2010-30476

FR Doc 2010-30476[Federal Register: December 8, 2010 (Volume 75, Number 235)]

[Proposed Rules]

[Page 76573-76609]

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

[DOCID:fr08de10-39]

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Part III

Commodity Futures Trading Commission

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17 CFR Part 45

Swap Data Recordkeeping and Reporting Requirements; Proposed Rule

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 45

RIN 3038-AD19

Swap Data Recordkeeping and Reporting Requirements

AGENCY: Commodity Futures Trading Commission (CFTC).

ACTION: Proposed Rulemaking.

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

CFTC'') is proposing rules to implement new statutory provisions

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

Protection Act. These proposed rules apply to swap data recordkeeping

and reporting requirements for swap data repositories, derivatives

clearing organizations, designated contract markets, swap execution

facilities, swap dealers, major swap participants, and swap

counterparties who are neither swap dealers nor major swap participants

(including counterparties who qualify for the end user exception with

respect to particular swaps).

DATES: Comments must be received on or before February 7, 2011.

ADDRESSES: You may submit comments, identified by RIN number 3038-AD19,

by any of the following methods:

Agency Web site, via its Comments Online process: http://

comments.cftc.gov. Follow the instructions for submitting comments

through the Web site.

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

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

Street, NW., Washington, DC 20581.

Hand Delivery/Courier: Same as mail above.

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

Follow the instructions for submitting comments.

All comments must be submitted in English, or must be accompanied

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

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

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

information that may be exempt from disclosure under the Freedom of

Information Act, a petition for confidential treatment of the exempt

information may be submitted according to the established procedures in

CFTC Regulation 145.9.\1\

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\1\ Commission regulations referred to herein are found at 17

CFR Ch. 1.

FOR FURTHER INFORMATION CONTACT: David Taylor, Special Counsel,

Division of Market Oversight, 202-418-5488, [email protected], or Irina

Leonova, Financial Economist, Division of Market Oversight, 202-418-

5646, [email protected]; Commodity Futures Trading Commission, Three

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Lafayette Centre, 1155 21st Street, NW., Washington, DC 20851.

SUPPLEMENTARY INFORMATION:

Table of Contents

Supplementary Information

I. Background

A. Introduction

B. Swap Data Provisions of the Dodd-Frank Act

C. International Developments Affecting Swap Data Reporting

G-20 and FSB

Standard Setting for Repositories and Data Reporting by

IOSCO and CPSS

BIS

ODRF and ODSG

D. Regulatory Needs for Swap Data

E. Existing Trade Repositories

F. Consultations With Other U.S. Financial Regulators

G. Consultations With International Regulators

Data Reporting Approaches

II. Proposed New Regulations, Part 45

A. Recordkeeping Requirements

B. Swap Data Reporting

Swap Creation Data

Swap Continuation Data

C. Unique Identifiers

Need for Unique Identifiers

Unique Swap Identifiers

Unique Counterparty Identifiers

Unique Product Identifiers

D. Determination of Which Counterparty Must Report

E. Third Party Facilitation of Swap Data Reporting

F. Reporting to a Single SDR

G. Swap Data Reporting for Swaps in Asset Classes Not Accepted

by Any Swap Data Repository

H. Required Data Standards

Reporting of Errors and Omissions in Previously Reported Data

III. Related Matters

A. Regulatory Flexibility Act

B. Paperwork Reduction Act

Cost-Benefit Analysis

Proposed Effective Data

IV. General Solicitation of Comments

Proposed Rules

Sec. 45.1 Definitions

Sec. 45.2 Swap Recordkeeping

Sec. 45.3 Swap Data Reporting

Sec. 45.4 Unique Identifiers

Sec. 45.5 Determination of Which Counterparty Must Report

Sec. 45.6 Third-Party Facilitation of Data Reporting

Sec. 45.7 Reporting to a Single SDR

Sec. 45.8 Data Reporting for Swaps in a Swap Asset Class Not

Accepted by Any SDR

Sec. 45.9 Required Data Standards

Sec. 45.10 Reporting of Errors and Omissions in Previously

Reported Data

Appendix 1 to Part 45--Tables of Minimum Primary Economic Terms Data

and Minimum Valuation Data

Appendix 2 to Part 45--Master Reference Generic Data Fields List

I. Background

A. Introduction

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

Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'').\2\

Title VII of the Dodd-Frank Act \3\ amended the Commodity Exchange Act

(``CEA'' or ``Act'') \4\ to establish a comprehensive new regulatory

framework for swaps and security-based swaps. The legislation was

enacted to reduce systemic risk, increase transparency, and promote

market integrity within the financial system by, among other things:

providing for the registration and comprehensive regulation of swap

dealers (``SDs'') and major swap participants (``MSPs''); imposing

clearing and trade execution requirements on standardized derivative

products; creating rigorous recordkeeping and data reporting regimes

with respect to swaps, including real time reporting; and enhancing the

Commission's rulemaking and enforcement authorities with respect to,

among others, all registered entities, intermediaries, and swap

counterparties subject to the Commission's oversight.

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

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

2010.''

\4\ 7 U.S.C. 1, et seq.

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B. Swap Data Provisions of the Dodd-Frank Act

To enhance transparency, promote standardization, and reduce

systemic risk, Section 728 of the Dodd-Frank Act establishes a newly-

created registered entity--the swap data repository (``SDR'') \5\--to

collect and maintain data related to swap transactions as prescribed by

the Commission, and to make such data electronically available to

regulators.\6\

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\5\ See also CEA Sec. 1a(40)(E).

\6\ Regulations governing core principles and registration

requirements for, and the duties of, SDRs are the subject of a

separate notice of proposed rulemaking under Part 49 of the

Commission's regulations.

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Section 728 directs the Commission to prescribe standards for swap

data recordkeeping and reporting. Specifically, Section 728 provides

that:

The Commission shall prescribe standards that specify the data

elements for each swap

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that shall be collected and maintained by each registered swap data

repository.\7\

\7\ CEA Sec. 21(b)(1)(A).

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These standards are to apply to both registered entities and

counterparties involved with swaps:

In carrying out [the duty to prescribe data element standards],

the Commission shall prescribe consistent data element standards

applicable to registered entities and reporting counterparties.\8\

\8\ CEA Sec. 21(b)(1)(B).

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Section 727 of the Dodd-Frank Act requires that each swap, either

cleared or uncleared, shall be reported to a registered SDR. That

Section also amends Section 1(a) of the CEA to add the definition of

swap data repository:

The term `swap data repository' means any person that collects and

maintains information or records with respect to transactions or

positions in, or the terms and conditions of, swaps entered into by

third parties for the purpose of providing a centralized recordkeeping

facility for swaps.\9\

\9\ CEA Sec. 1a(48).

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Section 728 also directs the Commission to regulate data collection and

maintenance by SDRs.

The Commission shall prescribe data collection and data

maintenance standards for swap data repositories.\10\

\10\ CEA Sec. 21(b)(2).

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These standards are to be comparable to those for clearing

organizations.

The [data] standards prescribed by the Commission under this

subsection shall be comparable to the data standards imposed by the

Commission on derivatives clearing organizations in connection with

their clearing of swaps.\11\

\11\ CEA Sec. 21(b)(3).

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Section 729 of the Dodd-Frank Act added to the CEA new Section 4r,

which addresses reporting and recordkeeping requirements for uncleared

swaps. Pursuant to this section, each swap not accepted for clearing by

any designated clearing organization (``DCO'') must be reported to an

SDR (or to the Commission if no repository will accept the swap).

Section 729 ensures that at least one counterparty to a swap has an

obligation to report data concerning that swap. The determination of

this reporting counterparty depends on the status of the counterparties

involved. If only one counterparty is an SD, the SD is required to

report the swap. If one counterparty is an MSP, and the other

counterparty is neither an SD nor an MSP (``non-SD/MSP counterparty''),

the MSP must report. Where the counterparties have the same status--two

SDs, two MSPs, or two non-SD-MSP counterparties--the counterparties

must select a counterparty to report the swap.\12\

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\12\ See CEA Sec. 4r(a)(3).

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In addition, Section 729 provides for reporting to the Commission

of swaps neither cleared nor accepted by any SDR. Under this provision,

counterparties to such swaps must maintain books and records pertaining

to their swaps in the manner and for the time required by the

Commission, and must make these books and records available for

inspection by the Commission or other specified regulators if requested

to do so.\13\ It also requires counterparties to such swaps to provide

reports concerning such swaps to the Commission upon its request, in

the form and manner specified by the Commission.\14\ Such reports must

be as comprehensive as the data required to be collected by SDRs.\15\

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\13\ CEA Sec. 4r(c)(2) requires individuals or entities that

enter into a swap transaction that is neither cleared nor accepted

by an SDR to make required books and records open to inspection by

any representative of the Commission; an appropriate prudential

regulator; the Securities and Exchange Commission; the Financial

Stability Oversight Council; and the Department of Justice.

\14\ CEA Sec. 4r(c).

\15\ CEA Sec. 4r(d).

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C. International Developments Affecting Swap Data Reporting

An extensive amount of work has been done in the area of over-the-

counter (``OTC'') derivatives reporting, both internationally and

domestically. The Commission has reviewed and considered this work in

preparing these proposed regulations.

G-20 and FSB. In November 2008, as a response to the global

economic crisis, the G-20 met in Washington. In September 2009, G-20

Leaders agreed in Pittsburgh to critical elements relating to the

reform of OTC oversight, including a provision that all ``OTC

derivatives contracts should be reported to trade repositories.'' \16\

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\16\ G-20 Leaders' Statement, The Pittsburg Summit, September

24-25, 2009.

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In October 2010, the Financial Stability Board (``FSB'') published

a report setting out 21 recommendations addressing implementation of G-

20 commitments concerning standardization, central clearing, organized

platform trading, and reporting to trade repositories (``TRs'').\17\

The report stated that regulatory authorities ``must have full and

timely access to the data needed to carry out their respective

mandates.'' \18\ It also provided that:

\17\ Financial Stability Board, Implementing OTC Derivatives

Market Reforms: Report of the OTC Derivatives Working Group, October

20, 2010.

\18\ Id. at 1-2.

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Authorities with the legal mandate to set requirements for the

reporting of transactions to trade repositories should consider the

recommendations set out in the forthcoming report of the FSB Data

Gaps and Systemic Linkages Group, and consult with the Committee on

the Global Financial System (CGFS), the Bank for International

Settlements (BIS), the ODSG and ODRF, to identify the data that

should be reported to trade repositories to enable authorities to

carry out their respective tasks . * * * Further, as the data must

be able to be readily aggregated on a global basis, by end-2011 CPSS

and IOSCO, in consultation with authorities, and with the ODRF,

should develop both for market participants reporting to trade

repositories and for trade repositories reporting to the public and

to regulators: (i) minimum data reporting requirements and

standardised formats, and (ii) the methodology and mechanism for the

aggregation of data on a global basis.\19\

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\19\ Financial Stability Board, Implementing OTC Derivatives

Market Reforms: Report of the OTC Derivatives Working Group, October

20, 2010, at 49.

Standard-Setting for Repositories and Data Reporting by CPSS and

IOSCO. To fulfill the mandate from FSB noted above, the Committee on

Payment and Settlement Systems (``CPSS''), and the International

Organization of Securities Commissions (``IOSCO''), which is recognized

as the international standard setting body for securities markets, have

formed an OTC Derivatives Regulation Task Force (``Task Force''). One

purpose of the Task Force is ``to take a leading role in coordinating

securities and futures regulators' efforts to work together in the

development of supervisory and oversight structures related to

derivatives markets,'' and ``to coordinate other international

initiatives relating to OTC derivatives regulation.'' \20\ Regarding

data reporting, the Task Force will produce a data report, scheduled

for release in July 2011, which:

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\20\ IOSCO Technical Committee Task Force On OTC Derivatives

Regulation, Terms of Reference, at 1-2.

sets out, both for market participants reporting to trade

repositories and for trade repositories reporting to the public and

to regulators for the purpose of macro- and micro-surveillance: (1)

Minimum data reporting requirements and standardised formats; and

(2) the methodology and mechanism for the aggregation of data on a

global basis.\21\

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\21\ Id.

The Commission serves as a Co-Chair of the Task Force, and will

participate in drafting its data report.

In May 2010, the IOSCO Technical Committee and CPSS issued a

consultative report, Considerations for Trade Repositories in OTC

Derivatives Markets (``CPSS-IOSCO Considerations for Trade

Repositories''), that identified

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twelve factors for consideration by trade repositories and relevant

authorities in developing more robust data recordkeeping and reporting

arrangements for derivatives.\22\ Regarding data reporting and

recordkeeping, the report emphasizes that:

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\22\ Committee on Payment and Settlement Systems, and Technical

Committee of the International Organization of Securities

Commissions, Considerations for Trade Repositories in OTC

Derivatives Markets: Consultative Report, May 2010.

[A] trade repository should promptly record the trade

information it receives from its participants. To ensure the

accuracy and currency of data, a trade repository should employ

timely and efficient record keeping procedures to document changes

to recorded trade information resulting from subsequent post-trade

events. Ideally, a trade repository should record to its central

registry trade information it receives from its participants in

real-time, and at a minimum, within one business day.\23\

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\23\ Id. at 11.

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BIS. The Bank for International Settlements (``BIS'') is an

international organization that fosters international monetary and

financial cooperation and serves as a bank for central banks. It is the

parent organization of CPSS, which is a BIS standing committee. BIS's

Coordination Group, a senior group of supervisory standard setters

comprised of the Chairmen and Secretaries of BIS, IOSCO, and the

International Association of Insurance Supervisors, meets twice

annually to allow supervisory standard setting organizations to

exchange views on priorities and key issues. BIS also publishes

statistics on global banking, securities, foreign exchange and

derivatives markets. Its Semiannual Over-the-Counter (OTC) Derivatives

Markets Statistics Report is designed to obtain comprehensive and

internationally consistent information on the size and structure of

major derivatives markets, including information on swaps and options

of foreign exchange, interest rate, equity and commodity derivatives.

Every three years, this semiannual survey is part of a world-wide

exercise concerning activity on derivatives markets. For these reasons,

BIS's expertise is relevant to data recordkeeping and reporting for

derivatives.

ODRF and ODSG. The OTC Derivative's Regulators' Forum (``ODRF'')

brings together representatives from central banks, prudential

supervisors, securities regulators and market regulators to discuss

issues of common interest, regarding central clearing parties

(``CCPs'') and TRs for OTC derivatives.\24\ As part of its support for

application and implementation of standards, the ODRF has developed an

outline of trade repository functionality that is desired by its

members.\25\ The outline is designed to document trade repository

attributes that will support the market transparency and data

availability objectives set out in the CPSS-IOSCO Considerations for

Trade Repositories. The outline addresses types, coverage, quality, and

frequency of TR data, as well as access to TR data and desirable data

elements. When discussing the frequency of data reporting to trade

repositories, the outline suggests that transaction data in trade

repositories should be updated at least once per day, such that all

transaction records can be considered reliable as of the previous day.

The OTC Derivatives Supervisors Group (``ODSG'') brings together the

prudential supervisors of the major OTC derivatives dealers for

coordination among them concerning major industry initiatives in the

OTC derivatives market. The ODSG has worked cooperatively with major

industry participants concerning establishment of trade repositories

for several OTC derivatives asset classes.

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\24\ As the ODRF itself states, ``the Forum is not a legal

entity in its own right with its own separate and independent

authority, nor is it a standard setting body.'' Rather, the ODRF

``provides mutual assistance among the [regulatory] Authorities in

carrying out their respective responsibilities with respect to OTC

derivatives CCPs and TRs. In doing so, the Forum acts without

prejudice to each Authority's statutory duties, and to national and

otherwise applicable laws.'' While the ODRF seeks to promote

consistent standards, ``This does not mean that the Forum will

develop its own standards or provide guidance interpreting

standards, but rather, the Forum supports the application and

implementation of standards set by other bodies in the international

regulatory community.'' OTC Derivatives Regulators' Forum, Scope and

Relationship with International Bodies, March 23, 2010, at 1.

\25\ ODRF, Outline of Trade Repository Functionality Being

Sought by Members of the OTC Derivatives Regulators' Forum (version

2), August 27, 2010.

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D. Regulatory Needs for Swap Data

The various parts of the U.S. financial sector are regulated by

several agencies and institutions: the Commodity Futures Trading

Commission (``CFTC''), Office of the Comptroller of the Currency

(``OCC''), Federal Deposit Insurance Corporation (``FDIC''), Federal

Reserve Board of Governors (``FRB''), National Credit Union

Administration (``NCUA''), and Securities and Exchange Commission

(``SEC'').

The CFTC's mission is to protect market users and the public from

fraud, manipulation, and abusive practices related to the sale of

commodity and financial futures and options, and to foster open,

competitive, and financially sound futures and option markets. The

OCC's primary mission is to charter, regulate, and supervise all

national banks. The OCC supervises the Federal branches and agencies of

foreign banks. The OCC's goal in supervising banks is to ensure that

they operate in a safe and sound manner and in compliance with laws

requiring fair treatment of their customers and fair access to credit

and financial products. The FDIC is an independent agency created by

the Congress to maintain stability and public confidence in the

nation's financial system by: Insuring deposits, examining and

supervising financial institutions for safety and soundness and

consumer protection, and managing receiverships. The Federal Reserve's

duties fall into four general areas: Conducting the nation's monetary

policy by influencing the monetary and credit conditions in the economy

in pursuit of maximum employment, stable prices, and moderate long-term

interest rates; supervising and regulating banking institutions to

ensure the safety and soundness of the nation's banking and financial

system and to protect the credit rights of consumers; maintaining the

stability of the financial system and containing systemic risk that may

arise in financial markets; providing financial services to depository

institutions, the U.S. government, and foreign official institutions,

including playing a major role in operating the nation's payments

system. The NCUA is the independent Federal agency that charters and

supervises Federal credit unions. The mission of the SEC is to protect

investors, maintain fair, orderly, and efficient markets, and

facilitate capital formation.

According to their regulatory mandates, the various U.S. financial

regulators need different types of financial information to fulfill

their missions. Systemic risk regulators, among other things, need data

that will enable them to monitor gross and net counterparty exposures,

wherever possible, not only on notional volumes for each contract but

also market values, exposures before collateral, and exposure values

net of collateral with a full counterparty breakdown. Such data would

allow for the calculation of measures that capture counterparty risk

concentrations both for individual risk categories as well as the

overall market. Market regulators need data that enables them to

promote market competitiveness and efficiency, protect market

participants against fraud, manipulation, and abusive trading

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practices, enforce aggregate speculative position limits as adopted,

and ensure the financial integrity of the clearing process.

International financial regulators have similarly varied data

needs. As noted in FSB's Report on Implementing OTC Derivative Market

Reforms:

The breadth and depth of information needed by authorities

varies according to their respective mandates and may continue to

evolve over time. Such mandates and objectives include, (i)

assessing systemic risk and financial stability; (ii) conducting

market surveillance and enforcement; (iii) supervising market

participants; and (iv) conducting resolution activities.\26\

\26\ Financial Stability Board, Implementing OTC Derivatives

Market Reforms: Report of the OTC Derivatives Working Group, October

20, 2010, at 47.

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When expanding on the level of data that must be collected to

satisfy these regulatory functions, the Report addresses both

transaction level data and portfolio level data. Regarding transaction

level data, the Report says:

Authorities must be able to retrieve transaction event (flow)

data at different levels of granularity, from aggregate statistics

to transaction level information. TRs must collect and maintain data

at a high level of details. Transaction event data must preserve

information on the original terms of the transaction that is

complete as practical and possible, and includes, for example,

preserving the underlying reference, trading counterparties, price,

and the time and date of the original transactions.\27\

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\27\ Id. at 48.

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Regarding portfolio level data, the Report states that:

TRs should collect data to enable monitoring of gross and net

counterparty exposures where possible, not only on notional volumes

for each contract but also market values, exposures before

collateral, and exposure value net of collateral with a full

counterparty breakdown. This would allow for the calculation of

measures that capture counterparty risk concentration both for

individual risk categories as well as the overall market.\28\

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\28\ Id.

E. Existing Trade Repositories

Currently there are global trade repositories for credit, interest

rate, and equity derivatives, in various stages of maturity and

development.

Credit Swaps Repository. The oldest and most fully developed of the

three existing trade repositories is the current repository for credit

swaps, the Depository Trust & Clearing Corporation's (``DTCC's'') Trade

Information Warehouse (``DTCC Warehouse'' or ``Warehouse''). It is

operated by a DTCC subsidiary, The Warehouse Trust Company, LLC, which

is registered as a bank and regulated as a member of the U.S. Federal

Reserve System, and as a limited purpose trust company by the New York

State Banking Department. All G-14 dealers began submitting credit swap

data to DTCC Warehouse in 2009, after they committed to reporting all

credit swap trades to a repository.

In addition to receiving and maintaining swap data, the Warehouse

is substantially focused on providing a number of other services to

swap counterparties. It calculates payments on all confirmed CDS

contracts and creates real-time bilateral nets for each currency.\29\

The Warehouse supports trade processing associated with events of

default, such as bankruptcy, failure to pay and restructuring that may

trigger pay-outs for the buyer of the credit protection for the

underlying reference entity of the credit derivative. Its automated

event processing includes coupon payment recalculations, and

calculation of credit event recovery and rebate amounts based on

auction results, automated exit of the transactions for single-named

trades exhausted by the credit event, factor adjustment and re-

versioning to new identification for affected index transactions.

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\29\ For currency swaps involving foreign exchange (sometimes

called FX swaps), DTCC also provides central, automated settlement

of payments for contracts processed through the Warehouse's Central

Settlement Service, in partnership with CLS Bank International.

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Interest Rate Swaps Repository. In January 2010, TriOptima launched

the Global OTC Derivatives Interest Rate Trade Reporting Repository

(``TriOptima Interest Rate Repository'' or ``TriOptima IRTRR''), after

being selected by the Rates Steering Committee of the International

Swaps and Derivatives Association (``ISDA'') to provide a trade

repository to collect information on trades in the interest rate

derivatives market. The TriOptima IRTRR is regulated by the Swedish

Financial Supervisory Authority. TriOptima is also a provider of post-

trade services for OTC derivatives, including portfolio reconciliation

and compression.

Equity Swaps Repository. The newest existing trade repository is

DTCC's Equity Derivatives Reporting Repository (``EDRR''), launched on

August 5, 2010. EDRR is designed to hold key position data, including

product types, notional value, open trade positions, maturity and

currency denomination for transactions, and counterparty type

indicators. Equity derivatives that EDRR plans to support initially

include equity swaps, dividend swaps, variance swaps, portfolio swaps,

and swaptions, among other categories. DTCC's MarkitSERV subsidiary

will provide operational support, including account management, client

sign-up and customer service, and other product management services.

Derivatives Repository Ltd., the legal company that runs the EDRR

service, is regulated by the United Kingdom Financial Services

Authority (``UK FSA'').

Existing Repository Data Access. Access to data in the existing

repositories requires a Memorandum of Understanding between the primary

regulator of a repository and any competent financial regulatory

authority that requires the data for regulatory purposes.

F. Consultations With Other U.S. Financial Regulators

In developing the swap data recordkeeping and reporting rule,

Commission staff has engaged in extensive consultations with U.S.

domestic financial regulators. The agencies and institutions consulted

include the Federal Reserve Board of Governors (including the Federal

Reserve Bank of New York), Federal Deposit Insurance Corporation,

Office of the Comptroller of Currency, Securities and Exchange

Commission, and the Department of the Treasury. Commission staff

welcomes and will continue consultations with these and other U.S.

agencies and institutions while working on the final version of the

rule.

