2011-9446

Federal Register, Volume 76 Issue 79 (Monday, April 25, 2011)[Federal Register Volume 76, Number 79 (Monday, April 25, 2011)]

[Proposed Rules]

[Pages 22833-22848]

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

[FR Doc No: 2011-9446]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 46

[3038-AD48]

Swap Data Recordkeeping and Reporting Requirements: Pre-Enactment

and Transition Swaps

AGENCY: Commodity Futures Trading Commission.

ACTION: Proposed rulemaking.

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

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

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

Consumer Protection Act (``Dodd-Frank Act''). The Dodd-Frank Act amends

the Commodity Exchange Act (``CEA'' or ``Act'') directing that rules

adopted by the Commission shall provide for the reporting of data

relating to swaps entered into before the date of enactment of the

Dodd-Frank Act, the terms of which have not expired as of the date of

enactment of that Act (``pre-enactment swaps'') and data relating to

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

Act and prior to the compliance date specified in the Commission's

final swap data reporting rules (``transition swaps''). This proposal

would establish recordkeeping and reporting requirements for pre-

enactment swaps and transition swaps.

DATES: Comments must be received by June 9, 2011.

ADDRESSES: You may submit comments, identified by RIN number 3038-AD48,

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.

[[Page 22834]]

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. Comments will be posted as received to

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

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

information that may be exempt from disclosure under the Freedom of

Information Act, you may submit a petition for confidential treatment

according to the procedures established in CFTC Regulation 145.9.\1\

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

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

submission from http://www.cftc.gov that it may deem to be

inappropriate for publication, such as obscene language. All

submissions that have been redacted or removed that contain comments on

the merits of the rulemaking will be retained in the public comment

file and will be considered as required under the Administrative

Procedure Act and other applicable laws, and may be accessible under

the Freedom of Information Act.

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

CFR Ch. 1.

FOR FURTHER INFORMATION CONTACT: David Taylor, Branch Chief, Market

Continuity, 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 Lafayette Centre, 1155 21st Street, NW.,

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Washington, DC 20581.

SUPPLEMENTARY INFORMATION: The Commission is proposing rules under its

part 46 regulations relating to recordkeeping and reporting

requirements applicable to both pre-enactment and transition swaps, and

is soliciting comment on all aspects of the proposed rules. These

rules, when adopted, will supersede interim final rules previously

adopted by the Commission in part 44 of its regulations.

Table of Contents

I. Background

A. Swap Data Provisions of the Dodd-Frank Act

B. The Commission's Proposed Rule on Swap Data Recordkeeping and

Reporting Requirements

C. The Interim Final Rules for Pre-Enactment and Transition

Swaps

II. Proposed New Regulations, Part 46

III. Related Matters

A. Regulatory Flexibility Act

B. Paperwork Reduction Act

C. Cost-Benefit Analysis

IV. Proposed Compliance Date

V. General Solicitation of Comments

I. Background

A. Swap Data Provisions of the Dodd-Frank Act

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

Act.\2\ Title VII of the Dodd-Frank Act \3\ amended the CEA \4\ to

establish a comprehensive new regulatory framework for swaps and

security-based swaps. The legislation was enacted to reduce risk,

increase transparency, and promote market integrity within the

financial system by, among other things: (1) Providing for the

registration and comprehensive regulation of swap dealers and major

swap participants; (2) imposing clearing and trade execution

requirements on standardized derivatives products; (3) creating robust

recordkeeping and real-time reporting regimes; and (4) enhancing the

Commission's rulemaking and enforcement authorities with respect to,

among others, all registered entities and intermediaries subject to the

Commission's oversight.

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\2\ 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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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. See CFTC Swap Data Repositories: Proposed

Rule, 75 FR 80898 (Dec. 23, 2010).

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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 that shall be collected and maintained by

each registered swap data repository.\7\

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

These standards are to apply to both registered entities and

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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).

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

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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\

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

Section 728 also directs the Commission to regulate data collection

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and maintenance by SDRs.

The Commission shall prescribe data collection and data

maintenance standards for swap data repositories.\10\

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

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

SDR (or to the Commission if no SDR 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 a swap dealer (``SD''), the SD is

required to report the swap. If one counterparty is a major swap

participant (``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.\11\

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\11\ See CEA Sec. 4r(a)(3).

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Section 729 also provides for reporting to the Commission of

uncleared swaps that are not 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

[[Page 22835]]

regulators if requested to do so.\12\ 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.\13\ Such reports must be as comprehensive as the data

required to be collected by SDRs.\14\

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\12\ CEA Sec. 4r(c)(2) requires individuals or entities that

enter into an uncleared swap transaction that is not 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.

\13\ CEA Sec. 4r(c).

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

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Section 729 establishes in new CEA Section 4r(a)(2)(A) a

transitional rule applicable to pre-enactment swaps. Section

4r(a)(2)(A) provides for the reporting of pre-enactment swaps the terms

of which have not expired as of the enactment of the Dodd-Frank Act to

an SDR or the Commission, by a date that the Commission determines to

be appropriate.\15\ Section 4r(a)(2)(B) directed the Commission to

promulgate an interim final rule within 90 days of the date of

enactment of the Dodd-Frank Act providing for the reporting of such

pre-enactment swaps.\16\

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\15\ Subsection (A) of CEA Section 4r(a)(2) provides that ``Each

swap entered into before the date of enactment of the Wall Street

Transparency and Accountability Act of 2010, the terms of which have

not expired as of the date of enactment of that Act, shall be

reported to a registered swap data repository or the Commission by a

date that is not later than--(i) 30 days after issuance of the

interim final rule; or (ii) such other period as the Commission

determines to be appropriate.''

\16\ Pursuant to Section 4r(a)(2)(B), the Commission on October

14, 2010 published in part 44 of its regulations an interim final

rule instructing specified counterparties to pre-enactment swaps to

report data to a registered SDR or to the Commission by a compliance

date to be established in reporting rules to be promulgated under

Section 2(h)(5)(A) of the CEA and advising counterparties of the

necessity, inherent in the reporting requirement, to retain

information pertaining to the terms of such swaps until reporting

can be effectuated under permanent rules. See Pre-Enactment Swaps

IFR, supra, note 17.

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Section 723 of the Dodd-Frank Act, which adds to the CEA new

Section 2(h)(5), addresses the reporting of swap data for both swaps

executed before the enactment of the Dodd-Frank Act \17\ and swaps

executed on or after the date of that enactment but before the

compliance date specified in the Commission's final swap data

recordkeeping and reporting rules.\18\ In a July 15, 2010 floor

statement concerning swap data reporting as well as other aspects of

the Dodd-Frank Act, Senator Blanche Lincoln emphasized that the

provisions of new CEA Section 4r (added by Section 729 of the Dodd-

Frank Act) and new CEA Section 2(h)(5) (added by Section 723 of the

Dodd-Frank Act) ``should be interpreted as complementary to one another

to assure consistency between them. This is particularly true with

respect to issues such as the effective dates of these reporting

requirements * * *'' \19\

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\17\ See CFTC Interim Final Rule for Reporting Pre-Enactment

Swap Transactions (``Pre-Enactment Swaps IFR''), 75 FR 63080 (Oct.

14, 2010).

\18\ See CFTC Interim Final Rule for Reporting Post-Enactment

Swap Transactions (``Post-Enactment Swaps IFR'' or ``Transition

Swaps IFR''), 75 FR 78892 (Dec. 17, 2010).

\19\ Senator Blanche Lincoln, ``Wall Street Transparency and

Accountability Act,'' Congressional Record, July 15, 2010, at S5923.

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This proposed rule refers to the two types of swaps addressed in

CEA Section 2(h)(5) as follows. ``Pre-enactment swap'' means a swap

executed before date of enactment of the Dodd-Frank Act (i.e., before

July 21, 2010) the terms of which have not expired as of the date of

enactment of that Act.\20\ ``Transition 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 compliance date specified in the final swap data

reporting and recordkeeping requirements regulations in part 45 of this

chapter.\21\ Collectively, the proposed rule refers to pre-enactment

swaps and transition swaps as ``historical swaps.''

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\20\ Subsection (A) of CEA Section 2(h)(5) Reporting Transition

Rules provides that ``Swaps entered into before the date of the

enactment of this subsection shall be reported to a registered swap

data repository or the Commission no later than 180 days after the

effective date of this subsection.''

\21\ Subsection (B) of 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.''

