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SPEECHES & TESTIMONY

  • Dissenting Statement, Swap Data Repositories: Interpretative Statement Regarding the Confidentiality and Indemnification Provisions of Section 21(d) of the Commodity Exchange Act

    Commissioner Jill E. Sommers and Commissioner Scott D. O’Malia

    October 22, 2012

    We respectfully dissent from issuing this Final Interpretative Statement Regarding the Confidentiality and Indemnification Provisions of Section 21(d) of the Commodity Exchange Act (CEA) (Final Interpretative Statement). When the Commission issued the proposed guidance (Proposed Interpretative Statement) in May of this year, we were concerned that the statement did not actually solve the problem with the statutory language beyond providing some additional clarity to the Swap Data Repository (SDR) rules and we called for a permanent solution by way of a legislative repeal of the indemnification provisions.

    When finalizing the SDR rules, the Commission stated that a foreign regulator may have direct access to confidential swap data reported to and maintained by an SDR registered with the Commission without executing a Confidentiality and Indemnification Agreement when the SDR is also registered with the foreign regulator and the foreign regulator is acting in a regulatory capacity with respect to the SDR. See Swap Data Repositories: Registration Standards, Duties and Core Principles, 76 FR 54,538, 54,554 (Sept. 1, 2011). The Final Interpretative Statement expands this to SDRs that are registered, recognized or otherwise authorized in a foreign regulator’s regulatory regime and clarifies that direct access to data should be granted even if the data the foreign regulator seeks also has been reported pursuant to the CEA and Commission regulations.

    The Commission received a comment from the European Securities and Markets Authority (ESMA) suggesting that we consider modifying the conditions that would need to be met so that a foreign regulator could escape being subject to the indemnification provisions. Specifically, ESMA suggested that the Commission consider the following alternative modifications: (1) delete the second condition of the Proposed Interpretative Statement, (i.e., “The data sought to be accessed by a foreign regulatory authority is reported to such registered SDR pursuant to the foreign regulatory regime”), which would leave the sole condition that the SDR be registered, recognized or otherwise authorized in the foreign regulatory regime; or (2) add language to the second condition such that it would read as follows: “The data sought to be accessed by a foreign regulatory authority has been reported to such registered SDR pursuant to the foreign jurisdiction’s regulatory regime or the foreign regulatory authority is entitled to access such data pursuant to its regulatory regime to fulfill its respective responsibilities and mandates.” Although the Commission acknowledges the comment in the Final Interpretative Statement, we do not adopt either suggestion and do not justify their exclusion.

    Our second concern involves the distinction the Commission made in the SDR rules between an Appropriate Domestic Regulator and an Appropriate Domestic Regulator with Regulatory Responsibilities. Under the current rules only the CFTC and the SEC are able to directly access SDR data absent an indemnification agreement. All other U.S. Regulators (i.e. “Appropriate Domestic Regulators”) would have to execute an indemnification agreement—something that we are told they are prohibited from doing. Adopting the second ESMA option and extending it to Appropriate Domestic Regulators would allow them direct access to data they believe is necessary to fulfill their regulatory mandate, and in our view is something that is within the Commission’s discretion. Instead, the Commission has purposely chosen to interpret the statute in a manner that constrains other domestic regulators’ ability to examine swap market data. For these reasons we cannot support the guidance issued today by the Commission.

    Last Updated: October 22, 2012



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