report all of the primary

    economic terms of a swap in the swap asset class of the swap in

    question'').

    \20\ 17 CFR 45.1 (defining ``confirmation data'').

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

    1. What information should be reported to an SDR as confirmation

    data? Please include specific data elements and any necessary

    definitions of such elements.

    a. For confirmations that incorporate terms by reference (e.g.,

    ISDA Master Agreement; terms of an Emerging Markets Trade Association

    (``EMTA'')), which of these terms should be reported to an SDR as

    confirmation data?

    2. Should the confirmation data reported to an SDR regarding

    cleared swaps be different from the confirmation data reported to an

    SDR regarding uncleared swaps? If so, how?

    3. Should the confirmation data reported to an SDR regarding swaps

    that are subject to the trade execution requirement in CEA section

    2(h)(8) be different from the confirmation data reported to an SDR

    regarding: (a) Swaps that are required to be cleared but not subject to

    the trade execution requirement; (b) swaps that are not subject to the

    clearing requirement but that are intended to be cleared at the time of

    execution; (c) swaps that are voluntarily submitted to clearing at some

    point after execution (e.g., backloaded trades); and (d) uncleared

    swaps? If so, how?

    4. More generally, please describe any operational, technological,

    or other challenges faced in reporting confirmation data to an SDR.

    B. Continuation Data (Sec. 45.4): How can the Commission ensure that

    timely, complete and accurate continuation data is reported to SDRs,

    and that such data tracks all relevant events in the life of a swap?

    Part 45 of the Commission's regulations defines ``required swap

    continuation data'' as ``all of the data elements that must be reported

    during the existence of a swap to ensure that all data concerning the

    swap in the SDR remains current and accurate, and includes all changes

    to PET data occurring during the existence of the swap.'' \21\ A swap's

    continuation data includes all lifecycle event data if the swap is

    reported using the lifecycle reporting method,\22\ or all state data

    \23\ if the swap is reported using the snapshot reporting method.\24\

    In addition, continuation data also includes all valuation data for the

    swap.\25\

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

    \21\ Id.

    \22\ See generally, 17 CFR 45.4.

    \23\ See 17 CFR 45.1 (defining ``state data'').

    \24\ See generally, 17 CFR 45.4.

    \25\ Id.

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

    Since implementation of part 45, market participants have raised a

    number of questions with respect to how certain events in the life of a

    swap should be represented when reporting continuation data. Divergent

    methods of reporting continuation data may introduce challenges to

    tracking the life of a swap. In addition, some non-SD/MSP

    counterparties have indicated that they have sometimes encountered

    difficulties in reporting continuation data to SDRs and in accessing

    data reported on their behalf by SDs and MSPs. Accordingly, the

    Commission requests comment on the following questions regarding

    continuation data.

    5. What processes and tools should reporting entities implement to

    ensure that required swap continuation data remains current and

    accurate?

    6. Swaps should be linked when new swaps result from the

    assignment, netting, compression, clearing, novation, allocation, or

    option exercise of existing swaps (or other events wherein new swaps

    result from existing swaps).

    a. What is the most effective and efficient method for achieving

    this link (including information regarding the time of the relevant

    event)?

    b. How should reporting entities identify the reason why two swaps

    are linked (e.g., identify that swap A is linked to swaps B and C in an

    SDR or across multiple SDRs because swaps B and C arose from the

    clearing and novation of swap A)?

    c. Aside from those events set forth in part 45, are there other

    events that require linkage between related swap transactions?

    d. How should related swaps reported to different SDRs be linked?

    i. Snapshot/State/Lifecycle Methods (Sec. 45.4)

    7. What are the benefits and/or disadvantages of reporting

    continuation data using: (i) The lifecycle reporting method; and (ii)

    the snapshot reporting method?

    a. Are there events or information that can be represented more

    effectively using one of the reporting methods rather than the other?

    b. Should all SDRs be required to accept both the snapshot and

    lifecycle methods for reporting continuation data?

    ii. Valuation Data Reporting (Sec. Sec. 45.4(b), 45.4(c), and NALs 13-

    34 and 12-55) \26\

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

    \26\ See CFTC Division of Market Oversight, Extension of Time-

    Limited No-Action Relief for Swap Dealers and Major Swap

    Participants from Compliance with Reporting Obligations Under 17 CFR

    45.4(b)(2)(ii), No-Action Letter No. 13-34 (June 26, 2013); CFTC

    Division of Market Oversight, Time-Limited No-Action Relief for Swap

    Dealers and Major Swap Participants From Compliance With Reporting

    Obligations Under 17 CFR 45.4(b)(2)(ii), No-Action Letter No. 12-55

    (Dec. 10, 2013).

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

    8. How can valuation data most effectively be reported to SDRs to

    facilitate Commission oversight? How can valuation data most

    effectively be reported to SDRs (including specific data elements), and

    how can it be made available to the Commission by SDRs?

    a. Should SDs and MSPs continue to be required by the swap data

    reporting rules to provide their own valuation data for cleared swaps

    to SDRs? If so, what are the benefits and challenges associated with

    this valuation reporting?

    b. What challenges and benefits are associated with unregistered

    swap counterparties (both financial entities \27\ and non-financial

    entities) reporting valuation data for uncleared swaps to SDRs on a

    quarterly basis?

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

    \27\ CEA section 2(h)(7)(C), 7 U.S.C. 2(h)(7)(C); see also 17

    CFR 1.3(mmm).

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

    iii. Events in the Life of a Swap (Sec. 45.4)

    9. Please: (i) Identify and (ii) describe the complete range of

    events that can occur in the life of a swap. Please also address

    whether, and if so how, reporting entities should report each such

    event.

    a. How should events in the life of a swap be represented in SDR

    data? For

    [[Page 16692]]

    example, should an ``event type'' identifier, as well as a description

    of the specific event, be required?

