2010-27538

FR Doc 2010-27538[Federal Register: November 2, 2010 (Volume 75, Number 211)]

[Proposed Rules]

[Page 67258-67277]

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

[DOCID:fr02no10-13]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 15 and 20

RIN 3038-AD17

Position Reports for Physical Commodity Swaps

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

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

``CFTC'') is proposing reporting regulations that are reasonably

necessary for implementing and enforcing aggregate position limits for

certain physical commodity derivatives. As a result of recent

legislative reforms, the Commission may adopt regulations establishing

aggregate position limits for designated contract market (``DCM'')

physical commodity futures contracts and swaps that are economically

equivalent to such contracts. The Commission currently receives, and

uses for market surveillance purposes, including position limit

enforcement, data on large positions in all physical commodity futures

and option contracts traded on DCMs. However, there is no analogous

reporting structure in place for economically equivalent swaps, which

until recently were largely unregulated financial contracts. The

Commission's proposal would require position reports on economically

equivalent swaps from clearing organizations, their members and swap

dealers. Notably, the proposed regulations also include a sunset

provision. The sunset provision would render the regulations

ineffective upon the Commission's issuance of an order finding that

operating swap data repositories (``SDRs'') are capable of processing

positional data in a manner that would enable the Commission to set and

enforce aggregate position limits.

DATES: Comments must be received on or before December 2, 2010.

ADDRESSES: You may submit comments, identified by RIN number, by any of

the following methods:

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

Follow instructions for submitting comments.

Agency Web Site: http://www.cftc.gov.

E-mail: [email protected]

Mail: David A. Stawick, Secretary of the Commission,

Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st

Street, NW., Washington, DC 20581.

Hand Delivery/Courier: Same as mail above.

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

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

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

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

information that is exempt from disclosure under the Freedom of

Information Act, a petition for confidential treatment of the exempt

information may be submitted according to the procedure established in

CFTC regulation 145.9 (17 CFR 145.9). The Commission reserves the

right, but shall have no obligation, to review, pre-screen, filter,

redact, refuse or remove any or all of your submission from http://

www.cftc.gov that it may deem to be inappropriate for publication, such

as obscene language. All submissions that have been redacted or removed

that contain comments on the merits of the rulemaking will be retained

in the public comment file and will be considered as required under the

Administrative Procedure Act and other applicable laws, and may be

accessible under the Freedom of Information Act.

FOR FURTHER INFORMATION CONTACT: Stephen Sherrod, Acting Deputy

Director, Market Surveillance, (202) 418-5452, [email protected], or

Bruce Fekrat, Senior Special Counsel, Office of the Director, (202)

418-5578, [email protected], Division of Market Oversight, Commodity

Futures Trading Commission, Three Lafayette Centre, 1155 21st Street,

NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Economically Equivalent Swaps

A. Background

The Commodity Exchange Act (``CEA or Act'') of 1936,\1\ as amended

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

Protection Act of 2010 (``Dodd-Frank Act''),\2\ includes provisions

imposing clearing and trade execution requirements on standardized

derivatives as well as comprehensive recordkeeping and reporting

requirements that extend to all swaps, a defined term in CEA section

1a(47). New section 4a(a)(2) of the CEA, as introduced by section 737

of the Dodd-Frank Act, charges the Commission with promulgating

regulations, as appropriate, to limit the amount of positions, other

than bona fide hedge positions, that may be held by any person with

respect to commodity futures and option contracts in exempt and

agricultural commodities \3\ traded on or subject to the rules of a DCM

within 180 and 270 days, respectively, of the legislation's enactment

on July 21, 2010. New section 4a(a)(6)(A) of the Act requires

Commission-set position limits to apply aggregately across DCMs to

contracts that are based on the same commodity. The exempt and

agricultural commodity futures and option contracts for which the

Commission may consider position limits are listed in proposed

regulation 20.2 (``20.2 listed futures contracts'' or ``20.2

contracts''). The list in proposed regulation 20.2, however, is non-

exclusive and preliminary. Should the Commission propose regulations to

establish position limits, it may decide not to propose position limits

for all of the 20.2 listed futures contracts or, alternatively, may

decide to propose

[[Page 67259]]

position limits for futures contracts other than the 20.2 contracts.

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

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

Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the

Dodd-Frank Act may be accessed at http://www.cftc.gov./

LawRegulation/OTCDERIVATIVES/index.htm.

\3\ Section 1a(20) of the Act defines the term ``exempt

commodity'' to mean a commodity that is not an excluded commodity or

an agricultural commodity. Section 1a(19) defines the term

``excluded commodity'' to mean, among other things, an interest

rate, exchange rate, currency, credit risk or measure, debt or

equity instrument, measure of inflation, or other macroeconomic

index or measure. Although the term ``agricultural commodity'' is

not defined in the Act, CEA section 1a(9) enumerates a non-exclusive

list of several agricultural-based commodities. The Commission will

consider the issuance of a notice of rulemaking proposing a

definition for the term ``agricultural commodity'' in October of

2010. Although broadly defined, exempt commodity futures contracts

are often viewed as energy and metals products.

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Similar to CEA section 4a(a)(2), new section 4a(a)(5) of the Act

charges the Commission with establishing position limits, including

aggregate position limits, as appropriate, for swaps that are

economically equivalent to DCM contracts in exempt and agricultural

commodities with CFTC-set position limits. The definition of the term

``paired swaps and swaptions'' in proposed regulation 20.1 attempts to

recognize a readily identifiable and partial set of swaps and swaptions

(for ease of reference, collectively ``swaps'') that could potentially

be considered as economically equivalent to 20.2 listed futures

contracts.

As discussed in more detail below, proposed regulation 20.1 defines

paired swaps, and hence economically equivalent swaps, in two ways.

First, paired swaps are defined as swaps that are directly or

indirectly linked to the price of one or more 20.2 listed futures

contract. Second, paired swaps are defined as swaps that are based on

the price of the same commodity for delivery at the same location(s) as

that of a 20.2 listed futures contract, or another delivery location,

with substantially the same supply and demand fundamentals as the

delivery location(s) referenced by a 20.2 listed futures contract. The

paired swap definition's second part therefore proposes to include

swaps that are settled to a price series that is not based on, but is

nonetheless highly correlated to, the price of a 20.2 listed futures

contract.

B. The Necessity of the Proposed Regulations

New section 4a(a)(5) of the Act provides that position limits for

economically equivalent swaps be developed concurrently with position

limits established for DCM contracts in exempt and agricultural

commodities. In order to have the ability to enforce market-specific

and aggregate position limits for the relevant DCM contracts and

economically equivalent swaps, the Commission would require positional

data for DCM contracts and economically equivalent swaps. The

Commission currently obtains DCM futures and option positional data

under parts 15 through 19 and 21 of its regulations,\4\ which derive

their statutory authority in significant part from sections 4a, 4g and

4i of the CEA. In contrast, the Commission has limited access to swaps

positional data. In this regard, the Commission receives positional

data on swaps that are significant price discovery contracts

(``SPDCs'') under part 36 of its regulations. Such contracts are

executed through exempt commercial markets and typically cleared.

SPDCs, however, do not encompass all economically equivalent swaps (as

defined by proposed regulation 20.1 through the term paired swaps).

SPDC positional data would therefore not supply sufficient information

to the Commission to monitor all economically equivalent swaps for

aggregate position limit violations, should such limits be adopted.

Moreover, parts 15 through 19 and 21 of the Commission's regulations do

not apply to uncleared swaps that may be SPDCs. To have consistency in

reporting, regulation 20.2(a) would require SPDCs that are paired swaps

to be reported under proposed part 20 instead of parts 15 through 19

and 21 of the Commission's regulations (which include position

reporting regulations for clearing organizations and futures

intermediaries that are analogous to those proposed herein).

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\4\ Commission regulations referred to herein are found at 17

CFR chapter 1.

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The Commission also receives positional data for some swaps that

are cleared by certain clearing organizations but not listed for

trading (``cleared-only swaps'').\5\ This positional data is received

from a limited number of clearing organizations, and depending on the

contract and the clearing organization, does not necessarily provide

disaggregated data on swaps held by non-clearing member counterparties.

As with SPDCs, cleared-only swaps positional data would not supply

sufficient data to the Commission to monitor for aggregate position

limit violations across DCM contracts with CFTC-set position limits and

economically equivalent swaps. To the extent that cleared-only swaps

are paired swaps, regulation 20.2(a) would require reporting under

proposed part 20 instead of parts 15 through 19 and 21 of the

Commission's regulations.

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\5\ See, e.g., Order (1) Pursuant to Section 4(c) of the

Commodity Exchange Act, Permitting the Chicago Mercantile Exchange

to Clear Certain Over-the-Counter Agricultural Swaps and (2)

Pursuant to Section 4d of the Commodity Exchange Act, Permitting

Customer Positions in Such Cleared-Only Contracts and Associated

Funds To Be Commingled With Other Positions and Funds Held in

Customer Segregated Accounts, 74 FR 12316, 12320 (March 24, 2009)

(requiring reporting under parts 15, 16 and 17 of the Commission's

regulations for cleared-only swaps).

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The Commission notes that the Dodd-Frank Act also provides for the

establishment of SDRs. Once established and operationally able to

receive swaps data, SDRs would have the potential to serve as the

Commission's primary positional data source. The Congressionally

mandated deadline for establishing position limits, however, predates

the deadline for Commission regulations for SDR registration. Thus, the

position reports for physical commodity swaps contemplated by these

proposed regulations would function as a transitional tool until SDRs

are in operation and able to provide the Commission with swap

positional data. If implemented in whole or in part, the Commission may

determine to continue or discontinue the proposed reporting system once

SDRs are operational.

CEA sections 4a and 8a(5), considered in tandem, provide the

statutory authority for these proposed regulations. The Commission

cannot fully effectuate the mandate of section 4a of the Act without an

operational data collection system. In proposing these regulations, the

Commission relies on its CEA section 8a(5) general rulemaking

authority. Section 8a(5) authorizes the Commission ``to make and

promulgate 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 this Act.'' For the

reasons discussed above, the proposed regulations, in the Commission's

judgment, are reasonably necessary to effectuate CEA section 4a as

amended by the Dodd-Frank Act.

II. The Proposed Regulations

A. Listed Futures Contracts

Section 4a(a)(2) of the Act provides that the Commission shall set,

as appropriate, position limits for exempt and agricultural DCM futures

and option contracts.\6\ The Act also provides that the Commission

shall establish position limits, including aggregate limits, as

appropriate, for swaps that are economically equivalent to futures

contracts (and options thereon or options on commodities) with CFTC-set

position limits. Proposed regulation 20.2 lists a broad set of futures

contracts and options thereon which may be the subject of CFTC-set

position limits. These 20.2 listed futures contracts can be divided

into two categories. The first category contains futures contracts that

have high levels of open interest and significant notional value (and

certain

[[Page 67260]]

related contracts).\7\ The contracts in this category are:

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\6\ New section 4a(a)(2) by its terms also applies to options on

physicals. With respect to options on physicals traded on DCMs, the

current open interest levels in such DCM contracts on the

commodities underlying the 20.2 listed futures contracts are

minimal.

\7\ These contracts can function as anchors to many other DCM

contracts and therefore directly or indirectly correspond to a

substantial fraction of open interest for listed physical commodity

derivatives. See, e.g., Federal Speculative Position Limits for

Referenced Energy Contracts and Associated Regulations, 75 FR 4133,

4154 (January 26, 2010) (``January 2010 proposed regulations for

major energy contracts'') (showing the spoke contracts linked to the

physically delivered NYMEX Crude Oil, Light Sweet futures contract).

Reference DCM Contracts With High Open Interest and Notional Value

(Including Certain Related Contracts)

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Chicago Board of Trade (``CBOT'') Corn.

CBOT Rough Rice.

CBOT Soybeans.

CBOT Soybean Meal.

CBOT Soybean Oil.

CBOT Wheat.

Chicago Mercantile Exchange (``CME'') Feeder Cattle.

CME Live Cattle.

CME Milk Class III.

Comex (``CMX'') Copper Grade 1.

CMX Gold.

CMX Silver.

ICE Futures US (``ICUS'') Cocoa.

ICUS Coffee C.

ICUS Cotton No. 2.

ICUS Frozen Concentrated Orange Juice.

ICUS Sugar No. 11.

ICUS Sugar No. 16.

Kansas City Board of Trade (``KCBT'') Wheat.

Minneapolis Grain Exchange (``MGEX'') Wheat.

NYSELiffe (``NYL'') Gold, 100 Troy Oz.

NYL Silver, 5000 Troy Oz.

New York Mercantile Exchange (``NYMEX'') Cocoa.

NYMEX Coffee.

NYMEX Cotton.

NYMEX Crude Oil, Light Sweet (``WTI'').

