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2017-01287

  • Federal Register, Volume 82 Issue 15 (Wednesday, January 25, 2017)

    [Federal Register Volume 82, Number 15 (Wednesday, January 25, 2017)]

    [Proposed Rules]

    [Pages 8369-8391]

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

    [FR Doc No: 2017-01287]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 49

    RIN 3038-AE44

    Proposed Amendments To Swap Data Access Provisions and Certain

    Other Matters

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Notice of proposed rulemaking.

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    SUMMARY: Pursuant to Title VII of the Dodd-Frank Wall Street Reform and

    Consumer Protection Act of 2010 (``Dodd-Frank Act''), as amended by the

    Fixing America's Surface Transportation Act of 2015 (``FAST Act''), the

    Commodity Futures Trading Commission (``Commission'' or ``CFTC'') is

    proposing amendments the Commission's regulations relating to access to

    swap data held by Swap Data Repositories. The proposed amendments would

    implement pertinent provisions of the FAST Act and make associated

    changes to the Commission's regulations governing the grant of access

    to swap data to certain foreign and domestic authorities by Swap Data

    Repositories and to certain other regulations unrelated to such access.

    DATES: Comments must be received on or before March 27, 2017.

    ADDRESSES: You may submit comments, identified by RIN 3038-AE44, by any

    of the following methods:

    CFTC Web site: https://comments.cftc.gov. Follow the

    instructions for submitting comments through the Comments Online

    process on the Web site.

    Mail: Christopher Kirkpatrick, 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 will be posted as received to

    www.cftc.gov. You should submit only information that you wish to make

    available publicly. If you wish the Commission to consider information

    that you believe is exempt from disclosure under the Freedom of

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

    the exempt information may be submitted according to the procedures

    established in Sec. 145.9 of the Commission's regulations.\1\

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    \1\ 17 CFR 145.9. All Commission regulations cited herein are

    set forth in chapter I of Title 17 of the Code of Federal

    Regulations.

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

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

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

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

    redacted or removed that contain comments on the merits of the

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

    considered as required under the Administrative Procedure Act and other

    applicable laws, and may be accessible under the FOIA.

    FOR FURTHER INFORMATION CONTACT: Daniel Bucsa, Deputy Director,

    Division of Market Oversight--Data and Reporting Branch, (202) 418-

    5435, dbucsa@cftc.gov; Jeffrey P. Burns, Assistant General Counsel,

    Office of the General Counsel, (202) 418-5101, jburns@cftc.gov; David

    E. Aron, Special Counsel, Division of Market Oversight--Data and

    Reporting Branch, (202) 418-6621, daron@cftc.gov; or Owen J. Kopon,

    Special Counsel, Division of Market Oversight--Data and Reporting

    Branch, (202) 418-5360, okopon@cftc.gov, Commodity Futures Trading

    Commission, Three Lafayette Centre, 1151 21st Street NW., Washington,

    DC 20581.

    SUPPLEMENTARY INFORMATION:

    Table of Contents

    I. Background and Introduction

    A. Statutory Background: The Dodd-Frank Act

    B. Regulatory History: The Part 49 Rules and the Commission's

    2012 Interpretative Statement

    1. Access to SDR Swap Data

    2. The Regulatory Indemnification Requirement

    C. FAST Act Amendments to CEA Section 21

    D. CEA Section 8 Informs the Confidentiality Provisions of CEA

    Section 21

    E. Summary of Proposed Revisions to Part 49

    F. Rescission of 2012 Interpretative Statement

    II. Discussion

    A. Definitions: Proposed Amendments to Sec. 49.2

    B. Domestic and Foreign Regulators With Regulatory

    Responsibility Over SDRs: Proposed Amendments to Sec. 49.17(d)(2)

    and (3)

    1. The Current Rule

    2. Proposed Amendments

    3. Request for Comment

    C. Appropriateness Determination for Foreign Regulators and Non-

    Enumerated Domestic Regulators: Proposed Sec. 49.17(h) and Proposed

    Amendments to Sec. 49.17(b)

    1. The Current Rule

    2. The Proposed Amendments

    3. The Factors Required for a Determination Order

    a. Scope of Jurisdiction

    b. Robust Confidentiality Safeguards

    c. Additional Considerations

    d. Other Matters Regarding the Determination Order Process

    e. Request for Comment

    4. Proposed Amendments to Sec. 49.17(d)(4)--SDR Notice and

    Verification Obligations

    5. Proposed New Sec. 49.17(i)--Delegation of Authority

    6. Request for Comment

    D. CEA Section 21(d) Confidentiality Agreements: Proposed

    Amendments to Sec. 49.18

    1. Current Sec. 49.18

    2. Proposed Amendments to Sec. 49.18(a)--Confidentiality

    Arrangement Required Prior to Disclosure of Swap Data

    3. Proposed Amendments to Sec. 49.18(b)--Required Elements of

    the Confidentiality Arrangement

    4. Removal of Sec. 49.18(c)--ADRs and AFRs With Regulatory

    Responsibility Over an SDR

    5. Failure To Fulfill the Terms of a Confidentiality

    Arrangement: Proposed Sec. 49.18(c) and (d)

    6. Proposed Sec. 49.18(e)--Delegation of Authority

    7. Conforming Changes

    8. Request for Comment

    E. Other Changes

    III. Request for Comment

    IV. Related Matters

    A. Regulatory Flexibility Act

    B. Paperwork Reduction Act

    1. Summary of the Proposed Requirements

    2. Collection of Information

    3. Request for Comments on Collection

    C. Cost-Benefit Considerations

    D. Antitrust Considerations

    I. Background and Introduction

    A. Statutory Background: The Dodd-Frank Act

    Title VII of the Dodd-Frank Act \2\ amended the Commodity Exchange

    Act (``CEA'' or the ``Act'') \3\ to establish a

    [[Page 8370]]

    comprehensive new regulatory framework for swaps including, in new CEA

    section 21, the registration and regulation of Swap Data Repositories

    (``SDRs'').\4\ CEA section 21 imposes on SDRs, among other duties and

    responsibilities, the duty to maintain the privacy of all swap

    transaction information received from a swap dealer, counterparty, or

    any other registered entity.\5\ CEA section 21(c)(7) directs SDRs to

    make swap data available ``on a confidential basis pursuant to section

    8 [of the CEA]'' \6\ to certain enumerated domestic authorities and any

    other person the Commission determines to be appropriate, which may

    include certain types of foreign authorities.\7\ Entities that are

    eligible to receive access to swap data from an SDR pursuant to CEA

    section 21(c)(7) are referred to herein, collectively, as the

    ``21(c)(7) entities'').

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

    Act, Public Law 111-203, 124 Stat. 1376 (2010), available at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm. Title VII of

    the Dodd-Frank Act, which amended the Commodity Exchange Act

    (``CEA'' or the ``Act''), may be cited as the Wall Street

    Transparency and Accountability Act of 2010.

    \3\ 7 U.S.C. 1 et seq.

    \4\ See Dodd-Frank Act section 728 (adding new CEA section 21, 7

    U.S.C. 24(a), to establish a registration requirement and regulatory

    regime for SDRs).

    \5\ 7 U.S.C. 24a(c)(6).

    \6\ As is discussed more fully below, CEA section 8 describes

    circumstances under which public disclosure of information in the

    Commission's possession is permitted and prohibited. As is

    particularly relevant here, CEA section 8(e) permits the Commission

    to disclose information in its possession and obtained in connection

    with the administration of the CEA, upon request, to Federal

    departments and agencies acting within the scope of their

    jurisdiction but prohibits such recipients from disclosing such

    information except in an action or proceeding under the laws of the

    United States to which the recipient, the Commission or the United

    States is a party. CEA section 8(e) further permits the Commission

    to disclose information in its possession obtained in connection

    with administration of the CEA, upon request, to any foreign futures

    authority, department, central bank and ministries, or agency of a

    foreign government or political subdivision thereof, acting within

    the scope of its jurisdiction, subject to the condition that the

    Commission is satisfied that the information will not be disclosed

    by such recipient other than in connection with an adjudicatory

    action or proceeding to which the foreign futures authority,

    department, central bank and ministries, or the foreign government

    or political subdivision or agency thereof is a party, and which is

    brought under the laws of the foreign government or its political

    subdivision, See 7 U.S.C. 12(e).

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

    Rulemaking: Swap Data Recordkeeping and Reporting Requirements, 77

    FR 2136, Jan. 13, 2012 (``Data Final Rules''). The Data Final Rules

    set forth, among others, regulations governing SDR data collection

    and reporting responsibilities under part 45 of the Commission's

    regulations.

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    As originally enacted, CEA sections 21(d)(1) and (2) of the Act

    mandated that, prior to receipt of any requested data or information

    from an SDR, a 21(c)(7) entity agree in writing to abide by the

    confidentiality requirements described in CEA section 8 and,

    separately, to indemnify the SDR and the Commission for ``any expenses

    arising from litigation relating to the information provided under

    section 8.'' \8\ Congress's repeal of the CEA section 21(d)(2)

    indemnification requirement in the FAST Act in December 2015 gave rise

    to the amendments proposed in this release.

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    \8\ 7 U.S.C. 24a(d). As noted above, the indemnification

    requirement was stricken from CEA section 21(d) by the FAST Act. See

    Public Law 114-94, section 86001(b)(2).

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    B. Regulatory History: The Part 49 Rules and the Commission's 2012

    Interpretative Statement

    1. Access to SDR Swap Data

    In 2011, the Commission adopted rules implementing CEA section 21's

    requirements for SDRs.\9\ The Commission implemented the SDR swap data

    access provisions of CEA sections 21(c)(7) and (d) by establishing

    processes by which various categories of entities could gain access to

    SDR swap data. The domestic entities enumerated in CEA section

    21(c)(7)(A)-(D),\10\ and certain others deemed by the Commission to be

    appropriate recipients of such swap data pursuant to CEA section

    21(c)(7)(E),\11\ were defined in Sec. 49.17(b)(1) of the Commission's

    regulations as ``Appropriate Domestic Regulators'' (``ADRs'').\12\

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    \9\ Swap Data Repositories: Registration Standards, Duties and

    Core Principles; 76 FR 54538 (Sept. 1, 2011) (``SDR Final Rules'');

    see also Swap Data Repositories: Registration Standards, Duties and

    Core Principles, 75 FR 80898 (Dec. 23, 2010) (the proposed SDR Final

    Rules) (``SDR NPRM'').

    \10\ The domestic regulators enumerated in CEA section

    21(c)(7)(A)-(D) are: (A) Each appropriate prudential regulator; (B)

    the Financial Stability Oversight Council (``FSOC''); (C) the

    Securities and Exchange Commission (``SEC''); and (D) the Department

    of Justice. The term ``prudential regulator'' is defined in CEA

    section 1a(39).

    \11\ In addition to enumerating certain domestic entities to

    which an SDR must grant swap data access, CEA section 21(c)(7)(E)

    identifies as an eligible recipient of such access ``any other

    person that the Commission determines to be appropriate, including--

    foreign financial supervisors (including foreign futures

    authorities); foreign central banks; foreign ministries; and other

    foreign authorities[.]'' 7 U.S.C. 24a(c)(7)(E). Pursuant to this

    authority, in rules 49.17(b)(1)(v) and (vi), the Commission

    identified any Federal Reserve Bank and the Office of Financial

    Research (``OFR''), respectively, as ``Appropriate Domestic

    Regulators.'' The Commission also defined as an ``Appropriate

    Domestic Regulator'' each prudential regulator identified in CEA

    section 1(a)(39), with respect to requests related to any such

    regulator's statutory authority. See Sec. 49.17(b)(1)(ii). The

    Commission further reserved the discretion, in Sec.

    49.17(b)(1)(vii), to recognize ``[a]ny other person the Commission

    deems appropriate'' to be an ``Appropriate Domestic Regulator.''

    \12\ Pursuant to Sec. 49.17(d)(2), ADRs with regulatory

    jurisdiction over an SDR are not required to apply for access to SDR

    data or to execute a confidentiality and indemnification agreement

    if the regulator executes an information sharing arrangement with

    the Commission and the Commission designates the regulator to

    receive direct electronic access to SDR data pursuant to CEA section

    21(c)(4). See also Sec. 49.18(c).

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    The term ``Appropriate Foreign Regulator'' (``AFR'') \13\ was

    defined in Sec. 49.17(b)(2) as a ``Foreign Regulator'' \14\ with an

    existing memorandum of understanding (``MOU'') or similar type of

    arrangement with the Commission; no AFRs were specifically identified

    in the rule. The term ``Appropriate Foreign Regulator'' was also

    defined to include a Foreign Regulator without an existing MOU with the

    Commission, as determined by the Commission on a case-by-case basis.

    Such a Foreign Regulator was required to file with the Commission an

    application providing sufficient facts and procedures to permit the

    Commission to analyze whether the Foreign Regulator employs appropriate

    confidentiality procedures, and to satisfy the Commission that any SDR

    data accessed by the Foreign Regulator would be disclosed ``only as

    permitted by [s]ection 8(e)'' of the CEA.\15\

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    \13\ The Commission established the category of AFRs pursuant to

    CEA section 21(c)(7)(E), which, among other things, includes a list

    of the types of foreign entities that the Commission may determine

    to be appropriate recipients of such swap data access.

    \14\ The term ``Foreign Regulator'' is defined in Sec.

    49.2(a)(5) to mean a foreign futures authority as defined in CEA

    section 1(a)(26), foreign financial supervisors, foreign central

    banks and foreign ministries.

    \15\ 17 CFR 49.17(b)(2)(i)(B).

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    An ADR or AFR seeking access to SDR data is required by current

    Sec. 49.17(d)(1) to file an access request with the SDR certifying

    that it is acting within the scope of its jurisdiction and is required

    by current Sec. 49.17(d)(6) to execute a ``Confidentiality and

    Indemnification Agreement'' with the SDR.\16\

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    \16\ Current Sec. 49.18(b) requires an SDR to receive such a

    Confidentiality and Indemnification Agreement from an ADR or AFR

    prior to releasing swap data to the ADR or AFR.

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    2. The Regulatory Indemnification Requirement

    In the preamble to the SDR Final Rules, the Commission acknowledged

    commenters' concerns that compliance with the statutory and regulatory

    indemnification requirements would be difficult for certain domestic

    and foreign regulators due to various home country laws and other

    regulations prohibiting such arrangements,\17\ and expressed its intent

    to continue to work to provide regulators sufficient access to SDR

    data. In this regard, the Commission outlined the circumstances under

    which it believed the indemnification provision of CEA section 21(d)

    and Sec. 49.18 would

    [[Page 8371]]

    not apply. The Commission explained that, under the part 49 rules,

    certain Appropriate Domestic Regulators may in some circumstances

    obtain access to swap data reported and maintained by SDRs without

    regard to the notice and indemnification requirements of CEA sections

    21(c)(7) and (d).\18\ With respect to foreign regulatory authorities,

    the Commission determined in the SDR Final Rules that swap data

    reported to and maintained by an SDR may be accessed by an AFR without

    the execution of a confidentiality and indemnification agreement when

    the AFR has supervisory authority over a Commission-registered SDR that

    is also registered with the AFR pursuant to foreign law and/or

    regulation.

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    \17\ See SDR Final Rules at 54554. The Commission notes that,

    prior to passage of the FAST Act on December 4, 2015, no 21(c)(7)

    entity had entered into a confidentiality or indemnification

    agreement pursuant to CEA section 21(d) or the part 49 rules.

    \18\ It was, in the Commission's view, 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 CEA sections 21(c)(7) and (d). See SDR Final Rules at

    54554, n163. Accordingly, pursuant to the Commission's Part 49

    rules, these provisions did 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 49.17(d)(2).

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    Concerns about the scope of the indemnification provision

    persisted, and in October 2012 the Commission issued an Interpretative

    Statement, which was designed to provide guidance and greater clarity

    to interested members of the public and foreign regulators with respect

    to the scope and application of CEA section 21(d) and the part 49

    rules.\19\ The Interpretative Statement clarified that a foreign

    regulatory authority's access to swap data held in a CFTC-registered

    SDR would not be subject to the confidentiality and indemnification

    provisions of CEA section 21(d) or the part 49 regulations if (i) the

    registered SDR is also registered in, or recognized or otherwise

    authorized by, the foreign authority's regulatory regime; and (ii) the

    data sought to be accessed by the foreign authority has been reported

    to the registered SDR pursuant to such foreign regulatory regime.\20\

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    \19\ See Swap Data Repositories: Interpretative Statement

    Regarding the Confidentiality and Indemnification Provisions of the

    Commodity Exchange Act, 77 FR 65177 (Oct. 25, 2012)

    (``Interpretative Statement'').

    \20\ Interpretative Statement at 65181.

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    C. FAST Act Amendments to CEA Section 21

    Congress responded to the regulators' access concerns by including

    in the FAST Act a repeal of CEA section 21(d)(2)'s indemnification

    requirement.\21\ The confidentiality requirement in CEA section

    21(d)(1) was retained in CEA section 21(d), as amended.\22\

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    \21\ Title LXXXVI (``Repeal of Indemnification Requirements'')

    of the FAST Act amends the CEA by:

    repeal[ing] the indemnification requirements added by the Dodd-

    Frank Wall Street Reform and Consumer Protection Act for regulatory

    authorities to obtain access to swap data. Foreign regulators and

    regulatory entities have indicated concerns regarding the

    indemnification requirements of Dodd-Frank. The title removes such

    requirements so data can be shared with foreign authorities. The

    title would still require the regulatory agencies requesting the

    information to agree to certain confidentiality requirements prior

    to receiving the data.

    FAST Act: Conference Report to Accompany H.R. 22, Dec. 1, 2015

    at 486-87. The repeal applied as well to the analogous provision in

    the Securities Exchange Act of 1934, 15 U.S.C. 78m(n)(5).

    \22\ The legislation struck subsection (d) of CEA section 21 and

    inserted in its place a provision entitled, ``Confidentiality

    Agreement,'' that states that before a swap data repository may

    share information with any entity described in subsection (c)(7),

    the swap data repository shall receive a written agreement from each

    entity stating that the entity shall abide by the confidentiality

    requirements described in section 8 of the CEA relating to the

    information on swap transactions that is provided. See FAST Act,

    Public Law 114-94, 129 Stat. 1312 (Dec. 4, 2015).

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    The FAST Act also modified CEA section 21(c)(7)(A) by specifying

    that ``swap'' data--as opposed to ``all'' data--must be provided to

    21(c)(7) entities, and added to CEA section 21(c)(7)(E)'s non-exclusive

    list of persons that the Commission may determine to be appropriate

    recipients of SDR swap data the new category ``other foreign

    authorities.''

