2016-14414

Federal Register, Volume 81 Issue 123 (Monday, June 27, 2016)

[Federal Register Volume 81, Number 123 (Monday, June 27, 2016)]

[Rules and Regulations]

[Pages 41735-41786]

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

[FR Doc No: 2016-14414]

[[Page 41735]]

Vol. 81

Monday,

No. 123

June 27, 2016

Part III

Commodity Futures Trading Commission

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17 CFR Part 45

Amendments to Swap Data Recordkeeping and Reporting Requirements for

Cleared Swaps; Final Rule

Federal Register / Vol. 81 , No. 123 / Monday, June 27, 2016 / Rules

and Regulations

[[Page 41736]]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 45

RIN 3038-AE12

Amendments to Swap Data Recordkeeping and Reporting Requirements

for Cleared Swaps

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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

``CFTC'') is adopting final regulations relating to swap data reporting

in connection with cleared swaps for swap data repositories (``SDRs''),

derivatives clearing organizations (``DCOs''), designated contract

markets (``DCMs''), swap execution facilities (``SEFs''), swap dealers

(``SDs''), major swap participants (``MSPs''), and swap counterparties

who are neither SDs nor MSPs. Commodity Exchange Act (``CEA'' or

``Act'') provisions relating to swap data recordkeeping and reporting

were added by the Dodd-Frank Wall Street Reform and Consumer Protection

Act (``Dodd-Frank Act''). These regulations adopt without change

revisions to the Commission regulations as proposed in the Notice of

Proposed Rulemaking (``NPRM'') issued August 31, 2015. These revisions

clarify regulations to clearly delineate the swap data reporting

requirements associated with each of the swaps involved in a cleared

swap transaction. Additionally, these revisions leave the choice of SDR

for each swap in a cleared swap transaction to the entity submitting

the first report on such swap.

DATES: This rule is effective July 27, 2016 except for the removal of

Sec. 45.4(b)(2)(ii) which is effective June 27, 2016.

Compliance Date: The compliance date for all revisions and

additions to part 45 of the Commission's regulations under this final

rule is December 27, 2016. Until such date, all existing reporting

obligations under part 45 (other than those contained in removed

paragraph (b)(2)(ii) of Sec. 45.4), including existing obligations on

reporting continuation data on original swaps and creation and

continuation data on clearing swaps, shall remain in effect.

FOR FURTHER INFORMATION CONTACT: Daniel Bucsa, Deputy Director,

Division of Market Oversight, 202-418-5435, [email protected]; Andrew

Ridenour, Special Counsel, Division of Market Oversight, 202-418-5438,

[email protected]; Owen J. Kopon, Attorney-Advisor, Division of Market

Oversight, 202-418-5360, [email protected]; Benjamin DeMaria, Special

Counsel, Division of Market Oversight, 202-418-5988, [email protected];

Aaron Brodsky, Special Counsel, Division of Market Oversight, 202-418-

5349, [email protected]; or Esen Onur, Economist, Office of the Chief

Economist, 202-418-6146, [email protected]

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background

A. Introduction

B. Statutory Authority

C. Regulatory History--Final Part 45 Rulemaking

D. Consultation With Other U.S. Financial Regulators

E. Summary of Proposed Revisions and Additions to Part 45

II. Revised and New Regulations

A. Definitions--Amendments to Sec. 45.1

B. Swap Data Reporting: Creation Data--Amendments to Sec. 45.3

C. Swap Data Reporting: Continuation Data--Amendments to Sec.

45.4

D. Unique Swap Identifiers--Amendments to Sec. 45.5

E. Determination of Which Counterparty Must Report--Amendments

to Sec. 45.8

F. Reporting to a Single Swap Data Repository--Amendments to

Sec. 45.10

G. Examples of Cleared Swap Reporting Workflows Under the

Adopted Revisions

H. Primary Economic Terms Data--Amendments to Appendix 1 to Part

45--Tables of Minimum Primary Economic Terms

III. Related Matters

A. Regulatory Flexibility Act

B. Paperwork Reduction Act

C. Cost-Benefit Considerations

D. Antitrust Considerations

IV. Compliance Dates

I. Background

A. Introduction

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

Act.\1\ Title VII of the Dodd-Frank Act amended the CEA \2\ to

establish a comprehensive new regulatory framework for swaps and

security-based swaps. The legislation was enacted to reduce systemic

risk, increase transparency, and promote market integrity within the

financial system by, among other things: Providing for the registration

and comprehensive regulation of SDs and MSPs; imposing clearing and

trade execution requirements on standardized derivative products;

creating rigorous recordkeeping and data reporting regimes with respect

to swaps, including real time reporting; and enhancing the Commission's

rulemaking and enforcement authorities with respect to, among others,

all registered entities, intermediaries, and swap counterparties

subject to the Commission's oversight.

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\1\ See Dodd-Frank Wall Street Reform and Consumer Protection

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

Dodd-Frank Act may be accessed at http://www.cftc.gov/LawRegulation/DoddFrankAct/index.htm.

\2\ 7 U.S.C. 1, et seq.

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B. Statutory Authority

To enhance transparency, promote standardization, and reduce

systemic risk, section 727 of the Dodd-Frank Act added to the CEA

section 2(a)(13)(G),\3\ which requires all swaps, whether cleared or

uncleared, to be reported to SDRs.\4\ SDRs are registered entities

created by section 728 of the Dodd-Frank Act to collect and maintain

data related to swap transactions as prescribed by the Commission, and

to make such data available to the Commission and other regulators.\5\

Section 21(b) of the CEA,\6\ added by section 728 of the Dodd-Frank

Act, directs the Commission to prescribe standards for swap data

recordkeeping and reporting, which are to apply to both registered

entities and counterparties involved with swaps,\7\ and which are to be

comparable to standards for clearing organizations in connection with

their clearing of swaps.\8\

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\3\ 7 U.S.C. 2(a)(13)(G).

\4\ See also 7 U.S.C. 1a(40)(E), 1a(48).

\5\ Regulations governing core principles and registration

requirements for, and the duties of, SDRs are the subject of part 49

of this chapter.

\6\ 7 U.S.C. 24a(b).

\7\ 7 U.S.C. 24a(b)(1)(A).

\8\ 7 U.S.C. 24a(b)(3).

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C. Regulatory History--Final Part 45 Rulemaking

On December 20, 2011, the Commission adopted part 45 of the

Commission's regulations (``Final Part 45 Rulemaking'').\9\ Part 45

implements the requirements of section 21 of the CEA by setting forth

the manner and content of reporting to SDRs, and requires electronic

reporting both when a swap is initially executed, referred to as

``creation'' data,\10\ and over the course

[[Page 41737]]

of the swap's existence, referred to as ``continuation'' data.\11\

Additionally, part 45 sets forth varying reporting timeframes depending

on the type of reporting, counterparty, execution, or product.\12\

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\9\ See Swap Data Recordkeeping and Reporting Requirements,

Final Rule, 77 FR 2136 (Jan. 13, 2012).

\10\ See 17 CFR 45.1 (defining ``required swap creation data''

as all primary economic terms data for a swap in the swap asset

class in question, and all confirmation data for the swap.).

``Primary economic terms data'' is defined as all of the data

elements necessary to fully report all of the primary economic terms

of a swap in the swap asset class of the swap in question, while

``confirmation data'' is defined as all of the terms of a swap

matched and agreed upon by the counterparties in confirming the

swap. Id. For cleared swaps, confirmation data also includes the

internal identifiers assigned by the automated systems of the DCO to

the two transactions resulting from novation to the clearing house.

Id. See also 17 CFR 45.3.

\11\ See 17 CFR 45.1 (defining ``required swap continuation

data'' as all of the data elements that must be reported during the

existence of a swap to ensure that all data concerning the swap in

the swap data repository remains current and accurate, and includes

all changes to the primary economic terms of the swap occurring

during the existence of the swap). See also 17 CFR 45.4.

\12\ See 17 CFR 45.3(a), 45.3(b), 45.3(c), and 45.3(d).

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As part of the Commission's ongoing efforts to improve swap

transaction data quality and to improve the Commission's ability to

utilize the data for regulatory purposes, Commission staff has

continued to evaluate issues in connection with reporting under part

45, including those related to cleared swaps in particular. To this

end, Commission staff formed an interdivisional staff working group

(``IDWG'') to identify, and to recommend resolutions to, reporting

challenges associated with certain swaps transaction data recordkeeping

and reporting provisions, including the provisions adopted in the Final

Part 45 Rulemaking.\13\

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\13\ See Press Release, CFTC to Form an Interdivisional Working

Group to Review Regulatory Reporting (Jan. 21, 2014), available at

http://www.cftc.gov/PressRoom/PressReleases/pr6837-14.

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Based in large part on those efforts, the Commission published a

request for comment on a variety of swap data reporting and

recordkeeping provisions to help determine how such provisions were

being applied, and to determine whether or what clarifications or

enhancements to these provisions may be appropriate (the ``IDWG Request

for Comment'').\14\ One of the subjects of the IDWG Request for Comment

was the reporting of cleared swaps, and, in particular, the manner in

which the swap data reporting rules should address cleared swaps.\15\

After considering the comments submitted in response to the IDWG

Request for Comment relating to the reporting of cleared swaps,\16\ the

Commission issued a Notice of Proposed Rulemaking (the ``NPRM'') in

which it proposed changes to part 45 as they relate to the reporting of

cleared swaps transactions.\17\ In response to the NPRM, the Commission

received 17 comments letters addressing its proposed revisions to part

45.\18\ This release will address the comments received on specific

aspects of the NPRM, and on specific issues raised in the IDWG Request

for Comment, in connection with explaining each of the amended

regulations adopted herein.\19\

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\14\ See Review of Swap Data Recordkeeping and Reporting

Requirements, Request for Comment, 79 FR 16689 (Mar. 26, 2014). The

IDWG Request for Comment was referred to simply as the ``Request for

Comment'' in the NPRM. The Commission has changed the short form

citation for that document in the final release to distinguish it

from the subsequent request for comment related to draft technical

specifications, referenced throughout this release.

\15\ 79 FR 16689, 16694.

\16\ The comment file for responses to the IDWG Request for

Comment is available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1484. Commenters responding to the IDWG Request

for Comment included: The American Gas Association, May 27, 2014;

American Petroleum Institute, May 27, 2014; Americans for Financial

Reform, May 27, 2014 (``AFR''); Australian Bankers' Association, May

27, 2014 (``ABA''); Better Markets, Inc., May 27, 2014, (``Better

Markets''); B&F Capital Markets, Inc., May 27, 2014; CME Group, May

27, 2014 (``CME''); Coalition for Derivatives End-Users, May 27,

2014 (``CDEU''); Coalition of Physical Energy Companies, May 27,

2014; Commercial Energy Working Group, May 27, 2014 (``CEWG'');

Commodity Markets Council, May 27, 2014 (``CMC''); The Depository

Trust & Clearing Corporation, May 27, 2014 (``DTCC''); EDF Trading

North America, LLC, May 27, 2014; Edison Electric Institute, May 27,

2014 (``EEI''); Financial InterGroup Holdings Ltd, May 27, 2014;

Financial Services Roundtable (``FSR''), May 27, 2014; Fix Trading

Community, May 27, 2014; The Global Foreign Exchange Division of the

Global Financial Markets Association, May 27, 2014 (``GFMA''); HSBC,

May 27, 2014; Interactive Data Corporation, May 27, 2014; ICE Trade

Vault, LLC, May 27, 2014 (``ITV''); International Energy Credit

Association, May 27, 2014; International Swaps and Derivatives

Association, Inc., May 23, 2014 (``ISDA''); Japanese Bankers

Association, May 27, 2014 (``JBA''); Just Energy Group Inc., May 27,

2014; LCH.Clearnet Group Limited, May 29, 2014 (``LCH''); Managed

Funds Association, May 27, 2014 (``MFA''); Markit, May 27, 2014;

Natural Gas Supply Association, May 27, 2014 (``NGSA''); NFP

Electric Associations (National Rural Electric Cooperative

Association, American Public Power Association, and Large Public

Power Council), May 27, 2014 (``NFPEA''); OTC Clearing Hong Kong

Limited, May 27, 2014 (``OTC Hong Kong''); Securities Industry and

Financial Markets Association Asset Management Group, May 27, 2014

(``SIFMA''); SWIFT, May 27, 2014; Swiss Re, May 27, 2014; Thomson

Reuters (SEF) LLC, May 27, 2014 (``TR SEF''); and TriOptima, May 27,

2014. Discussions of comments on reporting of cleared swaps received

in response to the IDWG Request for Comment are included in the

preamble to the NPRM.

\17\ See Amendments to Swap Data Recordkeeping and Reporting

Requirements for Cleared Swaps, Notice of Proposed Rulemaking, 80 FR

52544 (Aug. 31, 2015).

\18\ The comment file for responses to the NPRM is available at

http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1614.

Commenters to the NPRM included: Better Markets, October 30, 2015;

CME, October 30, 2015; COPE, October 30, 2015; CEWG, October 30,

2015; CMC, October 30, 2015; DTCC, October 30, 2015; EEI/EPSA,

October 30, 2015; Eurex Clearing AG (``Eurex''); FSR, October 30,

2015; ITV, October 30, 2015; ISDA, October 30, 2015; JBA, October

30, 2015; LCH, October 30, 2015; MFA and Alternative Investment

Management Association (``AIMA''), October 30, 2015; Markit, October

30, 2015; and North American Derivatives Exchange, Inc., October 30,

2015 (``Nadex'').

\19\ Unless otherwise noted, references to ``commenters''

throughout this release refer to those who submitted comment letters

to the NPRM.

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The swap data reporting framework adopted in the original Final

Part 45 Rulemaking was largely based on the mechanisms for the trading

and execution of uncleared swaps. Under such a regime, swap data

reporting was premised upon the existence of one continuous swap for

reporting and data representation purposes. The Commission has since

had additional opportunities to consult with industry and has observed

how the part 45 regulations function in practice with respect to swaps

that are cleared, including how the implementation of part 45 interacts

with the implementation of part 39 of the Commission's regulations,

which contains provisions applicable to DCOs.

In particular, Sec. 39.12(b)(6) provides that upon acceptance of a

swap by a DCO for clearing, that original swap is extinguished and

replaced by equal and opposite swaps, with the DCO as the counterparty

to each resulting swap.\20\ The original swap that is extinguished upon

acceptance for clearing is commonly referred to by market participants

as the ``alpha'' swap and the equal and opposite swaps that replace the

original swap are commonly referred to as ``beta'' and ``gamma'' swaps.

The process of extinguishing the ``alpha'' swap and creating the

``beta'' and ``gamma'' swaps is generally referred to as a novation.

The Commission has observed that certain provisions of part 45 could

better accommodate the cleared swap framework set forth in Sec.

39.12(b)(6). The new regulations in this release are intended to

provide clarity to swap counterparties and registered entities of their

part 45 reporting obligations with respect to the swaps involved in a

cleared swap transaction. These amendments and new regulations are also

intended to improve the efficiency of data collection and maintenance

associated with the reporting of the

[[Page 41738]]

swaps involved in a cleared swap transaction.

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\20\ See 17 CFR 39.12(b)(6) (requiring a DCO that clears swaps

to have rules providing that, upon acceptance of a swap by the DCO

for clearing: (i) The original swap is extinguished; (ii) the

original swap is replaced by an equal and opposite swap between the

[DCO] and each clearing member acting as principal for a house

trading or acting as agent for a customer trade). The Commission

reaffirmed its position regarding the composition of a cleared swap

in a statement regarding Chicago Mercantile Exchange (``CME'') Rule

1001. See Statement of the Commission on the Approval of CME Rule

1001 (Mar. 6, 2013), at 6, available at http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/statementofthecommission.pdf.

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D. Consultation With Other U.S. Financial Regulators

In developing these rules, Commission staff has engaged in

extensive consultations with other U.S. financial regulators, including

the Securities and Exchange Commission (``SEC''), the Federal Reserve

Board of Governors, the Federal Housing Finance Agency, the Federal

Deposit Insurance Corporation, Office of Comptroller of the Currency,

and the Farm Credit Administration. As noted in the NPRM,\21\ the

Commission endeavored to harmonize the regulations in this release with

the approach proposed by the SEC in its release proposing certain new

rules and rule amendments to Regulation SBSR--Reporting and

Dissemination of Security-Based Swap Information (``Regulation

SBSR'').\22\

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\21\ 80 FR 52544, 52545-46.