    10. Can swap data reporting be enhanced so that the current state

    of a swap in an SDR (e.g., open, cancelled, terminated, or reached

    maturity) can be determined more efficiently and, if so, how?

    a. What role should SDRs play in auditing swaps data to help

    identify the current state of a swap?

    b. Should reporting entities and/or SDRs be required to take any

    actions upon the termination or maturity of a swap so that the swap's

    status is readily ascertainable and, if so what should those

    requirements be?

    c. Should swaps that are executed on or pursuant to the rules of a

    DCM or SEF, but which are not accepted for clearing and are therefore

    void ab initio, continue to be reported to and identified in SDR data?

    Why or why not? If so, how? \28\

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

    \28\ See Staff Guidance on Swaps Straight-Through Processing

    (Sept. 26, 2013), available at http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/stpguidance.pdf; CFTC Division of

    Clearing and Risk and Division of Market Oversight, Time-Limited No-

    Action Relief for Swap Execution Facilities from Compliance with

    Certain Requirements of Commission Regulation 37.9(a)(2) and

    37.203(a), No-Action Letter No. 13-66 (Oct. 25, 2013).

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

    i. Should the swap data reporting rules be enhanced or further

    clarified to address void ab initio swaps?

    11. Should the Commission require periodic reconciliation between

    the data sets held by SDRs and those held by reporting entities?

    iv. Change in Status of Reporting Counterparty (Sec. 45.8)

    12. Commission regulation 45.8 establishes a process for

    determining which counterparty to a swap shall be the reporting

    counterparty. Taking into account statutory requirements, including the

    reporting hierarchy in CEA section 4r(a)(3),\29\ what challenges arise

    upon the occurrence of a change in a reporting counterparty's status,

    such as a change in the counterparty's registration status? In such

    circumstances, what regulatory approach best promotes uninterrupted and

    accurate reporting to an SDR?

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

    \29\ See 7 U.S.C. 6r(a)(3) (providing that, with respect to a

    swap in which only one counterparty is an SD or MSP, the SD or MSP

    shall report the swap; with respect to a swap in which one

    counterparty is an SD and the other an MSP, the SD shall report the

    swap; and with respect to any other swap, the counterparties to the

    swap shall select a counterparty to report the swap).

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

    C. Transaction Types, Entities, and Workflows: Can the Swap Data

    Reporting Rules be Clarified or Enhanced to Better Accommodate Certain

    Transactions and Workflows Present in the Swaps Market?

    Market participants have requested clarification from Commission

    staff regarding the appropriate manner to report certain swap

    transactions and workflows that are not explicitly addressed in the

    swap data reporting rules. Accordingly, the Commission requests comment

    related to the specific questions below.

    13. Please describe all data transmission processes arising from

    the execution, confirmation, clearing, and termination of a swap, both

    cleared and uncleared. Please include in your response any processes

    arising from all relevant platforms and methods of execution.

    14. Please identify any Commission rules outside of part 45 that

    impact swap data reporting pursuant to part 45. How do such other rules

    impact part 45 reporting?

    15. What are the challenges presented to reporting entities and

    other submitters of data when transmitting large data submissions to an

    SDR? Please include the submission methods utilized and the

    technological and timing challenges presented.

    i. Bespoke Transactions (Sec. 45.3, Appendix 1 to Part 45, and NALs

    13-35, and 12-39) \30\

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

    \30\ See CFTC Division of Market Oversight, Additional Time-

    Limited No-Action Relief for Bespoke or Complex Swaps from Certain

    Swap Data Reporting Requirements of Parts 43 and 45 of the

    Commission's Regulations, No-Action Letter No. 13-35 (June 27, 2013)

    (``NAL 13-35''); CFTC Division of Market Oversight, Time-Limited No-

    Action Relief for Bespoke or Complex Swaps from Certain Swap Data

    Reporting Requirements of Parts 43 and 45 of the Commission's

    Regulations, No-Action Letter No.12-39 (Nov. 30, 2012) (``NAL 12-

    39'').

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

    16. Market participants have indicated that they face challenges

    electronically representing all required data elements for swap

    transactions because those elements have not yet been incorporated into

    standard industry representations (e.g., FpML, FIXML). In particular,

    various market participants have indicated that these challenges impact

    reporting to SDRs. What is the most efficient methodology or process to

    standardize the data elements of a bespoke, exotic or complex swap, to

    ensure that all required creation data is electronically represented

    when reported to the SDR? Do these challenges vary depending on the

    asset class? If so, how?

    ii. Allocations and Compressions (Sec. Sec. 45.3, 45.4, NALs 13-01 and

    12-50) \31\

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

    \31\ See CFTC Division of Clearing and Risk, No-Action Relief

    from Required Clearing for Swaps Resulting from Multilateral

    Portfolio Compression Exercises, No-Action Letter No. 13-01 (Mar.

    18. 2013); CFTC Division of Market Oversight, Time-Limited No-Action

    Relief for Agents from the Post-Allocation Swap Timing Requirement

    of Sec. 45.3(e)(ii)(A) of the Commission's Regulations, No-Action

    Letter No. 12-50 (Dec. 13, 2012).

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

    17. Please describe any challenges associated with the reporting of

    allocations. How should allocation data elements (i.e., indications of

    whether swaps will be allocated, as well as the identities of entities

    to which portions of executed swaps are allocated) be reported to SDRs?

    18. How should swaps resulting from compression exercises and risk

    mitigation services be reported to, and identified in, an SDR so that

    the Commission is able to effectively review these exercises and

    determine what swaps result from a specific exercise?

    a. Please describe any technological, operational, or logistical

    challenges associated with reporting of such swap transactions.

    iii. Prime Brokerage (NAL 12-53) \32\

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

    \32\ See CFTC Division of Market Oversight, Time-Limited No-

    Action Relief from (i) Parts 43 and 45 Reporting for Prime Brokerage

    Transactions, and (ii) Reporting of Unique Swap Identifiers in

    Related Trades under Part 45 by Prime Brokers, No-Action Letter No.

