2012-26298
Federal Register, Volume 77 Issue 207 (Thursday, October 25, 2012)[Federal Register Volume 77, Number 207 (Thursday, October 25, 2012)]
[Notices]
[Pages 65177-65182]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-26298]
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COMMODITY FUTURES TRADING COMMISSION
Swap Data Repositories: Interpretative Statement Regarding the
Confidentiality and Indemnification Provisions of the Commodity
Exchange Act
AGENCY: Commodity Futures Trading Commission.
ACTION: Interpretative statement.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is issuing this interpretative statement (``Statement'') to
provide guidance regarding the applicability of the confidentiality and
indemnification provisions set forth in new section 21(d) of the
Commodity Exchange Act (``CEA'') added by section 728 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'').
This Statement clarifies that the provisions of CEA section 21(d)
should not operate to inhibit or prevent foreign regulatory authorities
from accessing data in which they have an independent and sufficient
regulatory interest, even if that data also has been reported pursuant
to the CEA and Commission regulations.
DATES: Effective date: October 25, 2012
FOR FURTHER INFORMATION CONTACT: Adedayo Banwo, Counsel, Office of the
General Counsel, at (202) 418.6249, [email protected]; With respect to
questions relating to international consultation and coordination:
Jacqueline Mesa, Director, at (202) 418.5386, [email protected], or
Mauricio Melara, Attorney-Advisor, at (202) 418.5719, [email protected],
Office of International Affairs, Commodity Futures Trading Commission,
Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Background: Statutory and Regulatory Authorities
On July 21, 2010, President Obama signed into law the Dodd-Frank
Act.\1\ Title VII amended the CEA to establish a comprehensive new
regulatory framework for swaps and security-based swaps.\2\ The
legislation was enacted to reduce risk, increase transparency and
promote market integrity within the financial system by, among other
things: (i) Providing for the registration and comprehensive regulation
of swap dealers and major swap participants; (ii) imposing clearing and
trade execution requirements on standardized derivative products; (iii)
creating robust recordkeeping and real-time reporting regimes; and (iv)
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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\1\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124 Stat. 1376 (2010), available at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.
\2\ Pursuant to section 701 of the Dodd-Frank Act, Title VII may
be cited as the ``Wall Street Transparency and Accountability Act of
2010;'' 7 U.S.C. 1 et seq.
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To enhance transparency, promote standardization and reduce
systemic risk, section 727 of the Dodd-Frank Act
[[Page 65178]]
added to the CEA new section 2(a)(13)(G),\3\ which requires all swaps--
whether cleared or uncleared--to be reported to swap data repositories
(``SDRs''). SDRs are new registered entities created by section 728 of
the Dodd-Frank Act.\4\ SDRs are required to perform specified functions
related to the collection and maintenance of swap transaction data and
information.\5\
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\3\ 7 U.S.C. 2(a)(13)(G).
\4\ Section 721 of the Dodd-Frank Act amends section 1a of the
CEA to add a definition of the term ``swap data repository.''
Pursuant to CEA section 1a(48), 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.'' 7
U.S.C. 1a(48).
\5\ See 7 U.S.C. 24a(c). See also Commission, Final Rulemaking:
Swap Data Recordkeeping and Reporting Requirements, 77 FR 2136, Jan.
13, 2012 (``Data Final Rules''). The Data Final Rules, among other
things, set forth regulations governing SDR data collection and
reporting responsibilities under part 45 of the Commission's
regulations.
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CEA section 21(c)(7) requires that SDRs make data available to
certain domestic and foreign regulators \6\ under specified
circumstances.\7\ Separately, CEA section 21(d) mandates that prior to
receipt of any requested data or information from an SDR, a regulatory
authority described in section 21(c)(7) shall agree in writing to abide
by the confidentiality requirements described in section 8 of the
CEA,\8\ and to indemnify the SDR and the Commission for any expenses
arising from litigation relating to the information provided under
section 8 of the CEA.\9\
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\6\ The Commission's regulations designate such regulators as
either an ``Appropriate Domestic Regulator'' or an ``Appropriate
Foreign Regulator'' in Sec. 49.17(b). See Swap Data Repositories:
Registration Standards, Duties and Core Principles, 76 FR 54538,
54554 (Sep. 1, 2011) (``SDR Final Rules'').
\7\ 7 U.S.C. 24a(c)(7).
\8\ 7 U.S.C. 12.