\22\ See Regulation SBSR--Reporting and Dissemination of

Security-Based Swap Information, 80 FR 14740 (Mar. 19, 2015).

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E. Summary of Revisions and Additions to Part 45

The Commission is making revisions and additions to Sec. Sec.

45.1, 45.3, 45.4, 45.5, 45.8, 45.10, and appendix 1 to part 45 in order

to provide clarity to swap counterparties as well as to registered

entities regarding their respective part 45 reporting obligations in

connection with each of the swaps involved in a cleared swap

transaction.\23\ The Commission is adopting the following amendments,

each of which is discussed in greater detail in Section II of this

release:

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\23\ The Commission is also amending the part 45 authority

citation to replace a reference to 7 U.S.C. 24 with a reference to 7

U.S.C. 24a.

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Amendments to Sec. 45.1 revise the definition of

``derivatives clearing organization'' to update a cross-reference and

to clarify that the definition covers only registered DCOs. Revised

Sec. 45.1 also adds new definitions for ``original swaps'' and

``clearing swaps.'' These terms are used throughout amended part 45 to

help clarify reporting obligations for the swaps involved in a cleared

swap transaction.

Amendments to Sec. 45.3 modify and clarify DCO creation

data reporting obligations for swaps that result from the clearing

process; establish which entity has the obligation to choose the SDR to

which creation data is reported; eliminate confirmation data reporting

obligations for swaps that are intended to be submitted to a DCO for

clearing at the time of execution; and make conforming changes.

Amendments to Sec. 45.4 modify and clarify continuation

data reporting obligations for original swaps, including the obligation

of a clearing DCO to report original swap terminations to the SDR to

which the original swap was reported; modify and clarify the obligation

to report data providing for the linking of original and clearing swaps

and the original and clearing swap SDRs; remove the requirement for SD/

MSP reporting counterparties to report daily valuation data for cleared

swaps; and make conforming changes.

Amendments to Sec. 45.5 set forth a DCO's obligations to

create, transmit, and use unique swap identifiers (``USIs'') to

identify clearing swaps.

Amendments to Sec. 45.8 provide that the DCO will be the

reporting counterparty for clearing swaps.

Amendments to Sec. 45.10 provide that all swap data for a

given clearing swap, and all swap data for each clearing swap that

replaces a particular original swap (and each equal and offsetting

clearing swap that is created upon execution of the same transaction

and that does not replace an original swap), must be reported to a

single SDR. Amendments also make conforming changes.

Amendments to appendix 1 modify certain existing primary

economic term (``PET'') data fields and certain explanatory notes in

the Comment sections for existing PET data fields, and add several new

PET data fields to account for the clarifications provided in this

release for the reporting of clearing swaps.

II. Revised and New Regulations

Throughout Section II of this release, the Commission will discuss

each amendment and the related comments. The Commission is also

including several examples to demonstrate how cleared swap reporting

workflows would function under the new regulations.

The Commission received some general comments on the proposed

amendments to part 45 relating to data quality. Better Markets was

generally supportive of the proposals, and commented that the NPRM

integrated many of the technical public comments on the concept release

to address the small but important fixes on reporting of cleared swap

transactions.\24\ COPE was also generally supportive of the NPRM on the

``guiding principal'' that end-users should not be unduly burdened by

the Commission's swap reporting regulations.\25\ COPE requested that

the Commission clarify that, under the proposed amendments, end-users

would not have reporting obligations on swaps executed pursuant to the

rules of a SEF or DCM and then cleared by a DCO.\26\

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\24\ See Better Markets Oct. 30, 2015 Letter, at 2.

\25\ See COPE Oct. 30, 2015 Letter, at 2.

\26\ See COPE Oct. 30, 2015 Letter, at 2. In response to COPE's

request for clarification, the Commission notes that under the final

rule being adopted, a non-SD/MSP would likely have no reporting

obligations on a swap executed on a SEF or DCM that is intended to

be cleared at the time of execution. However, the original swap

reporting counterparty as determined by the reporting hierarchy

under Sec. 45.8 could have obligations to report any amendments or

modifications of PET data fields, as well as any continuation data

on a swap between the execution of the swap and its acceptance for

clearing, such as a novation, allocation or termination. In such

circumstances, the reporting counterparty on the original swap would

have a reporting obligation under either Sec. 45.3 or Sec. 45.4,

respectively. Separately, end-users may also have obligations to

correct errors or omissions discovered in swap data for which the

end-user is the reporting counterparty pursuant to Sec. 45.14(a),

or to notify the reporting counterparty of such errors or omissions

if the end-user is not the reporting counterparty pursuant to Sec.

45.14(b).

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A. Definitions--Amendments to Sec. 45.1

1. Existing Sec. 45.1

Existing Sec. 45.1 defines ``derivatives clearing organization''

for purposes of part 45 by cross-referencing section 1a(9) of the CEA

\27\ and any Commission regulations implementing that section,

including but not limited to Sec. 39.5. Existing Sec. 45.1 does not

include definitions of either ``original swap'' or ``clearing swap.''

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\27\ 7 U.S.C. 1a(9).

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2. Proposed Amendments and Additions to Sec. 45.1

i. ``Derivatives Clearing Organization''

The Commission proposed to revise the definition of ``derivatives

clearing organization'' in Sec. 45.1 so that it cross-references the

definition provided in Sec. 1.3(d) of the Commission's regulations and

so that it explicitly refers to a DCO registered with the Commission

under section 5b(a) of the CEA.\28\ This modification redefines a

``derivatives clearing organization'' for purposes of part 45 to mean a

derivatives clearing organization, as defined by Sec. 1.3(d) of this

chapter, that is registered with the Commission.\29\

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\28\ 7 U.S.C. 7a-1(a).

\29\ See 80 FR 52544, 52547.

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ii. ``Original Swap'' and ``Clearing Swap''

The Commission proposed to add definitions of ``original swap'' and

``clearing swap'' to part 45 so that the part 45 reporting rules will

be more consistent with the regulations

[[Page 41739]]

applicable to DCOs set forth in Sec. 39.12(b)(6).\30\

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\30\ See 80 FR 52544, 52547.

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The Commission proposed to define ``original swap'' as a swap that

has been accepted for clearing by a derivatives clearing organization

and ``clearing swap'' as a swap created pursuant to the rules of a

derivatives clearing organization that has a derivatives clearing

organization as a counterparty, including any swap that replaces an

original swap that was extinguished upon acceptance of such original

swap by the derivatives clearing organization for clearing.

As noted above, while original swaps are commonly referred to as

``alpha'' swaps and while the equal and opposite swaps that replace the

original swap are commonly referred to as ``beta'' and ``gamma'' swaps,

the Commission will use the proposed defined terms ``original swap''

and ``clearing swap'' throughout this section of the release.

3. Comments

The Commission received comments on the proposed definitions from a

variety of market participants. Many commenters were supportive of the

proposed amendments to the definitions and the clarification that they

provide. Other commenters supported clarification of the definitions,

but suggested further modifications to the proposed definitions.

i. Derivatives Clearing Organization

Both ISDA and FSR commented that the proposed definition of

``derivatives clearing organization'' should be expanded to include

derivatives clearing organizations that are exempt from registering

with the Commission.\31\ These commenters suggested that the reporting

obligations should apply to the central counterparty regardless of

whether that counterparty is registered with the Commission. ISDA also

commented that the reporting obligations should apply to those

derivatives clearing organizations that are currently in the process of

registering with the Commission.\32\

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\31\ See ISDA Oct. 30, 2015 Letter, at 2-3; FSR Oct. 30, 2015

Letter, at 5.

\32\ See ISDA Oct. 30, 2015 Letter, at 2-3.

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ii. Clearing Swap

With respect to the proposed definition of ``clearing swap,'' ISDA

reiterated its comment that the definition should include all swaps

that are cleared through registered derivatives clearing organizations

as well as those that are cleared through derivatives clearing

organizations that are in the process of registering or are exempt from

registration.\33\ LCH commented that the definition of clearing swap is

incomplete as it may not capture cleared trades between a clearing

member and its client in a principal clearing model, because the DCO is

not a party to that transaction.\34\

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\33\ See Id. at 3.

\34\ See LCH Oct. 30, 2015 Letter, at 2.

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iii. Original Swap

Regarding the definition of ``original swap,'' ISDA commented that

it is supportive of the proposed definition and agrees that swaps

submitted for clearing should be classified as original swaps.\35\ LCH

commented that the definition of original swap is sufficiently clear

and complete.\36\ ISDA requested clarification on guidance issued by

the Commission's Divisions of Clearing and Risk and Market

Oversight,\37\ specifically as to whether there is an original swap

associated with CDS Clearing-Related Swaps that are created through a

firm or forced trade process.\38\ EEI/EPSA sought clarification from

the Commission that the definition of original swap includes both off-

facility swaps that are submitted for clearing, rejected, then

resubmitted and accepted for clearing, and swaps that are not intended

to be cleared when executed but are cleared at some point subsequent to

execution.\39\

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\35\ See ISDA Oct. 30, 2015 Letter, at 3.

\36\ See LCH Oct. 30, 2015 Letter, at 2.

\37\ See CFTC Letter No. 15-51 (Sept. 18, 2015).

\38\ ISDA also commented that it is not clear whether the

associated clearing swaps are publicly reportable swap transactions

for Part 43 purposes. See ISDA Oct. 30, 2015 Letter, at 3.

\39\ See EEI/EPSA Oct. 30, 2015 Letter, at 3.

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4. Final Rule

Having reviewed all relevant comments, the Commission has

determined to adopt the definitions as proposed in the NPRM. The

Commission has noted the comments received from market participants on

the limitation of ``derivatives clearing organization'' to DCOs

registered with the Commission. The Commission notes that, as of the

date of this release, it has granted exemptive relief to four non-U.S.

central counterparties from registering as a DCO with the Commission,

under section 5b(h) of the CEA, pursuant to Commission Orders (``DCO

Exemptive Orders'').\40\ The DCO Exemptive Orders include reporting

obligations that are consistent with those imposed on registered DCOs

under amended part 45.\41\ Therefore, the Commission believes that it

is sufficient for the obligations on derivatives clearing organizations

in part 45 to apply only to registered DCOs and, as a result, the

definition of ``derivatives clearing organization'' under amended

regulation 45.1 will cover only registered DCOs, as proposed.

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\40\ As of the date of this final release, the Commission has

issued DCO Exemptive Orders to ASX Clear (Futures) Pty Ltd.

(``ASX''), Japan Securities Clearing Corp., Korea Exchange Inc., and

OTC Clear Hong Kong Ltd. (``OTC Clear''). The Commission amended

ASX's DCO Exemptive Order on January 28, 2016 to require ASX to

report the termination of any swap accepted for clearing by ASX to

the SDR to which the original swap was reported.

\41\ The Commission also notes ISDA's comment concerning

entities that are in the process of registering as a DCO. Because

there is no temporary or provisional registration of DCOs, such

entities should not be entering into swaps that must be reported

under part 45 without full registration.

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The Commission notes general support for the definition of

``clearing swap.'' The Commission notes that the newly-defined term

``clearing swap'' would include any swap to which the DCO is a

counterparty, regardless of whether such swap is replacing an original

swap.\42\ While a cleared swap transaction generally comprises an

original swap that is terminated upon novation and the equal and

opposite swaps that replace it, the Commission is aware of certain

circumstances in which a cleared swap transaction may not involve the

replacement of an original swap.\43\ Accordingly, the revised

definition of ``clearing swap'' is intended to encompass: (1) Swaps to

which the DCO is a counterparty and that replace an original swap

(i.e., swaps commonly known as betas and gammas) and (2) all other

swaps to which the DCO is a counterparty (even if such swap does not

replace an original swap).

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\42\ The Commission has noted LCH's request for guidance

concerning reporting clearing swaps under the principal model of

clearing more commonly used outside of the United States. The

Commission declines to include such guidance at this time, but would

note that this issue of reporting principal versus agency model

clearing swaps is under consideration as part of the Technical

Specifications Request for Comment issued by the Commission's Office

of Data and Technology and the Division of Market Oversight on

December 22, 2015 relating to draft technical specifications for

certain swap data elements (``Technical Specifications Request for

Comment''). See Draft Technical Specifications for Certain Swap Data

Elements, Request for Comment (Dec. 22, 2015), available at http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/specificationsswapdata122215.pdf.

\43\ For example, in the preamble to the part 39 adopting

release, the Commission noted that ``open offer'' systems are

acceptable under Sec. 39.12(b)(6), stating that: Effectively, under

an open offer system there is no ``original'' swap between executing

parties that needs to be novated; the swap that is created upon

execution is between the DCO and the clearing member, acting either

as principal or agent. Derivatives Clearing Organization General

Provisions and Core Principles, Final Rule 76 FR 69334, 69361 (Nov.

8, 2011).

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[[Page 41740]]

The Commission also notes the broad support for the newly-defined

term ``original swap.'' \44\ In addressing ISDA's request for

clarification on firm or forced trades at the DCO, the Commission notes

that guidance from its Divisions of Clearing and Risk and Market

Oversight states that swaps arising out of a DCO's firm or forced trade

process would constitute ``clearing swaps.'' \45\ The Divisions'

guidance also states that DCOs should be the reporting counterparty of

such swaps.

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\44\ See ISDA Oct. 30, 2015 Letter, at 3; LCH Oct. 30, 2015

Letter, at 2.

\45\ CFTC Letter No. 15-51 (Sept. 18, 2015).

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The proposed definition of original swap will provide clarity with

respect to certain continuation data reporting requirements for such

swaps by tying such obligations to a specific point in time in the life

of a swap that is either intended to be submitted to a DCO for clearing

at the time of execution, or that is not intended to be cleared at the

time of execution but is later submitted to a DCO for clearing. The

Commission notes that under the proposed definition, a swap that is

submitted to a DCO for clearing can become an original swap by virtue

of the DCO's acceptance of such swap for clearing, irrespective of: (1)

Whether such swap is executed on or pursuant to the rules of a SEF or

DCM or off-facility; (2) whether or not such swap is subject to the

clearing requirement; and (3) whether such swap is intended to be

cleared at the time of execution or not intended to be cleared at the

time of execution, but subsequently submitted to a DCO for

clearing.\46\

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\46\ See 17 CFR 39.12(b)(6). Clearing swaps would not be

executed on or pursuant to the rules of a SEF or DCM as such swaps

are created pursuant to the rules of a DCO.

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In addressing EEI/EPSA's comment on whether the term ``original

swaps'' would include off-facility swaps rejected and then resubmitted

for clearing, or swaps not intended to be cleared at execution but

subsequently submitted for clearing, the Commission notes that a swap

becomes an ``original swap'' once it is accepted for clearing by a DCO.

The definition would apply regardless of whether the swap had

previously been rejected for clearing, or whether it was not intended

to be cleared at the time of execution.

B. Swap Data Reporting: Creation Data--Amendments to Sec. 45.3

1. Existing Sec. 45.3

Regulation 45.3 requires reporting to an SDR of two types of

``creation data'' generated in connection with a swap's creation:

``primary economic terms data'' (``PET data'') and ``confirmation

data.'' Additionally, Sec. 45.3 governs what creation data must be

reported, who must report it, and deadlines for its reporting.

The swap data reporting requirements under Sec. 45.3 concerning

both PET data and confirmation data differ for reporting counterparties

and entities depending on whether the swap is executed on or pursuant

to the rules of a SEF or DCM (Sec. 45.3(a)), is subject to mandatory

clearing and executed off-facility (Sec. 45.3(b)), or is not subject

to mandatory clearing and executed off-facility (Sec. 45.3(c) and

(d)). Regulation 45.3 also addresses specific creation data reporting

requirements in circumstances where a swap is accepted for clearing by

a DCO,\47\ including the excusal of the reporting counterparty from

reporting creation data in certain circumstances.\48\

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\47\ See 17 CFR 45.3(a)(2), (b)(2), (c)(1)(ii), (c)(2)(ii), and

(d)(2).