    12-53 (Dec. 17, 2012).

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

    19. Please describe any challenges associated with the reporting of

    prime brokerage swap transactions (e.g., challenges related to

    transactions executed either bilaterally or on a platform and/or

    involving different asset classes)?

    iv. Commodity Trade Options (NAL 13-08) \33\

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

    \33\ See CFTC Division of Market Oversight, Staff No-Action

    Relief from the Reporting Requirements of Sec. 32.3(b)(1) of the

    Commission's Regulations, and Certain Recordkeeping Requirements of

    Sec. 32.3(b), for End Users Eligible for the Trade Option

    Exemption, No-Action Letter No. 13-08 (Apr. 5, 2013).

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

    20. Under Commission regulation 32.3(b)(1), swap counterparties

    generally are required to report trade options pursuant to the

    reporting requirements of part 45 if, during the previous twelve

    months, they have become obligated to report under part 45 as the

    reporting counterparty in connection with any non-trade option swaps.

    Under Commission regulation 32.3(b)(2), trade options that are not

    otherwise required to be reported to an SDR under part 45 are required

    to be reported to the Commission by both counterparties to the

    transaction through an annual Form TO filing.

    [[Page 16693]]

    Please describe any challenges associated with the reporting of

    commodity trade options, whether reported to an SDR or to the

    Commission on Form TO.

    v. Swaps Executed or Cleared on or by FBOTs, No-Action CCPs, QMTFs, and

    Other Non-Registrants/Exempt Entities (Sec. Sec. 45.3, 45.4, 45.5, and

    NALs 14-27, 14-16, 14-07, 13-73, 13-43, 13-33, 12-63, and 12-56) \34\

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

    \34\ See note 17, supra.

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

    21. Are there instances in which requirements of CFTC regulations

    or reliance on exemptive or staff no-action relief \35\ result in more

    than one party reporting data to an SDR regarding a particular swap? If

    so, how should such duplicative reporting be addressed? What should be

    the role of the reporting entities, as well as other submitters of

    data, and SDRs in identifying and deleting duplicative reports? What

    solutions should be implemented to prevent such duplicative reporting?

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

    \35\ Staff no-action letters are available at http://www.cftc.gov/LawRegulation/DoddFrankAct/CurrentlyEffectiveStaffLetters/index.htm.

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

    22. In addition to those entities enumerated in Commission

    regulation 45.5, should other entities involved in swap transactions

    also be permitted to create unique swap identifiers (``USIs'')? If so,

    please describe those situations and the particular rationale for any

    such expansion of the USI-creation authority.

    23. How should data reported to SDRs identify trading venues such

    as SEFs, DCMs, QMTFs, FBOTs, and any other venue?

    vi. Inter-Affiliate Swaps (Sec. Sec. 45.3, 45.4, 45.6, and NAL 13-09)

    \36\

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

    \36\ See CFTC Division of Market Oversight and Division of

    Clearing and Risk, No-Action Relief for Swaps Between Affiliated

    Counterparties That Are Neither Swap Dealers Nor Major Swap

    Participants from Certain Swap Data Reporting Requirements Under

    Parts 45, 46, and Regulation 50.50(b) of the Commission's

    Regulations, No-Action Letter No. 13-09 (Apr. 5, 2013).

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

    24. In order to understand affiliate relationships and the combined

    positions of an affiliated group of companies, should reporting

    counterparties report and identify (and SDRs maintain) information

    regarding inter-affiliate relationships? Should that reporting be

    separate from, or in addition to, Level 2 reference data set forth in

    Commission regulation 45.6? \37\ If so, how?

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

    \37\ Commission regulation 45.6 provides that level two

    reference data for each swap counterparty, consisting of the

    identity of the counterparty's ultimate parent, shall be reported

    into a level two reference database. The Commission shall determine

    the location of the level two reference database by means of a

    Commission order that is published in the Federal Register and on

    the Commission's Web site. The order shall include notice of the

    location of the level two reference database and information

    concerning the procedure and requirements for reporting level two

    reference data to the database. The obligation to report level two

    reference data does not apply until the Commission has determined

    the location of the level two reference database. As of March 1,

    2014, the obligation to report level two reference data pursuant to

    Commission regulation 45.6 does not apply.

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

    vii. Reliance on No-Action Relief in General

    25. To the extent that a reporting entity is, in reliance on

    effective no-action relief issued by Commission staff, reporting to an

    SDR in a time and/or manner that does not fully comply with the swap

    data reporting rules (e.g., outside reporting rules' timeframe,

    required data elements missing), how can the reporting entity most

    effectively indicate its reliance upon such no-action relief for each

    affected data element?

    a. Are there any other challenges associated with the reliance on

    staff no-action relief with respect to compliance with part 45? If so,

    please describe them and explain how the swap data reporting rules

    should address those challenges.

    viii. Post-Priced Swaps (Sec. Sec. 45.3 and 45.4)

    26. Under the swap data reporting rules, are there any challenges

    presented by swaps for which the price, size, and/or other

    characteristics of the swap are determined by a hedging or agreed upon

    market observation period that may occur after the swap counterparties

    have agreed to the PET terms for a swap (including the pricing

    methodology)? If so, please describe those challenges.

    ix. Complex Swap Transactions (NAL 14-12) \38\

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

    \38\ See CFTC Division of Market Oversight, No-Action Relief

    from the Commodity Exchange Act Sections 2(h)(8) and 5(d)(9) and

    from Commission Regulation Sec. 37.9 for Swaps Executed as Part of

    a Package Transaction, No-Action Letter No. 14-12 (Feb. 10, 2014).

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

    27. Please describe how swap transactions such as strategies and

    packages should be represented in swap data reporting such that it

    enables the Commission to effectively understand timing and the

    economics of the strategy or package and the component swap

    transactions?

