Federal Register, Volume 77 Issue 171 (Tuesday, September 4, 2012)[Federal Register Volume 77, Number 171 (Tuesday, September 4, 2012)]
[Notices]
[Pages 53870-53873]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-21612]
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COMMODITY FUTURES TRADING COMMISSION
Availability of a Legal Entity Identifier Meeting the
Requirements of the Regulations of the Commodity Futures Trading
Commission and Designation of Provider of Legal Entity Identifiers To
Be Used in the Recordkeeping and Swap Data Reporting
AGENCY: Commodity Futures Trading Commission.
ACTION: Order.
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SUMMARY: On July 23, 2012, the Commodity Futures Trading Commission
issued an order designating DTCC-SWIFT as the provider of the legal
entity identifiers (LEIs) which will be used by registered entities and
swap counterparties in complying with the CFTC's swap data reporting
regulations. These identifiers will be known as CFTC Interim Compliant
Identifiers (CICIs) until establishment of a global LEI system, and
will transition into the global LEI system when it is established. The
order included findings of fact by the Commission that the CICI
provided by DTCC-SWIFT is the only available identifier that satisfies
all requirements of the Commission's swap data reporting rules, and can
be provided to market participants sufficiently in advance of the
initial compliance date for swap data reporting to enable compliance
with the rules. The designation is made for a limited term of two
years, and is subject to four conditions specified in the order.
FOR FURTHER INFORMATION CONTACT: David Taylor, Associate Director,
Division of Market Oversight, 202-418-5488, [email protected]; or Srini
Bangarbale, Chief Data Officer, Office of Data and Technology, 202-418-
5315, [email protected]; Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street NW., Washington, DC 20851.
SUPPLEMENTARY INFORMATION: Section 21(b) of the Commodity Exchange Act,
(``CEA''), added to the CEA by Section 728 of the Dodd-Frank Act,
directs the Commission to prescribe standards that specify the data
elements for each swap that shall be reported to, and collected and
maintained by, swap data repositories. Pursuant to this authority, part
45 of the Commission's regulations establishes recordkeeping and data
reporting requirements for swaps subject to the jurisdiction of the
Commission.\1\ Section 45.6, Legal entity identifiers, includes a legal
entity identifier (``LEI'') for each swap counterparty among the data
elements required to be reported for each swap. That section provides
that:
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\1\ 17 CFR part 45, Swap Data Recordkeeping and Reporting
Requirements, 77 FR 2136 (Jan. 13, 2012), http://www.cftc.gov/idc/groups/public/@lrfederalregister/documents/file/2011-33199a.pdf.
Each counterparty to any swap subject to the jurisdiction of the
Commission shall be identified in all recordkeeping and all swap
data reporting pursuant to this part by means of a single legal
entity identifier as specified in this section.\2\
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\2\ Sec. 45.6.
As noted in part 45, and stated in the CPSS-IOSCO Report on OTC
Derivatives Data Reporting and Aggregation Requirements, ``a standard
system of LEIs is an essential tool for aggregation of OTC derivatives
data.'' \3\
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\3\ Committee on Payment and Settlement Systems and Technical
Committee of the International Organization of Securities
Commissions, Report on OTC Derivatives Data Reporting and
Aggregation Requirements (Dec. 2011).
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In order to enable compliance with this requirement by registered
entities and swap counterparties subject to the Commission's
jurisdiction, part 45 provides that:
The Commission shall determine, as provided in paragraphs
(e)(1)(i) through (iii) of this section, whether a legal entity
identifier system that satisfies the requirements set forth in this
section is
[[Page 53871]]
available to provide legal entity identifiers for registered
entities and swap counterparties required to comply with this
part.\4\
\4\ Sec. 45.6(e)(1).
Section 45.6(e)(1)(i) specifies five factors that the Commission shall
consider in making this determination.