G. Consultations With International Financial Regulators

In developing the swap data recordkeeping and reporting rule,

Commission staff has had extensive consultations with numerous

international financial regulators and organizations. The international

organizations and institutions consulted have included the European

Commission (``EC''), European Central Bank (``ECB''), Committee of

European Securities Regulators (``CESR''), FSB Data Gaps and Systemic

Linkages Group (``DGSLG''), UK FSA, and financial regulators from

India, Brazil, and Canada, as well as IOSCO and the ODRF. Commission

staff welcomes and will continue consultations with these and other

international agencies, institutions and organizations while working on

the final version of the rule.

H. Data Reporting Approaches

Two Conceptual Approaches to Swap Data Reporting. Conceptually,

there are two distinct approaches to swap data reporting. One is

commonly referred to as a life-cycle or event flow approach,

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and the other is a state or snapshot approach.

The life cycle approach is focused on managing the flow of an

information system's data throughout the life cycle of the flow from

creation and initial storage to the time when it becomes obsolete.

Sometimes called an event flow approach, the life cycle method records

the details of a swap at its inception, and thereafter records

individual events that affect the terms of the swap, when they occur.

Systems based on the life-cycle data reporting approach typically are

based on, or interrelated with, operational infrastructure for other

functions, such as central credit event processing, legal

recordkeeping, settlement services, etc.

The state or snapshot approach is based on a report of all of the

primary economic terms of a swap at its inception, followed by a daily

update of the current state of the swap which incorporates all the

changes that have happened to the swap since the previous snapshot.

This approach also maintains daily synchronization and reconciliation

of the data in a repository with the data of the reporting swap

counterparty. Unlike the life cycle approach, the state or snapshot

approach does not require specifying and prescribing the various events

that require updating of data in a repository.

While both approaches are viable methods of data collection, one

can be more efficient than the other in different assets classes, due

to differences between asset classes in terms of market structure and

market processes. While a life-cycle approach is an efficient and

effective method of data processing for credit swaps, and may also be

suitable for equity swaps, a state or snapshot approach maybe more

appropriate for interest rate swaps, commodity swaps, and currency

swaps.

Illustration of the Life Cycle Approach. The DTCC Warehouse,

currently the only centralized global repository for OTC credit

derivatives contracts, follows the life cycle approach to data

reporting. The Warehouse supports the trade processing associated with

events of default, including bankruptcy, failure to pay, restructuring,

and other life cycle credit events which may trigger payouts for the

buyer of credit protection for the underlying reference entity that is

the subject of the credit swap.

DTCC cites several benefits of using a life cycle approach for

credit swaps. These benefits include greater control over payment

processing, by providing an automated way for participants to start or

stop automatic calculation of coupon payments for a specific trade;

minimization of time and cost by automating payment calculations and

providing bilateral netting of payments for firms participating in the

Warehouse; increased efficiency through streamlining of the trade

adherence process for life cycle events; and reduction of risk by

handling all credit events and successor events identically for each

participant, in the same time frame and with the same deadlines.

DTCC itself recognizes that the life cycle approach is not the

optimum approach for all asset classes, and that it often involves

ancillary services not part of the core function of a repository. In

responding to the CPSS-IOSCO Considerations for Trade Repositories,

DTCC agreed with comments made by a European Commission staff working

paper that highlighted the different fundamental natures of the OTC

derivatives asset classes.\30\ Due to these fundamental asset class

differences, DTCC said, it should be recognized that:

\30\ European Commission Staff Working Paper Accompanying the

Commission Communication ``Ensuring Efficient, Safe and Sound

Derivatives Markets (SEC 2009) 905 final, 3 July 2009).*COM019*

Therefore, for other asset classes (such as interest rates,

equity derivatives, commodities, etc.) the nature of the products

will dictate the overall operational infrastructure. For example,

life cycle credit events are only relevant to CDSs.

DTCC therefore agrees that repository services that fall broadly

under (1) position recording, (2) data cleansing, [and] (3)

reporting to regulators, the public and participant firms should be

provided on a global basis for each OTC asset class. The stated

goals of a repository--``to foster transparency, thus supporting the

efficiency, stability of and orderly functioning (i.e. avoidance of

abusive behavior) of financial markets''--are readily achieved

through these services.

However, DTCC does not believe it is appropriate to extend the

definition of a repository to encompass the aspects of Asset

Services (including legal record keeping) and Settlement Services

that the TIW (Trade Information Warehouse) provides to the CDS

market. These additional services are provided in addition to the

trade repository and are complementary to it, as opposed to being an

integral part.\31\

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\31\ Depository Trust & Clearing Corporation, Response by The

Depository Trust & Clearing Corporation to the CPSS-IOSCO

Consultative Report, June 22, 2010, at 8.

In contrast to the DTCC Warehouse, which offers a full suite of

repository and life cycle event processing services, the DTCC Equity

Derivatives Reporting Repository offers only position recording and

reporting services. This aligns with the industry's primary focus in

developing this repository.

Illustration of the State or Snapshot Approach. The TriOptima

Interest Rate Repository, currently the only centralized, global

repository for OTC interest rate derivatives contracts, uses the state

or snapshot approach to data reporting for interest rate swaps. The

TriOptima IRTRR collects transaction data on interest rate derivatives

from market participants and provides regulators with monthly reports

summarizing outstanding trade volumes and gross notionals as well as

currency breakdown and maturity profiles by product type. It holds

information for all types of both cleared and non-cleared OTC

derivatives interest rate transactions.

TriOptima cites a number of benefits of using the state or snapshot

approach for interest rate swaps. One is that this approach allows the

repository to have complete and up-to-date records at all times for all

live contracts to which the counterparties are legally bound (whether

or not full legal confirmation--which can take weeks--has occurred).

Such swap data comprehensiveness is a key consideration for systemic

risk monitoring. Another is that the state or snapshot approach avoids

a need to specify and prescribe all of the events that would need to be

recorded by a repository. TriOptima notes that this would be extremely

difficult for interest rate swaps--in contrast to credit swaps where

the list of life cycle events is clearly established--due to the wide

variety of different types of interest rate swaps, including

``bespoke'' swaps tailored to the specific needs of non-SD/MSP

counterparties (including end users), and to ongoing interest rate swap

product innovation. Provision of a daily snapshot also ensures that the

swap data in the repository is reconciled and synchronized each day

with the reporting counterparty's internal systems, which improves the

quality of data in the repository through interfacing with the

reporting counterparty's risk management systems.\32\

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\32\ See TriOptima Letter to the Commodity Futures Trading

Commission, October 26, 2010.

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II. Proposed New Regulations, Part 45

A. Recordkeeping Requirements

The Commission's existing requirements for recordkeeping with

respect to futures and options are found in Sections 5(b) and 5(d) of

the CEA; Sec. Sec. 1.31 and 1.35 of the Commission's Regulations;

Appendix B to Part 38 of the Commission's Regulations, Core Principle

17, Recordkeeping; and Appendix A to Part 39 of the

[[Page 76579]]

Commission's Regulations, Core Principle K, Recordkeeping.

Collectively, these provisions establish recordkeeping requirements for

all designated contract markets (``DCMs''), DCOs, futures commission

merchants (``FCMs''), introducing brokers (``IBs''), and members of

contract markets. Each such entity or person is generally required to

keep full and complete records, together with all pertinent data and

memoranda, of all activities relating to the business of the entity or

person that is subject to the Commission's authority. All such records

must be kept for a period of five years from the date of the record,

and must be readily accessible during the first two years of the five-

year period. Copies of all such records must be provided, at the

expense of the person required to keep the records, upon request by any

representative of the Commission or the Department of Justice.

The Commission believes that the rationale for requiring Commission

registrants to keep all records relating to the business involved must

also govern recordkeeping with respect to swaps by registered entities

and swap counterparties. Such records are essential to carrying out the

regulatory functions of not only the Commission but all other financial

regulators, and for appropriate risk management by registered entities

and swap counterparties themselves. The need for such records is also

recognized internationally. As CPSS has noted:

[I]t should be clear that the data recorded in a TR [trade

repository] cannot be a substitute for the records of transactions

at original counterparties. Therefore, it is important that even

where TRs have been established and used, market participants

maintain their own records of the transactions that they are a

counterparty to and reconcile them with their counterparties or TRs

on an ongoing basis (including for their own risk management

purposes).\33\

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\33\ Committee on Payment and Settlement Systems, Considerations

for Trade Repositories in OTC Derivatives Markets, May 2010, at 1.

A swap can continue to exist for a substantial period of time prior

to its final termination or expiration. During this time, which in some

cases can extend for many years, the key economic terms of the swap can

change. Thus, recordkeeping requirements with respect to a swap must

necessarily cover the entire period of time during which the swap

exists, as well as an appropriate period following final termination or

expiration of the swap.

Accordingly, the Commission's proposed regulations establishing

general swap recordkeeping requirements would require that all DCOs,

DCMs, swap execution facilities (``SEFs''), SDs, and MSPs must keep

full, complete, and systematic records, together with all pertinent

data and memoranda, of all activities relating to the business of such

entities or persons with respect to swaps. For all such entities and

swap counterparties, these requirements would include, without

limitation, records of all data required to be reported in connection

with any swap.

The proposed regulations would require that all records required to

be kept by DCOs, DCMs, SEFs, SDs, MSPs, and non-SD/MSP counterparties

must be kept throughout the existence of the swap and for five years

following final termination of the swap.\34\ Records required to be

kept by DCOs, DCMs, SEFs, SDs, and MSPs would be required to be readily

accessible by the registered entity or person in question via real time

electronic access throughout the life of the swap and for two years

following the final termination of the swap, and retrievable within

three business days through the remainder of the required retention

period.

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\34\ The Commission is aware that the European Commission's

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE

COUNCIL on OTC derivatives, central counterparties, and trade

repositories, SEC(2010) 1058 and 1059, September 15, 2010, would

require retention of records concerning swaps for ten years

following final termination of a swap. The Commission is proposing

to require record retention for five years following final

termination of a swap because it believes that a ten-year post-

termination retention period may not be necessary for regulatory

purposes, and could possibly impose an undue burden and costs on

registered entities and swap counterparties. The Commission requests

comment concerning the appropriate length of the required post-

termination retention period.

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Non-SD/MSP counterparties, including counterparties who qualify as

end users counterparties pursuant to Section 2(h)(7) of the CEA with

respect to particular swaps, would be required to keep full, complete,

and systematic records, including all pertinent data and memoranda,

with respect to each swap in which they are a counterparty. Each such

record would be required to be retrievable by the counterparty within

three business days during the required retention period.

The proposed rules would place lesser recordkeeping requirements on

non-SD/MSP counterparties than on SD or MSP counterparties or

registered entities because the Commission understands that non-SD/MSP

counterparties are less likely than other counterparties or registered

entities to have appropriate systems in place for this purpose, and

that the number of swaps in which they are counterparties is likely to

be smaller than the corresponding number for SDs or MSPs. The

Commission believes that this approach also effectuates a policy choice

made by Congress in Dodd-Frank to place lesser burdens on non-SD/MSP

counterparties to swaps, where this can be done without damage to the

fundamental systemic risk mitigation, transparency, standardization,

and market integrity purposes of the legislation. The Commission

requests comment concerning whether it should adopt a phase-in approach

for recordkeeping requirements by non-SD/MSP counterparties.

Because of the importance of swap data held in SDRs to all of the

various regulatory functions of financial regulators across the U.S.

financial sector and internationally, the proposed regulations would

require that all records required to be kept by SDRs must be kept by

the SDR both: (a) Throughout the existence of the swap and for five

years following final termination or expiration of the swap, during

which time the records must be readily accessible by the SDR and

available to the Commission via real time electronic access; and (b)

thereafter, for a period determined by the Commission, in archival

storage from which they are retrievable by the SDR within three

business days. The Commission believes that SDR records must be readily

accessible via real time electronic access throughout the existence of

the swap and for five years following final termination or expiration

of the swap in order to make effective the statutory mandate that SDRs

must ``provide direct electronic access to the Commission (or any

designee of the Commission including another registered entity.'' \35\

Regarding the length of the additional period, commencing five years

after final termination or expiration of a swap, during which an SDR

must keep swap records in archival storage, the Commission notes that

the ODRF has called for trade repositories to ``retain historical data

for an indefinite period.'' \36\ The Commission seeks comment

concerning whether SDRs should be required to keep swap data in

archival storage in perpetuity, or whether a limited term in years

should be required, and, if so, what archival storage period should be

required.

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\35\ Dodd-Frank Sec. 728, CEA Sec. 21(c)(4)(A).

\36\ ODRF, Outline of Trade Repository Functionality Being

Sought by Members of the OTC Derivatives Regulators' Forum (version

2), August 27, 2010, at 2.

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The proposed regulations would also require that all records

required to be kept pursuant to the regulations must be

[[Page 76580]]

open to inspection upon request by any representative of the

Commission, the Department of Justice, or the SEC, or by any

representative of a prudential regulator as authorized by the

Commission. The registered entity or swap counterparty involved would

be required to provide copies to the Commission, at the expense of the

registered entity or swap counterparty involved, either by electronic

means, in hard copy, or both, as requested by the Commission.

As referenced in the proposed regulations, in addition to the

general recordkeeping requirements discussed above, specific

recordkeeping requirements are being proposed in the Commission's other

proposed rulemakings concerning SDRs, DCOs, DCMs, SEFs, SDs, MSPs, and

non-SD/MSP counterparties.

The Commission requests comment on all aspects of the proposed

recordkeeping requirements. The Commission specifically requests

comment on the following aspects of the requirements:

The necessity, for risk management and other business

purposes, of the records required to be kept;

The length of time the records are required to be kept

by DCOs, DCMs, SEFs, SDs, MSPs, and non-SD/MSP counterparties; the

technology with which the records can be kept, any burden created by

this requirement, and the usefulness of the records in question over

the time required;

The length of time the records are required to be kept

by SDRs, the technology with which the records would be kept, any

burden created by this requirement, and the usefulness of the

records in question over the time required;

Whether records should be required to be kept by DCOs,

DCMs, SEFs, SDs, MSPs, and non-SD/MSP counterparties for ten years

following final termination of a swap rather than five years; and

The requirement that records be accessible in real time

for the periods required in the proposed regulation.

Whether the Commission should adopt a phase-in approach

to recordkeeping requirements for non-SD/MSP counterparties.

B. Swap Data Reporting

Swap Data Reporting from Two Stages of a Swap's Existence. The

Commission believes that it is important for fulfillment of the

purposes of Dodd-Frank to ensure that complete data concerning swaps is

maintained in SDRs and available to regulators.\37\ Accordingly, the

Commission believes that swap data reporting should include data from

each of two important stages of the existence of a swap: The creation

of the swap, and the continuation of the swap over its existence until

its final termination or expiration.\38\

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\37\ It is important to note that the reporting requirements

addressed in this proposed rulemaking are separate from the public

reporting of swap transactions requirements found in CEA Sec.

2(a)(13)(A) through (F), commonly called real time reporting. Real

time reporting requires swap data to be publicly disseminated in a

manner that protects anonymity. See CEA Sec. Sec. 2(a)(13)(C)(iii)

and 2(a)(13)(E)(i).

It is also important to note that the Commission intends to

establish data recordkeeping and reporting requirements for

``transitional swaps'' in a separate rulemaking. ``Transitional

swap'' means a swap executed on or after the date of enactment of

the Dodd-Frank Act (i.e., July 21, 2010) and before the effective

date of the final rule issued pursuant to this present rulemaking.

CEA Section 2(h)(5) Reporting Transition Rules provides that ``Swaps

entered into on or after [the] date of enactment [of the Dodd-Frank

Act] shall be reported to a registered swap data repository or the

Commission no later than the later of (i) 90 days after [the]

effective date [of Section 2(h)(5)] or (ii) such other time after

entering into the swap as the Commission may prescribe by rule or

regulation.'' The Commission anticipates that the rulemaking for

transitional swaps will address the records, information and data

regarding transitional swaps that must be retained and the timeframe

for reporting such information to the SDR or the Commission.

\38\ The proposed regulation uses the terms ``swap creation

data'' and ``swap continuation data'' to refer to these two stages

in the life of a swap, instead of referring to these stages as, for

example, the ``execution'' and ``life cycle'' of a swap, in order to

avoid the confusion that could result from the fact that those and

other commonly used terms do not have universally accepted

definitions and are used in different ways by different people in

the derivatives marketplace.

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Swap Creation Data Reporting: Two Sets of Data. With regard to the

creation of a swap, the proposed regulation calls for reporting of two

sets of data generated in connection with creation of the swap: Primary

economic terms data, and confirmation data.

Primary Economic Terms Data. The primary economic terms of a swap

include all of the terms of the swap verified or matched by the

counterparties at or shortly after the execution of the swap. Such

terms can differ not only for swaps in different swap asset classes,

but also for standardized versus non-standardized swaps. For swaps

executed on a SEF or DCM, the primary economic terms will be those

specified in the contract listed on the platform in question. For non-

standardized or bespoke swaps executed bilaterally, primary economic

terms are typically far less standardized. However, counterparties

verify the primary or essential economic terms of their swap with each

other in some fashion following execution in the case of every

swap.\39\ The industry does not have a single agreed-upon term for this

verification process, which is variously called affirmation, matching,

or confirmation of primary economic terms. By whatever name, the

proposed regulation would require that all of the terms of the swap

thus verified by the counterparties be reported to an SDR.

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\39\ For example, in the case of a swap involving an SD, the

SD's front office is where the trade starts. The order is placed,

and the SD will price the swap and give the quote to the

counterparty. If the counterparty agrees to the details of the trade

and is willing to enter into the deal, the trade is executed.

Typically, the trade is then captured by the SD's deal capture

system, which will validate all the necessary trade economics. An

acknowledgement is sent to the counterparty with the trade details,

and the counterparty either agrees or disagrees with those details.

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Minimum primary economic terms data. In order to ensure that the

array of primary economic terms reported to an SDR for a swap is

sufficient in each case for regulatory purposes, the proposed

regulations would require that the primary economic terms reported must

include, at a minimum, all of the data elements listed by the

Commission in the table of data elements for a swap of the asset class

involved, found in Appendix 1 to Part 45.\40\ The tables in Appendix 1

to Part 45 are designed to include data elements that reflect generic

economic terms and conditions common to most standardized products in

the asset class in question.\41\ They reflect the focus of required

reporting of primary economic terms data on the basic nature and

essential economic terms of the product involved, and are provided in

order to ensure to the extent possible that most such essential terms

are included when required primary economic terms are reported for each

swap. The proposed regulations are designed to capture the additional,

[[Page 76581]]

unique features of particular swaps in the asset class in question

through required reporting of confirmation data, which will include

reporting of all terms of each swap.

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\40\ When the final regulations are published, the Commission

intends to publish such tables in a separate Federal Register

release, which will be referenced in the final regulations. This

procedure is intended to allow the Commission to update the tables

from time to time, in response to swap market developments, without

a need to issue new regulations. The Commission requests comment

concerning this approach, including comments on its possible

utility, benefits, or drawbacks; on whether the data tables should

instead be published as an Appendix to the final regulations; and on

whether the data tables should be published in some other fashion.

\41\ On December 22, 2008, the FDIC published in the Federal

Register a final rule, effective January 21, 2009, that established

recordkeeping requirements for ``qualified financial contracts''

held by insured depository institutions in a ``troubled condition.''

Recordkeeping Requirements for Qualified Financial Contracts, 12 CFR

part 371, RIN 3064-AD30, December 22, 2008. Both terms are defined

in the rule. Upon written notification by FDIC, such an institution

is required by the rule to produce certain data required by the FDIC

over a period specified by the FDIC. The Commission requests comment

on whether it should incorporate the recordkeeping and data

reporting requirements in this FDIC rule in its final data reporting

rules, in its internal business conduct rules, or in other rules

swap-related rules promulgated by the Commission, and, if so, on how

such requirements should be incorporated.

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In addition to the tables included in Appendix 1 to Part 45,

Appendix 2 to Part 45 contains a Master Reference Generic Data Fields

List, which includes data elements that the Commission believes could

be relevant for standardized swaps in some or all swap asset classes.

The Commission requests comment on whether any of the data fields in

this Master Reference Generic Data Fields List should be included in

one or more of the Tables of Required Minimum Primary Economic Terms

Data for specific swap asset classes, or in the Minimum Valuation Data

table, that are included in Appendix 1 to Part 45.

The minimum primary economic terms data elements listed in the

tables in Appendix 1 to Part 45 include futures contract equivalent

data fields. The rationale for including those fields is the statutory

mandate to the Commission to promulgate regulations 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. The Commission would require

position data for not only futures and option contracts but also for

economically equivalent swaps, if the Commission's proposed rules

titled ``Position Reports for Physical Commodity Swaps'' become

final.\42\ In order to decrease potential burdens on persons that could

be subject to the requirement to file position reports under those

proposed rules (should they become final), the Commission requests

comment on whether certain aspects of the proposed position reports

should be a part of data reporting to SDRs.

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\42\ 75 FR 67258 (November 2, 2010).

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Confirmation data. The second set of data generated in connection

with the creation of a swap and required by the proposed regulations to

be reported is confirmation data. The proposed rulemaking defines

``confirmation'' as the full, signed, legal confirmation by the

counterparties of all of the terms of a swap, and defines

``confirmation data'' as all of the terms of a swap matched and agreed

upon by the counterparties in confirming the swap. The proposed

regulations would require reporting of confirmation data, in addition

to the earlier reporting of primary economic terms data, in order to

help ensure the completeness and accuracy of the data maintained in an

SDR with respect to a swap. Reporting of the terms of the confirmation,

which has the assent of both counterparties, provides a means of

fulfilling the statutory directive that an SDR ``shall confirm with

both counterparties to the swap the accuracy of the data that was

submitted.'' \43\ The goal of ensuring the highest possible degree of

swap data accuracy is shared internationally, as noted in the statement

included in the FSB Report Implementing OTC Derivatives Market Reforms

that ``authorities should ensure that market participants report and

TRs collect and provide data of the highest reliability practicable * *

*'' \44\

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\43\ CEA Sec. 21(c)(2).

\44\ FSB, Implementing OTC Derivatives Market Reforms: Report of

the OTC Derivatives Working Group, October 20, 2010, at 47.

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Who Reports Swap Creation Data. Under the proposed regulations,

determination of who must report required swap creation data is based

on two criteria. The first criterion is whether the swap is (1)

executed on a SEF or DCM and cleared on a DCO; (2) executed on a SEF or

DCM but not cleared; (3) not executed on a SEF or DCM but cleared on a

DCO; or (4) not executed on a SEF or DCM and not cleared. The second

criterion is whether the reporting counterparty (as determined

according to Sec. 45.5) is an SD or MSP, or instead is a non-SD/MSP

counterparty. Using these two criteria to determine who reports is

intended to streamline and simplify the data reporting approach, by

calling for reporting of each set of swap creation data by the

registered entity or counterparty that has the easiest, fastest, and

cheapest access to the set of data in question. The results of this

approach are shown in the following table:

Reporting of Swap Creation Data

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

Executed on a Executed on a Not executed on a Not executed on a

Reporting counterparty platform and platform and not platform and platform and not

cleared cleared cleared cleared

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

SD or MSP....................... SEF/DCM (primary SEF (primary SD/MSP (primary SD/MSP (primary

economic terms). economic terms). economic terms). economic terms).

DCO (confirmation) SD/MSP DCO (confirmation) SD/MSP

(confirmation). (confirmation).

Non-SD/MSP Counterparty......... SEF/DCM (primary SEF (primary Non-SD/MSP Non-SD/MSP

economic terms). economic terms). (primary economic (primary economic

terms). terms).

DCO (confirmation) Non-SD/MSP DCO (confirmation) Non-SD/MSP

(confirmation). (confirmation).