\9\ 7 U.S.C. 24a(d).
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Section 752 of the Dodd-Frank Act seeks to ``promote effective and
consistent global regulation of swaps,'' and provides that the CFTC and
foreign regulatory authorities ``may agree to such information-sharing
arrangements as may be deemed to be necessary or appropriate in the
public interest. * * *.'' \10\ In light of this statutory directive,
and consistent with section 21 of the CEA, the Commission has been
working to provide sufficient access to SDR data to domestic and
foreign regulators.
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\10\ See section 752(a) of the Dodd-Frank Act.
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In that regard, the Chairman of the CFTC and the Chairman of the
Securities and Exchange Commission (``Chairmen'') jointly submitted a
letter to Michel Barnier, European Commissioner for Internal Markets
and Services,\11\ highlighting their desire for international
cooperation. In the letter, the Chairmen expressed their belief that
indemnification and notice requirements need not apply when a
registered SDR is also registered in a foreign jurisdiction and the
foreign regulatory authority, acting within the scope of its
jurisdiction, seeks information directly from the SDR.
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\11\ See letter from Gary Gensler, Chairman of the Commission,
and Mary Schapiro, Chairman of the SEC, to Michel Barnier, European
Commissioner for Internal Markets and Services, European Commission,
dated June 8, 2011.
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On September 1, 2011, the Commission adopted regulations
implementing CEA section 21's registration standards, duties, and core
principles for SDRs.\12\ To implement the provisions of sections
21(c)(7) and (d), the Commission adopted definitions and standards for
determining access by domestic and foreign regulators to data
maintained by SDRs.
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\12\ See, generally, SDR Final Rules.
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The Commission acknowledged in the SDR Final Rules that the CEA's
indemnification requirement could have the unintended effect of
inhibiting direct access by other regulators to data maintained by SDRs
due to various home country laws and regulations.\13\ The SDR Final
Rules provided that under specified circumstances, certain
``Appropriate Domestic Regulators'' \14\ may gain access to the swap
data reported and maintained by SDRs without being subject to the
notice and indemnification requirements of CEA sections 21(c)(7) and
(d).\15\ In connection with foreign regulatory authorities, the
Commission determined in the SDR Final Rules that confidential swap
data reported to and maintained by an SDR may be accessed by an
Appropriate Foreign Regulator \16\ without the execution of a
confidentiality and indemnification agreement when the Appropriate
Foreign Regulator has supervisory authority over an SDR registered with
it pursuant to foreign law and/or regulation that is also registered
with the Commission.
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\13\ See SDR Final Rules at 54554.
\14\ The term ``Appropriate Domestic Regulator'' is defined in
17 CFR 49.17(b)(1) as the Securities and Exchange Commission; each
prudential regulator identified in section 1a(39) of the CEA. 7
U.S.C. 1a(39); the Financial Stability Oversight Council; the
Department of Justice; any Federal Reserve Bank; the Office of
Financial Research; and any other person the Commission deems
appropriate.
\15\ In the Commission's view, it is appropriate to permit
access to the swap data maintained by SDRs to Appropriate Domestic
Regulators that have concurrent regulatory jurisdiction over such
SDRs, without the application of the notice and indemnification
provisions of sections 21(c)(7) and (d) of the CEA. See SDR Final
Rules at 54554 n.163. Accordingly, these provisions do not apply to
an Appropriate Domestic Regulator that has regulatory jurisdiction
over an SDR registered with it pursuant to a separate statutory
authority that is also registered with the Commission, if the
Appropriate Domestic Regulator executes a memorandum of
understanding (``MOU'') or similar information sharing arrangement
with the Commission and the Commission, consistent with CEA section
21(c)(4)(A), designates the Appropriate Domestic Regulator to
receive direct electronic access. See 17 CFR 17(d)(2).
\16\ The term ``Appropriate Foreign Regulator'' is defined in 17
CFR 49.17(b)(2) as a foreign regulator with an existing MOU or
similar type of information sharing arrangement executed with the
Commission, and/or a foreign regulator without an MOU as determined
on a case-by-case basis by the Commission.