    D. CEA Section 8 Informs the Confidentiality Provisions of CEA Section

    21

    CEA section 8 governs the Commission's treatment of nonpublic

    information in its possession in a number of circumstances, and its

    disclosure restrictions and confidentiality standards expressly inform

    the access provisions of CEA sections 21(c)(7) and 21(d). As relevant

    here, CEA section 8(e) permits the Commission to furnish to the

    specified types of domestic or foreign entities--upon their request and

    acting within the scope of their jurisdiction--any information in its

    possession obtained in connection with the administration of the

    Act.\23\ CEA section 8(e) specifies, with respect to U.S. entities,

    that any information furnished thereunder shall not be disclosed except

    in an action or proceeding under the laws of the United States to which

    the entity, the Commission or the United States is a party. CEA section

    8(e) further specifies, with respect to the specified types of foreign

    entities, that the Commission shall not furnish information thereunder

    unless the Commission is satisfied that the information will not be

    disclosed by the entity except in connection with an adjudicatory

    action or proceeding to which the entity is a party brought under the

    laws to which such entity is subject.

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    \23\ 7 U.S.C. 12(e).

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    The principles underlying CEA section 8(e) are also fundamental to

    CEA sections 21(c)(7) and (d) and to the access standards and

    confidentiality provisions proposed in this release. In proposing

    clearer and more robust access and confidentiality standards in

    Sec. Sec. 49.17 and 49.18, the Commission is mindful of these

    foundational principles: Where information is sought to be accessed,

    the information must relate to the scope of the requesting entity's

    jurisdiction or authority; and information provided by the SDR shall

    not be further disclosed except in limited, defined circumstances.

    E. Summary of Proposed Revisions to Part 49

    Pursuant to its authority under the Act,\24\ the Commission is

    proposing amendments to Sec. Sec. 49.2, 49.9, 49.17, 49.18, and 49.22

    to (i) implement the statutory changes mandated by the FAST Act

    Amendments; (ii) make certain conforming and clarifying changes related

    to such implementation; (iii) revise the process by which

    appropriateness is determined for purposes of access to SDR swap data

    and clarify the standards in connection with the Commission's

    appropriateness determinations; and (iv) establish the form and

    substance of the written agreement mandated by CEA section 21(d), as

    amended. In formulating the following proposed amendments, the

    Commission has endeavored to balance the goal of effective and

    consistent global regulation of swaps \25\ with the mandate of CEA

    sections 21(c)(7) and (d) that swap data be made available to a limited

    universe of regulators on a

    [[Page 8372]]

    confidential basis pursuant to CEA section 8. The proposed rules and

    rule amendments would, if adopted:

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    \24\ See, e.g., CEA section 21(f)(4) (Additional duties

    developed by Commission), 7 U.S.C. 24a(f)(4). The Commission is also

    authorized by CEA section 8a(5), 7 U.S.C. 12a(5), to make such rules

    and regulations as, in the judgment of the Commission, are

    reasonably necessary to effectuate any of the provisions or to

    accomplish any of the purposes of the Act.

    \25\ Section 752 of the Dodd-Frank Act directs the CFTC, the SEC

    and the prudential regulators, as appropriate, to consult and

    coordinate with foreign regulatory authorities in this regard and

    provides that these entities may agree to such information-sharing

    arrangements as may be deemed necessary or appropriate in the public

    interest or for the protection of investors, swap counterparties,

    and security-based swap counterparties.

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    Add ``other foreign authorities'' to the foreign

    regulators identified in Sec. 49.2(a)(5), consistent with the FAST

    Act's amendment to CEA section 21(c)(7)(E) to include this category

    among the entities that the Commission may deem appropriate to access

    SDR swap data;

    Amend Sec. 49.9 to make clarifying changes;

    Amend Sec. 49.17 to, among other things: (i) Delete all

    references to the indemnification requirement and/or indemnification

    agreement; (ii) establish a process and clarify the standards for

    determining whether certain entities not enumerated in Sec.

    49.17(b)(1)(i)-(vi) are appropriate to directly access swap data from

    an SDR; (iii) revise the SDR notification requirement so that SDRs

    notify the Commission only for each initial request for swap data by

    ADRs and AFRs and any subsequent request at variance with the ADR's or

    AFR's scope of jurisdiction; (iv) specify that the information

    available to ADRs and AFRs is ``swap data''--as distinguished from

    ``data,'' to reflect the corresponding FAST Act amendment to CEA

    section 21; and (v) add a delegation of authority provision so that

    Commission staff is able to efficiently administer certain functions

    related to SDR swap data access;

    Amend Sec. 49.18 to, among other things: (i) Delete all

    references to the indemnification requirement and/or indemnification

    agreement; (ii) require that SDRs receive, prior to providing SDR swap

    data access to an ADR or AFR, a written confidentiality arrangement

    between the Commission and such ADR or AFR; (iii) specify the required

    elements of such written confidentiality arrangement; (iv) require SDRs

    to notify the Commission of any known failures to fulfill the terms of

    a confidentiality arrangement required by Sec. 49.18(a); (v) inform

    ADRs, AFRs and SDRs that the Commission may direct an SDR to limit,

    suspend or revoke an ADR's or AFR's access to swap data held by an SDR

    if such ADR or AFR has failed to fulfill the terms of a confidentiality

    arrangement required by Sec. 49.18(a); and (vi) add a delegation of

    authority provision so that Commission staff is able to efficiently

    administer certain functions related to SDR swap data access; and

    Amend Sec. 49.22(d)(4) to omit a reference to

    indemnification in order to conform to the corresponding FAST Act

    amendment to the CEA.

    F. Rescission of 2012 Interpretative Statement

    The Commission has determined to rescind its 2012 Interpretative

    Statement. References to the indemnification requirement in the

    Interpretative Statement are no longer relevant as the indemnification

    requirement in CEA section 21(d) has been repealed by the FAST Act.

    Additionally, the modifications to Sec. 49.17(d)(3) that are proposed

    here are consistent with the clarifications provided in the

    Interpretative Statement.

    II. Discussion

    A. Definitions: Proposed Amendments to Sec. 49.2

    As originally adopted, Sec. 49.2(a)(5) defined the term ``foreign

    regulator'' to include a foreign futures authority as defined in CEA

    section 1a(26), foreign financial supervisors, foreign central banks

    and foreign ministries.\26\ The FAST Act amendments to the CEA added to

    subsection 21(c)(7)(E) a new category of entity--``other foreign

    authorities''--that the Commission may deem appropriate to obtain

    access to SDR swap data. The Commission proposes a corresponding

    amendment to the definition of ``foreign regulator'' in Sec.

    49.2(a)(5) to conform this definition to amended subsection

    21(c)(7)(E).

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    \26\ 17 CFR 49.2(a)(5). CEA Section 1a(26) defines ``foreign

    futures authority'' as any foreign government, or any department,

    agency, governmental body, or regulatory organization empowered by a

    foreign government to administer or enforce a law, rule, or

    regulation as it relates to a futures or options matter, or any

    department or agency of a political subdivision of a foreign

    government empowered to administer or enforce a law, rule, or

    regulation as it relates to a futures or options matter. Section

    723(a)(2) of the Dodd-Frank Act added section 2(d) to the CEA to

    provide that enumerated provisions, including CEA section 1a, apply

    to swaps.

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    B. Domestic and Foreign Regulators With Regulatory Responsibility )

    Over SDRs: Proposed Amendments to Sec. 49.17(d)(2) and (3)

    1. The Current Rule

    Commission regulation 49.17(d)(2) of the Commission's regulations

    currently provides that an ADR with regulatory jurisdiction over an SDR

    registered with it pursuant to a separate statutory authority that is

    also registered with the Commission is not subject to the requirements

    of Sec. 49.17(d) (application and notice provisions) and Sec.

    49.18(b) (confidentiality and indemnification agreement) as long as the

    following conditions are met: (i) The ADR executes an MOU or similar

    information sharing arrangement with the Commission; and (ii) the

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

    to receive direct electronic access. As described in the SDR Final

    Rules, the Commission provided that these ADRs may be provided access

    to the swap data reported and maintained by SDRs without being subject

    to the notice and indemnification provisions of CEA sections 21(c)(7)

    and (d).\27\

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

    \27\ See SDR Final Rules at 54554.

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

    Commission regulation 49.17(d)(3) of the Commission's regulations

    currently provides that an AFR with supervisory authority over an SDR

    registered with it pursuant to foreign law and/or regulation that is

    also registered with the Commission is not subject to the requirements

    of Sec. 49.17(d) (application and notice provisions) and Sec.

    49.18(b) (confidentiality and indemnification agreement). As described

    in the SDR Final Rules and Interpretative Statement, the Commission

    believes that confidential swap data reported to, and maintained, by an

    SDR may be appropriately accessed by an AFR without the execution of a

    confidentiality and indemnification agreement when the AFR is acting in

    a regulatory capacity with respect to an SDR that is also registered

    with the AFR and with respect to data reported to such SDR pursuant to

    such AFR's regulatory regime.\28\

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

    \28\ Id. See also Interpretative Statement at 65181; section 752

    of the Dodd-Frank Act.

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

    2. Proposed Amendments

    With respect to domestic regulators with regulatory jurisdiction

    over an SDR, the Commission proposes to remove: (1) The reference to

    ``Appropriate Domestic Regulator'' in Sec. 49.17(d)(2) and replace it

    with the term ``domestic regulator'' to clarify that all domestic

    regulators and not just ADRs would fall under Sec. 49.17(d)(2); (2)

    subparagraph (i) to Sec. 49.17(d)(2) (the information sharing

    arrangement condition) and (3) subparagraph (ii) to Sec. 49.17(d)(2)

    (the direct electronic access condition). Although the Commission in

    the original part 49 rules adopted the information sharing and direct

    electronic access conditions so that ADRs would not be subject to the

    then-existing confidentiality and indemnification requirements, the

    Commission through experience with SDR swap data access believes an

    additional refinement of these rules is necessary in order to promote

    greater efficiency and cooperation among domestic regulators.

    Accordingly, the Commission submits that a domestic regulator that has

    regulatory jurisdiction

    [[Page 8373]]

    over an SDR registered with it pursuant to a separate statutory

    authority should be able to access SDR data reported to such SDR

    pursuant to such separate statutory authority irrespective of whether

    such domestic regulator has executed an MOU or similar information

    sharing arrangement with the Commission or been designated to receive

    direct electronic access by the Commission.\29\

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

    \29\ The Commission's proposal is consistent with the principle

    previously set forth in its Interpretative Statement relating to the

    confidentiality and indemnification provisions of the CEA. In

    particular, the Commission stated ``that a foreign regulator's

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

    recognized, or otherwise authorized in a foreign jurisdiction's

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

    pursuant to that [other] regulatory regime, [such access] will be

    dictated by that jurisdiction's regulatory regime and not by the CEA

    or Commission regulations.'' See Interpretative Statement at 65181.

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

    In connection with foreign regulatory authorities that have

    supervisory authority over an SDR, the Commission proposes to (i)

    remove the reference to ``Appropriate Foreign Regulator'' in Sec.

    49.17(d)(3) and replace it with the term ``Foreign Regulator'' as

    defined in Sec. 49.2 to clarify that all Foreign Regulators, not only

    those that have been determined ``appropriate'' by the Commission would

    fall under Sec. 49.17(d)(3); and (ii) add qualifying language to Sec.

    49.17(d)(3) so that Sec. 49.17(d)(3) applies not only to SDRs that are

    ``registered'' with the Foreign Regulator but also to those SDRs that

    are ``registered, recognized, or otherwise authorized'' by a foreign

    jurisdiction's regulatory regime, and where such swap data has been

    reported to the SDR pursuant to the Foreign Regulator's regulatory

    regime.\30\

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    \30\ Id.

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

    As it was when adopting the SDR Final Rules, the Commission is

    mindful of the need to protect the confidentiality of swap data when

    such data is provided to another regulator. Under the proposal, the

    Commission believes that the proposed changes to Sec. 49.17(d)(3)

    strike the appropriate balance in providing access to swap data

    consistent with the confidentiality protections set forth in the

    CEA.\31\

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

    \31\ See CEA section 21(c)(7); see also section 752 of the Dodd-

    Frank Act.

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

    3. Request for Comment

    The Commission requests comment on all aspects of amendments to

    Sec. 49.17(d)(2) and (3).

    C. Appropriateness Determination for Foreign Regulators and Non-

    enumerated Domestic Regulators: Proposed Sec. 49.17(h) and Proposed

    Amendments to Sec. 49.17(b)

    1. The Current Rule

    CEA section 21(c)(7) specifies U.S. entities to which swap data

    must be released by an SDR, provided certain prerequisites are

    satisfied. Because Congress has determined that access to SDR swap data

    by these entities is appropriate when the prerequisites are satisfied,

    no further access consideration by the Commission is necessary. These

    U.S. entities, along with others determined to be appropriate by the

    Commission pursuant to CEA section 21(c)(7)(E), are identified in Sec.

    49.17(b)(1) as ``Appropriate Domestic Regulators.'' The term

    ``Appropriate Domestic Regulator'' is also defined to include ``any

    other person the Commission deems appropriate.'' The current part 49

    rules do not include a process for determining that a U.S. entity not

    specifically enumerated in Sec. 49.17(b)(1) is an ``Appropriate

    Domestic Regulator.''

    Under current Sec. 49.17(b)(2)(i), in order for a Foreign

    Regulator \32\ that does not have a current MOU with the Commission to

    be determined to be an ``Appropriate Foreign Regulator,'' \33\ it must

    file with the Commission an application in the form and manner

    specified by the Commission.\34\ The application must provide

    sufficient facts and procedures to permit the Commission to analyze

    whether the Foreign Regulator's confidentiality procedures are

    appropriate and to satisfy the Commission that information provided by

    an SDR will not be disclosed by the Foreign Regulator except as

    permitted by CEA section 8(e).

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

    \32\ The term ``Foreign Regulator'' is defined in Sec.

    49.2(a)(5) to mean a foreign futures authority as defined in CEA

    section 1(a)(26), foreign financial supervisors, foreign central

    banks and foreign ministries.

    \33\ No Foreign Regulators are enumerated in CEA section

    21(c)(7) or specifically identified as Appropriate Foreign

    Regulators in Sec. 49.17(b)(2).

    \34\ To date the Commission has not specified a form and manner

    for the application referenced in current Sec. 49.17(b)(2)(i)(A).

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

    2. The Proposed Amendments

    The Commission proposes to eliminate the current filing

    requirements set forth in current Sec. 49.17(b)(2)(i) and establish

    new filing requirements in proposed Sec. 49.17(h). The Commission also

    proposes to include in Sec. 49.17(h), CEA section 8-related

    confidentiality considerations and the ability for the Commission to

    revisit or reassess appropriateness determinations. The filing

    requirements proposed in new Sec. 49.17(h) would apply to all foreign

    regulators regardless of whether a current MOU or similar arrangement

    with the Commission exists, and to any domestic regulator that is not

    an ADR enumerated in Sec. 49.17(b)(1)(i)-(vi) (``Enumerated ADR'').

    Proposed Sec. 49.17(h)(3) would specify two threshold requirements for

    a finding of appropriateness: (i) The requesting entity has in place

    appropriate safeguards to maintain the confidentiality of such swap

    data; and (ii) such entity is acting within the scope of its

    jurisdiction in seeking access to swap data maintained by an SDR. These

    requirements are necessary but may or may not be sufficient to support

    an appropriateness determination: The Commission proposes to evaluate

    each filing on a case-by-case basis with reference to these and other

    factors that the Commission may find germane to its determination. If

    the Commission finds on the basis of information submitted that access

    to SDR swap data is appropriate, the Commission would issue an order

    confirming the regulator's status as an ADR or AFR and setting forth

    any conditions or limitations on access consistent with the relevant

    statutory and regulatory requirements (the proposed ``Determination

    Order''). The Commission is also proposing, through Sec. 49.17(h)(4),

    to be able to revisit, reassess, limit, suspend or revoke a previously

    issued Determination Order. The Commission believes it is necessary to

    be able to revisit an appropriateness determination, and potentially

    take one of the foregoing remedial actions, in order to be able to

    address situations that may arise subsequent to the determination, such

    as where an AFR or ADR violates the term of a Determination Order or

    fails to properly keep SDR swap data confidential.

    3. The Factors Required for a Determination Order

    a. Scope of Jurisdiction

    CEA section 21(c)(7) directs SDRs to provide swap data to

    regulators ``on a confidential basis pursuant to section 8.'' \35\ The

    Commission interprets this provision to require consistency with CEA

    section 8(e)'s mandate that information may be furnished, on a

    confidential basis, only to other regulators acting within the scope of

    their jurisdiction. Accordingly, the Commission believes that an

    appropriateness determination must be

    [[Page 8374]]

    informed by reference to the regulator's jurisdiction and to the

    entity's legitimate regulatory or legal interest in the swap data to be

    sought.

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

    \35\ 7 U.S.C. 24(c)(7).

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

    In this regard, the Commission proposes to add to part 49 new Sec.

    49.17(h)(2), which would require an applicant seeking a Determination

    Order to provide the Commission sufficient information to permit the

    Commission to conclude that the applicant would be acting within the

    scope of its jurisdiction in seeking access to swap data maintained by

    an SDR. As part of this information, the Commission expects that an

    applicant would explain the relationship between its jurisdiction and

    its request for access to swap data maintained by SDRs, including an

    explanation of the applicant's need for particular swap data to carry

    out its regulatory mandate, legal authority or responsibility.

    The Commission proposes in new Sec. 49.17(h)(3) to specify that

    the Commission will not issue a Determination Order unless it is

    satisfied that the regulator is acting within the scope of its

    jurisdiction in seeking access to SDR swap data, and that any grant of

    access will be limited to swap data appropriate to the entity's

    regulatory mandate or legal authority. Each Determination Order would

    further require, as a condition of the appropriateness determination

    set forth therein, that a regulator that has received a Determination

    Order promptly notify the Commission, and each SDR from which it has

    received swap data, of any change to its jurisdiction that would relate

    to the swap data access requested.\36\ As described in proposed Sec.

    49.17(d)(5), the Commission would be able to direct SDRs to limit,

    suspend or revoke the scope of an ADR's or AFR's SDR swap data access

    to reflect the new scope of its jurisdiction.\37\ The Commission

    expects that this proposed limitation on access will reduce the risk of

    unauthorized or unnecessary disclosures because each appropriate

    regulator will have access to swap data only to the extent necessary to

    fulfill its jurisdictional mandate or regulatory responsibility.