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

Who Reports Primary Economic Terms Data. For a swap executed on a

SEF or DCM, the Commission anticipates that the swap contract

certification process conducted by the SEF or DCM will define all or

most of the primary economic terms of the swap, and that all or most of

the required primary economic terms data for the swap will be created,

in electronic form, on the electronic platform by virtue of execution

of the swap contract offered by the SEF or DCM. The proposed

regulations therefore call for the SEF or DCM to report the required

primary economic terms data for the swap to an SDR in electronic

form.\45\ In the case of a swap not executed on a SEF or DCM, primary

economic terms data will be created by the counterparties' verification

of the primary economic terms of the swap. The proposed regulations

therefore call for the reporting counterparty (as defined in the

proposed regulations) to report the required primary economic terms

data for the swap to an SDR in electronic form.

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\45\ To ensure that no required primary economic terms data goes

unreported in any circumstance, the proposed regulations also

contain a ``catch-all'' clause requiring the reporting counterparty

to report any required primary economic terms data not reported by

the SEF or DCM.

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Who Reports Confirmation Data. For cleared swaps, confirmation data

will be generated by DCOs in the course of the normal clearing process.

The proposed regulations thus call for DCOs to report confirmation data

for all cleared swaps to the appropriate SDR in electronic form. For

non-cleared swaps, confirmation will be done by the counterparties, in

many cases with the assistance of a third-party confirmation

[[Page 76582]]

service provider. The proposed regulations therefore would require the

reporting counterparty to report confirmation data for each uncleared

swap.

Time of Reporting for Primary Economic Terms Data. Dodd-Frank does

not specify the timeframes for reporting of swap data to SDRs for

regulatory purposes (as opposed to real time reporting). However, to

further the objectives of Dodd-Frank regarding systemic risk

mitigation, transparency of the entire swaps market to regulators, and

enhanced market surveillance and position limit monitoring, the

Commission believes it is important that swap data be reported to SDRs

either immediately following execution of the swap--the point of time

at which the counterparties become irrevocably bound by contract under

applicable law--or within a short but reasonable time following

execution, rather than waiting until the time that full, signed, legal

confirmation by the counterparties of all terms (not just the primary

economic terms) of the swap is completed.\46\ Requiring reporting only

at or after the time when full legal confirmation is completed, rather

than at the time (shortly after execution) when verification of the

primary economic terms of the swap occurs, could encourage

counterparties to delay full legal confirmation in order to delay the

reporting of a swap. In addition, the Commission has been informed by

various existing trade repositories, third party service providers, and

swap counterparties (notably including non-SD/MSP counterparties) that

full legal confirmation of a swap currently can take weeks or even

months in an appreciable number of cases.

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\46\ Proposed Sec. 45.1(c) defines ``confirmation'' as the

full, signed, legal confirmation by the counterparties of all of the

terms of a swap.

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Allowing the first report of swap data concerning a swap to come

from a DCO following clearing, or from a counterparty following full

legal confirmation, would result in reporting delays that the

Commission does not believe are desirable. Without reporting of primary

economic terms data shortly following execution of a swap, regulators

examining SDR data for regulatory purposes in many cases would not see

the swap in question for hours or in some cases nearly an entire day

(if initial reporting followed clearing), or even for days or weeks (if

initial reporting followed full legal confirmation). This lack of

complete swap data would frustrate fundamental purposes of financial

reform, recognized not only by Congress in passing Dodd-Frank, but

internationally. As the FSB Report Implementing OTC Derivatives Market

Reforms states:

[A]uthorities (i) should ensure that TRs are established to

collect and maintain comprehensive OTC derivative transaction data;

and (ii) must require market participants to report all OTC

transactions, both centrally cleared and non-centrally cleared

accurately and in a timely manner to TRs (or in exceptional

circumstances, to relevant authorities). Where transactions are

centrally cleared or otherwise terminated early, reporting to TRs

also must capture and preserve information on the original terms of

the transaction.\47\

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\47\ FSB, Implementing OTC Derivatives Market Reforms: Report of

the OTC Derivatives Working Group, October 20, 2010, at 44 (emphasis

added).

It would also be undesirable to have all reporting of required swap

creation data for cleared swaps done by DCOs, because such a limitation

could have anti-competitive effects. Dodd-Frank explicitly permits DCOs

to register as SDRs.\48\ However, the statute does not limit SDR

registration to DCOs, and it contemplates free market competition

between registered SDRs on a level playing field (as the existence of

its antitrust provisions makes clear).\49\ If Commission regulations

directed that all reporting of swap creation data for cleared swaps was

to be done by DCOs, this could give DCOs a competitive advantage in

comparison with other non-DCO SDRs, since non-DCO SDRs would not be

able to offer data reporting to an SDR as part of a possible bundling

of services to customers. The proposed regulations are designed to

ensure fair competition in the provision of SDR services.

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\48\ Dodd-Frank Sec. 728, CEA Sec. 21(a)(1)(B).

\49\ See CEA Sec. 21(f)(1).

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Primary Economic Terms Reporting Time for Swaps Executed on a SEF

or DCM. In the case of swaps executed on a SEF or DCM, where the

platform possess the necessary primary economic terms data in

electronic form at the time of execution, the Commission believes that

required primary execution data should be reported to an SDR by the SEF

or DCM electronically, as soon as technologically practicable following

execution of the swap.

Primary Economic Terms Reporting Time for Swaps Not Executed on a

SEF or DCM. With respect to swaps not executed on a SEF or DCM, where

reporting of required primary economic terms data will be done by the

reporting counterparty, the Commission recognizes that the amount of

time needed for reporting could vary depending on, among other things,

the extent to which the swap is standardized, and whether execution of

the swap and verification by the parties of the primary economic terms

of the swap occur electronically or manually.

Based on discussions with industry participants, the Commission

believes that required primary economic terms data would be available

relatively quickly for a swap for which execution and verification of

primary economic terms occur electronically, because in many cases all

of the required data would already be in an electronic format. The

Commission understands that the majority of swaps, which are likely to

have an SD or MSP as the reporting counterparty, are likely to fall

into this category.

Conversely, the Commission is aware that, where execution and

verification of primary economic terms do not occur electronically--a

situation which may occur more frequently for the relatively small

number of swaps between non-SD/MSP counterparties, including end

users--additional time may be needed to put the required data into an

electronic format.

Accordingly, the proposed regulation would require reporting

counterparty to report required primary economic terms data promptly,

but in no event later than:

15 minutes after execution of a swap for which

execution and verification of primary economic terms occur

electronically;

30 minutes after execution of a swap which is not

executed electronically but for which verification of primary

economic terms occurs electronically; or

In the case of a swap for which neither execution nor

verification of primary economic terms occurs electronically, within

a time after execution of the swap to be determined by the

Commission prior to promulgation of its final data reporting

regulations.\50\

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\50\ The Commission requests comment concerning the appropriate

deadline for reporting of required primary economic terms data in

the case of a swap for which neither execution nor verification of

primary economic terms occurs electronically.

The Commission believes that requiring reporting of required

primary economic terms data by a reporting counterparty within 15

minutes of a swap's execution would be appropriate for a swap for which

execution and verification of primary economic terms occur

electronically, because data for such a swap could easily be put into

the necessary electronic format if it is not in such a format already.

The Commission also believes that, for a swap which is not executed

electronically but for which verification of primary economic terms

occurs electronically, the reporting counterparty could need additional

time for reporting. The Commission believes that 30 minutes would be a

sufficient

[[Page 76583]]

amount of time, because the required primary economic terms data for

such a swap would have been put into electronic form for verification

of primary economic terms, which would not require a significant amount

of manual intervention.

Finally, since required primary economic terms data with respect to

a swap for which neither execution nor verification of primary economic

terms occurs electronically would not likely be already in electronic

format, and could require a significant amount of manual intervention,

the Commission believes that additional time would be needed for

reporting. The Commission believes that 24 hours would be a sufficient

amount of time to enable such reporting while still making data for the

swap available to regulators without undue delay, based on

conversations with industry representatives.

Time of Reporting for Confirmation Data. The proposed regulations

follow similar principles for the reporting of required confirmation

data. For swaps cleared on a DCO, where the DCO possesses the necessary

confirmation data in electronic form at the time the swap is cleared,

the Commission believes that required confirmation data should be

reported to an SDR by the DCO electronically, as soon as

technologically practicable following the clearing of the swap. With

respect to swaps not cleared on a DCO, where reporting of required

confirmation data will be done by the reporting counterparty, the

Commission recognizes that the amount of time needed for reporting

could vary, depending on whether the reporting counterparty is an SD or

MSP or conversely is a non-SD/MSP counterparty, and depending on

whether confirmation is done electronically (via the automated systems

of a third-party confirmation service provider or of an SD or MSP

counterparty), or is done manually with a resulting need to put the

confirmation terms into an electronic format for confirmation reporting

purposes.

Accordingly, the proposed regulations would require a DCO to report

required confirmation data for a cleared swap electronically, as soon

as technologically practicable following clearing of the swap. In the

case of an uncleared swap, the proposed regulations would require the

reporting counterparty to report required confirmation data

electronically, making such a report promptly following confirmation,

but in no event later than:

15 minutes after confirmation of a swap for which

confirmation occurs electronically; or

In the case of a swap for which confirmation was done

manually rather than electronically, within a time to be determined by

the Commission prior to promulgation of its final data reporting

regulations.\51\

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\51\ The Commission requests comment concerning the appropriate

deadline for reporting of required confirmation data in the case of

a swap for which confirmation was done manually rather than

electronically.

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Swap Continuation Data Reporting. As noted earlier, the Commission

believes that it is important to fulfilling the purposes of Dodd-Frank

to ensure that complete data concerning swaps is maintained in SDRs and

available to regulators. This requires reporting of data from the

continuation of a swap over its existence from the time it is created

until its final termination or expiration.

Two Approaches to Swap Continuation Data Reporting. Swap

continuation data reporting can follow either of the two conceptual

approaches to data reporting discussed above: the life cycle or event

flow approach, or the state or snapshot approach. As previously noted,

while both approaches are viable methods of data collection, one can be

more efficient than the other in different assets classes, due to

differences between asset classes in terms of market structure and

market processes. With respect to swap continuation data reporting, the

life cycle approach involves managing the flow of an information

system's data throughout the data's life cycle from creation and

initial storage to the time when it becomes obsolete, while the state

or snapshot approach involves a daily update of the current state of

the swap which incorporates all the changes that have happened to the

swap since the previous snapshot.

Life Cycle Approach for Credit Swap and Equity Swap Asset Classes.

The proposed regulations define the swap continuation data required to

be reported for credit and equity swaps in terms of the life cycle

approach, in part because the Commission understands that the life

cycle approach is likely to be followed in the SEC's proposed

regulations concerning swap data reporting for security-based swaps in

these asset classes. The Commission believes that, to the extent

possible, a unified approach to the reporting of swap data over the

existence of swaps in asset classes where the SEC and the Commission

share jurisdiction may serve the public interest, by avoiding

imposition of differing reporting requirements for security-based and

non-security-based swaps in the same asset class, and thus avoiding

imposition of an undue burden on swap market participants. The

Commission is also aware of the work already done by the industry with

respect to credit swap data reporting using the life cycle approach,

and of the fact that the existing global trade repository for credit

swaps, the DTCC Warehouse, uses the life cycle approach. The Commission

believes that the life cycle approach may be appropriate for the credit

swap asset class, and to an extent for the equity swap asset class, due

to their market structure, market processes, and present degree of

product standardization.

State or Snapshot Approach for Interest Rate Swap, Currency Swap,

and Other Commodity Swap Asset Classes. In light of the work already

done by the industry with respect to data reporting in the other swap

asset classes--notably the interest rate swap asset class--using the

state or snapshot approach, and in light of the fact that the existing

global trade repository for interest rate swaps, the TriOptima Interest

Rate Repository, uses the state or snapshot approach, the proposed

regulations define the swap continuation data required to be reported

for interest rate swaps, currency swaps, and other commodity swaps in

terms of the state or snapshot approach. The Commission believes that

this approach may be better suited to these asset classes, due to their

market structure, market processes, and present degree of product

standardization.

One reason for this is that the Commission understands that the

interest rate swap, currency swap, and other commodity swap asset

classes involve numerous and widely varying types of derivatives

products and a considerable degree of innovation and change with regard

to instrument types. Swaps in these asset classes are often tailored to

the specific needs of non-SD/MSP counterparties including end users.

Thus, it would be very difficult, if not impossible, to enumerate all

of the events that would need to be reported during the continuation of

such swaps. This situation contrasts, for example, with the situation

prevailing in the credit swap asset class, where a greater degree of

standardization exists.

Another reason why the state or snapshot approach may be better

suited to the interest rate swap, currency swap, and other commodity

swap asset classes is that in the life cycle or event flow approach,

reporting counterparties must be able to generate messages to the SDR

not only for all relevant life cycle events, but also for correction of

errors and omissions in previously submitted data. Such messages must

be tracked between reporting counterparties and

[[Page 76584]]

the SDR. This can create a need for manual intervention and produce

information backlog. It also creates a need to reconcile data between

the SDR and the reporting counterparty's internal systems to ensure

that all events have been captured correctly in the SDR's data. These

problems are exacerbated in the case of asset classes with relatively

less standardization of swap terms. By contrast, the state or snapshot

approach eliminates the need to specify and require reporting of all of

the individual life cycle events that require updating of SDR data,

since the current state of all of the primary economic terms of all

existing swaps is submitted daily to the SDR. This daily snapshot

ensures that SDR data is reconciled with a reporting counterparty's

internal systems on a daily basis, and provides automatic daily

corrections of errors and omissions in previously submitted data.

The daily snapshot also ensures that SDR data is continually

refreshed by the data contained in the risk management systems of

reporting counterparties, who for business reasons normally devote

considerable resources to ensuring data correctness. Leveraging the

data quality assurance processes of reporting counterparties in this

way can provide significant benefits in terms of the accuracy of swap

data resident in SDRs.

Finally, the state or snapshot approach eliminates the need for a

complex array of exception management messages, and reduces the

reporting burden for reporting counterparties by permitting the systems

of reporting counterparties to submit one basic type of message, the

daily snapshot of updated primary economic terms. The greater

technological simplicity thus permitted can be a significant benefit

where non-SD/MSP counterparties (including end users) are concerned.

Four Sets of Swap Continuation Data. For the above reasons, with

regard to the continuation of a swap, the proposed regulations would

call for reporting of four sets of data generated in connection with

the continuation of the swap: (1) Life cycle data for credit swaps and

equity swaps; (2) contract-intrinsic data for credit swaps and equity

swaps; (3) daily state data for interest rate swaps, currency swaps,

and other commodity swaps; and (4) valuation data for swaps in all five

swap asset classes.

Life Cycle Event Data Reporting for Credit Swaps and Equity Swaps.

For the purpose of required continuation data reporting for credit

swaps and equity swaps, the proposed regulations require reporting,

throughout the existence of a swap until its final termination or

expiration, of ``life cycle event data'', defined as all of the data

elements necessary to fully report any life cycle event, or any

adjustment due to a life cycle event, that results in a change to data

previously reported for the swap in question. The proposed regulations

define ``life cycle event'' to mean any event that would result in a

change in the data previously reported to an SDR in connection with the

swap, including, without limitation, a counterparty change resulting

from an assignment or novation; a partial or full termination of the

swap; a change in the cash flows originally reported; for a credit swap

or equity swap that is not cleared, any change to the collateral

agreement; or a corporate action affecting a security or securities on

which the swap is based (e.g., a merger, dividend, stock split, or

bankruptcy).

Contract-Intrinsic Data Reporting for Credit Swaps and Equity

Swaps. For the purpose of required continuation data reporting for

credit swaps and equity swaps, the proposed regulations would also

require reporting, throughout the existence of a swap until its final

termination or expiration, of ``contract-intrinsic event data,''

defined as all of the data elements necessary to fully report any

contract-intrinsic event with respect to the swap in question. The

proposed regulations define ``contract-intrinsic event'' to mean a

scheduled, anticipated event occurring during the existence of a swap

that does not result in any change to the contractual terms of the

swap, including, without limitation, the scheduled expiration of a

swap, or a previously described and anticipated interest rate

adjustment.

State Data Snapshot Reporting for Interest Rate Swaps, Currency

Swaps, and Other Commodity Swaps. For the purpose of required

continuation data reporting for interest rate swaps, currency swaps,

and other commodity swaps, the proposed regulations would require

reporting of all ``state data'' for the swap, reported daily throughout

the existence of the swap until its final termination or expiration.

The proposed regulations define ``state data'' to mean all of the data

elements necessary to provide a snapshot view, on a daily basis, of all

of the primary economic terms of a swap, including any changes to such

terms since the last snapshot. The proposed regulations also require

that, at a minimum, this data must include all of the economic terms

reflected in the appropriate table of data elements for a swap of the

asset class involved. These tables can be found in Appendix 1 to Part

45.

Valuation Data Reporting for Swaps in All Swap Asset Classes.

Valuation data is defined in the proposed regulations to mean all of

the data elements necessary for a person to determine the current

market value of a swap, including, without limitation, daily margin,

daily mark-to-market, and other measures of valuation to be determined

by the Commission prior to promulgation of its final swap data

reporting regulations. Swap valuation data is essential to a variety of

the regulatory functions of many financial regulators, and is crucial

to fulfillment of fundamental purposes of Dodd-Frank, including

systemic risk reduction and increased transparency of the derivatives

marketplace to regulators. The Commission and other regulators would

use valuation information regarding swaps reported to SDRs for

prudential oversight, to monitor potential systemic risk, and to

monitor compliance with regulatory requirements for SDs and MSPs. The

importance of reporting swap valuation data to SDRs is recognized

internationally. The FSB Report Implementing OTC Derivatives Market

Reforms provides that:

TRs should collect data to enable monitoring of gross and net

counterparty exposures, wherever possible, not only on notional

volumes for each contract but also market values, exposures before

collateral, and exposure value net of collateral with a full

counterparty breakdown. This would allow for the calculation of

measures that capture counterparty risk concentrations both for

individual risk categories as well as for the overall market.\52\

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\52\ FSB, Implementing OTC Derivatives Market Reforms: Report of

the OTC Derivatives Working Group, October 20, 2010, at 48.

Accordingly, the proposed regulations would require reporting of

valuation data for swaps in all five asset classes.

Who Reports Swap Continuation Data. Under the proposed regulations,

determination of who must report required swap continuation data is

based on two criteria. The first criterion is whether or not the swap

is cleared on a DCO. The second criterion is whether the reporting

counterparty (as provided in the proposed regulations) is an SD or MSP,

or instead is a non-SD/MSP counterparty. Using these two criteria to

determine who reports is intended to streamline and simplify the data

reporting approach, by calling for reporting of each set of swap

[[Page 76585]]

continuation data by the registered entity or counterparty that has the

easiest, fastest, and cheapest access to the set of data in question.

The results of this approach are shown in the following table:

Reporting of Swap Continuation Data

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

Credit and equity asset classes Interest rate, currency, and other

-------------------------------------- commodity asset classes

Reporting counterparty -------------------------------------------

Cleared Not cleared Cleared Not cleared

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

SD or MSP..................... DCO (life-cycle SD/MSP (life- SD/MSP (state SD/MSP (state snapshot

data). cycle data). snapshot data). data).

SD/MSP (intrinsic SD/MSP (intrinsic DCO and SD/MSP SD/MSP (valuation

data). data). (valuation data). data).

DCO and SD/MSP SD/MSP (valuation

(valuation data). data).

Non-SD/MSP Counterparty....... DCO (life-cycle Non-SD/MSP (life- Non-SD/MSP (state Non-SD/MSP (state

data). cycle data). snapshot data). snapshot data).

Non-SD/MSP Non-SD/MSP

(intrinsic data). (intrinsic data).

DCO (valuation Non-SD/MSP DCO (valuation Non-SD/MSP (valuation

data). (valuation data). data). data).

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

Who Reports Life Cycle Event Data and Contract-Intrinsic Event

Data. For a credit swap or equity swap cleared on a DCO, the Commission

understands that the DCO will possess information in electronic form

concerning some life cycle events required to be reported over the

existence of the swap, due to its status as a central counterparty,

while the swap counterparty (as defined in the proposed regulations)

will possess information concerning other life cycle events. The

proposed regulations therefore call for the DCO to report required life

cycle event data in its possession, and for the reporting counterparty

to report life cycle event data in its possession. For a credit swap or

equity swap that is not cleared, the proposed regulations call for the

reporting counterparty to report all required life cycle event data and

all contract-intrinsic event data.

The Commission understands that contract-intrinsic event data,

which involves anticipated events such as scheduled adjustments, will

be available to, and known in advance by, the reporting counterparty.

The proposed regulations thus require the reporting counterparty to

report all required contract-intrinsic event data for all credit swaps

or equity swaps.

Who Reports a Daily Snapshot of State Data. For an interest rate

swap, currency swap, or other commodity swap cleared on a DCO, the

proposed regulations require the reporting counterparty to report all

required state data, on a daily basis.

Who Reports Valuation Data. For cleared swaps in all five swap

assets classes, both the DCO and the reporting counterparty may possess

different types of valuation data.\53\ Therefore, for each cleared

swap, the proposed regulations would call for both the DCO and the

reporting counterparty to report valuation data. For uncleared swaps in

all five swap asset classes, the only source of valuation data will be

a counterparty. Accordingly, for each uncleared swap, the proposed

regulations would call for the reporting counterparty to report

valuation data.

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\53\ As noted earlier, the proposed regulations define

``valuation data'' as including ``other measures of valuation as

determined by the Commission'' in addition to specified valuation

measures. The Commission is requesting comment concerning what other

measures of valuation of a swap should be required to be reported to

an SDR. The Commission's eventual determination as to what other

measures of valuation should be required may affect what valuation

data must be reported by a DCO or by a reporting counterparty.

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Time of Reporting for Life Cycle and Contract-Intrinsic Event Data.

For credit swaps and equity swaps, whether cleared or uncleared, the

proposed regulations would require that life cycle event data must be

reported on the same day in which any life cycle event occurs, while

contract-intrinsic event data must be reported on the same day in which

any contract-intrinsic event occurs.

Time of Reporting for a Daily Snapshot of State Data. For interest

rate swaps, currency swaps, and other commodity swaps, whether cleared

or uncleared, the proposed regulations would require that all required

state data for the swap be reported daily through the existence of the

swap until its final termination or expiration.

Time of Reporting for Valuation Data. For each swap (regardless of

asset class) cleared on a DCO, the proposed regulations would require

the DCO to report all valuation data in its possession on a daily

basis. Where the reporting counterparty for such a swap is an SD or

MSP, the proposed regulations would require the SD or MSP to report all

valuation data in its possession on a daily basis. The Commission

understands that DCOs and SD or MSP reporting counterparties are likely

to have the automated system capacity necessary for such daily

reporting. The Commission also understands that, as of the effective

date of the final swap data reporting regulations, non-SD/MSP reporting

counterparties may not have a comparable level of automated system

capacity. Accordingly, where the reporting counterparty for such a swap

is a non-SD/MSP counterparty, the proposed regulations would call for

the reporting counterparty to report all valuation data in its

possession at times to be determined by the Commission prior to its

adoption of final swap data reporting regulations. The Commission

requests comment concerning the time intervals necessary and

appropriate for reporting of valuation data by non-SD/MSP

counterparties, and concerning whether the Commission should adopt a

phase-in approach to valuation data reporting by non-SD/MSP

counterparties.

Swap Asset Classes and Other Swap Classifications. For the purpose

of the proposed regulations, a swap would be classified as belonging to

one of five swap asset classes, including: (1) Credit swaps; (2)

currency swaps (including FX swaps and their variations); (3) equity

swaps; (4) interest rate swaps; and (5) other commodity swaps. The

proposed regulations would define these swap asset classes as follows.