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The confidentiality and indemnification provisions of new CEA
section 21 apply only when a regulatory authority seeks access to data
from an SDR. In the SDR Final Rules, the Commission noted that section
8(e) of the CEA permits the Commission (as opposed to an SDR) to share
confidential information in its possession with any department or
agency of the Government of the United States, or with any foreign
futures authority, department or agency of any foreign government or
political subdivision thereof,\17\ acting within the scope of its
jurisdiction.\18\
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\17\ Section 725(f) of the Dodd-Frank Act amended section 8(e)
of the CEA to include foreign central banks and ministries.
\18\ See SDR Final Rules at 54554.
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The SDR Final Rules became effective on October 31, 2011.\19\ Under
these rules, trade repositories may apply to the Commission for full
registration as SDRs. Pending the full implementation of other, related
regulatory provisions and definitions, however, such registrations are
deemed ``provisional.'' \20\
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\19\ Id.
\20\ See 17 CFR 49.3(b).
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II. The Proposed Interpretative Statement
On May 1, 2012, the Commission issued a proposed interpretative
statement (``Proposed Statement'') to address issues raised by
interested members of the public and foreign regulatory authorities
with respect to the scope and application of the confidentiality and
indemnification provisions of new section 21(d) of the CEA.\21\ Under
the Proposed Statement, the Commission clarified that the
confidentiality and indemnification provisions of CEA section 21(d)
should not operate to inhibit or prevent foreign regulatory authorities
from accessing data in which they have an independent and sufficient
regulatory interest.
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\21\ See 77 FR 26709 (May 7, 2012).
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[[Page 65179]]
The Proposed Statement provided that a registered SDR would not be
subject to the confidentiality and indemnification provisions of CEA
section 21(d) if: (i) such registered SDR is also registered,
recognized or otherwise authorized in a foreign jurisdiction's
regulatory regime; and (ii) the data sought to be accessed by a foreign
regulatory authority has been reported to such registered SDR pursuant
to the foreign jurisdiction's regulatory regime. In addition, because
some registered SDRs might also be registered, recognized or otherwise
authorized in a foreign jurisdiction and may accept swap data reported
pursuant to a foreign regulatory regime, the Commission concluded that
the confidentiality and indemnification provisions of CEA section 21(d)
generally apply only to such data reported pursuant to the CEA and
Commission regulations.
As detailed in Section III.B., interested members of the public and
a foreign regulatory authority responded to the Commission's request to
receive public comments on all aspects of the Proposed Statement.\22\
In adopting this Statement, the Commission has carefully considered
these comments.
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\22\ See public comment file in response to the Proposed
Statement, available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1198.
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III. Considerations Relevant to the Commission's Statement \23\
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\23\ Legislation has been introduced in Congress that would
amend the CEA to eliminate or substantially limit the SDR
indemnification provision. As discussed in Section III.B.,
commenters expressed the general view that a ``legislative fix''
would be the best course of action to resolve issues regarding the
section 21(d) requirements.
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A. International Considerations
As noted above, section 752(a) of the Dodd-Frank Act directs the
Commission to consult and coordinate with foreign regulatory
authorities regarding the establishment of consistent international
standards for the regulation of swaps and various ``swap entities.''
Section 752(a) also provides that the Commission ``may agree to such
information-sharing arrangements [with foreign regulatory authorities]
as may be deemed to be necessary or appropriate in the public
interest'' or for the protection of investors and counterparties.\24\
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\24\ See section 752(a) of the Dodd-Frank Act.
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The Commission is committed to a cooperative international approach
to the registration and regulation of SDRs, and consulted extensively
with various foreign regulatory authorities in promulgating both its
proposed and final regulations concerning SDRs and in the finalization
of the Proposed Statement.\25\ The Commission notes that the SDR Final
Rules are largely consistent with the recommendations and goals of the
May 2010 ``CPSS-IOSCO Consultative Report, Considerations for Trade
Repositories in the OTC Derivatives Market'' (``Working Group
Report'').\26\
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\25\ See public comment file in response to the proposal for the
SDR Final Rules, available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=939 and SDR Final Rules note 6 at
54539, supra.
\26\ This working group was jointly established by the Committee
on Payment and Settlement Systems (``CPSS'') of the Bank of
International Settlements and the Technical Committee of the
International Organization of Securities Commissions (``IOSCO'').