    D. PET Data and Appendix 1 (Sec. 45.3 and Appendix 1): Monitoring the

    Primary Economic Terms of a Swap

    Appendix 1 to part 45 sets forth a list of minimum PET terms for

    swap transactions within each of the five asset classes. Market

    participants have indicated that there are circumstances in which they

    face challenges in either the initial reporting of certain PET terms or

    the subsequent reporting of modifications to these terms. Market

    participants have also indicated that the data elements included in

    Appendix 1 may not sufficiently reflect all necessary economic terms

    for various swap transactions.

    28. Please describe any challenges (including technological,

    logistical or operational) associated with the reporting of required

    data fields, including, but not limited to:

    a. Cleared status;

    b. Collateralization;

    c. Execution timestamp;

    d. Notional value;

    e. U.S. person status; and

    f. Registration status or categorization under the CEA (e.g., SD,

    MSP, financial entity).

    29. What additional data elements beyond the enumerated fields in

    Appendix 1 of part 45, if any, are needed to ensure full, complete, and

    accurate representation of swaps (both cleared and uncleared)? For

    example, other fields could include additional timestamps (for each

    lifecycle event, including clearing-related timestamps); clearing-

    related information (identity of futures commission merchant, clearing

    member, house vs. customer origin indication, mandatory clearing

    indicator, or indication of exception or exemption from clearing); and/

    or execution-specific terms (order type or executing broker). Responses

    should consider the full range of oversight functions performed by the

    Commission, including, but not limited to, financial surveillance;

    market surveillance; risk monitoring; and trade practice surveillance.

    a. Should the Commission require reporting of the identities,

    registration status, and roles of all parties involved in a swap

    transaction (e.g., special entity (as defined in Commission regulation

    23.401(c)); executing broker; or voice/electronic systems)?

    b. What, if any, additional fields would assist the Commission in

    obtaining a more complete picture of swaps executed on SEFs or DCMs

    (e.g., order entry time; request for quote (``RFQ''), or central limit

    order book (``CLOB''), or order book; request for cross, blocks, and

    other execution method indicators or broker identification)?

    c. Are there additional data elements that could help the

    Commission fulfill its oversight obligations, as described above?

    d. Should the fact that a swap is guaranteed be a required data

    element for SDR reporting? If so, what

    [[Page 16694]]

    information regarding the guarantee should be reported to the SDR? What

    will be the challenges presented to the reporting party in capturing

    this information?

    30. Have reporting entities been unable to report to an SDR terms

    or products that they believe are required under part 45 or related

    provisions? If so, please generally describe the data elements and/or

    products involved.

    a. Where a single swap has more than two counterparties, please

    comment on how such information should be provided within a single part

    45 submission (i.e., one USI)?

    31. Could the part 45 reporting requirements be modified to render

    a fuller and more complete schedule of the underlying exchange of

    payment flows reflected in a swap as agreed upon at the time of

    execution? If so, how could the requirements be modified to capture

    such a schedule?

    32. Taking into account the European Union's reporting rules \39\

    and Commission regulation 39.19, should the Commission require

    additional reporting of collateral information? If so, how should

    collateral be represented and reported? Should there be any differences

    between how collateral is reported for cleared and uncleared swaps?

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

    \39\ See European Securities Markets Authority's European Market

    Infrastructure Regulation (``EMIR'') and corresponding rules,

    available at http://www.esma.europa.eu/page/European-Market-Infrastructure-Regulation-EMIR.

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

    E. Reporting of Cleared Swaps (Sec. Sec. 45.3, 45.4, 45.5, and 45.8):

    How Should the Swap Data Reporting Rules Address Cleared Swaps?

    The Commission has a strong regulatory interest in monitoring

    transactions and risk in both the cleared and uncleared swap markets.

    Information regarding cleared swaps (both voluntarily cleared and

    required to be cleared) comes directly to the Commission daily in the

    form of position information under Commission regulation 39.19. In

    addition, pursuant to the swap data reporting rules, cleared swap

    information is reported on a transaction basis to SDRs. The Commission

    monitors the cleared swap market on a transaction and position basis to

    ensure compliance with the Act and Commission rules, including those

    associated with trade execution and clearing and the clearing

    requirement in section 2(h)(1) of the Act.

    Cleared swaps currently are reported as three separate swaps.\40\

    Industry convention refers to the original swap as the ``alpha'' swap

    and the two equal and opposite resulting swaps as the ``beta'' and

    ``gamma'' swaps. The Commission has previously determined that the

    alpha, beta, and gamma swaps, although related, are reported as

    separate swaps for purposes of part 45.\41\ Information regarding the

    alpha, beta, and gamma swaps in an SDR must at all times be current and

    accurate and include all changes to each swap throughout its

    lifecycle.\42\

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

    \40\ Commission regulation 39.12(b)(6) requires a DCO to have a

    rule providing that once a swap is accepted for clearing by a DCO

    such swap is extinguished and is replaced by two equal and opposite

    swaps. 17 CFR 39.12(b)(6).

    \41\ See 77 FR 2136; Statement of the Commission on the Approval

    of CME Rule 1001 at 6 (``A cleared swap in fact comprises three

    separate swaps.''), available at http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/statementofthecommission.pdf.

    \42\ See 17 CFR 45.4(a) (``[R]eporting counterparties and

    derivatives clearing organizations required to report swap

    continuation data must do so in a manner sufficient to ensure that

    all data in the swap data repository concerning the swap remains

    current and accurate, and includes all changes to the primary

    economic terms of the swap occurring during the existence of the

    swap.''); see 77 FR at 2153 (``[T]he final rule requires registered

    entities and reporting counterparties to report continuation data in

    a manner sufficient to ensure that the information in the SDR

    concerning the swap is current and accurate, and includes all

    changes to any of the primary economic terms of the swap.''); see

    also 17 CFR 49.11 (confirmation of data accuracy).