[[Page 76586]]

``Credit swap'' means any swap that is primarily based on

instruments of indebtedness, including, without limitation: Any swap

primarily based on one or more broad-based indices related to

instruments of indebtedness: Any swap that is an index credit swap or

total return swap on one or more indices of debt instruments.

``Currency swap'' means any swap which is primarily based on rates

of exchange between different currencies, changes in such rates, or

other aspects of such rates. This category includes foreign exchange

swaps as defined in CEA Section 1a(25).\54\

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\54\ CEA Sec. 1a(25) provides that: ``The term `foreign

exchange swap' means a transaction that solely involves--(A) an

exchange of 2 [sic] different currencies on a specific date at a

fixed rate that is agreed upon on the inception of the contract

covering the exchange; and (B) a reverse exchange of the 2 [sic]

currencies described in subparagraph (A) at a later date and at a

fixed rate that is agreed upon on the inception of the contract

covering the exchange.''

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``Equity swap'' means any swap that is primarily based on equity

securities, including, without limitation: any swap primarily based on

one or more broad-based indices of equity securities; any total return

swap on one or more equity indices.

``Interest rate swap'' means any swap which is primarily based on

one or more reference rates, such as swaps of payments determined by

fixed and floating rates.

``Other commodity swap'' means any swap not included in the credit

swap, currency swap, equity swap, or interest rate swap categories,

including, without limitation, any swap for which the primary

underlying item is a physical commodity or the price or any other

aspect of a physical commodity.

``Asset class'' means the particular broad category of goods,

services or commodities underlying a swap. The asset classes include

interest rate, currency, credit, equity, other commodity, and such

other asset classes as may be determined by the Commission.

In addition, the Commission anticipates that some swaps subject to

its jurisdiction may belong to two other swap categories: mixed swaps,

and multi-asset swaps. Generally, a mixed swap is in part a security-

based swap subject to the jurisdiction of the SEC and in part a swap

belonging to one of the swap asset classes subject to the jurisdiction

of the Commission.\55\ Multi-asset swaps are those that do not have one

easily identifiable primary underlying notional item within the

Commission's jurisdiction. The Commission requests comment concerning

how such swaps should be treated with respect to swap data reporting,

and concerning the category or categories under which swap data for

such swaps should be reported to SDRs and maintained by SDRs.

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\55\ Dodd-Frank defines ``mixed swap'' as follows: ``The term

`security-based swap' includes any agreement, contract, or

transaction that is as described in section 3(a)(68)(A) of the

Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(68)(A)) and is

also based on the value of 1 [sic] or more interest or other rates,

currencies, commodities, instruments of indebtedness, indices,

quantitative measures, other financial or economic interest or

property of any kind (other than a single security or a narrow-based

security index), or the occurrence, non-occurrence, or the extent of

the occurrence of an event or contingency associated with a

potential financial, economic, or commercial consequence (other than

an event described in subparagraph (A)(iii).'' Dodd-Frank Sec.

721(21), CEA Sec. 1a(47)(D).

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Requests for Comment. The Commission requests comment on all

aspects of the proposed data reporting regulation and the definitions

associated with it. The Commission specifically requests comment on the

following questions relating to this proposed regulation.

Is the separation of reporting counterparties into two

categories (SD or MSP, versus non-SD/MSP counterparty) appropriate, and

does it further the purposes described?

Is the second criterion for swap creation data--division

of swaps into four categories depending on whether they are platform

executed and cleared or not--appropriate?

Should the Commission take the internal recordkeeping

systems of SDs and MSPs into account as it does in the proposed

regulation?

Is the concept of primary economic terms data, as defined,

inclusive enough to capture all of the primary economic terms of a swap

upon execution?

What are the benefits or drawbacks of required reporting

of primary economic terms data? Will such reporting serve to verify the

accuracy of swap execution data?

Will the required reporting of confirmation data to an

SDR, after the reporting of primary economic terms data to the SDR,

help enable the SDR to satisfy the statutory requirement to confirm

with both counterparties to the swap the accuracy of the data and

information submitted?

Should back-office confirmation be an acceptable means of

confirming a swap?

What is the proper way to report bunched (block) orders

that are allocated to ultimate owners after execution?

What is the appropriate time delay for reporting of

primary economic terms by (1) SDs, (2) MSPs, and (3) non-SD/MSP

counterparties? Should the time required differ according to these

categories?

What is the appropriate time delay for reporting of

confirmation terms by (1) SDs, (2) MSPs, and (3) non-SD/MSP

counterparties? Should the time required differ according to these

categories?

Is there sufficient industry infrastructure in place to

support the life cycle data reporting approach for credit and equity

swaps?

Is it appropriate to use the life cycle approach to swap

data reporting for credit swaps, or for equity swaps? Why or why not?

Is it appropriate to use the daily snapshot of state data

approach to swap data reporting for interest rate, currency and

commodity swaps? Why or why not?

Is there currently infrastructure in place to support

alternative approaches for data reporting for credit, equity, interest

rate, currency and commodity swaps?

Is the definition of ``multi-asset swap'' appropriate? Why

or why not?

For the purposes of the data recordkeeping and reporting

rule, should a multi-asset swap be reported within any of the following

categories: credit swaps, equity swaps, currency swaps, commodity

swaps, or interest rate swaps? What criteria should govern this

determination?

Should a separate procedure be established for reporting

of multi-asset swaps?

Should the Commission require that, for multi-asset swaps,

reporting counterparties must report all required swap data in each

asset class involved?

Should a separate procedure be established for reporting

of mixed swaps?

Is the list of swap asset classes all-inclusive and

appropriately defined? Why or why not?

Should a phase-in approach be used for the time of

reporting of confirmation by non-SD/MSP counterparties?

Should a separate collateral warehouse system be

established as part of an SDR to enable systemic risk and prudential

regulators to monitor collateral management and gross exposure on a

portfolio level for swap participants? How should this be done?

Should a separate master agreement library system be

established as part of an SDR? How should this be done?

In what asset class should cross-currency swaps be

reported? Should this be done in the interest rate swap asset class, or

in the currency swap asset class?

For multi-asset class swaps, should the swap data required

to be reported

[[Page 76587]]

include all required primary economic terms data for each asset class

involved in any leg or part of the swap?

How should asset class classification be done for the

purpose of data reporting? What should be the criteria to classify a

swap within a certain asset class?

Should foreign exchange swaps be included in the currency

swap asset class, or should they be treated separately for data

reporting purposes? A foreign exchange swap is usually defined as a

financial transaction whereby two parties exchange agreed-upon amounts

of two currencies as a spot transaction, simultaneously agreeing to

unwind the exchange at a future date, based on a rule that reflects

both interest and principal payments.

C. Unique Identifiers

Need for Unique Identifiers. Over the course of the last decade,

virtually all stakeholders in the financial sector have come to

recognize the need for universal, accurate, and trusted methods of

identifying particular financial transactions, the legal entities that

are parties to financial transactions, and the product type involved in

particular financial transactions. Such identifiers will be crucial

tools for financial regulators tasked with measuring and monitoring

systemic risk, preventing fraud and market manipulation, conducting

market and trade practice surveillance, enforcing position limits, and

exercising resolution authority. Without such unique identifiers, and

the ability to aggregate data across multiple markets, entities, and

transactions that they would provide, the enhanced monitoring of

systemic risk and greater market transparency that are fundamental

goals of Dodd-Frank cannot be fully achieved. Such identifiers would

also have great benefits for financial transaction processing, internal

recordkeeping, compliance, due diligence, and risk management by

financial entities. The Commission believes, in light of recent

economic events, that the need for unique identifiers that are based on

open standards and are capable of international adoption is now urgent,

and that their creation has become essential.

The Commission understands that this conceptual approach is

supported by the SEC. Commission staff have consulted closely with SEC

staff concerning the unique ID provisions of these regulations. The

Commission anticipates that proposed regulations issued by SEC with

respect to swap data recordkeeping and reporting will follow the same

principles with respect to unique ID that are included in the unique ID

provisions of the Commission's proposed regulations. The Commission

understands, from discussions with staff of the Department of the

Treasury, that this conceptual approach could also be followed by the

Office of Financial Research (``OFR''), created in the Department of

the Treasury by the Dodd-Frank Act \56\ in part for the purposes of

standardizing the types and formats of data reported and collected by

the OFR with regard to swaps, and of assisting agencies that are

members of the Financial Stability Oversight Council (``FSOC'') in

determining the types and formats of data they will collect, as

required by Dodd-Frank.\57\

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\56\ See Dodd-Frank Act Title 1, Subtitle B, Sections 151

through 156.

\57\ Dodd-Frank Act, Title 1, Sections 153(2) and 153(7).

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The Commission's own need for unique identifiers for swap

transactions, counterparties, and products arises from a need to

aggregate and track information on swap transactions efficiently across

a diverse array of market participants, trading venues, and product

classes. Unlike centralized futures markets where standardized

contracts are traded among participants in a fairly closed system,

swaps have been and will continue to be offered in a variety of forms

and market venues. There is a close relationship between the swap

markets and the underlying cash and futures markets that typically

provide the basis for the price references and benchmark prices. In

addition, because swaps can serve as a substitute for a transaction in

the underlying reference market, market participants are often free to

transact in the market of their choice, meaning that an entity may hold

positions, for example, in both the futures market and in swaps that

reference the futures market price.

With respect to futures markets futures commission merchants,

clearing members, and foreign brokers are required to file reports on

the positions of large traders (as defined by the Commission), and in

doing so to aggregate the positions of traders that may be held in

various accounts at the firm, and to report them under a single,

unique, identifying account number. Thus, at least with respect to

reporting by a single reporting firm, the Commission is able to see the

total position of a trader in a particular futures or option contract

offered at an exchange. By contrast, swap counterparties will not

necessarily conduct their trading through a single entity or trading

venue that could easily aggregate an entity's position. Instead, swaps

having similar underlying product characteristics may be entered into

through a variety of dealers or MSPs, on different DCMs or SEFs, or in

bilateral trades. In addition, because each swap contract potentially

has a unique set of terms and conditions, as opposed to the common set

of terms and conditions that define an exchange-traded futures

contract, defining a position or transaction in a particular contract

can be complicated.

Unique identifiers would also serve the important goal of enabling

the Commission to link together all of the various types of data that

it collects in fulfilling its regulatory missions, including data

concerning swaps, futures, and large traders. This would enhance the

effectiveness of the Commission's various market monitoring tools, and

improve its ability to detect and respond to market risks. The ability

of unique identifiers to serve as a data linchpin will also be of great

benefit to other financial regulators with respect to the different

types of data they collect.

Accordingly, the Commission is proposing to require use of unique

identifiers designed to ensure the Commission's ability to aggregate

transaction and position data for the purpose of conducting market and

financial risk surveillance, enforcing position limits, analyzing

market data, enforcing Commission regulations, monitoring systemic

risk, and improving market transparency. Such unique identifiers will

better enable the Commission to ascertain the overall positions and

activity of traders in and across markets, track activity over the life

of individual transactions, and determine overall activity in

particular product classes.

Unique Swap Identifiers. The Unique Swap Identifier (``USI'')

called for by the proposed rules would be created and assigned to a

swap at the time it is executed, and used to identify that particular

swap transaction throughout its existence. Swaps will typically have a

number of events associated with them over their lifetime, often

referred to as life cycle events. These can include economic revisions,

counterparty changes, early partial or full terminations, normal

terminations, option exercises, credit events, servicing events and

cash flow settlements. Because a swap might have a life that extends

over many years, it is important that the Commission be able to

identify the origins of the transaction as well as events related to

that swap over its lifetime. Without the ability to track transactions

through the use of a unique

[[Page 76588]]

identifier, it would be difficult for the Commission to separate new

transactions from existing ones and to identify changes that have

occurred to a specific swap contract. Use of USIs is also essential to

collating swap creation data, swap continuation data, and error

corrections reported by execution platforms, clearing houses, and

counterparties concerning a single swap into a single, accurate data

record that tracks the swap over its duration.

The Commission believes that workable USIs for all swaps under its

jurisdiction can be created via a ``first-touch'' approach. For a swap

executed on a trading platform, the USI would be created and assigned

by the SEF or DCM involved. For a swap executed bilaterally, the USI

would be created and assigned by the SD or MSP required to report

concerning the swap, or in the case of a swap between non-SD/MSP

counterparties would be created by the SDR to which the swap is

reported.

The proposed rules would ensure the uniqueness of each USI by

specifying that the USI must include two components. The first

component would be the unique, extensible, alphanumeric code assigned

by the Commission to each registered entity required by the proposed

regulations to create USIs, at the time of its registration, for the

purpose of identifying that entity in the context of USI creation. The

second component would be an extensible, alphanumeric code generated

and assigned by the automated systems of the registered entity that

must be unique with respect to all such codes generated and assigned by

the entity.

The registered entity creating the USI would be required to

transmit the USI to all other registered entities and swap

counterparties involved with the swap, as soon as technologically

practicable after its creation and assignment. Thereafter, all

registered entities and swap counterparties would be required to

include the USI in all records and all swap data reporting concerning

that swap, throughout the existence of the swap and for as long as any

records are required to be kept concerning that swap.

BILLING CODE 6351-01-P

[[Page 76589]]

[GRAPHIC] [TIFF OMITTED] TP08DE10.008

BILLING CODE 6351-01-C

The required use of USIs would not prohibit the additional use or

reporting of other identifiers internally generated by the automated

systems of registered entities or counterparties.

The Commission seeks comment concerning the required use of USIs;

the benefits or burdens that required use of USIs would create; the

practicability of the Commission's proposed method of creating USIs;

other possible methods of creating USIs; and possible transmission

methods for USIs among registered entities and reporting parties.

Unique Counterparty Identifiers. The Unique Counterparty Identifier

(``UCI'') called for by the proposed rules would be used for precise,

reliable, and unique identification of each counterparty to any swap

subject to the Commission's jurisdiction, in all recordkeeping and data

reporting concerning swaps. The Commission believes that full

realization of the systemic risk mitigation and transparency purposes

of Dodd-Frank cannot be fully achieved without mandatory use of UCIs.

To assess systemic risk, it is essential to understand how individual

financial firms are exposed to specific risks across all their

activities, and the interconnectedness between firms. The way that

financial firms are identified is critical to understanding those

issues. With such identifiers, regulators will be able to aggregate

exposures consistently and accurately across the financial system. As

noted in February 2010 by Daniel K. Tarullo, member of the Board of

Governors of the Federal Reserve System, in testimony before the U.S.

Senate:

Clearly, the [recent financial] crisis exposed the need for a

regulatory mechanism that will provide real time analysis across

multiple financial markets to identify systemic risk and stresses in

market conditions before they occur. A unique entity identifier for

data sharing and use in data collections between the Federal

financial regulatory agencies is the critical missing component for

this analysis.\58\

\58\ Daniel K. Tarullo, Member, Board of Governors of the

Federal Reserve System, Equipping Financial Regulators With the

Tools Necessary to Monitor Systemic Risk, before the Subcommittee on

Security and International Trade and Finance, Committee on Banking,

Housing, and Urban Affairs, U.S. Senate, Washington, DC, February

12, 2010.

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[[Page 76590]]

An important purpose of the UCI required by the proposed rules

would be to enable effective assessment of counterparty positions and

aggregation of swap data across asset classes, markets, and related

legal entities, in order to effectuate the systemic risk prevention and

transparency purposes of Dodd-Frank.

Policy analysis by financial regulators employs legal entity

reference data as the basic infrastructure for identifying, describing,

classifying, labeling, organizing, and using other information. Such

reference data allows identification of interconnections between firms.

In the business world, legal entity reference data can support

communication between systems, facilitate transaction processing, and

allow for accurate aggregation of positions vis-[agrave]-vis individual

counterparties or classes of counterparties, something necessary for

effective risk management and calculation of margin. Sales, compliance,

and due diligence functions also rely on entity identifiers, and would

benefit from availability of unique entity identifiers.

Today, there is no universal legal entity identification system

available to serve the financial sector and regulatory community.\59\

In the absence of such a universal system, private firms and regulators

have created a variety of identifiers. This creates inefficiencies for

firms, and presents obstacles to regulators and policymakers.

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\59\ Discussions of the concept of a universal legal entity

identification system for financial firms of all types often refer

to a legal entity identifier or ``LEI.'' This is the same concept

addressed by the proposed rule. The proposal refers to the

identifier as a UCI, rather than an LEI, because in the context of

this rule it would be used to identify the legal entities who are

counterparties to a swap. The Commission recognizes that identifiers

provided by a universal legal identification system through an

international consensus process could appropriately be used to

identify legal entities in various other contexts across the

financial sector.

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At private firms, because there is no industry-wide legal entity

identification standard, tracking counterparties and calculating

exposures across multiple data systems is complicated, expensive, and

can result in costly errors. For example, maintaining internal

identifier databases and reconciling entity identification with

counterparties is expensive for large firms and disproportionately so

for small firms. In the worst case scenario, identification problems

can lead to transactions that are broken or fail to settle.

The lack of a universal identification standard also creates

problems for financial regulators. Precise identification of financial

firms is necessary to understand systemic risk, which involves entities

operating across a range of industries. The problems that firms face in

aggregating exposure are magnified in measuring risk across the system.

In addition, futures and securities regulators must often identify

parents and affiliates of futures commission merchants or broker-

dealers manually and by name. Multiple and generally different

identifiers for participants can make it difficult to create a

consolidated order audit trail.

It is worth noting in this context that leaders in the information

technology industry have stated that data standardization is a

significant obstacle to using technology to further the needs of

private industry and regulators. Complete automation of back-office

activities and ``straight through processing'' remain elusive, in part

because of the lack of a universal identifier for legal entities.

The vendor community has attempted to provide solutions for these

private and public challenges. However, none is sufficiently robust,

comprehensive, and open to serve as an industry-wide standard. Indeed,

most of the solutions offered by vendors are proprietary and restricted

in use and redistribution. In addition, current identifiers are not

sufficiently unique or persistent. Current vendor identifiers that are

unique and unrestricted with respect to use and redistribution are

limited in scope; for example, limited to institutions engaged in

payment activities.

All of these challenges are magnified in the international context.

Many in industry and the world regulatory community have recognized the

potential benefit of a universal standard for legal entity

identification for years. For example, the ODRF has stated that:

A number of key data items related to registered OTC derivatives

transactions span OTC derivative asset classes--for example, entity

representation. * * * In order to ensure consistency across asset

classes, infrastructure platforms and services should model these

items in a consistent manner, preferably through the development of

open standards in industry forums.\60\

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\60\ OTC Derivatives Regulators' Forum, Prioritization and

Communication of Regulatory Data Requests: Consolidated Report and

Recommendations, 10 November 2009, at 5 (emphasis added).

ODRF's Outline of Trade Repository Functionality states that trade

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repository data:

should represent the counterparties of the transaction records it

maintains as precise legal entities, enriched with further

counterparty information including affiliate relationships, sector

and geography. Affiliate relationship data should enable the

analysis of aggregated transaction records in terms of netting,

guaranty, and credit support arrangements.\61\

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\61\ ODRF Outline of Trade Repository Functionality Being Sought

by Members of the OTC Derivatives Regulators' Forum, August 27, 2010

(revision 2), at 3.

Efforts have been made to create such a standard through domestic and

international processes. Heretofore, a lack of focus, funding and

investment issues, and competing priorities have prevented consensus

and implementation.

However, circumstances have changed. The financial crisis has

focused both industry and regulators on this issue. Dodd-Frank's

mandate to the Commission and the SEC to promulgate regulations for

swap data reporting has created a window of opportunity for the world

financial sector to come together in creation of a universal,

internationally accepted standard for legal entity identification. The

Commission believes that the data reporting regulations to be issued

simultaneously by the Commission and the SEC pursuant to Dodd-Frank can

and should provide the necessary impetus for achieving this long-sought

goal.

The proposed regulations would mandate that each counterparty in

any swap subject to the Commission's jurisdiction and executed after

the effective date of the Commission's final swap data reporting

regulations must be identified in all recordkeeping and reporting by

means of a single UCI having the characteristics specified by the

Commission.

It should be noted that the UCI requirement included in the

proposed regulations differs markedly from the concept of identifying

the ultimate beneficial owners of particular futures and options

accounts, a subject addressed in a previous Commission proposed

rulemaking.\62\ Unlike identification of the ownership and control of

existing accounts, use of UCIs for swap data reporting would not

require modification of existing systems or alteration of existing

data. The UCI requirement would only apply prospectively to new swap

transactions executed following the effective date of the Commission's

final swap data reporting regulations. No substantial alteration of

system architecture would be required; instead, only a single data

[[Page 76591]]

field would need to be added to the information submitted with an order

for a swap transaction or with a report of swap data to an SDR. Where

compiling the information necessary to create the type of account

ownership and control report addressed in the Commission's proposed

ownership and control rule would depend on collecting data points not

in the possession of any single entity, by contrast, once a legal

entity that intends to be a swap counterparty has obtained an UCI--

something it would only need to do once--it would possess all the

information required for its subsequent use.

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\62\ CFTC, Account Ownership and Control Report, 17 CFR Part 16,

September 9, 2010.

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Information concerning a counterparty's affiliations must be

available in conjunction with UCIs in order to enable regulators to

aggregate data across entities and markets for the purpose of effective

monitoring of systemic risk. For this purpose, regulators need to be

able to identify all swap positions within the same ownership group.

Accordingly, the proposed regulations would require each swap

counterparty to report all of its corporate affiliations into a

confidential, non-public corporate affiliations reference database,

maintained and located as determined by the Commission. Data contained

in the corporate affiliations reference database would be available

only to the Commission, and to other financial regulators via the same

data access procedures applicable to data in SDRs, for regulatory

purposes. For these purposes, ``corporate affiliations'' would mean the

identity of all legal entities that own the counterparty, that are

under common ownership with the counterparty, or that are owned by the

counterparty. The corporate affiliation information reported would be

required to be sufficient to disclose parent-subsidiary and affiliate

relationships, such that each legal entity within or affiliated with

the corporate hierarchy or ownership group to which the counterparty

belongs would be separately identified. Each counterparty would also be

required to report to the corporate affiliations reference database all

changes to the information previously reported concerning the

counterparty's corporate affiliations, so as to ensure that the

corporate affiliation information recorded in the corporate

affiliations reference database remains current and accurate at all

times.

The corporate affiliations reference database would need to be

accessible to both national and international financial regulators in

order to make the identification system involving UCIs fully effective

for regulatory purposes. To ensure the availability of comprehensive

and accurate information, it would therefore appear to be optimal that

there be a single corporate affiliations reference database, maintained

by a single organization in a single location. The Commission seeks

comment on where and by what organization the corporate affiliations

database would best be maintained: whether by an international

voluntary consensus standards body (discussed below); by a self-

regulatory organization; by the Commission; by the OFR; or by some

other organization.

The Commission understands that, while a single identifier

satisfying the requirements included in the proposed regulations is not

currently published by any standard-setting body, market participants

have been working diligently to solve practical issues that stand in

the way of such publication.

The Commission believes, and understands that the SEC and the OFR

also believe, that optimum effectiveness of UCIs for achieving the

systemic risk protection and transparency goals of Dodd-Frank--goals

shared by financial regulators world-wide--would come from creation of

an identification system, including UCIs, on an international basis,

through an international ``voluntary consensus standards body'' as

defined in Office of Management and Budget (``OMB'') Circular No. A-119

Revised. The National Technology Transfer and Advancement Act of 1995

codified OMB Circular No. A-119, and directs Federal agencies to use

voluntary consensus standards in lieu of government-unique standards

except where inconsistent with law or otherwise impractical.\63\ This

provision's intent is to eliminate the cost to the government of

developing its own standards, decrease the burden of complying with

agency regulations, provide incentives and opportunities to establish

standards that serve national needs, encourage long-term growth for

U.S. enterprises, promote efficiency and economic competition through

harmonization of standards, and further the policy of reliance upon the

private sector to supply government needs for goods and services.