Section 45.6 emphasizes that making this determination and having
LEIs available for identification of swap counterparties when swap data
reporting commences as of the compliance dates set forth in part 45 is
highly important to achieving the systemic risk mitigation,
transparency, and market abuse prevention purposes of the Dodd-Frank
Act. For this reason, Sec. 45.6(e)(1)(ii) provides that:
In making this determination, the Commission shall consider all
candidates meeting the criteria set forth in paragraph (e)(1)(i) of
this section, but shall not consider any candidate that does not
demonstrate that it in fact can provide LEIs for identification of
swap counterparties in swap data reporting commencing as of the
compliance dates set forth in this part.
In addition, Sec. 45.6(e)(1)(iii) provides that:
The Commission shall make this determination at a time it
believes is sufficiently prior to the compliance dates set forth in
this part to enable issuance of LEIs far enough in advance of those
compliance dates to enable compliance with this part.
If the Commission determines that a provider whose LEI system
provides LEIs meeting the requirements of part 45 is available, the
rule calls for the Commission to inform registered entities and swap
counterparties subject to the Commission's jurisdiction of where they
can obtain the LEIs needed for compliance with part 45, by issuing an
order designating the provider of the LEIs to be used for that purpose.
Section 45.6(e)(2) provides that:
If the Commission determines pursuant to paragraph (e)(1) of
this section that such a legal entity identifier system is
available, the Commission shall designate the legal entity
identifier system as the provider of legal entity identifiers to be
used in recordkeeping and swap data reporting pursuant to this part,
by means of a Commission order that is published in the Federal
Register and on the Web site of the Commission, as soon as
practicable after such determination is made. The order shall
include notice of this designation, the contact information of the
LEI utility, and information concerning the procedure and
requirements for obtaining legal entity identifiers.
Once the Commission has determined that an LEI meeting the
requirements of part 45 is available, and has designated its provider
as set forth in Sec. 45.6(e)(2), registered entities and swap
counterparties subject to the Commission's jurisdiction are required to
use the LEIs furnished by that provider in recordkeeping and swap data
reporting. Section 45.6(f)(1) provides that:
When a legal entity identifier system has been designated by the
Commission pursuant to paragraph (e) of this section, each
registered entity and swap counterparty shall use the legal entity
identifier provided by that system in all recordkeeping and swap
data reporting pursuant to this part.
II. Determination and Designation Process
A. Request for Submissions
Pursuant to these provisions of part 45, on March 9, 2012, the
Commission issued a public request for submissions from industry
participants that wished to be considered for designation by the
Commission as the provider of LEIs to be used in complying with the
rule.\5\
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\5\ Commodity Futures Trading Commission Press Release, CFTC
announces process to designate the provider of CFTC Interim
Compliant Identifiers, March 9, 2012.
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The Commission's request for submissions included provisions
relating to international aspects of LEIs. It reiterated that part 45
calls for issuance of the identifier used in recordkeeping and swap
data reporting under CFTC jurisdiction, and for any utility formed to
issue such identifiers, to be subject to international supervision by a
governance structure that includes the Commission and other financial
regulators in any jurisdiction requiring use of the legal entity
identifier pursuant to applicable law. It noted the Commission's
ongoing participation in an international process, coordinated by the
Financial Stability Board (``FSB''), to establish governance principles
and reference data requirements for a global legal entity identifier,
to be contained in recommendations by an international regulatory LEI
Expert Group (including the Commission) for consideration by the FSB in
May 2012. In light of that process, and as requested by other
international financial regulators, the request for submissions stated
that the Commission would refer to the identifier to be used in
reporting under part 45 as the CFTC Interim Compliant Identifier
(``CICI'') until after the FSB Plenary meeting in May 2012, and would
defer its designation of the provider of CICIs until after that
meeting. The request also reiterated that, as provided in part 45, the
Commission plans to adopt the governance principles and LEI reference
data requirements endorsed by the FSB, making them applicable to
identification of swap counterparties under CFTC jurisdiction. The
request further stated that, once these steps are completed, the
Commission anticipates that the identifier then called the CICI will
transition into the global LEI, and be referred to as the LEI.