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B. The Commission's Proposed Rule on Swap Data Recordkeeping and

Reporting Requirements

On December 8, 2010, the Commission published for comment a notice

of proposed rulemaking concerning swap data (the ``Swap Data NPRM'')

that would establish swap data recordkeeping and reporting requirements

applicable to registered SDRs, derivatives clearing organizations

(``DCOs''), designated contract markets (``DCMs''), swap execution

facilities (``SEFs''), SDs, major swap participants MSPs, and non-SD/

MSP counterparties.\22\ The latter category of swap counterparties

would include but not be limited to counterparties who qualify for the

statutory end user exception with respect to particular swaps.\23\

Consistent with the purposes of the Dodd-Frank Act, the Swap Data NPRM

would require generally that all DCOs, DCMs, SEFs, and swap

counterparties 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. The

proposed rules contemplate that swap data reporting should include data

from each of two important stages in 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. The proposed rules

call for reporting of two sets of data generated in connection with the

creation of the swap: primary economic terms data and confirmation

data.\24\ Reporting of swap continuation data can follow either of two

conceptual approaches described in the Swap Data NPRM: The life cycle

or event flow approach, or the state or snapshot approach.\25\

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\22\ 75 FR 76574 (Dec. 8, 2010) (``Swap Data NPRM'').

\23\ CEA Section 2(h)(7).

\24\ See Swap Data NPRM, supra, note 22 at 76580-76582.

\25\ Id. at 76583-76584.

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The Swap Data NPRM did not address CEA Section 2(h)(5)'s mandate

that the Commission adopt recordkeeping and reporting rules applicable

to pre-enactment swaps or transition swaps, but instead noted that a

separate rulemaking to establish requirements for these historical

swaps would address the records, information and data required to be

maintained and the timeframe for reporting such information to a

registered SDR or to the Commission.\26\ This proposal would establish

recordkeeping and reporting standards applicable to pre-enactment and

transition swaps.

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\26\ Id. at 76580 note 37.

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C. The Interim Final Rules for Pre-Enactment and Transition Swaps

Interim Final Rule for Pre-Enactment Swaps. As described above,

Title VII of the Dodd-Frank Act added new Section 4r(a)(2) to the CEA,

which provided for the reporting of pre-enactment swaps and directed

that the Commission promulgate, within 90 days of enactment of the

Dodd-Frank Act, an interim final rule (``IFR'') providing for the

reporting of such swaps. On October 14, 2010, pursuant to the mandate

of CEA Section 4r(a)(2)(B), the Commission published in new part 44 of

its regulations an IFR instructing specified counterparties to pre-

enactment swaps to report data to a registered SDR or to the Commission

by

[[Page 22836]]

a compliance date to be established in reporting rules to be

promulgated under CEA Section 2(h)(5), and advising such counterparties

of the necessity, inherent in the reporting requirement, to preserve

information pertaining to the terms of such swaps until reporting was

effectuated under permanent rules.\27\ This Pre-Enactment Swaps IFR

stated that the reporting and recordkeeping provisions established by

Section 4r and Sec. Sec. 44.00-44.02 of the Commission's regulations

would remain in effect until the effective date of the permanent

reporting rules to be adopted by the Commission pursuant to Section

2(h)(5) of the CEA.\28\ A principal purpose of this IFR was to advise

counterparties of the need to retain data related to swap transactions

so that reporting could be effectuated under permanent rules

subsequently to be adopted.

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\27\ See Pre-Enactment Swaps IFR, supra note 17, at 63083.

\28\ See Pre-Enactment Swaps IFR, supra note 17.

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With respect to the scope and coverage of the Pre-Enactment Swaps

IFR, the Commission acknowledged inconsistencies between the two Dodd-

Frank provisions governing the Commission's rulemaking. Specifically,

new CEA Section 4r(a)(2) limits reportable pre-enactment swaps to those

whose terms have not expired on the date of enactment of the Dodd-Frank

Act; Section 2(h)(5) does not contain the same qualifying language. As

discussed in the Pre-Enactment Swaps IFR, the Commission believes that

failure to limit the term ``pre-enactment swap'' to unexpired swaps

would require reporting of every swap that has ever been entered into;

accordingly, the Commission concluded that reportable pre-enactment

swaps should be limited to those whose terms had not expired at the

time of enactment.\29\

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\29\ Id. at 63082.

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Interim Final Rule for Transition Swaps. Section 4r of the CEA did

not mandate an IFR establishing reporting provisions for transition

swaps. The Commission nonetheless believed that such a rule would

provide clarity and guidance with respect to such swaps, by

establishing that transition swaps will be subject to Section

2(h)(5)(B)'s reporting requirements and to Commission regulations to be

promulgated thereunder. The Commission also believed it was prudent to

advise potential counterparties to such swaps that implicit in this

prospective reporting requirement is the need to retain relevant data

until such time as reporting can be effected. Accordingly, on December

17, 2010 the Commission published under Part 44 of its regulations

interim final rules establishing that counterparties to transition

swaps will be subject to permanent recordkeeping and reporting

requirements to be adopted by the Commission pursuant to Section

2(h)(5)(B) of the CEA.\30\

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\30\ See Transition Swaps IFR, supra note 18.

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The Commission intended both the Pre-Enactment Swaps IFR and the

Transition Swaps IFR to put counterparties on notice that swap data

should be retained pending the adoption of permanent rules for pre-

enactment and transition swaps under proposed part 46 of this chapter.

With respect to both pre-enactment and transition swaps, the Commission

stated that counterparties to these transactions should retain material

information about such transactions. The Commission emphasized,

however, that in the context of the interim rules, no counterparty was

being required to create new records with respect to transactions that

occurred in the past; instead, records relating to the terms of such

transactions could be retained in their existing format to the extent

and in such form as they presently exist.\31\

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\31\ See Pre-Enactment Swaps IFR, supra note 17, at 63086, and

Transition Swaps IFR, supra note 18, at 78894.

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Comments Received. The Commission received a number of comments in

response to each of the IFRs. Comments generally fell into one or more

of several broad categories and in a number of instances were common to

both IFRs. Some commenters observed that issuance of IFRs in advance of

regulations further defining the term ``swap'' (or defining other key

terms in the Dodd-Frank Act) creates legal and regulatory uncertainty

and increases compliance risk; most of these commenters urged the

Commission to further detail the record retention aspects of the

interim final rules.\32\ In this connection, commenters requested that

the Commission issue guidance clarifying and limiting the information

that must be retained,\33\ or create a safe harbor for good faith

compliance efforts.\34\ Energy interests suggested that the Commission

should ensure that end users need only report basic data in a

simplified reporting scheme, or should outline categories of

information that need not be retained by persons who anticipate

becoming eligible for the end user exemption under the Dodd-Frank

Act.\35\ One commenter urged greater specificity with respect to the

Pre-Enactment IFR's requirements, as well as consistency with the

standards adopted by the Securities and Exchange Commission (``SEC'')

and international regulators, and proposed alternatives to the

requirements adopted in the IFR for pre-enactment swaps, particularly

with respect to reporting protocols, record retention, and

confidentiality issues (notably, those confidentiality issues arising

in the context of cross-border transactions).\36\ Another commenter

urged that U.S. swap data reporting requirements should not apply with

respect to foreign swaps transactions, where counterparties are non-

U.S. entities.\37\

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\32\ See, e.g., letters dated November 15, 2010 and January 18,

2011 from the Working Group of Commercial Energy Firms (``Working

Group letters''); letter dated November 15, 2010 from Hess

Corporation (``Hess Corporation letter''); letter dated November 15,

2010 from the Edison Electric Institute (``EEI letter''); letters

dated November 15, 2010 and January 18, 2011 from the Not-for-Profit

Electric End User Coalition (``Coalition letters''); letter dated

January 18, 2011 from the American Gas Association (``AGA letter'').

\33\ EEI letter.

\34\ Working Group letters; EEI letter; Hess Corporation letter.

\35\ AGA letter; Coalition letters.

\36\ Letter dated November 12, 2010, from the International

Swaps and Derivatives Association, Inc. and the Futures Industry

Association.

\37\ Letter dated January 11, 2011, from Barclays Bank PLC, BNP

Paribas S.A., Deutsche Bank AG, Royal Bank of Canada, The Royal Bank

of Scotland Group PLC, Soci[eacute]t[eacute] G[eacute]n[eacute]rale

and UBS AG.

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The Commission is mindful of these concerns and expects to consider

and address them, as well as all comments received in response to this

proposed rule, in formulating permanent rules applicable to pre-

enactment and transition swaps.