NYMEX Gasoline Blendstock (RBOB).

NYMEX Natural Gas.

NYMEX No. 2 Heating Oil, New York Harbor.

NYMEX Palladium.

NYMEX Platinum.

NYMEX Sugar No. 11.

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The contracts in the second category, listed below, do not have

high levels of open interest or represent significant notional values.

However, based on feedback from inquiries posed to swap market

participants relating to the size and level of activity in certain

markets, Commission staff recommended their inclusion in proposed

regulation 20.2.\8\ Such contracts may serve as the pricing basis of a

significant number of swap market transactions, thereby warranting some

measure of Commission scrutiny.

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\8\ Staff tasked with assisting the Commission in developing the

proposed regulations made this recommendation after meeting with or

speaking to 23 outside parties, representing commercial end-users,

commercial merchants, commodity-based swap trading arms of large

financial institutions, futures exchanges, swap data service

providers, and our sister financial regulators. See http://

www.cftc.gov/LawRegulation/ DoddFrankAct/ExternalMeetings/otc_

meetings.html.

Additional DCM Reference Contracts

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CBOT Ethanol.

CBOT Oats.

CME Butter.

CME Cheese.

CME Dry Whey.

CME Hardwood Pulp.

CME Lean Hogs.

CME Non Fat Dry Milk.

CME Random Length Lumber.

CME Softwood Pulp.

NYMEX Brent Financial.

NYMEX Central Appalachian Coal.

NYMEX Hot Rolled Coil Steel.

NYMEX Uranium.

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B. Scope of Economically Equivalent Swaps

The Commission, through the definition of paired swap or paired

swaption (for ease of reference, collectively ``paired swaps'') in

proposed regulation 20.1, defines a subset of swaps that may qualify as

economically equivalent to the DCM contracts listed in proposed

regulation 20.2. Proposed regulation 20.1 identifies paired swaps

(i.e., economically equivalent swaps) in two paragraphs. The first

paragraph of proposed regulation 20.1 defines paired swaps to include

those that directly or indirectly are linked to the price of a 20.2

listed futures contract. This category includes swaps that are

partially or fully settled or priced at a differential to a 20.2 listed

futures contract. The following list provides examples of the types of

swaps that are intended to be covered under the first paragraph of the

proposed definition of paired swap.

1. Directly linked to a listed contract--A swap settled to the

price of the NYMEX Heating Oil Calendar Swap Futures Contract is

directly linked to a 20.2 listed DCM futures contract because the

floating price of the futures contract is equal to the monthly average

settlement price of the first nearby contract month for the NYMEX New

York Harbor No. 2 Heating Oil Futures Contract.

2. Indirectly linked to a listed contract--The ICE WTI Average

Price Option is indirectly linked to a 20.2 listed futures contract

because the floating price of the swap references the ICE WTI 1st Line

Swap Contract which in turn is equal to the monthly average settlement

price of the NYMEX Front Month WTI Crude Futures Contract.

3. Partially settled to a listed contract--A swap settled to the

Argus Sour Crude Index (``ASCI'') (which also underlies the CME Argus

WTI Formula Basis Calendar Month Swap Futures Contract) is partially

settled to a 20.2 listed futures contract.\9\ Because the ASCI index

uses both a physical cash market component and the NYMEX WTI Futures

Contract to establish the level of the index, it would partially settle

to a 20.2 listed futures contract and would be a paired swap under the

first paragraph of the proposed definition.\10\

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\9\ The floating price of the CME futures contract is equal to

the arithmetic average of the ASCI (1st month) outright price from

Argus Media for each business day that the ASCI is determined during

the contract month.

\10\ For a description of the ASCI methodology, see, e.g.,

http://web04.us.argusmedia.com/ArgusStaticContent//Meth/ASCI.pdf.

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4. Priced at a differential to a listed contract--The ICE Henry

Physical Basis LD1 Contract is priced at a differential to a 20.2

listed futures contract because the settlement price is the final

settlement price for natural gas futures (a listed 20.2 contract) as

reported by NYMEX for the specified month plus the contract price.

The second paragraph of the proposed definition of a paired swap

includes swaps that directly or indirectly link to, including being

partially or fully settled or priced at a differential to, the price of

the same commodity for delivery at the same location or locations as

that of a 20.2 listed futures contract. As opposed to paragraph one,

the second paragraph of the definition of paired swap looks to a swap's

connection to the commodity underlying a 20.2 listed futures contract,

and to the delivery locations with a nexus to those delivery locations

specified in a 20.2 listed contract, as opposed to the price of the of

the contract itself. Therefore, in contrast to paragraph one, the

linkage is to the price of the underlying commodity and its physical

marketing channels.

Under paragraph two, a paired swap would include swaps that are

based on the same commodity\11\ as that of a 20.2 listed futures

contract but deliverable at locations that are different than a 20.2

listed futures contract's delivery locations, so long as such locations

have substantially the same supply and demand fundamentals as that of a

20.2

[[Page 67261]]

listed futures contract reference delivery location. The following list

provides examples of the types of swaps that are reportable under the

second paragraph of the definition.

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\11\ As provided in the Commission's January 2010 proposed

regulations for major energy contracts, a commodity will be

considered to be the same (for the purposes of reporting under this

regulation) if such commodity has the same economic characteristics

with respect to grade and quality specifications as those referenced

by a 20.2 listed futures contract.

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1. Same commodity with a delivery point that shares substantially

the same supply and demand fundamentals--An uncleared swap based on a

NYMEX Columbia Gulf, Mainline Natural Gas Index Swap (Platts Gas Daily/

Platts IFERC) Futures Contract provides an example of a futures

contract which references an underlying spot market that is affected by

substantially similar supply and demand forces as the pricing location

to which the NYMEX Natural Gas Futures Contract references. In this

case, the floating price of the NYMEX Columbia Gulf, Mainline Natural

Gas Index Swap (Platts Gas Daily/Platts IFERC) Futures Contract is

equal to the difference in the monthly average prices for Mainline

Midpoint (Midpoint) and the Platts Inside FERC's Gas Market Report

(Platts IFERC) Columbia Gulf Transmission Co., Mainline Index. This

swap would be on based the same commodity as that of a 20.2 listed

contract, but deliverable at a different location. The different

location, however, shares substantially the same supply and demand

fundamentals as the Henry Hub, which is the delivery location for the

NYMEX Natural Gas contract. The swap's delivery location is in close

proximity to the Henry Hub, and there is tight arbitrage between the

two pricing hubs.

2. Same commodity at different locations--The NYMEX Transco, Zone 6

Natural Gas Index Swap (Platts Gas Daily/Platts IFERC) Futures Contract

provides an example of a futures contract which references an

underlying spot market that is interconnected with a spot market to

which the NYMEX Natural Gas Futures Contract references. The floating

price of the NYMEX Transco, Zone 6 Natural Gas Index Swap (Platts Gas

Daily/Platts IFERC) Futures is equal to the difference in the monthly

average prices for the Platts Gas Daily Transco, Zone 6 N.Y. Midpoint

(Midpoint) and the Platts Inside FERC's Gas Market Report (Platts

IFERC) Transco Zone 6 Index (Index) for the stipulated period within

the contract specifications. The index price represents a natural gas

spot market that is physically linked, via the Transco pipeline, to a

spot market (Henry Hub) which is referenced by a 20.2 listed futures

contract.

C. Reporting Under the Proposed Regulations

1. Reports by Clearing Organizations

Regulation 20.3 proposes to collect paired swap reports from

clearing organizations. Clearing organizations are defined in proposed

regulation 20.1 as persons or organizations that act as a medium

between clearing members for the purpose of clearing swaps or swaptions

or effecting settlements of swaps or swaptions. The intent of the

definition, which is modeled on the definition used in Commission

regulation 15.00 (the definitional section for the Commission's large

trader reporting rules), is to apply the reporting regulations only to

entities that perform clearing functions as clearing intermediaries and

counterparties to each side of a swap for the purpose of clearing the

trade. The proposed definition is intended to cover entities that are

commonly known as clearing organizations, regardless of their

registration status with the Commission. It is not meant to apply to

financial institutions or parties to swaps that provide counterparties

with financing, credit support, or hold collateral to facilitate or to

ensure that payments are made under the terms of a paired swap.

Pursuant to proposed regulation 20.3, clearing organizations, for

paired swap positions, would report the aggregate proprietary and

aggregate customer accounts of each clearing member of that clearing

organization. Proposed regulation 20.1 defines clearing member as any

person who is a member of, or enjoys the privilege of clearing trades

in its own name through, a clearing organization. The paired swap

positions would be reported to the Commission as futures equivalent

positions in terms of a swap's related 20.2 listed futures contract.

Proposed Appendix A to this part provides several examples of the

methods used for converting swap positions into futures equivalent

positions. The proposed regulations would ask for reporting in futures

equivalents because such conversions are made by entities that deal in

swaps to effectively manage residual price risks by entering into 20.2

listed futures contracts. Reporting in futures equivalents would result

in a measure of equivalency between positions in paired swaps and their

related 20.2 listed futures contracts, and it would allow for the

enforcement of aggregate position limits across futures and swaps

should the Commission adopt such limits.

As required under paragraph (a) and (b) of proposed regulation

20.3, each clearing organization would submit to the Commission a data

record that identifies either gross long and gross short futures

equivalent positions if the record corresponds to a paired swap

position, or gross long and gross short futures equivalent positions on

a non-delta-adjusted basis if the data record corresponds to a paired

swaption position. A data record (for the purposes of this rulemaking)

can be thought of as a grouped subset of the overall set of reported

data elements that communicates a unique (non-repetitive) positional

message to the Commission.

Clearing organizations would be required to report a data record

for each clearing member for each reporting day, which is defined in

proposed regulation 20.1 as the daily period of time between a clearing

organization or reporting entity's usual and customary last internal

valuation of paired swaps or swaptions and the next such period. In

order to provide clearing organizations with some flexibility in

determining daily operational cycles that would coincide with their

obligation to provide clearing member reports on a daily basis, the

proposed definition would permit such cycles of time to vary for

different clearing organizations, so long as the daily period of time

is consistently observed and the Commission is notified, upon its

request, of the manner by which a cycle is calculated. Data records

would be reported electronically in a manner consistent with current

Commission practice.

The positional data elements in paragraphs (a) and (b) of proposed

regulation 20.3 would require daily reports for each aggregated

proprietary account and each aggregated customer account, by each

cleared product, and by each futures equivalent month. Each data record

would indicate the commodity reference price with which each cleared

product is associated. As defined in proposed regulation 20.1, a

commodity reference price is the price series used by the parties to a

swap or swaption to determine payments made, exchanged, or accrued

under the terms of that swap or swaption. In addition, data records for

swaptions would be required to be broken down further by expiration

date, put or call indicator, and strike price. Proposed Appendix B to

part 20 includes examples of data records that would be required of

clearing organizations. The examples in Appendix B are provided to

facilitate the public's ability to comment on these reports, and if

adopted as part of a final rulemaking, increase a clearing

organization's familiarity with the type of reporting the regulations

would require.

[[Page 67262]]

In addition to reports for clearing members, clearing organizations

would, pursuant to proposed regulation 20.3(c), be required to provide

to the Commission, for each futures equivalent month, end of reporting

day settlement prices for each cleared product and deltas for every

unique swaption put and call, expiration date, and strike price. This

second daily report would provide the type of information that is

necessary to assign a weight to a trader's positions.

2. Reports by Reporting Entities

Proposed regulation 20.4 would require reporting entities to report

proprietary positions in paired swaps and their paired swap

counterparty positions. Proposed regulation 20.1 identifies a reporting

entity as a clearing member or a swap dealer as defined in section 1a

of the CEA and as subject to definitional changes that may be made

through the issuance of Commission regulations.

The definition of reporting entity is intended to identify

financial firms that regularly make markets in swaps, as well as

divisions or subsidiaries of large commercial swap market participants

that provide risk management services to other commercial entities in

the normal course of their business operations. Proposed regulation

20.4 is intended to require reports from such financial firms and not

from commercial end-users with swaps activities of limited scope. By

requiring reporting from these large market participants, proposed

regulation 20.4 could provide visibility into the majority of paired

swaps trading activity without burdening commercial entities that may

have less experience with compliance and reporting requirements

stemming from the regulation of financial institutions.\12\ The

Commission solicits comment specifically on the proposed definition of

reporting entity and the sufficiency of the market visibility gained by

requiring reports only from a limited set of market participants.

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\12\ The proposed definition of reporting entity includes an

exemption from the definition of reporting entity for entities that

are not commonly known as swap dealers.