In its request for submissions, the Commission stated that
submitters must be prepared to demonstrate that they meet all of the
requirements set forth in part 45. It further notified submitters that:
(1) The Commission's determination and designation process would
include an on-site, live demonstration for Commission staff of the
process to be used for issuance of CICIs; (2) the Commission's
designation will be for a limited term of two years, and be terminable
on six months' notice if a different central utility for the global LEI
is chosen later through the FSB process and becomes operational; and
(3) subject to applicable confidentiality laws, the Commission's
designation will require that the designated LEI utility must make
public all CICI data, operations, identity validation processes and
audit trail, and to pass to any successor LEI utility, free of charge,
all CICI data and all CICI intellectual property rights.
B. Requirements for Designation as the LEI Utility
Four parties expressed an interest in becoming the LEI provider. To
assess their suitability, the Commission required the submitters to
provide both (1) a written demonstration of their ability to meet the
Commission's part 45 requirements, and (2) an on-site, live
demonstration of their process for issuing CICIs.
1. Written Demonstration of Ability To Meet Commission Requirements
Detailed requirements for the written demonstration were provided
to each submitter. The requirements document stated that, as provided
in Sec. 45.6(e)(1)(i) of the Commission's regulations, in determining
whether a CICI meeting the requirements of part 45 is available, and if
so designating its provider as the utility that will provide the CICI,
the Commission would consider, without limitation, the following five
factors:
Whether the CICI provided by the utility is issued under,
and conforms to, ISO Standard 17442, Legal Entity Identifier (LEI).
Whether the CICI provided by the utility complies with all
of the technical principles set forth in part 45.
[[Page 53872]]
Whether the CICI utility complies with all of the
governance principles set forth in part 45.
Whether the CICI utility has demonstrated that it in fact
can provide CICIs for identification of swap counterparties in swap
data reporting commencing as of the compliance dates set forth in part
45.
The acceptability of the CICI utility to industry
participants required to use the LEI in complying with part 45.
The requirements document also described the functions to be
performed by the CICI system, including, but not limited to, the
following:
Utility Administration (e.g., accounting; audit; CICI fee
collection; billing and payment; communications, human resources; and
legal department).
Data Management (e.g., receive registrant data; establish
and maintain registrant data record; apply validation and data quality
assurance processes to registrant data; issue unique CICI; transmit
CICI to registrant; maintain and update data record history; maintain
and update required metadata; maintain complete audit trail of all
records, data, and messages; and maintain appropriate system
safeguards).
Verification of Entity Identification (e.g., cleanse and
validate identification data submitted through both self-registration
and third-party registration; connect to and communicate with national
business registers in jurisdictions world-wide; provide identification
data challenge services; verify uniqueness of submitted identification
information; provide local verification in countries world-wide; visit
provided addresses to verify entity presence; process entity messages
regarding identification data, for example concerning corporate
actions; perform periodic re-verification; and identify the
verification level at which each record has been verified).
Public Database (e.g., establish and maintain free public
database of all CICIs; provide 24/7 internet query facility; provide
near-real time response to queries; provide complete, current CICI
directory; and provide help desk and assistance services for the
public).
CICI Registration Services (e.g., provide local language
services world-wide; respond to market participant queries; receive and
process both electronic and paper registration requests; and provide
timely processing of CICI requests and timely assignment of CICIs).
Compliance (e.g., monitor and ensure adherence to
technical and governance principles, to operational and technical
standards and protocols, to regulatory policies concerning access to
hierarchical data; and to applicable laws; regulatory oversight
reporting; compliance with directives of international Regulatory
Oversight Committee, when established; and maintain capability to
transfer all CICI data to international central utility when
established).