\48\ See 17 CFR 45.3(b)(1), (c)(1)(i), (c)(2)(i), and (d)(1).

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2. Proposed Amendments to Sec. 45.3

As noted above, the Commission has observed how the part 45

regulations function in practice with respect to swaps that are

cleared. While CEA section 2(a)(13)(G) requires each swap (whether

cleared or uncleared) to be reported to a registered SDR, the

Commission believes that the interplay between the Sec. 45.3 reporting

requirements applicable to SEFs, DCMs and reporting counterparties, and

the reporting requirements applicable to DCOs, should be clarified in

the context of a cleared swap transaction. Accordingly, the Commission

proposed several amendments to Sec. 45.3 to better delineate the

creation data reporting requirements associated with each swap involved

in a cleared swap transaction.

i. Proposed Revised References to Clearing Requirement Exceptions and

Exemptions

References to the end-user exception to the swap clearing

requirement set forth in section 2(h)(7) of the CEA are included in

existing Sec. Sec. 45.3 and 45.8. Following the publication of the

Final Part 45 Rulemaking, the Commission codified the end-user

exception in Sec. 50.50 and published two exemptions to the swap

clearing requirement: The inter-affiliate exemption in Sec. 50.52, and

the financial cooperative exemption in Sec. 50.51. Therefore, the

Commission proposed revisions to the introductory language of Sec.

45.3, Sec. Sec. 45.3(b)-(d), and 45.8(h)(1)(vi) to reflect that

exceptions to, and exemptions from, the clearing requirement are now

codified in part 50 of the Commission's regulations.\49\

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\49\ See 80 FR 52544, 52548.

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ii. Proposed Addition of Sec. 45.3(e)--Clearing Swaps

Paragraphs (a)-(d) of Sec. 45.3 govern creation data reporting in

connection with swaps executed on or pursuant to the rules of a SEF or

DCM and for off-facility swaps, but do not separately address creation

data reporting for swaps created through the clearing process by a DCO

(i.e., clearing swaps). Accordingly, the Commission proposed

renumbering existing paragraph (e) (Allocations) of Sec. 45.3 as

paragraph (f), and adding new paragraph (e) to Sec. 45.3, which will

exclusively govern creation data reporting requirements for clearing

swaps. The Commission also proposed revising the introductory language

of Sec. 45.3 to clarify that paragraphs (a)-(d) apply to all swaps

except clearing swaps, while paragraph (e) applies to clearing

swaps.\50\ The Commission did not propose to change the existing

requirements for who reports creation data for those swaps that become

original swaps. Creation data for such swaps will continue to be

reported by the reporting counterparty, as determined pursuant to Sec.

45.8, or by the SEF/DCM in the case of on-facility swaps.

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\50\ See 80 FR 52544, 52548-49.

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Under the proposed revisions to Sec. 45.3(e), a DCO would be

required as reporting counterparty under new Sec. 45.8(i) \51\ to

report all required swap creation data for each clearing swap, either

as soon as technologically practicable after an original swap is

accepted by the DCO for clearing (in the event that the clearing swap

replaced an original swap), or as soon as technologically practicable

after execution of a clearing swap (in the event that the clearing swap

does not replace an original swap). Additionally, under the proposed

revisions to Sec. 45.3(e), required swap creation data for clearing

swaps must be provided to a registered SDR electronically by the DCO

and must include all PET data and all confirmation data for each

clearing swap.

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\51\ The Commission proposed adding Sec. 45.8(i), which

establishes the DCO as the reporting counterparty for all clearing

swaps. This change is discussed in greater detail in Section II.E.

of this release. The Commission also proposed conforming amendments

to Sec. 45.4(b)(1) and (2) to add the phrase ``as reporting

counterparty'' after ``derivatives clearing organization'' to make

clear that the DCO will be the reporting counterparty for purposes

of those provisions. See Section II.C.

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As noted above, CEA section 2(a)(13)(G) \52\ requires each swap

[[Page 41741]]

(whether cleared or uncleared) to be reported to a registered SDR.

Proposed revisions to paragraphs (a)-(d) and new paragraph (e) of Sec.

45.3 will thus cover creation data reporting requirements for all

swaps: Revised Sec. 45.3(a) applies to each swap executed on or

pursuant to the rules of a SEF or DCM, revised Sec. 45.3(b)-(d)

applies to ``all off-facility swaps,'' and proposed new Sec. 45.3(e)

would apply to clearing swaps. The proposed amendments to Sec.

45.3(a)-(d) would thus exclude clearing swaps. Under the proposed

amendments to Sec. 45.3, a SEF/DCM or counterparty other than the DCO

will not have swap data reporting obligations with respect to clearing

swaps. Additionally, revised Sec. 45.3(a)-(d) will govern the creation

data reporting requirements for swaps, including swaps commonly known

as ``alpha'' swaps, regardless of whether they later become original

swaps by virtue of their acceptance for clearing.\53\

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\52\ 7 U.S.C. 2(a)(13)(G).

\53\ Swaps created by a DCO under Sec. 39.12(b)(6) are a type

of clearing swap as defined in this release, and thus could not be

executed on or pursuant to the rules of a SEF or DCM. Additionally,

a DCO would not report creation data for a swap that was executed on

or pursuant to the rules of a SEF or DCM, or for an off-facility

swap that is submitted to the DCO for clearing, because, under Sec.

45.3(a)-(d), the SEF/DCM or reporting counterparty would be

responsible for reporting creation data for such swaps after

execution. Under the revisions to Sec. 45.3, a DCO will not have

creation data reporting obligations for swaps that are not clearing

swaps. The Commission notes that the revisions to Sec. 45.3 in this

release are consistent with the prior no action relief and guidance

issued by Commission staff relating to firm or forced trades at

DCOs. See CFTC Letter No. 15-51 (Sept. 18, 2015); CFTC No-Action

Letter No. 14-119 (Sept. 29, 2014).

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iii. Proposed Removal of Provisions

As noted above, several provisions of existing Sec. 45.3 impose

certain creation data reporting requirements on a DCO in circumstances

where a swap is accepted for clearing by a DCO. To ensure consistency

with Sec. 39.12(b)(6), the Commission proposed to remove these

creation data reporting provisions (current Sec. Sec. 45.3(a)(2),\54\

(b)(2), (c)(1)(ii), (c)(2)(ii), and (d)(2)), and replacing them with

new proposed Sec. 45.3(e), as described above.\55\

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\54\ The Commission is also renumbering Sec. 45.3(a)(1) as

Sec. 45.3(a).

\55\ See 80 FR 52544, 52548-49.

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Additionally, the Commission proposed to remove portions of

Sec. Sec. 45.3(b)(1), (c)(1)(i), (c)(2)(i), and (d)(1).\56\

Previously, where both a DCO and reporting counterparty had obligations

under Sec. 45.3 for reporting creation data for the same swap, the

reporting counterparty would be excused from reporting creation data if

the swap is accepted for clearing before any PET data is reported by

the reporting counterparty. Under the proposed regulation, these

excusal provisions are no longer necessary because the proposed rules

require DCOs to report creation data only for clearing swaps, and not

for swaps accepted for clearing (i.e., original swaps).

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\56\ See 80 FR 52544, 52549.

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iv. Proposed Removal of Certain Confirmation Data Reporting

Requirements

Existing Sec. Sec. 45.3(a)-(d) requires the SEF/DCM (under Sec.

45.3(a)) or the reporting counterparty (under Sec. Sec. 45.3(b)-(d))

to report both PET and confirmation data in order to comply with

creation data reporting obligations. The Commission believes that the

confirmation data requirements for clearing swaps in new Sec. 45.3(e)

will provide the Commission with a sufficient representation of the

confirmation data for a cleared swap transaction, because the original

swap is extinguished upon acceptance for clearing and replaced by equal

and opposite clearing swaps.

Accordingly, for swaps that are intended to be submitted to a DCO

for clearing at the time of execution, the Commission proposed to amend

Sec. Sec. 45.3(a), (b), (c)(1)(iii), (c)(2)(iii), and (d)(2) to remove

the existing confirmation data reporting requirements.\57\

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\57\ See 80 FR 52544, 52549-50.

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v. Proposed Revisions to Sec. 45.3(f)--Allocations

The Commission proposed renumbering existing Sec. 45.3(e), which

governs creation data reporting for swaps involving allocation, as

Sec. 45.3(f).\58\ The Commission also proposed replacing the phrase

``original swap transaction'' in Sec. Sec. 45.3(f)(2) and

45.8(h)(1)(vii)(D), and in the PET data tables found in appendix 1 to

part 45, with ``initial swap transaction'' to avoid confusion with the

term ``original swap,'' which is defined in Sec. 45.1.\59\

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\58\ The Commission also proposed renumbering Sec. 45.3

paragraphs (f), (g), and (h) as paragraphs (g), (h), and (i),

respectively.

\59\ See 80 FR 52544, 52550.

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vi. Proposed Addition of Sec. 45.3(j): Choice of SDR

The Commission proposed adding Sec. 45.3(j) in order to explicitly

establish which entity has the obligation to choose the SDR to which

the required swap creation data is reported.\60\ New Sec. 45.3(j)

provides that: For swaps executed on or pursuant to the rules of a SEF

or DCM (including swaps that may later become original swaps), the SEF

or DCM has the obligation to choose the SDR; for all other swaps

(including off-facility swaps and/or clearing swaps) the reporting

counterparty (as determined in Sec. 45.8) will have the obligation to

choose the SDR.\61\

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\60\ See 80 FR 52544, 52550.

\61\ Regulation 45.3(j) generally reflects the language included

in the preamble to the original Final Part 45 Rulemaking, which

provides that the SEF or DCM would select the SDR for platform-

executed swaps, and the reporting counterparty would choose the SDR

for off-facility swaps. See 77 FR 2136, 2146 (Jan. 13, 2012). Under

the new rule, the DCO will have the obligation to choose the SDR for

clearing swaps.

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Under the proposed addition of Sec. 45.3(j) and the proposed

revisions to Sec. 45.10,\62\ the entity with the obligation to report

the initial required swap creation data will select the SDR to which

all subsequent swap creation and continuation data for that swap will

be reported by choosing the SDR to which such initial required swap

creation data is reported. Thereafter, all required swap creation data

and all required swap continuation data for a given swap will be

reported to the same SDR used by the registered entity or

counterparty.\63\

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\62\ Revisions to Sec. 45.10 are discussed in Section II.F

below. As will be discussed in Section II.F below, by operation of

Sec. 45.10, DCOs will be obligated to report all required

continuation data for original swaps to the registered SDR (as

selected by the SEF, DCM, or reporting counterparty pursuant to

proposed Sec. 45.3(j)) to which required creation data for the swap

was reported pursuant to Sec. Sec. 45.3(a)-(d).

\63\ See Proposed Sec. 45.10. See also Section II.F.2, infra.

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Finally, the Commission notes that it is aware of certain

situations wherein SEFs, DCMs and reporting counterparties for off-

facility swap transactions may report the part 43 data for a swap to an

SDR prior to reporting the part 45 required creation data for the same

swap. In such situations, the registered entity or reporting

counterparty has effectively chosen the SDR for the swap prior to

submitting the part 45 data, since, pursuant to revisions to Sec.

45.10 adopted in this release, all swap data reported pursuant to parts

43 and 45 for a given swap is required to be reported to a single

SDR.\64\ For example, if a swap is executed on or pursuant to the rules

of SEF A, and SEF A immediately upon execution reports the part 43 data

to SDR B, prior to reporting part 45 data, SEF A has effectively chosen

SDR B as the SDR for all required creation data for the swap, because

revised Sec. 45.10 requires that all part 43 and 45 swap data for a

given swap must be reported to a single SDR.\65\ Accordingly, in this

example,

[[Page 41742]]

part 45 required creation data must be reported to SDR B.

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\64\ Id.

\65\ Id.

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vii. Proposed Removal of Expired Compliance Date References

The Commission proposed to remove the references to the expired

compliance dates in Sec. Sec. 45.3(b)(1)(i), (b)(1)(ii), (b)(2),

(b)(2)(ii), (c)(1)(i)(A), (c)(1)(i)(B), (c)(2)(i)(A), (c)(2)(i)(B),

(d)(1), and (d)(3), and in the introductory language to Sec. 45.3.\66\

These references to phase-in compliance dates are no longer necessary

as they have expired.

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\66\ See 80 FR 52544, 52550.

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3. Comments

The Commission received a number of comments in response to its

proposed revisions to Sec. 45.3. Many of these comments focused on the

proposed reporting of creation data associated with clearing swaps and

related reporting obligations concerning original swaps. Other comments

addressed the new choice of SDR provision set out in Sec. 45.3(j).

And, finally, some commenters discussed the new clearing swaps rules in

the context of principal model clearing.\67\

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\67\ FSR requested that the Commission codify no action relief

issued by the Division of Clearing and Risk and the Division of

Market Oversight on April 5, 2013, providing relief to non-SD/MSPs

from reporting requirements for swaps between wholly-owned

affiliates. See FSR Oct. 30, 2015 Letter, at 5 (referencing CFTC No-

Action Letter No. 13-09 (Apr. 5, 2013)). This request is beyond the

scope of the NPRM and will not be addressed in this release.

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i. Creation Data Reporting for Clearing Swaps

With respect to the reporting of clearing swaps, commenters

generally supported the Commission's proposal to require DCOs to report

creation data for clearing swaps.\68\ FSR and CMC agreed that the DCO

is in the best position to report creation data for clearing swaps.\69\

ISDA,\70\ DTCC, and LCH also noted support for requiring DCOs to report

data for clearing swaps.\71\ CME likewise supported the requirement for

DCOs to report creation data for clearing swaps, recommending that the

DCO be assigned all reporting obligations for original and clearing

swaps.\72\ Markit recommended an alternative approach whereby the

reporting counterparty to the original swap would be permitted to

choose whether it reports creation data for the clearing swaps, while

allowing the reporting counterparty to delegate the reporting

responsibilities to a DCO.\73\

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\68\ See FSR Oct. 30, 2015 Letter, at 2; CMC Oct. 30, 2015

Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015

Letter, at 2; DTCC Oct. 30, 2015 Letter, at 3.

\69\ See FSR Oct. 30, 2015 Letter, at 2; CMC Oct. 30, 2015

Letter, at 2.

\70\ ISDA also commented that currently not all DCOs report

clearing swaps in a consistent manner in instances where an

affiliate of a clearing member enters into a swap that is

subsequently cleared through its affiliated clearing member. ISDA

suggested that the Commission make clear that the submission of a

swap for clearing should not result in a change in the name of the

counterparty that is reported to an SDR and that the report

submitted by the DCO for the clearing swap has to reflect the

relevant affiliate and not the clearing member as the legal

counterparty to the clearing swap with the derivatives clearing

organization. See ISDA Oct. 30, 2015 Letter, at 12. While noting

this comment, the Commission declines to address this as beyond the

scope of the NPRM.

\71\ See ISDA Oct. 30, 2015 Letter, at 4; DTCC Oct. 30, 2015

Letter, at 3 (distinguishing between reporting obligations and the

ability to select the SDR to which data related to clearing swaps is

reported); LCH Oct. 30, 2015 Letter, at 2.

\72\ See CME Oct. 30 2015 Letter, at 3.

\73\ See Markit Oct. 30 2015 Letter, at 5.

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LCH requested that the Commission change references to ``execution

of a clearing swap'' in proposed Sec. 45.3(e) to ``creation of a

clearing swap'' in order to more clearly address compression events.

LCH also suggested cross-referencing re-numbered Sec. 45.3(f) to new

Sec. 45.3(e), to cover situations where block trades are allocated

post-clearing.\74\

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\74\ See LCH Oct. 30, 2015 Letter, at 2.