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Proposed regulation 20.4 would require reporting entities to

provide the Commission with positional reports only if the reporting

entities hold reportable paired swap positions. Proposed regulation

20.1 defines a reportable position as a position, in any one futures

equivalent month, comprised of fifty or more futures equivalent paired

swaps or swaptions based on the same commodity. This proposed level is

calibrated to capture data on a sufficiently large percentage of paired

swap positions and was arrived at after consultation with multiple

market participants.\13\ The Commission specifically requests comment

on whether this reporting level is appropriate relative to the size of

positions held by paired swap counterparties.

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\13\ See http://www.cftc.gov/LawRegulation/DoddFrankAct/

ExternalMeetings/otc_meetings.html.

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Once a reporting entity's paired swaps position meets or exceeds

the fifty futures equivalent paired swaps or swaptions threshold,

proposed regulation 20.1 defines all other paired swap positions held

by the reporting entity (in the commodity that initially caused the

reporting entity's positions to be deemed reportable) to be part of the

entity's reportable position.\14\ Clearing members and other reporting

entities would follow the same procedure for determining if their

proprietary positions or any counterparty positions are reportable to

the Commission. As with clearing member reports that would be provided

by clearing organizations to the Commission under proposed regulation

20.3, proposed regulation 20.4 would require paired swap positions to

be represented and reported in futures equivalents. Without a common

method of accounting for positions in swaps and futures, aggregate

positions could potentially not be enforceable, should the Commission

promulgate such limits.

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\14\ In order to verify that a reporting entity's paired swap

positions are no longer above the threshold, the proposed definition

of reportable position would also encompass positions in paired

swaps held by the reporting entity on the first day after which the

reporting entity's paired swap positions are no longer reportable.

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To determine what to report under proposed regulation 20.4,

reporting entities would separately consider proprietary positions,

counterparty positions, and positions in controlled accounts. For each

actual swap or swaption account that includes a paired swap or swaption

in which the reporting entity is reportable, such entities would be

required to provide for each reporting day a data record that either

identifies long and short paired swap positions (if the record pertains

to swap positions) or long and short non-delta-adjusted paired swaption

positions and long and short delta-adjusted swaption positions (if the

record pertains to swaptions positions). For uncleared paired swaps,

the proposed regulations would require a reporting entity to use

economically reasonable and analytically supported deltas.

As proposed under regulation 20.4, this information would be

grouped separately by swap or swaption account that is a part of a

reportable account, by futures equivalent month, by cleared or

uncleared contracts, by commodity reference price, and by clearing

organization, if the data record pertains to cleared swaps. Data

records pertaining to cleared swaption positions under the proposed

regulations would be further grouped by put or call, expiration date,

and strike price. Uncleared swaption positions, however, would not be

required to be grouped by put or call, expiration date, and strike

price. The reports provided under proposed regulation 20.4 would also

include identifiers for the commodity underlying the reportable

position, the counterparties of the account and the 102S filing

identifier, as described in more detail below, assigned by the

reporting entity to the owner(s) of the account, as well as the

controller(s) of the account. Proposed Appendix B to this part includes

several examples of required records.

3. Series S Filings

Proposed regulation 20.5(a) would require a 102S filing for the

identification of the direct owner or controller of a ``reportable

account'' by the reporting entity holding or carrying the account. The

102S filing would consist of the ``name, address, and contact

information of the direct owner or controller of the reportable

account'' and a ``brief description of the nature of such person's

paired swaps and swaptions' market activity'' (e.g., whether it is an

omnibus account for another broker or an individual account). The

reporting entity is required to submit a 102S filing only once for each

person associated with a reportable account.

Once an account holder or controller is reportable, the Commission

may contact the trader directly and require that the trader file a more

detailed identification report, a 40S filing. The Commission would

require a 40S filing if a trader has become reportable for the first

time and is not known to the Commission. A 40S filing would consist of

the submission of a CFTC Form 40 ``Statement of Reporting Trader.'' As

the current version of Form 40 covers information on positions in

futures and options, the trader would be required to complete the form

as if the form covered

[[Page 67263]]

information related to positions in paired swaps and swaptions.\15\

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\15\ The Commission plans to revise Form 40 in the future so

that the form would explicitly target information on paired swaps

and swaptions positions as well as futures and options positions.

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The 102S filings and the 40S filing together would allow the

Commission to identify the person(s) owning the account or controlling

its trading, the person to contact regarding trading, the nature of the

account, whether the reported account is related--by financial interest

or control--to another account, and the principal occupation or

business of the account owner. The filings also would provide the

Commission information on whether the account is being used for hedging

cash market exposure.

Commission staff would use the information in these two filings to

determine if the reported account corresponds to a new trader or is an

additional account of an existing trader. If the account is an

additional one of an existing trader, it would then be aggregated with

that of other related accounts currently being reported. By properly

identifying and aggregating accounts, Commission surveillance staff

would be able to assess a trader's compliance with speculative position

limits across futures and swaps markets, should the Commission adopt

such limits.

4. Maintenance of Books and Records

Proposed regulation 20.6 would impose recordkeeping requirements on

reporting clearing organizations, reporting entities, and persons with

reportable swaps positions. Proposed regulation 20.6(a) would require

clearing organizations to keep records of transactions in paired swaps

or swaptions. Proposed regulation 20.6(b) would require reporting

entities and persons with reportable positions to maintain ``books and

records * * * showing all records for transactions concerning all

reportable positions.'' In addition, reporting entities and persons

with reportable positions would be required to keep books and records

on ``transactions in the cash commodity'' and its products and

byproducts, and ``all commercial activities'' that are hedged in 20.2

listed futures contract, ``or options thereon,'' or paired swaps and

swaptions. These recordkeeping requirements are very similar to those

in current regulation 18.05.

The recordkeeping duties imposed by proposed regulation 20.6 are to

be in accordance with the requirements of regulation 1.31. Most

pertinently, regulation 1.31(a)(1) requires that these transaction

records be kept for five years, the first two of which they ``shall be

readily accessible.'' Such books and records ``shall be open to

inspection by any representative of the Commission.''

These recordkeeping requirements would allow the Commission to have

ready access to records that would enable Commission staff to

reconstruct the transaction history of reported positions. These

requirements would ensure that data records submitted to the Commission

could be audited. In addition, these records would enable Commission

staff to better reconstruct trading activity that may have had a

material impact on the price discovery process.

The recordkeeping burden imposed by proposed regulation 20.6 is not

anticipated to be high. These requirements are not unlike the

recordkeeping requirements imposed by Congress in new CEA section

4r(c)(2) on all swap market participants, and by the Commission on

those entities with reportable futures accounts under the existing

recordkeeping provision of regulation 18.05.

5. Form and Manner of Reporting

Proposed regulation 20.7(a) provides that the Commission would

specify, in writing to persons required to report, the format, coding

structure, and electronic data transmission procedures for these

reports and submissions. The purpose of this provision would be to

provide notice on how the Commission would determine the means by which

the part 20 reports are to be formatted and submitted.

6. Delegation of Authority

Proposed regulation 20.8 delegates certain of the Commission's

proposed part 20 authority to the Director of the Division of Market

Oversight and through the Director to other employee or employees as

designated by the Director. The delegated authority extends to: (1)

Issuing a special call for a 40S or 102S filing; and (2) providing

instructions or determining the format, coding structure, and

electronic data transmission procedures for submitting data records and

any other information required under proposed part 20. The purpose of

this delegation provision is to facilitate the ability of the

Commission to respond to changing market and technological conditions

for the purpose of ensuring timely and accurate data reporting.

7. Sunset Provision

Proposed regulation 20.9 includes a sunset provision. The sunset

provision would render the proposed regulations ineffective and

unenforceable upon the Commission's finding (through the issuance of an

order) that operating SDRs are capable of processing positional data in

a manner that would enable the Commission to effectively surveil paired

swaps trading and paired swap markets. Proposed regulation 20.9 also

provides the Commission with the authority to retain the effectiveness

and enforceability of any requirement in part 20, such as the reporting

of deltas for uncleared paired swaps or the reporting of paired swap

positions in futures equivalents, should the Commission determine that

such reporting is of material value to conducting market surveillance.

D. Solicitation of Comments

Pursuant to the Dodd-Frank Act, the Commission will refine the

definition of swap dealer in CEA section 1a. The Commission solicits

comments on whether it should delay the implementation of proposed part

20 to sixty days following a final Commission rulemaking further

defining the term swap dealer. The Commission also specifically

requests comments on any role self-regulatory organizations could play

in gathering positional data on paired swaps. In addition, the

Commission solicits comments on alternative approaches that may be

employed to gather positional data on paired swaps.

III. Related Matters

A. Cost-Benefit Analysis

1. Introduction

Section 15(a) of the Act requires that the Commission, before

promulgating a regulation under the Act or issuing an order, consider

the costs and benefits of its action. By its terms, CEA section 15(a)

does not require the Commission to quantify the costs and benefits of a

new regulation or determine whether the benefits of the regulation

outweigh its costs. Rather, CEA section 15(a) simply requires the

Commission to ``consider the costs and benefits'' of its action.

CEA section 15(a) specifies that costs and benefits shall be

evaluated in light of the following considerations: (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. Accordingly, the Commission could, in its discretion,

give greater weight to any of the five considerations and could, in its

discretion, determine that,

[[Page 67264]]

notwithstanding its costs, a particular regulation was necessary or

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

provisions or to accomplish any of the purposes of the Act.

2. Costs

As mentioned above, under CEA section 4a(a)(2), the Commission has

been directed to establish position limits, as appropriate, on traders

in certain physical commodity futures and swaps markets within 180 or

270 days of the enactment of the Dodd-Frank Act, for exempt and

agricultural commodities, respectively. As explained in this release,

the Commission lacks the information it needs with respect to paired

swaps to be able to conduct surveillance for limits that may be

established under CEA section 4a.

In developing these proposed regulations, the Commission has aimed

to minimize the cost and burden associated with reporting positional

data to the Commission. As discussed above, the Commission has tailored

the regulations to conform to the market structure for cleared and

uncleared paired swaps. The cost of proposed part 20 regulations would

be borne by firms that are clearing organizations reporting under

proposed regulation 20.3 and clearing member reportable entities

reporting under proposed regulation 20.4. For such firms, the

additional cost to implement a reporting system is expected to be

minimal since the Commission understands these firms track their own

and their counterparties' positions for risk-management purposes.

Although the Commission has proposed a reporting system for cleared

paired swaps that resembles the large trader reporting system, the

Commission proposes a structurally different reporting system for

uncleared paired swaps. The structure of the uncleared paired swaps

market is not as centralized as the cleared paired swaps market: There

is no central counterparty that corresponds to a clearing organization

in the uncleared paired swaps market. The Commission believes that swap

dealers may be counterparties to a significant portion of the market

for uncleared paired swaps and swaptions.

Accordingly, the Commission has proposed to require position

reporting from swap dealers. These firms are to report their positions

as well as those of their counterparties, provided that they are above

the ``reportable position'' level. These firms have the

creditworthiness to be able to negotiate a substantial swaps portfolio

in paired swaps across many counterparties. As is the case for clearing

member reportable entities, it is likely that creating or purchasing an

information technology system that can present such a firm's net

position exposures on a daily basis would not be an overly burdensome

marginal expense, since the Commission understands swap dealers track

their exposures for risk management purposes.

For counterparties that would be subject to the recordkeeping

requirements of proposed regulation 20.6, it should be noted that these

requirements would place new burdens (in terms of reporting and

retaining information on cash market transactions) only on persons that

are reportable solely in paired swaps. This is because recordkeeping

requirements are imposed by Congress with respect to all swaps in new

section 4r(c)(2) of the CEA. Likewise, counterparties that hold

reportable futures positions (in addition to reportable paired swaps

positions) are currently subject to existing recordkeeping requirements

under regulation 18.05. Thus, the Commission believes that these

additional burdens, in marginal terms, are not expected to be overly

burdensome, given that firms collect information on their commercial

activities in the normal course of business operations.

3. Benefits

As discussed above, implementing proposed part 20 would enable the

Commission to monitor and enforce position limits, if established by

the Commission, to diminish, eliminate, or prevent excessive

speculation; to deter and prevent market manipulation; ensure

sufficient market liquidity for bona fide hedgers; and to ensure that

the price discovery function of the underlying market is not disrupted.

By enabling the Commission to monitor compliance with position limits

to address these concerns, the Commission would be better able to

protect the price discovery process (CEA section 15(a)(2)(C)) and

market participants and the public from the threats of excessive

speculation and price manipulation (CEA section 15(a)(2)(A)).

In addition to providing increased market transparency through the

reporting of paired swap positions to the Commission, the Commission

would be better able to first, protect market participants and the

public (CEA section 15(a)(2)(A)) and second, increase the efficiency

and competitiveness of the markets (CEA section 15(a)(2)(B)). The

extension of the Commission's surveillance activities to these paired

swap markets would help ensure the integrity of these markets and

thereby protect market participants and the public from disruptive

trading, price manipulation, and the effects of market congestion.