Further, to promote trade and implement the provisions of international

treaty agreements, the provision requires Federal agencies to consider

international standards in procurement and regulatory applications.

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\63\ Public Law 104-113, Sec. 12(d).

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As defined in OMB Circular A-119, ``voluntary consensus standards''

are standards developed or adopted by voluntary consensus standards

bodies, both domestic and international. These standards include

provisions requiring that owners of relevant intellectual property have

agreed to make that intellectual property available on a non-

discriminatory, royalty-free or reasonable royalty basis to all

interested parties. ``Voluntary consensus standards bodies'' are

domestic or international organizations that plan, develop, establish,

or coordinate voluntary consensus standards using agreed-upon

procedures.

For the reasons set forth above, the Commission proposes to use its

rulemaking authority to require the use of UCIs in all swap data

reporting subject to its jurisdiction. The Commission prefers to have

its swap data reporting regulations prescribe use of a universally-

available UCI that is part of an identification system created on an

international basis through an international ``voluntary consensus

standards body,'' and intends to promulgate final regulations to that

effect if such an identification is available sufficiently prior to the

implementation date included in the Commission's final swap data

reporting regulations. However, the Commission will prescribe its own

method for creation of UCIs to be used in swap data reporting subject

to the Commission's regulations if no such internationally-accepted

identification system acceptable to the Commission is available prior

to the implementation date of the final regulations.

The Commission anticipates that a system for publication of UCIs

meeting the requirements of the proposed regulations may be developed

through an international voluntary consensus body and be available as

of the implementation date for the UCI requirement. Dodd-Frank

explicitly permits the Commission to ``take into consideration any

evolving standard of the United States or the international

community.'' \64\

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\64\ CEA Sec. 21(f)(4)(B).

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Accordingly, the proposed regulations set forth principles that the

Commission believes must govern the identification system used to

establish UCIs for swap counterparties, among other purposes. Under

these principles, the identification system must:

Result in a unique identifier format that is capable of

becoming the single international standard for unique identification

of legal entities in the financial sector on a global basis.

Be developed via an international ``voluntary consensus

standards body'' as defined in OMB Circular No. A-119 Revised, such

as the International Organization for

[[Page 76592]]

Standardization (``ISO''), and must be maintained by such a body and

an associated Registration Authority. Both the standards body and

Registration Authority must have a formally documented governance

structure acceptable to the Commission.

Be available to all interested parties on a non-

discriminatory, royalty-free or reasonable royalty basis. While

reasonable initial and annual fees would be appropriate to cover the

cost of issuance, maintenance, and initial and ongoing verification

of unique identifiers, fees must not be charged for redistribution,

publication or other use by the counterparty identified or any other

entity or person, and the identification system must be operated on

a non-profit basis. Information concerning the issuance process for

new identifiers and a comprehensive, current directory of the UCIs

issued by the identification system (but not the entity relationship

or affiliation information reported by counterparties), must be

available publicly and free of charge.

Be supported by a trusted and auditable method of

verifying the identity of each legal entity receiving a UCI, both

initially and at appropriate intervals thereafter. The Registration

Authority must maintain reference data sufficient to verify that a

user has been correctly identified as an entity. Issuance of

identifiers must be speedy and unbiased.

Maintain robust quality assurance practices and system

safeguards acceptable to the Commission.

Be sufficiently extensible to cover all existing and

potential future legal entities of all types that are or may become

swap counterparties, are or may become involved in any aspect of the

financial issuance and transactions process, or may be subject to

required due diligence by financial sector entities.

Assign only one unique identifier to any legal entity.

Have a unique identifier format consisting of a single

data field, and contain either no embedded intelligence or as little

embedded intelligence as practicable.

Persist despite all corporate events.

In the event that an identification system satisfying these

principles is not available as of the effective date of the proposed

regulations, the proposed regulations provide that a UCI for each swap

counterparty must be created and assigned by an SDR, using the method

specified for this purpose in the proposed regulations.

The Commission seeks comment concerning the required use of UCIs;

concerning the benefits that required use of UCIs would create;

concerning the required reporting of affiliation information by swap

counterparties and the scope of affiliation information necessary to

achieve regulatory purposes; concerning the principles set forth in the

proposed regulations for development of an identification system

including UCIs; concerning possible means of achieving international

adoption of a suitable identification system for financial sector legal

entities that involves UCIs; and concerning what international

voluntary consensus standards body can best provide the needed

identification standard including UCIs, and what advantages are offered

by the standards body recommended by the commenter.

Unique Product Identifiers. The Unique Product Identifier (``UPI'')

called for by the proposed rules would be used for categorization of

swaps with respect to the underlying products referenced in them. While

the UPI would be assigned to a particular level of the taxonomy of the

asset class or sub-asset class in question, its existence would enable

the Commission and other regulators to aggregate transactions at

various taxonomy levels based on the type of product underlying the

swap. For example, a UPI might identify a swap referencing the NYMEX

futures price for light, sweet crude oil as a NYMEX WTI crude oil

futures price swap. The taxonomy associated with the UPI would enable

regulators to identify the product underlying the swap as a commodity,

an energy product, a petroleum product, a crude oil product, or

ultimately the NYMEX crude oil futures price, as desired.

The ability to identify underlying products in a categorical way

would serve several regulatory purposes. First, it would enhance

transparency, by allowing the Commission or other regulators to

aggregate and report swap activity at a variety of product type levels.

Second, it would enhance position limit enforcement. The Dodd-Frank Act

requires the Commission to establish position limits for agricultural

and exempt commodities that would span across the futures, options and

swap markets. A UPI that provides information indicating what swaps

need to be aggregated with other contracts would enhance the

Commission's ability to develop and oversee its position limit

regulatory program. Third, it would enhance analysis of swap data. For

example, classification of swaps via UPIs would facilitate examination

of the activity of market participants at various levels of a product

class. The Commission is required by Dodd-Frank to prepare semi-annual

reports regarding swap market activity, and such classification via

UPIs would be necessary for meaningful evaluation of such activity.

Effective use of UPIs for regulatory purposes would require a

robust taxonomy for swaps in each swap asset class, as well as

decisions concerning what classification scheme to use, and concerning

the appropriate level for UPI assignment within such taxonomies.

The Commission seeks comments concerning the most effective

classification scheme for swap products, and concerning the taxonomy

level within each swap asset class at which UPIs should be assigned. In

considering these issues, commenters should take into consideration

what levels of aggregation are desirable for reporting swap activity.

The Commission also seeks comment concerning the benefits or burdens

that required use of UPIs would create, and concerning the optimal

implementation date for effective adoption and use of UPIs.

D. Determination of Which Counterparty Must Report

New Section 4r(3) of the CEA specifies the counterparty obligated

to report a swap transaction to a swap data repository.\65\

Specifically, Section 4r(3) provides that:

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\65\ Dodd-Frank Sec. 729.

With respect to a swap in which only 1 [sic] counterparty is a

swap dealer or major swap participant, the swap dealer or major swap

participant shall report the swap * * * With respect to a swap in

which 1 [sic] counterparty is a swap dealer and the other a major

swap participant, the swap dealer shall report the swap. * * * With

respect to any other swap * * * the counterparties to the swap shall

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select a counterparty to report the swap * * *.

The effect of this provision is to establish a hierarchy of

counterparty types for reporting obligation purposes, in which SDs

outrank MSPs, who outrank non-SD/MSP counterparties. Where both

counterparties are at the same hierarchical level, the statute calls

for them to select the counterparty obligated to report.

The Commission believes that, regardless of the possible merits of

swap data reporting by both counterparties to a swap, this statutory

provision does not permit the Commission by regulation or other

regulatory action to require swap data reporting by both counterparties

to a swap. New CEA Section 21 does provide, with respect to the duties

of an SDR, that an SDR shall ``confirm with both counterparties to the

swap the accuracy of the data that was submitted.'' \66\ However, the

obligation to report swap data to an SDR is distinct from the duty of

the SDR to confirm the accuracy of the reported data. Congress could

have provided for reporting by both counterparties, but chose instead

to establish which counterparty bears the obligation to report.\67\ The

proposed

[[Page 76593]]

regulations require reporting of confirmation data for all swaps as a

means of verification of the accuracy of the data submitted in

connection with each swap.

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\66\ CEA Sec. 21(c)(2).

\67\ The Commission does not believe that Dodd-Frank precludes

an SDR from accepting and maintaining swap data from both

counterparties to a swap. For example, an SDR or its affiliate

performing the ancillary service of maintaining the single binding

legal record of a swap, such as the ``gold'' record maintained by

the Depository Trust & Clearing Corporation (``DTCC'') for credit

swaps, would not be barred from receiving dual reporting in that

connection.

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While Section 4r(a) of the CEA applies explicitly to swaps not

accepted for clearing by any DCO, the Commission believes,

preliminarily, that for the sake of uniformity and ease of

applicability, the duty to report should be borne by the same

counterparty regardless of whether the swap is cleared or uncleared.

The Commission also believes it is appropriate for SDs and MSPs to have

the responsibility of reporting with respect to the majority of swaps,

because they are more likely than other counterparties to have

automated systems in place that can facilitate reporting.

The proposed regulations establish a mechanism for counterparties

to follow in choosing the counterparty to report in situations where

both counterparties have the same hierarchical status, in order to

prevent confusion or delay concerning this choice. Where both

counterparties are SDs, or both are MSPs, or both are non-SD/MSP

counterparties, the proposed regulations require the counterparties to

agree as one term of their swap transaction which counterparty will

fulfill reporting obligations with respect to that swap.

The proposed regulations also provide that, where only one

counterparty to a swap is a U.S. person, the U.S. person should be the

reporting counterparty. The Commission believes this approach is

necessary in order to ensure compliance with reporting requirements in

such situations.

The Commission requests comment concerning the possible utility of

some type of swap data reporting by both counterparties, and how such

dual reporting could be achieved other than by regulations requiring

such reporting (which regulations appear barred by Dodd-Frank);

regarding whether reporting of confirmation data is a sufficient means

of verifying with both parties the accuracy of swap data reported to an

SDR, and if not, what other means should be employed; on whether

selection of the reporting counterparty should be the same for cleared

swaps as for non-cleared swaps, and if not on how the reporting

counterparty should be selected for cleared swaps; and on the

mechanisms provided in the proposed regulation for counterparties to

follow in choosing the counterparty to report in situations where both

counterparties have the same hierarchical status, and on possible

alternative mechanisms for this purpose.

E. Third Party Facilitation of Swap Data Reporting

While the various reporting obligations established in the proposed

regulations fall explicitly on registered entities and swap

counterparties, the Commission recognizes that practicality,

efficiencies, and decreased cost could in some circumstances be gained

by engaging third parties to facilitate the actual reporting of

information. The use of such third-party facilitators, however, should

not allow the counterparty with the obligation to report to avoid its

responsibility to report swap data in a timely and accurate manner.

Therefore, the proposed regulations explicitly recognize that

registered entities and counterparties required to report under

provisions in Part 45 may contract with third-party service providers

to facilitate reporting, but, nonetheless, remain fully responsible for

reporting as required by the regulations.

The Commission requests comment on the merits of allowing third

party facilitation of swap data reporting; on appropriate types of

third party facilitators and functions to be used for this purpose; and

on the automated system and connectivity technology that may be

required or should be used in this connection.

F. Reporting to a Single SDR

The Commission believes that important regulatory purposes of Dodd-

Frank would be frustrated, and that regulators' ability to see

necessary information concerning swaps could be impeded, if data

concerning a given swap was spread over multiple SDRs. Accordingly, the

proposed regulations would require that all swap data for a given swap

must be reported to a single SDR, which shall be the SDR to which

required primary economic terms data for that swap is first reported.

The proposed regulations would also provide that the SDR receiving this

initial report must transmit its own identity, together with the USI

for the swap (created as provided in Sec. 45.4) to each counterparty

to the swap, to the SEF or DCM, if any, on which the swap was executed,

and to the DCO, if any, to which the swap is submitted for clearing.

Thereafter, the proposed regulations would require that all data

reported for the swap by any registered entity or any counterparty to

the swap, and all corrections of errors and omissions in previously

reported data, must be reported to that same SDR (or to its successor

in the event that it ceases to operate).

Where the initial report of required primary economic terms data is

made by the SEF or DCM on which a swap is executed, or by an SD or MSP

counterparty in the case of a swap not executed on a SEF or DCM, the

proposed regulations would provide that the choice of the SDR to

receive the initial report shall be made in a manner to be determined

by the Commission prior to adoption of its final swap data reporting

regulations. Where the initial report of required primary economic

terms data is made by a non-SD/MSP counterparty, the proposed

regulations would provide that the non-SD/MSP counterparty making that

report shall choose the SDR to which the report is made.

The Commission requests comment concerning the benefits or

drawbacks of requiring that all swap data for a given swap should be

reported to the same SDR; concerning how the choice of the SDR to which

swap data is to be reported for a swap should be made, and concerning

what registered entity or swap counterparty should make this choice.

G. Data Reporting for Swaps in Asset Classes Not Accepted by Any Swap

Data Repository

Section 4r(a)(1)(B) of the CEA recognizes that in some

circumstances there may be no SDR that will accept swap data for

certain swap transactions. This category of swaps should be limited,

since proposed regulations for SDRs set forth in the Commission's

separate advance notice of proposed rulemaking regarding SDRs will

require an SDR that accepts swap data for any swap in an asset class to

accept data for all swaps in that asset class. However, situations

could arise where a novel product does not fit into any existing asset

class, or where no SDR yet accepts swap data for any swap in an

existing asset class. In such situations, the CEA and the proposed

regulations would require the reporting counterparty to report to the

Commission all swap data required by Part 45 to be reported to an SDR

where one is available. This report would be required to be made at a

time and in a form and manner determined by the Commission.

The Commission requests comment on whether SDRs that accept data

for any swap in a swap asset class should be required to accept data

for all swaps

[[Page 76594]]

in that asset class; and on the time and the form and manner of

reporting that the Commission should require with respect to data

reporting for swaps that must be reported to the Commission because no

SDR presently accepts swap data for swaps in the asset class involved.

H. Required Data Standards

Dodd-Frank directs the Commission to ``prescribe data collection

and data maintenance standards for swap data repositories.'' \68\ It

also provides that SDRs shall maintain swap data reported to them ``in

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

the Commission,'' and directs SDRs to ``provide direct electronic

access to the Commission.'' \69\ These requirements are designed to

effectuate the fundamental purpose for the legislation's swap data

reporting requirements: making swap data available to the Commission

and other financial regulators so as to enable them to better fulfill

their market oversight and other regulatory functions, increase market

transparency, and mitigate systemic risk. Accordingly, the Commission

believes that data standards for SDRs must enable them to provide data

to the Commission in a format that enables its effective and timely use

for such purposes.

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\68\ CEA Sec. 21(b)(2).

\69\ CEA Sec. 21(c)(3) and (4).

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The Commission has considered, and will continue to consider,

whether it would be preferable to require that all swap data reporting

to SDRs be done in a uniform reporting format or via a single data

standard. However, the Commission is aware that such a requirement

would be likely to require changes to the existing automated systems of

some entities and counterparties that will be required to report swap

data pursuant to these regulations, and that in some cases such changes

could impose a substantial burden on such entities and counterparties.

The Commission has been advised by some existing trade repositories

that they are able to accept data in multiple formats or data standards

from different counterparties, and to map the data they receive into a

common data standard within the repository, without undue difficulty,

delay, or cost. The Commission understands that automated systems and

data standards evolve over time, and that it may be desirable for

regulations concerning data standards to avoid locking reporting

entities, reporting counterparties, and SDRs into particular data

standards that could become less appropriate in the future. Dodd-Frank

explicitly permits the Commission to ``take into consideration any

evolving standard of the United States or the international

community.'' \70\

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\70\ CEA Sec. 21(f)(4)(B).

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Finally, the Commission anticipates that the degree of flexibility

offered by SDRs concerning data standards for swap data reporting could

become an element of marketplace competition with respect to SDRs.

Accordingly, the proposed regulations would require an SDR to

maintain all swap data reported to it in a format acceptable to the

Commission, and to transmit all swap data requested by the Commission

to the Commission in an electronic file in a format acceptable to the

Commission. The proposed regulations would require reporting entities

and counterparties to use the facilities, methods, or data standards

provided or required by an SDR to which they report data, but also

would allow an SDR to permit reporting via various facilities, methods,

or data standards, provided that its requirements in this regard enable

it to maintain swap data and transmit it to the Commission as the

Commission requires. The Commission believes that this approach can

provide market participants sufficient flexibility and opportunity to

innovate, while also ensuring that SDRs can meet their legal mandates

to transmit swap data to the Commission in a timely fashion. Finally,

the proposed regulations would delegate to the Director of the Division

of Market Oversight the ability to accommodate the needs of different

communities of users and to provide the flexibility to adapt to

changing circumstances and evolving data standards.

The Commission requests comments concerning the approach to data

standards taken in the proposed regulation; and concerning the relative

merits of leaving SDRs free to permit reporting via various facilities,

methods, or data standards, provided that its requirements in this

regard enable it to maintain swap data and transmit it to the

Commission as the Commission requires; concerning whether the

Commission should require use of a single data standard (e.g., FpML) by

all reporting entities and counterparties and by all SDRs.

I. Reporting of Errors and Omissions in Previously Reported Data

Accurate swap data is essential to effective fulfillment of the

various regulatory functions of financial regulators. To help ensure

data accuracy, the proposed regulations would require registered

entities and swap counterparties that report swap data to an SDR or to

any other registered entity or swap counterparty to report any errors

or omissions in the data they report, as soon as technologically

practicable after discovery of any error or omission. Because daily

snapshot reports of state data by reporting counterparties by their

nature can correct errors or omissions in previous snapshot reports,

the proposed regulations provide that for interest rate swaps,

commodity swaps, and currency swaps, reporting counterparties fulfill

the requirement to report errors or omissions in state data previously

reported by making corrections in their next daily report of state

data. Because Dodd-Frank permits the Commission to require reporting by

only one swap counterparty, and because error and omission correction

from non-reporting counterparties is nevertheless desirable to better

ensure data accuracy, the proposed regulation (a) would require a non-

reporting swap counterparty that discovers any error or omission with

respect to any swap data reported to an SDR for its swaps to notify the

reporting counterparty promptly of each such error or omission, and (b)

would require the reporting counterparty, upon receiving such notice,

to report a correction of each such error or omission to the SDR, as

soon as technologically practicable after receiving notice of it from

the non-reporting counterparty.

To ensure consistency of data within an SDR with respect to error

corrections, the proposed regulations would require an entity or

counterparty correcting an error or omission to do so in the same data

format it used in making the erroneous report. To similarly ensure

consistency of data transmitted to the Commission with respect to error

corrections, the proposed regulations impose the same requirement on

SDRs with respect to transmission of error corrections.

The Commission requests comment concerning the requirement that all

entities and counterparties that report swap data to an SDR or to any

other registered entity or swap counterparty must report any errors or

omissions in the data they report, as soon as technologically

practicable after discovery of any error or omission; concerning the

mechanism provided in the proposed regulation for reporting of errors

or omissions discovered by a non-reporting swap counterparty, and

whether any alternative methods for this purpose would be preferable;

and

[[Page 76595]]

concerning the requirement for use of the same data format to report

errors or omissions that was used to report the erroneous data in

question.

III. Related Matters

A. Regulatory Flexibility Act

The RFA \71\ requires that agencies consider whether the rules they

propose will have a significant economic impact on a substantial number

of small entities and, if so, provide a regulatory flexibility analysis

respecting the impact.\72\ The rules proposed by the Commission would

affect SDRs, DCOs, SEFs, DCMs, SDs, MSPs, and non-SD/MSP counterparties

who are counterparties to one of more swaps and subject to the

Commission's jurisdiction. The Commission has previously established

certain definitions of ``small entities'' to be used by the Commission

in evaluating the impact of its regulations on small entities in

accordance with the RFA.\73\ In its previous determinations, the

Commission has concluded that DCMs and DCOs are not small entities for

the purpose of the RFA.\74\

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\71\ 5 U.S.C. 601 et seq.

\72\ 5 U.S.C. 601 et seq.

\73\ 47 FR 18618 (Apr. 30, 1982).

\74\ 47 FR 18618, 18619 (April 30, 1982) discussing contract

markets; and 66 FR 45604, 45609 (August 29, 2001) discussing

derivatives clearing organizations.

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As SDRs, SDs, MSPs and SEFs are new entities to be regulated by the

Commission pursuant to the Dodd-Frank Act, the Commission has not

previously determined whether they are small entities for the purpose

of the RFA. The Commission is proposing to determine that SDRs, SDs,

MSPs and SEFs covered by these rules, for reasons similar to those

applicable to DCMs and DCOs, are not small entities for purposes of the

RFA.

Specifically, the Commission proposes that SDRs, SDs, MSPs and SEFs

should not be considered small entities based on, among other things,

the central role they will play in the national regulatory scheme

overseeing the trading of swaps. Because they will be required to

accept swaps across asset classes, SDRs will require significant

operational resources. With respect to SDs, the Commission previously

has determined that FCMs should not be considered to be small entities

for purposes of the RFA.\75\ Like FCMs, SDs will be subject to minimum

capital and margin requirements, and are expected to comprise the

largest global financial firms. Additionally, the Commission is

required to exempt from designation entities that engage in a de

minimis level of swaps.\76\ Similarly, with respect to MSPs, the

Commission has also previously determined that large traders are not

``small entities'' for RFA purposes.\77\ Like large traders, MSPs will

maintain substantial positions, creating substantial counterparty

exposure that could have serious adverse effects on the financial

stability of the United States banking system or financial markets.

With respect to SEFs, not only will SEFs play a vital role in the

national economy, but they will be required to operate as self-

regulatory organizations, subject to Commission oversight, with

statutory duties to enforce the rules adopted by their own governing

bodies. Most of these entities will not be small entities for RFA

purposes.

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\75\ 47 FR 18618 (Apr. 30, 1982).

\76\ Id. at 18619.

\77\ 47 FR at 18620.

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The proposed regulations would require reporting by a non-SD/MSP

counterparty only with respect to swaps in which neither counterparty

is an SD or MSP. The considerable majority of swaps involve at least

one SD or MSP. In addition, most end users and other non-SD/MSP

counterparties who are regulated by the Employee Retirement Income

Security Act of 1974 (``ERISA''), such as pension funds, which are

among the most active participants in the swap market, are prohibited

from transacting directly with other ERISA-regulated participants.\78\

Therefore, the Commission does not believe that the reporting

obligations under this rulemaking will create a significant economic

impact on a substantial number of small entities.

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\78\ 29 U.S.C. 1106

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Accordingly, the Chairman, on behalf of the Commission, hereby

certifies pursuant to 5 U.S.C. 605(b) that the proposed rules will not

have a significant impact on a substantial number of small entities.

Nonetheless, the Commission specifically requests comment on the impact

these proposed rules may have on small entities.

B. Paperwork Reduction Act

Introduction. Provisions of proposed Commission Regulations 45.2,

45.3, and 45.4 would result in new collection of information

requirements within the meaning of the Paperwork Reduction Act

(``PRA'').\79\ 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 ``Regulations 45.2, 45.3, and 45.4--Swap Data

Recordkeeping and Reporting Requirements,'' OMB control number 3038--

NEW). If adopted, responses to this new collection of information would

be mandatory. The Commission will 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.'' 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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\79\ 44 U.S.C. 3501 et seq.