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ii. Removal of Confirmation Data Reporting Requirements for Intended To

Be Cleared Swaps

With respect to swaps that become original swaps, commenters were

generally supportive of the Commission's proposal to eliminate the

requirement for reporting confirmation data on intended to be cleared

swaps.\75\ FSR commented that the reporting of confirmation data for

clearing swaps should provide sufficient confirmation data for a

cleared swap transaction.\76\ Markit, on the other hand, commented that

eliminating the requirement for reporting confirmation data for swaps

that are intended to be cleared, while still maintaining the

requirement to report primary economic terms data, will not benefit

reporting workflows and that there is little incremental cost to report

confirmation data as reporting systems are set up to capture that

information already.\77\

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\75\ See FSR Oct. 30, 2015 Letter, at 3; ISDA Oct. 30, 2015

Letter, at 4; EEI/EPSA Oct. 30, 2015 Letter, at 3.

\76\ See FSR Oct. 30, 2015 Letter, at 3.

\77\ See Markit Oct. 30, 2015 Letter, at 2-3.

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iii. Creation Data Reporting for Swaps That Become Original Swaps

While the proposed amendments to part 45, aside from the removal of

the excusal provisions noted above, do not change creation data

reporting requirements for swaps that become original swaps, several

commenters commented on which entity should be responsible for

reporting creation data for swaps that will become original swaps. Some

commenters suggested that if reporting of creation data for swaps that

become original swaps continues, the DCO, rather than the reporting

counterparty, should be responsible for reporting the creation data for

that swap.\78\ CME commented that assigning all the reporting

obligations for original and clearing swaps to the DCO is a better and

simpler way to address alpha swap reporting, and would eliminate the

need to reconcile original and clearing swaps across SDRs.\79\ CMC

similarly commented that DCOs are best positioned to report on swaps

that they accept or reject for clearing and should assume all reporting

obligations for cleared swaps, including all reporting of swaps that

are intended to be cleared.\80\ AIMA likewise suggested that if the

Commission continues to require the reporting of original swaps,

assigning the reporting obligations to the DCO will remove reporting

burdens and the risk of data fragmentation across SDRs.\81\

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\78\ See e.g., CME Oct. 30, 2015 Letter, at 2-3; CMC Oct. 30,

2015 Letter, at 2-3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30,

2015 Letter, at 3.

\79\ See CME Oct. 30, 2015 Letter, at 3.

\80\ See CMC Oct. 30, 2015 Letter, at 2.

\81\ See AIMA Oct. 30, 2015 Letter, at 6.

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Other commenters recommended that the Commission continue requiring

the reporting counterparty to report creation data for those swaps that

will become original swaps.\82\ LCH commented that the reporting

counterparty should always be a party to the transaction and therefore,

in the case of a swap that will become an original swap, the DCO would

not be better suited than the SEF, DCM, or reporting counterparty to

report the creation data.\83\ Eurex suggested that assigning the

reporting obligation of original swap creation data to the DCO may

present a timeliness issue depending on when the DCO receives the

necessary information from the counterparties.\84\ ISDA likewise agreed

that the obligation to report swaps that become original swaps should

remain with the reporting counterparty for that swap.\85\

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\82\ See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015

Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4.

\83\ See LCH Oct. 30, 2015 Letter, at 2.

\84\ See Eurex Oct. 30, 2015 Letter, at 4.

\85\ ISDA also commented in support of the Commission's proposal

to remove the provisions in Sec. 45.3 that excused a reporting

counterparty from reporting creation data for a swap accepted for

clearing before the primary economic terms reporting deadline. See

ISDA Oct. 30, 2015 Letter, at 4.

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[[Page 41743]]

Some commenters suggested that the reporting of any creation data

for swaps that will become original swaps is unnecessary.\86\ AIMA

commented that eliminating reporting for swaps that are intended to be

cleared at the time of execution will significantly reduce complexity

in the reporting regime and streamline the reported data.\87\ AIMA also

commented that the Commission's proposed reporting approach for

original swaps will not reduce data fragmentation.\88\ Similarly, EEI/

EPSA suggested that there is little to no benefit to original swap

reporting for swaps that are intended to be cleared at the time of

execution and that counterparties should not be required to report any

creation data for such swaps.\89\ Other commenters, in response to the

IDWG Request for Comment, supported the continued reporting of creation

data for swaps that will become original swaps.\90\

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\86\ See AIMA Oct. 30, 2015 Letter, at 2-6; EEI/EPSA Oct. 30,

2015 Letter, at 3; CEWG Oct. 30, 2015 Letter, at 2.

\87\ See AIMA Oct. 30, 2015 Letter, at 3.

\88\ See AIMA Oct. 30, 2015 Letter, at 4 (noting that reporting

original swap creation data to one SDR and reporting clearing swap

data to a different SDR may undermine data quality for the

Commission's supervisory purposes).

\89\ See EEI/EPSA Oct. 30, 2015 Letter, at 3.

\90\ See NPRM, 80 FR 52544, 52549 at nn. 37-39 (citing DTCC May

27, 2014 Letter at 17-18; AFR May 27, 2014 Letter at 5; Markit May

27, 2014 Letter at 25; TR SEF May 27, 2014 Letter at 10).

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iv. Choice of SDR Provisions

The Commission received a number of comments on its proposal

regarding the selection of the SDR to which the required swap creation

data should be reported. Some commenters were supportive of the

Commission's proposed addition of Sec. 45.3(j) and proposed

modifications to Sec. 45.10 relating to the choice of the SDR for a

particular swap. As discussed below, other commenters suggested

modifications to the Commission's proposal and changes to the manner in

which the SDR is selected for a particular swap.

With respect to clearing swaps, commenters were divided as to which

entity should have the ability to select the SDR. FSR, LCH, and ISDA

all supported allowing the DCO to select the SDR for purposes of

reporting creation data for clearing swaps, as the DCO has the sole

obligation to report clearing swaps.\91\ CME and LedgerX similarly

supported the proposal to allow DCOs to select the SDR for clearing

swaps.\92\ CME supports the Commission's proposal to assign all

clearing swap reporting obligations, and the right to select the SDR to

which it reports, to the DCO. CME also recommended that the Commission

assign all original swap reporting obligations, and associated SDR

selection rights, to the DCO, which would, in CME's opinion, ensure

that all data for a cleared swap transaction is housed in the same SDR,

thereby avoiding data fragmentation.\93\

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\91\ See FSR Oct. 30, 2015 Letter, at 2; LCH Oct. 30, 2015

Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4.

\92\ See CME Oct. 30, 2015 Letter, at 1-2; LedgerX Oct. 30, 2015

Letter, at 1.

\93\ See CME Oct. 30, 2015 Letter, at 2-3.

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Other commenters suggested that the reporting counterparty to the

swap that becomes the original swap should select the SDR to which the

clearing swaps are reported. DTCC commented that the DCO for a clearing

swap should have the obligation to report the clearing swap to the SDR

selected by the reporting counterparty to the swap that became the

original swap, or selected by the SEF or DCM for on-facility swaps.\94\

DTCC commented that this ``single SDR approach'' would be vital for

providing a full audit trail and the ability to efficiently aggregate

data.\95\ DTCC also commented that allowing the DCO to select the SDR

for clearing swaps creates a competition problem due to vertically

integrated SDRs and DCOs.\96\ DTCC explained that permitting a DCO to

report to an affiliated SDR when the original swap data had been

reported to another SDR, allows DCOs to bundle services and further

entrenches DCOs' vertical integration of trade execution, clearing, and

data reporting.\97\ Markit recommended that the Commission allow the

reporting counterparty to the swap that becomes the original swap to

select the SDR to which the clearing swap is reported, while also

allowing that reporting counterparty to delegate the selection of the

swap data repository to the DCO. Markit commented that this

counterparty choice approach would result in a more competitive DCO

marketplace.\98\

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\94\ See DTCC Oct. 30, 2015 Letter, at 3.

\95\ See id. at 4.

\96\ See id. at 7.

\97\ See id.

\98\ See Markit Oct. 30, 2015 Letter, at 5.

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Other commenters suggested that, for on-facility swaps that are not

cleared by a DCO, the party responsible for reporting continuation data

for the swap should not be bound by the SEF or DCM's choice of SDR for

the reporting of creation data.\99\ ISDA commented that in such cases

the selection of the SDR should not be assigned to the entity that has

the first obligation to report, but rather should be assigned to the

entity that has the longest, recurring, or most frequent obligation to

report.\100\

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\99\ See ISDA Oct. 30, 2015 Letter, at 4-5; JBA Oct. 30, 2015

Letter, at 1.

\100\ See ISDA Oct. 30, 2015 Letter, at 4-5.

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v. Reporting of Principal Model Cleared Swaps

Finally, a few comments focused on swaps that are cleared through a

principal, rather than agency, model. Eurex commented that it is not

clear under the proposal which entity is to be reported as the

counterparty to the DCO with regard to a clearing swap in the principal

model.\101\

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\101\ See Eurex Oct. 30, 2015 Letter, at 9; see also FSR Oct.

30, 2015 Letter, at 5.

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4. Final Rule

The Commission has considered the comments that it received in

response to the proposed changes to Sec. 45.3. As discussed above,

some of the proposed changes to Sec. 45.3 received widespread support

among commenters, while other proposed changes received both support

and objection from commenters. The Commission has decided to adopt the

changes to Sec. 45.3 as proposed in the NPRM for the following

reasons.\102\

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\102\ The Commission has made one non-substantive conforming

change to final Sec. 45.3(b), changing the phrase ``exception or

exemption from the clearing requirement'' to ``exception to, or

exemption from, the clearing requirement,'' to make this provision

consistent with other uses of the phrase throughout Sec. 45.3.

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i. Creation Data Reporting for Clearing Swaps

As discussed above, the Commission's proposal to require DCOs to

report creation data for clearing swaps received support from

commenters.\103\ The Commission agrees with these commenters that the

DCO is in the best position to report creation data for clearing swaps.

As for Markit's proposed counterparty choice alternative, the

Commission recognizes the flexibility that Markit's proposal could

offer parties to the clearing swap. However, the Commission believes

Markit's proposal would likely result in additional complexity in the

reporting process and could obscure, to the Commission, which entity

has the ultimate responsibility for reporting the clearing swap. After

considering the comments received, the Commission continues to believe

that the DCO is the entity with the easiest and quickest access to full

information with respect to PET data and confirmation data for clearing

swaps. Commission regulation

[[Page 41744]]

Sec. 39.12(b)(6) requires DCOs to have rules providing that, upon

acceptance of a swap by the DCO for clearing, the original swap is

extinguished and replaced by an equal and opposite swap between the DCO

and each clearing member acting as either principal for a house trade

or agent for a customer trade.\104\ Because the DCO must replace an

original swap with clearing swaps when accepting the original swap for

clearing, the Commission believes that the DCO should be the entity

that reports creation data for clearing swaps, and adopts its proposal

to require DCOs to report creation data for clearing swaps.

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\103\ See FSR Oct. 30, 2015 Letter, at 2; CMC Oct. 30, 2015

Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4; DTCC Oct. 30, 2015

Letter, at 3; LCH Oct. 30, 2015 Letter, at 2.

\104\ See 17 CFR 39.12(b)(6).

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The Commission notes LCH's comments that, when establishing the

timing requirement for reporting clearing swaps that do not replace

original swaps in Sec. 45.3(e), the term ``creation of a clearing

swap'' may better capture compression events than ``execution of a

clearing swap.'' The Commission believes that the phrase ``execution of

a clearing swap,'' for purposes of part 45, is sufficiently clear to

cover reporting obligations for all clearing swaps that do not replace

original swaps. The Commission also believes that the adopted reporting

requirements for clearing swaps would cover post-clearing allocations

of block trades raised by LCH. If a block trade is allocated after

clearing, then any allocations of that block would have a DCO as one

counterparty. Thus, such post-allocation swaps would be clearing swaps

and must be reported by the DCO pursuant to Sec. 45.3(e).

ii. Removal of Confirmation Data Reporting Requirements for Intended To

Be Cleared Swaps

Under the new rules, SEFs/DCMs and reporting counterparties will

continue to be required to report PET data as part of their creation

data reporting, but will be required to report confirmation data only

for swaps that, at the time of execution, are not intended to be

submitted to a DCO for clearing. For swaps that, at the time of

execution, are intended to be submitted to a DCO for clearing, SEFs/

DCMs and reporting counterparties will not be required to report

confirmation data. If the swap is accepted for clearing by a DCO, the

DCO will be required to report confirmation data for the clearing swaps

pursuant to proposed Sec. 45.3(e).\105\

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\105\ The Commission notes that this change only impacts certain

confirmation data reporting and recordkeeping requirements in Sec.

45.3, and does not alter existing obligations to generate or

exchange confirmations under other Commission regulations.

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With respect to swaps that will become original swaps, the

Commission received widespread support of the proposed elimination of

the requirement to report confirmation data associated with these

swaps.\106\ One commenter did suggest that there is little incremental

cost to continuing to require reporting of confirmation data for swaps

that will become original swaps.\107\ However, the Commission continues

to believe that the confirmation data requirements for clearing swaps

provide the Commission with a sufficient representation of the

confirmation data for a cleared swap transaction, as the original swap

is extinguished upon acceptance for clearing and replaced by equal and

opposite clearing swaps. Accordingly, the Commission is adopting its

proposal to remove the confirmation data reporting requirement for

swaps that are intended to be cleared at the time of execution.

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\106\ See FSR Oct. 30, 2015 Letter, at 3; ISDA Oct. 30, 2015

Letter, at 4; EEI/EPSA Oct. 30, 2015 Letter, at 3.

\107\ See Markit Oct. 30, 2015 Letter, at 2-3.

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iii. Creation Data Reporting for Swaps That Become Original Swaps

With the exception of the removal of excusal provisions, the

Commission has not proposed to change the existing requirement to

report creation data for swaps that will become original swaps. As

noted in the NPRM, CEA section 2(a)(13)(G) requires each swap, whether

cleared or uncleared, to be reported to a registered SDR.\108\ The

Commission did, however, receive some comments urging the Commission to

eliminate the existing requirement to report swaps that will become

original swaps. The Commission also received, in response to the IDWG

Request for Comment, comments in support of continued reporting of

creation data for swaps that will become original swaps.\109\

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\108\ See 80 FR 52544, 52548.

\109\ See NPRM, 80 FR 52544, 52549, nn. 37-39 (citing DTCC May

27, 2014 Letter at 17-18; AFR May 27, 2014 Letter at 5; Markit May

27, 2014 Letter at 25; TR SEF May 27, 2014 Letter at 10).

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Having reviewed the comments regarding reporting of swaps that

become original swaps, the Commission continues to interpret CEA

section 2(a)(13)(G) as requiring all swaps to be reported, which would

include swaps that become original swaps as distinct swaps from

resulting clearing swaps under Sec. 39.12(b)(6). Further, the

Commission continues to believe that original swaps contain essential

information regarding the origins of cleared swap transactions for

market surveillance and audit-trail purposes, including but not limited

to the identity of the original counterparties, the execution venue,

and the timestamp of the original transaction between the original

counterparties. Such essential information could not be easily

determined if only resulting clearing swaps were to be reported. The

Commission's ability to trace the history of a cleared swap transaction

from execution between the original counterparties to clearing novation

relies on this information. The Commission also notes that the

continued reporting of swaps that become original swaps is consistent

with the SEC's proposed Regulation SBSR--Reporting and Dissemination of

Security-Based Swap Information.\110\ Finally, the continued reporting

of original swaps, including original swap terminations, will aid the

Commission's ability to analyze cleared swap activity and review swap

activity for compliance with the clearing requirement. For these

reasons the Commission, in this final rule, continues to require

reporting of swaps that will become original swaps.

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

\110\ See Regulation SBSR, 80 FR 14740.

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The Commission received divided comments as to which entity should

be responsible for reporting creation data for those swaps that will

become original swaps. Some commenters suggested that the DCO should be

the reporting counterparty,\111\ while other commenters recommended

that the reporting counterparty report creation data for those swaps

that will become original swaps.\112\ After careful consideration of

the comments received on this issue, the Commission believes that the

creation data reporting requirements for those swaps that will become

original swaps should remain as they currently exist, aside from the

removal of excusal provisions noted above. The Commission recognizes

that reporting counterparties and registered entities have invested

substantial time and resources to report swaps (both cleared and not

cleared) to SDRs and that DCOs have invested substantial resources to

report clearing swaps. The Commission believes that maintaining the

existing requirement for the reporting counterparty, rather than for

the DCO, to report creation data of the swap that will become an

original swap will help to prevent disruption of established industry

workflows. The Commission also continues to believe that the SEF/DCM or

reporting

[[Page 41745]]

counterparty has the easiest and fastest access to initial creation

data for swaps that become original swaps.