Further, with the extension, the Commission would be able to expand its

Commitments of Traders report to include aggregate position data on the

paired swaps markets, and thus, would provide the public, including

market participants, greater transparency into the constitution of

markets covered by the proposed part. This increased transparency may

reduce the informational asymmetries in the paired swap markets and

thereby improve the efficiency of the market and promote competition.

4. Conclusion

The Commission, after considering the CEA section 15(a) factors,

finds that the expected incremental cost imposed by proposed part 20 is

outweighed by the expected benefit. Accordingly, the Commission has

determined to propose part 20. The Commission invites public comment on

its cost-benefit considerations. Commenters are also are invited to

submit any data or other information that they may have quantifying or

qualifying the costs and benefits of proposed part 20.

B. Regulatory Flexibility Act

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

in proposing regulations, to consider the impact of those regulations

on ``small entities.'' \16\ The proposed regulations detailed in this

release would affect organizations including registered derivatives

clearing organization (``DCOs''), clearing members (many of whom would

be registered with the Commission already as futures commission

merchants (``FCMs'')), swap dealers, and persons who have reportable

paired swaps positions and otherwise have not been reportable based on

futures positions.

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\16\ 5 U.S.C. 601 et seq.

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The Commission has previously determined that DCOs \17\ and FCMs

\18\ are not ``small entities'' for purposes of the RFA. As noted

above, a reportable paired swaps position would include 50 or more

paired swaps positions in a futures equivalent month. The Commission

notes this threshold is higher than the minimum 25 contract reporting

levels in effect for futures positions under regulation 15.03.

Previously, the Commission had determined that the reporting levels in

regulation 15.03 would not affect small

[[Page 67265]]

entities.\19\ The Commission does not believe that entities who meet

the proposed larger quantitative threshold would constitute small

entities for RFA purposes.

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\17\ 66 FR 45604, 45609 (August 29, 2001).

\18\ Policy Statement and Establishment of Definitions of

``Small Entities'' for Purposes of the Regulatory Flexibility Act,

47 FR 18618, 18619 (Apr. 30, 1982).

\19\ Id. at 18620 (excluding large traders from the definition

of small entity).

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Accordingly, the Commission does not expect the regulations, as

proposed herein, to have a significant impact on a substantial number

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

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

proposed regulations would not have a significant economic impact on a

substantial number of small entities. The Commission invites the public

to comment on whether the entities covered by these proposed

regulations should be considered small entities for purposes of the

RFA.

C. Paperwork Reduction Act

1. Overview

The Paperwork Reduction Act (``PRA'') \20\ imposes certain

requirements on Federal agencies in connection with their conducting or

sponsoring any collection of information as defined by the PRA. This

proposed rulemaking would result in new collection of information

requirements within the meaning of the PRA. The Commission therefore is

submitting this proposal to the Office of Management and Budget

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

1320.11. The title for this collection of information is ``Part 20--

Position Reports for Physical Commodity Swaps'' (OMB control number

3038-NEW). If adopted, responses to this collection of information

would be mandatory.

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

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An agency may not conduct or sponsor, and a person is not required

to respond to, a collection of information unless it displays a

currently valid control number. OMB has not yet assigned a control

number to the new collection for proposed part 20. The requirements of

new part 20 are not currently covered by any existing OMB control

number.

The Commission is submitting this proposal to OMB for review in

accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11.

As noted earlier, in section 737 of the Dodd-Frank Act, Congress

amended section 4a of the CEA to require the Commission to establish,

as appropriate, aggregate position limits for futures contracts traded

on a DCM and for economically equivalent swaps. Pursuant to new section

4a(a)(2)(B) of the CEA, Congress mandated that the Commission set these

position limits within 180 days of enactment of the Dodd-Frank Act for

exempt commodities and 270 days for agricultural commodities. In order

to enforce regulations establishing position limits for economically

equivalent swaps, the Commission has determined that it first needs to

establish the reporting regulations proposed herein. Given the short

timeframe in which the Commission must determine whether to set

position limits under the Dodd-Frank Act, the Commission has determined

that it needs to adopt a swaps reporting system on an expedited basis

to comply with the statutory deadline contained in new section

4a(a)(2)(B) of the CEA.

2. Information Provided and Recordkeeping Duties

As a result of the Dodd-Frank Act, new part 20 proposes putting

into place reporting requirements for ``clearing organizations'' and

``reporting entities'' and recordkeeping requirements for these firms

in addition to firms that become reportable because of a reportable

paired swap or swaption positions. Accordingly, the Commission is

seeking a new and separate control number for reporting from ``clearing

organizations'' and ``reporting entities'' (collectively

``respondents'') and recordkeeping for firms that become reportable

because of a reportable paired swap or swaption position operating in

compliance with the requirements of proposed part 20. Upon OMB's

approval and assignment of a new control number specifically for the

collection of information and recordkeeping requirements of proposed

part 20, the Commission intends to submit the necessary documentation

to OMB to enable it to apply a new OMB control number exclusively for

part 20 reports.

Proposed part 20 would result in the collection of information on

``paired swaps and swaptions'' positions as defined in proposed

regulation 20.1. Specifically, proposed part 20 provides for three new

kinds of reports:

1. Under proposed regulation 20.3, swap ``clearing organizations''

would provide daily reports of relevant position and clearing data.

2. Under proposed regulation 20.4, ``reporting entities'' would

produce position reports on a daily basis on their own and individual

counterparty accounts. Within this class of ``reporting entities,''

there are two categories of ``reporting entities:'' (a) ``clearing

members'' and (b) ``swap dealers'' that are not clearing members. The

former category, ``clearing members,'' would include many firms that

are currently registered as FCMs with the Commission. The Commission

estimates that a total of 180 swap dealers transact in physical

commodity swaps and thereby may be reporting entities under proposed

part 20 (clearing members and non-clearing members combined).

3. Finally, under proposed regulation 20.5, all ``reporting

entities'' would submit identifying information to the Commission on

new reportable accounts through a 102S filing.

In addition to creating these reporting requirements, proposed

regulation 20.6 would impose recordkeeping requirements for (1)

clearing organizations, (2) reporting entities, and (3) persons with

``reportable positions'' in the covered futures contract listed in

proposed regulation 20.2 or ``paired swaps or swaptions.'' Proposed

regulation 20.6(a) would require clearing organizations to maintain

``all records of transactions in paired swaps or swaptions'' on

clearing organizations. Proposed regulation 20.6(b) would require

reporting entities and ``persons with reportable positions'' to

maintain for all commodities in which it holds a reportable position

``all records for transactions * * * in the cash commodity * * * [and]

its products and byproducts'' and in ``commercial activities''

underlying a hedge in a covered futures contract or in paired swaps or

swaptions. These provisions extend those recordkeeping requirements

currently applicable to those traders holding reportable positions in

futures contracts, as currently found in regulation 18.05, to those

traders holding reportable positions in swaps.

The Commission estimates that the recordkeeping requirements of

proposed regulation 20.6 would not be overly burdensome. For the firms

subject to the reporting and recordkeeping requirements of proposed

regulation 20.6, it should be noted that these requirements are not

unlike the recordkeeping requirements imposed by Congress in the new

CEA section 4r(c)(2) of the CEA and by existing recordkeeping

regulation 18.05. If a firm subject to these recordkeeping requirements

was previously reportable due to a futures position in the relevant

commodity above the ``reporting level'' (see regulation 15.03), then

the proposed regulation 20.6(b) recordkeeping burdens would not be new,

as that firm would already be subject to these requirements under

regulation 18.05. If a firm becomes subject to the proposed regulation

20.6 recordkeeping requirements only because of a reportable swaps

position (not because of a futures position above

[[Page 67266]]

the reportable level) then the requirements contained in the proposal

add only the duty to keep records on ``all commercial activities that a

reporting entity or person hedges'' to the swaps-related recordkeeping

duties imposed by CEA section 4r(c)(2). These additional burdens are

not expected to be substantial, given that in the normal course of

business firms would collect this information on their commercial

activities.

The Commission estimates that implementing proposed part 20 would

create a total annual reporting and recordkeeping hour burden of 79,503

hours across 705 firms. Based on a weighted average wage rate of

$74.36,\21\ this would amount to an annualized labor cost of $5.9

million. In addition, the Commission estimates that total annualized

capital/start-up, operating, and maintenance costs \22\ would amount to

a combined $32.7 million. This overall total reporting and

recordkeeping hour burden is the sum of estimated burdens for the three

reporting categories and the three recordkeeping categories mentioned

above.

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\21\ The Commission staff's estimates concerning the wage rates

are based on salary information for the securities industry compiled

by the Securities Industry and Financial Markets Association

(``SIFMA''). The $74.36 per hour is derived from figures from a

weighted average of salaries and bonuses across different

professions from the SIFMA Report on Management & Professional

Earnings in the Securities Industry 2009, modified to account for an

1,800-hour work-year and multiplied by 1.3 to account for overhead

and other benefits. The wage rate is a weighted national average of

salary and bonuses for professionals with the following titles (and

their relative weight); ``programmer (senior)'' (60% weight),

``compliance advisor (intermediate)'' (20%), ``systems analyst''

(10%), and ``assistant/associate general counsel'' (10%).

\22\ The capital/start-up cost component of ``annualized

capital/start-up, operating, and maintenance costs'' is based on an

initial capital/start-up cost that is straight-line depreciated over

five years.

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Reporting burdens:

1. Proposed regulation 20.3 clearing organization reports would

account for 938 of these annual reporting and recordkeeping hours.

These hours would be spread across 5 respondents. Annualized capital/

start-up, operating, and maintenance costs for all affected clearing

organizations combined would be approximately $100,000.\23\

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\23\ All of the capital cost estimates in these estimates are

based on a 5 year, straight-line depreciation.

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2. Proposed regulation 20.4 reporting entity reports would have two

separate burden estimates based on the kind of reporting entity

providing the report:

a. Clearing member (80 clearing member/swap dealers plus 20

clearing member/non-swap dealers) reporting entity reports would create

an annual reporting and recordkeeping burden of 25,000 hours spread

across 100 respondents. Annualized capital/start-up, operating, and

maintenance costs for all firms in this category combined would be

approximately $6 million.

b. Swap dealer non-clearing member reporting entity reports would

create an annual reporting and recordkeeping burden of 37,500 hours

spread across 100 respondents. Annualized capital/start-up, operating,

and maintenance costs for all firms in this category combined would be

approximately $8 million.

3. Proposed regulation 20.5 reporting entity 102S submissions would

create an annual reporting and recordkeeping burden of 1,800 hours

spread across 200 firms. Annualized capital/start-up, operating, and

maintenance costs for all reporting entities combined providing these

reports would be approximately $1 million.

4. 40S submissions by persons with reportable positions under

proposed regulation 20.5(b) in paired swaps would create an annual

reporting and recordkeeping burden of 165 hours and would affect 500

firms. Annualized capital/start-up, operating, and combined maintenance

costs for all firms providing 40S filings would be approximately $4.5

million.

Recordkeeping burdens:

1. Proposed regulation 20.6(a) recordkeeping duties for clearing

organizations would account for 100 of these annual reporting and

recordkeeping hours. These hours would be spread across 5 firms.

Annualized capital/start-up, operating, and maintenance costs to meet

the recordkeeping requirements of proposed regulation 20.6(a) would be

approximately $100,000 spread across all affected clearing

organizations.

2. Proposed regulation 20.6(b) reporting entity recordkeeping

duties would have two separate burden estimates based on the kind of

reporting entity providing the report:

a. Clearing member (80 clearing member/swap dealers plus 20

clearing member/non-swap dealers) reporting entity recordkeeping would

create an annual reporting and recordkeeping burden of 2,000 hours

spread across 100 respondents. Annualized capital/start-up, operating,

and maintenance costs for all firms in this category of recordkeeping

reporting entities would be approximately $2 million.

b. Swap dealer non-clearing member reporting entity recordkeeping

would create an annual reporting and recordkeeping burden of 2000 hours

spread across 100 respondents. Annualized capital/start-up, operating,

and maintenance costs for all firms in this category of recordkeeping

reporting entities would be approximately $2 million.

3. Proposed regulation 20.6(b) recordkeeping duties for persons

with reportable positions in swaps (these firms were previously not

reportable) would create an annual reporting and recordkeeping burden

of 10,000 hours spread across 500 firms. Annualized capital/start-up,

operating, and maintenance costs for all traders in this category

combined would be approximately $11.5 million.