In addition, the requirements document provided that each submitter
was required to provide detailed information concerning its relevant
background and experience. This information was required to include
details of the submitter's corporate and organization background and
ownership and legal structure; its financial status; and its plan for
financing establishment and operation of the CICI utility on a non-
profit, cost-recovery basis, without charging market participants any
fees that could reasonably be construed to constitute a barrier to
participation in financial markets. Each submitter was also required to
include a detailed description of its experience in assigning,
maintaining, and managing validated corporate or legal entity
identifiers, and its experience with gathering, cleansing, maintaining,
and using reference data associated with identifying corporate or legal
entities.
Each submitter provided a document to the Commission in response to
the requirement for a written demonstration, as set forth above.
2. On-site, Live Demonstration of Complete CICI Issuance Process
Each submitter was also required to provide an on-site, live
demonstration of its systems, operations, and processes for obtaining,
cleansing, and using reference data to validate the identity of a legal
entity and for issuing a CICI to such an entity. Submitters were asked
to provide examples of preliminary identifiers and test files or test
identifiers already prepared for or provided to swap counterparties for
use in automated system preparation and testing in preparation for swap
data reporting beginning on the applicable compliance date established
in part 45. The demonstration was required to include live presentation
of the submitter's web portal, file transmission facilities, and test
processes that would be available to registered entities and swap
counterparties for use in the CICI issuance process. The demonstration
was also required to include live presentation of the submitter's
procedures and staffing for obtaining entity reference data, entity
challenge with respect to reference data, de-duplication of preliminary
identifiers, and assignment of unique identifiers to all swap
counterparties subject to the Commission's jurisdiction.
All four submitters provided some form of on-site, live
demonstration to Commission staff.
D. Evaluation Criteria
The requirements document set forth criteria the Commission would
use in evaluating the submitters and the CICIs they provide, for the
purpose of determining whether a CICI meeting the requirements of part
45 is available, and if so, designating its provider as the source of
CICIs to be used in compliance with part 45. Among other things, the
four submissions were evaluated based on the following criteria:
1. Evidence that the submitter can in fact provide all CICIs
required by market participants for the purpose of complying with part
45 of the Commission's regulations, and can do so sufficiently in
advance of July 16, 2012, to enable market participants to be ready to
comply as of that date. As provided in Sec. 45.6 of the Commission's
regulations, submitters that do not demonstrate this will not be
considered further.
2. Whether the written demonstration completely and satisfactorily
addresses all of the Commission's requirements addressed in the
requirements document. Incomplete submissions will not be considered
further.
3. Evidence of the submitter's satisfactory understanding of the
Commission's requirements with respect to the CICI utility, as set
forth in the requirements document.
4. Evidence satisfying the Commission that the submitter has
commenced setting up, will fully set up before June 1, 2012, and can
satisfactorily manage and maintain, a CICI utility meeting all of the
Commission's requirements, as set forth in the requirements document
and in part 45 of the Commission's regulations. Submissions not
providing such evidence will not be considered further.
5. A successful, onsite, live, complete demonstration for
Commission staff of the submitter's systems, operations, and processes
for obtaining, cleansing, and using level one reference data to
validate the identity of a legal entity and issuing a CICI to such an
entity. Submitters who do not provide such a successful demonstration
will not be considered further.
6. The submitter's relevant experience, as described in the
requirements document, in assigning, maintaining, and managing
validated corporate or legal entity identifiers, and the submitter's
experience with gathering, cleansing, maintaining, and
[[Page 53873]]
using reference data associated with identifying corporate or legal
entities.
7. A workable plan for financing the non-profit, cost-recovery-
based establishment and operation of the CICI utility, without charging
market participants any fee reasonably deemed to constitute a barrier
to market participation.