The Working Group Report presented a set of factors to consider in
connection with the design, operation and regulation of SDRs. A
significant focus of the Working Group Report is access to SDR data
by appropriate regulators. The Working Group Report urges that a
trade repository ``should support market transparency by making data
available to relevant authorities and the public in line with their
respective information needs.'' The Working Group Report is
available at http://www.bis.org/publ/cpss90.pdf. See also CPSS-IOSCO
Consultative Report, Principles of Financial Market Infrastructures
(March 2011) available at http://www.bis.org/publ/cpss94.pdf (``PFMI
Report''). See also Financial Stability Board (``FSB''),
Implementing OTC Derivatives Market Reforms, Oct. 25, 2010 (``FSB
Report''); FSB, Derivative Market Reforms, Progress Report on
Implementation, Apr. 15, 2010 (``FSB Progress Report'').
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Consistent with the international harmonization envisioned by
section 752 of the Dodd-Frank Act, the Commission has engaged in
consultations with foreign regulatory authorities regarding the
Commission's adoption and implementation of regulations and the
issuance of interpretative guidance relating to the Dodd-Frank Act. In
this context, foreign regulatory authorities have expressed concern
about the difficulty in complying with the indemnification provisions
of CEA section 21(d).
B. Comments on the Proposed Statement \27\
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\27\ The Commission received five comments, four of which regard
the Proposed Statement. All comment letters are available on the
Commission Web site at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1198. Specific comment letters are identified by
the submitter. Comments addressing the Proposed Statement were
received from: (i) The European Securities and Markets Authority,
June 5, 2012; (ii) the Financial Services Roundtable, June 6, 2012;
(iii) Cloud Strategix, LLC, June 5, 2012; and (iv) the Depository
Trust & Clearing Corporation, June 6, 2012. The fifth comment
regards the implementation of section 619 of the Dodd-Frank Act.
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The Depository Trust & Clearing Corporation (``DTCC'') stated its
support of the adoption of the Proposed Statement as a ``necessary
first step.'' Nevertheless, DTCC concluded that the statutory language
at issue requires a ``legislative fix'' to clarify the scope and
applicability of the confidentiality and indemnification provisions of
CEA section 21(d) because ``the indemnification requirement'' would
limit the sharing of trade repository data across borders. DTCC noted
that a foreign regulator might have an interest in SDR data related to
a swap transaction entered into by parties not subject to the foreign
regulator's ``oversight authority.'' In this regard, DTCC noted
concerns expressed by foreign regulatory authorities who believe that a
``jurisdictional nexus'' would nonetheless exist with respect to the
terms of swap transactions (e.g., swap transactions using currencies or
underlying reference entities subject to a foreign regulator's
oversight authority) that are not reported ``pursuant to the foreign
jurisdiction's regulatory regime.'' DTCC pointed out that access to
such swap transaction data that is not reported ``pursuant to the
foreign jurisdiction's regulatory regime'' would not be available
unless the foreign regulator enters into a confidentiality and
indemnification agreement with the SDR.
DTCC also suggested certain substantive modifications to the
Proposed Statement.\28\ Among them, DTCC suggested that the Commission
expand on the meaning of ``registered, recognized or otherwise
authorized'' in the Proposed Statement or, alternatively, state that
operation in accordance with the PFMI Report would mean that an SDR is
``authorized'' for purposes of this Statement.
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\28\ DTCC suggested that the Commission consider the following
modifications to the Proposed Statement: (i) Provide that no
registration or licensing would be necessary with respect to the
condition that a registered SDR is also registered, recognized or
otherwise authorized in a foreign jurisdiction's regulatory regime;
(ii) provide that SDRs operating in accordance with principles
relevant to trade repositories under the PFMI Report should be
deemed authorized; and (iii) provide that with respect to the
condition that the SDR data sought to be accessed by a foreign
regulator is reported pursuant to the foreign jurisdiction's
regulatory regime, the meaning attributed to regulatory regime
includes a foreign jurisdiction's adherence to the PFMI Report
provisions outlined for market regulators.
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The European Securities and Markets Authority (``ESMA'') noted that
it considers the Commission's ``recognition of foreign regimes and the
access to data requirements originating from them'' under the Proposed
Statement as a ``step in the right direction'' that would allow
relevant European authorities to obtain data in accordance with
relevant European Union laws and forthcoming
[[Page 65180]]
regulations. However, ESMA noted its concern that the Commission's
interpretation of the indemnification provision of CEA section 21(d)
``cannot overrule the [Dodd-Frank] Act itself'' and concluded that
``the confidentiality and indemnification issue could only be fully
addressed with a legislative amendment by repealing the original
provision in the Dodd-Frank Act.'' In addition, consistent in part with
DTCC's comment, ESMA noted that relevant European Union authorities
could have an interest in accessing swap transaction data reported to a
registered SDR pursuant to the Dodd-Frank Act, but not reported
pursuant to European Union laws and forthcoming regulations.