3. Confidentiality

The Commission would protect proprietary information according to

the Freedom of Information Act and 17 CFR part 145, ``Commission

Records and Information.'' In addition, section 8(a)(1) of the Act

strictly prohibits the Commission, unless specifically authorized by

the Act, from making public ``data and information that would

separately disclose the business transactions or market positions of

any person and trade secrets or names of customers.'' \24\ The

Commission also is required to protect certain information contained in

a government system of records according to the Privacy Act of 1974, 5

U.S.C. 552a.

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\24\ 7 U.S.C. 12(a)(1).

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4. Comments on Information Collection

The Commission invites the public and other Federal agencies to

comment on any aspect of the reporting and recordkeeping burdens

discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission

solicits comments in order to: (i) Evaluate whether the proposed

collection of information is necessary for the proper performance of

the functions of the Commission, including whether the information

would have practical utility; (ii) evaluate the accuracy of the

Commission's estimate of the burden of the proposed collection of

information; (iii) determine whether there are ways to enhance the

quality, utility, and clarity of the information to be collected; and

(iv) 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 e-mail at

[email protected] Please provide the Commission with a copy

of submitted comments so that all

[[Page 67267]]

comments can be summarized and addressed in the final regulation

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 RegInfo.gov. OMB is

required to make a decision concerning the collection of information

between 30 and 60 days after publication of this release. Consequently,

a comment to OMB is most assured of being fully effective if received

by OMB (and the Commission) within 30 days after publication of this

notice of proposed rulemaking.

List of Subjects

17 CFR Part 15

Brokers, Commodity futures, Reporting and recordkeeping

requirements.

17 CFR Part 20

Physical commodity swaps, Swap dealers, Reporting and recordkeeping

requirements.

For the reasons stated in the preamble, the Commodity Futures

Trading Commission proposes to amend 17 CFR parts 15 and 20 as follows:

PART 15--REPORTS--GENERAL PROVISIONS

1. The authority citation for part 15 is revised to read as

follows:

Authority: 7 U.S.C. 2, 5, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 6n, 7,

7a, 9, 12a, 19, and 21, as amended by Title VII of the Dodd-Frank

Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124

Stat. 1376 (2010).

2. Revise the heading and introductory text in Sec. 15.00 to read

as follows:

Sec. 15.00 Definitions of terms used in parts 15 to 19, and 21 of

this chapter.

As used in parts 15 to 19, and 21 of this chapter:

* * * * *

3. Add part 20 to read as follows:

PART 20--POSITION REPORTS FOR PHYSICAL COMMODITY SWAPS

Sec.

20.1 Definitions.

20.2 Covered contracts.

20.3 Clearing organizations.

20.4 Reporting entities.

20.5 Series S filings.

20.6 Maintenance of books and records.

20.7 Form and manner of reporting and submitting information or

filings.

20.8 Delegation of authority to the Director of the Division of

Market Oversight.

20.9 Sunset provision.

Appendix A to Part 20--Guidelines on Futures Equivalancy

Appendix B to Part 20--Explanatory Guidance on Data Record Layouts

Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6c, 6f, 6g, 6t, 12a, 19, as

amended by Title VII of the Dodd-Frank Wall Street Reform and

Consumer Protection Act, Pub. L. 111-203, 124 Stat. 1376 (2010).

Sec. 20.1 Definitions.

As used in, and solely for the purposes of, this part:

Account controller means a person that by power of attorney or

otherwise directs trading for an account.

Business day means ``business day'' as that term is defined in

Sec. 1.3 of this chapter.

Cleared product means a paired swap or swaption that a clearing

organization offers or accepts for clearing.

Clearing member means any person who is a member of, or enjoys the

privilege of, clearing trades in its own name through a clearing

organization.

Clearing organization means the person or organization that acts as

a medium between clearing members for the purpose of clearing swaps or

swaptions or effecting settlements of swaps or swaptions.

Closed swap or closed swaption means a swap or swaption that has

been settled, exercised, closed out, or terminated.

Commodity reference price means the price series (including

derivatives contract and cash market prices or price indices) used by

the parties to a swap or swaption to determine payments made,

exchanged, or accrued under the terms of the contracts.

Controlled account means ``controlled account'' as defined in Sec.

1.3 of this chapter.

Counterparty means, from the perspective of one side to a contract,

the person that directly corresponds to the other side of the contract.

Futures equivalent means an economically equivalent amount of one

or more futures contracts that represents a position or transaction in

one or more paired swaps or swaptions consistent with the conversion

guidelines in Appendix A of this part.

Open swap or swaption means a swap or swaption that has not been

closed.

Paired swap or paired swaption means an open swap that is:

(1) Directly or indirectly linked, including being partially or

fully settled on, or priced at a differential to, the price of any

commodity futures contract listed in Sec. 20.2; or

(2) Directly or indirectly linked, including being partially or

fully settled on, or priced at a differential to, the price of the same

commodity for delivery at the same location, or locations with

substantially the same supply and demand fundamentals, as that of a

commodity futures contract listed in Sec. 20.2.

Person means any ``person'' as that term is defined in Sec. 1.3 of

this chapter.

Reportable account or consolidated account that is reportable means

a consolidated account that includes a reportable position.

Reportable position means:

(1) A position, in any one futures equivalent month, comprised of

fifty or more futures equivalent paired swaps or swaptions based on the

same commodity underlying a futures contract listed in Sec. 20.2,

grouped separately by swaps and swaptions, then grouped by gross long

contracts on a futures equivalent basis or gross short contracts on a

futures equivalent basis;

(2) For a consolidated account (described in Sec. 20.4(a)) that

includes a reportable position as defined in paragraph (1) of this

definition, all other positions in that account that are based on the

commodity that renders the account reportable; and

(3) The first reporting day on which a consolidated account

(described in Sec. 20.4(a)) no longer in fact includes a reportable

position as described in paragraph (1) of this definition (because on

such day, the reporting entity's consolidated account shall be

considered and treated as if it in fact included reportable positions

as described in paragraph (1) of this definition.

Reporting day means the period of time between a clearing

organization or reporting entity's usual and customary last internal

valuation of paired swaps or swaptions and the next such period, so

long as the period of time is consistently observed on a daily basis

and the Commission is notified, upon its request, of the manner by

which such period is calculated and any subsequent changes thereto.

Reporting entity, means:

(1) A clearing member; or

(2) Swap dealer as that term is defined in section 1a of the Act

and any Commission definitional regulations adopted thereunder, unless

determined otherwise by the Commission for the purpose of excluding

entities that are not commonly known as swap dealers from the reporting

requirements of Sec. 20.4.

Swap means (other than a swaption) ``swap'' as defined in section

1a of the Act and any Commission definitional regulations adopted

thereunder.

Swaption means an option to enter into a swap or a physical

commodity

[[Page 67268]]

option included in the definition of ``swap'' under section 1a of the

Act and any Commission definitional regulations adopted thereunder.

Swap or swaption account means an account for swaps or swaptions

maintained at a clearing organization or reporting entity.

Sec. 20.2 Covered contracts.

(a) All paired swaps and swaptions, unless specifically provided

otherwise, shall be reported pursuant to the requirements and

conditions of this part and shall not be reported under parts 15

through 19, or 21 of this chapter.

(b) The futures and option contracts listed by designated contract

markets for the purpose of reports filed and information provided under

this part are as follows:

Covered Agricultural and Exempt Futures Contracts

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

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

Chicago Board of Trade (``CBOT'') Corn.

CBOT Ethanol.

CBOT Oats.

CBOT Rough Rice.

CBOT Soybean Meal.

CBOT Soybean Oil.

CBOT Soybeans.

CBOT Wheat.

Chicago Mercantile Exchange (``CME'') Butter.

CME Cheese.

CME Dry Whey.

CME Feeder Cattle.

CME Hardwood Pulp.

CME Lean Hogs.

CME Live Cattle.

CME Milk Class III.

CME Non Fat Dry Milk.

CME Random Length Lumber.

CME Softwood Pulp.

COMEX (``CMX'') Copper Grade 1.

CMX Gold.

CMX Silver.

ICE Futures U.S. (``ICUS'') Cocoa.

ICUS Coffee C.

ICUS Cotton No. 2.

ICUS Frozen Concentrated Orange Juice.

ICUS Sugar No. 11.

ICUS Sugar No. 16.

Kansas City Board of Trade (``KCBT'') Wheat.

Minneapolis Grain Exchange (``MGEX'') Wheat.

NYSELiffe (``NYL'') Gold, 100 Troy Oz.

NYL Silver, 5000 Troy Oz.

New York Mercantile Exchange (``NYMEX'') Cocoa.

NYMEX Brent Financial.

NYMEX Central Appalachian Coal.

NYMEX Coffee.

NYMEX Cotton.

NYMEX Crude Oil, Light Sweet.

NYMEX Gasoline Blendstock (RBOB).

NYMEX Hot Rolled Coil Steel.

NYMEX Natural Gas.

NYMEX No. 2 Heating Oil, New York Harbor.

NYMEX Palladium.

NYMEX Platinum.

NYMEX Sugar No. 11.

NYMEX Uranium.

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

Sec. 20.3 Clearing organizations.

(a) Reporting data records. For each reporting day, with respect to

paired swaps or swaptions, clearing organizations shall report to the

Commission, separately for each clearing member's proprietary and

customer account, unique groupings of the data elements in paragraph

(b) of this section (to the extent that there are such corresponding

elements), in a single data record, so that each reported record is

distinguishable from every other reported record (because of differing

data values, as opposed to the arrangement of the elements).

(b) Populating reported data records with data elements. Data

records reported under paragraph (a) of this section shall include the

following data elements:

(1) An identifier assigned by the Commission to the clearing

organization;

(2) The identifier assigned by the clearing organization to the

clearing member;

(3) The identifier assigned by the clearing organization for a

cleared product;

(4) The reporting day;

(5) A proprietary or customer account indicator;

(6) The futures equivalent month;

(7) The commodity reference price;

(8) Long swap positions;

(9) Short swap positions;

(10) A swaption put or call side indicator;

(11) A swaption expiration date;

(12) A swaption strike price;

(13) Long non-delta-adjusted swaption positions; and

(14) Short non-delta-adjusted swaption positions.

(c) End of reporting day data. For all futures equivalent months,

clearing organizations shall report end of reporting day settlement

prices for each cleared product and deltas for every unique swaption

put and call, expiration date, and strike price.

Sec. 20.4 Reporting entities.

(a) Consolidated accounts. Each reporting entity shall combine all

paired swap and swaption positions:

(1) That are proprietary positions (swaps and swaptions to which

the reporting entity is a counterparty), in a single consolidated

account that it shall attribute to itself;

(2) That are positions directly owned by a reporting entity's

counterparty, in a single consolidated account that it shall attribute

to that specific counterparty; and

(3) That are positions under the direction of an account

controller, in a single consolidated account that it shall attribute to

that specific account controller.

(b) Reporting data records. Reporting entities shall report to the

Commission, for each reporting day, and separately for each

consolidated account described in paragraphs (a)(1) through (a)(3) of

this section that is reportable, unique groupings of the data elements

in paragraph (c) of this section (to the extent that there are such

corresponding elements), in a single data record, so that each reported

record is distinguishable from every other reported record (because of

differing data values, as opposed to the arrangement of the elements).

(c) Populating reported data records with data elements. Data

records reported under paragraph (b) of this section shall include the

following data elements:

(1) An identifier assigned by the Commission to the reporting

entity;

(2) An identifier assigned by the reporting entity to each swap or

swaption account;

(3) A 102S identifier assigned by the reporting entity to the owner

of such accounts;

(4) A 102S identifier assigned by the reporting entity to the

controller of such accounts;

(5) The name of each owner of such accounts;

(6) The name of each controller of such accounts;

(7) The reporting day;

(8) The identifier for the cleared product assigned by the clearing

organization (cleared only);

(9) The commodity underlying the reportable positions;

(10) The futures equivalent month;

(11) A cleared or uncleared indicator;

(12) A clearing organization identifier;

(13) The commodity reference price;

(14) A bi-lateral trade indicator;

(15) Long paired swap positions;

(16) Short paired swap positions;

(17) A swaption put or call side indicator (cleared only);

(18) A swaption expiration date (cleared only);

(19) A swaption strike price (cleared only);

(20) Long non-delta-adjusted paired swaption positions;

(21) Short non-delta-adjusted paired swaption positions;

(22) Long delta-adjusted paired swaption positions (non-cleared

only, using economically reasonable and analytically supported deltas);

[[Page 67269]]

(23) Short delta-adjusted paired swaption positions (non-cleared

only, using economically reasonable and analytically supported deltas);

(24) Long paired swap or swaption notional value (non-cleared

only); and

(25) Short paired swap or swaption notional value (non-cleared

only).

Sec. 20.5 Series S filings.

(a) 102S filing.