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Information Provided by Reporting Entities/Persons. Under proposed

Regulation 45.2, SDRs, SEFs, DCMs, DCOs, SDs, MSPs, and non-SD/MSP

counterparties--which presently would include an estimated 30,384

entities or persons \80\--would be required to keep records of all

activities relating to swaps. Specifically, proposed Regulation 45.2

would require SDRs, SEFs, DCMs, DCOs, SDs, and MSPs to keep complete

records of all activities relating to their business with respect to

swaps. The proposed regulation would require non-SD/MSP counterparties

to keep complete records with respect to each swap in which they are a

counterparty. With respect to SDs and MSPs, the Commission has

determined that proposed Regulation 45.2 will not impose any new

recordkeeping or information collection requirements, or other

collections of information that require approval of the Office of

Management and Budget under the Paperwork Reduction Act. Requirements

for maintaining and recording swap transaction data by SDs and MSPs

will be addressed by related rulemakings associated with business

conduct standards for SDs and MSPs as part of the Commission's overall

[[Page 76596]]

rulemaking initiative implementing the Dodd-Frank Act.\81\ With respect

to SDRs, SEFs, DCMs, DCOs (an estimated 84 entities or persons), which

will have higher levels of swap recording activity \82\ than non-SD/MSP

counterparties, the Commission estimates that there may be

approximately 40 annual burden hours per entity, excluding customary

and usual business practices. With respect to non-SD/MSP reporting

counterparties (an estimated 30,000 entities or persons), who will have

lower levels of swap recording activity, the Commission estimates that

there may be approximately 10 annual burden hours per entity, excluding

customary and usual business practices. Therefore, there are 303,360

estimated aggregate annual burden hours.

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\80\ Because SDRs, MSPs, SDs, DCOs, and SEFs are new entities,

estimates were made by the Commission: 15 SDRs, 50 MSPs, 250 SDs, 12

DCOs, and 40 SEFs. The number of DCMs was estimated to be 17 DCMs

based on the current (as of October 18, 2010) number of designated

DCMs (http://services.cftc.gov/SIRT/

SIRT.aspx?Topic=TradingOrganizations&implicit=true&type=DCM&CustomCol

umnDisplay=TTTTTTTT). Additionally, for purposes of the Paperwork

Reduction Act, the Commission estimates that there would be 30,000

non-SD/MSP counterparties who would annually be subject to the

recordkeeping requirements of proposed Regulation 45.1. Because the

Commission has not regulated the swap market, it has not collected

data relevant to this estimate. Therefore, the Commission requests

comment on this estimate.

\81\ The Commission invites public comment on the accuracy of

its estimate that no additional recordkeeping or information

collection requirements related to SDs and MSP would result from the

rules proposed herein.

\82\ For purposes of this Paperwork Reduction Act analysis, the

Commission estimates that ``high activity'' entities or persons are

those who process or enter into hundreds or thousands of swaps per

week that are subject to the jurisdiction of the Commission. Low

activity users would be those who process or enter into

substantially fewer than the high activity users. The Commission

requests comment on its estimate.

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Under proposed Regulation 45.3, SEFs, DCMs, DCOs, MSPs, SDs, and

non-SD/MSP counterparties would be required to provide reports to SDRs

regarding swap transactions. SEFs and DCMs are required to report

certain information once at the time of swap execution. DCOs, SDs,

MSPs, and non-SD/MSP counterparties are required to report certain

information once, as well as other information on a daily basis. With

respect to reporting by SDs, MSPs, and non-SD/MSP counterparties, only

one counterparty to a swap is required to report, typically an SD or an

MSP as determined by proposed Regulation 45.4. The Commission

anticipates that the reporting will to a significant extent be

automatically completed by electronic computer systems; the following

burden hours are calculated based on the annual burden hours necessary

to oversee and maintain the reporting functionality.\83\ SEFs, DCMs,

DCOs, MSPs, and SDs (an estimated 369 entities or persons) are

anticipated to have high levels of reporting activity; the Commission

estimates that their average annual burden may be approximately 2,080

hours.\84\ Non-SD/MSP counterparties who would be required to report--

which presently would include an estimated 1,500 entities \85\--are

anticipated to have lower levels of activity with respect to reporting;

the Commission estimates that their annual burden may be approximately

75 hours. Therefore, there are 880,020 estimated aggregate annual

burden hours.

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\83\ Estimated burden hours were obtained in consultation with

the Commission's information technology staff. The Commission

requests comment on these estimates.cvvv

\84\ The Commission estimated 2,080 hours by assuming that a

significant number of SEFs, DCMs, DCOs, MSP, and SDs will dedicate

the equivalent of at least one full-time employee to ensuring

compliance with the reporting obligations of Regulation 45.3 (2,080

hours = 52 weeks x 5 days x 8 hours). The Commission believes that

this is a reasonable assumption due to the volume of swap

transactions that will be processed by these entities, the varied

nature of the information required to be reported by Regulation

45.3, and the frequency (daily) with which some reports must be

made. The Commission requests comment on its estimate.

\85\ This is the estimated number of non-SD/MSP counterparties

who would be required to report in a given year. Only one

counterparty to a swap is required to report, typically an SD or a

MSP as determined by proposed Regulation 45.4. The Commission

requests comment on this estimate.

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Under proposed Regulation 45.4, SDRs, SEFs, DCMs, SDs, and MSPs

would be required to report a unique swap identifier to other

registered entities and swap participants. SEFs and DCMs are

anticipated to have higher levels of activity than SDRs, SDs, and MSPs

with respect to unique swap identifier reporting. The Commission

anticipates that the reporting of the unique swap identifier will be

automatically completed by electronic computer systems. The following

burden hours are based on the estimated burden hours necessary to

oversee and maintain the electronic functionality of unique swap ID

reporting.\86\ The Commission estimates that SEFs and DCMs (an

estimated 57 entities or persons) may have approximately 22 annual

burden hours per entity. The Commission estimates that SDRs, SDs, and

MSPs (an estimated 315 entities or persons) may have approximately 6

annual burden hours per entity. Therefore, there are 3,144 estimated

aggregated annual burden hours.

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\86\ Estimated burden hours were obtained in consultation with

the Commission's information technology staff. The Commission

requests comment on these estimates.

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Additionally under Proposed Regulation 45.4, SDs, MSPs, and non-SD/

MSP counterparties (an estimated 30,300 entities and persons), would be

required to report into a confidential database their ownership and

affiliations information (as well as changes to ownership and

affiliations). The report would be made once at the time of the first

swap reported to an SDR, and would be made anytime thereafter that the

entity's legal affiliations change. The estimated number of burden

hours per report is approximately two hours per entity, excluding

customary and usual business practices. The number of reports required

to be made per year is estimated to vary between zero and four,

depending on the number of changes an entity has in its legal

affiliations in that year. Thus, the estimated annual burden per entity

varies between zero and eight burden hours. Therefore, there are

between 0 and 242,400 estimated aggregate annual burden hours.

Information Collection Comments. 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 will 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 comments can be summarized and

addressed in the final rule preamble. Refer to the Addresses section of

this notice of proposed rulemaking for comment submission instructions

to the Commission. A copy of the supporting statements for the

collections of information discussed above may be obtained by visiting

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.

C. Cost-Benefit Analysis

Introduction. Section 15(a) of the Commodity Exchange Act (``CEA'')

requires the Commission to consider the costs and benefits of its

actions before issuing a rulemaking under the Act. By its terms,

section 15(a) does not require

[[Page 76597]]

the Commission to quantify the costs and benefits of the rulemaking or

to determine whether the benefits of the rulemaking outweigh its costs;

rather, it requires that the Commission ``consider'' the costs and

benefits of its actions. Section 15(a) further specifies that the costs

and benefits shall be evaluated in light of five broad areas of market

and public concern: (1) Protection of market participants and the

public; (2) the efficiency, competitiveness and financial integrity of

markets; (3) price discovery; (4) sound risk management practices; and

(5) other public interest considerations. The Commission may in its

discretion give greater weight to any one of the five enumerated areas

and could in its discretion determine that, notwithstanding its costs,

a particular rule is necessary or appropriate to protect the public

interest or to effectuate any of the provisions to accomplish any of

the purposes of the Act.

Summary of proposed requirements. The proposed Commission

regulations in Part 45 would provide for certain recordkeeping and data

reporting requirements for SDRs, SEFs, DCMs, DCOs, SDs, MSPs, and non-

SD/MSP counterparties. The proposed regulations would require SDRs,

SEFs, DCMs, DCOs, SDs, and MSPs to keep records of all activities

relating to their business with respect to swaps; non-SD/MSP

counterparties would be required to keep records with respect to each

swap in which they are a counterparty. The proposed regulations would

require SEFs, DCMs, DCOs, SDs, MSPs, and non-SD/MSP counterparties to

report to SDRs various types of swap data, as defined and required in

the regulations. Further, in some instances the proposed regulations

would require SDRs, SEFs, DCMs, SDs, and MSPs to create unique swap

identifiers and transmit them to other registered entities and swap

participants. Additionally, the proposed regulations would require SDs,

MSPs, and non-SD/MSP counterparties to report their ownership and

affiliations information (as well as changes to ownership and

affiliations), in a manner to be determined by the Commission prior to

its adoption of final swap data reporting regulations.

Costs. With respect to costs, the Commission believes that the

proposed reporting and recordkeeping requirements could impose

significant compliance costs on some SDRs, SEFs, DCMs, DCOs, SDs, MSPs,

and non-SD/MSP counterparties. The proposed regulations could require

capital expenditures for some such entities that could affect the

ability of some regulated entities to compete in the global marketplace

because of reductions in available resources.

Benefits. Notwithstanding the potential costs that could be

incurred by SDRs, SEFs, DCMs, DCOs, SDs, MSPs, and non-SD/MSP

counterparties, the Commission believes that the benefits of the

proposed regulations are significant and important. Through the

requirement that swap information be reported to SDRs, the proposed

regulations will greatly improve the efficiency and transparency of the

swap market. Through the Commission's access to swap data, market

participants and the public will be better protected, as the result of

increased market surveillance and monitoring.

The Commission believes that the proposed regulations are essential

to the financial protection of swap market participants and the public.

With their support for greater transparency and more effective

oversight, the proposed regulations will help to ensure the efficiency,

competitiveness, and financial integrity of swap markets. By providing

regulators data necessary for effective prudential supervision, the

proposed regulations will enable enhanced protection against systemic

risk. The proposed regulations will also improve the important function

of price discovery. For all these reasons, the proposed regulations

would serve the public interest.

Public Comment. For the reasons set forth above, the Commission

believes that the benefits of the proposed regulations outweigh their

costs, and has decided to issue them. The Commission invites public

comment on its cost-benefit considerations. Commenters are also invited

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

or qualifying the costs and benefits of the Proposal with their comment

letters.

IV. Proposed Effective Date

The Commission understands that, after the date on which the

Commission promulgates its final swap data reporting regulations, the

industry will need a reasonable period of time to implement the

requirements of those regulations. Time may be required for entities to

register as SEFs, DCMs, DCOs, or SDRs (or to update current

registrations as DCMs or DCOs) pursuant to new Commission regulations

concerning such entities. Time may also be needed for registered

entities and potential swap counterparties to adapt or create automated

systems capable of fulfilling the requirements of Commission

regulations concerning swap data reporting. Accordingly, it may be

appropriate for the Commission's final swap data reporting regulations

to establish an effective date for the requirements contained in those

regulations that is later than the date of their promulgation.

The Commission requests comment concerning the need for an

implementation date for its final swap data reporting regulations that

is later than the date of their promulgation; concerning the benefits

or drawbacks of such an approach; concerning the length of time needed

for registered entities and potential swap counterparties to prepare

for implementation in the ways discussed above, or otherwise; and

concerning the implementation date which the Commission should specify

in its final regulations concerning swap data reporting.

V. General Solicitation of Comments

The Commission requests comments concerning all aspects of the

proposed regulations, including, without limitation, all of the aspects

of the proposed regulations on which comments have been requested

specifically herein.

Proposed Rules

List of Subjects in 17 CFR Part 45

Swaps, data recordkeeping requirements and data reporting

requirements.

For the reasons set forth in the preamble, the Commodity Futures

Trading Commission proposes to add a new part 45 to read as follows:

PART 45--SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS

Sec.

45.1 Definitions.

45.2 Swap recordkeeping.

45.3 Swap data reporting.

45.4 Unique identifiers.

45.5 Determination of which counterparty must report.

45.6 Third-party facilitation of data reporting.

45.7 Reporting to a single SDR.

45.8 Data reporting for swaps in a swap asset class not accepted by

any SDR.

45.9 Required data standards.

45.10 Reporting of errors and omissions in previously reported data.

Appendix 1 to Part 45--Tables of minimum primary economic terms data

and minimum valuation data

Appendix 2 to Part 45--Master reference generic data fields list

Authority: 7 U.S.C. Sec. Sec. 2(a)(13)(G), 4r, 6s, 7, 7a-1,

7b-3, 12a and 21(b), as amended by Title VII of the Wall Street

Reform and Consumer Protection Act of 2010, Public Law 111-203, 124

Stat. 1376 (2010).

[[Page 76598]]

Sec. 45.1 Definitions.

As used in this part 45, the following terms shall have the

definitions set forth below.

(a) ``Asset class'' means the particular broad category of goods,

services or commodities underlying a swap. The asset classes include

interest rate, currency, credit, equity, other commodity, and such

other asset classes as may be determined by the Commission.

(b) ``Confirmation'' (``confirming'') means the consummation

(electronically or otherwise) of legally binding documentation

(electronic or otherwise) that memorializes the agreement of the

parties to all terms of a swap. A confirmation must be in writing

(whether electronic or otherwise) and must legally supersede any

previous agreement (electronically or otherwise).

(c) ``Confirmation data'' means all of the terms of a swap matched

and agreed upon by the counterparties in confirming the swap.

(d) ``Contract-intrinsic event'' means a scheduled, anticipated

event occurring during the existence of a swap that does not result in

any change to the contractual terms of the swap, including, without

limitation, the scheduled expiration of a swap, or a previously

described and anticipated interest rate adjustment (e.g., a quarterly

interest rate adjustment).

(e) ``Contract-intrinsic event data'' means, with respect to a

credit swap or equity swap, all of the data elements necessary to fully

report any contract-intrinsic event with respect to that swap.

(f) ``Credit swap'' means any swap that is primarily based on

instruments of indebtedness, including, without limitation: Any swap

primarily based on one or more broad-based indices related to

instruments of indebtedness; and any swap that is an index credit swap

or total return swap on one or more indices of debt instruments.

(g) ``Currency swap'' means any swap which is primarily based on

rates of exchange between difference currencies, changes in such rates,

or other aspects of such rates. This category includes foreign exchange

swaps as defined in CEA Section 1a(25).

(h) ``Derivatives Clearing Organization'' or ``DCO'' has the

meaning set forth in CEA Section 1a(9), and any Commission regulation

implementing that Section, including, without limitation, Sec. 39.5 of

this chapter.

(i) ``Designated Contract Market'' or ``DCM'' has the meaning set

forth in CEA Section 5, and any Commission regulation implementing that

Section.

(j) ``Equity swap'' means any swap that is primarily based on

equity securities, including, without limitation: Any swap primarily

based on one or more broad-based indices of equity securities; and any

total return swap on one or more equity indices.

(k) ``Interest rate swap'' means any swap which is primarily based

on one or more interest rates, such as swaps of payments determined by

fixed and floating interest rates.

(l) ``Life cycle event'' means, with respect to a credit swap or

equity swap, any event that would result in a change in the data

previously reported to an SDR in connection with the swap, including,

without limitation, a counterparty change resulting from an assignment

or novation; a partial or full termination of the swap; a change in the

cash flows originally reported; for a credit swap or equity swap that

is not cleared, any change to the collateral agreement; or a corporate

action affecting a security or securities on which the swap is based

(e.g., a merger, dividend, stock split, or bankruptcy).

(m) ``Life cycle event data'' means, with respect to a credit swap

or equity swap, all of the data elements necessary to fully report any

life cycle event, or any adjustment due to a life cycle event, that

results in a change to data previously reported with respect to that

swap.

(n) ``Major Swap Participant'' or ``MSP'' has the meaning set forth

in CEA Section 1a(33), and any Commission regulation implementing that

Section.

(o) ``Non-SD/MSP counterparty'' means a swap counterparty that is

neither a Swap Dealer nor a Major Swap Participant.

(p) ``Other commodity swap'' means any swap not included in the

credit swap, currency swap, equity swap, or interest rate swap

categories, including, without limitation, any swap for which the

primary underlying item is a physical commodity or the price or any

other aspect of a physical commodity.

(q) ``Primary economic terms'' for a credit swap or equity swap

means:

(1) The Unique Swap Identifier for the swap, pursuant to Sec.

45.4(a);

(2) The Unique Counterparty Identifier of each counterparty to the

swap, pursuant to Sec. 45.4(b);

(3) The Unique Product Identifier assigned to the swap, pursuant to

Sec. 45.4(c);

(4) An indication of the counterparty purchasing protection and of

the counterparty selling protection;

(5) Information identifying the reference entity for the swap, in a

format determined by the Commission;

(6) An indication of whether or not both counterparties are SDs;

(7) An indication of whether or not both counterparties are MSPs;

(8) An indication of whether or not both counterparties are non-SD/

MSP counterparties;

(9) The date and time of execution, expressed using Coordinated

Universal time (``UTC'');

(10) The venue where the swap was executed;

(11) The effective date;

(12) The scheduled termination date;

(13) The price;

(14) The notional amount, the currency in which the notional amount

is expressed, and the equivalent notional amount in U.S. dollars;

(15) The amount and currency or currencies of any up-front payment;

(16) A description of the payment streams of each counterparty;

(17) The title of any master agreement incorporated by reference

and the date of any such agreement;

(18) If the transaction involved an existing swap, an indication

that the transaction did not involve an opportunity to negotiate a

material term of the contract, other than the counterparty;

(19) The data elements necessary for a person to determine the

market value of the transaction;

(20) Whether or not the swap will be cleared by a designated

clearing organization;

(21) The name of the designated clearing organization that will

clear the swap, if any;

(22) If the swap is not cleared, whether the exception in Sec.

2(h)(7) (``End User exception'') was invoked;

(23) If the swap is not cleared, all of the settlement terms,

including, without limitation, whether the swap is cash-settled or

physically settled, and the method for determining the settlement

value; and

(24) Any other primary economic term(s) of the swap matched by the

counterparties in verifying the swap.

(r) ``Primary economic terms'' means, for an interest rate swap,

other commodity swap, or currency swap, all of the terms of a swap

matched by the counterparties in verifying the swap, including at a

minimum each of the terms included in the most recent Federal Register

release by the Commission listing minimum primary economic terms for

interest rate swaps, other commodity swaps, or currency swaps. The

Commission's current lists of minimum primary economic terms for

interest rate, commodity, and currency swaps are found in Appendix 1 to

part 45.

[[Page 76599]]

(s) ``Primary economic terms data'' means all of the data elements

necessary to fully report all of the primary economic terms of a swap

in the swap asset class of the swap in question.

(t) ``Reporting counterparty'' means the counterparty required to

report swap data pursuant to Sec. 45.5.

(u) ``Required swap creation data'' for a credit swap or equity

swap means:

(1) All primary economic terms data for a credit swap or equity

swap; and

(2) All confirmation data for the swap.

(v) ``Required swap creation data'' for an interest rate swap,

commodity swap, or currency swap means:

(1) All primary economic terms data for an interest rate swap,

commodity swap, or currency swap, as appropriate; and

(2) All confirmation data for the swap.

(w) ``Required swap continuation data'' for a credit swap or equity

swap means:

(1) All life cycle event data for the swap;

(2) All contract-intrinsic event data for the swap; and

(3) All valuation data for the swap, and all changes to valuation

data previously reported concerning the swap, reported at intervals to

be determined by the Commission prior to its adoption of final swap

data reporting regulations.

(x) ``Required swap continuation data'' for an interest rate swap,

other commodity swap, or currency swap means:

(1) All state data for the swap, reported daily throughout the

existence of the swap until its final termination; and

(2) A report at intervals specified by the Commission, throughout

the existence of the swap until its final termination, of all valuation

data and all changes to valuation data concerning the swap.

(y) ``State data'' means all of the data elements necessary to

provide a snapshot view, on a daily basis, of all of the primary

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

question, including any changes to such terms since the last snapshot.

At a minimum, state data must include all of the economic terms listed

in the most recent Federal Register release by the Commission

concerning minimum primary state data elements for interest rate,

commodity, or currency swaps. The Commission's current lists of minimum

primary economic terms for interest rate, commodity, and currency swaps

are found in Appendix 1 to Part 45.

(z) ``Swap Data Repository'' or ``SDR'' has the meaning set forth

in CEA Section 1a(48), and any Commission regulation implementing that

Section.

(aa) ``Swap Dealer'' or ``SD'' has the meaning set forth in CEA

Section 1a(49), and any Commission regulation implementing that

Section.

(bb) ``Swap Execution Facility'' or ``SEF'' has the meaning set

forth in CEA Section 1a(50), and any Commission regulation implementing

that Section.

(cc) ``Valuation data'' means all of the data elements necessary

for a person to determine the current market value of the swap,

including, without limitation, daily margin, daily mark-to-market, and

other measures of valuation as determined by the Commission.

(dd) ``Verification'' (``verify'' or ``verifying'') means the

matching by the counterparties to a swap of each of the primary

economic terms of a swap, at or shortly after the time the swap is

executed.

Sec. 45.2 Swap recordkeeping.

(a) All DCOs, DCMs, SEFs, SDs, and MSPs who are subject to the

jurisdiction of the Commission shall keep full, complete, and

systematic records, together with all pertinent data and memoranda, of

all activities relating to the business of such entities or persons

with respect to swaps, as prescribed by the Commission. Such records

shall include, without limitation, the following:

(1) For DCOs, all records required by part 39 of this chapter.

(2) For SEFs, all records required by part 37 of this chapter.

(3) For DCMs, all records required by part 38 of this chapter.

(4) For SDs and MSPs, all records required by part 23 of this

chapter.

(b) All non-SD/MSP counterparties subject to the jurisdiction of

the Commission shall keep full, complete, and systematic records,

together with all pertinent data and memoranda, with respect to each

swap in which they are a counterparty, including all required swap

creation data and all required swap continuation data that they are

required to report pursuant to this part 45, and including all records

demonstrating that they are entitled, with respect to any swap, to the

end user exception pursuant to Section 2(h)(7).

(c) All records required to be kept by DCOs, DCMs, SEFs, SDs, MSPs,

and non-SD/MSP counterparties pursuant to this Section shall be kept

with respect to each swap from the date of the creation of the swap

through the life of the swap and for a period of at least five years

from the final termination of the swap, in a form and manner acceptable

to the Commission.

(d) Records required to be kept by DCOs, DCMs, SEFs, SDs, MSPs, or

non-SD/MSP counterparties pursuant to this Section shall be retrievable

as follows:

(1) Each record required by this Section or any other Section of

the Act to be kept by an SDR shall be readily accessible via real time

electronic access by the SDR indefinitely.

(2) Each record required by this Section or any other Section of

the Act to be kept by a DCO, DCM, SEF, SD, or MSP shall be readily

accessible via real time electronic access by the registrant throughout

the life of the swap and for two years following the final termination

of the swap, and shall be retrievable by the registrant or its

affiliates within three business days through the remainder of the

period following final termination of the swap during which it is

required to be kept.

(3) Each record required by this Section or any other Section of

the Act to be kept by a non-SD/MSP counterparty shall be retrievable by

that counterparty within three business days throughout the period

during which it is required to be kept.