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

    The Commission requests comment on the existing cleared swaps

    reporting framework. The Commission is particularly interested in the

    extent to which the reporting of cleared swaps can be improved to: (i)

    Ensure consistency across the Commission's regulations; and (ii)

    achieve efficiencies in both the Commission's review of cleared swaps

    data and the DCOs' reporting of information to the Commission and SDRs.

    In this regard, the Commission seeks comment on what additional data

    elements, if any, should be reported to an SDR with respect to cleared

    swaps that would provide the Commission with information necessary to

    monitor and track swaps created through clearing and resulting

    positions facing the DCO.

    The Commission also requests comment related to the specific

    questions below.

    33. Part 45 requires the reporting of all swaps to SDRs. The

    Commission requests comment on how cleared swaps should be reported.

    Specifically:

    a. For swaps that are subject to the trade execution requirement in

    CEA section 2(h)(8), and ipso facto the clearing requirement, do

    commenters believe that the part 45 reporting requirements with respect

    to original swaps (alpha) should be modified or waived, given that the

    two new resulting swaps (beta and gamma) will also be reported?

    b. For swaps that are subject to the clearing requirement, but not

    the trade execution requirement, do commenters believe that the part 45

    reporting requirements with respect to alpha swaps should be modified

    or waived, given that the beta and gamma swaps will also be reported?

    c. For swaps that are not subject to the clearing requirement, but

    are intended for clearing at the time of execution, do commenters

    believe that the part 45 reporting requirements with respect to alpha

    swaps should be modified or waived, given that the beta and gamma swaps

    will also be reported?

    d. Please discuss whether in each of the circumstances described

    above there actually is an alpha swap.

    34. In addressing the questions posed in items 33 (a)-(d),

    commenters are also requested to address how any modifications to the

    reporting of cleared swaps would be consistent with the swap reporting

    requirement in CEA section 2(a)(13)(G) and the restrictions on CFTC

    exemptive authority in CEA section 4(c)(1)(A)(i)(I).

    35. Can the existing rules be improved to more clearly represent

    how the clearing process impacts reporting obligations with respect to

    both the original swap (alpha) and the two new resulting swaps (beta

    and gamma)? If so, please explain.

    a. Responses should address:

    i. The reporting obligations applicable to alpha swaps;

    ii. The reporting obligations applicable to beta and gamma swaps;

    iii. Who holds the reporting obligation(s) for each swap;

    iv. The reporting of the linkage of alpha, beta, and gamma swaps;

    and

    v. Who has the legal right to determine the SDR to which data is

    reported?

    36. What steps should reporting entities and/or SDRs undertake to

    verify the absence of duplicate records across multiple SDRs for a

    single cleared swap transaction?

    37. How should cleared swap data be represented in the SDR to

    facilitate the Commission's oversight of compliance with clearing-

    related rules, including the clearing requirement (Commission

    regulations 50.2 and 50.4) and straight-through processing requirements

    (Commission regulations 1.74, 23.506, 37.702(b), 38.601, and

    39.12(b)(7))?

    38. What reporting technique, term, or flag is recommended to

    identify a cleared swap?

    [[Page 16695]]

    i. CDS-Clearing Related Swaps and Open Offer (Part 45 and NALs 12-59,

    13-36, and 13-86) \43\

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

    \43\ See CFTC Division of Market Oversight, Time-Limited No-

    Action Relief for Swap Dealers and Major Swap Participants from the

    Reporting Provisions of Part 45 for CDS Clearing-Related Swaps, No-

    Action Letter No. 12-59 (Dec. 19, 2012); CFTC Division of Market

    Oversight, Extension of Time-Limited No-Action Relief for Swap

    Dealers and Major Swap Participants from the Reporting Requirements

    of Part 45 for CDS Clearing-Related Swaps, No-Action Letter No. 13-

    36 (June 27, 2013); CFTC Division of Market Oversight, Provision of

    Time-Limited No-Action Relief to DCOs and their Clearing Members

    from the SEF Registration Requirement and Trading Mandate under Part

    37 and from Various Reporting Requirements under Part 45, all in

    Connection with CDS Clearing-Related Swaps, No-Action Letter No. 13-

    86 (Dec. 31, 2013).

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

    39. Swaps created by operation of a DCO's rules related to

    determining the end-of-day settlement prices for cleared credit default

    swaps (``CDS'') are also known as ``firm trades'' or ``clearing-related

    swaps'' (see NAL 13-86). How should these swaps be reported pursuant to

    the swap data reporting rules?

    40. Aside from ``firm trades,'' some swaps may be created from

    ``open offer,'' meaning there is no original swap between two

    counterparties, but only equal and opposite swaps between each of the

    counterparties and the clearinghouse. How should the swap data

    reporting rules address such swaps?

    ii. DCO Reporting, Netting Processes, and Positions (Sec. Sec. 45.3

    and 45.4)

    41. As described above, DCOs provide position data to the

    Commission pursuant to part 39 and report transactions to SDRs pursuant

    to part 45. The Commission is aware of potential overlap in these data

    sets. With respect to such overlap, how can reporting of swaps data be

    made more efficient, while ensuring that the Commission continues to

    receive all data necessary to fulfill its regulatory responsibilities?

    42. For cleared swaps, how can the netting and compression of swaps

    and positions by DCOs be most effectively represented?

    a. Please provide recommendations regarding the reporting of

    netting and compression, and describe any relevant differences in

    reporting of netting and of compression.

    b. Are netting and compression different concepts in the uncleared

    swaps markets versus the cleared swap market? If so, how?

    F. Other SDR and Counterparty Obligations (Sec. Sec. 45.9, 45.13,

    45.14): How Should SDRs and Reporting Entities Ensure That Complete and

    Accurate Information is Reported to, and Maintained by, SDRs?

    When using swaps data reported to SDRs, the Commission must rely on

    the accuracy and completeness of such data throughout the life of a

    swap. Data accuracy can be achieved through, among other means, SDR

    processes confirming the accuracy of data submitted, data

    reconciliation exercises by reporting entities, and by the prompt

    reporting of errors and omissions by reporting entities.