Accordingly, ESMA suggested certain modifications to the Proposed
Statement.\29\
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\29\ ESMA suggested that the Commission consider the following
alternative modifications to the Proposed Statement: (i) delete the
second condition of the Proposed Statement (i.e., ``The data sought
to be accessed by a foreign regulatory authority is reported to such
registered SDR pursuant to the foreign regulatory regime.''); or
(ii) add the following bracketed language to the second condition
such that it would read as follows: ``The data sought to be accessed
by a foreign regulatory authority has been reported to such
registered SDR pursuant to the foreign jurisdiction's regulatory
regime [or the foreign regulatory authority is entitled to access
such data pursuant to its regulatory regime to fulfill its
respective responsibilities and mandates.]''
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The Financial Services Roundtable (``FSR'') requested that the
Commission support a legislative solution which would remove the
indemnification provision from CEA section 21(d). FSR also requested
that the Commission continue its discussions with regulators in other
jurisdictions as well as its participation in standard-setting bodies
to develop international standards relevant to the swap markets.
Cloud Strategix, LLC (``Cloud Strategix''), representing the data
hosting and cloud computing industry, in relevant part expressed a
general concern with respect to the ``several costs, unintended
consequences, and impracticalities'' related to the Proposed Statement
and the SDR Final Rules. Specifically, Cloud Strategix noted that the
Proposed Statement ``does not seem to consider the great cost to the
data center that hosts the SDR in assisting the SDR with compliance
with foreign regulators.'' In this context, Cloud Strategix suggested
that the Commission ``provide an exemption for all data centers to
indemnify SDRs for regulatory inquiries, enforcement proceedings, or
litigation for both foreign and domestic regulators.''
C. Commission Determination
After considering the comments received to the Proposed Statement
and following the aforementioned consultations with foreign regulatory
authorities pursuant to the Congressional mandate for cooperation in
section 752 of the Dodd-Frank Act, the Commission has concluded that
the guidance described in the Proposed Statement is necessary to ensure
that appropriate access by foreign regulatory authorities is not
unnecessarily inhibited. Accordingly, while the SDR Final Rules address
foreign regulators with supervisory authority and regulatory
responsibility, the Commission is issuing this Statement to ensure that
foreign regulators receive sufficient access to data reported to SDRs
where such foreign regulators have an independent and sufficient
regulatory interest.
In response to DTCC's comment regarding expanding on the meaning of
``registered, recognized or otherwise authorized'' of the Proposed
Statement or, alternatively, stating that operation in accordance with
the PFMI Report would mean that an SDR is ``authorized'' for purposes
of this Statement, the Commission believes, consistent with DTCC's
comment, that a foreign regulator with ``oversight responsibilities''
of an SDR pursuant to the regulatory regime of the applicable foreign
jurisdiction would meet the ``registered, recognized or otherwise
authorized'' prong herein. Nonetheless, the Commission declines to
express a more detailed view on the regulatory or jurisdictional
structures applicable to SDRs governed within foreign jurisdictions
that would meet the ``registered, recognized or otherwise authorized''
prong herein. As the Commission indicated in its Proposed Statement,
access by foreign regulatory authorities ``should be governed by such
foreign jurisdiction's regulatory regime,'' and the Commission believes
that ``registered, recognized or otherwise authorized'' is sufficiently
broad to cover a wide variety of foreign regulatory structures and
regimes.
Similarly, and in response to DTCC's and ESMA's comment regarding
accessing data which is not reported pursuant to European Union laws
and forthcoming regulations, the Commission acknowledges the difficulty
that certain foreign regulators may face in this regard. The Commission
reiterates that foreign and domestic regulators may nonetheless be able
to receive confidential data from the Commission without the execution
of a confidentiality and indemnification agreement.
In response to FSR's comment regarding consultations and
participation with standard-setting bodies, the Commission agrees and
notes its participation in various international regulatory and
industry-led working groups.\30\
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\30\ Among the working groups the Commission is actively
participating in to develop consistent international standards are
the FSB, CPSS and IOSCO working group on data access (see infra n.