(1) When a consolidated account first becomes reportable, the

reporting entity holding or carrying the account shall submit a 102S

filing, which shall consist of the name, address, and contact

information of the direct owner or controller of the reportable account

and a brief description of the nature of such person's paired swaps and

swaptions market activity.

(2) A reporting entity may submit a 102S filing only once for each

person, even if such persons at various times have multiple reportable

positions in the same or different paired swaps or swaptions; however,

reporting entities must update a 102S filing if the information

provided is no longer accurate.

(3) Reporting entities shall submit a 102S filing within three days

following the first day a consolidated account first becomes reportable

or at such time as instructed by the Commission upon special call.

(b) 40S filing. Every person who holds or controls a reportable

position shall after a special call upon such person by the Commission

file with the Commission a 40S filing at such time and place as

directed in the call. A 40S filing shall consist of the submission of a

Form 40, which shall be completed by such person as if any references

to futures or option contracts were references to paired swaps or

swaptions as defined in Sec. 20.1.

Sec. 20.6 Maintenance of books and records.

(a) Every clearing organization shall keep all records of

transactions in paired swaps or swaptions in accordance with the

requirements of Sec. 1.31 of this chapter.

(b) Every reporting entity or person with reportable positions

shall keep books and records, in accordance with the requirements of

Sec. 1.31 of this chapter, showing all records for transactions

concerning all reportable positions, including records for transactions

in the cash commodity in which the reporting entity or other person is

reportable, its products and byproducts, and all commercial activities

that a reporting entity or person hedges by taking a position in the

contracts listed in Sec. 20.2 or paired swaps and swaptions.

Sec. 20.7 Form and manner of reporting and submitting information or

filings.

Unless otherwise instructed by the Commission, a clearing

organization or reporting entity shall submit data records and any

other information required under this part to the Commission as

follows:

(a) Using the format, coding structure, and electronic data

transmission procedures approved in writing by the Commission; and

(b) Not later than 9 a.m. eastern time on the next business day

following the reporting day or at such other time as instructed by the

Commission.

Sec. 20.8 Delegation of authority to the Director of the Division of

Market Oversight.

(a) The Commission hereby delegates, until it orders otherwise, to

the Director of the Division of Market Oversight or such other employee

or employees as the Director may designate from time to time, the

authority:

(1) In Sec. 20.5(a)(3) for issuing a special call for a 102S

filing;

(2) In Sec. 20.5(b) for issuing a special call for a 40S filing;

(3) In Sec. 20.7 for providing instructions or determining the

format, coding structure, and electronic data transmission procedures

for submitting data records and any other information required under

this part.

(b) The Director of the Division of Market Oversight may submit to

the Commission for its consideration any matter which has been

delegated in this section.

(c) Nothing in this section prohibits the Commission, at its

election, from exercising the authority delegated in this section.

Sec. 20.9 Sunset provision.

(a) Except as otherwise provided in paragraph (b) of this section,

the sections of this part shall become ineffective and unenforceable

upon a Commission finding that, through the issuance of an order,

operating swap data repositories are processing positional data and

that such processing will enable the Commission to effectively surveil

trading in paired swaps and swaptions and paired swap and swaption

markets.

(b) The Commission may determine, in its discretion, to maintain

the effectiveness and enforceability of any section of this part, or

any requirement therein, in an order issued under paragraph (a) of this

section, upon finding that such sections, or requirements therein,

provide the Commission with positional data or data elements that

materially improves the accuracy and surveillance utility of the

positional data processed by swap data repositories.

Appendix A to Part 20--Guidelines on Futures Equivalency

The following examples illustrate how swaps should be converted

into futures equivalents. In general the total notional quantity for

each swap should be apportioned to referent futures months based on

the fraction of days remaining in the life of the swap during each

referent futures month to the total duration of the swap, measured

in days. The terms used in the examples are to be understood in a

manner that is consistent with industry practice.

Example 1--Fixed for Floating WTI Crude Oil Swap Linked to a DCM

Contract

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

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

Reference price................... Daily official next to expire

contract price for the NYMEX Light

Sweet Crude Oil Futures Contract

(``WTI'') in $/bbl through the

NYMEX spot month.

Fixed Price....................... $80.00 per barrel.

Floating Price.................... The arithmetic average of the

reference price during the pricing

period.

Notional Quantity................. 100,000 bbls/month.

Calculation Period................ One month.

Fixed Price Payer................. Company A.

Floating Price Payer.............. Company B.

Settlement Type................... Financial.

Swap Term......................... Six full months from January 1 to

June 30.

Floating Amount................... Floating Price * Notional Quantity.

Fixed Amount...................... Fixed Price * Notional Quantity.

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

[[Page 67270]]

NYMEX WTI trading in the next to expire futures contract ceases

on the third business day prior to the 25th of the calendar month

preceding the contract month. For simplicity in this example, the

last trading day in each WTI futures contract is shown as the 22nd

of the month.

Futures equivalent position on January 1

Total Notional Quantity = 6 months * 100,000 bbls/month = 600,000

bbls

1,000 bbl = 1 futures contract

Therefore 600,000 bbls/1,000 bbls/contract = 600 futures equivalent

contracts

Total number of days in swap term = 31 + 28 + 31 + 30 + 31 + 30 =

181

Futures Equivalent Position of Swap on January 1

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

Company A Company B

Dates swap in force Referent futures Fraction of days position (long) position

month [dagger] (short) [dagger]

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

January 1-January 22............... February............. 22/181 73 73

January 23-February 22............. March................ 31/181 103 103

February 23-March 22............... April................ 28/181 93 93

March 23-April 22.................. May.................. 31/181 103 103

April 23-May 22.................... June................. 30/181 99 99

May 23-June 22..................... July................. 31/181 103 103

June 23-June 30th.................. August............... 8/181 27 27

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

Total.......................... ..................... 181/181 601 601

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

[dagger] Contracts rounded to the nearest integer.

Futures equivalent position on January 2

Total Notional Quantity = Remaining swap term * 100,000 bbls/month =

596,685 bbls

1,000 bbl = 1 futures contract

Therefore 596,685 bbls/1,000 bbls/contract = 597 futures equivalent

contracts

Total number of days = 30 + 28 + 31 + 30 + 31 + 30 = 180

Futures Equivalent Position of Swap on January 2

[Example 1 continued]

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

Company A Company B

Dates swap in force Referent futures Fraction of days position (long) position

month [dagger] (short) [dagger]

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

January 2-January 22............... February............. 21/180 70 -70

January 23-February 22............. March................ 31/180 103 -103

February 23-March 22............... April................ 28/180 93 -93

March 23-April 22.................. May.................. 31/180 103 -103

April 23-May 22.................... June................. 30/180 99 -99

May 23-June 22..................... July................. 31/180 103 -103

June 23-June 30th.................. August............... 8/180 27 -27

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

Total.......................... ..................... 180/180 597 -597

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

[dagger] Contracts rounded to the nearest integer.

Example 2--Fixed for Floating Corn Swap

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

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

Reference price................... Daily official next to expire

contract price for the CBOT Corn

Futures Contract in $/bushel

through the CBOT spot month.

Fixed Price....................... $5.00 per bushel per month.

Floating Price.................... The arithmetic average of the

reference price during the pricing

period.

Calculation Period................ One month.

Notional Quantity................. 1,000,000 bushels/month.

Fixed Price Payer................. Company A.

Floating Price Payer.............. Company B.

Settlement Type................... Financial.

Swap Term......................... Six full months from January 1 to

June 30.

Floating Amount................... Floating Price * Notional Quantity.

Fixed Amount...................... Fixed Price * Notional Quantity.

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

Last trading day in the nearby CBOT Corn futures contract is the

business day preceding the 15th of the contract month. For

simplicity in this example, the last trading day in each Corn

futures contract is shown as the 14th of the month. Futures contract

months for corn are March, May, July, September, and December.

Futures equivalent position on January 1

Total Notional Quantity = 6 contract months * 1,000,000 bushels/

month = 6,000,000 bushels

5,000 bushels = 1 futures contract

Therefore 6,000,000 bushels/5,000 bushels/contract = 1,200 futures

equivalent contracts

Total days = 31 + 28 + 31 + 30 + 31 + 30 = 181

[[Page 67271]]

Futures Equivalent Position of Swap on January 1

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

Company A Company B

Dates swap in force Referent futures Fraction of days position position

month (long)[dagger] (short)[dagger]

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

January 1-March 14................. March................ 73/181 483 -483

March 15-May 14.................... May.................. 61/181 404 -404

May 15-June 30..................... July................. 47/181 311 -311

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

Total.......................... ..................... 181/181 1,198 -1,198

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

[dagger] Contracts rounded to the nearest integer.

Example 3--Fixed For Floating NY RBOB (Platts) Calendar Swap Futures

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

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

Reference price................... Platts Oilgram next to expire

contract Price Report for New York

RBOB (Barge) through the NYMEX spot

month.

Fixed Price....................... $1.8894 per gallon.

Floating Price.................... For each contract month, the

floating price is equal to the

arithmetic average of the high and

low quotations from Platts Oilgram

Price Report for New York RBOB

(Barge) for each business day that

it is determined during the

contract month.

Calculation Period................ One quarter.

Notional Quantity................. 84 million gallons/quarter.

Fixed Price Payer................. Company A.

Floating Price Payer.............. Company B.

Settlement Type................... Financial.

Swap Term......................... Six full months from January 1 to

June 30.

Floating Amount................... Floating Price * Notional Quantity.

Fixed Amount...................... Fixed Price * Notional Quantity.

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

NYMEX NY RBOB (Platts) Calendar Swap Futures Contract month ends

on the final business day of the contract month. For simplicity in

this example, the last trading day in each futures contract is shown

as the final day of the month.

Futures equivalent position on January 1

Total Notional Quantity = 2 quarters * 84 million = 168 million

gallons

42,000 gallons = 1 futures contract

Therefore 168 million/42,000 gallons/futures contract = 4,000

futures equivalent contracts

Total number of days = 31 + 28 + 31 + 30 + 31 + 30 = 181

Futures Equivalent Position of Swap on January 1

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

Company A Company B

Dates swap in force Referent futures Fraction of days position position

month (long)[dagger] (short)[dagger]

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

January 1-March 31................. April................ 90/181 1989 -1989

April 1-June 30.................... July................. 91/181 2011 -2011

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

Total.......................... ..................... 181/181 4000 4000

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

[dagger] Contracts rounded to the nearest integer.

Example 4--Calendar Spread Swap

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

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

Reference price................... The difference between the next to

expire contract price for the NYMEX

WTI Futures contract and the

deferred contract price for the

NYMEX WTI Futures contract.

Fixed Price....................... $80 per barrel.

Floating Price.................... The arithmetic average of the

reference price during the pricing

period.

Calculation Period................ One month.

Notional Quantity................. 100,000 bbls/month.

Fixed Price Payer................. Company A.

Floating Price Payer.............. Company B.

Settlement Type................... Financial.

Swap Term......................... Six full months from January 1 to

June 30.

Floating Amount................... Floating Price * Notional Quantity.

Fixed Amount...................... Fixed Price * Notional Quantity.

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

NYMEX WTI trading in the next to expire futures contract ceases

on the third business day prior to the 25th of the calendar month

preceding the contract month. For simplicity in this example, the

last trading day in each WTI futures contract is shown as the 22nd

of the month.

Futures equivalent position on January 1

Total Notional Quantity = 6 months * 100,000 bbls/month = 600,000

bbls

1,000 bbl = 1 futures contract

Therefore 600,000 bbls/1,000 bbls/contract = 600 futures equivalent

contracts

Total number of days = 31 + 28 + 31 + 30 + 31 + 30 = 181

[[Page 67272]]

Futures Equivalent Position of Swap on January 1

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

Applicable next to Company A Company B Applicable Company A Company B

Dates swap in force Fraction of expire futures position position deferred futures position Position

days month (long)[dagger] (short)[dagger] month (short)[dagger] (long)[dagger]

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

January 1-January 22........... 22/181 February........... 73 -73 March............. -73 73

January 23-February 22......... 31/181 March.............. 103 -103 April............. -103 103

February 23-March 22........... 28/181 April.............. 93 -93 May............... -93 93

March 23-April 22.............. 31/181 May................ 103 -103 June.............. -103 103

April 23-May 22................ 30/181 June............... 99 -99 July.............. -99 99

May 23-June 22................. 31/181 July............... 103 -103 August............ -103 103

June 23-June 30th.............. 8/181 August............. 27 -27 September......... -27 27

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

Total...................... 181/181 ................... 601 -601 .................. -601 601

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

[dagger] Contracts rounded to the nearest integer.

Example 5--Columbia Gulf Mainline Basis Swap (Platts IFERC) Futures

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

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

Reference price................... The next issue of the Inside FERC's

Gas Market Report (``Platts

IFERC'') Columbia Gulf Transmission

Co. Mainline Index (``Index'') and

the next to expire NYMEX (Henry

Hub) Natural Gas Futures contract

final settlement price.