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\111\ See CME Oct. 30, 2015 Letter, at 2-3; CMC Oct. 30, 2015

Letter, at 2-3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30, 2015

Letter, at 2.

\112\ See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015

Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4.

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As discussed in its Final Part 45 Rulemaking, the Commission

believes that requiring all swaps that become original swaps to be

reported only to SDRs chosen by the DCO of the resulting clearing swaps

could create an uneven playing field between DCO affiliated SDRs and

non-DCO affiliated SDRs.\113\ Likewise, if the reporting counterparty

or SEF/DCM were to report creation data, or select the SDR to which

such data is reported, an SDR in which swap dealers have an ownership

interest may obtain a dominant market position. This Final Rule avoids

injecting the Commission into a market decision by maintaining the

requirement that creation data for swaps that become original swaps is

reported by the reporting counterparty for that swap, or the SEF/DCM,

and the resulting clearing swaps are reported by the DCO.

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\113\ See 77 FR 2136, 2149.

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The Commission acknowledges the data fragmentation concerns raised

by those that recommend DCOs report original swap creation data,

however, the Commission also recognizes that requiring the DCOs, rather

than the original reporting counterparty, to report original swap

creation data may also present challenges. For example, Eurex noted

that there could be a timeliness issue depending on when the DCO

receives necessary information from counterparties to report creation

data.\114\ The Commission also is concerned that, should DCOs report

original swaps, potential delays in clearing could delay real-time

swaps reporting pursuant to part 43. The Commission believes that

accurate and timely reporting of the required data fields by all

parties, in particular the clearing swap PET fields and data elements

specific to terminations of original swaps, will alleviate data

fragmentation concerns for those situations where the original swap and

clearing swaps are reported to different SDRs.

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\114\ See Eurex Oct. 30, 2015 Letter, at 4.

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iv. Choice of SDR Provisions

The Commission received a variety of comments on its proposed

addition of Sec. 45.3(j) and modifications to Sec. 45.10 regarding

the choice of the SDR for a particular swap. With respect to clearing

swaps, some commenters recommended that the DCO should select the

SDR,\115\ while other commenters suggested the reporting counterparty

to the original swap should select the SDR to which the clearing swap

must be reported.\116\ The Commission has considered these comments and

continues to believe, as discussed above, that placing the obligation

to choose the SDR on the registered entity or counterparty that is

required to first report the required swap creation data, rather than

on another entity, will result in more efficient data reporting.

Allowing the first entity to report data on a swap to choose the SDR

will allow reporting entities to select an SDR to which they have

established connections; giving another entity the ability to choose

the SDR could require the first reporting entities to connect to

multiple SDRs. The Commission also believes allowing the first

reporting registered entity or counterparty to choose the SDR will also

promote competition among SDRs to provide SDR services to a broad array

of reporting entities.

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\115\ See FSR Oct. 30, 2015 Letter, at 2; LCH Oct. 30, 2015

Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4; CME Oct. 30, 2015

Letter, at 2-3 (CME also suggested that the DCO select the SDR to

which original swaps are reported); LedgerX Oct. 30, 2015 Letter, at

1.

\116\ See DTCC Oct. 30, 2015 Letter, at 3; Markit Oct. 30, 2015

Letter, at 5 (Markit also suggested the counterparty have the option

to delegate the selection of the SDR to the DCO).

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Requiring this method of SDR selection also avoids inserting anyone

other than a party to the swap (or facility where the transaction is

executed) into the decision as to how a registered entity or

counterparty fulfills its regulatory obligation to report initial

required swap creation data. As with the ``first-touch'' approach taken

with respect to the creation of USIs in part 45,\117\ the Commission

believes that the entity with the first reporting obligation should

select the SDR for that report. The Commission believes that this

method of SDR selection will avoid delays in real-time reporting for

part 43 purposes. If DCOs were to select the SDR for an original swap,

the DCO would not be in a position to make such selection until after a

swap was accepted for clearing. Any delays in clearing would translate

into delays in reporting for both part 43 real-time reporting and part

45 reporting.

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\117\ See Final Part 45 Rulemaking, 77 FR 2136, 2158.

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The registered entity or counterparty that is required to report a

swap pursuant to Sec. 45.8 may select an SDR to which its

technological systems are most suited or to which it already has an

established relationship, providing for the efficient and accurate

reporting of swap data. The Commission notes that this Final Rule does

not prohibit a registered entity or counterparty from choosing an SDR

based on consideration of market preference or other factors, however,

the obligation to choose the SDR will rest solely with the registered

entity or counterparty set forth in amended Sec. 45.8. The Commission

recognizes that this may result in original swaps and clearing swaps

being reported to different SDRs, however, the Commission believes that

the required data fields, such as original swap USI included in

clearing swap reporting, and clearing swap USIs included in original

swap reporting, will allow the Commission to efficiently and accurately

link data across SDRs and perform its regulatory mandate.

The Commission has also noted ISDA's proposed alternative that the

entity with the ``longest, recurring, or most frequent obligation to

report'' be given choice of SDR. In particular, ISDA expressed concern

that market participants would be required, due to the made available

to trade mandate, to trade certain swaps at a particular SEF, and

therefore be required to report to that SEF's chosen SDR. However, the

Commission notes that any swaps made available to trade would be

subject to the clearing mandate. As discussed above, counterparties to

cleared, on-facility swaps would likely have no reporting

obligations.\118\ Therefore, the concern raised by ISDA would not

likely impact a large percentage of on-facility swaps. Moreover, ISDA

notes that its proposed alternative would require amending various

other provisions in part 45, including assignment of reporting

counterparty designation and USI creation. Additionally, the Commission

notes that the ``longest, recurring, or most frequent obligation to

report'' may be difficult to determine at the outset of a swap,

creating potential confusion as to who could select the SDR. Because

amended Sec. 45.3(j) codifies current industry practice,\119\ the

Commission believes the choice of SDR provisions adopted in this final

rule create the least disruption in the market while achieving the goal

of consistent and timely swaps reporting.

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\118\ See supra, n. 26, discussing reporting obligations for

counterparties to cleared, on-facility swaps.

\119\ See NPRM, 80 FR 52544, 52550.

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v. Reporting of Principal Model Clearing Swaps

The Commission has noted comments from Eurex on reporting of

clearing swaps under the principal clearing model. The Commission is

aware of issues surrounding the reporting of principal model clearing

swaps, but is

[[Page 41746]]

not providing further guidance at this time.

C. Swap Data Reporting: Continuation Data--Amendments to Sec. 45.4

1. Existing Sec. 45.4

Regulation 45.4 governs the reporting of swap continuation data to

an SDR during a swap's existence through its final termination or

expiration. This provision establishes the manner in which continuation

data, including life cycle event data or state data, and valuation

data,\120\ must be reported (Sec. 45.4(a)), and sets forth specific

continuation data reporting requirements for both cleared (Sec.

45.4(b)) and uncleared (Sec. 45.4(c)) swaps. For cleared swaps, Sec.

45.4(b) currently requires that life cycle event data or state data be

reported by the DCO, and that valuation data be reported by both the

DCO and by the reporting counterparty (if the reporting counterparty is

an SD or MSP).

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

\120\ ``Required swap continuation data'' is defined in Sec.

45.1 and includes ``life cycle event data'' or ``state data''

(depending on which reporting method is used) and ``valuation

data.'' Each of these data types is defined in Sec. 45.1. ``Life

cycle event data'' means all of the data elements necessary to fully

report any life cycle event. ``State data'' means all of the data

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

all of the primary economic terms of a swap. ``Valuation data''

means all of the data elements necessary to fully describe the daily

mark of the transaction, pursuant to CEA section 4s(h)(3)(B)(iii),

and to Sec. 23.431 if applicable. 17 CFR 45.1.

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

For uncleared swaps, Sec. 45.4(c) requires the reporting

counterparty to report all required swap continuation data, including

life cycle event data or state data, and valuation data.

2. Proposed Amendments to Sec. 45.4

The Commission understands that Sec. 45.4 could be clarified

regarding continuation data reporting responsibilities for each of the

swaps involved in a cleared swap transaction. Accordingly, the

Commission proposed several amendments to Sec. 45.4 to better

delineate the continuation data reporting requirements associated with

each swap involved in a cleared swap transaction.\121\ In particular,

the Commission proposed conforming changes to existing Sec. 45.4(a),

revisions to existing Sec. 45.4(b) and to existing Sec. 45.4(c)

(proposed to be renumbered as Sec. 45.4(d)), and the addition of new

Sec. 45.4(c). Each proposed amendment is discussed in detail below.

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\121\ See 80 FR 52544, 52551.

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i. Proposed Conforming Changes to Sec. 45.4(a)

The Commission proposed to revise the heading of Sec. 45.4(a) to

read ``Continuation data reporting method generally'' to reflect that

the continuation data reporting method requirements in Sec. 45.4(a)

apply to all swaps, regardless of asset class or whether the swap is an

original swap, clearing swap or uncleared swap, whereas the

continuation data reporting requirements in proposed Sec. 45.4(b),

(c), and (d) would apply to clearing swaps, original swaps, and

uncleared swaps, respectively.\122\

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\122\ See 80 FR 52544, 52551.

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ii. Proposed Revisions to Sec. 45.4(b)

Regulation 45.4(b) currently governs continuation data reporting

obligations for ``cleared swaps,'' but does not distinguish among the

different swaps involved in a cleared swap transaction (i.e. original

and clearing swaps). The Commission thus proposed to revise the

introductory language of Sec. 45.4(b) to replace the terms ``cleared

swaps'' and ``swaps cleared by a derivatives clearing organization,''

which were not defined in the Final Part 45 Rulemaking, with the

defined term ``clearing swaps.'' \123\

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\123\ See 80 FR 52544, 52551-52.

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The Commission proposed to remove existing Sec. 45.4(b)(2)(ii),

which requires a reporting counterparty that is an SD or MSP to report

valuation data for cleared swaps daily, in addition to the valuation

data that is required to be reported by the DCO pursuant to Sec.

45.4(b)(2)(i). For clearing swaps, the DCO would be the only swap

counterparty required to report continuation data, including valuation

data.\124\

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\124\ This proposal would codify certain no-action letters

issued by the Commission's Division of Market Oversight. See CFTC

No-Action Letter No. 12-55 (Dec. 17, 2012); CFTC No-Action Letter

No. 13-34 (Jun. 26, 2013); and CFTC No-Action Letter No. 14-90 (Jun.

30, 2014). Staff no-action relief from the requirements of Sec.

45.4(b)(2)(ii) has been in effect since the initial compliance date

for part 45 reporting.

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iii. Proposed Addition of Sec. 45.4(c): Continuation Data Reporting

for Original Swaps

Existing Sec. 45.4(c) governs continuation data reporting for

uncleared swaps. The Commission proposed renumbering Sec. 45.4(c) as

Sec. 45.4(d) (for reasons discussed below), and proposed the addition

of a new Sec. 45.4(c), which would set forth the continuation data

reporting requirements for original swaps.\125\

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\125\ See 80 FR 52544, 52552.

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Specifically, proposed Sec. 45.4(c) would require a DCO to report

all required continuation data for original swaps, including original

swap terminations, to the original swap SDR pursuant to Sec. 45.3(a)

through (d).\126\ As proposed, Sec. 45.4(c) would also reference the

existing requirement that all continuation data must be reported in the

manner provided in Sec. 45.13(b), and that the SDR, in order to comply

with Sec. 49.10, must also ``accept and record'' such data, including

original swap terminations.\127\ The proposed addition of a reference

to Sec. 49.10 is consistent with an IDWG commenter's request for

clarification regarding the obligation of the SDR to accept and process

the termination message from the DCO.\128\

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\126\ As discussed above, under the proposed revisions to

Sec. Sec. 45.3(a)-(d), a SEF/DCM or reporting counterparty would be

required to report creation data for all swaps except clearing swaps

(including for swaps that later become original swaps by virtue of

their acceptance for clearing by a DCO). See Section II.B.4., supra.

See also Sec. Sec. 45.10 (a)-(c) (providing that all required swap

continuation data reported for a swap must be reported to the same

SDR to which required swap creation data was first reported pursuant

to Sec. 45.3). The Commission notes that pursuant to existing

regulation Sec. 45.13, each reporting entity and/or counterparty is

required to use the facilities, methods, or data standards provided

or required by the SDR to which the entity or counterparty reports

the data. 17 CFR 45.13.

\127\ SDR regulation Sec. 49.10(a) provides that an SDR shall

accept and promptly record all swap data in its selected asset class

and other regulatory information that is required to be reported

pursuant to part 45 and part 43 by DCMs, DCOs, SEFs, SDs, MSPs and/

or non-swap dealer/non-major swap participant counterparties.

Section 49.10(a)(1) further provides that for purposes of accepting

all swap data as required by part 45 and part 43, the registered SDR

shall adopt policies and procedures, including technological

protocols, which provide for electronic connectivity between the SDR

and DCMs, DCOs, SEFs, SDs, MSPs and/or certain other non-swap

dealer/non-major swap participant counterparties who report such

data. It further states that the technological protocols established

by a SDR shall provide for the receipt of swap creation data, swap

continuation data, real-time public reporting data, and all other

data and information required to be reported to such SDR.

Additionally, Sec. 49.10(a)(1) provides that the SDR shall ensure

that its mechanisms for swap data acceptance are reliable and

secure. 17 CFR 49.10. The Commission also proposed conforming

changes to the introductory language of Sec. 45.3 and Sec. 45.4 to

make clear that all required swap creation and continuation data

must be reported to the relevant SDR in the manner provided in Sec.

45.13, and pursuant to Sec. 49.10, which sets forth rules governing

the acceptance and recording of such data.

\128\ See ITV May 27, 2014 Letter, at 4 (noting that failure to

accept the termination message can produce inaccurate swap data due

to double reporting and that the rejection of the termination

message could distort notional amounts and market risks, and stating

that amending the reporting rules to place the reporting obligation

on the DCO for intended to be cleared swaps simplifies the reporting

flows and places the responsibility on the party best-suited to

accurately report cleared swap data).

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As proposed, Sec. 45.4(c)(1) would require a DCO to report all

life cycle event data for an original swap on the same day that any

life cycle event occurs, or to report all state data for the original

swap, daily.

The continuation data reporting requirements of proposed Sec.

45.4(c)

[[Page 41747]]

would apply to a swap that has been submitted to a DCO for clearing and

that becomes an original swap by virtue of the DCO's acceptance of such

swap for clearing. The DCO's continuation data reporting obligations

for a swap to which it is not a counterparty (i.e., for swaps other

than clearing swaps) will only be triggered if a swap is accepted for

clearing (and thus becomes an original swap). If a swap is submitted to

a DCO for clearing and is not accepted for clearing, then the DCO will

not have continuation data reporting obligations for the swap, because

the swap is not an original swap or a clearing swap.

iv. Proposed Additional Continuation Data Fields To Be Reported by DCOs

Proposed Sec. 45.4(c) would require DCOs to report additional data

fields when reporting continuation data on original swaps.\129\ These

fields would be the LEI of the SDR to which the DCO reported clearing

swaps replacing the original swap; the USI of the original swap being

replaced; and the USIs of each clearing swap that is replacing the

original swap. As discussed in the NPRM,\130\ the Commission proposed

these additional data fields to enable the Commission to track the

complete life of a cleared swap transaction. Inclusion of these data

fields in continuation data on the original swap, taken in conjunction

with existing requirements to reporting original swap information in

reports clearing swaps, will aid the Commission in linking the original

swap and all clearing swaps replacing it.

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\129\ See 80 FR 52544, 52552-53.

\130\ See 80 FR 52544, 52532-33.

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v. Proposed Revisions to Sec. 45.4(d)

As mentioned above, the Commission proposed to renumber Sec.