II. Proposed New Regulations, Part 46

As provided in the Commission's Swap Data NPRM,\38\ Pre-Enactment

Swaps IFR,\39\ and Transition Swaps IFR,\40\ this proposed rule

addresses the records, information, and data that must be retained for

historical swaps, the timeframe for reporting data to an SDR or the

Commission concerning such swaps, and the specific data to be reported.

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\38\ See Swap Data NPRM, supra note 20, at fn. 37.

\39\ See Pre-Enactment Swaps IFR, supra note 17.

\40\ See Transition Swaps IFR, supra note 18.

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Recordkeeping. For historical swaps in existence on or after the

date of publication of the proposed rule, the rule would impose

limited, specific recordkeeping obligations. Counterparties to such

swaps would be required to keep records of an asset class-specific set

of specified, minimum primary economic terms. The Commission believes

that counterparties to historical swaps will possess this limited set

of asset class-specific information as part of their normal

[[Page 22837]]

business practices.\41\ Commission staff have consulted with industry

representatives, including buy-side counterparties, concerning

information routinely kept in this connection for swaps in different

asset classes. Counterparties to historical swaps in existence on or

after the date of publication of this proposed rule would also be

required to keep records of a confirmation of their swaps if they have

that information in their possession on or after the publication date

(the date from which public notice of this specific proposed

recordkeeping requirement is available). The Commission requests

comment concerning the appropriateness of these limited recordkeeping

requirements, and specifically requests comment concerning whether all

counterparties to historical swaps will possess the limited set of

asset class-specific information called for by the proposed rule as

part of their normal business practices. If there are any

counterparties to historical swaps who do not possess the limited set

of asset class-specific information called for by the proposed rule,

the Commission requests comment from such counterparties concerning

what information concerning historical swaps such counterparties do

possess, and concerning what information such counterparties retain

concerning their swaps in order to meet the requirements of other

applicable law, such as hedge accounting requirements or the

requirements of applicable state law.

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\41\ The Commission understands that the terminology used to

describe the specific terms and conditions of a swap can vary among

market participants, and that agreed definitions for certain terms

could increase consistency among participants in how historical

swaps are described. The Commission therefore requests comment on

whether the proposed minimum primary economic terms for each asset

class are sufficiently clear in terms of what economic data is

expected to be reported, or whether further clarification is needed

in this respect.

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For historical swaps that were in existence as of the date of

enactment of the Dodd-Frank Act but have expired or been terminated

prior to the publication date of this proposed rule, a counterparty

would only be required to keep records as provided in the Commission's

IFRs concerning pre-enactment and transition swaps: namely, the

information and documents relating to the terms of the swap that the

counterparty possessed when the applicable IFR was published, in

whatever format that information is kept by the counterparty.\42\

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\42\ As used in the IFRs, ``format'' refers to the method by

which the information is organized and stored. It does not refer to

a recording format (i.e., a format for electronic encoding of data).

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The Commission understands that the minimum primary economic terms

for a swap can vary widely depending on the asset class of the

underlying products or on the nature of a particular product within an

asset class. Consequently, the Commission encourages the industry to

reach an internal consensus about the appropriate, asset class-

specific, minimum primary economic terms to be reported for pre-

enactment and transition swaps. The Commission welcomes comments from

industry and market participants in this regard, and will consider them

in determining the minimum primary economic terms to be specified in

the final swap data recordkeeping and reporting rules.

Reporting timeframe. The proposed rule provides that swap data

reporting for historical swaps would commence on the compliance date

specified in the Commission's final swap data recordkeeping and

reporting regulations in part 45 of this chapter.\43\ The Commission

believes that the purposes of the Dodd-Frank Act can be best served by

establishing a single date for the commencement of all swap data

reporting pursuant to that Act. It also believes that the compliance

date for the final swap data reporting regulations in part 45--the date

on which reporting must commence--is the most practicable and

appropriate date for this purpose. The effective date will be set by

the Commission in its final swap data reporting regulations.\44\ In the

Swap Data NPRM, the Commission requested comments concerning the time

needed to prepare automated systems for swap data recordkeeping and

reporting prior to implementation of the regulations, and it will

carefully consider the comments received in response to that request.

The Commission similarly requests comment concerning the proposal to

specify the same compliance date as the date for initial data reporting

concerning pre-enactment and transition swaps, and the time needed in

this connection for preparation of necessary automated systems prior to

the specified compliance date.

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\43\ 17 CFR part 45.

\44\ As provided in CEA Section 2(h)(5)(B), the effective date

must be no sooner than 90 days after the effective date of CEA

Section 2(h)(5), but may be a later date set by the Commission.

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Data to be reported. The proposed rule specifies data to be

reported for historical swaps. For pre-enactment and transition swaps

in existence on or after the date of publication of this proposed rule,

the rule specifies the data elements to be reported. For historical

swaps in existence as of enactment of the Dodd-Frank Act which expired

or were terminated prior to publication of this proposed rule, the rule

provides for reporting of the information relating to the terms of the

transaction that was in the possession of a reporting counterparty as

of publication of the applicable Commission IFR regarding pre-enactment

or transition swaps, in such format as it is kept by the reporting

counterparty.

As noted above, the Dodd-Frank Act requires reporting of data

concerning all swaps in existence as of the legislation's

enactment.\45\ Data concerning pre-enactment swaps and transition swaps

will assist achievement of the systemic risk mitigation, market

transparency, and market supervision purposes for which the Dodd-Frank

Act was enacted. Such data will be needed to give regulators the

complete picture of the swap market which the comprehensive regulatory

framework and reporting requirements of the statute are designed to

provide. Data concerning historical swaps also is necessary for the

Commission to prepare the semi-annual reports it is required to provide

to Congress regarding the swap market.

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\45\ CEA Section 4r(a)(2)(A).

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The Commission is aware that internal swap data retention policies

are not uniform among swap counterparties, and that the current

automated systems of market participants vary with respect to their

suitability for swap data reporting. The Commission believes it is

appropriate to limit the burden placed on swap counterparties in

connection with data reporting for historical swaps, to the extent that

this can be done in a manner consistent with the requirements of the

Dodd-Frank Act and the Commission's need for such data. The Commission

has also considered comments received concerning the Pre-Enactment

Swaps IFR and Transition Swaps IFR which requested that the Commission

specify clearly what data would be required to be reported concerning

historical swaps.

Data reporting for historical swaps in existence as of or after

publication of this proposed rule. For each pre-enactment or transition

swap in existence as of or after publication of this proposed rule, the

rule calls (a) for an initial data report on the compliance date for

data reporting, and (b), if such a historical swap has not expired or

been terminated as of the compliance date specified in the final part

45 swap data reporting regulations, for ongoing reporting of required

swap continuation data (as defined in the Commission's final part 45

swap data reporting

[[Page 22838]]

regulations) during the remaining existence of the swap.

The proposed rule calls for the initial data report for historical

swaps in existence as of or after publication of this proposed rule to

include the transaction terms included in the swap confirmation if the

confirmation was in the reporting counterparty's possession on or after

the publication date of this proposed rule,\46\ and in any event to

include all of the minimum primary economic terms for a pre-enactment

or transition swap specified in the appropriate table in the Appendix

to the proposed rule.

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\46\ The Commission understands that counterparties may use

either a short-form or a long-form confirmation. Either form can be

used to satisfy this requirement.

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The Commission understands that industry definitions used in

documenting some swap transactions, for instance in some master

agreements or confirmations, may not match exactly the asset class

definitions included in this proposed rule, which are the same as the

asset class definitions in the Commission's part 45 proposed rules

regarding swap data recordkeeping and reporting requirements. The

Commission requests comment on how the proposed asset class definitions

in this proposed rule and the overall swap classification scheme

embodied in them might most appropriately be aligned with current swap

instrument classifications used by the industry, and with definitions

employed by, e.g., the International Swaps and Derivatives Association

(``ISDA''), the Edison Electric Institute, the North American Energy

Standards Board, and others.

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.\47\ Multi-asset swaps are those that do not have one

easily identifiable primary underlying notional item within the

Commission's jurisdiction. The Dodd-Frank Act 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).'' \48\ The Commission requests

comment concerning how such swaps should be treated with respect to

swap data reporting for historical swaps, 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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\47\ See Swap Data NPRM, supra note 20, at 76586.

\48\ Dodd-Frank Act Sec. 721(21), CEA Sec. 1a(47)(D).

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The initial data report for historical swaps in existence as of or

after publication of this proposed rule would also be required to

include the Unique Counterparty Identifier of the reporting

counterparty (as defined in part 45),\49\ and the reporting

counterparty's internal system identifiers for the non-reporting

counterparty and the particular swap transaction in question.