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

    \36\ The form of confidentiality arrangement set forth in

    proposed Appendix B to part 49 also would require such notices.

    \37\ As is relevant here, proposed Sec. 49.17(d)(5) would

    require that each SDR ``shall, as directed by the Commission, limit,

    suspend or revoke . . . such access should the Commission . . .

    direct the [SDR] to limit, suspend or revoke such access.''

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

    b. Robust Confidentiality Safeguards

    CEA section 21(c)(7) is explicit in requiring that SDRs make swap

    data available on a confidential basis pursuant to CEA section 8.

    Proposed Sec. 49.17(h)(2) accordingly would require that the applicant

    submit to the Commission information sufficient to permit a

    determination that the applicant employs adequate confidentiality

    safeguards to ensure that swap data the applicant receives from an SDR

    will not be disclosed other than as permitted by the confidentiality

    arrangement required by Sec. 49.18(a). The Commission anticipates that

    this would involve the Commission considering whether the applicant's

    confidentiality protocols, system safeguards and security compliance

    procedures can be expected to ensure the confidentiality of the swap

    data, and that the applicant has in place protections sufficient to

    prevent unauthorized intrusions into the systems that maintain the swap

    data. In this regard, the Commission would also expect to consider the

    applicant's processes for limiting internal access to swap data to

    those persons with a need to know, as well as how the swap data will be

    stored and whether the swap data will be segregated from other

    information.

    It is the Commission's view that reliance on these factors strikes

    an appropriate balance between realizing the benefits of data access by

    regulators \38\ and the obligation to protect confidential information

    in accordance with the dictates of CEA section 8(e), as incorporated by

    reference in CEA section 21(c)(7) and (d) through those sections'

    incorporation of CEA section 8. The Commission considers these factors

    essential to a determination of appropriateness. Other considerations,

    while not proposed to be codified in these proposed rules, may also

    contribute to the Commission's appropriateness analysis.

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

    \38\ See CEA section 21(c)(7); see also Section 752 of the Dodd-

    Frank Act (recognizing the goal of effective and consistent global

    regulation of swaps).

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

    c. Additional Considerations

    Although the Commission proposes to eliminate the current

    regulatory provision conferring AFR status on a foreign regulator with

    ``an existing [MOU] or other similar type of information sharing

    arrangement executed with the Commission . . ., '' \39\ it nonetheless

    continues to believe that the existence of such an arrangement fosters

    a cooperative relationship and encourages the development of shared

    understandings related to regulatory responsibilities. Although not

    dispositive, indications of a strong cooperative relationship with

    another authority, as established by the existence of such an

    arrangement and the Commission's experience working with such authority

    in finalizing and administering the arrangement, would likely be a

    factor supporting an appropriateness determination. Also, a failure to

    cooperate fully or to comply with the terms of an existing or prior

    arrangement might be expected to weigh against an appropriateness

    determination.

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

    \39\ 17 CFR 49.17(b)(2).

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

    Similarly, when assessing appropriateness, the Commission expects

    to consider whether it receives access to swap data maintained by trade

    repositories in that regulator's jurisdiction. The Commission is

    mindful of the Dodd-Frank Act's encouragement of coordination and

    cooperation with foreign regulatory authorities.\40\ The Commission

    believes that increased data access by regulators has the potential to

    provide the Commission and other authorities with more complete

    information with which to monitor risk exposures and should be expected

    to promote global market stability through enhanced regulatory

    transparency. Accordingly, Commission access to swap data maintained by

    trade repositories in such other regulator's jurisdiction, an

    arrangement prospectively to assist the Commission in obtaining data

    from other jurisdictions, and a history of assistance from a foreign

    regulator, would be viewed favorably by the Commission in considering

    appropriateness.

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

    \40\ See Dodd-Frank Act section 752, supra.

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

    d. Other Matters Regarding the Determination Order Process

    The Commission preliminarily believes that the Determination Order

    process and factors discussed above offer a reasonable approach to

    providing requesting entities access to SDR swap data based on clearly

    articulated factors and any additional considerations or circumstances

    the Commission may deem relevant on a case-by-case basis. Both the

    required factors and the additional considerations support the mandate

    of CEA sections 8, 21(c)(7) and 21(d) and are consistent with the

    express intent of Congress that the Commission coordinate and cooperate

    with foreign regulatory authorities on matters related to the

    regulation of swaps. Through the issuance of Determination Orders, the

    Commission will be able to impose appropriate conditions or

    restrictions on an entity's access to SDR swap data such that the

    entity's access is linked to its jurisdictional scope. Pursuant to

    proposed Sec. 49.17(h)(4), the Commission

    [[Page 8375]]

    may also, in its discretion, issue a Determination Order of limited

    duration, and may otherwise limit, suspend or revoke such an order if

    the entity fails to comply with its terms or the terms of the statutory

    confidentiality arrangements. The Commission would expect SDRs to take

    into account any conditions or restrictions contained in a

    Determination Order when providing access to swap data to an ADR or

    AFR.

    The Commission further believes it is appropriate to make the

    process and factors proposed in Sec. 49.17(h) applicable to any

    domestic entities that are not enumerated as ADRs in Sec.

    49.17(b)(1)(i)-(vi), as scope of jurisdiction and confidentiality

    considerations are equally applicable to U.S. entities, and has drafted

    proposed Sec. 49.17(h) accordingly.

    e. Request for Comment

    The Commission requests comment on all aspects of proposed Sec.

    49.17(h), particularly on whether the proposed regulatory and other

    factors are sufficient to determine whether access to SDR swap data is

    appropriate.

    4. Proposed Amendments to Sec. 49.17(d)(4)--SDR Notice and

    Verification Obligations

    CEA section 21(c)(7) requires each SDR to notify the Commission of

    a swap data request received from an ADR or AFR.\41\ Currently, this

    statutory requirement is implemented in Sec. 49.17(d)(4)(i), which

    provides that an SDR must promptly notify the Commission regarding

    ``any'' request received by an ADR or AFR to gain access to swap data

    maintained by the SDR.

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

    \41\ See CEA section 21(c)(7), 7 U.S.C. 24a(c)(7).

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

    To reduce the burden on SDRs and provide greater operational

    efficiency consistent with the intent of CEA section 21(c)(7), the

    Commission is proposing to amend the SDR notification requirement in

    current Sec. 49.17(d)(4)(i) to require an SDR to notify the Commission

    (i) at the time that it receives the first request for swap data from a

    particular ADR or AFR and (ii) at any time that a request does not

    comport with the scope of the ADR's or AFR's jurisdiction, as described

    in the confidentiality arrangement required by proposed Sec. 49.18(a).

    The proposed amendment would make the notification applicable only to

    the initial request for swap data and any subsequent request at

    variance with the ADR's or AFR's scope of jurisdiction: On receiving

    either such request for data by a particular ADR or AFR, the SDR would

    be required to provide prompt electronic notification to the Commission

    of the request, in a format specified by the Secretary of the

    Commission, pursuant to proposed Sec. 49.17(d)(4)(ii). The SDR would

    be required to keep such notification and related requests confidential

    consistent with the requirements of CEA sections 21(c)(6) and (7) and

    related regulatory requirements set forth in Sec. Sec. 49.16 and

    49.17.

    The Commission believes that the proposed approach to SDR

    notification supports the Commission's need to be aware of who is able

    to access SDR swap data and what data has been accessed, while

    eliminating potentially costly, unwieldy and inefficient notice of

    every swap data request. Under the proposal, the Commission would be

    notified that a particular ADR or AFR has requested access to SDR swap

    data and will be able to examine records of the ADR's or AFR's

    individual swap data requests, and the swap data provided, as it deems

    necessary.\42\

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

    \42\ Consistent with the current recordkeeping requirements for

    SDRs in Sec. 45.2(f), SDRs are required to maintain records of all

    information related to the initial and all subsequent requests for

    swap data from ADRs/AFRs. Appropriate records would include, at a

    minimum, the identity of the ADR/AFR accessing the swap data; the

    date, time and substance of the request for access; confirmation

    that the request is consistent with the scope of the regulator's

    jurisdiction; and copies of all swap data provided in connection

    with the request for access. Pursuant to CEA section 1.31, SDRs are

    required to maintain such records for a period of no less than five

    years after the date of such request and must provide this

    information to the Commission upon request.

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

    The Commission also proposes to amend Sec. 49.17(d)(4) by adding

    new subsection (iii) to require each SDR that receives a request for

    access to its swap data from an ADR or AFR to verify, prior to

    providing such access, that the request is consistent with the scope of

    the ADR's or AFR's jurisdiction, as described in the confidentiality

    arrangement required by proposed Sec. 49.18(a).\43\ This verification

    would need to incorporate any subsequent changes thereto. The

    Commission is also proposing to require an ADR or AFR that has executed

    a confidentiality arrangement with the Commission pursuant to Sec.

    49.18(a) and provided such confidentiality arrangement to one or more

    SDRs to notify the Commission and each such SDR of any change to such

    ADR's or AFR's scope of jurisdiction as described in such

    confidentiality arrangement. Additionally, the proposal would enable

    the Commission to direct a SDR to suspend, limit, or revoke access to

    swap data maintained by such SDR based on any such change to such ADR's

    or AFR's scope of jurisdiction, and that, if so directed, such SDR

    shall so suspend, limit, or revoke such access.

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

    \43\ The scope of jurisdiction would be described in Exhibit A

    to the form of confidentiality arrangement set forth in proposed

    Appendix B to part 49.

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

    As proposed, Sec. 49.17(d)(4)(iv) would require SDR verification

    only once with respect to a request for ongoing or recurring access to

    particular data, provided that there has not been a change in the scope

    of the regulator's jurisdiction (in which case an SDR would need to

    verify anew that the swap data requested is within the scope of the

    requesting ADR's or AFR's jurisdiction). The Commission recognizes that

    the proposed requirement imposes a burden on SDRs; however, it notes

    that SDRs are obliged by CEA section 21(c)(7) to provide access

    ``pursuant to section 8'' of the CEA, which requires a jurisdictional

    nexus to the information requested. In these circumstances, the

    Commission believes SDRs must take a role in ensuring compliance with

    these statutory restrictions.

    5. Proposed New Sec. 49.17(i)--Delegation of Authority

    In the interests of expedience and efficiency in determining

    appropriateness of access by regulators, the Commission proposes to

    delegate all functions reserved to the Commission in Sec. 49.17 to the

    Director of the Division of Market Oversight and to such members of the

    Commission's staff acting under his or her direction as he or she may

    designate from time to time.

    6. Request for Comment

    The Commission requests comment on all aspects of the proposed

    amendments to Sec. 49.17, and particularly invites comments on:

    1. Whether commenters believe there are more cost-effective methods

    of notification and recordkeeping that would still provide the

    Commission with access to the information necessary for it to perform

    its regulatory functions in a manner consistent with CEA section

    21(c)(7); and

    2. Whether a phase-in process is necessary to decrease the

    likelihood that a large number of new demands on SDRs' systems from

    ADRs and AFRs seeking access to swap data will decrease SDR systems

    reliability, efficiency or speed.

    D. CEA Section 21(d) Confidentiality Agreements: Proposed Amendments to

    Sec. 49.18

    CEA section 21(d), as amended, requires that, prior to providing

    swap data to a 21(c)(7) entity, an SDR ``shall

    [[Page 8376]]

    receive a written agreement from each entity stating that the entity

    shall abide by the confidentiality requirements described in CEA

    section 8 relating to the information on swap transactions that is

    provided.'' \44\ As originally adopted, the part 49 rules required that

    such confidentiality agreements be executed between the SDR and the

    21(c)(7) entity.\45\ The Commission proposes to add a new Sec.

    49.18(a) to require that a confidentiality arrangement be executed by

    and between the ADR or AFR and the Commission.\46\ Once the ADR or AFR

    and the Commission have executed a confidentiality arrangement, the ADR

    or AFR may present the executed document to any SDR from which it

    requests access to swap data in satisfaction of CEA section 21(d).

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

    \44\ See CEA section 21(d). 7 U.S.C. 24a(d) as amended by the

    FAST Act.

    \45\ See current Sec. 49.17(d)(6) and 49.18(b).

    \46\ See proposed Sec. 49.18(a) (requiring that an SDR received

    ``an executed confidentiality arrangement between the Commission and

    the [ADR] or [AFR] . . . .''). The Commission notes that the SEC has

    implemented a similar approach with respect to the execution of the

    required agreement. See Access to Data Obtained by Security-Based

    Swap Data Repositories, 81 FR 60585 at 60591 and 60608 (Sept. 2,

    2016) (SEC rule 13n-4(b)(10), 17 CFR 240.13n-4(b)(10), and

    associated preamble text).

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

    The Commission recognizes that its proposed amendments to Sec.

    49.18 represent a change in approach from the part 49 rules as adopted.

    Based on its experience with SDRs and swap data access since the

    adoption of part 49 in 2011, and further consideration of the

    relationship between CEA sections 21 and 8, however, the Commission

    believes this change is consistent with the statutory framework

    established by Congress in CEA section 21(d) and 21(c)(7). Moreover, in

    the Commission's view a confidentiality arrangement between the

    Commission and the regulator more directly supports the confidentiality

    mandate of CEA section 8. Finally, the Commission believes that the

    proposed requirement will promote regulatory efficiency and reduce

    costs to SDRs, ADRs and AFRs while ensuring the confidentiality of SDR

    swap data by giving full effect to the strictures of CEA section 8(e).

    To further promote regulatory efficiency, the Commission is

    proposing to provide a form of confidentiality arrangement as Appendix

    B to Part 49, for use by ADRs and AFRs. The Commission would expect its

    use by ADRs and AFRs to reduce significantly the need for these

    entities to negotiate separate confidentiality arrangements with the

    Commission. This proposed change also would eliminate the costs and

    potential inefficiencies to SDRs inherent in requiring them to

    negotiate confidentiality agreements with a potentially large number of

    ADRs and AFRs. Finally, while its use is not required, the Commission

    believes that the proposed form of confidentiality arrangement in

    Appendix B to Part 49 can be expected to conserve its limited staff

    resources by eliminating in many cases the need for the Commission and

    its staff to develop individualized confidentiality arrangements with

    multiple ADRs or AFRs seeking access to SDR swap data.

    1. Current Sec. 49.18

    The Commission adopted Sec. 49.18 to implement CEA section

    21(d)(1) and (2) as originally enacted. Accordingly, the current rule

    sets forth the obligation for SDRs to execute a ``Confidentiality and

    Indemnification Agreement'' before providing SDR swap data to an ADR or

    AFR. Congress has repealed the indemnification requirement, and the

    Commission proposes to make conforming amendments to Sec. 49.18 to

    remove references to indemnification.

    Separately, the Commission is proposing revisions to Sec. 49.18 to

    modify the substantive requirements of the confidentiality arrangement

    and the parties to the confidentiality arrangement, to establish

    conditions for restricting or revoking access to SDR swap data, and to

    clarify the confidentiality obligations of ADRs and AFRs with

    regulatory responsibility over an SDR.

    2. Proposed Amendments to Sec. 49.18(a)--Confidentiality Arrangement

    Required Prior to Disclosure of Swap Data

    The Commission proposes to remove current Sec. 49.18(a) \47\ and

    add a new Sec. 49.18(a) requiring that an SDR receive a

    confidentiality arrangement, executed by the Commission and the ADR or

    AFR seeking access to the swap data maintained by the SDR, that, at a

    minimum, contains all elements described in proposed Sec. 49.18(b).

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

    \47\ Current Sec. 49.18(a) describes the purpose of Sec.

    49.18.

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

    3. Proposed Amendments to Sec. 49.18(b)--Required Elements of the

    Confidentiality Arrangement

    The Commission proposes to replace the text of current Sec.

    49.18(b) \48\ with a requirement that the confidentiality arrangement

    required pursuant to Sec. 49.18(a) shall, at a minimum, include all

    elements included in the form of confidentiality arrangement set forth

    in proposed Appendix B to part 49. Paragraph 5 of the confidentiality

    arrangement would require the ADR or AFR to undertake that it will be

    acting within the scope of its jurisdiction each time it requests swap

    data from an SDR, and to promptly notify the Commission and each

    relevant SDR if the scope of the ADR's or AFR's jurisdiction changes.

    Paragraph 5 of the confidentiality arrangement also would require ADRs

    and AFRs to employ procedures to maintain the confidentiality of swap

    data and any information and analyses derived therefrom (the swap data

    and such information are referred to collectively as the ``Confidential

    Information'').

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

    \48\ Current Sec. 49.18(b) requires an SDR to receive a

    confidentiality agreement from a 21(c)(7) entity before granting the

    21(c)(7) entity access to swap data maintained by the SDR. As

    discussed above, the Commission proposes to address in proposed

    Sec. 49.18(a) the confidentiality arrangement condition to swap

    data access.

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

    Paragraph 6 of the confidentiality arrangement would require ADR

    and AFR signatories to employ the following safeguards to maintain the

    confidentiality of the Confidential Information:

    To the maximum extent practicable, maintain Confidential

    Information received from SDRs separately from other data and

    information; \49\

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

    \49\ ADRs and AFRs seeking useful guidance for Confidential

    Information segregation can look to the data segregation standards

    contained in the National Institute of Standards and Technology

    (``NIST'') Special Publication 800-53, Revision 4, Security and

    Privacy Controls for Federal Information Systems and Organizations

    (April 2013), available at http://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.800-53r4.pdf or in the Federal

    Information Security Management Act of 2002, as amended (``FISMA'').

    44 U.S.C. 3541. As the Commission has previously noted in a

    different context, FISMA ``is a source of cybersecurity best

    practices and also establishes legal requirements for federal

    government agencies . . . .'' System Safeguards Testing

    Requirements, 80 FR 80139, 80142 (Dec. 23, 2015) (``Registered

    Entity Cyber NPRM''). The Commission recently adopted final rules

    based on the Registered Entity Cyber NPRM. See System Safeguards

    Testing Requirements, 81 FR 64271 (Sept. 19, 2016) (``Final

    Registered Entity Cyber Rules'').

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

    Protect such Confidential Information from

    misappropriation and misuse; \50\

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

    \50\ This should include cybersecurity measures. As the

    Commission detailed in a different context in the Final Registered

    Entity Cyber Rules, ``cyber threats to the financial sector continue

    to expand.'' See Final Registered Entity Cyber Rules at 64272. See

    also System also Safeguards Testing Requirements for Derivatives

    Clearing Organizations, 80 FR 80113, 80114-80115 (Dec. 23, 2015)

    (describing escalating and evolving cybersecurity threats);

    Registered Entity Cyber NPRM at 80140-80141 (Dec. 23, 2015)

    (describing, inter alia, the current cybersecurity threat

    environment).