45.4(c) (Continuation data reporting for uncleared swaps) as Sec.

45.4(d). The Commission also proposed to amend Sec. 45.4(d), which

applies to all swaps that are not cleared by a derivatives clearing

organization, to add the phrase ``including swaps executed on or

pursuant to the rules of a swap execution facility or designated

contract market.''\131\ This proposed change would clarify the existing

requirement that reporting counterparties report all required swap

continuation data for an uncleared swap, irrespective of whether the

swap was executed off-facility (in which case the reporting

counterparty must report required swap creation data), or whether the

swap was executed on or pursuant to the rules of a SEF or DCM (in which

case the SEF or DCM must report the required swap creation data).\132\

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\131\ See 80 FR 52544, 52553.

\132\ See 17 CFR 45.3(b)-(d) (creation data reporting

requirements for off-facility swaps) and 17 CFR 45.3(a) (creation

data reporting requirements for swaps executed on or pursuant to the

rules of a SEF or DCM). See also Section II.B.4.iii supra.

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Finally, the Commission proposed to modify the introductory

language to Sec. 45.4 and Sec. 45.4(d)(1)(ii)(A) to remove outdated

references to compliance dates that have already expired.\133\

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\133\ See 80 FR 52544, 52553.

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3. Comments Received

The Commission received numerous comments on its proposed revisions

to Sec. 45.4.\134\ Below is a summary of comments for each of the

primary revisions and additions to Sec. 45.4.

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\134\ The Commission did not receive any comment directly

addressing the conforming changes to Sec. 45.4(a) or renumber and

amended Sec. 45.4(d). The Commission received a comment from FSR on

continuation data for amortizing swaps. See FSR Oct. 30, 2015

Letter, at 4. Because the NPRM was limited to revisions of Sec.

45.4 as it relates to clearing swaps, FSR's request is beyond the

scope of this rulemaking.

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i. Comments on Proposed Revisions to Sec. 45.4(b)

The proposed amendment to Sec. 45.4(b)(2), requiring only DCOs to

submit valuation data for clearing swaps, was widely supported in the

comment letters. Although one commenter contended that valuation data

from SD/MSP swap counterparties is valuable information and that the

Commission should require such information from SD/MSP counterparties

for all swaps, cleared or uncleared,\135\ many commenters to the IDWG

Request for Comment and NPRM stated that only the DCO should have the

responsibility to report valuation data for cleared swaps, and that the

Commission should eliminate the requirement for an SD or MSP to report

valuation data for cleared swaps.\136\ One commenter noted that

valuation data and mark-to-market value data provided by DCOs are

sufficient for the Commission to understand clearing swap valuations,

particularly because the DCO's valuation method is the industry

standard.\137\

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\135\ See Markit May 27, 2014 Letter, at 10-11 (arguing that the

Commission might receive valuable information from valuations

reported by counterparties).

\136\ See ABA May 27, 2014 Letter, at 2; CME May 27, 2014

Letter, at 9-10; FSR May 27, 2014 Letter, at 2; ITV May 27, 2014

Letter, at 2, 10, 15; ISDA May 27, 2014 Letter, at 13-14; JBA May

27, 2014 Letter, at 2-3; MFA May 27, 2014 Letter, at 2, 4; NGSA May

27, 2014 Letter, at 4-5; AIMA Oct. 30, 2015 Letter, at 6; ISDA Oct.

30, 2015 Letter, at 5; JBA Oct. 30, 2015 Letter, at 2; FSR Oct. 30,

2015 Letter, at 3.

\137\ See Eurex Oct. 30, 2015 Letter, at 6. Eurex also stated

that information on posted collateral could be a useful data point

for the Commission, but the original counterparties would be in a

better position than the DCO to report such information. Eurex also

stated that DCOs could provide information on margin, but that such

data would require more effort.

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ii. Comments on Proposed Revisions to Sec. 45.4(c)

Commenters were split on support of proposed Sec. 45.4(c), which

would require the DCO to report continuation data on the original swaps

once they are accepted for clearing to the SDR to which the original

swap was originally reported. ISDA strongly supported the revision,

stating that it would eliminate the issue of cleared ``alpha'' swaps

that had not been terminated, which negatively affects data quality.

ISDA commented that DCOs should be allowed to report continuation data

as either lifecycle event data or state data.\138\ DTCC, in its

response to the IDWG Request for Comment, also supported requiring DCOs

to report terminations of original swaps.\139\ However, DTCC commented

that some DCOs fail to submit termination of original swaps to DTCC

according to DTCC's technical standards.\140\ CEWG commented that DCOs

were in the best position to report all data on original and clearing

swaps, although it believes the original swap should not be

reported.\141\

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\138\ See ISDA Oct. 30, 2015 Letter, at 5.

\139\ See DTCC May 27, 2014 Letter, at 7 (stating that when an

alpha swap is novated, the Commission should require a DCO to submit

information about the beta and gamma swaps in addition to the

termination notice for the alpha swap).

\140\ See DTCC Oct. 30, 2015 Letter, at 8.

\141\ See CEWG Oct. 30, 2015 Letter, at 3. See Section II.B.3,

above, for discussion of CEWG's and other commenters' positions on

reporting of creation data for an original swap.

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CME commented that under the proposed division of reporting

obligations for original swaps and clearing swaps, DCOs are dependent

on original swap counterparties providing sufficient information on the

original swaps to fulfill reporting obligations on terminations of the

original swap.\142\ CME noted that counterparties rarely provided this

information, meaning that DCOs cannot effectively terminate original

swaps. As an alternative, CME proposed that DCOs should be the

reporting party for creation and continuation data for both original

and clearing swaps.\143\

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\142\ See CME Oct. 30, 2015 Letter, at 3.

\143\ See CME Oct. 30, 2015 Letter, at 3.

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In contrast, some commenters recommended that the clearing member,

and not the DCO, should report termination of the original swap to the

[[Page 41748]]

SDR.\144\ Eurex stated that the clearing member would already have

information on the original swap and a connection to the SDR where the

original swap was reported, putting the original reporting party in the

best position to report a termination.\145\ LCH commented that having

the original reporting party report any continuation events would avoid

reporting gaps on events occurring between creation and clearing.\146\

LCH commented that requiring DCOs to submit cancelations of original

swaps would be inconsistent with reporting obligations under the

European Markets Infrastructure Regulation (``EMIR'').\147\ LCH also

commented that the choice of original swap SDR could become an

eligibility criterion for clearing, and that DCOs could potentially

reject swaps from clearing based on the original swap SDR.\148\ Eurex

and LCH both noted that the requirement would force DCOs to connect to

all registered SDRs and report terminations according to the technical

requirements of each SDR.\149\ As an alternative, Eurex proposed that

DCOs be allowed to select the SDR to which they report the termination

of the original swap.\150\

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\144\ See OTC Hong Kong May 27, 2014 Letter, at 2-3. OTC Hong

Kong stated that requiring the original counterparty to report

termination of the alpha would be more cost-effective because the

original reporting counterparty is already required to report

creation data and life cycle event data of such alpha to an SDR, and

thus would already have in place a technical and operational

interface with the SDR of its choice. The commenter also stated that

imposing an additional requirement on a DCO to report termination of

the alpha does not appear to increase or improve the quantity and

quality of information already available to the Commission, and that

the burden on DCOs of the additional reporting requirement appears

to outweigh the benefits to the Commission. See also LCH May 29,

2014 Letter, at 8 (stating that reporting entities should already

report terminations under the obligation to report continuation

data); LedgerX Oct. 30, 2015 Letter, at 3.

\145\ See Eurex Oct. 30, 2015 Letter, at 3.

\146\ See LCH Oct. 30, 2015 Letter, at 3.

\147\ See id.

\148\ See id.

\149\ Eurex Oct. 30, 2015 Letter, at 4-5; LCH Oct. 30, 2015

Letter, at 3.

\150\ Eurex also suggested that reporting of terminations could

be foregone entirely, as an original swap, by definition, has been

accepted for clearing and ceases to exist. See Eurex Oct. 30, 2015

Letter, at 5.

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Regarding timing of reporting continuation data for original swaps,

ISDA supported the provision in new Sec. 45.4(c) allowing DCOs to

report continuation data on original swaps daily and via either

lifecycle event data or state data.\151\ The Japanese Bankers

Association commented that original swaps should be terminated as soon

as technologically practicable, to align reporting on clearing swaps

with reporting on cleared futures transactions under Sec. 1.74.\152\

Eurex commented that terminations were the only lifecycle events for

original swaps that would need to be reported as continuation

data.\153\

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\151\ ISDA Oct. 30, 2015 Letter, at 5.

\152\ JBA Oct. 30, 2015 Letter, at 2; see also LedgerX Oct. 30,

2015 Letter, at 3 (commenting that termination of original swap

should be reported as soon as technologically practicable, but

commenting that reporting party of original swap should have

obligation to report termination).

\153\ Eurex Oct. 30, 2015 Letter, at 6. ISDA noted that bunched

orders may be cleared either pre- or post-allocation, potentially

creating multiple clearing swaps for a single original swap. See

ISDA Oct. 30, 2015 Letter, at 6. ISDA commented that, where

allocation is done after clearing, DCOs should report the USI of the

pre-allocation swap as the ``prior ISO'' on clearing swaps for the

allocations. Eurex commented that, in the event of default by a

clearing member, it attempts to auction off the clearing swap. See

Eurex Oct. 30, 2015 Letter, at 3. Eurex commented that it was

unclear whether the novation of an auctioned clearing swap should be

reported to the original swap SDR.

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DTCC requested that the Commission offer guidance on how SDRs,

DCOs, and any other affected entities should address previously

reported cleared swaps for which the original swap had not been

terminated.\154\

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\154\ See DTCC Oct. 30, 2015 Letter, at 9.

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iii. Comments on Proposed Additional Continuation Data Fields To Be

Reported by DCOs

Several commenters asserted that the most cost-effective method for

establishing a link between the original swaps and the swaps that

replace the original swap upon acceptance for clearing is to include

the USI of the original swap as a prior USI for the beta and gamma

swaps.\155\ Several commenters to the IDWG Request for Comment

supported the concept of requiring that the DCO provide USIs for

clearing swaps to the counterparties to those swaps under proposed

Section 45.5(d)(2).\156\ ISDA, DTCC and Markit generally supported the

requirement that DCOs include the USI of the original swap when

reporting clearing swaps, but objected to requiring additional fields

linking original and clearing swaps as redundant.\157\ LCH suggested

that there should be a standardized format for reporting terminations

of original swaps that must be accepted by all SDRs.\158\

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\155\ See CME May 27, 2014 Letter, at 10 (``The most effective

and efficient method for achieving linkage for all such events that

have a one-to-one relationship (i.e., assignment or exercise) or a

one-to-many relationship (i.e., clearing, novation, allocation) is

by the inclusion of a prior USI(s).)''; DTCC letter appendix at 3

(stating that a new swap can generally be linked to an existing

swaps through the use of a ``prior USI'' data field); ISDA May 23,

2014 Letter, at 11 (``Related swaps sent to different SDRs can also

be linked via use of the USI. . . .''); Markit May 27, 2014 Letter,

at 8 (arguing that the most effective method to establish a link

between new and existing swaps is to store the USI of the original

swap as a prior USI).

\156\ See AIMA Oct. 30, 2015 Letter, at 7; Eurex Oct. 30, 2015

Letter, at 7; ISDA Oct. 30, 2015 Letter, at 7. ITV also commented on

requirements for SDRs to transmit USIs to non-reporting

counterparties for swaps between non-swap dealers or major swap

participants, not executed on a DCM or SEF under existing Section

45.5(c)(2). ITV Oct. 30, 2015 Letter, at 4. Because the NPRM did not

propose to amend Sec. 45.5(c)(2), this comment is beyond the scope

of the proposed rule.

\157\ See ISDA Oct. 30, 2015 Letter, at 6; DTCC Oct. 30, 2015

Letter, at 8; Markit Oct. 30, 2015 Letter, at 3.

\158\ See LCH Oct. 30, 2015 Letter, at 4.

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4. Final Rule Text

Having considered the comments received, the Commission has decided

to adopt the amendments to Sec. 45.4 as proposed.

i. Conforming Changes to Sec. 45.4(a)

Receiving no comments on the conforming changes to Sec. 45.4(a),

the Commission adopts these changes as proposed. The changes clarify

that the standards for reporting continuation data in Sec. 45.4(a)

apply to all continuation events regardless of asset class or whether

the swap is uncleared, an original swap, or a clearing swap.

ii. Revisions to Sec. 45.4(b)

The Commission notes support among market participants for the

amendment to Sec. 45.4 removing the requirement that SDs and MSPs

report valuation data for clearing swaps. The Commission adopts this

revision, codifying existing no-action relief,\159\ as proposed.

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\159\ See CFTC Letter 15-38 (Jun. 12, 2015).

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iii. Addition of Sec. 45.4(c)--Continuation Data Reporting for

Original Swaps

The Commission notes the different opinions offered by commenters

on the proposed addition of Sec. 45.4(c), which would require DCOs to

report continuation data, including terminations, of original swaps.

The Commission has considered the alternative approaches to reporting

original swap terminations that were proposed by commenters, such as

requiring original swap reporting parties to report terminations;

requiring DCOs to report both original and clearing swaps; and allowing

DCOs to select the SDR for original swap terminations. The Commission

believes that its proposed method best incorporates existing industry

practice, whereby DCOs generally report clearing swaps as well as

submitting termination messages on original swaps, thereby limiting

additional costs. It may be more burdensome for the counterparties to

the original swaps to report terminations because they would have

[[Page 41749]]

to receive messages from the DCO confirming that the original swap was

accepted for clearing, then translate that message from the DCO into a

termination message to the SDR. This may be particularly burdensome for

commercial end-users executing swaps on SEFs or DCMs who might

otherwise have no reporting obligations and who may not have the

infrastructure in place to report as quickly or as efficiently as

DCOs.\160\

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\160\ See supra, n. 26, for discussion of reporting obligations

for on-facility cleared swaps.

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On the other hand, requiring DCOs to report creation and

continuation data for both original and clearing swaps could slow the

reporting of original swaps for part 43 and part 45 purposes. DCOs

would need to receive messages from the counterparties, or from the SEF

or DCM where executed on-facility, with all information necessary to

report the swap that becomes an original swap. The DCO would then need

to transmit such information to the SDR of its choice. Introducing an

extra step in reporting would inherently slow reporting, which must be

done as soon as technologically practicable particularly for

transparency reasons. At the same time, requiring DCOs to report

original swaps for part 43 and part 45 purposes would require DCOs to

obtain information beyond what would be needed for clearing purposes,

thus increasing the burden on DCOs.

Finally, the Commission has considered the alternative proposal

that DCOs be allowed to report an original swap termination to an SDR

other than that where the original swap was reported. Adoption of this

alternative approach could result in significant data fragmentation, as

data on a single swap could be housed at more than one SDR.

Additionally, this alternative approach would render useless any

position reports generated by an SDR, as the SDR (or market participant

accessing its own data on an SDR) could not determine if the swaps it

housed are still in effect, thereby removing a potential validation

tool for market participants.\161\

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\161\ The Commission notes that the approach adopted could

generate some degree of data fragmentation, as reports on the

original swaps may be housed at a different SDR from reports on its

clearing swaps. However, the Commission believes this issue can be

overcome for its regulatory purposes--namely risk analysis and

market surveillance--if the Commission is able to pull accurate data

on individual swaps from each of the registered SDRs. Moreover,

accurate reporting of original swap USIs and SDR identities in

clearing swaps reporting, and accurate clearing swaps USIs and SDR

identities in original swaps terminations, would allow for easy

tracking of the lifecycle of a cleared swap transaction.

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Having considered these alternatives as suggested by commenters,

the Commission has determined to adopt the amendments to Sec. 45.4 as

it has proposed. The Commission believes that DCOs are in the best

position to report the termination of an original swap because the DCO,

through the clearing process, has all information needed to report such

terminations. By virtue of its decision to accept a swap for clearing

and to extinguish the swap upon acceptance,\162\ a DCO will be the

first entity to know that clearing occurred and that the original swap

should be terminated, putting the DCO in the best position to report

terminations quickly. DCOs can build original swap terminations into

their systems architecture, allowing for fast, consistent, and accurate

terminations.\163\

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\162\ See 17 CFR 39.12(b)(6). Through its rules, the DCO

determines whether or not a swap that is submitted for clearing

becomes an original swap.