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\49\ The Commission intends to take the need for reporting

counterparties to obtain Unique Counterparty Identifiers into

account in setting the effective date for the data reporting rules

in part 45.

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The proposed rule would give non-reporting counterparties an

additional 180 days after the compliance date specified in the

Commission's final part 45 rules for data reporting before they would

be required to obtain and use a Unique Counterparty Identifier in

connection with pre-enactment and transition swaps. The Commission is

proposing this additional time because it understands that the majority

of non-reporting counterparties are likely to be non-SD/MSP

counterparties. While SDs and MSPs are likely to have infrastructure in

place that can incorporate and track Unique Counterparty Identifiers,

non-SD-MSP counterparties could need to acquire new automated systems

or undertake modifications of existing systems in order to incorporate

identifiers. The Commission requests comment concerning the

appropriateness of this additional time, concerning the length of the

additional time provided, and concerning whether the Commission should

differentiate further between SD and MSP counterparties versus non-SD/

MSP counterparties with respect to use of Unique Counterparty

Identifiers for non-reporting counterparties to pre-enactment and

transition swaps.

The proposed rule also requires the reporting counterparty to

report the master agreement identifier (if any) used by the reporting

counterparty's automated systems to identify the master agreement

governing a pre-enactment or transition swap. This information would

allow the Commission and other regulators to aggregate transactional

data to calculate net or gross exposure of a particular counterparty.

The Commission requests comment concerning whether its final swap data

recordkeeping and reporting regulations for pre-enactment and

transition swaps should require such reporting of a master agreement

identifier.

The Commission requests comment concerning the appropriateness and

adequacy of these initial data report requirements. Additionally, the

Commission requests comment on the appropriate method for identifying

the association of an individual swap transaction with a particular

master agreement or with a swap portfolio, in order to identify

individual swaps that may be subject to close-out netting and other

provisions typical in portfolio compression.\50\ Identifying this

association could be a necessary means of enabling regulators to

determine a counterparty's net exposure (current or future) on the

basis of transactional data reported to SDRs. In particular, the

Commission requests comment on whether reporting of a master agreement

identifier as provided in this proposed rule is needed in this

connection and would provide a workable means of achieving this goal.

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\50\ The Commission's proposed rule regarding confirmation,

portfolio reconciliation and portfolio compression requirements for

SDs and MSPs, 17 CFR part 23, defines portfolio compression as a

mechanism whereby substantially similar transactions among two or

more counterparties are terminated and replaced with a smaller

number of transactions of decreased notional value, in an effort to

reduce the risk, cost, and inefficiency of maintaining unnecessary

transactions on the counterparties' books. See CFTC Notice of

Proposed Rulemaking: Confirmation, Portfolio Reconciliation and

Portfolio Compression Requirements for Swap Dealers and Major Swap

Participants, 75 FR 81519 (Dec. 28, 2010).

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The Commission has chosen to propose limited requirements for

recordkeeping and initial data reports concerning pre-enactment and

transition swaps because it understands that the current recordkeeping

and reporting systems that some counterparties to such swaps have at

present might not be able to fulfill, with respect to historical swaps,

recordkeeping and reporting requirements as extensive as those proposed

in part 45. In these circumstances, the Commission believes it is

appropriate to limit the burden imposed on such counterparties, to the

extent that this can be done in a way

[[Page 22839]]

that is consistent with the requirements of the Dodd-Frank Act and the

Commission's need for data concerning historical swaps. The Commission

believes, however, that the limited set of minimum primary economic

terms data set forth in this proposed rule with respect to historical

swaps is the minimum necessary to give regulators a picture of the risk

exposures and counterparty participation in such swaps at the minimum

level necessary for the Commission and other regulators to fulfill

their regulatory responsibilities. The Commission requests comment

concerning the appropriateness of this approach to initial data

reporting for pre-enactment and transition swaps.

Regarding ongoing reporting of required swap continuation data

during the remaining existence of a pre-enactment or transition swap

after the compliance date, the proposed rule follows the life cycle

approach for credit swaps and equity swaps, and the state or snapshot

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

swaps. This same distinction is made in the Commission's Swap Data

NPRM, which sets forth the Commission's reasons for making this

distinction, reasons which also apply with respect to part 46. The

Commission believes that this unified approach to swap data reporting

rules for pre-enactment, transition, and post-compliance-date swaps

will minimize recordkeeping and swap data reporting burdens for

industry and provide a coherent and consistent picture of the overall

swap market to regulators. Since the proposed part 45 continuation data

reporting requirements are aligned with the approach taken in the SEC's

proposed rules for security-based credit and equity swaps, this also

serves to avoid differing requirements for security-based swaps and

swaps. The Commission requests comment concerning whether required

reporting of the same swap continuation data for pre-enactment and

transition credit swaps and equity swaps, in line with the requirements

of proposed part 45 and of the SEC's proposed rules, is appropriate in

this connection.

For pre-enactment or transition interest rate swaps, currency

swaps, and other commodity swaps, this proposed rule also limits

continuation data reporting obligations for non-SD/MSP reporting

counterparties. Specifically, the proposal requires that SD or MSP

reporting counterparties must meet continuation data reporting

requirements for pre-enactment and transition swaps in those asset

classes that are the same as the continuation data reporting

requirements of proposed part 45 for swaps in those asset classes.

While non-SD/MSP reporting counterparties for such swaps are required

to report the state data \51\ necessary to provide a daily snapshot

view of the primary economic terms of the swap, the state data that

must be reported by non-SD/MSP reporting counterparties for such swaps

is limited to the state data available to the non-SD/MSP reporting

counterparty on the compliance date. This may consist of only the data

elements contained in the table of minimum primary economic terms for

various swap asset classes, as set forth in Appendix 1 to part 46, if

that is all that was available to the non-SD/MSP reporting counterparty

on that date. This approach is designed to avoid placing undue

recordkeeping and reporting burdens on non-SD/MSP counterparties, who

are the reporting counterparties least likely to have the automated

systems needed for more extensive reporting with respect to pre-

enactment or transition swaps. The Commission requests comment

concerning the appropriateness of this approach to continuation data

reporting for pre-enactment and transition swaps.

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\51\ For purposes of this proposed rule, ``state data'' has the

meaning defined in part 45 of this chapter. See Swaps Data NPRM,

supra note 20, at 76599.

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Data reporting for historical swaps in existence as of enactment of

the Dodd-Frank Act but expired or terminated prior to publication of

this proposed rule. For historical swaps in existence as of enactment

of the Dodd-Frank Act which expired or were terminated prior to

publication of this proposed rule, only an initial data report would be

required.\52\ For such swaps, the proposed rule would require that the

reporting counterparty report such information relating to the terms of

the transaction as was in that counterparty's possession as of issuance

of the relevant Commission IFR.\53\ This information would be permitted

to be reported in the format in which it was kept by the reporting

counterparty.\54\

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\52\ By its nature, continuation data reporting occurs during

the continuation of a swap prior to its expiration or termination.

\53\ Pre-Enactment Swaps IFR, supra note 15, and Transition

Swaps IFR, supra note 18.

\54\ This could include submission of a PDF file.

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Selection of reporting counterparty. This proposed rule provides

that determination of which counterparty to a pre-enactment or

transition swap is the reporting counterparty for that swap shall be

made according to Dodd-Frank Act's 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 proposed rule establishes a

mechanism for counterparties to follow in choosing the counterparty to

report in situations where both counterparties have the same

hierarchical status. Where both counterparties are SDs, or both are

MSPs, or both are non-SD/MSP counterparties, the proposed rule requires

the counterparties to agree as on term of their swap transaction which

counterparty will fulfill reporting obligations. The proposed rule also

provides 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, preliminarily, that this approach may be necessary in order

to ensure compliance with reporting requirements in such situations. In

these respects, the proposed rule mirrors the provision of the part 45

Swap NPRM regarding selection of the reporting counterparty.

The proposed rule also provides that determination of the reporting

counterparty shall be made with respect to the current counterparties

to the swap as of the compliance date (for historical swaps in

existence as of that date) or as of the prior expiration or termination

of the swap (for historical swaps expired or terminated prior to the

compliance date), regardless of who the counterparties to the swap were

when it was originally executed.