Fixed Price....................... $0.05 per MMBtu per month.

Floating Price.................... The Floating Price for each contract

month will be equal to the Platts

Inside FERC's Gas Market Report

(``Platts IFERC'') Columbia Gulf

Transmission Co. Mainline Index

(``Index'') published in the table

titled ``Prices of Spot Gas

Delivered to Pipelines'' in the

first regular issue of the contract

month minus the NYMEX (Henry Hub)

Natural Gas Futures contract final

settlement price for the

corresponding contract month.

Calculation Period................ Monthly.

Notional Quantity................. 10,000 MMBtu/calendar day.

Fixed Price Payer................. Company A.

Floating Price Payer.............. Company B.

Settlement type................... Financial.

Swap Term......................... One month from January 1 to January

31.

Floating Amount................... Floating Price * Notional Quantity *

calendar days in the month.

Fixed Amount...................... Fixed Price * Notional Quantity *

calendar days in the month.

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

NYMEX Henry Hub Natural Gas Futures Contract trading ceases

three business days prior to the first day of the delivery month.

For simplicity in this example, the last trading day in the futures

contract is shown as the 28th of the month.

Futures equivalent position on January 1

Total Notional Quantity for each leg = 1 month * 31 days/month *

10,000 MMBtu/day = 310,000 MMBtu

10,000 MMBtu = 1 futures contract

Therefore 310,000 MMBtu/10,000 MMBtu/contract = 31 futures

equivalent contracts

Total number of days = 31

Futures Equivalent Position of Swap on January 1

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

Company B

Company A position in

position in Company A Columbia Company B

Columbia position in Gulf position in

Dates swap in force Fraction of Referent futures month Gulf NYMEX (Henry Transmission NYMEX (Henry

days Transmission Hub) natural Co. mainline Hub) natural

Co. mainline gas futures natural gas gas futures

natural gas (short) (short) (long)

(long) MMBtu MMBtu

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

January 1-January 28.......................... 28/31 February.......................... [dagger][dag -28 [dagger][dag 28

ger][dagger] ger][dagger]

January 29-January 31......................... 3/31 March............................. ............ -3 ............ 3

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

Total..................................... 31/31 .................................. ............ -31 ............ 31

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

[dagger][dagger][dagger] Note: Because there is no underlying position taken in a basis contract, for reporting purposes, only enter the futures

equivalent contract quantities into the corresponding futures.

Example 6--WTI Swaption (Call)

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

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

Swaption Style.................... American.

Option Type....................... Call.

Swaption Start Date............... Jan 1 of the current year.

Swaption End Date................. June 30 of the current year.

Strike Price...................... $80.50/bbl.

Notional Quantity................. 100,000 bbl/month.

Calculation Period................ One month.

[[Page 67273]]

Reference Price................... Daily official next to expire

contract price for WTI NYMEX Crude

Oil Futures Contract in $/bbl

through the NYMEX spot month.

Fixed Price....................... $80.00 per barrel per month.

Floating Price.................... The arithmetic average of the

reference price during the pricing

period.

Settlement Type................... Financial.

Swap Term......................... One month from July 1 to July 31 of

the current year.

Floating Amount................... Floating Price * Notional Quantity.

Fixed Amount...................... Fixed Price * Notional Quantity.

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

NYMEX WTI trading ceases on the third business day prior to the

25th of the calendar month preceding the delivery month. For

simplicity in this example, the last trading day in each WTI futures

contract is shown as the 22nd of the month.

Futures equivalent position on January 1

Total Notional Quantity = 1 month * 100,000 bbls/month = 100,000

bbls

1,000 bbl = 1 futures contract

Therefore 100,000 bbls/1,000 bbls/contract = 100 futures equivalent

contracts

Total number of days = 31

Gross Position on January 1

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

Company A Company B

Dates swap in force Referent futures Fraction of days position position

month (long)[dagger] (short)[dagger]

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

July 1-July 22..................... August............... 22/31 70 -70

July 23--July 31................... September............ 9/31 29 -29

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

Total.......................... ..................... 31/31 99 99

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

[dagger] Contracts rounded to the nearest integer.

Delta [dagger][dagger] Adjusted Position and Futures Equivalent Position on January 1

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

August September

Date -----------------------------------------------------------------------

Delta Position Delta Position

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

January 1............................... .2 14 .2 5

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

[dagger][dagger] Deltas should be calculated in an economically reasonable and analytically supportable basis.

Example 7--WTI Collar Swap

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

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

Swaption Style.................... American.

Swaption Start Date............... Jan 1 of the current year.

Swaption End Date................. June 30 of the current year.

Call strike Price................. $70.00 per bbl.

Put strike price.................. $90.00 per bbl.

Notional Quantity................. 100,000 barrels per month.

Calculation Period................ One month.

Reference Price................... Daily official next to expire

contract price for WTI NYMEX Crude

Oil in $/bbl through the NYMEX spot

month.

Fixed Price....................... $80.00 per barrel.

Floating Price.................... The arithmetic average of the

reference price during the pricing

period.

Settlement Type................... Financial.

Swap Term......................... One month from July 1 to July 31 of

the current year.

Floating Amount................... Floating Price * Notional Quantity.

Fixed Amount...................... Fixed Price * Notional Quantity.

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

NYMEX WTI trading ceases on the third business day prior to the

25th of the calendar month preceding the delivery month. For

simplicity in this example, the last trading day in each WTI futures

contract is shown as the 22nd of the month.

Futures equivalent position on January 1

Total Notional Quantity = 1 month * 100,000 bbls/month = 100,000

bbls

1,000 bbl = 1 futures contract

Therefore 100,000 bbls/1,000 bbls/contract = 100 futures equivalent

contracts

Total number of days = 31

Gross Position on January 1

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

Company A position Company B position

Dates swap in force Referent futures month Fraction of ---------------------------------------------------------------

days Call Put Call Put

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

July 1-July 22............................ August...................... 22/31 70.97 70.97 -70.97 -70.97

[[Page 67274]]

July 23-July 31........................... September................... 9/31 29.03 29.03 -29.03 -29.03

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

Total................................. ............................ 31/31 100 100 -100 -100

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

Company (A) Delta[dagger] Adjusted Position on January 1

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

August September

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

Date Long call Short put Long call Short put

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

Delta Position Delta Position Delta Position Delta Position

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

January 1............................................... .7 49 .3 -21 .7 20 .3 -8

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

[dagger] Deltas should be calculated in an economically reasonable and analytically supportable basis.

Futures Equivalent Position on January 1

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

August [dagger][dagger] September [dagger][dagger]

Date -----------------------------------------------------------------------

Long Short Long Short

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

January 1............................... 70 0 28 0

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

[dagger][dagger] Contracts rounded to the nearest integer.

Appendix B to Part 20--Explanatory Guidance on Data Record Layouts

Record Layout Examples for Sec. 20.3

The following example (in Tables 1, 2 and 3) covers reporting

for a particular clearing organization. ``Clearing Organization

One'' would report, for the 27th of September 2010, the following

eleven unique data record submissions. Each data record submission

represents a unique position, as indicated by Sec. 20.3, held by a

clearing member of Clearing Organization One. Paragraph (a) of Sec.

20.3 broadly outlines the data elements that determine unique

positions for reports on clearing member positions. Paragraphs (b)

of Sec. 20.3 present all of the data elements that should be

submitted in reference to a particular data record for a particular

clearing member (in Table 1). Paragraph (c) identifies data elements

that would comprise end of day record data on cleared products (in

Tables 2 and 3). Therefore, paragraphs (b) and (c) of Sec. 20.3

present all of the data elements that should be submitted in

reference to a particular data record. Paragraphs (a) and (c) are

reproduced below.

(a) Reporting data records. For each reporting day, with respect

to paired swaps or swaptions, clearing organizations shall report to

the Commission, separately for each clearing member's proprietary

and customer account, unique groupings of the data elements in

paragraph (b) of this section (to the extent that there are such

corresponding elements), in a single data record, so that each

reported record is distinguishable from every other reported record

(because of differing data values, as opposed to the arrangement of

the elements).

(c) End of reporting day data. For all futures equivalent

months, clearing organizations shall report end of reporting day

settlement prices for each cleared product and deltas for every

unique swaption put and call, expiration date, and strike price.

Because CFTC designated Clearing Organization One (in this

example) currently has two clearing members, ``Clearing Members

One'' and ``Clearing Member Two.'' positions cleared for these two

distinct clearing members would be subdivided.

In the following example it is assumed that the clearing member

accounts are either proprietary or customer (but not both) and

therefore data record submissions do not have to be delineated by

these account types. However, if clearing members did have both

proprietary and customer accounts, then a clearing organization

would have to further subdivide these clearing member data records

by these two account types.

Clearing Member One currently has five positions with multiple

cleared product IDs and futures equivalent months/years, and

therefore these positions also constitute separate data records.

Clearing Member Two currently has six positions with the

following varying characteristics: Cleared product IDs; futures

equivalent months/years; commodity reference prices; swaption

positions that involve both puts and calls; and multiple strike

prices. Accordingly, these positions must be reported in separate

data records. An illustration of how these records would appear is

included in Table 1 below. Clearing Organization One would also have

to report the corresponding swaption position deltas, strike prices,

expiration dates, and settlement prices and swap settlement prices.

An illustration of these submissions is included in Tables 2 and 3

below.

Table 1--Data Records Reported Under Paragraphs (a) and (b) of Sec. 20.3

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

Proprietary/ Futures

Data records CFTC clearing org Clearing org Clearing org Reporting day customer account equivalent month Commodity reference price

ID clearing member ID cleared product ID indicator and year

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

Data record 1.................... CCI--ID--1........ CM--ID--2......... CP--04............ 9/27/2010......... C................... Nov-10........... NYMEX NY Harbor No. 2.

Data record 2.................... CCO--ID--1........ CM--ID--2......... CP--04............ 9/27/2010......... C................... Oct-10........... NYMEX NY Harbor No. 2.

Data record 3.................... CCI--ID--1........ CM--ID--2......... CP--02............ 9/27/2010......... C................... Nov-10........... NYMEX Henry Hub.

Data record 4.................... CCO--ID--1........ CM--ID--2......... CP--02............ 9/27/2010......... C................... Oct-10........... NYMEX Henry Hub.

Data record 5.................... CCI--ID--1........ CM--ID--2......... CP--02............ 9/27/2010......... C................... Nov-10........... NYMEX Henry Hub.

Data record 6.................... CCO--ID--1........ CM--ID--2......... CP--02............ 9/27/2010......... C................... Oct-10........... NYMEX Henry Hub.

Data record 7.................... CCO--ID--1........ CM--ID--1......... CP--03............ 9/27/2010......... P................... Mar-11........... NYMEX Light Sweet.

[[Page 67275]]

Data record 8.................... CCO--ID--1........ CM--ID--1......... CP--03............ 9/27/2010......... P................... Feb-11........... NYMEX Light Sweet.

Data record 9.................... CCO--ID--1........ CM--ID--1......... CP--01............ 9/27/2010......... P................... Mar-11........... NYMEX Light Sweet.

Data record 10................... CCO--ID--1........ CM--ID--1......... CP--01............ 9/27/2010......... P................... Feb-11........... NYMEX Light Sweet.

Data record 11................... CCO--ID--1........ CM--ID--1......... CP--01............ 9/27/2010......... P................... Jan-11........... NYMEX Light Sweet.

NDR.............................. Yes............... Yes............... Yes............... Yes............... Yes................. Yes.............. No.

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

Non-delta

Data records Long swap position Short swap Put/call Swaption Swaption strike adjusted long Non-delta adjusted short swaption

position indicator expiration date price swaption position position

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

Data record 1.................... 0 5000 .................. ................. ................. ................. ........................................

Data record 2.................... 0 2000 .................. ................. ................. ................. ........................................

Data record 3.................... .................. .................. C 7/29/2011 5.59 2000 0

Data record 4.................... .................. .................. C 7/29/2011 5.59 18000 0

Data record 5.................... .................. .................. P 7/29/2011 5.50 100 30

Data record 6.................... .................. .................. P 7/29/2011 5.50 900 270

Data record 7.................... 5000 0 .................. ................. ................. ................. ........................................

Data record 8.................... 5000 0 .................. ................. ................. ................. ........................................

Data record 9.................... 429 1286 .................. ................. ................. ................. ........................................

Data record 10................... 2281 6843 .................. ................. ................. ................. ........................................

Data record 11................... 1290 3871 .................. ................. ................. ................. ........................................

NDR.............................. No No Yes Yes Yes No No

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

Note: The bottom row of Table 1 indicates whether data elements

for which any difference in one of the elements constitutes a reason

for a new data record (NDR).