36), the Technical Committee of IOSCO which developed the ``Report
on OTC derivatives and aggregation requirements,'' and the FSB's
Legal Entity Identifier Expert Group.
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In response to the cost-benefit considerations raised by Cloud
Strategix, the Commission has previously acknowledged such costs in its
consideration of the costs and benefits of compliance with its SDR
Final Rules \31\ and Data Final Rules.\32\ The Commission does not
believe that the Proposed Statement changes or modifies its earlier
consideration of the costs and benefits of the applicable final rules.
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\31\ See SDR Final Rules, supra n. 6, at 54572.
\32\ See Data Final Rules, supra n. 5, at 2176.
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IV. Interpretative Statement
In consideration of the foregoing, the Commission is providing
guidance regarding the confidentiality and indemnification provisions
of CEA section 21(d) by adopting the substance of the Proposed
Statement. In this regard, the Commission seeks to ensure an orderly
transition to the Dodd-Frank Act's swap data reporting regime by
providing certainty to market participants and regulators with respect
to the confidentiality and indemnification provisions of CEA section
21(d).
A. Data Reported to Registered SDRs
The Commission understands that some registered SDRs also may be
registered, recognized or otherwise authorized in a foreign
jurisdiction and may accept swap data reported pursuant to the foreign
regulatory regime. The Commission concludes that the confidentiality
and indemnification provisions of CEA section 21(d) generally apply
only to such data reported pursuant to the CEA and Commission
regulations.
The Commission further concludes that the confidentiality and
indemnification provisions should not operate to inhibit or prevent
foreign regulatory authorities from accessing data in which they have
an independent and sufficient regulatory interest (even if that data
also has been reported
[[Page 65181]]
pursuant to the CEA and Commission regulations).
Accordingly, and consistent with the Commission's SDR Final Rules,
the Commission interprets CEA section 21(d) such that a registered SDR
would not be subject to the confidentiality and indemnification
provisions of that section if:
Such registered SDR also is registered, recognized or
otherwise authorized in a foreign jurisdiction's regulatory regime; and
The data sought to be accessed by a foreign regulatory
authority has been reported to such registered SDR pursuant to the
foreign jurisdiction's regulatory regime.
This Statement is grounded in principles of international law and
comity. For example, in F. Hoffmann-La Roche Ltd. v. Empagran S.A., the
U.S. Supreme Court, in reviewing the extraterritorial applicability of
a different federal statute, stated that extraterritorial jurisdiction
should be construed, where ambiguous, ``to avoid unreasonable
interference with the sovereign authority of other nations.''\33\ In
cases considering concepts of international law and comity in
evaluating the extraterritorial scope of federal statutes, the Supreme
Court has noted that the principles in the Third Restatement of Foreign
Relations Law are relevant to the interpretation of U.S. law.\34\
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\33\ F. Hoffmann-LaRoche, Ltd. v. Empagran S.A., 542 U.S. 155,
164 (2004). In Hoffmann-LaRoche, the Supreme Court also stated that
canons of statutory construction ``assume that legislators take
account of the legitimate sovereign interests of other nations when
they write American laws.'' Id.
\34\ Id. at 164-165.
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Specifically, section 403 of the Third Restatement of Foreign
Relations Law states, in relevant part:
Whether exercise of jurisdiction over a person or activity is
unreasonable is determined by evaluating all relevant factors,
including, where appropriate:
(a) The link of the activity to the territory of the regulating
state, i.e., the extent to which the activity takes place within the
territory, or has substantial, direct, and foreseeable effect upon
or in the territory;
(b) The connections, such as nationality, residence, or economic
activity, between the regulating state and the person principally
responsible for the activity to be regulated, or between that state
and those whom the regulation is designed to protect;
(c) The character of the activity to be regulated, the
importance of regulation to the regulating state, the extent to
which other states regulate such activities, and the degree to which
the desirability of such regulation is generally accepted;
(d) The existence of justified expectations that might be
protected or hurt by the regulation;
(e) The importance of the regulation to the international
political, legal, or economic system;
(f) The extent to which the regulation is consistent with the
traditions of the international system;
(g) The extent to which another state may have an interest in
regulating the activity; and
(h) The likelihood of conflict with regulation by another
state.\35\
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\35\ Rest. 3d., Third Restatement Foreign Relations Law section
403 (scope of a statutory grant of authority must be construed in
the context of international law and comity including, as
appropriate, the extent to which regulation is consistent with the
traditions of the international system).