    Commission regulation 45.14 requires registered entities and swap

    counterparties to report any errors or omissions in data they

    previously reported. Additionally, each non-reporting counterparty to a

    swap that discovers an error or omission with respect to swap data

    reported to an SDR must promptly notify the reporting counterparty of

    the error or omission. Commission regulation 49.11 requires SDRs to

    adopt policies and procedures to ensure the accuracy of swap data and

    to confirm the accuracy of all swap data reported pursuant to part 45.

    Commission regulation 49.11(b) provides--in pertinent part--that a

    registered SDR ``has confirmed the accuracy of swap data submitted

    directly by a counterparty if the [SDR] has notified both

    counterparties of the data that was submitted and received from both

    counterparties acknowledgement of the accuracy of the swap data and

    corrections for any errors.''

    43. The Commission requests comment that addresses whether

    reporting entities face challenges with respect to complete and

    accurate swap data reporting.

    44. The Commission also requests comment regarding whether

    clarifications or enhancements to swap data reporting requirements,

    including requirements relating to the reporting of errors and

    omissions and requirements for data reconciliation across reporting

    entities, could facilitate accurate and complete reporting of data to

    the SDRs, as well as data maintained in the SDRs.

    45. Should third-party service providers that report part 45 data

    to SDRs on behalf of reporting entities be required to register with

    the Commission?

    i. Confirmation of Data Accuracy and Errors and Omissions (Sec. 45.14)

    46. Commission regulation 49.11(b) requires SDRs to verify with

    both counterparties the accuracy of swaps data reported to an SDR

    pursuant to part 45. What specific, affirmative steps should SDRs take

    to verify the accuracy of data submitted? Please include in your

    response steps that SDRs should take regarding data submitted by

    reporting counterparties on behalf of non-reporting counterparties who

    are not participants or users of the SDR.

    47. In what situations should an SDR reject part 45 data from

    entities due to errors or omissions in the data? How should the

    Commission balance legal requirements for reporting as soon as

    technologically practicable and the need for complete and accurate

    data?

    48. All data in an SDR must be current and accurate, and the

    Commission expects SDRs, counterparties, and registered entities to

    take proactive steps to ensure data accuracy. Are there challenges that

    a reporting entity faces in confirming data accuracy? If so, how can

    those challenges most effectively be addressed?

    49. If an error or omission is discovered in the data reported to

    an SDR, what remedies and systems should be in place to correct the

    data? Within what time frame should a reporting entity be required to

    identify an error in previously reported data and submit corrected

    information to an SDR?

    ii. SDR Required Data Standards (Sec. 45.13)

    50. In addition to data harmonization, how can reporting entities

    and SDRs improve data quality and standardization across all data

    elements and asset classes within an SDR? Please provide examples of

    how the presentation of data may be standardized, utilizing specific

    data elements.

    51. How should SDRs leverage the results of data elements

    harmonization to help ensure regulatory reporting is more accurate and

    consistent?

    52. Are there additional existing swaps data standards (other than

    the legal entity identifier (``LEI''), unique product identifier

    (``UPI'') and USI) that the Commission should consider requiring as

    part of any effort to harmonize SDR data with both domestic and foreign

    regulators?

    iii. Identifiers (Sec. Sec. 45.5, 45.6 and 45.7)

    53. Please explain your experiences and any challenges associated

    with obtaining and maintaining an LEI.

    a. What additional steps can market participants and SDRs take to

    help ensure counterparties have valid LEIs?

    54. What principles should the Commission consider when designating

    [[Page 16696]]

    a UPI and product classification system pursuant to Sec. 45.7?

    a. Are there any commonly used taxonomies that the Commission

    should consider in connection with the designation process? Please

    respond by asset class.

    55. Please explain your experiences and any challenges associated

    with the creation, transmission and reporting of USIs.

    G. Swap Dealer/Major Swap Participant Registration and Compliance: How

    Can the Commission Enhance Part 45 to Facilitate Oversight of Swap

    Dealers and Major Swap Participants?

    One Commission interest in swap data reporting is to evaluate

    whether a market participant meets the definition of, and is required

    to register as, an SD or MSP.\44\ The Commission can use swap data

    reports to determine a market participant's aggregate gross notional

    amount of swap transactions on a rolling 12-month basis, taking into

    account, among other things, the definitions of SD and MSP and the

    Commission's registration requirements.\45\ Additionally, swap data

    reporting allows the Commission to assess a market participant's

    compliance with the Commission's regulations, including, but not

    limited to, part 23 requirements for SDs and MSPs (e.g., swap

    confirmation,\46\ portfolio compression,\47\ and swap processing and

    clearing requirements \48\).

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

    \44\ 17 CFR 1.3(ggg); see Further Definition of ``Swap Dealer,''

    ``Security-Based Swap Dealer,'' ``Major Swap Participant,'' ``Major

    Security-Based Swap Participant,'' and ``Eligible Contract

    Participant,'' 77 FR 30596 (May 23, 2012).

    \45\ 17 CFR 3.10; see Registration of Swap Dealers and Major

    Swap Participants, 77 FR 2613 (Jan. 19, 2012).

    \46\ 17 CFR 23.501; see Confirmation, Portfolio Reconciliation,

    Portfolio Compression, and Swap Trading Relationship Documentation

    Requirements for Swap Dealers and Major Swap Participants, 77 FR

    55903 at 55917 (Jan. 19, 2012) (``Confirmation has been recognized

    as an important post-trade processing mechanism for reducing risk

    and improving operational efficiency by both market participants and

    their regulators. Prudent practice requires that, after coming to an

    agreement on the terms of a transaction, parties document the

    transaction in a complete and definitive written record so there is

    legal certainty about the terms of their agreement.'').

    \47\ 17 CFR 23.503; see 77 FR at 55932 (``Portfolio compression

    is an important, post-trade processing and netting mechanism that

    can be an effective and efficient tool for the timely and accurate

    processing and netting of swaps by market participants.'').