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

    Ensure that only ADR or AFR personnel with a need to

    access particular Confidential Information to perform their job

    functions related to such Confidential Information have access thereto

    and that such access is

    [[Page 8377]]

    permitted only to the minimum extent necessary to perform such job

    functions; \51\

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

    \51\ One basic principle of data security is that only those

    with a need to access data to perform their work should be granted

    access to such data. See, e.g., Framework for Improving Critical

    Infrastructure Cybersecurity at 23 (Feb. 12, 2014), available at

    http://www.nist.gov/cyberframework/upload/cybersecurity-framework-021214.pdf (characterizing the ``Protect'' element of a core

    cybersecurity framework as one where ``[a]ccess to assets and

    associated facilities is limited to authorized users, processes, or

    devices, and to authorized activities and transactions.'').

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

    Except as provided in paragraph 8 of the confidentiality

    arrangement, prevent disclosure of Confidential Information unless

    sufficiently aggregated and anonymized to prevent identification,

    through disaggregation or otherwise, of a market participant's business

    transactions, trade data, market positions, customers or

    counterparties; \52\

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

    \52\ The Commission understands that ADRs and AFRs may want to

    use aggregated and anonymized information derived from SDR swap data

    in analyses that may be made public. Cf. U.S. Gov't Accountability

    Office, GAO-16-175, Financial Regulation: Complex and Fragmented

    Structure Could Be Streamlined To Improve Effectiveness 71-75 (2016)

    (``GAO Report''), available at http://www.gao.gov/assets/680/675400.pdf (discussing the OFR's Financial Stability Monitor and

    related confidentiality issues and protections surrounding sharing

    aggregated and disaggregated information provided by other

    agencies). The Commission believes that, when properly aggregated

    and anonymized, information derived from SDR swap data generally can

    be disclosed without violating the requirement in CEA section 21(d)

    that a recipient of swap data agree, with respect to the information

    on swap transactions that is provided by an SDR, to abide by the

    confidentiality requirements described in CEA section 8. Cf. Sec.

    49.16(c) (stating that ``[s]ubject to Section 8 of the Act, [SDRs]

    may disclose aggregated swap data on a voluntary basis or as

    requested[ ] in the form and manner[ ] prescribed by the

    Commission.''); SDR Final Rules at 54551 (stating that ``the

    Commission believes that it is permissible under the Dodd-Frank Act

    and part 49 of the Commission's regulations for an SDR to disclose,

    for non-commercial purposes, data on an aggregated basis such that

    the disclosed data reasonably cannot be attributed to individual

    transactions or market participants.''). In certain cases, however,

    even aggregated information may enable a reader to determine a

    market participant's business transactions, trade secrets (e.g.,

    algorithms) or positions. Thus, the proposed form of confidentiality

    arrangement requires ADRs and AFRs to implement safeguards designed

    to appropriately limit the use of information that has been

    aggregated from SDR swap data and to prevent disaggregation or other

    derivations of a market participant's business transactions, trade

    data or market positions. ADRs and AFRs can look to Sec.

    43.4(d)(1), (d)(4) and (g) for guidance on anonymization principles.

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

    Prohibit the use of Confidential Information by ADR or AFR

    personnel for any improper purpose; and

    Monitor compliance with the confidentiality safeguards and

    ensure prompt notification of the CFTC and each relevant SDR of any

    violation of the safeguards or failure to fulfill the terms of the

    confidentiality arrangement.

    Paragraph 7 of the confidentiality arrangement also would preclude,

    with limited exceptions, ADRs and AFRs from disclosing any Confidential

    Information, via onward sharing \53\ or otherwise. The only permitted

    disclosures would be (1) in actions, adjudicatory actions or

    proceedings, as applicable, described in CEA section 8(e), the

    operative language of which is included in paragraph 8 of the

    confidentiality arrangement and (2) aggregated SDR swap data that is

    anonymized to prevent identification (through disaggregation or

    otherwise) of a market participant's business transactions, trade data,

    market positions, customers or counterparties.

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

    \53\ The Commission interprets the restrictions on disclosure

    contained in CEA section 8 that are incorporated in CEA section

    21(c)(7) and 21(d) as prohibiting an ADR or AFR from onward sharing

    swap data it obtains from an SDR.

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

    Paragraph 9 of the confidentiality arrangement contains certain

    provisions requiring ADRs and AFRs to notify the Commission, and take

    certain protective actions, prior to disclosing SDR swap data even

    where an ADR or AFR receives a legally enforceable demand to disclose

    Confidential Information.

    Paragraph 11 of the confidentiality arrangement would require ADRs

    and AFRs accessing swap data from SDRs to comply with all security-

    related requirements imposed by SDRs in connection with access to such

    swap data, as such requirements may be revised from time to time.

    Because, subject to specified conditions, CEA sections 21(c)(7) and

    21(d) require SDRs to provide ADRs and AFRs access to swap data, the

    Commission expects that SDRs will not impose security-related access

    requirements beyond those that are necessary to ensure the privacy and

    confidentiality of SDR swap data. The Commission further expects that

    SDRs' security-related access requirements for ADRs and AFRs would be

    akin, if not identical, to the requirements SDRs impose on others

    (e.g., the Commission, reporting counterparties) to whom SDRs provide

    swap data access.

    To further protect the confidentiality of SDR swap data, paragraph

    12 of the confidentiality arrangement would require ADR and AFR

    signatories to promptly destroy all Confidential Information for which

    they no longer have a need or which no longer falls within their scope

    of jurisdiction.\54\ While it may be the case that ADRs or AFRs will

    use some or all Confidential Information in perpetuity, if they no

    longer have a need for Confidential Information, they should destroy

    such Confidential Information to prevent its misuse. Similarly, it is

    possible that an SDR may inadvertently provide swap data outside the

    scope of an ADR or AFR's jurisdiction. In such circumstances, such swap

    data also should be destroyed immediately after the ADR or AFR

    discovers that such swap data is outside the scope of its jurisdiction.

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

    \54\ Paragraph 12 of the confidentiality arrangement would also

    require ADR and AFR signatories to certify to the CFTC, upon

    request, that they have destroyed such swap data.

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

    The proposed rule would require that the confidentiality

    arrangement must include an exhibit (Exhibit A) specifying the scope of

    jurisdiction of the ADR or AFR signatory. If such signatory is not an

    Enumerated ADR, the ADR or AFR would attach the Commission

    Determination Order described in Sec. 49.17(h) as Exhibit A to the

    confidentiality arrangement. If such signatory is an Enumerated ADR, it

    would attach, as Exhibit A to the confidentiality arrangement, a

    detailed description of its scope of jurisdiction as it relates to the

    swap data maintained by SDRs that the ADR would seek pursuant to the

    confidentiality arrangement. This requirement is designed to assist

    SDRs in determining that the scope of each swap data request is within

    the scope of the requesting entity's jurisdiction.

    While the Commission would impose certain obligations on ADRs and

    AFRs, with respect to swap data received from an SDR, in the proposed

    confidentiality arrangement, ADRs and AFRs retain the discretion to

    determine how to comply with those obligations. Additionally, to the

    extent that neither the proposal nor commenters address a relevant

    confidentiality issue that arises after an ADR or AFR commences

    accessing swap data, the Commission expects affected ADRs and AFRs to

    take appropriate measures to safeguard affected swap data and advise

    the Commission of such issue promptly so that the Commission may

    consider appropriate action.

    4. Removal of Sec. 49.18(c)--ADRs and AFRs With Regulatory

    Responsibility Over an SDR

    The Commission proposes to remove current Sec. 49.18(c), which

    provides that the indemnification and confidentiality requirements

    established in Sec. 49.18(b) do not apply to certain ADRs and AFRs

    with regulatory jurisdiction or supervisory responsibilities over an

    SDR, but requires such regulators to comply with CEA section 8 and

    ``any other relevant statutory confidentiality authorities.'' As noted

    above in section II.B. relating to Sec. 49.17(d)(2) and (3), the

    Commission believes that those domestic and foreign regulators that

    have regulatory responsibility over an

    [[Page 8378]]

    SDR should be able to access SDR data reported to such SDR pursuant to

    such other regulator's regulatory regime, without limitation.

    Therefore, the Commission submits that Sec. 49.18(c) is not

    appropriate because it requires these domestic and foreign regulators

    with regulatory responsibility over SDRs to comply with CEA section 8

    and any other relevant statutory confidentiality authorities. In

    addition, Sec. 49.17(d)(2) and (3) already provide that the

    confidentiality and indemnification requirements of Sec. 49.18(b) do

    not apply to these domestic and foreign regulators with regulatory

    responsibility over SDRs. However, insofar as a regulator sought swap

    data that was not reported to the SDR pursuant to that regulator's

    regulatory regime, the exclusions set forth within Sec. 49.17(d)(2)

    and (3) would not apply.

    The Commission accordingly submits that current Sec. 49.18(c) is

    inappropriate and unnecessary, and therefore, should be eliminated.

    5. Failure to Fulfill the Terms of a Confidentiality Arrangement:

    Proposed Sec. 49.18(c) and (d)

    The Commission proposes in new Sec. 49.18(c) to require SDRs to

    promptly report to the Commission any known failure to fulfill the

    terms of a confidentiality arrangement that they receive pursuant to

    Sec. 49.18(a). Proposed new Sec. 49.18(d) would authorize the

    Commission to direct an SDR to limit, suspend or revoke an AFR's or

    ADR's access to swap data, if the Commission determines that the AFR or

    ADR has failed to fulfill the terms of its confidentiality arrangement

    with the Commission.\55\

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

    \55\ Proposed Sec. 49.18(d) provides that, if an ADR or AFR

    fails to fulfill the terms of a confidentiality arrangement under

    paragraph (a) of proposed Sec. 49.18, the Commission may direct

    each registered SDR to limit, suspend or revoke the ADR's or AFR's

    access to swap data held by the SDR Similarly, proposed Sec.

    49.17(d)(5) would require an SDR, as directed by the Commission, to

    limit, suspend or revoke an ADR's or AFR's swap data access should

    the Commission revoke the appropriateness determination for such ADR

    or AFR or otherwise direct the SDR to suspend or revoke such access.

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

    6. Proposed Sec. 49.18(e)--Delegation of Authority

    The Commission is proposing to add Sec. 49.18(e)(1) to delegate to

    the Director of the Division of Market Oversight, and to such staff

    acting under his or her direction as he or she may designate from time

    to time, all functions reserved to the Commission in Sec. 49.18.

    Proposed Sec. 49.18(e)(2) would reserve to the Director of the

    Division of Market Oversight the authority to submit to the Commission

    for its consideration any matter which has been delegated to the

    Director under proposed Sec. 49.18(e)(1). The Commission proposes in

    Sec. 49.18(e)(3) to expressly permit the Commission, at its election,

    to exercise the authority delegated to the Director of the Division of

    Market Oversight under proposed Sec. 49.18(e)(1).

    This delegation is intended to conserve Commission resources and

    increase the effectiveness and efficiency of the Commission's oversight

    and supervision of SDR swap data access. The Commission anticipates

    that the delegation of authority will help facilitate timely access to

    SDR swap data by ADRs and AFRs consistent with the requirements set

    forth in part 49 of the Commission's regulations. However, the Division

    of Market Oversight may submit matters to the Commission for its

    consideration, as it deems appropriate.

    7. Conforming Changes

    As a result of the FAST Act Amendments, the Commission proposes

    conforming changes to Sec. 49.17(d)(6), to delete references to an

    Indemnification Agreement. As a result of the proposed changes to Sec.

    49.18, and in particular, Sec. 49.18(a), the Commission proposes

    conforming changes to Sec. 49.22(d)(4) relating to chief compliance

    officer compliance responsibilities and duties so that the appropriate

    section reflecting the confidentiality arrangement is referenced.

    8. Request for Comment

    1. The Commission requests comment on all aspects of the proposed

    amendments to Sec. 49.18. Commenters are particularly invited to

    address the proposed amendments to Sec. 49.18 relating to the

    confidentiality provisions of CEA sections 21(c)(7) and 21(d), whether

    the Commission should prescribe specific processes to govern ADR and

    AFR requests for swap data access from an SDR; and whether the

    Commission should prescribe a process to govern an SDR's treatment of

    requests for swap data access.

    2. In addition, commenters are invited to address the proposed

    rules implementing the notification requirement. In this regard, is

    there an alternative to requiring SDRs to maintain copies of all data

    they provide in connection with the data access provisions that would

    still permit the Commission to assess the SDR's ongoing compliance with

    those provisions? For example, are alternative approaches available

    such that the Commission need not require SDRs to maintain actual

    copies of all information provided pursuant to the data access

    provisions? Would such an alternative approach reduce the burdens on

    SDRs while still permitting the Commission to assess ongoing

    compliance?

    E. Other Changes

    In addition to those changes discussed throughout this release, the

    Commission is proposing other changes to part 49, including a number of

    ministerial changes. The Commission proposes to amend Sec. 49.9(a)(9)

    to change the reference in Sec. 49.9(a)(9) from ``certain appropriate

    domestic regulators and foreign regulators'' to ``Appropriate Domestic

    Regulators and Appropriate Foreign Regulators'' to make clear that an

    SDR is required to provide access to swap data, pursuant to Sec.

    49.17, only to ADRs and AFRs. The Commission is proposing to make a

    number of other changes to part 49 to more consistently refer to the

    defined term ``swap data''. The Commission is proposing to modify the

    references in existing Sec. Sec. 49.9(a)(9) and 49.17(b)(2)(i) to

    ``swap data or information''; the reference in existing Sec.

    49.17(d)(4)(i) to ``swaps transaction data''; and the reference in

    existing Sec. 49.17(d)(6) to ``requested data,'' to be references to

    ``swap data'' as that term is defined in Sec. 49.2(a)(15). The

    Commission is proposing these changes to eliminate confusion and to

    conform part 49 to the FAST Act's amendment of CEA section 21(c)(7) to

    refer to ``swap data.''

    The Commission is also proposing to replace the reference in Sec.

    49.17(a) to ``swaps data'' with a reference to ``swap data'' and to

    replace the reference in Sec. 49.17(a) to ``Regulation'' with a

    reference to ``Sec. 49.17'' to match the format of the reference in

    Sec. 49.17(b). The Commission does not intend to effect any

    substantive changes with these proposed amendments.

    The Commission is proposing to change the references to ``swap

    transaction data'' and ``swaps transaction data'' in Sec. 49.17(c)(2)

    and 49.17(c)(3) to ``swap data'' as defined in Sec. 49.2(a)(15). The

    Commission is also proposing to change the references to ``data'' in

    Sec. 49.17(d)(5), (d)(6), (e), and (e)(1) to ``swap data'' in order to

    clarify the Commission's intent to refer to ``swap data'' within the

    meaning of Sec. 49.2(a)(15). For the same reason, the Commission is

    also proposing to add ``swap data and'' before ``information'' in Sec.

    49.17(e)(2) to conform it to Sec. 49.17(e)(1), as proposed to be

    amended.\56\ The Commission also

    [[Page 8379]]

    proposes to add the term ``and information'' after the term ``swap

    data'' in the second sentence of Sec. 49.17(e) so that such sentence

    is consistent with the first sentence of Sec. 49.17(e), which permits

    access by third parties to both swap data and information maintained by

    a registered SDR, subject to certain conditions.

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

    \56\ Although Sec. 49.17(e) uses the terms ``data'' and ``swap

    data'' interchangeably, the Commission intended those paragraphs to

    reference the definition of ``swap data'' and, consequently,

    believes that these do not represent a change to the Commission's

    original intent in promulgating Sec. 49.17(e). However, the term

    ``swap data'' is narrower than the terms ``data'' and

    ``information.'' Consequently, changing ``data'' to ``swap data''

    arguably would narrow the scope of the confidentiality procedures

    and confidentiality arrangement required by Sec. 49.17(e)(1) and

    (2).

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

    In Sec. 49.17(f)(2), the Commission is proposing to change both

    references to ``[d]ata and information'' to ``[S]wap data and

    information'' in order to clarify, in each case, that the intended

    reference is to ``swap data'' as defined in Sec. 49.2(a)(15).

    In addition to those changes related to references to swap data,

    the Commission is also proposing to amend Sec. 49.17(b)(1)(vii) to

    change ``[a]ny other person the Commission deems appropriate[ ]'' to

    ``[a]ny other person the Commission determines to be appropriate

    pursuant to the process set forth in Sec. 49.17(h)'' to match the

    language in CEA section 21(c)(7).

    Commission regulation 49.17(f)(1) currently states, ``Access of

    swap data maintained by the registered swap data repository to market

    participants is generally prohibited.'' The Commission is proposing to

    amend Sec. 49.17(f)(1) to state, ``Access by market participants to

    swap data maintained by the registered swap data repository is

    prohibited other than as set forth in Sec. 49.17(f)(2)'' in order to

    clarify its meaning. The Commission does not intend this to be a

    substantive change to Sec. 49.17(f)(1).

    Finally, the Commission is proposing several minor clarifying

    changes to Sec. 49.18(b).\57\ These changes include replacing ``the

    swap data'' with ``swap data''; replacing the ``with any Appropriate

    Domestic Regulator or Appropriate Foreign Regulator'' reference with

    ``to any Appropriate Domestic Regulator or Appropriate Foreign

    Regulator''; and adding ``each'' before ``as defined in Sec.

    49.17(b)'' to reflect that both ``Appropriate Domestic Regulator'' and

    ``Appropriate Foreign Regulator'' are defined terms in Sec. 49.17(b).

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

    \57\ These proposed changes appear in proposed Sec. 49.18(a).

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

    III. Request for Comment

    In addition to the specific questions set forth in various sections

    above, the Commission requests comment on all aspects of the proposal,

    and particularly invites comment on the questions set forth below.

    (1) What, if any, impediments exist to accurately and cost-

    effectively determining whether swap data access requests are within

    the scope of an ADR's/AFR's jurisdiction?

    (2) Are there any particular elements the Commission has proposed

    to include in the confidentiality arrangement that are unnecessary? Has

    the Commission omitted particular element(s) that should be included in

    a confidentiality arrangement?

    (3) Do SDRs maintain swap data in a manner that permits accurate

    reproduction at a later date of the results of an ADR's/AFR's request

    for swap data? If so, is it necessary for the Commission to require

    that SDRs maintain records of the results of such requests, as opposed

    to merely maintaining the details of the request?