Table 2--Example of Data Records Required Under Sec. 20.3(c) for Cleared Swaption Products

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

Swaption

CFTC clearing Clearing org Reporting Futures Commodity reference Swaption Swaption Put/call daily

Data records org ID cleared product day equivalent month price expiration strike price indicator Delta settlement

ID and year date price

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

Data record 1................... CCI--ID--1...... CP--02.......... 9/27/2010 Nov-10.......... NYMEX Henry Hub..... 7/29/2011 5.59.......... C............. .5............ 6.25

Data record 2................... CCO--ID--1...... CP--02.......... 9/27/2010 Oct-10.......... NYMEX Henry Hub..... 7/29/2011 5.59.......... C............. .5............ 5.50

Data record 3................... CCI--ID--1...... CP--02.......... 9/27/2010 Nov-10.......... NYMEX Henry Hub..... 7/29/2011 5.50.......... P............. .2............ 4.53

Data record 4................... CCO--ID--1...... CP--02.......... 9/27/2010 Oct-10.......... NYMEX Henry Hub..... 7/29/2011 5.50.......... P............. .2............ 4.78

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

Table 3--Example of Data Records Required Under Sec. 20.3(c) for Cleared Swap Products

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

Swap daily

Data records CFTC clearing org ID Clearing org cleared Reporting day Futures equivalent Commodity reference settlement

product ID month and year price price

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

Data record 1................... CCI--ID--1.......... CP--04.............. 9/27/2010 Nov-10.............. C................... 20.35

Data record 2................... CCO--ID--1.......... CP--04.............. 9/27/2010 Oct-10.............. C................... 10.50

Data record 3................... CCO--ID--1.......... CP--03.............. 9/27/2010 Mar-11.............. P................... 15.00

Data record 4................... CCO--ID--1.......... CP--03.............. 9/27/2010 Feb-11.............. P................... 21.00

Data record 5................... CCO--ID--1.......... CP--01.............. 9/27/2010 Mar-11.............. P................... 17.50

Data record 6................... CCO--ID--1.......... CP--01.............. 9/27/2010 Feb-11.............. P................... 21.65

Data record 7................... CCO--ID--1.......... CP--01.............. 9/27/2010 Jan-11.............. P................... 12.50

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

Record Layout Example for Sec. 20.4

In this example, ``Reporting Entity One'' would report for the

27th of September 2010, the following twelve unique data records

under Sec. 20.4. Each data record represents a unique part of a

reportable position in the same commodity held by Reporting Entity

One. Paragraph (b) of Sec. 20.4 outlines the data elements that

determine unique positions; paragraph (b) is reproduced below.

(b) Reporting data records. Reporting entities shall report to

the Commission, for each reporting day, and separately for each

consolidated account described in paragraphs (a)(1) through (a)(3)

of this section that is reportable, unique groupings of the data

elements in paragraph (c) of this section (to the extent that there

are such corresponding elements), in a single data record, so that

each reported record is distinguishable from every other reported

record (because of differing data values, as opposed to the

arrangement of the elements).

In the following example it is assumed that Reporting Entity One

currently clears with one clearing organization and therefore the

[[Page 67276]]

data records do not have to be delineated by clearing organization.

However, if Reporting Entity One did use multiple clearing

organizations, then it would have to further subdivide its data

submissions by each clearing organization.

Reporting Entity One currently has twelve positions with the

following varying characteristics: account owners; account

controllers; futures equivalent months/years; clearing organization

cleared products; swaptions that were either cleared or uncleared;

commodity reference prices; and whether the trade was entered into

on or off execution facilities. Accordingly, these positions

constitute separate data records. An illustration of how these

records would appear is included in Table 4 below.

Table 4--Example of Data Records Reported Under Sec. 20.4(c)

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

Commission Reporting entity

Data records reporting entity client account 102S Owner ID 102S Controller Account owner Account Reporting day Clearing org cleared

ID number ID name controller name product ID

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

Data record 1.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--04

Data record 2.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--04

Data record 3.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--04

Data record 4.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--04

Data record 5.................... CRE--ID--1........ ACCT--3........... CONTROL--2........ OWNER--1......... XYZ Corp......... FED Corp......... 9/27/2010......... CP--03

Data record 6.................... CRE--ID--1........ ACCT--4........... CONTROL--2........ OWNER--2......... WVU Corp......... FED Corp......... 9/27/2010......... CP--03

Data record 7.................... CRE--ID--1........ ACCT--2........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--03

Data record 8.................... CRE--ID--1........ ACCT--5........... CONTROL--1........ OWNER--2......... WVU Corp......... ABC Corp......... 9/27/2010......... CP--03

Data record 9.................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... ....................

Data record 10................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... ....................

Data record 11................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--01

Data record 12................... CRE--ID--1........ ACCT--1........... CONTROL--1........ OWNER--1......... XYZ Corp......... ABC Corp......... 9/27/2010......... CP--01

NDR Uncleared.................... Yes............... Yes............... No................ No............... No............... No............... Yes............... No

NDR Cleared...................... Yes............... Yes............... No................ No............... No............... No............... Yes............... Yes

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

Futures Cleared/

Data records Commodity equivalent uncleared CFTC clearing Commodity Execution Long swap Short swap

code month and year indicator org identifier reference price facility position position

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

Data record 1................ HO1.......... Feb-11........ C.............. CCO--ID--1.... Platts Oilgram EX1.......... 1989....... 0

Price Report

for New York

No. 2 (Barge).

Data record 2................ HO1.......... Jan-11........ C.............. CCO--ID--1.... Platts Oilgram EX2.......... 2011....... 0

Price Report

for New York

No. 2 (Barge).

Data record 3................ HO1.......... Feb-11........ C.............. CCO--ID--1.... NYMEX NY Harbor EX1.......... 0.......... 5000

No. 2.

Data record 4................ CL........... Jan-11........ C.............. CCO--ID--1.... NYMEX NY Harbor EX3.......... 0.......... 2000

No. 2.

Data record 5................ CL........... Feb-11........ C.............. CCO--ID--1.... NYMEX Light EX1.......... 5000....... 0

Sweet.

Data record 6................ CL........... Feb-11........ C.............. CCO--ID--1.... NYMEX Light EX1.......... 5000....... 0

Sweet.

Data record 7................ CL........... Feb-11........ C.............. CCO--ID--1.... NYMEX Light EX7.......... 429........ 1286

Sweet.

Data record 8................ CL........... Feb-11........ C.............. CCO--ID--1.... NYMEX Light EX1.......... 1571....... 4714

Sweet.

Data record 9................ NG........... Nov-10........ U.............. U............. NYMEX Henry Hub. NOEX......... ........... ...........

Data record 10............... NG........... Oct-10........ U.............. U............. NYMEX Henry Hub. NOEX......... ........... ...........

Data record 11............... NG........... Nov-10........ C.............. CCO--ID--1.... NYMEX Henry Hub. EX1.......... ........... ...........

Data record 12............... NG........... Oct-10........ C.............. CCO--ID--1.... NYMEX Henry Hub. EX1.......... ........... ...........

NDR Uncleared................ No........... Yes........... Yes............ No............ Yes............. Yes.......... No......... No

NDR Cleared.................. No........... Yes........... Yes............ Yes........... No.............. Yes.......... No......... No

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

Short swap or

Non-delta Non-delta Delta adjusted Delta adjusted Long swap or swaption

Data records Put/call Swaption expiration Swaption adjusted long adjusted short long swaption short swaption swaption notional notional

indicator date strike price swaption swaption position position value position value

position position position

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

Data record 1................... ................ ................... .............. ................ ................ .............. .............. .................... .............

Data record 2................... ................ ................... .............. ................ ................ .............. .............. .................... .............

Data record 3................... ................ ................... .............. ................ ................ .............. .............. .................... .............

Data record 4................... ................ ................... .............. ................ ................ .............. .............. .................... .............

Data record 5................... ................ ................... .............. ................ ................ .............. .............. .................... .............

Data record 6................... ................ ................... .............. ................ ................ .............. .............. .................... .............

Data record 7................... ................ ................... .............. ................ ................ .............. .............. .................... .............

Data record 8................... ................ ................... .............. ................ ................ .............. .............. .................... .............

Data record 9................... ................ ................... .............. 2000............ 0............... 1000.......... 0............. 111800000........... 0

Data record 10.................. ................ ................... .............. 18000........... 0............... 9000.......... 0............. 1006200000.......... 0

Data record 11.................. P............... 7/29/2011.......... 5.55.......... 100............. 30.............. 20............ 6............. .................... .............

Data record 12.................. P............... 7/29/2011.......... 5.55.......... 900............. 270............. 180........... 54............ .................... .............

NDR Uncleared................... No.............. Yes................ No............ No.............. No.............. No............ No............ No.................. No

NDR Cleared..................... Yes............. Yes................ Yes........... No.............. No.............. No............ No............ No.................. No

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

Note: The bottom two rows in Table 4 indicate whether, for

uncleared and cleared swaps and swaptions, data elements for which

any difference in one of the elements constitutes a reason for a new

data record (NDR).

Issued by the Commission this 19th day of October 2010 in

Washington, DC.

David Stawick,

Secretary of the Commission.

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

Federal Regulations.

Statement of Chairman Gary Gensler

Position Reports for Physical Commodity Swaps

October 19, 2010

I support the proposed large trader reporting rulemaking for

physical commodity swaps. The Commission currently receives data on

large

[[Page 67277]]

positions in all physical commodity futures traded on DCMs and uses it

for market surveillance purposes, including position limit enforcement.

With today's proposed rule, we would have an analogous reporting system

for swaps.

The proposal would require position reports on economically

equivalent swaps from clearing organizations, their members and swap

dealers. This will enable the CFTC to receive such data until swap data

repositories are in operation and capable of fulfilling the

Commission's need for this information.

Concurring Statement of Commissioner Jill E. Sommers

Relating to the Commission's Proposal on Position Reports for Physical

Commodity Swaps and Swaptions

October 19, 2010

I support this proposal to receive daily position reports for

physical commodity swaps and swaptions because I believe it furthers

our continued effort to expand transparency into swap markets and

because I believe it is critical that the Commission receive this

information as soon as possible. I recognize that this proposal is a

precursor to the Commission moving forward with a proposal on the

imposition of position limits. That said, my vote in support of this

proposal today should not in any way be interpreted as expressing

support for moving forward with the imposition of position limits by

the deadlines set forth in Dodd-Frank.

In July and August 2009, the Commission held three public hearings

to discuss imposition of position limits in energy markets. Five months

later, in January 2010, the Commission issued a proposed rule imposing

position limits in four enumerated energy contracts. I had grave

concerns about moving forward with position limits on those four

contracts, and accordingly voted against the proposal. My grave

concerns about moving forward with position limits have not been eased,

and in fact, have only been heighted by certain provisions of Dodd-

Frank.

Section 737 of Dodd-Frank states that the Commission shall by rule,

regulation, or order establish limits on the amount of positions, as

appropriate, that may be held by any person. This section requires the

limits to be aggregated across markets and related products and to be

imposed within 180 days for energy and metals contracts, and 270 days

for agricultural contracts.

In my view, no position limit is appropriate if it is imposed

without the benefit of receiving and fully analyzing complete data

concerning the open interest in each market. Only then is the

Commission able to properly consider the size of each market and

calibrate a limit that is appropriate for each market. Currently, the

Commission does not have complete data and will not have complete data

until swap data repositories are up and running and all swap market

data is reported to swap data repositories or to the Commission. I

believe that, optimistically, the earliest this reporting can happen

will be by the end of 2011. Again that is an optimistic estimate.

Because of the 180 and 270 day requirements in Dodd-Frank, as we

sit here today, the Commission is tentatively planning a November 30

public meeting to vote on proposed speculative position limits for

exempt and agricultural commodities. Mind you, by November 30 the

Commission will not have garnered any data from the proposed rule we

are discussing today, because it, or some modified version of it,

probably will not be effective in final form by November 30. In

addition, by November 30, swap data repositories will still be at least

one year away from operating. Even if the proposed rule we are

discussing today were effective by November 30, it will not provide

complete information sufficient to impose position limits.

Under these circumstances, when considering the imposition of

aggregate position limits on exempt and agricultural commodities, I

believe the Commission should find that imposing such limits is not

appropriate in the absence of full and complete data and analysis on

the open interest in each market. I believe it is a mistake to

interpret the arbitrary 180 day and 270 day deadlines as somehow

trumping the requirement that the Commission make an appropriateness

determination before imposing any position limits.

This is an issue that I will be following closely, and I look

forward to hearing the views of the public and market participants on

this issue.

[FR Doc. 2010-27538 Filed 11-1-10; 8:45 am]

BILLING CODE 6351-01-P

Last Updated: November 2, 2010