    \48\ 17 CFR 23.506; see Customer Clearing Documentation, Timing

    of Acceptance for Clearing, and Clearing Member Risk Management, 77

    FR 21278 at 21281 (Apr. 9, 2012) (noting that the rule was adopted

    ``in order to ensure compliance with any mandatory clearing

    requirement issued pursuant to section 2(h)(1) of the CEA and to

    promote the mitigation of counterparty credit risk through the use

    of central clearing'').

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

    The Commission requests comment on what clarifications or

    enhancements, if any, should be made to the swap data reporting rules

    so that it may better monitor SDs and MSPs. The Commission also

    requests comment related to the specific questions below.

    56. Should the Commission require an SDR to aggregate the number of

    transactions by an entity, and the aggregate notional value of those

    transactions, to reflect the entity's total swap position and its total

    swap activity during a given period (e.g., for purposes of monitoring

    the SD de minimis calculation)?

    57. Should data elements be reported to the SDR to reflect whether

    a swap is a dealing or non-dealing swap? If so, how should this

    information be reflected in the SDR?

    58. Where transactions are executed in non-U.S. dollar (``USD'')

    denominations, should the SDR data reflect USD conversion information

    for the notional values, as calculated by the counterparty at the time

    of the transaction (rather than the conversion taking place at the

    SDR)?

    a. If so, how should the SDR data reflect this information?

    b. Would this answer be different depending on the registration

    status of the reporting counterparty (e.g., SD/MSP)?

    H. Risk: How Can Part 45 Better Facilitate Risk Monitoring and

    Surveillance?

    Swap data reported to SDRs facilitates a number of Commission risk

    monitoring and surveillance activities, including monitoring of both

    financial and market risks resulting from the accumulation of large

    positions in cleared and uncleared swaps.

    The Commission has supervisory programs for DCOs, futures

    commission merchants, SDs, MSPs, and other participants in the clearing

    system. These programs monitor market participants' compliance with

    applicable provisions of the Act and Commission regulations, including

    parts 1, 22, 23, 39, and 50. A primary concern of these programs is to

    monitor and mitigate potential risks that can arise from swaps

    activities.

    With respect to clearing, the Commission conducts periodic

    examinations of DCOs, and Commission risk surveillance staff monitors,

    on a daily basis, the risks posed to or by DCOs, clearing members, and

    market participants. This analysis includes reviewing position data at

    the trader, clearing member, and DCO levels.

    The Commission requests comment on what clarifications or

    enhancements, if any, should be made to the swap data reporting rules

    so that it may better monitor risk and conduct related surveillance.

    The Commission also requests comment on the specific questions below.

    59. Should the Commission require SDRs to calculate market

    participants' positions in cleared and uncleared swaps?

    a. Given the definition of ``position'' in part 49 of the

    Commission's regulations,\49\ and the transactional nature of swap data

    reporting, how should an SDR calculate the positions of market

    participants whose swaps are reported to it?

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

    \49\ See 17 CFR 49.2; SDR Rules at 54576.

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

    i. Please explain whether these calculations should differ by

    underlying instrument, index or reference entity, counterparty, asset

    class, long risk of underlying instrument, index, or reference entity,

    or short risk of the underlying instrument, index or reference entity,

    or any other attribute.

    b. How should SDR positions or position calculation methods relate,

    if at all, to positions calculated by DCOs and DCOs' position

    calculation methods?

    60. Are there data elements that should be reported on a

    transaction basis to identify the linkage between a swap transaction

    and a reporting counterparty's other positions in products regulated by

    the Commission?

    61. How can swap data reporting be enhanced to facilitate the

    calculation of positions within SDRs?

    a. How should position information within an individual SDR be

    aggregated across multiple SDRs so that the Commission has a complete

    view of a market participant's risk profile for swaps reportable under

    Dodd-Frank?

    b. How can the Commission efficiently aggregate information by

    product and by market participant in order to understand positions

    across cleared and uncleared markets?

    62. How can the Commission best aggregate data across multiple

    trade repositories (including registered SDRs)?

    63. What international regulatory coordination would be necessary

    to facilitate such data aggregation?

    I. Ownership of Swap Data and Transfer of Data Across SDRs

    Since the adoption of the swap data reporting and SDR rules,

    questions have emerged whether a particular party or parties have the

    legal authority to direct and/or use such swap data.

    Commission regulation 49.17(g) generally prohibits a registered SDR

    from using the data it maintains for

    [[Page 16697]]

    commercial or business purposes. As part of this prohibition,

    Commission regulation 49.17(g) requires registered SDRs to adopt and

    implement adequate ``firewalls'' to protect the swaps data from any

    improper commercial use. Commission regulation 49.17(g)(2) provides a

    limited exception if the submitters of the data provide express written

    consent to the SDR.\50\

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

    \50\ The statutory basis for the regulation is set forth in

    Sections 21(c)(6), 21(c)(7), and 21(f)(3) of the CEA adopted as part

    of Section 728 of the Dodd-Frank Act, 7 U.S.C. 24a(c)(6), 24a(c)(7),

    and 24a(f)(3).

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

    Because of the inherent conflicts in connection with maintaining

    swap data and SDR operations (e.g., the incentive to develop ancillary

    services using swap data), the Commission in part 49 required that

    ``commercial use'' of any data submitted to and maintained by an SDR be

    restricted. Accordingly, Commission regulation 49.27 requires

    registered SDRs to provide fair, open and equal access to their

    services and provides that registered SDRs must not discriminate

    against submitters of data regardless of whether such a submitter has

    agreed to any ``commercial use'' of its data.