    IV. Related Matters

    A. Regulatory Flexibility Act

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

    in promulgating rules, to consider the impact of those rules on small

    entities.\58\ The rules proposed herein will have a direct effect on

    the operations of SDRs and certain domestic and foreign regulators

    seeking access to swap data reported to, and maintained, by SDRs.

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

    \58\ See 5 U.S.C. 601 et seq.

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

    The Commission has previously established certain definitions of

    ``small entities'' to be used by the Commission in evaluating the

    impact of its rules on small entities in accordance with the RFA.\59\

    The Commission has previously determined that SDRs are not small

    entities for purpose of the RFA.\60\ For purposes of the Regulatory

    Flexibility Act, the definition of ``small entity'' also encompasses

    ``small governmental jurisdictions,'' which in relevant part means

    governments of locales with a population of less than fifty

    thousand.\61\ Although the Commission anticipates that this proposal

    may be expected to have an economic impact on various governmental

    entities that access data pursuant to Dodd-Frank's data access

    provisions, the Commission does not anticipate that any of those

    governmental entities would be small governmental jurisdictions.

    Therefore, the Commission does not believe that this proposal will have

    a significant economic impact on a substantial number of small

    entities. Therefore, the Chairman, on behalf of the Commission,

    pursuant to 5 U.S.C. 605(b), hereby certifies that the proposed rules

    will not have a significant economic impact on a substantial number of

    small entities.

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

    \59\ See Policy Statement and Establishment of ``Small

    Entities'' for purposes of the Regulatory Flexibility Act, 47 FR

    18618 (Apr. 30, 1982) at 18618-21.

    \60\ See Part 49 Adopting Release at 54575 and Notice of

    Proposed Rulemaking: Swap Data Repositories, 75 FR 80898 (Dec. 23,

    2010) at 80926.

    \61\ 5 U.S.C. 601(5), (6).

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

    B. Paperwork Reduction Act

    The proposed amendments to part 49 would result in new ``collection

    of information'' requirements within the meaning of the Paperwork

    Reduction Act of 1995 (``PRA'').\62\ An agency may not conduct or

    sponsor, and a person is not required to respond to, a collection of

    information unless it displays a currently valid Office of Management

    and Budget (``OMB'') control number. The OMB control number for the

    information collection associated with part 49 swap reporting is 3038-

    0086.\63\ The Commission is seeking to revise Information Collection

    3038-0086 because the rule amendments proposed herein will impose

    information collection requirements that require approval from OMB

    under the PRA. The Commission is therefore submitting this proposal to

    OMB for review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11.

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

    \62\ 44 U.S.C. 3501 et seq.

    \63\ See OMB Control Number 3038-0086 (``Information Collection

    3038-0086''). The most recent revision to OMB Control Number 3038-

    0086 was approved November 30, 2015 and is available at: http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0086.

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

    1. Summary of the Proposed Requirements

    The proposed modifications to part 49 would require SDRs to make

    swap data available to requesting entities if certain conditions are

    satisfied. These conditions include the requesting entity executing a

    confidentiality arrangement and, in some cases, receiving a

    determination order from the Commission that it is an appropriate

    entity to receive SDR swap data. The proposed modifications would also

    require SDRs to report failures to fulfill the terms of confidentiality

    arrangements to the Commission.

    2. Collection of Information

    Currently, OMB Control Number 3038-0086 sets out burden estimates

    relating to a broad range of SDR obligations associated with

    registration requirements, reporting requirements, recordkeeping

    requirements, and disclosure requirements. Where the information

    collection associated with those obligations would be modified by this

    proposed rule, the Commission is proposing to revise Information

    [[Page 8380]]

    Collection 3038-0086 accordingly. To the extent the proposed

    modifications to part 49 introduce new information collections that

    were not previously incorporated into Information Collection 3038-0086,

    the Commission is proposing to revise Information Collection 3038-0086

    to account for the new information collections. Finally, many of the

    information collections discussed in Information Collection 3038-0086

    are not implicated or modified by the Commission's proposed revisions

    to part 49 in this release. The Commission, therefore, is not proposing

    to revise the estimated burdens associated with such information

    collections. New or revised information collections contained in these

    proposed revisions to part 49 will affect SDRs as well as entities that

    request access to SDR swap data pursuant to these provisions.

    As discussed above, the proposed modifications to part 49 set out

    in this release are intended to provide a process by which other

    authorities may obtain access to SDR swap data. The information

    collections associated with this process are intended to ensure that

    SDR swap data is only accessed by appropriate entities and that the

    confidentiality of any accessed SDR swap data is adequately protected.

    The ultimate result of this process is intended to provide other

    authorities with information to assist with the oversight of the global

    swaps market and market participants.

    ADR/AFRs. As discussed throughout this release, certain conditions

    must be satisfied before a requesting entity is permitted to access SDR

    swap data. These conditions may implicate various PRA collections and

    burdens as discussed below.

    Pursuant to Sec. 49.18(a), every requesting entity seeking access

    to SDR swap data must execute a confidentiality arrangement with the

    Commission prior to receiving access. This requirement applies to both

    those entities that are specifically enumerated as appropriate in Sec.

    49.17(b)(1) and those entities that require a determination from the

    Commission that they are appropriate entities to receive access to SDR

    swap data, regardless of whether the requesting entity is a domestic or

    foreign entity.

    In addition to executing a confidentiality arrangement, requesting

    entities that are not Enumerated ADRs will be required to seek a

    Determination Order from the Commission to have access to SDR swap

    data. Such Determination Orders will describe SDR swap data that is

    appropriate for the entity to access, based on the requesting entity's

    scope of jurisdiction. For Enumerated ADRs, the Commission is proposing

    to require that the confidentiality arrangement describe the requesting

    entity's scope of jurisdiction. The Commission believes the use of the

    form of confidentiality arrangement set out in Appendix B to part 49

    will provide an efficient means to satisfy the requirements of Sec.

    49.18(a).

    The Commission, for PRA purposes, believes that it is reasonable to

    assume that 300 total entities will seek access to SDR swap data. This

    estimate is based on the Commission's experience in receiving data

    requests from other regulators and its experience in coordinating and

    cooperating with other regulators.\64\ For PRA purposes, the Commission

    assumes there are four SDRs, which is the number of SDRs that are

    provisionally registered with the Commission. As the confidentiality

    arrangement will be between the ADR or AFR and the Commission and

    delivered to the SDR, AFRs and ADRs need not execute a separate

    confidentiality arrangement for each SDR. Accordingly, the Commission

    estimates, for PRA purposes, that the total number of confidentiality

    arrangements that will be executed under the proposed rules is 300.

    Given that the Commission will have published a form of confidentiality

    arrangement as an appendix to part 49, the Commission estimates that

    the review and execution of each confidentiality arrangement by an ADR

    or AFR will take approximately 40 hours, for a total burden of 12,000

    hours. The burden estimates associated with entering into such

    confidentiality arrangements are addressed in the proposed revised OMB

    Control Number 3038-0086.

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

    \64\ The Commission estimates that up to approximately 30

    authorities in the United States may seek to access swap data from

    SDRs. In the context of potential AFRs, the Commission believes that

    most requests will come from authorities in G20 countries, each of

    which will have no more and likely fewer than 30 authorities that

    may request swap data from SDRs. In addition, certain authorities

    from outside the G20 also may request swap data from SDRs.

    Accounting for all of these entities, the Commission estimates that

    there likely will be a total of no more than 300 relevant domestic

    and foreign authorities that may request swap data from SDRs.

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

    An entity that seeks access to SDR swap data must be considered

    appropriate by the Commission prior to that entity receiving access to

    SDR swap data. For Enumerated ADRs, there is no burden associated with

    seeking to be deemed appropriate by the Commission as they are already

    enumerated as such. Those entities that are not Enumerated ADRs will be

    required to receive a Determination Order prior to receiving access to

    SDR swap data. The process for obtaining such a Determination Order is

    set out in general terms in proposed Sec. 49.17(h) and requires the

    requesting entity to prepare and submit an application to the

    Commission. The preparation and submittal of this application

    constitutes an information collection under the PRA.

    As discussed above, the Commission believes that for PRA purposes

    it is reasonable to assume that 300 domestic and foreign entities will

    seek access to SDR swap data. Very few of these entities are

    specifically enumerated in Sec. 49.17(b)(1). The Commission estimates,

    for PRA purposes, that each such requesting entity would expend 100

    hours in connection with filing an application to receive an

    appropriateness determination, for a total initial burden of no more

    than 30,000 hours, calculated as the product of 300 domestic and

    foreign entities seeking access to SDR swap data and 100 hours per

    application). This estimate considers the relevant information that

    would be required to be provided in such an application, including

    information regarding the entity's scope of jurisdiction, mutual

    assistance provided to the Commission, and the existence of cooperation

    related to an MOU or similar information sharing arrangement with the

    Commission, as well as any other information relevant for the

    Commission's determination. This burden estimate is included in the

    Commission's proposed revisions to Information Collection 3038-0086.

    Swap Data Repositories. As discussed throughout this release, SDRs

    are required to facilitate access to SDR swap data by requesting

    entities, provided certain conditions are met. This requirement may

    implicate PRA collections and burdens, some of which are already

    addressed in the existing OMB Control Number 3038-0086, and some of

    which constitute new collections, as discussed below. Currently, the

    burden on SDRs of making data available to ADRs and AFRs is accounted

    for in OMB Control Number 3038-0086, as this is an existing obligation

    under existing Sec. 49.17(d). However, the proposed rules set out in

    this release clarify and modify the requirements imposed on SDRs in

    providing access to SDR swap data to ADRs and AFRs. Consequently the

    Commission is revising Information Collection 3038-0086 to account for

    these modifications.

    The Commission expects to limit a requesting entity's access to SDR

    swap data based on the entity's scope of jurisdiction. In connection

    with this

    [[Page 8381]]

    limitation, the Commission expects SDRs to incur burdens and costs

    associated with setting up access to SDR swap data that is consistent

    with an ADR or AFR's scope of jurisdiction. The Commission expects that

    each confidentiality arrangement will identify, either directly or

    through the attached Determination Order, the scope of access that is

    appropriate for a given requesting entity. The Commission expects SDRs

    to use these limitations to program their systems to reflect the scope

    of the ADR or AFR's access to SDR swap data. These limits set out in

    the confidentiality arrangement are expected to reduce the burdens on

    SDRs of assessing whether a request satisfies the relevant conditions,

    particularly with regard to whether SDR swap data relates to persons or

    activities within the requesting entity's scope of jurisdiction. The

    Commission estimates that the burden on an SDR associated with setting

    up access restrictions to match a requesting entity's scope of

    jurisdiction will include 20 hours of programmer analyst time, five

    hours of senior programming time, and one hour of attorney time, for a

    total of 26 hours. Consequently, for PRA purposes, the Commission

    estimates that each SDR would incur a total burden of 7,800 hours

    (i.e., the product of 300 entities and 26 hours of time) associated

    with setting up access for each ADR or AFR. The burdens associated with

    these permissioning requirements are addressed in proposed revised OMB

    Control Number 3038-0086.

    SDRs will also be required to provide electronic notice to the

    Commission of the first request for data from a particular requesting

    entity and promptly after receiving any request that does not comport

    with the scope of the ADR's or AFR's jurisdiction. In addition to

    notifying the Commission of the foregoing, the Commission is proposing,

    in Sec. Sec. 49.17(d)(4)(i) and (iii), to require SDRs to maintain

    records of all information related to the initial and all subsequent

    requests for data from the requesting entity. These records shall

    include, at a minimum, the identity of the requestor or person

    accessing the data; the date, time and substance of the request or

    access; and copies of all data reports or other aggregation of data

    provided in connection with the request or access. The SDR shall

    maintain this information for a period of no less than five years after

    the date of such request and shall provide this information to the

    Commission upon request.

    Currently, OMB Control Number 3038-0086 estimates burdens

    associated with various registration, reporting, recordkeeping, and

    disclosure requirements to which SDRs are subject. The proposed

    recordkeeping requirements relating to requesting entities' data

    requests constitute an information collection for PRA purposes and

    require the Commission to revise the recordkeeping burden estimates

    contained in OMB Control Number 3038-0086. The reporting and

    recordkeeping requirements proposed in this release may potentially

    impact each SDR.

    SDRs already have the ability to communicate electronically with

    the Commission and are subject to significant recordkeeping

    requirements pursuant to Sec. 49.12. Therefore, the proposed

    requirements should not result in SDRs having to incur initial costs to

    implement systems to properly notify the Commission when a requesting

    entity submits a data request for the first time that are in excess of

    what is already accounted for in OMB Control Number 3038-0086. The

    Commission estimates that initially each SDR may incur a burden of 360

    hours associated with these proposed recordkeeping requirements, for a

    total of 1,440 hours (i.e., the product of four SDRs and 360 hours).

    Additionally, the Commission estimates that each SDR would incur an

    annual burden of 280 hours associated with the recordkeeping

    requirements, for a total of 1,120 hours annually (i.e., the product of

    four SDRs and 280 hours). The burdens associated with these

    notification requirements are addressed in proposed revised Information

    Collection 3038-0086.

    Finally, current Information Collection 3038-0086 accounts for the

    costs to SDRs of executing a ``Confidentiality and Indemnification

    Agreement'' with each requesting ADR and AFR. Under the Commission's

    proposal, the SDR is no longer required to execute such an agreement

    with the ADRs or AFRs. The proposed confidentiality arrangement shall

    be between the requesting ADR or AFR and the Commission. Accordingly,

    the total burden to SDRs, as currently reflected in Information

    Collection 3038-0086, is reduced by the cost to execute such

    agreements. The reduction in burden associated with this change in the

    confidentiality agreement is addressed in proposed revised Information

    Collection 3038-0086.

    3. Request for Comments on Collection

    The Commission invites the public and other Federal agencies to

    comment on any aspect of the reporting burdens discussed above.

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

    in order to: (1) Evaluate whether the proposed collection of

    information is necessary for the proper performance of the functions of

    the Commission, including whether the information will have practical

    utility; (2) evaluate the accuracy of the Commission's estimate of the

    burden of the proposed collection of information; (3) determine whether

    there are ways to enhance the quality, utility, and clarity of the

    information to be collected; and (4) minimize the burden of the

    collection of information on those who are to respond, including

    through the use of automated collection techniques or other forms of

    information technology.

    Comments may be submitted directly to the Office of Information and

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

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

    of submitted comments so that all comments can be summarized and

    addressed in the final rule preamble. Refer to the ADDRESSES section of

    this notice of proposed rulemaking for comment submission instructions

    to the Commission. A copy of the supporting statements for the

    collections of information discussed above may be obtained by visiting

    www.RegInfo.gov. OMB is required to make a decision concerning the

    collection of information between 30 and 60 days after publication of

    this document in the Federal Register. Therefore, a comment is best

    assured of having its full effect if OMB receives it within 30 days of

    publication.

    C. Cost-Benefit Considerations

    1. Introduction

    As discussed in Section I, entitled ``Background and

    Introduction,'' above, Congress passed the FAST Act to facilitate

    broader access to swap data by the regulatory community. Section

    86001(b) of the FAST Act amends CEA section 21 by, among other things,

    eliminating the requirement that, as a condition of receiving

    information from SDRs, each ADR or AFR agree to indemnify the SDR and

    the Commission for any expenses arising from litigation relating to the

    information provided under CEA Section 8. The Commission is issuing

    this proposed rulemaking to enable ADRs and AFRs to access swap data,

    subject to certain safeguards designed to protect swap data from

    misappropriation or misuse, and to advise the public of the practical

    implications of the changes to the CEA made by the FAST Act. The

    Commission preliminarily believes that the proposed safeguards are

    warranted based on the incorporation by reference

    [[Page 8382]]

    in CEA sections 21(c)(7) and 21(d) of the strong protections of CEA

    section 8.

    CEA section 15(a) requires the Commission to consider the costs and

    benefits of its actions before promulgating a regulation under the CEA

    or issuing certain orders. CEA section 15(a) further specifies that the

    costs and benefits shall be evaluated in light of the following five

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

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

    financial integrity of futures markets; (3) price discovery; (4) sound

    risk management practices; and (5) other public interest

    considerations. The Commission considers the costs and benefits

    resulting from its discretionary determinations with respect to the CEA

    section 15(a) factors.

    As an initial matter, the Commission recognizes that there are

    benefits, discussed more fully below, for domestic and foreign

    regulators to have access to SDR swap data. Yet, there are inherent

    compromises between data access and data security. More directly,

    greater access leads to data being less secure from misappropriation or

    misuse. The Commission recognizes that there are costs associated with

    this proposed rulemaking. The Commission, however, lacks the requisite

    data and information to precisely estimate costs, in part, because the

    proposed rulemaking grants SDRs, ADRs, and AFRs discretion to implement

    the proposed regulations through alternative measures. Furthermore, the

    Commission does not know which approach SDRs, ADRs, and AFRs will take.

    As a consequence, where it is not feasible to quantify (e.g., because

    of the lack of accurate data or appropriate metrics), the Commission

    has considered the costs and benefits of this proposed rulemaking in

    qualitative terms. The Commission, nevertheless, requests that

    commenters provide any data or other information that would be useful

    in the estimation of the quantifiable costs and benefits of this

    proposed rulemaking.

    2. Baseline and Proposed Rule Summary

    a. Definition of Foreign Regulator--Proposed Amendment to Sec.

    49.2(a)(5)

    The status quo baseline definition for the term ``foreign

    regulator'' as defined in current Sec. 49.2(a)(5) is a ``foreign

    futures authority as defined in CEA Section 1a(26), foreign financial

    supervisors, foreign central banks and foreign ministries.'' \65\ The

    Commission is proposing to amend the term ``foreign regulator'' to add

    entities. Specifically, the Commission is adding the phrase ``other

    foreign authorities'' to the definition. This approach is consistent

    with the FAST Act's amendment to CEA section 21(c)(7)(E).

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

    \65\ 17 CFR 49.2(a)(5).

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

    b. Definition of Appropriate Foreign Regulator--Proposed Amendment to

    Sec. 49.17(b)(2)

    The status quo baseline definition for the term ``Appropriate

    Foreign Regulator'' (defined in current Sec. 49.17(b)(2)) is ``those

    Foreign Regulators with an existing memorandum of understanding or

    other similar type of information sharing arrangement executed with the

    Commission and/or Foreign Regulators without an MOU as determined on a

    case-by-case basis by the Commission.'' \66\

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

    \66\ 17 CFR 49.17(b)(2).