As noted above, where both counterparties have the same

hierarchical status, the proposed rule calls for the counterparties to

agree as one term of their swap transaction which counterparty will

fulfill reporting obligations. In the case of a historical swap

executed prior to publication of this proposed rule, for which the

agreement to enter into the swap has already been made, agreement by

the counterparties on selection of the reporting counterparty would

require negotiation occurring after the agreement to enter into the

swap was made, and could require amendment of the agreement to enter

into the swap in this respect. The Commission requests comment

concerning how two SD counterparties, two MSP counterparties, or two

non-SD/MSP counterparties should select the reporting counterparty for

a pre-enactment or transition swap which was executed prior to the

publication date of this proposed rule, and thus does not include an

agreement term selecting the reporting counterparty. The Commission

also requests comment concerning whether its final data recordkeeping

and

[[Page 22840]]

reporting rules for historical swaps should prescribe a method for

selecting a reporting counterparty in such circumstances. The

Commission may include such a method in the final data recordkeeping

and reporting rules for historical swaps.

The Commission has received comments regarding the part 45 Swap

NPRM suggesting that, where only one counterparty to a swap is a U.S.

person, the counterparty designated as the reporting counterparty under

the hierarchical approach based on the Dodd-Frank Act and discussed

above should be applied in the same way as for a swap where both

counterparties are U.S. persons. This would mean, for example, that for

a swap between a non-U.S. SD and a U.S. non-SD/MSP counterparty, the

non-U.S. SD would be the reporting counterparty. The Commission

requests comment concerning how the reporting counterparty for a

historical swap should be selected when one counterparty is a non-U.S.

person.

Non-duplication of previous reporting. The Commission is aware that

in some instances, reporting counterparties may have reported data

concerning pre-enactment or transition swaps to a presently-existing

trade repository prior to the compliance date. If such a repository is

registered with the Commission as an SDR as of the compliance date, the

Commission would not require reporting counterparties to report

duplicate information to the SDR, although it would require reporting

on the compliance date of any information required by this proposed

rule that had not already been reported to the SDR.

III. Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (``RFA'') \55\ 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.\56\ The regulations proposed by the Commission would affect

SDs, MSPs, and non-SD/MSP counterparties who are counterparties to one

or more pre-enactment or transition swaps. 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.\57\

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\55\ 5 U.S.C. 601 et seq.

\56\ 5 U.S.C. 601 et seq.

\57\ 47 FR 18618 (Apr. 30, 1982).

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The Commission hereby determines that SDs and MSPs should not be

considered small entities for purposes of the RFA. SDs and MSPs will

play a central role in the national regulatory scheme overseeing the

trading of swaps. With respect to SDs, the Commission previously has

determined that Futures Commission Merchants (``FCMs'') should not be

considered to be small entities for purposes of the RFA.\58\ Like FCMs,

SDs will be subject to minimum capital and margin requirements and are

expected to comprise the largest global financial firms.\59\ Similarly,

with respect to MSPs, the Commission has previously determined that

large traders are not ``small entities'' for RFA purposes.\60\ Like

large traders, MSPs will maintain substantial positions, creating

substantial counterparty exposure that could have serious adverse

effects on the financial stability of the U.S. banking system or

financial markets.

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\58\ 47 FR 18618 (Apr. 30, 1982).

\59\ Additionally, the Commission is required to exempt from

designation entities that engage in a de minimis level of swaps. Id.

at 18619.

\60\ 47 FR at 18620.

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With respect to non-SD/MSP counterparties, the Commission believes

that the proposed regulations will not create a significant economic

impact on a substantial number of small entities. The proposed rule

sets forth recordkeeping and reporting requirements with respect to

pre-enactment and transition swaps. The Commission believes that the

records the proposed rule would require to be kept are already kept by

swap counterparties in their normal course of business. The proposed

rule would require limited swap data reporting for pre-enactment or

transition swaps, and would require such reporting by non-SD/MSP

counterparties only with respect to such 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.\61\ For these reasons, the Commission does not believe

that the regulations would have a significant economic impact on a

substantial number of small entities.

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\61\ 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 rule will not

have a significant economic impact on a substantial number of small

entities. Nonetheless, the Commission specifically requests comment on

the impact this proposed rule may have on small entities.

B. Paperwork Reduction Act

Introduction. Provisions of the proposed rule would result in new

collection of information requirements within the meaning of the

Paperwork Reduction Act (``PRA'').\62\ 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 46.2 and

46.3--Swap Data Recordkeeping and Reporting: Pre-Enactment and

Transition Swaps,'' 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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\62\ 44 U.S.C. 3501 et seq.

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Information Provided by Reporting Entities/Persons. The proposed

rule sets forth recordkeeping and reporting requirements for SDs, MSPs,

and non-SD/MSP counterparties.

Recordkeeping Burdens. Under proposed Regulation 46.2, all

counterparties to pre-enactment or transition swaps would be required

to keep records relating to such swaps. For swaps that are in existence

as of or after the enactment of the Dodd-Frank Act, but are expired as

of the publication of the proposed rule, the proposed Regulation 46.2

requires that parties simply maintain the swap records already in their

possession, in the form in which they are already maintained. For

purposes of the PRA, the Commission will not calculate the burden for

this requirement; the Commission has previously calculated the burden

for this requirement in the

[[Page 22841]]

PRA analyses for the interim final rules for pre-enactment and

transition swaps.

For pre-enactment or transition swaps that are in existence as of

or after the publication of the proposed rule, the proposed Regulation

46.2 would require counterparties to keep records of a minimum set of

primary economic data relating to such swaps. The Commission believes

that counterparties already would possess this set of primary economic

data as part of their normal business practices. The proposed

regulation provides that counterparties must record certain additional

information (e.g., information relating to confirmation) only if the

counterparty is in possession of that information on or after the

publication date of the proposed rule. After the compliance date

specified in the Commission's final swap data rules in Part 45,

proposed Regulation 46.2 provides that counterparties must record

information required by recordkeeping provisions of those final swap

rules only if such information is available to the counterparty on or

after the compliance date specified in those rules.

For historical swaps that are in existence as of or after the

publication date of the proposed rule, the rule would require the

counterparties to keep the records beginning on the publication date of

the proposed rule and through the life of the swap, and for a period of

at least five years from the final termination of the swap. In

calculating the burden of this recordkeeping requirement for purposes

of the PRA, the Commission will not include the burdens occurring after

the compliance date specified in the Commission's final swap data rules

in Part 45; the burden occurring after the compliance date is and will

be subsumed by the recordkeeping burdens calculated for those final

rules.\63\ Therefore, for this proposed rule, the Commission will only

calculate a recordkeeping burden for the time period beginning with the

publication date of this proposed rule, and ending on the compliance

date. The Commission estimates this period of time to be approximately

one year. The Commission estimates that 30,300 SDs, MSPs, and non-SD/

MSP counterparties will be affected by these recordkeeping burdens

during this time.\64\ With respect to SDs and MSPs (an estimated 300

entities or persons), which will have higher levels of swap recording

activity than non-SD/MSP counterparties, the Commission estimates that

the average one-time burden per entity is 40 hours, 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

the average one-time burden per entity is 10 hours, excluding customary

and usual business practices. Therefore, the total aggregate one-time

burden is 312,000 hours. The Commission requests comment on this

estimate.

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\63\ The recordkeeping burden for those final rules is

calculated based on the number of annual counterparties to swaps and

therefore implicitly includes counterparties to pre-enactment and

transition swaps that are unexpired after the effective date.

\64\ As noted, the applicable recordkeeping burden applies

during a period estimated by the Commission to be one year. The

Commission has previously estimated that there are annually 30,000

non-SD/MSP entities who are counterparties to a swap (see, e.g., the

Commission's Paperwork Reduction Act statement for the Swap Data

Recordkeeping and Reporting Requirements Proposed Rulemaking). The

Commission has also previously estimated that there are 250 SDs and

50 MSPs. Therefore, a total of 30,300 entities would be subject to

the recordkeeping burdens of the proposed rule.

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Reporting Burdens. The reporting obligations set forth in proposed

Regulation 46.3 involve both an initial data report and ongoing

reporting of required swap continuation data relating to pre-enactment

and transition swaps. For historical swaps that are in existence as of

or after the enactment of the Dodd-Frank Act, but expired prior to

publication of the proposed rule, the rule would require only an

initial data report.

The proposed regulation provides that reporting counterparties for

pre-enactment or transition swaps must make an initial data report

relating to those swaps. The frequency of the report would be once per

swap, and the report would occur on the compliance date of the

Commission's final swap data recordkeeping and reporting regulations in

Part 45. The report would not be required to be made for historical

swaps that are expired as of the enactment of the Dodd-Frank Act. The

Commission estimates that there are 1,800 affected entities who will be

reporting counterparties for pre-enactment and transition swaps.\65\

The Commission estimates that the average one-time reporting burden for

each affected entity is 24 hours. Therefore, the total aggregate one-

time burden is 43,200 hours. The Commission requests comment on this

estimate.