\163\ The Commission has also considered LCH's comment that EMIR

puts the original swap termination obligation on the original swap

parties. Placing reporting obligations on one party under CFTC

regulations, and on another party under EMIR, would not create a

direct conflict as both parties would be able to satisfy their

respective regulatory obligations. The Commission recognizes that

this situation could result in two termination messages for the same

original swap, but this should not have a negative impact on the

quality of SDR data.

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DCOs will also have all information needed to terminate the

original swap based on the swap submitted for clearing. Data required

for such termination messages would either be generated by the DCO

itself (such as clearing swap USIs and clearing swap SDR LEIs) or could

be included in any message submitting a swap for clearing (such as the

USI of the original swap and the LEI of the original swap SDR). While

CME commented that clearing members have not consistently included

original swap USI and LEI of the original swap SDR in messages

transmitted to the DCO for clearing, the Commission notes that DCOs

could require their clearing members to provide such information. As

proposed, Sec. 45.4(c) would require DCOs to report these fields. DCOs

must obtain the relevant information from their clearing members.

iv. Addition of Continuation Data Fields To Be Reported by DCOs

The Commission has considered the comments opposing the creation of

required continuation data fields to be reported by DCOs for original

swaps. The Commission has also considered ISDA's comment regarding the

potential redundancy of having USIs of clearing swaps transmitted in

the termination message for the original swap, as well as having the

USI of the original swap in the creation data for the clearing swaps.

The Commission believes that reporting the clearing swaps USIs as

continuation data for the original swap is an efficient mechanism for

linking clearing swaps to the original swap that they replace and

should be used for this purpose. New Sec. 45.4(c)(2) will thus require

DCOs to include the following additional enumerated data elements when

reporting continuation data for original swaps pursuant to proposed

Sec. 45.4(c)(1): (i) The legal entity identifier (``LEI'') of the SDR

to which each clearing swap for a particular original swap was reported

by the DCO pursuant to new Sec. 45.3(e); (ii) the USI of the original

swap that was replaced by the clearing swaps; \164\ and (iii) the USI

for the clearing swaps that replace the original swap.

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\164\ See existing Sec. Sec. 45.5(a)(2)(iii), (b)(2)(iii), &

(c)(2)(ii) (requiring the entity that created the USI to transmit

the USI of a swap to the DCO, if any, to which the swap is submitted

for clearing, as part of the required swap creation data transmitted

to the derivatives clearing organization for clearing purposes).

Proposed revisions to Sec. 45.5 are described in Section II.D of

this release.

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As adopted, these data fields will enable the DCO to fulfill its

continuation data reporting obligations, enable the SDR to maintain the

accuracy and completeness of swap transaction data, enable the

Commission to track the life of a cleared swap transaction, and enable

the Commission to monitor compliance with the clearing mandate. In

particular, inclusion within an original swap termination message the

LEI of the clearing swap SDR will permit the Commission and other

regulators to ascertain the SDR where the clearing swaps associated

with a particular original swap reside, which will enable the

Commission and other regulators to review and more effectively

associate data available at multiple SDRs in circumstances where the

reporting entity or counterparty selects one SDR for the original swap

and the DCO selects a different SDR for the clearing swaps under Sec.

45.3.

Inclusion of the original swap's USI is necessary to enable the

original swap SDR to associate continuation data reported by the DCO

with the initial creation data reported by a SEF/DCM or reporting

counterparty pursuant to Sec. 45.3(a) through (d).\165\ These data

will

[[Page 41750]]

allow SDRs to validate termination messages reported by DCOs by

ensuring that the termination message has the same USI as the original

report. Similarly, in the case of clearing swaps that replace an

original swap, inclusion of the USIs of the clearing swaps will permit

the Commission and other regulators to identify the specific clearing

swaps that replaced an original swap, thereby presenting a full history

of the cleared swap transaction.

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\165\ For instance, inclusion of the USI of the original swap in

DCO continuation data reporting will permit the SDR receiving such

continuation data to associate data regarding a life cycle event

such as termination with the existing data maintained for the swap.

This will help ensure that data in the SDR remains current and

accurate and will enable the Commission and other regulators to

ascertain whether a swap remains in existence or has been

extinguished upon acceptance for clearing by a DCO.

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Together, the revisions to Sec. 45.4(b) and the addition of Sec.

45.4(c) will require the reporting of continuation data for original

swaps and clearing swaps. Accordingly, the Commission expects that

records of original swaps that have been terminated would include the

USIs for the clearing swaps that replaced the original swap and the LEI

of the clearing swap SDR, such that review of an original swap would

permit the identification of the resulting clearing swaps and the SDR

where they resides. These provisions will reflect the regulations

applicable to DCOs outlined in part 39 of the Commission's regulations

and will clearly delineate the continuation data reporting obligations

associated with each swap involved in a cleared swap transaction.\166\

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\166\ See 17 CFR 39.12(b)(6). Part 45 currently requires all

swap data and information reported to and maintained by an SDR

regarding a given swap to be ``current and accurate'' and to include

``all changes'' to a swap. See 17 CFR 45.4(a).

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The Commission is mindful of LCH's suggestion that there be an

industry-wide standard for original swap termination messages and

DTCC's comment that termination reports often do not comply with SDR

specifications. To help DCOs comply with the requirements of amended

Sec. 45.4, the Commission encourages DCOs and SDRs to develop an

industry-wide standard for original swap termination messages. The

Commission anticipates that original swap termination messages could be

standardized given the limited number of data elements that must be

transmitted, such as clearing swap USIs, DCO LEIs, and clearing swap

SDR LEIs. Standardization also would alleviate LCH's concern that the

original swap's SDR would become a factor in determining whether a swap

was eligible for clearing.

The Commission has also considered conflicting comments on whether

original swap terminations should be reported at the end of the day or

as soon as technologically practicable. The Commission has determined

to adopt the amendment as proposed and require reporting original swap

terminations at the end of the day, as this would be consistent with

reporting other types of continuation data under Sec. 45.4.

v. Revisions to Sec. 45.4(d)

The Commission received no comments on the proposed revisions to

Sec. 45.4(d), and is adopting those revision as proposed.

D. Unique Swap Identifiers--Amendments to Section 45.5

1. Existing Sec. 45.5

Existing Sec. 45.5 requires that each swap subject to the

Commission's jurisdiction be identified in all recordkeeping and all

swap data reporting by the use of a USI. The rule establishes different

requirements for the creation and transmission of USIs depending on

whether the swap is executed on a SEF or DCM (Sec. 45.5(a)), executed

off-facility with an SD or MSP reporting counterparty (Sec. 45.5(b)),

or executed off-facility with a non-SD/MSP reporting counterparty

(Sec. 45.5(c)). Existing Sec. 45.5 provides that for swaps executed

on a SEF or DCM, the SEF or DCM creates the USI, and for swaps not

executed on a SEF or DCM, the USI is created by an SD or MSP reporting

counterparty, or by the SDR if the reporting counterparty is not an SD

or MSP.\167\

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\167\ See 17 CFR 45.5(a)-(c).

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With the exception of swaps with a non-SD/MSP reporting

counterparty, the existing rule generally requires USI creation and

transmission to be carried out by the entity or counterparty required

to report all required swap creation data for the swap. Existing Sec.

45.5 thus does not distinguish between original and clearing swaps,

does not provide USI creation and transmission requirements

specifically for DCOs, and consequently does not provide for the

issuance to DCOs of a USI ``namespace,'' which is one of two component

parts of a USI.\168\

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\168\ See, e.g., 17 CFR 45.5(a)(1)(i), (b)(1)(i) and (c)(1)(i)

(the data component of a USI commonly referred to as a namespace is

the unique alphanumeric code assigned to the registered entity

responsible for generating the USI for the purpose of identifying

such registered entity with respect to USI creation).

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The Commission understands that, in practice, SEFs/DCMs and

reporting counterparties, or SDRs in the case of non-SD/MSP reporting

counterparties, generate and assign USIs for swaps that would become

original swaps under the proposed rules, and that DCOs generate and

assign USIs to swaps that would qualify as clearing swaps in connection

with reporting required swap creation data for clearing swaps to SDRs.

2. Proposed Amendments to Sec. 45.5

The Commission proposed to renumber existing Sec. 45.5(d) as Sec.

45.5(e), and to create a new Sec. 45.5(d) that would set forth

requirements regarding the creation and transmission of USIs for

clearing swaps.\169\

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\169\ The Commission also proposes conforming amendments to

renumber existing Sec. 45.5(e) as Sec. 45.5(f).

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As proposed, Sec. 45.5(d)(1) would require a DCO to generate and

assign a USI for each clearing swap upon, or as soon as technologically

practicable after, acceptance of an original swap by the DCO for

clearing (or execution of a clearing swap that does not replace an

original swap), and prior to reporting the required swap creation data

for each clearing swap.\170\ Proposed Sec. 45.5(d)(1) would also

require that the USI for each clearing swap consist of two data

components: A unique alphanumeric code assigned to the DCO by the

Commission for the purpose of identifying the DCO with respect to USI

creation, and an alphanumeric code generated and assigned to that

clearing swap by the automated systems of the DCO. These proposed USI

creation requirements and data components for DCOs and clearing swaps

are consistent with those currently required by part 45 for other

registered entities such as SEFs, DCMs, and SDRs.\171\

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\170\ See 80 FR 52544, 52554.

\171\ See, e.g., 17 CFR 45.5(a), 45.5(c).

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As proposed, Sec. 45.5(d)(2) would require a DCO to transmit the

USI for a clearing swap electronically to the SDR to which the DCO

reports required swap creation data for the clearing swap, as part of

that report, and to the DCO's counterparty with respect to that

clearing swap, as soon as technologically practicable after either

acceptance of the original swap by the DCO for clearing or execution of

a clearing swap that does not replace an original swap.\172\

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\172\ See 80 FR 52544, 52554.

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Finally, the Commission proposed to amend Sec. Sec. 45.5(a),

45.8(f), and 45.10(a) to incorporate the language ``or pursuant to the

rules of'' to the phrase ``swaps executed on a swap execution facility

or designated contract market'' to make clear that those provisions

currently apply to all swaps executed on or pursuant to the rules of a

SEF or DCM.\173\

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\173\ See 80 FR 52544, 52554.

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3. Comments Received

The Commission received several comments regarding its proposed

amendments to Sec. 45.5.\174\ All comments

[[Page 41751]]

received were supportive of the amendment to Sec. 45.5(d)(1), which

requires DCOs to generate USIs for clearing swaps.\175\

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\174\ ITV requested that the Commission remove the obligation

for SDRs, when a swap is executed between two non-SD/MSPs and the

SDR is obligated to create the USI, to transmit the USI to the

counterparties. ITV commented that this could create obligations for

SDRs to transmit information to parties not enrolled with the SDR.

The Commission has noted this comment, but it is beyond the scope of

the NPRM.

\175\ See ITV Oct. 30, 2015 Letter, at 3 (but noting that

generation of the USI for a clearing swap by the SDR would slow

acceptance of swaps in the clearing process); ISDA Oct. 30, 2015

Letter, at 7 (also suggesting that the Commission require the

namespace component of USIs for each DCO be made publicly

available); AIMA Oct. 30, 2015 Letter, at 7.

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FSR requested that the Commission adopt ISDA best practices for

identifying international swaps, including allowing for the use of a

USI as a unique transaction identifier (``UTI'') for reporting swaps in

other jurisdictions.\176\ FSR commented that adopting the ISDA best

practice concerning USIs would avoid potential double-counting when an

international swap is reported to two separate SDRs in two

jurisdictions.\177\

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\176\ See FSR Oct. 30, 2015 Letter, at 4.

\177\ See id.

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ISDA commented that, in principal model clearing, the DCO should

ensure that both the DCO's clearing member and the ultimate

counterparty (if not the clearing member) receive the clearing swap

USIs.\178\ ISDA further noted that the current Orders of Exemption

issued to foreign DCOs do not include an obligation for those exempt

DCOs to generate the USIs for reportable clearing swaps.\179\

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\178\ See ISDA Oct. 30, 2015 Letter, at 6.

\179\ See ISDA Oct. 30, 2015 Letter, at 6.

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4. Final Rule Text of Sec. 45.5

Having considered the comments relating to the purpose and scope of

the proposed amendments to Sec. 45.5, the Commission is adopting

amended Sec. 45.5 as proposed. The proposed Sec. 45.5(d) provisions

that would govern creation and assignment of USIs by the DCO with

respect to clearing swaps would be consistent with the Commission's

``first-touch'' approach to USI creation for SEFs, DCMs, SDs, MSPs, and

SDRs.\180\

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\180\ See Final Part 45 Rulemaking, 77 FR 2136, 2158 (Jan. 13,

2012). The Commission's approach with respect to SEFs, DCMs, SDs,

MSPs, and SDRs was designed to foster efficiency by taking advantage

of the technological sophistication and capabilities of such

entities, while ensuring that a swap is identified by a USI from its

inception.

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The Commission notes ISDA's request for guidance on whether DCOs

must ensure, in the principal clearing mode, that the ultimate

counterparty (when not the clearing member) receive the USI of the

clearing swaps. As noted above, the Commission is aware of various

issues relating to reporting of principal model clearing but will not

offer further guidance at this time. The Commission notes ISDA's

comment that the current Orders of Exemption for foreign DCOs do not

include a requirement that the DCO generate USIs for reportable

clearing swaps. Finally, the Commission notes FSR's request for the

Commission to align the use of USIs and UTIs for reporting

international swaps. While the Commission declines to address the issue

in this release as it is beyond the scope of the NPRM, the Commission

is cognizant of the need to harmonize reporting across jurisdictions

and will continue to work with other regulators to address this and

other issues.

E. Determination of Which Counterparty Must Report--Amendments to Sec.

45.8

1. Existing Sec. 45.8

Existing Sec. 45.8 sets forth a hierarchy under which the

reporting counterparty for a particular swap depends on the nature of

the counterparties involved in the transaction. Regulation 45.8 assigns

a reporting counterparty for off-facility swaps, for which the

reporting counterparty must report all required swap creation data, as

well as for swaps executed on or pursuant to the rules of a SEF or DCM,

for which the SEF or DCM must report all required swap creation data.

2. Proposed Amendments to Sec. 45.8

The Commission proposed to add paragraph (i) to Sec. 45.8 in order

to explicitly provide that the DCO will be the reporting counterparty

for clearing swaps.\181\ The Commission also proposed to amend the

introductory language of Sec. 45.8 to make clear that the reporting

counterparty for all swaps except clearing swaps will be made as

provided in paragraphs (a) through (h) of Sec. 45.8, while the

reporting counterparty for clearing swaps will be made as provided in

paragraph (i) of Sec. 45.8. The Commission further proposed to remove

the language ``if available'' from Sec. 45.8(h)(1)(i) to ensure

consistency with proposed changes to appendix 1 to part 45. As

discussed below in addressing changes to the PET data fields in

appendix 1, the ``if available'' language was only relevant prior to

availability of the LEI system.\182\

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\181\ See 80 FR 52544, 52554-55.

\182\ See, infra, Section II.H.1.i.

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The Commission proposed to further amend Sec. 45.8 to remove part

of paragraphs (d)(1) and (f)(1) and to remove part of paragraph (h)(2)

and all of paragraphs (h)(2)(i) and (ii), which require SEFs to notify

counterparties to a swap if it cannot determine who would be the

reporting counterparty. Finally, the Commission proposed conforming

changes to explanatory notes in the PET data tables in appendix 1 to

part 45 that reference the situation described in Sec. 45.8(h)(2).

3. Comments Received

The Commission received six comments in connection with its

proposed amendments to Sec. 45.8. One commenter supported proposed

Sec. 45.8(i) as it would promote efficiency in reporting by explicitly

designating the DCO as the reporting party for clearing swaps.\183\

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\183\ See AIMA Oct. 30, 2015 Letter, at 6.