    The basis for prohibiting SDRs from commercializing Core Data \51\

    without the consent of the counterparties is based on (i) the duty of

    the SDR set forth in Section 21(c)(6) of the CEA to keep swap

    information private and confidential, and (ii) the inherent conflict of

    interest for an SDR to use Core Data for commercial purposes. Core

    Principle 3 set forth in Section 21(f)(3) of the CEA requires SDRs to

    ``establish and enforce rules to minimize conflicts of interest in the

    decision-making process of the swap data repository.'' Commission

    regulation 49.17(g) permits an SDR to disclose, consistent with Section

    8 of the CEA, aggregated data information if such disclosure is not for

    a commercial purpose. In sum, part 49 provides an SDR with an implied

    license to use Core Data for regulatory purposes, and absent the

    consent of the counterparties, an SDR would be prohibited from

    commercially benefiting from the use of such Core Data. The Commission

    is requesting industry and public input on whether the current

    Commission regulations regarding ``commercialization'' of data are

    consistent with legal property interests and industry practices.

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

    \51\ Core Data constitutes the two separate streams of data

    received by SDRs: ``(i) Data related to real-time public reporting

    which by its nature is publicly available and (ii) data that is

    intended for use by the Commission and other regulators which is

    subject to statutory confidential treatment.'' SDR Rules at 54550.

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

    Additionally, the Commission requests comment related to the

    specific questions below.

    64. The Commission seeks input from market participants regarding

    the ownership of the transactional data resulting from a swap

    transaction. Is the swap transaction data from a particular swap

    transaction owned by the counterparties to the transaction?

    a. If cleared, should a DCO have preferential ownership or

    intellectual property rights to the data?

    b. Should ownership or intellectual property rights change based on

    whether the particular swap transaction is executed on a SEF or DCM?

    c. What would be the basis for property rights in the data for each

    of these scenarios?

    d. What ownership interests, if any, are held by third-party

    service providers?

    e. What are the ownership interests of non-users/non-participants

    of an SDR whose information is reported to the SDR by a reporting

    counterparty or other reporting entity?

    65. Is commercialization of swap transaction data consistent with

    the regulatory objective of transparency?

    a. In what circumstances should an SDR be permitted to

    commercialize the data required to be reported to it?

    b. Does commercialization of swap data increase potential data

    fragmentation?

    c. Is commercialization of swap data reported to an SDR, DCM or SEF

    necessary for any such entity to be economically viable? If so, what

    restraints or controls should be imposed on such commercialization?

    66. Does the regulatory reporting of a swap transaction to an SDR

    implicitly or explicitly provide ``consent'' to further distribution or

    use of swap transaction data for commercial purpose by the SDR?

    67. Even though swap data reported to an SDR must be available for

    public real-time reporting, should any use of such real-time data or

    commercialization of such data occur only with the specific consent of

    the counterparties to the swap?

    68. An ancillary issue relating to commercialization of data and

    legal property rights relates to the ``portability'' of SDR data. This

    issue relates to the operation of Commission regulation 45.10

    (Reporting to a single SDR), which requires that all swap data for a

    given swap must be reported to a single SDR, specifically, the SDR to

    which creation data is first reported. The Commission did not, however,

    directly address whether the data in one SDR may be moved, transferred

    or ``ported'' to another SDR.\52\ The Commission seeks comment on

    whether Sec. 45.10 should be re-evaluated and whether a viable

    alternative exists. Should portability of data be permitted? If so,

    should there be agreement by the counterparties to a swap prior to the

    data being ported?

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

    \52\ The Commission did provide that SDR data could be

    transferred or moved to another SDR in the case of an SDR ceasing to

    operate as an SDR registered the Commission. See 17 CFR 49.4.

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

    J. Additional Comment

    69. To the extent not addressed by any of the questions above,

    please identify any challenges regarding: (i) The accurate reporting of

    swap transaction data; (ii) efficient access to swap transaction data;

    and (iii) effective analysis of swap transaction data. Please address

    each issue and challenge as it pertains to reporting entities, SDRs,

    and others. Please also discuss how such challenges can be resolved.

    a. What challenges do Commission registrants (SDs, MSPs, SEFs,

    DCMs, and DCOs) face as reporting entities and reporting counterparties

    under the swap data reporting rules? What enhancements or

    clarifications to the Commission's rules, if any, would help address

    these challenges?

    b. What challenges do financial entities face as reporting

    counterparties and non-reporting counterparties under the swap data

    reporting rules? What enhancements or clarifications to the

    Commission's rules, if any, would help address these challenges?

    c. What challenges do non-financial entities, including natural

    persons, face as reporting counterparties and non-reporting

    counterparties under the swap data reporting rules? What enhancements

    or clarifications to the Commission's rules, if any, would help address

    these challenges?

    Issued in Washington, DC, on March 19, 2014, by the Commission.

    Christopher J. Kirkpatrick,

    Deputy Secretary of the Commission.

    Appendices to Request for Comment on Part 45 and Related Provisions of

    the Commission's Swap Data Reporting Rules

    Appendix 1--Commission Voting Summary

    On this matter, Acting Chairman Wetjen and Commissioners Chilton

    and O'Malia voted in the affirmative. No Commissioner voted in the

    negative.

    Appendix 2--Statement of Commissioner Scott D. O'Malia

    I support the request for comment on part 45 and related

    provisions of the

    [[Page 16698]]

    Commission's swap data reporting rules. I commend the cross-

    divisional data team's effort to fix our reporting rules and enhance

    the Commission's ability to use its data. I hope that the data team

    and the Commission will carefully evaluate market participants'

    comments and recommendations and develop workable solutions to

    improve our data reporting regime.

    At the same time, I urge market participants to carefully review

    the Commission's questions, submit their comments, and alert the

    Commission to other data reporting issues that have not been

    included in this request for comment. This comment period is a

    critical step in the Commission's effort to improve its data

    utilization. I encourage all market participants to help the

    Commission improve its data reporting regime.

    [FR Doc. 2014-06426 Filed 3-25-14; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: March 26, 2014



See Also:

OpenGov Logo

CFTC's Commitment to Open Government

Gavel and Book

Follow the Status of Enforcement Actions