To avoid unnecessary interference with the sovereign authority of
foreign regulatory authorities, this Statement is supported and
underpinned by principles of international law and comity.
B. Foreign Regulatory Access
In the Commission's view, a foreign regulator's access to data held
in a registered SDR that also is registered, recognized, or otherwise
authorized in a foreign jurisdiction's regulatory regime, should be
governed by such foreign jurisdiction's regulatory regime where the
data sought to be accessed has been reported pursuant to that
regulatory regime. The Commission concludes that it is appropriate not
to apply the requirements of CEA section 21(d) in these circumstances,
in light of, among other things, the importance of such data to the
foreign jurisdiction's regulatory regime, foreign regulators' interest
in unfettered access to such data, and the traditions of mutual trust
and cooperation among international regulators.\36\
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\36\ The Commission notes that access to data held by trade
repositories is a concept under discussion and development among
international regulators. At the request of the FSB, CPSS and IOSCO
have established a working group of relevant authorities to produce
a forthcoming report regarding authorities' access to trade
repository data.
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Therefore, the Commission concludes that a foreign regulator's
access to data from a registered SDR that also is registered,
recognized, or otherwise authorized in a foreign jurisdiction's
regulatory regime, where the data to be accessed has been reported
pursuant to that regulatory regime, will be dictated by that foreign
jurisdiction's regulatory regime and not by the CEA or Commission
regulations. Such access is appropriate, in the Commission's view, even
if the applicable data is also reported to the registered SDR pursuant
to the Commission's Data Final Rules.\37\
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\37\ Regarding the Commission's access to SDR data, section
21(b)(1)(A) of the CEA states 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.''
Section 21(c)(1) of the CEA requires registered SDRs to ``accept
data prescribed by the Commission for each swap under subsection
(b).'' With respect to Commission access to data held in registered
SDRs, the Commission concludes that the direct electronic access
provisions of CEA section 21(c)(4) apply only to such data that the
SDR is required to accept under section 21(c)(1), which is further
defined by part 45 of the Commission's regulations. In this respect,
the Commission concludes that its direct electronic access applies
only to such data reported pursuant to section 21 and Commission
regulations promulgated thereunder.
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Additionally, the Commission reiterates that a foreign regulatory
authority, like domestic regulators, can nonetheless receive
confidential data, without the execution of a confidentiality and
indemnification agreement, from the Commission (as opposed to an SDR)
pursuant to section 8(e) of the CEA.\38\ Such data sharing and access
would be governed by the confidentiality provisions of section 8 of the
CEA.\39\ The Commission is committed to continuing its close
cooperation with: (i) foreign regulatory authorities to promptly
address such information requests; and (ii) registered SDRs that
request the Commission's assistance in determining if a foreign
regulatory authority has an independent and regulatory interest in data
that has been reported to such registered SDR pursuant to the relevant
foreign jurisdiction's regulatory regime.
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\38\ CEA section 8(e), 7 U.S.C. 12(e), allows the Commission to
share confidential information in its possession obtained in
connection with the administration of the CEA with ``any department
or agency of the Government of the United States'' or with any
foreign futures authority or a department, central bank or ministry,
or agency of a foreign government or political subdivision thereof,
acting within the scope of its jurisdiction.
\39\ 7 U.S.C. 12.
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* * * * *
Issued in Washington, DC on October 22, 2012 by the Commission.
Stacy D. Yochum,
Counsel.
Appendices to Swap Data Repositories: Interpretative Statement
Regarding the Confidentiality and Indemnification Provisions of Section
21(d) of the Commodity Exchange Act--
Note: The following appendices will not appear in the Code of
Federal Regulations.
Appendix 1--Commission Voting Summary
On this matter, Chairman Gensler and Commissioners Chilton and
Wetjen voted in the affirmative; Commissioners Sommers and O'Malia
voted in the negative.
Appendix 2--Statement of Chairman Gary Gensler
I support the final interpretative guidance regarding the
confidentiality and
[[Page 65182]]
indemnification provisions of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act).
The confidentiality and indemnification provisions in the Dodd-
Frank Act state that before a registered swap data repository (SDR)
may share information with certain domestic and foreign regulators,
those regulators must first agree in writing to abide by the
confidentiality provisions of Section 8 of the Commodity Exchange
Act (CEA). In addition, the Dodd-Frank Act requires that regulators
also must indemnify both the SDR and the Commodity Futures Trading
Commission (Commission) for any expenses arising from litigation
relating to the information provided under Section 8 of the CEA.