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\65\ The Commission has previously estimated that there are

annually 1,500 non-SD/MSP counterparties who are a ``reporting

counterparty'' (see, e.g., the Commission's Paperwork Reduction Act

statement for the Swap Data Recordkeeping and Reporting Requirements

Proposed Rulemaking). In addition, the Commission has previously

estimated that there are 250 SDs and 50 MSPs. The Commission

believes that the number of entities who are reporting

counterparties to pre-enactment or transition swaps (that are in

existence as of or after the enactment of the Dodd-Frank Act) is

similar to the number of annual reporting counterparties. The

Commission requests comment on this estimate.

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The proposed regulation also provides for an ongoing reporting

obligation that must be fulfilled by reporting counterparties to pre-

enactment and transition swaps that are in existence as of the

compliance date specified in the Commission's final swap data reporting

rules in part 45. The burden for this ongoing reporting is and will be

subsumed by the reporting burden calculated for the Commission's final

swap data recordkeeping and reporting regulations in part 45.\66\

Therefore, for this proposed rulemaking, the Commission will not

calculate a burden estimate for ongoing reporting.

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\66\ The reporting burden for those final rules is calculated

based on the number of annual ``reporting counterparties'' to swaps

and therefore implicitly include reporting counterparties to pre-

enactment and transition swaps that are unexpired after the

effective date.

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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 collections of information are 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 collections 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 collections 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

[[Page 22842]]

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 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

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 of or accomplish any of

the purposes of the Act.

Summary of Proposed Requirements. The proposed rule provides that

counterparties to pre-enactment or transition swaps must keep records

of, and must report, certain information relating to the swaps. The

proposed reporting requirements involve both an initial report and

ongoing reporting that continues until the final termination of the

swap.

Costs. There are recordkeeping and reporting costs associated with

the proposed requirements to record and report certain swap

information. The Commission has crafted the rule to be efficient in

terms of those costs and has also attempted to minimize the burden on

non-SD/MSP counterparties. The proposed rule provides that certain

records must be kept by a counterparty only if the counterparty is in

possession of that information on or after certain dates as provided in

the regulations. The proposed rule would require a counterparty to a

pre-enactment or transition swap in existence as of or after

publication of this proposed rule to keep, at a minimum, records of a

specified set of primary economic terms data; however, the Commission

believes that counterparties already would possess this information as

part of their normal business practices. For non-SD/MSP reporting

counterparties for pre-enactment or transition swaps in the interest

rate, currency, or other commodity asset classes, the proposed rule

limits the scope of required continuation data reporting to the data

elements available to the reporting counterparty on the compliance date

specified in the Commission's final swap data rules in Part 45.

Benefits. In addition to being mandated by the Dodd-Frank Act,

reporting of data concerning pre-enactment and transition swaps is

essential to the fundamental systemic risk mitigation, transparency,

and market supervision purposes for which the Dodd-Frank Act was

enacted. This reporting is necessary to give regulators complete

information regarding the entire swap market. It provides the

Commission and other financial regulators with necessary insight

concerning the number of transactions and the number and type of

participants involved in the swap market, as well as its outstanding

notional size. Such information provides both a baseline against which

to assess the development of the swap market over time and a first step

toward a transparent and well-regulated market for swaps. Data

concerning pre-enactment and transition swaps also is necessary for the

Commission to prepare the semi-annual reports it is required to provide

to Congress.

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 Compliance Date

The Commission understands that, after the date on which the

Commission issues final swap data recordkeeping and reporting

regulations, including its final regulations concerning pre-enactment

and transition swaps, 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 for

extant DCMs or DCOs to revise their rules and procedures) 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

recordkeeping and reporting. Accordingly, it may be appropriate for the

Commission's final swap data recordkeeping and reporting regulations,

including those for pre-enactment and transition swaps, to establish a

compliance date that is later than the date the final regulations are

issued.

The Commission requests comment concerning the need for a

compliance date for its final swap data recordkeeping and reporting

regulations, including those for pre-enactment and transition swaps,

that is later than the date of their issuance; 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 compliance date which the Commission should specify in

its final regulations concerning swap data recordkeeping and 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 46

Swaps, Data recordkeeping requirements and Data reporting

requirements.

For the reasons set forth in the preamble, and pursuant to the

authority in the Commodity Exchange Act, as amended, and in particular

Sections 2(h)(5) and 4r(a), the Commission also hereby proposes to

amend Chapter 1 of Title 17 of the Code of Federal Regulations by

adding Part 46 to read as follows:

PART 46--SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS: PRE-

ENACTMENT AND TRANSITION SWAPS

Sec.

46.1 Definitions.

46.2 Recordkeeping for pre-enactment swaps and transition swaps.

46.3 Swap data reporting for pre-enactment swaps and transition

swaps.

46.4 Unique identifiers.

[[Page 22843]]

46.5 Determination of which counterparty must report.

46.6 Third-party facilitation of data reporting.

46.7 Reporting to a single swap data repository.

46.8 Data reporting for swaps in a swap asset class not accepted by

any swap data repository.

46.9 Required data standards.

46.10 Reporting of errors and omissions in previously reported data.

Appendix to Part 46--Tables of Minimum Primary Economic Terms Data

for Pre-Enactment and Transition Swaps.

Authority: Title VII, sections 723 and 729, Pub. L. 111-203,

124 Stat. 1738.

Sec. 46.1 Definitions.

Terms used in this part are defined as follows:

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.

Compliance date means the compliance date specified in the final

swap data recordkeeping and reporting regulations in part 45 of this

chapter as the date on which those regulations will be implemented,

i.e., the date on which registered entities and swap counterparties

must begin to comply with those regulations.

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).

Confirmation data means all of the terms of a swap matched and

agreed upon by the counterparties in confirming the swap.

Credit support agreement means an International Swaps and

Derivatives Association, Inc. credit support agreement or equivalent

agreement.

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.

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 Commodity Exchange Act Section 1a(25).

Electronic reporting or reporting electronically means reporting

data in compliance with Sec. 46.9 of this part. The obligation to

report electronically is not satisfied by electronic transmission of an

image of a document.

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.

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.

Major swap participant has the meaning set forth in Commodity

Exchange Act, Section 1a(33), and any Commission regulation

implementing that Section.

Master agreement means an agreement, signed by the counterparties,

providing comprehensive documentation of standard terms and conditions

covering one or more swap transactions between such counterparties.

Non-swap dealer/major swap participant counterparty means a swap

counterparty that is neither a swap dealer nor a major swap

participant.

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.

Pre-enactment swap means any swap entered into prior to enactment

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

not expired as of the date of enactment of that Act.

Reporting counterparty means the counterparty required to report

swap data pursuant to Sec. 45.5 of this chapter.

Swap data repository has the meaning set forth in Commodity

Exchange Act Section 1a(48), and any Commission regulation implementing

that Section.

Swap dealer has the meaning set forth in Commodity Exchange Act,

Section 1a(49), and any Commission regulation implementing that

Section.

Transition swap means any swap entered into on or after the

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

the compliance date specified in the final swap data reporting and

recordkeeping requirements regulations in part 45 of this chapter.

Sec. 46.2 Recordkeeping for pre-enactment swaps and transition swaps.

(a) Recordkeeping for pre-enactment and transition swaps in

existence on or after April 25, 2011. Each counterparty to any pre-

enactment swap or transition swap that is in existence on or after

April 25, 2011 shall keep the following records concerning each such

swap:

(1) Minimum records required. The minimum records required to be

kept concerning each pre-enactment swap and transition swap shall be as

follows:

(i) Each counterparty shall keep records of all of the minimum

primary economic terms data specified in the appendix to this part.

(ii) If at any time on or after April 25, 2011 a counterparty is in

possession of a confirmation of the swap executed by the

counterparties, the counterparty shall keep records of all terms of

that confirmation.

(2) Additional records required to be kept if possessed by a

counterparty. In addition to the minimum records required pursuant to

paragraph (a)(1) of this part, a counterparty that is in possession at

any time on or after April 25, 2011 of any of the following

documentation shall keep copies thereof:

(i) Any master agreement governing the swap, and any modification

or amendment thereof.

(ii) Any credit support agreement or equivalent documentation

relating to the swap, and any modification or amendment thereof.