(e) All SDRs registered with the Commission shall keep full,

complete, and systematic records, together with all pertinent data and

memoranda, of all activities relating to the business of the SDR and

all swap data reported to the SDR, as prescribed by the Commission.

Such records shall include, without limitation, all records required by

Sec. 45.10 of the Commission's proposed swap data repositories

regulations.

(f) All records required to be kept by an SDR pursuant to this

Sec. 45.2 must be kept by the SDR both:

(1) Throughout the existence of the swap and for five following

final termination of the swap, during which time the records must be

readily accessible by the SDR and available to the Commission via real

time electronic access; and

(2) Thereafter, for a period to be determined by the Commission

prior to promulgation of its final swap data recordkeeping and

reporting regulations, in archival storage from which they are

retrievable by the SDR within three business days.

(g) All records required to be kept pursuant to this Section by any

registrant or its affiliates or by any non-SD/MSP counterparty shall be

open to inspection upon request by any representative of the

Commission, the United States Department of Justice, or the Securities

and Exchange Commission, or by any representative of a prudential

regulator as authorized by the Commission. Copies of all such records

shall be provided, at the

[[Page 76600]]

expense of the entity or person required to keep the record, to any

representative of the Commission upon request, either by electronic

means, in hard copy, or both, as requested by the Commission.

Sec. 45.3 Swap data Reporting.

This Section establishes the general swap data reporting

obligations of SDs, MSPs, non-SD/MSP counterparties, SEFs, DCMs, and

DCOs to report swap data to an SDR. In addition to the reporting

obligations set forth in this Section, SDs, MSPs, and non-SD/MSP

counterparties are also subject to the reporting obligations with

respect to corporate affiliations reporting set forth in Sec.

45.4(b)(2); DCMs, SEFs, SDs, MSPs, and non-SD/MSP counterparties are

subject to the reporting obligations with respect to real time

reporting of swap data set forth in part 43; and, where applicable,

SDs, MSPs, and non-SD/MSP counterparties are subject to the reporting

obligations with respect to large traders set forth in parts 17 and 18

of this chapter.

(a) Reporting of required swap creation data. Registered entities

and swap counterparties must report required swap creation data

electronically to an SDR as set forth in this Section.

(1) Swaps for which the reporting counterparty is an SD or MSP. For

all swaps in which the reporting counterparty is an SD or MSP, required

swap creation data must be reported as follows:

(i) Swaps executed on a SEF or DCM and cleared on a DCO. (A) The

SEF or DCM on which the swap is executed must report all primary

economic terms data for the swap asset class of the swap that is in its

possession, as soon as technologically practicable following execution

of the swap.

(B) The DCO on which the swap is cleared must report all

confirmation data, as soon as technologically practicable following

clearing of the swap.

(C) The reporting counterparty, as determined pursuant to Sec.

45.5, must report any primary economic terms data for the swap asset

class of the swap that is not reported by the SEF or DCM. This report

must be made promptly following verification of the primary economic

terms by the counterparties with each other at the time of, or

immediately following, execution of the swap, but in no event later

than: 15 minutes after execution of the swap if both execution and

verification of primary economic terms occur electronically; 30 minutes

after execution of the swap if execution does not occur electronically

but verification of primary economic terms occurs electronically; or 24

hours after execution of the swap if neither execution nor verification

of primary economic terms occurs electronically.

(ii) Swaps Executed on a SEF but Not Cleared on a DCO. (A) The SEF

on which the swap is executed must report all primary economic terms

data for the swap asset class of the swap that is in its possession, as

soon as technologically practicable following execution of the swap.

(B) The reporting counterparty, as determined pursuant to Sec.

45.5, must report any primary economic terms data for the swap that is

not reported by the SEF. This report must be made promptly following

verification of the primary economic terms by the counterparties with

each other at the time of, or immediately following, execution of the

swap, but in no event later than: 15 minutes after execution of the

swap if both execution and verification of primary economic terms occur

electronically; 30 minutes after execution of the swap if execution

does not occur electronically but verification of primary economic

terms occurs electronically; or 24 hours after execution of the swap if

neither execution nor verification of primary economic terms occurs

electronically.

(C) The reporting counterparty must report all confirmation data

for the swap. This report must be made promptly following confirmation

of the swap, but in no event later than: 15 minutes after confirmation

of the swap if confirmation occurs electronically, or 24 hours after

confirmation of the swap if confirmation was done manually rather than

electronically.

(iii) Swaps Not Executed on a SEF or DCM but Cleared on a DCO. (A)

The reporting counterparty, as determined pursuant to Sec. 45.5, must

report all primary economic terms data for the swap asset class of the

swap. This report must be made promptly following verification of the

primary economic terms by the counterparties with each other at or

immediately following execution of the swap, but in no event later

than: 30 minutes after execution of the swap if verification of primary

economic terms occurs electronically; or 24 hours after execution of a

swap if verification of primary economic terms does not occur

electronically.

(B) The DCO on which the swap is cleared must report all

confirmation data, as soon as technologically practicable following

clearing of the swap.

(iv) Swaps Not Executed on a SEF or DCM and Not Cleared on a DCO.

The reporting counterparty, as determined pursuant to Sec. 45.5, must

report all primary economic terms data for the swap, and must report

electronically all confirmation data for the swap. The report of

primary economic terms data must be made promptly following

verification of the primary economic terms by the counterparties with

each other at or immediately following execution of the swap, but in no

event later than: 30 minutes after execution of the swap if

verification of primary economic terms occurs electronically; or 24

hours after execution of a swap if verification of primary economic

terms does not occur electronically. The report of confirmation data

must be made promptly following confirmation of the swap, but in no

event later than: 15 minutes after confirmation of the swap if

confirmation occurs electronically, or 24 hours after confirmation of

the swap if confirmation was done manually rather than electronically.

(2) Swaps for which the reporting counterparty is a non-SD/MSP

counterparty. For all swaps in which the reporting counterparty is a

non-SD/MSP counterparty, required swap creation data must be reported

as set forth in this Section.

(i) Swaps executed on a SEF or DCM and cleared on a DCO. (A) The

SEF or DCM on which the swap is executed must report all primary

economic terms data for the swap asset class of the swap that is in its

possession, as soon as technologically practicable following execution

of the swap.

(B) The DCO on which the swap is cleared must report all

confirmation data, as soon as technologically practicable following

clearing of the swap.

(C) The reporting counterparty, as determined pursuant to Sec.

45.5, must report any primary economic terms data for the swap asset

class of the swap that is not reported by the SEF or DCM. This report

must be made promptly following verification of the primary economic

terms by the counterparties with each other at the time of, or

immediately following, execution of the swap, but in no event later

than: 15 minutes after execution of the swap if both execution and

verification of primary economic terms occur electronically; 30 minutes

after execution of the swap if execution does not occur electronically

but verification of primary economic terms occurs electronically; or 24

hours after execution of the swap if neither execution nor verification

of primary economic terms occurs electronically.

(ii) Swaps Executed on a SEF but Not Cleared on a DCO. (A) The SEF

on which the swap is executed must report all primary economic terms

data for the swap asset class of the swap that is in

[[Page 76601]]

its possession, as soon as technologically practicable following

execution of the swap.

(B) The reporting counterparty, as determined pursuant to Sec.

45.5, must report any primary economic terms data for the swap that is

not reported by the SEF. This report must be made promptly following

verification of the primary economic terms by the counterparties with

each other at the time of, or immediately following, execution of the

swap, but in no event later than: 15 minutes after execution of the

swap if both execution and verification of primary economic terms occur

electronically; 30 minutes after execution of the swap if execution

does not occur electronically but verification of primary economic

terms occurs electronically; or 24 hours after execution of the swap if

neither execution nor verification of primary economic terms occurs

electronically.

(C) The reporting counterparty must report all confirmation data

for the swap. This report must be made within a time to be determined

by the Commission prior to its adoption of final swap data reporting

regulations.

(iii) Swaps Not Executed on a SEF or DCM but Cleared on a DCO. (A)

The reporting counterparty, as determined pursuant to Sec. 45.5, must

report all primary economic terms data for the swap. This report must

be made promptly following verification of the primary economic terms

by the counterparties with each other at the time of, or immediately

following, execution of the swap, but in no event later than: 30

minutes after execution of the swap if verification of primary economic

terms occurs electronically; or 24 hours after execution of the swap if

verification of primary economic terms does not occur electronically.

(B) The DCO on which the swap is cleared must report all

confirmation data, as soon as technologically practicable following

clearing of the swap.

(iv) Swaps Not Executed on a SEF or DCM and Not Cleared on a DCO.

(A) The reporting counterparty, as determined pursuant to Sec. 45.5,

must report all primary economic terms data for the swap asset class of

the swap, and must report all confirmation data. The report of primary

economic terms data must be made promptly following verification of the

primary economic terms by the counterparties with each other at or

immediately following execution of the swap, but in no event later

than: 30 minutes after execution of the swap if verification of primary

economic terms occurs electronically; or 24 hours after execution of a

swap if verification of primary economic terms does not occur

electronically.

(B) The reporting counterparty must report all confirmation data

for the swap. This report must be made within a time to be determined

by the Commission prior to its adoption of final swap data reporting

regulations.

(b) Reporting of required swap continuation data. Registered

entities and swap counterparties must report required swap continuation

data to an SDR as set forth in this Section.

(1) Credit swaps and equity swaps. For all credit swaps and equity

swaps, registered entities and counterparties must report as set forth

below.

(i) Swaps for which the reporting counterparty is an SD or MSP. For

all credit swaps and equity swaps in which the reporting counterparty

is an SD or MSP, required swap continuation data must be reported as

follows:

(A) Swaps cleared on a DCO. (1) The DCO on which the swap is

cleared must report all life cycle event data, on the same day in which

any life cycle event occurs; and must report all valuation data in its

possession, on a daily basis.

(2) The reporting counterparty must report all valuation data in

its possession, on a daily basis; and must report all contract-

intrinsic event data, on the same day in which any contract-intrinsic

event occurs.

(B) Swaps Not Cleared on a DCO. The reporting counterparty must

report:

(1) All life cycle event data, on the same day in which any life

cycle event occurs;

(2) All valuation data, on a daily basis; and

(3) All contract-intrinsic event data, on the same day in which any

contract-intrinsic event occurs.

(ii) Swaps for which the reporting counterparty is a non-SD/MSP

counterparty. For all credit swaps in which the reporting counterparty

is neither an SD nor MSP, required swap continuation data must be

reported as follows:

(A) Swaps cleared on a DCO.

(1) The DCO on which the swap is cleared must report all life cycle

event data, on the same day in which any life cycle event occurs; and

must report all valuation data in its possession, on a daily basis.

(2) The reporting counterparty must report all valuation data in

its possession, at times to be determined by the Commission prior to

its adoption of final swap data reporting regulations; and must report

all contract-intrinsic event data, on the same day in which any

contract-intrinsic event occurs.

(B) Swaps Not Cleared on a DCO. The reporting counterparty must

report all life cycle event data, on the same day in which any life

cycle event occurs; all valuation data, at intervals to be determined

by the Commission prior to its adoption of final swap data reporting

regulations; and all contract-intrinsic event data, on the same day in

which any contract-intrinsic event occurs.

(2) Interest rate swaps, commodity swaps, and currency swaps. For

all interest rate swaps, commodity swaps, and currency swaps,

registered entities and counterparties must report as follows:

(i) Swaps for which the reporting counterparty is an SD or MSP. For

all interest rate swaps, commodity swaps, and currency swaps in which

the reporting counterparty is an SD or MSP, required swap continuation

data must be reported as follows:

(A) Swaps cleared on a DCO. (1) The reporting counterparty must

report all required state data, on a daily basis.

(2) The DCO must report all required valuation data in its

possession, on a daily basis.

(3) The reporting counterparty must report all required valuation

data in its possession, on a daily basis.

(B) Swaps Not Cleared on a DCO. The reporting counterparty must

report:

(1) All required state data, on a daily basis; and

(2) All required valuation data, on a daily basis.

(ii) Swaps for which the reporting counterparty is a non-SD/MSP

counterparty. For all interest rate swaps, commodity swaps, or currency

swaps in which the reporting counterparty is a non-SD/MSP counterparty,

required swap continuation data must be reported as follows:

(A) Swaps cleared on a DCO. (1) The reporting counterparty must

report all state data, on a daily basis.

(2) The DCO must report all valuation data in its possession, on a

daily basis.

(3) The reporting counterparty must report all valuation data in

its possession, at intervals to be determined by the Commission prior

to its adoption of final swap data reporting regulations.

(B) Swaps Not Cleared on a DCO. The reporting counterparty must

report:

(1) All state data, on a daily basis; and

(2) All valuation data, at intervals to be determined by the

Commission prior to its adoption of final swap data reporting

regulations.

Sec. 45.4 Unique identifiers.

Each swap subject to the jurisdiction of the Commission shall be

identified in all recordkeeping and all swap data reporting concerning

that swap by the use of three unique identifiers: A Unique Swap

Identifier (``USI''), a

[[Page 76602]]

Unique Counterparty Identifier (``UCI''), and a Unique Product

Identifier (``UPI'').

(a) Unique Swap Identifiers. (1) Creation and Transmission for

Swaps Executed on a SEF or DCM. For each swap executed on a SEF or DCM,

a Unique Swap Identifier shall be created and transmitted as follows.

(i) Creation. The SEF or DCM shall generate and assign a Unique

Swap Identifier at the time of execution of the swap, in the form

specified by the Commission. The Unique Swap Identifier shall consist

of a single data field that contains two components:

(A) The unique, extensible, alphanumeric code assigned to the SEF

or DCM by the Commission at the time of its registration, for the

purpose of identifying the SEF or DCM; and

(B) an extensible, alphanumeric code generated and assigned to that

swap by the automated systems of the SEF or DCM, which shall be unique

with respect to all such codes generated and assigned by that SEF or

DCM.

(ii) Transmission. The SEF or DCM creating the Unique Swap

Identifier for the swap shall transmit the identifier electronically as

follows:

(A) To each counterparty to the swap, as soon as technologically

practicable after execution of the swap;

(B) to the DCO, if any, to which the swap is submitted for

clearing, simultaneously with the transmission of required swap

creation data to the DCO for clearing purposes; and

(C) to the SDR to which the SEF or DCM reports required swap

creation data for the swap, simultaneously with the transmission by the

SEF or DCM to the SDR of required swap creation.

(2) Creation and Transmission for Swaps Not Executed on a SEF or

DCM. For each swap not executed on a SEF or DCM but rather bilaterally

by the counterparties, a Unique Swap Identifier shall be created and

transmitted as follows.

(i) Creation Where the Reporting Counterparty Is an SD or MSP. If

the reporting counterparty determined in accordance with Sec. 45.5 is

an SD or MSP, that counterparty shall generate and assign a Unique Swap

Identifier at the time of execution of the swap, in the form specified

by the Commission. The Unique Swap Identifier shall consist of a single

data field that contains two components:

(A) The unique, extensible, alphanumeric code assigned to the SD or

MSP by the Commission at the time of its registration as such, for the

purpose of identifying the SD or MSP with respect to USI creation; and

(B) an extensible, alphanumeric code generated and assigned to that

swap by the automated systems of the SD or MSP, which shall be unique

with respect to all such codes generated and assigned by that SD or MSP

for USI purposes.

(ii) Transmission Where the Reporting Counterparty Is an SD or MSP.

The SD or MSP creating the Unique Swap Identifier for the swap shall

transmit the identifier electronically as follows:

(A) To the other counterparty to the swap, as soon as

technologically practicable after execution of the swap;

(B) to the DCO, if any, to which the swap is submitted for

clearing, simultaneously with the transmission of required swap

creation data to the DCO for clearing purposes; and

(C) to the SDR to which the SD or MSP reports required swap

creation data for the swap, as part of the report of that data.

(iii) Creation Where the Reporting Counterparty Is a non-SD-MSP

Counterparty. If the reporting counterparty determined in accordance

with Sec. 45.5 is a non-SD/MSP counterparty, the SDR to which the

reporting counterparty reports required swap creation data shall

generate and assign a Unique Swap Identifier as soon as technologically

practicable following receipt of the first report of required swap

creation data concerning the swap, in the form specified by the

Commission. The Unique Swap Identifier shall consist of a single data

field that contains two components:

(A) The unique, extensible, alphanumeric code assigned to the SDR

by the Commission at the time of its registration as such, for the

purpose of identifying the SDR with respect to USI creation; and

(B) An extensible, alphanumeric code generated and assigned to that

swap by the automated systems of the SDR, which shall be unique with

respect to all such codes generated and assigned by that SDR for USI

purposes.

(iv) Transmission Where the Reporting Counterparty Is a Non-SD/MSP

counterparty. The SDR creating the Unique Swap Identifier for the swap

shall transmit the identifier electronically as follows:

(A) To the counterparties to the swap, as soon as technologically

practicable following creation of the USI; and

(B) To the DCO, if any, to which the swap is submitted for

clearing, as soon as technologically practicable following creation of

the USI.

(3) Use. Each registered entity or swap counterparty subject to the

rules of the Commission shall include the Unique Swap Identifier for a

swap in all of its records and all of its swap data reporting

concerning that swap, from the time it receives the identifier

throughout the existence of the swap and for as long as any records are

required by the rules of the Commission to be kept concerning the swap,

regardless of any changes that may occur from time to time with respect

to the state of the swap or with respect to the counterparties to or

the ownership of the swap. This requirement shall not prohibit the use

by a registered entity or swap counterparty in its own records of any

additional identifier or identifiers internally generated by the

automated systems of the registered entity or swap counterparty, or the

reporting to an SDR or to a regulator of such internally generated

identifiers in addition to the reporting of the Unique Swap Identifier.

(b) Unique Counterparty Identifiers. (1) Each counterparty to any

swap subject to the jurisdiction of the Commission shall be identified

in all recordkeeping with respect to swaps and in all swap data

reporting by means of a single, unique counterparty identifier having

the characteristics specified by the Commission.

(2) Each counterparty to any swap subject to the jurisdiction of

the Commission shall report all of its corporate affiliations into a

confidential, non-public corporate affiliations reference database

maintained and located as determined by the Commission. Data contained

in the corporate affiliations reference database shall be available

only to the Commission, and to other financial regulators via the same

data access procedures applicable to data in SDRs as provided in part

49, for regulatory purposes. For purposes of this rule, ``corporate

affiliations'' means the identity of all legal entities that own the

counterparty, that are under common ownership with the counterparty, or

that are owned by the counterparty. This corporate affiliation

information must be sufficient to disclose parent-subsidiary and

affiliate relationships, such that each legal entity within or

affiliated with the corporate hierarchy or ownership group to which the

counterparty belongs is separately identified. Each counterparty shall

also report to the corporate affiliations reference database all

changes to the information previously reported concerning the

counterparty's corporate affiliations, so as to ensure that the

corporate affiliation information recorded in the corporate

affiliations reference database is current and accurate at all times.

(3) The identification system characteristics required for the

Commission to approve an internationally-developed UCI as the

[[Page 76603]]

means by which registered entities and swap counterparties must fulfill

their obligations under Sec. 45.4(b)(1) shall be as follows:

(i) The identification system must result in a unique identifier

format that is capable of becoming the single international standard

for unique identification of legal entities in the financial sector on

a global basis, if it is adopted world-wide.

(ii) The identification system must be developed via an

international ``voluntary consensus standards body'' as defined in

Office of Management and Budget (``OMB'') Circular No. A-119 Revised,

such as the International Organization for Standardization, and must be

maintained by such a body and an associated Registration Authority. The

standards body and Registration Authority must have a formally

documented governance structure acceptable to the Commission, and must

have proven expertise in designing and implementing standards for the

financial sector. The standards body and Registration Authority must

coordinate with the Commission, the Securities and Exchange Commission,

the Office of Financial Research, and other financial regulators.

(iii) As provided in OMB Circular No. A-119 Revised, the

identification system must be available to all interested parties on a

non-discriminatory, royalty-free or reasonable royalty basis.

(A) Information concerning the issuance process for new identifiers

must be available publicly and free of charge.

(B) While reasonable initial registration fees and reasonable

annual fees would be appropriate for issuance, maintenance, and initial

and ongoing verification of a unique identifier, fees must not be

charged for use of unique identifiers provided via the identification

system, and the identification system must be operated on a non-profit

basis.

(C) A comprehensive and reasonably current directory of the Unique

Counterparty Identifiers issued by the identification system (but not

the entity relationship information reported by the counterparties to

the Office of Financial Research or to an SDR as provided above) must

be made available free of charge over the Internet or by similarly

convenient means.

(iv) The identification system must be supported by a trusted and

auditable method of verifying the identity of each legal entity to whom

a unique identifier is assigned, both initially and at appropriate

intervals thereafter.

(A) The Registration Authority must maintain reference data

sufficient to verify that a user has been correctly identified as an

entity. At a minimum, the reference data (though not the identifier

itself) should include the entity's name and location.

(B) Issuance of identifiers must be speedy and unbiased. It must

not materially hinder the normal course of a firm's business. Any

updates to the reference data must be done with a minimal lag.

(v) The Registration Authority must establish quality assurance

practices. The necessary quality assurance processes must ensure that

duplicate identifiers are not erroneously assigned, and that reference

data for legal entities is accurate. For this purpose, the Registration

Authority should accept request for updates or amendments from any

identification system participant or financial regulator.

(vi) The Registration Authority must maintain system safeguards

comparable to those required for SDRs pursuant to part 49 of this

chapter.

(vii) The identification system must be sufficiently extensible to

cover all existing and potential future legal entities of all types

that are or may become swap counterparties or that are or may become

involved in any aspect of the financial issuance and transactions

process, and to cover entities of all types with respect to which

financial sector entities are required by any financial regulator

world-wide to perform due diligence for reporting or risk management

purposes.

(viii) The identification system must assign only one unique

identifier to any legal entity.

(ix) The unique identifier format must consist of a single data

field, and must contain either no embedded intelligence or as little

embedded intelligence as practicable.

(x) The unique identifier assigned must persist despite all

corporate events. When a corporate event (e.g., a merger or spin-off)

results in a new entity, the new entity must receive a new identifier,

while the previous identifier continues to identify the predecessor

entity.

(xi) The identification system must use data standards and formats

that will enable consistency of standards and formats across platforms,

data repositories, and asset classes, in order to ensure data

comparability and enable data aggregation and cross-sectional analysis.

(4) The Commission shall determine, at least 100 days prior to the

implementation date for its final data reporting regulations, whether

an identification system that satisfies the requirements set forth in

Sec. 45.4(b)(3) is available and can provide UCIs for all registered

entities and swap counterparties required by Sec. 45.4 to use UCIs. If

the Commission determines that such an identification system is

available, then:

(i) The Commission shall publish in the Federal Register and on the

Web site of the Commission, no later than 90 days prior to the

implementation date for the Commission's final swap data reporting, the

name of the identification system approved by the Commission, the name

and contact information of the Registration Authority through which

registered entities and swap counterparties can obtain UCIs provided

through the approved identification system, and information concerning

the procedure and requirements for obtaining such a UCI; and

(ii) All registered entities and swap counterparties subject to

these regulations shall comply with Sec. 45.4(b)(1) by using a UCI

provided by the identification system approved by the Commission for

that purpose.

(5) The Commission may, in its discretion, delegate to the Director

of the Division of Market Oversight (``Director''), until the

Commission orders otherwise, the authority to make the determination

called for by Sec. 45.4(b)(4), to be exercised by the Director or by

such other employee or employees of the Commission as may be designated

from time to time by the Director. The Director may submit to the

Commission for its consideration any matter which has been delegated in

this paragraph. Nothing in this paragraph prohibits the Commission, at

its election, from exercising the authority delegated in this

paragraph.