The Commission recognizes the importance to foreign regulators
of swap data reported under foreign regulatory regimes. The
Commission's final SDR rules specified that confidential swap data
reported to and maintained by an SDR may be accessed by an
``appropriate foreign regulator'' without a confidentiality and
indemnification agreement when the SDR is also registered with that
foreign regulator.
To provide further clarity for foreign regulators, the
Commission is issuing this interpretative guidance on the Dodd-Frank
Act confidentiality and indemnification provisions. The final
interpretative guidance makes clear that a foreign regulator will
not be prevented from accessing data in which it has an independent
and sufficient regulatory authority over the SDR and such data has
been reported pursuant to the foreign jurisdiction's regulatory
regime.
With this interpretive guidance, the Commission has taken
another important step to ensure appropriate access to SDRs by
foreign regulatory authorities consistent with the provisions of the
Dodd-Frank Act.
Appendix 3--Statement of Commissioners Jill E. Sommers and Scott D.
O'Malia
We respectfully dissent from issuing this Final Interpretative
Statement Regarding the Confidentiality and Indemnification
Provisions of Section 21(d) of the Commodity Exchange Act (CEA)
(Final Interpretative Statement). When the Commission issued the
proposed guidance (Proposed Interpretative Statement) in May of this
year, we were concerned that the statement did not actually solve
the problem with the statutory language beyond providing some
additional clarity to the Swap Data Repository (SDR) rules and we
called for a permanent solution by way of a legislative repeal of
the indemnification provisions.
When finalizing the SDR rules, the Commission stated that a
foreign regulator may have direct access to confidential swap data
reported to and maintained by an SDR registered with the Commission
without executing a Confidentiality and Indemnification Agreement
when the SDR is also registered with the foreign regulator and the
foreign regulator is acting in a regulatory capacity with respect to
the SDR. See Swap Data Repositories: Registration Standards, Duties
and Core Principles, 76 FR 54,538, 54,554 (Sept. 1, 2011). The Final
Interpretative Statement expands this to SDRs that are registered,
recognized or otherwise authorized in a foreign regulator's
regulatory regime and clarifies that direct access to data should be
granted even if the data the foreign regulator seeks also has been
reported pursuant to the CEA and Commission regulations.
The Commission received a comment from the European Securities
and Markets Authority (ESMA) suggesting that we consider modifying
the conditions that would need to be met so that a foreign regulator
could escape being subject to the indemnification provisions.
Specifically, ESMA suggested that the Commission consider the
following alternative modifications: (1) delete the second condition
of the Proposed Interpretative Statement, (i.e., ``The data sought
to be accessed by a foreign regulatory authority is reported to such
registered SDR pursuant to the foreign regulatory regime''), which
would leave the sole condition that the SDR be registered,
recognized or otherwise authorized in the foreign regulatory regime;
or (2) add language to the second condition such that it would read
as follows: ``The data sought to be accessed by a foreign regulatory
authority has been reported to such registered SDR pursuant to the
foreign jurisdiction's regulatory regime or the foreign regulatory
authority is entitled to access such data pursuant to its regulatory
regime to fulfill its respective responsibilities and mandates.''
Although the Commission acknowledges the comment in the Final
Interpretative Statement, we do not adopt either suggestion and do
not justify their exclusion.
Our second concern involves the distinction the Commission made
in the SDR rules between an Appropriate Domestic Regulator and an
Appropriate Domestic Regulator with Regulatory Responsibilities.
Under the current rules only the CFTC and the SEC are able to
directly access SDR data absent an indemnification agreement. All
other U.S. Regulators (i.e. ``Appropriate Domestic Regulators'')
would have to execute an indemnification agreement--something that
we are told they are prohibited from doing. Adopting the second ESMA
option and extending it to Appropriate Domestic Regulators would
allow them direct access to data they believe is necessary to
fulfill their regulatory mandate, and in our view is something that
is within the Commission's discretion. Instead, the Commission has
purposely chosen to interpret the statute in a manner that
constrains other domestic regulators' ability to examine swap market
data. For these reasons we cannot support the guidance issued today
by the Commission.
[FR Doc. 2012-26298 Filed 10-24-12; 8:45 am]
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