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

    The Commission is proposing to amend current Sec. 49.17(b)(2) to

    require all ``foreign regulators'' to file an application with the

    Commission to become ``Appropriate Foreign Regulators.'' The existence

    of a current MOU or other information sharing arrangement with the

    Commission will not be dispositive to a determination of

    appropriateness. The proposed amendment would require the Commission to

    issue an order finding each foreign regulator ``appropriate.'' In this

    manner, the Commission will ensure that each ``Appropriate Foreign

    Regulator'' is acting within its scope of jurisdiction as mandated

    under CEA section 21(c)(7) through incorporation by reference of CEA

    section 8(e). The Commission believes that this proposal will provide

    greater control over the process by which foreign regulators obtain

    access to SDR swap data; specifically, it will help to ensure that only

    those foreign regulators who have a regulatory interest in SDR swap

    data can access such swap data. The limitation on swap data access

    proposed in this recommendation is expected to help reduce the risk of

    unauthorized disclosure, misappropriation or the misuse of swap data.

    c. Duties of Registered SDRs--Proposed Amendments to Sec. 49.9(a)(9)

    The Commission has proposed conforming language changes to current

    Sec. 49.9(a)(9).\67\ There are no substantive changes with respect to

    costs and benefits.

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

    \67\ 17 CFR 49.9(a)(9).

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

    d. Purpose of Access to SDR Data--Proposed Amendment to Sec. 49.17(a)

    The Commission has proposed conforming language changes to current

    Sec. 49.17(a).\68\ There are no substantive changes with respect to

    costs and benefits.

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

    \68\ 17 CFR 49.17(a).

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

    e. Appropriate Domestic Regulator--Proposed Amendment to Sec.

    49.17(b)(vii)

    The Commission has proposed conforming language changes to current

    Sec. 49.17(b)(vii) to cross-reference the process under Sec.

    49.17(h).\69\ There are no substantive changes with respect to costs

    and benefits in proposed Sec. 49.17(b)(vii). If there are any costs or

    benefits associated with the changes in Sec. 49.17(b)(vii), they will

    be discussed in regards to the process defined under proposed Sec.

    49.17(h), which is the appropriateness-determination process.

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

    \69\ 17 CFR 49.17(b)(vii).

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

    f. Domestic Regulator With Regulatory Responsibility--Proposed

    Amendment to Sec. 49.17(d)(2)

    By way of this proposed rulemaking, the Commission has explained

    that if a domestic regulator receives swap data pursuant to its

    regulatory regime, that access is not subject to CEA sections 21(c)(7)

    or 21(d), or Commission regulations Sec. 49.17(d) or Sec. 49.18.

    g. Foreign Regulator With Regulatory Responsibility--Proposed Amendment

    to Sec. 49.17(d)(3)

    Foreign Regulators require data in order to fulfill their

    regulatory responsibilities. In proposed Sec. 49.17(d)(3) the

    Commission has explained that, if a foreign regulator receives swap

    data pursuant to its regulatory regime, that access is not subject to

    CEA sections 21(c)(7) or 21(d), or Sec. Sec. 49.17(d) or 49.18.

    h. SDR Notification Requirement--Proposed Amendment to Sec.

    49.17(d)(4)(i) to (iv)

    Current Sec. 49.17(d)(4)(i) requires an SDR to promptly notify the

    Commission regarding any request for swap data received by Appropriate

    Domestic or Foreign Regulators.\70\ SDRs under this current regulation

    are required to notify the Commission for each and every request of an

    Appropriate Domestic or Foreign Regulator (including ongoing swap data

    requests).

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

    \70\ 17 CFR 49.17(d)(4)(i).

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

    The Commission proposes to amend current Sec. 49.17(d)(4)(i)-(ii)

    to provide that SDRs notify the Commission at the time that such SDR

    receives the initial request for swap data from a particular

    [[Page 8383]]

    ADR or AFR and promptly after receiving any request that does not

    comport with the scope of the ADR's or AFR's jurisdiction. Consistent

    with current recordkeeping requirements set forth in Sec. 49.12, SDRs

    are required to maintain books and records of all information related

    to the initial and any subsequent requests for swap data from an

    Appropriate Domestic or Foreign Regulator. The Commission also proposed

    electronic notification similar to the current rule requirement. In

    addition, the Commission placed a few obligations on SDRs under

    proposed Sec. 49.17(d)(4)(iii) and (iv) regarding data access to ADRs

    and AFRs, and determining an ADR's or AFR's jurisdiction.

    In addition, proposed Sec. 49.17(d)(4)(iii) requires SDRs to

    limit, suspend, or revoke an ADR's or AFR's swap data access if the

    ADR's or AFR's scope of jurisdiction changes and the Commission directs

    the ADR or AFR to limit, suspend, or revoke an ADR's or AFR's swap data

    access.

    i. Timing; Limitation, Suspension or Revocation of Access--Proposed

    Amendments to Sec. 49.17(d)(5)

    The changes to the rule text in current Sec. 49.17(d)(5) make

    clear that SDRs must notify the Commission of an ADR or AFR access

    request and the receipt of a confidentiality arrangement, among other

    things. In addition, proposed Sec. 49.17(d)(5) requires SDRs to limit,

    suspend, or revoke an ADR's or AFR's swap data access if the Commission

    limits, suspends or revokes the ADR's or AFR's appropriateness

    determination or otherwise directs the ADR or AFR to limit, suspend, or

    revoke an ADR's or AFR's swap data access.

    j. Confidentiality Agreement--Proposed Amendments to Sec. Sec.

    49.17(d)(6) and 49.18(a)-(f)

    Current Sec. Sec. 49.17(d)(6) and 49.18, adopted as part of the

    original part 49 rules, provide that SDRs execute a ``Confidentiality

    and Indemnification Agreement'' with a CEA section 21(c)(7) entity,

    prior to sharing swap transaction data and information.\71\ This

    Agreement is required to state that the other regulator will abide by

    the confidentiality provisions of CEA section 8 and agree to indemnify

    both the SDR and the Commission against any litigation expenses

    relating to information provided under CEA section 8. However, through

    the passage of the FAST Act, Congress has eliminated the requirement

    that certain domestic and foreign regulators execute the

    ``Confidentiality and Indemnification Agreement'' prior to obtaining

    SDR swap data. More specifically, Congress amended CEA section 21(d) to

    require only the execution of a written agreement by domestic and

    foreign regulators prior to receipt of swap data from SDRs so that

    these regulators will abide by the confidentiality requirements

    described in CEA section 8.

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

    \71\ See 17 CFR 49.17(d)(6) and 49.18.

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

    The Commission proposes to amend current Sec. Sec. 49.17(d)(6) and

    49.18 to (i) reflect the FAST Act amendments to CEA sections 21(c)(7)

    and (d), and (ii) require SDRs to receive a confidentiality arrangement

    from a 21(c)(7) entity, before sharing swap data, to satisfy the

    requirements of CEA section 21(d). Unlike the current regulations, this

    confidentiality arrangement will not be executed by the SDR with the

    21(c)(7) entity, but instead would be executed by the Commission and

    the 21(c)(7) entity. The Commission proposes to provide a form of

    confidentiality arrangement attached as Appendix B to part 49. Use of

    the form would not be mandatory but would provide an efficient and

    expeditious means of fulfilling the confidentiality requirement of

    21(d) and Sec. Sec. 49.17(d) and 49.18.

    k. Third-Party Service Providers--Proposed Amendments to Sec. 49.17(e)

    The Commission modified the text in current Sec. 49.17(e) for

    clarity. There are no substantive cost or benefit implications.

    l. Access by Market Participants Barred--Proposed Amendment to Sec.

    49.17(f)

    The Commission modified the text in current Sec. 49.17(f) for

    clarity. There are no substantive cost or benefit implications.

    m. Filing Requirements for Applicants To Be Determined Appropriate--

    Proposed Amendments to Sec. 49.17(h)

    In this proposed rulemaking, the Commission has added proposed

    Sec. 49.17(h) to describe the application process for persons seeking

    an appropriateness determination. In sub-paragraph (2), the Commission

    explains that the applicant must provide sufficient detail to explain

    its jurisdiction and its confidentiality safeguards. Proposed Sec.

    49.17(h)(3) also outlines the standards by which the Commission will

    issue an appropriateness determination. Finally, the Commission

    explains in proposed Sec. 49.17(h)(4) that it reserves the right to

    ``revisit, reassess, limit, suspend or revoke'' an appropriateness

    determination.

    n. Delegation of Authority--Addition of Proposed Sec. Sec. 49.17(i)

    and 49.18(e)

    Current Sec. Sec. 49.17 and 49.18 do not have delegation of

    authority provisions. The Commission proposes to amend Sec. Sec. 49.17

    and 49.18 to add a delegation of authority to the Director of the

    Division of Market Oversight (``DMO'') and the Director's designee(s)

    of functions reserved to the Commission in Sec. Sec. 49.17 and 49.18.

    The delegation of Commission authority would make the process more

    effective and efficient.

    o. SDR Chief Compliance Officer Duties--Proposed Amendment to Sec.

    49.22(d)(4)

    The change to current Sec. 49.22(d)(4) is the removal of the word

    ``indemnification'' from the rule text. This is a conforming change to

    make the rule consistent with the FAST Act amendments.

    3. Benefits

    At a high level regarding benefits, the rulemaking is expected to

    assist regulators in performing their supervisory and regulatory

    functions by providing them access to swap data, which would help

    regulators better understand the risks their regulated entities are

    assuming and the impact of such risks on the broader markets. These

    supervisory and regulatory functions may include: Monitoring and

    mitigation of systemic risk; ensuring financial stability; registration

    and oversight of financial market infrastructures; registration and

    oversight of trading venues; registration and oversight of market

    participants; central bank activities; prudential supervision;

    restructuring or resolution of infrastructures and firms; and

    regulation of cash markets, in some of which swap counterparties are

    active.

    A more granular benefit to regulators flows from the Commission's

    proposal to resolve a conflict or potential conflict between the

    Commission's Interpretative Statement and current Sec. 49.18(c). In

    the Interpretative Statement, the Commission took the view that other

    regulators who access swap data based on their own authority over SDRs

    are not subject to the swap data access-related provisions of the CEA.

    On the other hand, current Sec. 49.18(c) provides that such regulators

    are required to comply with CEA section 8 and any other relevant

    statutory confidentiality provisions. The Commission proposes to delete

    the statement in current Sec. 49.18(c) providing that other regulators

    are required to comply with CEA section 8 and any other relevant

    statutory

    [[Page 8384]]

    confidentiality provisions even when they access swap data based on

    their own authority over SDRs.\72\ Other regulators will benefit both

    from the clarity this action provides and by the greater ease of access

    to swap data within their jurisdiction.

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

    \72\ 17 CFR 49.18(c).

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

    4. Costs

    The Commission recognizes that there are different types of costs

    associated with this proposed rulemaking. One cost is the potential

    harm to market participants and the public if swap data is misused--for

    example, inappropriately disclosed by ADRs and AFRs. Or, another

    harmful scenario might involve misappropriated data where hackers

    pilfer swap data from ADRs and AFRs to learn the positions of market

    participants so that the hackers, or other interested parties who may

    even pay for such information, scam the market. Such bad actors might

    be able to anticipate such market participants' trades and trade in

    front of them, raising swap trading costs to market participants,

    thereby reducing their profits.\73\ If the aforementioned scenario

    occurred frequently enough this might induce swap dealers to widen

    their spreads, making hedging more expensive. In turn, this might lead

    to sub-optimal business and investment strategies, as parties would be

    less willing to participate in swap markets, because it would be more

    costly. Further, the scenario posed could cause market participants to

    be concerned that their business strategies might be tipped to their

    competitors, because with stolen data, somebody might be able to infer

    their strategies from knowing their swap positions and how these

    positions change in response to relevant economic events.\74\ Such

    concerns could lead some market participants to withdraw to some extent

    from swap markets, reducing liquidity and potentially inducing them to

    use less effective hedging instruments or trading strategies in other

    markets.

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

    \73\ See, e.g., Registered Entity Cyber proposed rulemaking at

    80141 (observing that ``there has . . . been a rise in attacks by .

    . . hacktivists . . . aimed at . . . [, among other things,] theft

    of data or intellectual property . . . .''); Id. at 80189

    (Concurring Statement of Commissioner Bowen) (stating that ``our

    firms are facing an unrelenting onslaught of attacks from hackers

    with a number of motives ranging from petty fraud to international

    cyberwarfare.'').

    \74\ While the same risks of misuse and misappropriation exist

    with respect to swap data maintained at SDRs, SDRs are regulated,

    and subject to sanctions, by the Commission, whereas ADRs and AFRs

    are not.

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

    At a high level regarding costs to ADRs and AFRs, the less access

    to swap data granted to ADRs and AFRs, the less such swap data would

    help in performing ADRs' and AFRs' supervisory and other regulatory

    functions. Similarly, the more impediments to swap data access, the

    longer it would take ADRs and AFRs to use, or the less use ADRs and

    AFRs could make of, such swap data.

    At a more granular level, the Commission is proposing several new

    obligations applicable to foreign regulators and certain domestic

    regulators that will trigger costs for such regulators. The obligation

    for foreign regulators and unenumerated domestic regulators to apply

    for a Determination Order conferring AFR or ADR status so that such

    foreign regulators and unenumerated domestic regulators can receive

    access to SDR swap data will, at a minimum, require such applicants to

    dedicate personnel to drafting the application. Some applicants for ADR

    and AFR status may choose to retain outside counsel or another third

    party to draft the application, thereby incurring related costs. There

    also may be an additional cost associated with the complexity of the

    application because applicants for ADR and AFR status will have to

    explain their jurisdiction and link it to the sought swap data so that

    the Commission can provide swap data access parameters to SDRs in the

    Determination Orders.\75\ While applicants will need to expend

    resources developing their ``appropriateness'' applications, the

    Commission expects that the requirements and guidance it has provided

    in the proposed rulemaking should reduce such expenditures to a certain

    extent. Nonetheless, such expenditures will depend on the particulars

    of a given applicant. Because the Commission lacks sufficient knowledge

    of the specific characteristics of the applicants, among other things,

    the Commission is unable to quantify these expenditures at this time.

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

    \75\ Enumerated domestic regulators also will have to

    demonstrate to the Commission the scope of their jurisdiction so

    that SDRs will know the contours of the swap data access they can

    provide to enumerated domestic regulators.

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

    The proposed requirement in Sec. 49.18(a) that SDRs receive an

    executed confidentiality arrangement from an ADR or AFR before the SDR

    can provide the ADR or AFR swap data is based on a corresponding

    requirement set forth in CEA section 21(d) and will generate costs to

    ADRs and AFRs. CEA section 21(d) does not specify any details of the

    required written agreement other than that it must state that the ADR

    or AFR shall abide by CEA section 8's confidentiality requirements. The

    Commission, however, is proposing, in Appendix B to this part 49, to

    specify required elements as well as a form of confidentiality

    arrangement providing for ADRs and AFRs to implement a number of

    safeguards that would impose burdens on ADRs and AFRs. The

    confidentiality arrangement would include safeguards that:

    To the maximum extent practicable, maintain Confidential

    Information separately from other data and information;

    Protect Confidential Information from misappropriation and

    misuse;

    Ensure that only ADR or AFR personnel with a need to

    access particular Confidential Information to perform their job

    functions related to such Confidential Information have access thereto

    and that such access is permitted only to the minimum extent necessary

    to perform such job functions;

    Prevent disclosure of aggregated Confidential Information

    unless anonymized to prevent identification, through disaggregation or

    otherwise, of a market participant's business transactions, trade data,

    market positions, customers or counterparties;

    Prohibit the use of Confidential Information by ADR or AFR

    personnel for any improper purpose, including in connection with

    trading for their personal benefit or for the benefit of others or with

    respect to any commercial or business purpose;

    Monitor compliance with the confidentiality safeguards and

    ensure prompt notification of the CFTC and each relevant SDR of any

    violation of the safeguards or failure to fulfill the terms of the

    confidentiality arrangement;

    Prohibit the onward sharing or disclosing of Confidential

    Information unless exempted in paragraphs 6(d) or 8 of the

    confidentiality arrangement;

    Notify the CFTC in writing prior to complying with any

    legally enforceable demand for Confidential Information and assert all

    available appropriate legal exemptions or privileges with respect to

    such Confidential Information, and use its best efforts to protect the

    confidentiality of the Confidential Information; and

    Promptly destroy all Confidential Information for which an

    ADR or AFR no longer has a need or for which the information no longer

    falls within the scope of its jurisdiction, and certify to the CFTC,

    upon request, that the ADR or AFR has destroyed such Confidential

    Information.

    The Commission preliminarily believes that the monetary costs of

    these burdens would be minor, and the other costs of complying with

    these burdens, such as the costs to develop policies,

    [[Page 8385]]

    procedures and safeguards, are within the scope of ADRs' and AFRs'

    expertise.\76\ Given that ADRs and AFRs can elect not to seek access to

    swap data from SDRs and that ADRs and AFRs who do seek such access have

    some control over the manner in which they seek to access such swap

    data, ADRs and AFRs themselves can influence to some degree the costs

    they impose on themselves by seeking access to swap data from SDRs.

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

    \76\ The Commission believes that potential ADRs and AFRs would

    likely have established safeguards to protect sensitive data other

    than swap data and that such safeguards could be adapted to address

    the requirements of the proposed form of confidentiality arrangement

    without great cost.

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

    The proposed rulemaking would prohibit ADRs and AFRs from onward

    sharing Confidential Information with other parties. This could impose

    some costs in that ADRs and AFRs would not be able to freely share swap

    data among themselves. This could reduce the utility of the swap data

    to ADRs and AFRs, possibly reducing the effectiveness thereof. In

    addition, the fact that the Commission is proposing not to specify a

    particular means of ADRs and AFRs accessing swap data could result in

    SDRs providing a means of access other than a means preferred by ADRs

    and AFRs. This might impose additional costs to ADRs and AFRs relative

    to the potentially lesser costs of their preferred means of access.

    Because of these uncertainties, the Commission is unable to quantify

    these costs but is able to identify such costs generally.

    For SDRs, providing swap data access to so many potential ADRs and

    AFRs may be expensive. For example, SDRs may be forced to purchase new

    servers, hire new system administrators to oversee the new swap data/

    system usage and troubleshoot related problems that may arise. New

    recordkeeping requirements would require more system resources. The

    proposed requirement to limit the swap data provided to ADRs and AFRs

    to only swap data that is within the scope of ADRs' and AFRs'

    jurisdiction may cause SDRs to elect to create new methods for parsing

    swap data to comply with the proposed requirement to so limit swap

    data. The proposed reporting obligations also will increase SDRs'

    costs, although to the extent that such reporting obligations are not

    triggered, such cost increases would be tempered accordingly.