III. Findings and Order
Now, therefore, based on the statutory provisions and Commission
regulations cited above, and on the written submissions and on-site,
live demonstrations provided by the submitters, the Commission makes
the following findings and rulings:
The Commission FINDS that:
1. An LEI is available that: satisfies the requirements set forth
in Sec. 45.6 of the Commission's regulations; is provided by a utility
fully set up by June 1, 2012; and can be provided to market
participants sufficiently in advance of the initial compliance date for
swap data reporting to enable compliance with the Commission's
regulations. That LEI is the LEI provided by DTCC-SWIFT. DTCC-SWIFT met
all of the Commission's requirements and evaluation criteria set forth
in part 45 of the Commission's regulations and the requirements
document.
2. The LEI provided by DTCC-SWIFT is the only available LEI that:
satisfies the requirements set forth in Sec. 45.6 of the Commission's
regulations; is provided by a utility fully set up by June 1, 2012; and
can be provided to market participants sufficiently in advance of the
initial compliance date for swap data reporting to enable compliance
with the Commission's regulations.
Therefore:
It is hereby ordered that:
1. DTCC-SWIFT is designated as the provider of legal entity
identifiers (``LEIs''), to be known as CFTC Compliant Interim
Identifiers (``CICIs'') until establishment of the global LEI system or
further action by the Commission, to be used in recordkeeping and swap
data reporting pursuant to parts 45 and 46 of the Commission's
regulations.
a. This designation is conditioned on modification of the DTCC-
SWIFT Web site and other facilities and documents used to provide
identifiers for use in complying with parts 45 and 46, to refer to the
CICI and not to refer to the LEI, the preliminary LEI, or other similar
terms including the term LEI. This shall include, without limitation,
references to the CICI rather than the LEI on the utility logo,
documentation, instructions and field labels used by DTCC-SWIFT.
b. This designation is conditioned on DTCC-SWIFT's continuing
compliance, for as long as it is authorized to provide LEIs (to be
known as CICIs until establishment of the global LEI system), by this
order or any future order of the Commission, with all of the legal
entity identifier requirements of Part 45 of the Commission's
regulations, and any related requirements as set forth in this order or
in the requirements document provided to DTCC-SWIFT during the
determination and designation process; including, without limitation,
the requirement to be subject to supervision by a governance structure
that includes the Commission and other financial regulators in any
jurisdiction requiring use of legal entity identifiers pursuant to
applicable law, for the purpose of ensuring that issuance and
maintenance of CICIs and of associated reference data adheres on an
ongoing basis to the Commission's requirements set forth in part 45.
c. This designation is further conditioned on the requirement that,
subject to applicable confidentiality laws and other applicable law,
(1) DTCC-SWIFT shall make public all CICI identifiers and associated
reference data, utility operations, and identity validation processes,
and (2) following establishment of the global LEI system by means of a
charter acceded to by the Commission, or following designation by the
Commission of a successor CICI utility, DTCC-SWIFT shall pass to any
successor CICI utility, or to the global LEI system, free of charge,
all CICI identifiers and associated reference data and all CICI
intellectual property rights.
d. This designation is made for a limited term of two years from
the date of this Order, and may be terminated by the Commission on six
months' notice in connection with the establishment of a global LEI
system. At the conclusion of the term of this designation, if the
global LEI system is not yet operational, the Commission may consider
the feasibility of having multiple CICI providers and the feasibility
of coordination among them to avoid duplicative LEIs, and if it
believes this is feasible, may consider submissions from DTCC-SWIFT as
well as from other parties that seek to become CICI providers.
2. Registered entities and swap counterparties subject to the
Commission's jurisdiction shall use CICIs provided by DTCC-SWIFT to
comply with the legal entity identifier requirements of parts 45 and 46
of the Commission's regulations. For this purpose, registered entities
and swap counterparties may contact DTCC-SWIFT at: The Depository Trust
& Clearing Corporation, 55 Water Street, New York, NY 10041, 212-855-
1000.
Issued in Washington, DC, this 23rd day of July, 2012.
By the Commission.
Sauntia S. Warfield,
Assistant Secretary of the Commission.
[FR Doc. 2012-21612 Filed 8-31-12; 8:45 am]
BILLING CODE 6351-01-P
Last Updated: May 1, 2013