(3) Records created or available after the compliance date. In

addition to the records required to be kept pursuant to paragraphs

(a)(1) and (2) of this section, each counterparty to any pre-enactment

swap or transition swap that remains in existence on the compliance

date shall keep for each such swap, from the compliance date forward,

all of the records required to be kept by Sec. 45.2 of this chapter,

to the extent that any such records are created by or become available

to the counterparty on or after the compliance date.

(b) Recordkeeping for pre-enactment and transition swaps expired or

terminated prior to April 25, 2011. Each counterparty to any pre-

enactment swap or transition swap that is expired or terminated prior

to April 25, 2011 shall keep the following records concerning each such

swap:

(1) Pre-enactment swaps expired prior to April 25, 2011. Each

counterparty to any pre-enactment swap that expired or was terminated

prior to April 25, 2011 shall retain the information and documents

relating to the terms of the transaction that were possessed by the

counterparty on or after October 14,

[[Page 22844]]

2010 (17 CFR 44.00 through 44.02). Such information may be retained in

the format in which it existed on or after October 14, 2010, or in such

other format as the counterparty chooses to retain it. This paragraph

(b)(1) does not require the counterparty to create or retain records of

information not in its possession on or after October 14, 2010, or to

alter the format, i.e., the method by which the information is

organized and stored.

(2) Transition swaps expired prior to April 25, 2011. Each

counterparty to any transition swap that expired or was terminated

prior to April 25, 2011 shall retain the information and documents

relating to the terms of the transaction that were possessed by the

counterparty on or after December 17, 2010 (17 CFR 44.03). Such

information may be retained in the format in which it existed on or

after December 17, 2010, or in such other format as the counterparty

chooses to retain it. This paragraph (b)(2) does not require the

counterparty to create or retain records of information not in its

possession on or after December 17, 2010, or to alter the format, i.e.,

the method by which the information is organized and stored.

(c) Retention period. All records required to be kept by this Sec.

46.2 shall be kept from the applicable dates specified in paragraph (b)

of this section 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) Retrieval. Records required to be kept pursuant to this Sec.

46.2 shall be retrievable as follows:

(1) Each record required to be kept by a counterparty that is a

swap dealer or major swap participant shall be readily accessible via

real time electronic access by the counterparty 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.

(2) Each record required to be kept by a non-swap dealer/major swap

participant counterparty shall be retrievable by the counterparty

within three business days through the period during which it is

required to be kept.

(e) Inspection. All records required to be kept pursuant to this

section 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. Copies of all such records shall be provided, at

the 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. 46.3 Swap data reporting for pre-enactment swaps and transition

swaps.

(a) Reporting for pre-enactment and transition swaps in existence

on or after April 25, 2011. (1) Initial data report. For each pre-

enactment swap or transition swap in existence on or after April 25,

2011, the reporting counterparty shall report electronically to a swap

data repository (or to the Commission if no swap data repository for

swaps in the asset class in question is available), on the compliance

date, the following:

(i) All of the terms of the confirmation that are recorded in the

automated systems of the reporting counterparty, if the terms so

reported include all of the minimum primary economic terms data

specified in the appendix to this part; or all of the minimum primary

economic terms data specified in the appendix to this part;

(ii) The Unique Counterparty Identifier required pursuant to Sec.

46.4 of this part; and

(iii) The following additional identifiers:

(A) The internal counterparty identifier used by the automated

systems of the reporting counterparty to identify the non-reporting

counterparty;

(B) The internal transaction identifier used by the automated

systems of the reporting counterparty to identify the swap; and

(C) The internal master agreement identifier (if any) used by the

automated systems of the reporting counterparty to identify the master

agreement governing the swap.

(2) Non-duplication of previous reporting. If the reporting

counterparty for a pre-enactment or transition swap has reported any of

the information required as part of the initial data report by

paragraph (a) of this section to a trade repository prior to the

compliance date, and if as of the compliance date that repository has

registered with the Commission as a swap data repository, then:

(i) The counterparty shall not be required to report such

previously reported information to the swap data repository again;

(ii) The counterparty shall be required to report to the swap data

repository on the compliance date any information required as part of

the initial data report by Sec. 46.3(a) of this part that has not been

reported prior to the compliance date; and

(iii) The initial data report required by paragraph (b)(2) of this

section and all subsequent data reporting concerning the swap shall be

made to the same swap data repository to which data concerning the swap

was reported prior to the compliance date (or to its successor in the

event that it ceases to operate, as provided in part 49 of this

chapter).

(3) Reporting of required swap continuation data for a credit swap

or equity swap. For each pre-enactment or transition swap in either the

credit swap or equity swap asset class, that is in existence on or

after April 25, 2011, throughout the existence of the swap following

the compliance date, the reporting counterparty, as defined in part 45

of this chapter, shall report all required swap continuation data

required to be reported for credit swaps or equity swaps under part 45

of this chapter.

(4) Reporting of required swap continuation data for an interest

rate swap, other commodity swap, or currency swap. For each pre-

enactment or transition swap in the interest rate, other commodity, or

currency asset class, that is in existence on or after April 25, 2011,

throughout the existence of the swap following the compliance date, the

reporting counterparty as defined in part 45 shall report required swap

continuation data as follows:

(i) Swaps for which the reporting counterparty is a swap dealer or

major swap participant. For each pre-enactment swap or transition swap

in existence on or after April 25, 2011, for which the reporting

counterparty as defined in part 45 is a swap dealer or major swap

participant, the reporting counterparty shall report to a swap data

repository electronically all required swap continuation data

concerning the swap as provided in part 45.

(ii) Swaps for which the reporting counterparty is a non-swap

dealer/major swap participant counterparty. For each pre-enactment swap

or transition swap in existence on or after April 25, 2011, for which

the reporting counterparty as defined in part 45 is a non-swap dealer/

major swap participant counterparty, the reporting counterparty shall

report to a swap data repository electronically all required swap

continuation data concerning the swap as provided in part 45. However,

notwithstanding any other provision of part 45, the state data reported

to provide a snapshot view, on a daily basis, of the primary economic

terms of the swap shall be the greater of the following which is in the

possession of

[[Page 22845]]

the reporting counterparty on the compliance date:

(A) The state data, or any part thereof, for the swap as defined in

part 45 of this chapter; or

(B) All of the data elements contained in the table of minimum

primary economic terms for pre-enactment or transition swaps in the

asset class of the swap in question that is included in the appendix to

this part.

(b) Reporting for pre-enactment and transition swaps expired or

terminated prior to April 25, 2011. (1) Pre-enactment swaps expired or

terminated prior to April 25, 2011. For each pre-enactment swap which

expired or was terminated prior to April 25, 2011, the reporting

counterparty shall report to a swap data repository (or to the

Commission if no swap data repository for swaps in the asset class in

question is available), on the compliance date, such information

relating to the terms of the transaction as was in the reporting

counterparty's possession on or after October 14, 2010 (17 CFR 44.00

through 44.02). This information can be reported via any method

selected by the reporting counterparty.

(2) Transition swaps expired or terminated prior to April 25, 2011.

For each transition swap which expired or was terminated prior to April

25, 2011, the reporting counterparty shall report to a swap data

repository (or to the Commission if no swap data repository for swaps

in the asset class in question is available), on the compliance date,

such information relating to the terms of the transaction as was in the

reporting counterparty's possession on or after December 17, 2010 (17

CFR 44.03). This information can be reported via any method selected by

the reporting counterparty.

Sec. 46.4 Unique identifiers.

The unique identifier requirements for swap data reporting with

respect to pre-enactment or transition swaps shall be as follows:

(a) By the compliance date, the reporting counterparty (as defined

by part 45 of this chapter) for each pre-enactment or transition swap

in existence on or after April 25, 2011, for which an initial data

report is required by this part 46, shall obtain a Unique Counterparty

Identifier, as provided in part 45, for itself, and shall include its

own Unique Counterparty Identifier in the initial data report

concerning the swap. With respect to that Unique Counterparty

Identifier, the reporting counterparty and the swap data repository to

which the swap is reported shall comply thereafter with all unique

identifier requirements of part 45 respecting Unique Counterparty

Identifiers.

(b) Within 180 days after the compliance date, the non-reporting

counterparty for each pre-enactment or transition swap in existence on

or after April 25, 2011 for which an initial data report is required by

this part 46, shall obtain a Unique Counterparty Identifier, as

provided in part 45, for itself, and shall provide that Unique

Counterparty Identifier to the reporting counterparty. Upon receipt of

the non-reporting counterparty's Unique Counterparty Identifier, the

reporting counterparty shall provide that Unique Counterparty

Identifier to the swap data repository to which swap data for the swap

was reported. Thereafter, with respect to the Unique Counterparty

Identifier of the non-reporting counterparty the counterparties to the

swap and the swap data repository to which it is reported shall comply

with all requirements of part 45 respecting Unique Counterparty

Identifiers.