    Nevertheless, SDRs presumably would need to incur some costs to develop

    policies and procedures, and build out systems, to monitor potential

    events that would trigger the proposed new reporting requirements.

    Other SDR costs will include those related to SDRs verifying that

    each access request by an ADR or AFR is within the scope of the ADR's

    or AFR's jurisdiction. This will require SDRs to expend resources to

    ensure that they do not improperly disclose to an ADR or AFR swap data

    that such ADR or AFR is not entitled to see, in violation of CEA

    section 21(c)(7)'s requirement that SDRs disclose swap data to ADRs and

    AFRs ``on a confidential basis pursuant to [CEA] section 8 . . . .''

    \77\ By stating that SDRs shall not provide ADRs or AFRs with swap data

    access unless such swap data is within the scope of a requesting ADR's

    or AFR's jurisdiction as described and appended to the confidentiality

    arrangement required by proposed Sec. 49.18(a), proposed Sec.

    49.17(d)(4)(iii) would narrow the scope of the sources SDRs must

    consult to determine the ADR's or AFR's scope of jurisdiction. The

    Commission anticipates that narrowing the scope of the sources that

    SDRs must review to determine an ADR's or AFR's scope of jurisdiction

    would limit the resources SDRs must expend to verify the scope of an

    ADR's or AFR's jurisdiction. The Commission also anticipates that lists

    of ADRs' and AFRs' regulated entities' legal entity identifiers

    (``LEIs'') and uniform product identifiers (``UPIs'') of swaps within

    the scope of ADRs' and AFRs' jurisdiction would limit the resources

    SDRs must expend to verify whether swap data access requests are within

    the scope of an ADR's or AFR's jurisdiction--if ADRs and AFRs choose to

    develop such lists--which the Commission anticipates they would.

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

    \77\ The need for these resource expenditures would flow from

    proposed Sec. 49.17(d)(4)(iii), which would preclude SDRs from

    granting ADRs or AFRs access to swap data unless the SDR has

    determined that such swap data is within the then-current scope of

    such ADRs' or AFRs' jurisdiction.

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

    The Commission understands that there are some blank data entries

    in LEI fields, however, despite the Commission having designated an LEI

    system in 2012, and masked LEIs in a number of cases to reflect certain

    other jurisdictions' privacy law limits on disclosure.\78\ In addition,

    UPIs are still evolving for many swap contracts. Specifically, UPIs are

    in widespread use for standardized swaps but less so for other swaps.

    In cases where there is no UPI for a class of swaps, Sec. 45.7(c)(2)

    requires SDRs to create a UPI for such class and requires SDRs, all

    other registered entities and swap counterparties to use such SDR UPI-

    equivalent contract identifiers to classify swaps. In such cases, ADRs

    and AFRs could use SDRs' UPI-equivalents to identify swaps within the

    scope of ADRs' and AFRs' jurisdiction.

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

    \78\ See, e.g., DMO No-Action Letter 16-03 (Jan. 15, 2016),

    available at http://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/16-03.pdf, for further information regarding such

    privacy law restrictions.

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

    In general, the blank or masked LEI data fields and UPI limits

    discussed above would raise the costs for SDRs and potentially for ADRs

    and AFRs. Inadequate data fields and UPIs hinder SDRs' abilities to

    identify transactions and determine whether such transactions, in

    particular swap data, are within an ADR's or AFR's jurisdictional scope

    and interest. Even though the Commission believes these obstacles would

    increase costs, the Commission also believes that such costs are

    difficult to quantify at this time. The Commission specifically

    requests comment on this concern. Commenters are encouraged to quantify

    such costs, if practical. The Commission understands that lists of LEIs

    of ADRs' and AFRs' regulated entities and lists of UPIs or UPI-

    equivalents of swaps within ADRs' and AFRs' jurisdiction may have to be

    updated from time to time as regulated entities move in and out of

    ADRs' and AFRs' jurisdiction, ADRs' and AFRs' jurisdiction expands or

    contracts, swaps evolve, and new swaps are developed. In these cases,

    for example, an ADR or AFR likely would have to modify periodically the

    list of LEIs and UPIs it gives to SDRs.

    The proposal would further mitigate the costs to SDRs by permitting

    them to verify the scope of an ADR's or AFR's jurisdiction just once

    for a recurring request the details of which do not change. SDRs might

    incur additional costs, however, if the scope of jurisdiction changes

    for an ADR or AFR. Such additional costs include some fraction of the

    above costs as well as the cost to notify the Commission of the change

    in jurisdiction for the ADR or AFR.

    The Commission is proposing Appendix B to Part 49 to provide a form

    of confidentiality arrangement for execution by the Commission and by

    ADRs and AFRs seeking swap data access maintained by SDRs so that ADRs

    and AFRs can satisfy the confidentiality agreement requirement set

    forth in CEA Sec. 21(d). The Commission believes that this form would

    eliminate SDRs' costs and reduce ADRs' and AFRs' costs to negotiate the

    terms of such an arrangement relative to an alternative of negotiating

    and signing confidentiality arrangements with four separate SDRs.

    Otherwise, confidentiality arrangement costs could be substantial in

    terms of management

    [[Page 8386]]

    attention and expenditures.\79\ The Commission expects that reviewing

    and signing a confidentiality arrangement would not require substantial

    expenditures, but request public comments on such costs.\80\ Commenters

    are encouraged to quantify where practical.

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

    \79\ Nevertheless, proposed Sec. 49.18(a) would allow ADRs and

    AFRs to negotiate an alternative to the proposed form, provided that

    such alternative contains the elements required in proposed Sec.

    49.18(b), which, in turn, requires that such alternative contain all

    the elements of the proposed form.

    \80\ The Commission has on occasion used the SIFMA Report on

    Management and Professional Earnings in the Securities Industry to

    estimate these kinds of costs. For instance, on page 279 of the

    SIFMA Report for 2013, the mean salary for a compliance attorney is

    $100,840 with an average bonus of $26,666. This gives $127,506 in

    average total compensation for a compliance attorney. This number is

    divided by 1,800 hours and multiplied by 5.35 to account for

    overhead to get approximately $379 per hour. Next, multiplying by

    12,000 burden hours (from the Paperwork Reduction Act section of

    this release) results in approximately $4,500,000 in estimated

    costs.

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

    The Commission is proposing to permit SDRs to determine the means

    by which they will provide access to swap data to ADRs and AFRs. The

    Commission notes that SDRs already provide the Commission and the

    National Futures Association with data. Providing incremental access to

    ADRs and AFRs may permit SDRs to take advantage of economies of scale,

    thus mitigating SDRs' costs. The proposal would also mitigate SDRs'

    costs by permitting them to choose the means by which they will provide

    access to swap data to ADRs and AFRs. The Commission expects that SDRs

    would choose the lowest cost means of access consistent with their

    statutory obligation to provide ADRs and AFRs access to swap data and

    other constraints. The Commission cannot forecast what these costs

    would be at this time, however, because it depends on particulars of

    each SDR that the Commission does not know. Consequently, the

    Commission welcomes public comments on this requirement and how SDRs

    might satisfy this requirement. Commenters are encouraged to quantify

    where practical.

    CEA section 21(c)(7) requires SDRs to notify the Commission of

    requests for data from a particular ADR or AFR. Proposed Sec.

    49.17(d)(4)(i) would reduce that burden by permitting SDRs to notify

    the Commission only of the first such request by each ADR or AFR and

    promptly after receiving any request that does not comport with the

    scope of the ADR's or AFR's jurisdiction. In addition to the foregoing,

    the Commission is proposing to amend current Sec. 49.17(d)(4)(i) to

    require SDRs to maintain records of all information related to the

    initial and all subsequent requests for data from the requesting

    entity. The SDR would have to maintain this information for the same

    period required for other SDR records. Although these costs may be

    relatively small, the Commission anticipates using such data to, for

    example, monitor ADRs' and AFRs' access requests from time to time to

    ensure that they remain within the scope of their jurisdiction and,

    relatedly, to ensure that SDRs have been monitoring this access issue.

    As one alternative to proposing comprehensive swap data safeguards,

    the Commission instead could have chosen to merely delete the

    indemnification references in its regulations. While that approach

    could have avoided imposing many of the costs to ADRs, AFRs, and SDRs

    related to protection of confidentiality discussed herein, it would

    have dramatically increased the risk of imposing on market participants

    and the public the costs discussed above in the first paragraph of this

    section IV.C.4. and below in section IV.C.5.a.-c., which the Commission

    preliminarily believes is inconsistent with the historical importance

    Congress and the Commission have placed on protecting information

    covered by CEA section 8. Consequently, the Commission has determined

    to take the proposed approach.

    5. Consideration of CEA Section 15(a) Factors

    a. Protection of Market Participants and the Public

    The Commission is proposing a number of safeguards to prevent

    market participants' swap data maintained at SDRs from being

    misappropriated or misused, as discussed above. Those proposed

    safeguards include: Modifying the requirements for being an AFR;

    requiring both ADRs and AFRs to demonstrate the scope of their swap-

    data jurisdiction as a limit on the swap data to which an ADR or AFR

    may have access; having the Commission issue Determination Orders;

    imposing on ADRs and AFRs seeking access to swap data maintained by

    SDRs a number of required confidentiality safeguards; barring onward

    sharing of swap data; certain recordkeeping and reporting requirements;

    and ensuring the Commission's ability to revoke an ADR's or AFR's swap

    data access. Some market participants, and the public, could be harmed

    if market participants' proprietary swap data were misappropriated or

    misused. As detailed above in the ``Cost'' discussion, there is the

    potential harm that misappropriated swap data could be used to front

    run market participants whose swap data were misappropriated, raising

    their costs of completing swap transactions. More specifically, spreads

    could widen, which could deter some market participants from engaging

    in swap transactions trading and prevent prices from adjusting as

    quickly. Another possible misuse of market participants' swap data is

    if those who obtained misappropriated swap data were to reverse

    engineer the trading strategies of the market participants whose data

    were misappropriated and use such strategies, potentially undermining

    their efficacy.

    b. Efficiency, Competitiveness, and Financial Integrity of Futures

    Markets

    The Commission believes that there will be little effect on

    efficiency, competiveness, and financial integrity of futures markets

    if swap data is properly protected from being misappropriated or

    misused. If swap data is not properly protected, however, competition

    might be affected, in that market participants might be less willing to

    engage in swap transactions if parties are trading in front of them,

    raising their costs, or misappropriating their trading strategies,

    lowering such strategies' effectiveness. This could induce some swap

    dealers to charge higher fees (explicitly or implicitly) for their

    services and otherwise reduce profits. Such concerns may also encourage

    market participants to increase their use of futures contracts relative

    to swaps, because futures position data may be better protected.

    c. Price Discovery

    The Commission believes that price discovery would not be affected

    by this proposed rulemaking. There may be some indirect effects on

    price discovery if the safeguards in this proposed rulemaking prove

    ineffective, however. Price discovery could be negatively impacted if

    position data is misappropriated or misused to the disadvantage of some

    participants. For instance, as previously explained, some market

    participants might withdraw from swaps markets if they fear that their

    position data will be misappropriated or misused. This could lead to

    less frequent trading as well as reduced liquidity in swap markets.

    Furthermore, spreads could widen due to front-running concerns, which

    could make prices more volatile and harm price discovery.

    [[Page 8387]]

    d. Sound Risk Management Practices

    This proposed rulemaking will help regulators better understand the

    risks posed by their regulated entities. Without swaps data, it is

    impossible to comprehensively supervise entities that engage in swap

    trading. In this way, the proposed rulemaking helps to mitigate

    systemic risk. Allowing more ADRs and AFRs to access SDR swap data

    establishes the potential to improve SDR data by potentially

    facilitating research and analysis that ultimately leads to better risk

    management by market participants. This can occur through academic

    research that influences market participants to improve their risk

    management based on the research, or by ADRs and AFRs asserting their

    authority over their regulated entities to compel them to improve their

    swap data reporting and risk management.

    e. Other Public Interest Considerations

    The Commission does not believe that there are any other public

    interest considerations with respect to this proposed rulemaking.

    6. Request for Comment

    The Commission requests comment on all aspects of its cost and

    benefit considerations. Commenters are encouraged to quantify their

    comments, if practical.

    D. Antitrust Considerations

    CEA section 15(b) requires the Commission to take into

    consideration the public interest to be protected by the antitrust laws

    and endeavor to take the least anticompetitive means of achieving the

    objectives of the CEA, in issuing any order or adopting any Commission

    rule or regulation.

    The Commission does not anticipate that the proposed amendments to

    part 49 will result in anticompetitive behavior. However, because the

    proposed amendments affect existing SDR procedures relating to data

    reporting validation and data accuracy, the Commission encourages

    comments from the public on any aspect of the proposal that may have

    the potential to be inconsistent with the antitrust laws or be

    anticompetitive in nature.

    List of Subjects in 17 CFR Part 49

    Access to swap data; Commodity Exchange Act section 8;

    Confidentiality; Registration and regulatory requirements; Swap data

    repositories.

    For the reasons stated in the preamble, the Commodity Futures

    Trading Commission proposes to amend 17 CFR part 49 as set forth below:

    PART 49--SWAP DATA REPOSITORIES

    0

    1. The authority citation for part 49 is revised to read as follows:

    Authority: 7 U.S.C. 12a and 24a, unless otherwise noted.

    0

    2. In Sec. 49.2, revise paragraph (a)(5) to read as follows:

    Sec. 49.2 Definitions.

    (a) * * *

    (5) Foreign Regulator. The term ``foreign regulator'' means a

    foreign futures authority as defined in Section 1a(26) of the Act,

    foreign financial supervisors, foreign central banks, foreign

    ministries and other foreign authorities.

    * * * * *

    0

    3. In Sec. 49.9, revise paragraph (a)(9) to read as follows:

    Sec. 49.9 Duties of registered swap data repositories.

    (a) * * *

    (9) Upon request of Appropriate Domestic Regulators and Appropriate

    Foreign Regulators, provide access to swap data held and maintained by

    the swap data repository, as prescribed in Sec. 49.17;

    * * * * *

    0

    4. Amend Sec. 49.17 as follows:

    0

    a. Revise paragraphs (a), (b)(1)(vii), (b)(2), (c)(2) and (c)(3),

    (d)(2) through (d)(6), and (e) and (f); and

    0

    b. Add paragraphs (h) and (i).

    The revisions and additions to read as follows:

    Sec. 49.17 Access to SDR data.

    (a) Purpose. This section provides a procedure by which the

    Commission, other domestic regulators and foreign regulators may obtain

    access to the swap data held and maintained by registered swap data

    repositories. Except as specifically set forth in this section, the

    Commission's duties and obligations regarding the confidentiality of

    business transactions or market positions of any person and trade

    secrets or names of customers identified in Section 8 of the Act are

    not affected.

    (b) * * *

    (1) * * *

    (vii) Any other person the Commission determines to be appropriate

    pursuant to the process set forth in Sec. 49.17(h).

    (2) Appropriate Foreign Regulator. The term ``Appropriate Foreign

    Regulator'' shall mean those Foreign Regulators the Commission

    determines to be appropriate pursuant to the process set forth in Sec.

    49.17(h).

    * * * * *

    (c) * * *

    (2) Monitoring tools. A registered swap data repository is required

    to provide the Commission with proper tools for the monitoring,

    screening and analyzing of swap data, including, but not limited to,

    Web-based services, services that provide automated transfer of data to

    Commission systems, various software and access to the staff of the

    swap data repository and/or third-party service providers or agents

    familiar with the operations of the registered swap data repository,

    which can provide assistance to the Commission regarding data structure

    and content. These monitoring tools shall be substantially similar in

    analytical capability as those provided to the compliance staff and the

    Chief Compliance Officer of the swap data repository.

    (3) Authorized users. The swap data provided to the Commission by a

    registered swap data repository shall be accessible only by authorized

    users. The swap data repository shall maintain and provide a list of

    authorized users in the manner and frequency determined by the

    Commission.

    (d) * * *

    (2) Domestic regulator with regulatory responsibility over a swap

    data repository. When a swap data repository that is registered with

    the Commission pursuant to this chapter is also registered with a

    domestic regulator pursuant to a separate statutory authority, and such

    domestic regulator seeks access to swap data that has been reported to

    such swap data repository pursuant to the domestic regulator's

    regulatory regime, such access is not subject to the requirements of

    sections 21(c)(7) or 21(d) of the Act, or of Sec. Sec. 49.17(d) or

    49.18.

    (3) Foreign Regulator with regulatory responsibility over a swap

    data repository. When a swap data repository that is registered with

    the Commission pursuant to this chapter is also registered with, or

    recognized or otherwise authorized by, a Foreign Regulator that has

    supervisory authority over such swap data repository pursuant to

    foreign law and/or regulation, and such Foreign Regulator seeks access

    to swap data that has been reported to such swap data repository

    pursuant to the Foreign Regulator's regulatory regime, such access is

    not subject to the requirements of sections 21(c)(7) or 21(d) of the

    Act, or of Sec. Sec. 49.17(d) or 49.18.

    (4) Obligations of the registered swap data repository in

    connection with appropriate domestic regulator or appropriate foreign

    regulator requests for data access. (i) A registered swap data

    repository shall notify the

    [[Page 8388]]

    Commission promptly after receiving an initial request from an

    Appropriate Domestic Regulator or Appropriate Foreign Regulator to gain

    access to swap data maintained by such swap data repository and

    promptly after receiving any request that does not comport with the

    scope of the ADR's or AFR's jurisdiction, as described and appended to

    the confidentiality arrangement required by Sec. 49.18(a). Each

    registered swap data repository shall maintain records thereafter,

    pursuant to Sec. 49.12, of the details of such initial request and of

    all subsequent requests by such Appropriate Domestic Regulator or

    Appropriate Foreign Regulator for such access.

    (ii) The registered swap data repository shall notify the

    Commission electronically, in a format specified by the Secretary of

    the Commission, of the receipt of a request specified in Sec.

    49.17(d)(4)(i).