(6) If the Commission, or the Director as provided in Sec.

45.4(b)(5), determines pursuant to Sec. 45.4(b)(4) that an

identification system that satisfies the requirements set forth in

Sec. 45.4(b)(3) is not then available, then until such time as the

Commission determines that such an identification system has become

available, registered entities and swap counterparties shall comply

with Sec. 45.4(b)(1) by using a UCI created and assigned by an SDR as

follows:

(i) When a swap involving one or more counterparties for which no

unique counterparty identifier has yet been created and assigned is

reported to an SDR, the repository shall create and assign a unique

counterparty identifier for each such counterparty, in a format

determined by the Commission, as soon as technologically practicable

after that swap is first reported to the repository.

[[Page 76604]]

(ii) Each such repository-created unique identifier shall consist

of a single data field that contains two components, including:

(A) The unique, extensible, alphanumeric code assigned to the SDR

by the Commission at the time of its registration, for the purpose of

identifying the SDR; and

(B) An extensible, alphanumeric code generated and assigned to that

counterparty by the automated systems of the SDR, which shall be unique

with respect to all such unique counterparty identifier codes generated

and assigned by that SDR.

(iii) The SDR shall transmit each unique counterparty identifier

thus created to each counterparty to the swap, to each other registered

entity associated with the swap, to each registered entity or swap

counterparty who has made any report of any swap data to the SDR, and

to each SDR registered with the Commission, as soon as technologically

practicable after creation and assignment of the identifier.

(iv) Once any SDR has created and assigned such a UCI to a swap

counterparty and has transmitted it as required by Sec.

45.4(b)(6)(iii), all registered entities and swap counterparties shall

use that UCI to identify that counterparty in all swap data

recordkeeping and reporting, until such time as the Commission

determines that an identification system complying with Sec.

45.4(b)(3) has become available, and by regulation requires the use of

a different UCI provided by that identification system.

(c) Unique Product ID. (1) Each swap subject to the jurisdiction of

the Commission shall be identified in all recordkeeping with respect to

swaps and in all swap data reporting by means of a unique product

identifier, having the characteristics specified by the Commission.

(2) The unique product identifier shall identify the swap asset

class to which the swap belongs and the sub-type within that swap asset

class to which the swap belongs, with sufficient distinctiveness and

specificity to enable the Commission and other financial regulators to

fulfill their regulatory responsibilities and to enable real time

reporting of swaps as provided in the Act and the Commission's

regulations. The level of distinctiveness and specificity which the

unique product identifier will provide shall be determined separately

for each swap asset class.

(3) The system of swap product classification used by unique

product identifiers shall be as determined by the Commission.

Sec. 45.5 Determination of which counterparty must report.

(a) If only one counterparty is an SD, the SD shall fulfill all

counterparty reporting obligations.

(b) If neither party is an SD, and only one counterparty is an MSP,

the MSP shall fulfill all counterparty reporting obligations.

(c) If both counterparties are SDs, or both counterparties are

MSPs, or both counterparties are non-SD/MSP counterparties, the

counterparties shall agree as one term of their swap transaction which

counterparty shall fulfill reporting obligations with respect to that

swap; and the counterparty so selected shall fulfill all counterparty

reporting obligations.

(d) Notwithstanding the provisions of Sec. 45.5(a) through (c), if

only one counterparty to a swap is a U.S. person, that counterparty

shall be the reporting counterparty and shall fulfill all counterparty

reporting obligations.

(e) Notwithstanding the provisions of Sec. 45.5(a) through (c), if

neither counterparty to a swap is a U.S. person, but the swap is

executed on a SEF or DCM or otherwise executed in the United States, or

is cleared by a DCO, then:

(1) The counterparties to the swap shall select one counterparty to

be the reporting counterparty, making such selection as one term of the

swap; and

(2) The counterparty so selected shall be the reporting

counterparty and shall fulfill all counterparty reporting obligations.

(f) If a reporting counterparty selected pursuant to Sec. 45.5(a)

through (f) ceases to be a counterparty to a swap due to an assignment

or novation, and the new counterparty is a U.S. person, the new

counterparty shall be the reporting counterparty and fulfill all

reporting counterparty obligations following such assignment or

novation. If a new counterparty to a swap due to an assignment or

novation is not a U.S. person, the counterparty that is a U.S. person

shall be the reporting counterparty and fulfill all reporting

counterparty obligations following such assignment or novation.

Sec. 45.6 Third-party facilitation of data reporting.

Registered entities and counterparties required by this part 45 to

report required swap creation data or required swap continuation data,

while remaining fully responsible for reporting as required by this

part 45, may contract with third-party service providers to facilitate

reporting.

Sec. 45.7 Reporting to a single SDR.

(a) A SEF, DCM, SD or MSP that creates the USI for a swap as

provided in Sec. 45.5 shall report all primary economic terms data

required to be reported for that swap to a single SDR. The choice of

the SDR to receive this report shall be made in a manner to be

determined by the Commission.

(b) Where a non-SD/MSP counterparty is the reporting counterparty

pursuant to Section 45.5, that reporting counterparty shall report all

primary economic terms data required to be reported for that swap to a

single SDR of its choosing, which SDR shall create the USI for that

swap as provided in Sec. 45.5.

(c) When the SDR chosen as provided in Sec. 45.8(a) and (b)

receives the initial report of primary economic terms data for a swap,

the SDR shall transmit its own identity, together with the USI for the

swap, to each counterparty to the swap, to the SEF or DCM, if any, on

which the swap was executed, and to the DCO, if any, to which the swap

is submitted for clearing, as soon as technologically practicable

following the SDR's receipt of the initial report of primary economic

terms data for the swap.

(d) Thereafter, all data reported for the swap, and all corrections

of errors and omissions in previously reported data for the swap, by

any registered entity or counterparty, shall be reported to that same

SDR (or to its successor in the event that it ceases to operate, as

provided in part 49 of this chapter).

Sec. 45.8 Data reporting for swaps in a swap asset class not accepted

by any SDR.

Should there be a swap asset class for which no SDR currently

accepts swap data, each registered entity or counterparty required by

Sec. 45.3 to report any required swap creation data or required swap

continuation data with respect to a swap in that asset class must

report that same data at a time and in a form and manner determined by

the Commission.

Sec. 45.9 Required data standards.

(a) Data Maintained and Furnished to the Commission by SDRs. An SDR

shall maintain all swap data reported to it in a format acceptable to

the Commission, and shall transmit all swap data requested by the

Commission to the Commission in an electronic file in a format

acceptable to the Commission.

(b) Data Reported To SDRs. In reporting swap data to an SDR as

required by this Part 45, each reporting entity or counterparty shall

use the facilities, methods, or data standards provided or required by

the SDR to

[[Page 76605]]

which the entity or counterparty reports the data. SDRs may permit

reporting entities and counterparties to use various facilities,

methods, or data standards, provided that its requirements in this

regard enable it to meet the requirements of Sec. 45.9(a) with respect

to maintenance and transmission of swap data.

(c) Delegation of Authority to the Director of the Division of

Market Oversight. The Commission hereby delegates to the Director of

the Division of Market Oversight (``Director''), until the Commission

orders otherwise, the authority set forth in this Sec. 45.9(c), to be

exercised by the Director or by such other employee or employees of the

Commission as may be designated from time to time by the Director. The

Director may submit to the Commission for its consideration any matter

which has been delegated in this paragraph. Nothing in this paragraph

prohibits the Commission, at its election, from exercising the

authority delegated in this paragraph. The authority delegated to the

Director by this Sec. 45.9(c) shall include:

(1) The authority to determine the manner, format, coding

structure, and electronic data transmission standards and procedures

acceptable to the Commission for the purposes of Sec. 45.9(a).

(2) The authority to determine whether the Commission may permit or

require use by reporting entities or counterparties, or by SDRs, of one

or more particular data standards (such as FIX, FpML, ISO 20022, or

some other standard), in order to accommodate the needs of different

communities of users, or to enable SDRs to comply with Sec. 45.9(a).

(d) The Director shall publish from time to time in the Federal

Register and on the Web site of the Commission the format, data schema,

and electronic data transmission methods and procedures acceptable to

the Commission.

Sec. 45.10 Reporting of errors and omissions in previously reported

data.

(a) Each registered entity and swap counterparty required by this

Part 45 to report swap data to an SDR or to any other registered entity

or swap counterparty shall report any errors and omissions in the data

so reported. Corrections of errors or omissions shall be reported as

soon as technologically practicable after discovery of any such error

or omission.

(b) For interest rate swaps, commodity swaps, and currency swaps,

reporting counterparties fulfill the requirement to report errors or

omissions in state data previously reported by making appropriate

corrections in their next daily report of state data as required by

Sec. 45.3(b)(2).

(c) Each counterparty to a swap that is not the reporting

counterparty as determined pursuant to Sec. 45.5, and that discovers

any error or omission with respect to any swap data reported to an SDR

for that swap, shall promptly notify the reporting counterparty of each

such error or omission. Upon receiving such notice, the reporting

counterparty shall report a correction of each such error or omission

to the SDR, as provided in Sec. 45.10(a) and (b).

(d) Unless otherwise approved by the Commission, or by the Director

of Market Oversight pursuant to Sec. 45.9(c), each registered entity

or swap counterparty reporting corrections to errors or omissions in

data previously reported as required by this Section shall report such

corrections in the same format as it reported the erroneous or omitted

data. Unless otherwise approved by the Commission, or by the Director

of Market Oversight pursuant to Sec. 45.9, an SDR shall transmit

corrections to errors or omission in data previously transmitted to the

Commission in the same format as it transmitted the erroneous or

omitted data.

Appendix 1 to Part 45--Tables of Minimum Primary Economic Terms Data

and Minimum Valuation Data

Minimum Primary Economic Terms Data--Credit Swaps and Equity Swaps

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

Sample category Comment

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

The Unique Swap Identifier for the swap As defined in Sec. 45.4.

The Unique Counterparty Identifier of As defined in Sec. 45.4.

the reporting counterparty.

The Unique Counterparty Identifier of As defined in Sec. 45.4.

the non-reporting party.

The Unique Product Identifier assigned As defined in Sec. 45.4.

to the swap.

An indication of the counterparty E.g. option buyer and option

purchasing protection and of the seller; buyer and seller.

counterparty selling protection.

Information identifying the reference The entity that is the subject

entity. of the protection being

purchased and sold in the

swap.

An indication of whether or not both ...............................

counterparties are SDs.

An indication of whether or not both ...............................

counterparties are MSPs.

An indication of whether or not either ...............................

counterparty is an SD or an MSP.

The date and time of trade, expressed ...............................

using Coordinated Universal time

(``UTC'').

The venue where the swap was executed. ...............................

The effective date. ...............................

The expiration data. ...............................

The price.............................. E.g. strike, initial price,

spread, etc.

The notional amount, the currency in ...............................

which the notional amount is

expressed, and the equivalent notional

amount in U.S. dollars.

The amount and currency or currencies ...............................

of any up-front payment.

A description of the payment streams of E.g. coupon.

each counterparty.

The title of any master agreement E.g. annex, credit agreement.

incorporated by reference and the date

of any such agreement.

If the transaction involved an existing E.g. assignment.

swap, an indication that the

transaction did not involve an

opportunity to negotiate a material

term of the contract, other than the

counterparty.

The data elements necessary for a ...............................

person to determine the market value

of the transaction.

Whether or not the swap will be cleared ...............................

by a designated clearing organization.

[[Page 76606]]

The name of the designated clearing ...............................

organization that will clear the swap,

if any.

If the swap is not cleared, whether the ...............................

``End User exception'' was invoked.

If the swap is not cleared, all of the ...............................

settlement terms, including, without

limitation, whether the swap is cash-

settled or physically settled, and the

method for determining the settlement

value.

Any other primary economic term(s) of ...............................

the swap matched by the counterparties

in verifying the swap.

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

Minimum Primary Economic Terms Data--Currency Swaps

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

Sample data fields Comments

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

The Unique Swap Identifier for the swap As defined in Sec. 45.4.

The Unique Counterparty Identifier of As defined in Sec. 45.4.

the reporting counterparty.

The Unique Counterparty Identifier of As defined in Sec. 45.4.

the non-reporting party.

The Unique Product Identifier assigned As defined in Sec. 45.4.

to the swap.

Contract type.......................... E.g. swap, swaption, forwards,

options, basis swap, index

swap, basket swap, other.

Execution timestamp.................... Time and date of execution.

Currency 1............................. ISO Code.

Currency 2............................. ISO Code.

Notional amount 1...................... For currency one.

Notional amount 2...................... For currency two.

Settlement agent of the reporting ID of the settlement agent.

counterparty.

Settlement agent of the non-reporting ID of the settlement agent.

counterparty.

Settlement currency.................... If applicable.

Exchange rate 1........................ At the moment of trade/

agreement.

Exchange rate 2........................ At the moment of trade/

agreement, if applicable.

Swap delivery type..................... Cash or physical.

Expiration date........................ Expiration date of the

contract.

Timestamp for submission to SDR........ Time and date of submission to

the SDR.

Futures contract equivalent............ As defined in part 150.

Futures contract equivalent unit of As defined in part 150.

measure.

Any other primary economic term(s) of ...............................

the swap matched by the counterparties

in verifying the swap.

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

Minimum Primary Economic Terms Data--Interest Rate Swaps

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

Sample data field Comment

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

The Unique Swap Identifier for the swap As defined in Sec. 45.4.

The Unique Counterparty Identifier of As defined in Sec. 45.4.

the reporting counterparty.

The Unique Counterparty Identifier of As defined in Sec. 45.4.

the non-reporting party.

The Unique Product Identifier assigned As defined in Sec. 45.4.

to the swap.

Contract type.......................... E.g. swap, swaption, option,

basis swap, index swap, etc.

Trade timestamp........................ Time and date of execution.

Swap effective date.................... Effective date of the contract.

Swap end-date.......................... Expiration date of the

contract.

Notional amount one.................... The current active notional in

local currency.

Notional currency one.................. ISO code of the notional

currency.

Notional amount two.................... The second notional amount

(e.g. receiver leg).

Notional currency two.................. ISO code of the notional

currency.

Timestamp for submission to SDR........ Time and date of submission to

the SDR.

Payer (fixed rate)..................... Is the reporting party a fixed

rate payer?

Yes/No/Not applicable.

Fixed leg payment frequency............ How often will the payments on

fixed leg be made.

Direction.............................. For swaps--if the principal is

paying or receiving the fixed

rate. For float-to-float and

fixed-to-fixed swaps, it is

unspecified. For non-swap

instruments and swaptions, the

instrument that was bought or

sold.

Option type............................ E.g. put, call, straddle.

Fixed rate. ...............................

Fixed rate day count fraction. ...............................

Floating rate payment frequency. ...............................

Floating rate reset frequency. ...............................

Floating rate index name/rate period. ...............................

[[Page 76607]]

Leg 1.................................. If two floating legs, report

what is paid.

Leg 2.................................. If two floating legs, repot

what is received.

Futures contract equivalent............ As defined in part 150.

Futures contract equivalent unit of As defined in part 150.

measure.

Any other primary economic term(s) of ...............................

the swap matched by the counterparties

in verifying the swap.

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

Minimum Primary Economic Terms Data--Other Commodity Swaps

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

Sample data field Comment

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

The Unique Swap Identifier for the swap As defined in Sec. 45.4.

The Unique Counterparty Identifier of As defined in Sec. 45.4.

the reporting counterparty.

The Unique Counterparty Identifier of As defined in Sec. 45.4.

the non-reporting party.

The Unique Product Identifier assigned As defined in Sec. 45.4.

to the swap.

Contract type.......................... E.g. swap, swaption, option,

etc.

Execution timestamp.................... Time and date of execution.

Quantity............................... The Unit of measure applicable

for the quantity on the swap.

Total quantity......................... The amount of the commodity for

the entire term of the swap.

Settlement method...................... Cash or physical.

Delivery type.......................... For physical delivery.

Start date............................. Predetermined start date from

which payments will be

exchanged.

End-date............................... Predetermined end date from

which payments will be

exchanged.

Submission to SDR timestamp............ Time and date of submission to

the SDR.

Averaging method....................... The type of calendar days used

to calculate price on a

transaction.

Payment calendar.

Buyer pay index........................ The published price as paid by

the buyer.

Seller pay index....................... The published price as paid by

the seller.

Buyer.................................. Party purchasing product, e.g.

payer of the fixed price (for

swaps), or payer of the

floating price (for put

swaption), or payer of the

fixed price (for call

swaption).

Seller................................. Party offering product, e.g.

payer of the floating price

(for swaps), payer of the

fixed price (for put

swaption), or payer of the

floating price (for call

swaption).

Price.................................. E.g. fixed price, the heat rate

value, etc.

Price unit............................. The unit of measure applicable

for the price on the

transaction.

Price currency......................... E.g. ISO code.

Grade.................................. E.g. the grade of oil or

refined product being

delivered.

Futures contract equivalent............ As defined in part 150.

Futures contract equivalent unit of As defined in part 150.

measure.

Any other primary economic term(s) of

the swap matched by the counterparties

in verifying the swap.

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

Minimum Valuation Data

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

Sample data fields

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

Independent amount.

Independent amount currency.

Independent amount payer.

Independent amount receiver.

Initial margin.

Variation margin.

Mark-to-market.

Non-cash collateral.

Non-cash collateral valuation.

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

Appendix 2 to Part 45--Master Reference Generic Data Fields List

This table includes Master Reference Generic Data Fields that

the Commission believes could be relevant for standardized swaps in

some or all swap asset classes. The Commission requests comment on

whether any of the data fields in this Master Reference Generic Data

Fields List should be included in one or more of the Tables of

Required Minimum Primary Economic Terms Data for specific swap asset

classes, or in the Minimum Valuation Data table, that are included

in Appendix 1 to Part 45.

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

Data fields Description

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

Potential Initial Data

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

Client Name............................ Name of the customer (client).

Counterparty Origin.................... Indicator of whether a swap was

done on behalf of a customer

or house account.

Delivery Type.......................... Deliverable or Non-deliverable.

Effective Date or Start Date........... The date a swap becomes

effective or starts.

Entity Reporting to SDR................ The entity making a data

report.

Execution Timestamp.................... The time and date a swap was

executed on a platform.

[[Page 76608]]

Industrial Sector...................... Industrial sector.

Intermediary........................... The entity that brings two

parties together for the swap

transaction.

Master Agreement Type.................. The type of master agreement

that was executed.

Maturity, Termination, or End Date..... The day a swap expires.

Non-Financial Entity................... Y/N. Are one or more

counterparties to the swap

transaction not a financial

entity?

Order Entry Timestamp.................. The time and date when the

order was entered.

Parent Counterparty.................... The parent company of the

counterparty.

Parent Originator...................... The parent company of the

originator.

Platform/Deal Source................... Name of the platform or system

on which the swap was

executed.

Registration with the SEC.............. Y/N. This field indicates

whether the exempted

counterparties are registered

with the SEC.

SDR submission date.................... The time and date the swap

transaction was submitted to

the SDR.

Settlement Method...................... The agreed upon way the swap

will settle.

Submission of order entry timestamp.... The time and date when the

order was sent to the platform

to be executed.

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

Potential Confirmation/Clearance Data

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

Board of Directors approval............ Y/N. If the exempted

counterparties are registered

with the SEC did their Board

of Directors (or alternative

governance body for non-

corporate end users) approve

the exemption from clearing?

Call, put or cancellation date......... Information needed to determine

when a call, put, or

cancellation may occur with

respect to a transaction.

Cleared................................ An indicator of whether a swap

has been cleared.

Clearing Entity........................ Name of the Clearing

Organization where a swap was

cleared.

Clearing Exemption..................... Y/N. Are one or more

counterparties to the swap

transaction exempted from

clearing?

Clearing Timestamp..................... The time and date a swap was

cleared.

Confirmed.............................. An indicator of whether a swap

has been confirmed by both

parties.

Master Agreement Date.................. Date of the Master Agreement.

Submission Timestamp for clearing...... The time and date when a swap

was submitted to a clearing

organization.

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

Potential Position Data

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

Exchange Rate/Price Unit............... Spot rate or price unit used.

Futures Contract Equivalent............ Swap amount divided by the

commodity quantity per futures

contract to give you the total

number of futures contracts.

Futures Contract Equivalent unit of The unit of measure that was

measure. used in the future contract

equivalent computation.

Notional (U.S.$ Equiv.)................ U.S.$ equivalent of the

``Notional Amount or Total

Quantity.''

Notional Amount/Total Notional Quantity Total currency amount or total

quantity in the unit of

measure of an underlying

commodity.

Notional Currency/Price Currency....... Notional Currency.

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

Potential Option Instrument Applicable Data

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

Lockout Period......................... Date of first allowable

exercise.

Option Expiration Date................. Expiration date of the option.

Option Premium......................... Fixed premium paid by the buyer

to the seller.

Option Premium currency................ The currency used to compute

the premium.

Option Style........................... American, European, Bermudan,

Asian.

Option Type............................ Call, Put, Straddle, Strangle,

Collar, Butterfly, etc.

Strike Price (Cap/Floor rate).......... The strike price of the option.

Value for Options...................... This value of the option at the

end of every business day.

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

Potential Margin/Collateral Data

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

Collateral on Deposit.................. The amount of collateral that

has been agreed upon by the

parties to the swap.

Collateral Type........................ The type of collateral that has

been agreed upon.

Credit Support Indicator............... Y/N. Have the exempt

counterparties given notice to

the CFTC regarding the

exemption and executed a CSA

or other form of credit

support?

Independent Amount..................... Independent amount.

Independent Amount Currency............ Currency of the independent

amount.

Independent Amount Payer............... The counterparty that will pay

the independent amount.

Independent Amount Receiver............ The counterparty that will

receive the independent

amount.

Initial Margin Requirement............. The initial margin requirement

that has been required by the

parties to the swap.

Linked Independent Amount.............. Linked independent amount.

Linked Independent Amount Currency..... Currency of the linked

independent amount.

Long Option Value...................... The long option value contained

in the maintenance margin

requirement.

[[Page 76609]]

Maintenance Margin Requirement......... The maintenance margin

requirement that has been

required by the parties to the

swap.

Non-Cash Collateral.................... Non-Cash collateral that is

allowed for certain end users.

Short Option Value..................... The short option value

contained in the maintenance

margin requirement.

Types of Collateral on Deposit......... List of collateral by asset

type for the collateral on

deposit amount.

Variation Margin....................... U.S. $ amount that is paid

daily in order to mark to

market the swap transaction.

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

Issued in Washington, DC, on November 19, 2010, by the

Commission.

David A. Stawick,

Secretary of the Commission.

Statement of Chairman Gary Gensler

Swap Data Recordkeeping and Reporting Requirements

I support the proposed rulemaking to establish swap data

recordkeeping and reporting requirements for registered entities and

counterparties involved in swaps. The proposed rule is intended to

ensure that complete, timely and accurate data concerning all swaps

is available to the Commission and other regulators. The proposed

rule requires that data be consistently maintained and reported to

swap data repositories by swap dealers, major swap participants,

designated contract markets, swap execution facilities, derivatives

clearing organizations and futures commission merchants. As swaps

exist over a period of days to sometimes years, the proposal

includes requirement for the reporting of data upon the transaction

and to continue over the lifecycle of the swap. Another important

component of the proposed rulemaking is that there will be required

unique identifiers for swaps, counterparties and products. This will

enhance operational efficiency for market participants and improve

market surveillance for regulators.

[FR Doc. 2010-30476 Filed 12-7-10; 8:45 am]

BILLING CODE 6351-01-P

Last Updated: December 8, 2010