(c) The Unique Counterparty Identifier requirements of parts 46 and

45 of this chapter shall not apply to pre-enactment or transition swaps

expired or terminated prior to April 25, 2011.

(d) The Unique Swap Identifier and Unique Product Identifier

requirements of part 45 of this chapter shall not apply to pre-

enactment or transition swaps.

Sec. 46.5 Determination of which counterparty must report.

(a) Determination of which counterparty must report swap data

concerning each pre-enactment or transition swap shall be made as

follows:

(1) If only one counterparty is an SD, the SD shall fulfill all

counterparty reporting obligations.

(2) If neither party is an SD, and only one counterparty is an MSP,

the MSP shall fulfill all counterparty reporting obligations.

(3) For each pre-enactment swap or transition swap for which 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.

(4) Notwithstanding the provisions of paragraphs (a)(1) through (3)

of this section, if only one counterparty to a pre-enactment swap or

transition swap is a U.S. person, that counterparty shall be the

reporting counterparty and shall fulfill all counterparty reporting

obligations.

(5) If a reporting counterparty selected pursuant to paragraphs

(a)(1) through (4) of this section 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.

(b) For pre-enactment and transition swaps in existence as of the

compliance date, determination of the reporting counterparty shall be

made by applying the provisions of paragraph (a) of this section with

respect to the current counterparties to the swap as of the compliance

date, regardless of whether either or both were original counterparties

to the swap when it was first executed.

(c) For pre-enactment and transition swaps for which reporting is

required, but which have expired or been terminated prior to the

compliance date, determination of the reporting counterparty shall be

made by applying the provisions of paragraph (a) of this section to the

counterparties to the swap as of the date of its expiration or

termination, regardless of whether either or both were original

counterparties to the swap when it was first executed.

Sec. 46.6 Third-party facilitation of data reporting.

Counterparties required by this part 46 to report swap data for any

pre-enactment or transition swap, while remaining fully responsible for

reporting as required by this part 46, may contract with third-party

service providers to facilitate reporting.

Sec. 46.7 Reporting to a single swap data repository.

All data reported for each pre-enactment or transition swap

pursuant to this part 46, and all corrections of errors and omissions

in previously reported data for the swap, by any registered entity or

counterparty, shall be reported to the same swap data repository to

which the initial data report concerning the swap is made (or to its

successor in the event that it ceases to operate, as provided in part

49 of this chapter).

[[Page 22846]]

Sec. 46.8 Data reporting for swaps in a swap asset class not accepted

by any swap data repository.

Should there be a swap asset class for which no swap data

repository currently accepts swap data, each counterparty required by

this part 46 to report swap data with respect to a pre-enactment or

transition swap in that asset class must report that same data at a

time and in a form and manner determined by the Commission.

Sec. 46.9 Required data standards.

In reporting swap data to a swap data repository as required by

this part 46, each reporting counterparty shall use the facilities,

methods, or data standards provided or required by the swap data

repository to which counterparty reports the data.

Sec. 46.10 Reporting of errors and omissions in previously reported

data.

(a) Each swap counterparty required by this part 46 to report swap

data 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 pre-enactment or transition interest rate swaps, currency

swaps, or other commodity swaps in existence as of the compliance date,

reporting counterparties fulfill the requirement to report errors or

omissions in state data previously reported as part of required

continuation data reporting by making appropriate corrections in their

next daily report of state data as required by this part 46 and part 45

of this chapter.

(c) Each counterparty to a pre-enactment or transition swap that is

not the reporting counterparty as determined pursuant to part 45, and

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

reported to a swap data repository 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 swap data repository,

as provided in Sec. 45.10(a) and (b) of this chapter.

(d) Unless otherwise approved by the Commission, or by the Director

of Market Oversight pursuant to part 45 of this chapter, each swap

counterparty reporting corrections to errors or omissions in data

previously reported as required by this part 46 shall report such

corrections in the same format as it reported the erroneous or omitted

data.

Appendix to Part 46--Tables of Minimum Primary Economic Terms Data for

Pre-Enactment and Transition Swaps

Minimum Primary Economic Terms Data for Pre-Enactment and Transition

Credit Swaps and Equity Swaps

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

Sample category Comment

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

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 swap dealers.

An indication of whether or not both ...............................

counterparties are major swap

participants.

An indication of whether or not either ...............................

counterparty is a swap dealer or major

swap participant.

The date and time of trade, expressed ...............................

using Coordinated Universal Time

(``CUT'').

The venue where the swap was executed. ...............................

The effective date for the swap. ...............................

The expiration date for the swap. ...............................

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 derivatives clearing

organization.

The name of the derivatives clearing ...............................

organization that will clear the swap,

if any.

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 for Pre-Enactment and Transition

Currency Swaps

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

Sample data field Comments

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

1 Contract type........................ E.g., swap, swaption, forwards,

options, basis swap, index

swap, basket swap, other.

2 Swap transaction date................ Date when the swap was entered.

[[Page 22847]]

3 Currency 1........................... International Organization for

Standardization Code.

4 Currency 2........................... International Organization for

Standardization Code.

5 Notional amount 1.................... For currency one.

6 Notional amount 2.................... For currency two.

7 Settlement agent of the reporting ID of the settlement agent.

counterparty.

8 Settlement agent of the non-reporting ID of the settlement agent.

counterparty.

9 Settlement currency.................. If applicable.

10 Exchange rate 1..................... At the moment of trade/

agreement.

11 Exchange rate 2..................... At the moment of trade/

agreement, if applicable.

12 Swap delivery type.................. Cash or physical.

13 Expiration date..................... Expiration date of the

contract.

Any other primary economic term(s) of

the swap matched by the counterparties

in verifying the swap.

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

Minimum Primary Economic Terms Data for Pre-Enactment and Transition

Interest Rate Swaps

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

Sample data field Comment

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

1 Contract type........................ E.g., swap, swaption, option,

basis swap, index swap, etc.

2 Swap transaction date................ Date when the swap was entered.

3 Swap effective date.................. Effective date of the contract.

4 Swap end-date........................ Expiration date of the

contract.

5 Notional amount one.................. The current active notional in

local currency.

6 Notional currency one................ International Organization for

Standardization code of the

notional currency.

7 Notional amount two.................. The second notional amount

(e.g., receiver leg).

8 Notional currency two................ International Organization for

Standardization code of the

notional currency.

9 Payer (fixed rate)................... Is the reporting party a fixed

rate payer? Yes/No/Not

applicable.

10 Fixed leg payment frequency......... How often will the payments on

fixed leg be made.

11 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.

12 Option type......................... E.g., put, call, straddle.

13 Fixed rate..........................

14 Fixed rate day count fraction.......

15 Floating rate payment frequency.....

16 Floating rate reset frequency.......

17 Floating rate index name/rate period

18 Leg 1............................... If two floating legs, report

what is paid.

19 Leg 2............................... If two floating legs, report

what is received.

Any other primary economic term(s) of

the swap matched by the counterparties

in verifying the swap.

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Minimum Primary Economic Terms Data for Pre-Enactment and Transition

Other Commodity Swaps

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Sample data field Comment

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1 Contract type........................ E.g., swap, swaption, option,

etc.

2 Swap transaction date................ Date when the swap was entered.

3 Quantity............................. The unit of measure applicable

for the quantity on the swap.

4 Start date........................... Predetermined start date from

which payments will be

exchanged.

5 End-date............................. Predetermined end date from

which payments will be

exchanged.

6 Buyer pay index...................... The published price as paid by

the buyer.

7 Seller pay index..................... The published price as paid by

the seller.

8 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).

9 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).

10 Price............................... E.g., fixed price, the heat

rate value, etc.

11 Price unit.......................... The unit of measure applicable

for the price on the

transaction.

12 Grade............................... E.g., the grade of oil or

refined product being

delivered.

Any other primary economic term(s) of

the swap matched by the counterparties

in verifying the swap.

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[[Page 22848]]

Issued in Washington, DC, on April 6, 2011, by the Commission.

David A. Stawick,

Secretary of the Commission.

[FR Doc. 2011-9446 Filed 4-22-11; 8:45 am]

BILLING CODE 6351-01-P

Last Updated: April 25, 2011