    (iii) The registered swap data repository shall not provide an

    Appropriate Domestic Regulator or Appropriate Foreign Regulator access

    to swap data maintained by the swap data repository unless the swap

    data repository has determined that the swap data to which the

    Appropriate Domestic Regulator or Appropriate Foreign Regulator seeks

    access is within the then-current scope of such Appropriate Domestic

    Regulator's or Appropriate Foreign Regulator's jurisdiction, as

    described and appended to the confidentiality arrangement required by

    Sec. 49.18(a). An Appropriate Domestic Regulator or Appropriate

    Foreign Regulator that has executed a confidentiality arrangement with

    the Commission pursuant to Sec. 49.18(a) and provided such

    confidentiality arrangement to one or more swap data repositories shall

    notify the Commission and each such swap data repository of any change

    to such Appropriate Domestic Regulator's or Appropriate Foreign

    Regulator's scope of jurisdiction as described in such confidentiality

    arrangement. The Commission may direct a swap data repository to

    suspend, limit, or revoke access to swap data maintained by such swap

    data repository based on any such change to such Appropriate Domestic

    Regulator's or Appropriate Foreign Regulator's scope of jurisdiction,

    and, if so directed, such swap data repository shall so suspend, limit,

    or revoke such access.

    (iv) The registered swap data repository need not make the

    determination required pursuant to Sec. 49.17(d)(4)(iii) more than

    once with respect to a recurring swap data request. If such request

    changes, the swap data repository must make a new determination

    pursuant to Sec. 49.17(d)(4)(iii).

    (5) Timing; limitation, suspension or revocation of swap data

    access. Once a registered swap data repository has--

    (i) Notified the Commission, pursuant to Sec. 49.17(d)(4)(i) and

    (ii), of an initial request for swap data access by an Appropriate

    Domestic Regulator or Appropriate Foreign Regulator, as applicable,

    that was submitted pursuant to Sec. 49.17(d)(1);

    (ii) Received from such Appropriate Domestic Regulator or

    Appropriate Foreign Regulator a confidentiality arrangement executed by

    the Commission and such Appropriate Domestic Regulator or Appropriate

    Foreign Regulator as required by Sec. 49.18(a); and

    (iii) Satisfied its obligations under Sec. 49.17(d)(4)(iii), such

    swap data repository shall provide access to the requested swap data;

    provided, however, that such swap data repository shall, as directed by

    the Commission, limit, suspend or revoke such access should the

    Commission limit, suspend or revoke the appropriateness determination

    for such Appropriate Domestic Regulator or Appropriate Foreign

    Regulator or otherwise direct the swap data repository to limit,

    suspend or revoke such access.

    (6) Confidentiality arrangement. Consistent with Sec. 49.18(a),

    the Appropriate Domestic Regulator or Appropriate Foreign Regulator

    shall, prior to receiving access to any requested swap data, execute a

    confidentiality arrangement with the Commission consistent with the

    requirements set forth in Sec. 49.18(b).

    (e) Third-party service providers to a registered swap data

    repository. Access to the swap data and information maintained by a

    registered swap data repository may be necessary for certain third

    parties that provide various technology and data-related services to a

    registered swap data repository. Third-party access to the swap data

    and information maintained by a swap data repository is permissible

    subject to the following conditions:

    (1) Both the registered swap data repository and the third party

    service provider shall have strict confidentiality procedures that

    protect swap data and information from improper disclosure.

    (2) Prior to a registered swap data repository granting access to

    swap data or information to a third-party service provider, the third-

    party service provider and the registered swap data repository shall

    execute a confidentiality agreement setting forth minimum

    confidentiality procedures and permissible uses of the swap data and

    information maintained by the swap data repository that are equivalent

    to the privacy procedures for swap data repositories outlined in Sec.

    49.16.

    (f) Access by market participants--(1) General. Access by market

    participants to swap data maintained by the registered swap data

    repository is prohibited other than as set forth in Sec. 49.17(f)(2).

    (2) Exception. Swap data and information related to a particular

    swap that is maintained by the registered swap data repository may be

    accessed by either counterparty to that particular swap. However, the

    swap data and information maintained by the registered swap data

    repository that may be accessed by either counterparty to a particular

    swap shall not include the identity or the legal entity identifier (as

    such term is used in part 45 of this chapter) of the other counterparty

    to the swap, or the other counterparty's clearing member for the swap,

    if the swap is executed anonymously on a swap execution facility or

    designated contract market, and cleared in accordance with Commission

    regulations in Sec. Sec. 1.74, 23.610, and 37.12(b)(7) of this

    chapter.

    * * * * *

    (h) Appropriateness determination process. (1) Each person seeking

    an appropriateness determination pursuant to this paragraph shall file

    an application with the Commission.

    (2) Each applicant seeking an appropriateness determination shall

    provide sufficient detail in its application to permit the Commission

    to analyze whether the applicant is acting within the scope of its

    jurisdiction in seeking access to swap data maintained by a registered

    swap data repository, and whether the applicant employs appropriate

    confidentiality safeguards to ensure that any swap data such applicant

    receives from a registered swap data repository will not, except as

    allowed for in the form of confidentiality arrangement set forth in

    Appendix B of this part, be disclosed.

    (3) If the Commission determines that an applicant pursuant to this

    paragraph is, conditionally or unconditionally, appropriate for

    purposes of CEA section 21(c)(7), the Commission shall issue an order

    setting forth its appropriateness determination. The Commission shall

    not determine that an applicant pursuant to this paragraph is

    appropriate unless the Commission is satisfied that--

    (i) The applicant employs appropriate confidentiality safeguards to

    ensure that any swap data such applicant receives from a registered

    swap data repository

    [[Page 8389]]

    will not be disclosed, except as allowed for in the form of

    confidentiality arrangement set forth in Appendix B of this part and

    (ii) Such applicant is acting within the scope of its jurisdiction

    in seeking access to swap data from a registered swap data repository.

    (4) The Commission reserves the right, in connection with any

    appropriateness determination with respect to an Appropriate Domestic

    Regulator or Appropriate Foreign Regulator, to revisit, reassess,

    limit, suspend or revoke such determination consistent with the Act.

    (i) Delegation of authority relating to certain matters in this

    section. (1) The Commission hereby delegates, until such time as the

    Commission orders otherwise, the following functions to the Director of

    the Division of Market Oversight and to such members of the

    Commission's staff acting under his or her direction as he or she may

    designate from time to time: All functions reserved to the Commission

    in this section.

    (2) The Director of the Division of Market Oversight may submit any

    matter which has been delegated under paragraph (i)(1) of this section

    to the Commission for its consideration.

    (3) Nothing in this section may prohibit the Commission, at its

    election, from exercising the authority delegated under paragraph

    (i)(1) of this section.

    0

    5. Revise Sec. 49.18 to read as follows:

    Sec. 49.18 Confidentiality arrangement.

    (a) Confidentiality arrangement required prior to disclosure of

    swap data by a registered swap data repository to an Appropriate

    Domestic Regulator or Appropriate Foreign Regulator. Prior to a

    registered swap data repository providing access to swap data to any

    Appropriate Domestic Regulator or Appropriate Foreign Regulator, each

    as defined in Sec. 49.17(b), the swap data repository shall receive,

    pursuant to Section 21(d) of the Act, an executed confidentiality

    arrangement between the Commission and the Appropriate Domestic

    Regulator or Appropriate Foreign Regulator, as applicable, in the form

    set forth in Appendix B of this part or, at a minimum, containing the

    elements required in paragraph (b) of this section, from such

    Appropriate Domestic Regulator or Appropriate Foreign Regulator. Such

    confidentiality arrangement must include, either as Exhibit A to the

    form set forth in Appendix B of this part or similarly appended, a

    description of the Appropriate Domestic Regulator's or Appropriate

    Foreign Regulator's jurisdiction. Once a registered swap data

    repository is notified that a confidentiality arrangement received from

    an Appropriate Domestic Regulator or Appropriate Foreign Regulator no

    longer is in effect, the swap data repository shall not provide access

    to swap data to such Appropriate Domestic Regulator or Appropriate

    Foreign Regulator.

    (b) Elements of confidentiality arrangement. The confidentiality

    arrangement required pursuant to paragraph (a) of this section shall,

    at a minimum, include all elements included in the form of

    confidentiality arrangement set forth in Appendix B of this part.

    (c) Reporting failures to fulfill the terms of a confidentiality

    arrangement. A registered swap data repository shall immediately report

    to the Commission any known failure to fulfill the terms of a

    confidentiality arrangement that it receives pursuant to paragraph (a)

    of this section.

    (d) Failures to fulfill the terms of the confidentiality

    arrangement. The Commission may, if an Appropriate Domestic Regulator

    or Appropriate Foreign Regulator fails to fulfill the terms of a

    confidentiality arrangement described in paragraph (a) of this section,

    direct each registered swap data repository to limit, suspend or revoke

    such Appropriate Domestic Regulator's or Appropriate Foreign

    Regulator's access to swap data held by such swap data repository.

    (e) Delegation of authority relating to certain matters in this

    section. (1) The Commission hereby delegates, until such time as the

    Commission orders otherwise, the following functions to the Director of

    the Division of Market Oversight and to such members of the

    Commission's staff acting under his or her direction as he or she may

    designate from time to time: All functions reserved to the Commission

    in this section.

    (2) The Director of the Division of Market Oversight may submit any

    matter which has been delegated under paragraph (e)(1) of this section

    to the Commission for its consideration.

    (3) Nothing in this section may prohibit the Commission, at its

    election, from exercising the authority delegated under paragraph

    (e)(1) of this section.

    0

    6. In Sec. 49.22, revise paragraph (d)(4) to read as follows:

    Sec. 49.22 Chief compliance officer.

    * * * * *

    (d) * * *

    (4) Taking reasonable steps to ensure compliance with the Act and

    Commission regulations in this chapter relating to agreements,

    contracts, or transactions, and with Commission regulations in this

    chapter under Section 21 of the Act, including confidentiality

    arrangements received by the chief compliance officer's registered swap

    depository pursuant to Sec. 49.18(a);

    * * * * *

    0

    7. Add Appendix B to part 49, to read as follows:

    Appendix B to Part 49--Confidentiality Arrangement for Appropriate

    Domestic Regulators and Appropriate Foreign Regulators To Obtain Access

    To Swap Data Maintained by Registered Swap Data Repositories Pursuant

    to Sec. Sec. 49.17(d)(6) and 49.18(a)

    [[Page 8390]]

    [GRAPHIC] [TIFF OMITTED] TP25JA17.088

    The U.S. Commodity Futures Trading Commission (``CFTC'') and the

    [name of foreign/domestic regulator (``ABC'')] (each an

    ``Authority'' and collectively the ``Authorities'') have entered

    into this Confidentiality Arrangement (``Arrangement'') in

    connection with [whichever is applicable] [CFTC Regulation

    49.17(b)(1)[(i)-(vi)]/the determination order issued by the CFTC to

    [ABC] (``Order'')] and any request for swap data by [ABC] to any

    swap data repository (``SDR'') registered with the CFTC.

    Article One: General Provisions

    1. ABC is permitted to request and receive swap data directly

    from a registered SDR (``Swap Data'') on the terms and subject to

    the conditions of this Arrangement.

    2. This Arrangement is entered into to fulfill the requirements

    under Section 21(d) of the Commodity Exchange Act (``Act'') and CFTC

    Regulation 49.18. Upon receipt by a registered SDR, this Arrangement

    will satisfy the requirement for a written agreement pursuant to

    Section 21(d) of the Act and CFTC Regulation 49.17(d)(6). This

    Arrangement does not apply to information that is [reported to a

    registered SDR pursuant to [ABC]'s regulatory regime where the SDR

    also is registered with [ABC] pursuant to separate statutory

    authority, even if such information also is reported pursuant to the

    Act and CFTC regulations][reported to a registered SDR pursuant to

    [ABC]'s regulatory regime where the SDR also is registered with, or

    recognized or otherwise authorized by, [ABC], which has supervisory

    authority over the repository pursuant to foreign law and/or

    regulation, even if such information also is reported pursuant to

    the Act and CFTC regulations.] \1\

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

    \1\ The first bracketed paragraph will be used for ADRs; the

    second will be used for AFRs. The inapplicable paragraph will be

    deleted.

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

    3. This Arrangement is not intended to limit or condition the

    discretion of an Authority in any way in the discharge of its

    regulatory responsibilities or to prejudice the individual

    responsibilities or autonomy of any Authority.

    4. This Arrangement does not alter the terms and conditions of

    any existing arrangements.

    Article Two: Confidentiality of Swap Data

    5. ABC will be acting within the scope of its jurisdiction in

    requesting Swap Data and employs procedures to maintain the

    confidentiality of Swap Data and any information and analyses

    derived therefrom (collectively, the ``Confidential Information'').

    ABC undertakes to notify the CFTC and each relevant SDR promptly of

    any change to ABC's scope of jurisdiction.

    6. ABC undertakes to treat Confidential Information as

    confidential and will employ safeguards that:

    a. To the maximum extent practicable, identify the Confidential

    Information and maintain it separately from other data and

    information;

    b. Protect the Confidential Information from misappropriation

    and misuse;

    c. Ensure that only authorized ABC personnel with a need to

    access particular Confidential Information to perform their job

    functions related to such Confidential Information have access

    thereto, and that such access is permitted only to the extent

    necessary to perform their job functions related to such particular

    Confidential Information;

    d. Prevent the disclosure of aggregated Confidential

    Information; provided, however, that ABC is permitted to disclose

    any sufficiently aggregated Confidential Information that is

    anonymized to prevent identification, through disaggregation or

    otherwise, of a market participant's business transactions, trade

    data, market positions, customers or counterparties;

    e. Prohibit use of the Confidential Information by ABC personnel

    for any improper purpose, including in connection with trading for

    their personal benefit or for the benefit of others or with respect

    to any commercial or business purpose; and

    f. Include a process for monitoring compliance with the

    confidentiality safeguards described herein and for promptly

    notifying the CFTC, and each SDR from which ABC has received Swap

    Data, of any violation of such safeguards or failure to fulfill the

    terms of this Arrangement.

    7. Except as provided in Paragraphs 6.d. and 8, ABC will not

    onward share or otherwise disclose any Confidential Information.

    8. ABC undertakes that:

    a. If a department, central bank, or agency of the Government of

    the United States, it will not disclose Confidential Information

    except in an action or proceeding under the laws of the United

    States to which it, the CFTC, or the United States is a party;

    b. If a department or agency of a State or political subdivision

    thereof, it will not disclose Confidential Information except in

    connection with an adjudicatory action or proceeding brought under

    the Act or the laws of [name of either the State or the State and

    political subdivision] to which it is a party; or

    c. If a foreign futures authority or a department, central bank,

    ministry, or agency of a foreign government or subdivision thereof,

    or any other Foreign Regulator, as defined in Commission Regulation

    49.2(a)(5), it will not disclose Confidential Information except in

    connection with an adjudicatory action or proceeding brought under

    the laws of [name of country, political subdivision, or (if a

    supranational organization) supranational lawmaking body] to which

    it is a party.

    9. Prior to complying with any legally enforceable demand for

    Confidential Information, ABC will notify the CFTC of such demand in

    writing, assert all available appropriate legal exemptions or

    privileges with respect to such Confidential Information, and use

    its best efforts to protect the confidentiality of the Confidential

    Information.

    10. ABC acknowledges that, if it does not fulfill the terms of

    this Arrangement, the CFTC may direct any registered SDR to suspend

    or revoke ABC's access to Swap Data.

    11. ABC will comply with all applicable security-related

    requirements imposed by an SDR in connection with access to Swap

    Data maintained by the SDR, as such requirements may be revised from

    time to time.

    12. ABC will promptly destroy all Confidential Information for

    which it no longer has a need or which no longer falls within the

    scope of its jurisdiction, and will certify to the CFTC, upon

    request, that ABC has destroyed such Confidential Information.

    Article Three: Administrative Provisions

    13. This Arrangement may be amended with the written consent of

    the Authorities.

    14. The text of this Arrangement will be executed in English,

    and may be made available to the public.

    15. On the date this Arrangement is signed by the Authorities,

    it will become effective and may be provided to any registered SDR

    that holds and maintains Swap Data that falls within the scope of

    ABC's jurisdiction.

    [[Page 8391]]

    16. This Arrangement will expire 30 days after any Authority

    gives written notice to the other Authority of its intention to

    terminate the Arrangement. In the event of termination of this

    Arrangement, Confidential Information will continue to remain

    confidential and will continue to be covered by this Arrangement.

    This Arrangement is executed in duplicate, this ___day of ___.

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

    [name of Chairman]

    Chairman

    U.S. Commodity Futures Trading Commission

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

    [name of signatory]

    [title]

    [name of foreign/domestic regulator]

    [Exhibit A: Description of Scope of Jurisdiction. If ABC is not

    enumerated in Commission Regulations 49.17(b)(1)(i)-(vi), it must

    attach the Determination Order received from the Commission pursuant

    to Commission Regulation 49.17(h). If ABC is enumerated in

    Commission Regulations 49.17(b)(1)(i)-(vi), it must attach a

    sufficiently detailed description of the scope of ABC's jurisdiction

    as it relates to Swap Data maintained by SDRs.]

    Issued in Washington, DC, on January 13, 2017, by the

    Commission.

    Christopher J. Kirkpatrick,

    Secretary of the Commission.

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

    Federal Regulations.

    Appendices to Proposed Amendments to the Swap Data Access Provisions of

    Part 49 and Certain Other Matters--Commission Voting Summary and

    Chairman's Statement

    Appendix 1--Commission Voting Summary

    On this matter, Chairman Massad and Commissioners Bowen and

    Giancarlo voted in the affirmative. No Commissioner voted in the

    negative.

    Appendix 2--Statement of Chairman Timothy G. Massad

    The increased reporting of data on swaps transactions is an

    important reform of the derivatives markets agreed to by the G20

    leaders in 2009. Today, thanks to this reporting, regulators across the

    globe are in a better position to assess exposures and risks related to

    this market. Because of the global nature of the market, it is critical

    for regulators to be able to share information, subject to appropriate

    confidentiality and other protections.

    That's why I am pleased we are issuing this proposal, which will

    make it easier for other regulators, both domestic and foreign, to gain

    access to swap data repository (SDR) swap data. The proposal would

    conform our rules to various changes Congress made in the law and

    provide a process for sharing of information. Among other things,

    Congress removed a requirement that another regulator must indemnify

    both the Commission and the swap data repository for expenses related

    to litigation before data could be shared. To date, no domestic or

    foreign regulator has provided such an indemnification. Today's

    proposal removes this requirement in the CFTC's own rules, makes other

    changes consistent with Congressional action, and creates a process for

    when and how other regulators gain access to SDR information that will

    protect confidentiality.

    I thank my fellow Commissioners Bowen and Giancarlo for their

    unanimous support for this proposal. I also thank the hardworking CFTC

    staff for all their efforts.

    [FR Doc. 2017-01287 Filed 1-24-17; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: January 25, 2017