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ISDA noted a potential inconsistency between reporting obligations

under parts 43 and 45 for clearing swaps, as DCOs are not included in

the hierarchy under Sec. 43.3 for determining reporting party of real-

time reporting.\184\ ISDA suggested that this could result in

duplicative reporting obligations for DCOs and clearing members in

situations where a clearing swap does not replace an original swap.

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\184\ See ISDA Oct. 30, 2015 Letter, at 7.

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

EEI/EPSA requested that the Commission not remove, as proposed, the

provisions in Sec. Sec. 45.8(d)(1) and (f)(1), which currently require

the counterparties to select the reporting party, where the swap is

executed on a SEF or DCM and both counterparties have the same SD, MSP

or financial entity status.\185\ The commenter requested that the

provisions be left in place because the proposed rule did not set out

how the reporting party would be determined. ITV argued that the

reporting hierarchy in existing Sec. Sec. 45.8(c) and (e), when

applied to uncleared swaps between end-users, particularly in the

commodity asset class, can preclude end-users from negotiating between

themselves who the reporting party would be.\186\ This may result in

the selection of a reporting party who has less technical

infrastructure than the non-reporting counterparty.\187\ ISDA

recommended that the Commission encourage SEFs to adopt the ISDA asset

class tie-breaker logic (the ``ISDA RCP'') for determining reporting

party for on-SEF swaps.\188\

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\185\ See EEI/EPSA Oct. 30, 2015 Letter, at 4.

\186\ See ITV Oct. 30, 2015 Letter, at 4 and 6.

\187\ ITV also commented that it believes counterparties should

be permit to select the reporting party for a swap when both

counterparties are non-SD/MSPs, regardless of financial entity

status or U.S. person status. See ITV Oct. 30, 2015 Letter, at 4.

\188\ See ISDA Oct. 30, 2015 Letter, at 7.

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Two commenters noted that, with the addition of proposed Sec.

45.8(i)

[[Page 41752]]

addressing the reporting of clearing swaps, the phrase ``or is cleared

by a derivatives clearing organization'' in Sec. 45.8(f) would become

inapplicable.\189\ The commenters recommended that the Commission

remove this clause from existing Sec. 45.8(f).

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\189\ See EEI/EPSA Oct. 30, 2015 Letter, at 4; CMC Oct. 30, 2015

Letter, at 3.

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4. Final Rule Text of Sec. 45.8

For the reasons expressed more fully below, the Commission has

decided to adopt the amendments to Sec. 45.8 as proposed.

The Commission has considered ISDA's comment that the inclusion of

DCOs in the part 45 reporting hierarchy could create inconsistencies

between part 43 and part 45 reporting obligations for clearing swaps

that do not replace original swaps. Existing Sec. 43.3(a)(3) sets out

the reporting hierarchy for real-time reporting of off-facility swaps.

DCOs are not included in this hierarchy, but the hierarchy is

applicable unless otherwise agreed to by the parties prior to the

execution of the publicly reportable swap transaction.\190\ To the

extent that clearing swaps are reportable events under part 43, the

Commission notes that DCOs and their clearing members could agree that

the DCO should be the reporting party for part 43 purposes pursuant to

the ``unless otherwise agreed'' clause of Sec. 43.3(a)(3). It is only

if the DCO and its clearing member did not so agree would the clearing

member have part 43 reporting obligations for some clearing swaps

pursuant to the reporting hierarchy under Sec. 43.3. The Commission

therefore declines in this rule release to include DCOs in the part 43

real-time reporting hierarchy.

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\190\ 17 CFR 43.3(a)(3).

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The Commission has also considered comments from EEI/EPSA and ITV

regarding the removal of provisions in Sec. Sec. 45.8(d)(1) and (f)(1)

governing the selection of reporting parties for swaps executed on SEFs

and DCMs. As was explained in the preamble to the NPRM, the Commission

proposed to remove these provisions to help preserve parties' anonymity

on SEFs and DCMs, in particular for swaps cleared through a straight-

through-processing mechanism.\191\ SEFs have adopted various formulas

to determine who will be the reporting party when both counterparties

have the same SD, MSP, financial entity, and U.S. Person status. These

formulas will ensure that reporting parties are selected consistently.

Therefore, the Commission is adopting amendments to Sec. Sec.

45.9(d)(1) and (f)(1) as proposed. In addressing ISDA's comment

regarding the ISDA RCP, the Commission declines to adopt or impose any

particular formula at this time for selecting the reporting party,

instead leaving such determinations to the SEFs.

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\191\ See 80 FR 52544, 52555.

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The Commission has also considered EEI/EPSA's and CMC's comments

regarding the continued inclusion of the phrase ``or is cleared by a

derivatives clearing organization'' in Sec. 45.8(f). The Commission

notes that existing Sec. 45.8(f) addresses reporting hierarchy for

certain categories of reportable swaps executed between two non-U.S.

Persons; one category of such reportable swaps is a swap cleared

through a DCO. The Commission notes that the swap ``cleared by a

derivatives clearing organization'' in this provision relates to the

original swap between the original counterparties, and not the clearing

swaps with the DCO. The Commission is adopting Sec. 45.8(f) as

proposed, with the continued inclusion of the phrase ``cleared by a

derivatives clearing organization.''

F. Reporting to a Single Swap Data Repository--Amendments to Sec.

45.10

1. Existing Sec. 45.10

Existing Sec. 45.10 requires ``all swap data for a given swap'' to

be reported to a single SDR, which must be the same SDR to which

creation data for that swap is first reported. The time and manner in

which such data must be reported to a single SDR depends on whether the

swap is executed on a SEF or DCM,\192\ executed off-facility with an

SD/MSP reporting counterparty,\193\ or executed off-facility with a

non-SD/MSP reporting counterparty.\194\ Currently, Sec. 45.10(b) and

(c) also provide circumstances in which a reporting counterparty is

excused from reporting PET data to an SDR because the swap is accepted

for clearing by a DCO before the applicable reporting deadline.

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\192\ See 17 CFR 45.10(a).

\193\ See 17 CFR 45.10(b)

\194\ See 17 CFR 45.10(c).

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2. Proposed Amendments to Sec. 45.10

In order to further clarify that ``all swap data for a given swap''

encompasses all swap data required to be reported pursuant to parts 43

and 45 of the Commission's regulations, the Commission proposed to add

language to this effect to paragraphs (a) through (c) and to the

introductory language of Sec. 45.10.\195\ This proposed additional

language would clarify the existing requirement that registered

entities and reporting counterparties must provide all swap data

required under parts 43 and 45 to a single SDR for a given swap.\196\

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\195\ See 80 FR 52544, 52555-56.

\196\ The Commission also proposed to repeat the language ``Off-

facility swaps with a swap dealer or major swap participant

reporting counterparty'' from the title of Sec. 45.10(b) in the

body of that regulation to make clear that the requirement pertains

to off-facility swaps with an SD or MSP.

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

The Commission also proposed to remove Sec. 45.10(b)(2) and

(c)(2),\197\ which are no longer applicable because they reference

provisions in Sec. 45.3(b)(1), (c)(1)(i), and (c)(2)(i) that, as

discussed above, the Commission proposed to remove.\198\

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\197\ The Commission also proposed conforming amendments to

Sec. 45.10 to renumber paragraph (b)(3) as (b)(2), paragraph (c)(3)

as (c)(2), and paragraph (c)(4) as (c)(3). The Commission also

proposed to remove a reference to Sec. 45.10(c)(2) from existing

Sec. 45.10(c)(4) because the Commission proposed to remove Sec.

45.10(c)(2).

\198\ See Section II.B.2.ii, supra.

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Additionally, the Commission proposed to add new Sec. 45.10(d),

which would govern clearing swaps and would establish explicit

requirements that DCOs report all required swap creation data and all

required swap continuation data for each clearing swap to a single

SDR.\199\ Specifically, proposed Sec. 45.10(d)(1) would require a DCO

to report all required swap creation data for a particular clearing

swap to a single SDR. As proposed, Sec. 45.10(d)(1) would also require

the DCO to transmit the LEI of the SDR to which it reported the

required swap creation data for each clearing swap to the counterparty

of each clearing swap, as soon as technologically practicable after

either acceptance of the original swap by the DCO for clearing or

execution of a clearing swap that does not replace an original

swap.\200\

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\199\ See 80 FR 52544, 52555-56.

\200\ See 80 FR 52544, 52555-56.

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As proposed, Sec. 45.10(d)(2) would require a DCO to report all

required swap creation data and all required swap continuation data for

a particular clearing swap to the same SDR that received the initial

swap creation data for the clearing swap required by Sec. 45.10(d)(1).

In the event there are two or more clearing swaps that replace a

particular original swap, and in the event there are equal and opposite

clearing swaps that are created upon execution of the same transaction

and that do not replace an original swap, proposed Sec. 45.10(d)(3)

would require the DCO to report all required swap creation and

continuation data for each such clearing swap to a single SDR.\201\

[[Page 41753]]

Accordingly, all required creation and continuation data for all

clearing swaps that can be traced back to the same original swap (and

for all equal and opposite clearing swaps that are created upon

execution of the same transaction but that do not replace an original

swap) will be reported to a single SDR.

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\201\ The Commission notes that proposed Sec. 45.10(d)(3) would

require any equal and opposite clearing swaps, including those

resulting from the operation of Sec. 39.12(b)(6) of the

Commission's regulations, to be reported to a single SDR, regardless

of whether such clearing swaps replaced an original swap.

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The Commission noted in its proposal that by operation of proposed

new Sec. 45.8(i) and (j) and proposed Sec. 45.3(e), there may be

scenarios in which the SEF/DCM or reporting counterparty reports

required swap creation data for the swap that became the original swap

to one SDR, and the DCO reports required swap creation data for the

clearing swaps that replace the original swap to a different SDR.\202\

The Commission proposed to require that all swap data for the clearing

swaps that can be traced back to the same original swap be reported to

the same SDR, but did not require that the clearing swaps be reported

to the same SDR as the original swap.\203\

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\202\ See 80 FR 52556.

\203\ See id.

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The Commission included in the NPRM the following example to

illustrate the application of proposed Sec. 45.10: \204\

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\204\ See 80 FR 52544, 52556.

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Swap 1 is intended to be submitted to a DCO for clearing and

executed on or pursuant to the rules of a SEF. The SEF reports all

required creation data for such swap to registered SDR A pursuant to

Sec. 45.3(a), which was selected by the SEF pursuant to proposed Sec.

45.3(j)(1), and submits the swap to the DCO for clearing. Upon

acceptance of Swap 1 for clearing, the DCO extinguishes Swap 1 and

replaces it with Swap 2 and Swap 3, both of which are clearing swaps.

Swap 1 is now an original swap.

Proposed Sec. 45.4(c) would require the DCO to report the

termination of Swap 1 to SDR A,\205\ reflecting that Swap 1, now an

original swap, has been terminated through clearing novation.\206\ The

DCO would also report all required swap creation data for clearing Swap

2 to a single SDR of its choice (say, for example, SDR B) pursuant to

proposed Sec. Sec. 45.3(e) and (j)(2), and 45.10(d).\207\ Similarly,

the DCO would be required to report all required swap creation data for

clearing Swap 3 to a single SDR, in this case SDR B. Pursuant to

proposed Sec. 45.10(d)(3), the DCO would be required to report all

required swap creation data for clearing Swap 2 and clearing Swap 3 to

the same SDR (SDR B) because Swap 2 and Swap 3 replaced Swap 1.

Thereafter, proposed Sec. 45.10(d)(2) would require the DCO to report

all required swap creation data and continuation data to the SDR where

the first report of required swap creation data for both clearing Swap

2 and clearing Swap 3 was made (SDR B).

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\205\ Pursuant to proposed Sec. 45.10(a)(2), (b)(2), and

(c)(3), continuation data for original swaps must be reported to the

SDR where the first report of required swap creation data was made

for the swap.

\206\ Pursuant to existing Sec. 45.13(b), the DCO shall use the

facilities, methods, or data standards provided or required by SDR

A. 17 CFR 45.13(b).

\207\ The Commission notes that pursuant to proposed Sec. Sec.

45.10(a)-(d), the DCO in this example could select an SDR other than

SDR A.

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3. Comments Received

The Commission received three comments addressing its proposed

amendments to Sec. 45.10.\208\ AIMA supported the Commission's

proposal clarifying that the DCO is obligated to report creation and

continuation data for clearing swaps to a single SDR.\209\

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\208\ An additional comment letter addressed the issue of

``portability'' of swaps reporting between SDRs. See ITV Oct. 30,

2015 Letter, at 3-4. The portability issue is beyond the scope of

the NPRM.

\209\ See AIMA Oct. 30, 2015 Letter, at 7.

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ISDA opposed the requirement in proposed Sec. 45.10(d)(1) that a

DCO transmit to the counterparties of clearing swaps the LEI of the SDR

to which the clearing swaps were reported.\210\ ISDA doubted the value

of such information for the clearing swap counterparties, and opined

that counterparties are unlikely to build mechanisms to retain such

information on a transactional basis.\211\ ISDA also noted that a DCO

would be separately required to send a termination of the original swap

to the original swap's SDR, and this report would include the LEI of

the SDR to which the clearing swaps are reported, making a report of

such data to the counterparties redundant.\212\

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

\210\ See ISDA Oct. 30, 2015 Letter, at 8.

\211\ Id.

\212\ Id.

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

DTCC opposed the provision in proposed Sec. 45.10(d)(1) that would

allow a DCO to select the SDR for reporting clearing swaps, instead

arguing that clearing swaps should be reported to the same SDR as the

original swap.\213\ DTCC argued that such reporting would create data

fragmentation between the original swap and related clearing swaps.

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\213\ See DTCC Oct. 30, 2015 Letter, at 6.

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4. Final Rule Text of Sec. 45.10

Having considered all of the comments relating to the purpose and

scope of the proposed amendments to Sec. 45.10, including amendments

to Sec. Sec. 45.10(a) through (c) and new Sec. 45.10(d), the

Commission is adopting amended Sec. 45.10 as proposed. The

requirements for DCOs demonstrated in the above example and contained

in proposed Sec. 45.10(d)(1) and (2) are consistent with the existing

requirements for SEFs, DCMs, and other reporting counterparties under

current Sec. 45.10. By requiring that all swap data for each clearing

swap be reported to a single SDR, proposed Sec. Sec. 45.10(d)(1) and

(2) further the Commission's stated purpose in creating Sec. 45.10,

and part 45 generally, of reducing fragmentation of data for a given

swap across multiple SDRs.\214\

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\214\ See, e.g., Final Part 45 Rulemaking, 77 FR 2136, 2139

(``To avoid fragmentation of data for a given swap across multiple

SDRs, the [Notice of Proposed Rulemaking] [for part 45] would

require that all data for a particular swap must be reported to the

same SDR.''); at 2143 (``First, in order to prevent fragmentation of

data for a single swap across multiple SDRs, which would seriously

impair the ability of the Commission and other regulators to view or

aggregate all of the data concerning the swap, the proposed rule

provided that, once an initial data report concerning a swap is made

to an SDR, all data reported for that swap thereafter must be

reported to the same SDR.''); and at 2168 (``The Commission believes

the important regulatory purposes of the Dodd-Frank Act would be

frustrated, and that regulators' ability to see necessary

information concerning swaps could be impeded, if data concerning a

given swap was spread over multiple SDRs.'').

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The proposed requirement in Sec. Sec. 45.10(d)(3) that the DCO

report to a single SDR all swap data for each clearing swap that can be

traced back to the same original swap also supports the goal of

avoiding fragmentation of swap data. Though clearing swaps are new

individual swaps, all clearing swaps that issue from the same original

swap are component parts of a cleared swap transaction. Fragmentation

among clearing swaps would needlessly impair the ability of the

Commission and other regulators to view or aggregate all the data

concerning the related clearing swaps.

While proposed Sec. 45.10 ensures that each swap comprising a

cleared swap transaction is reported to a single SDR, the Commission

notes DTCC's comments on data fragmentation where original swaps are

reported to different SDRs than their resulting clearing swaps.

However, as long as DCOs properly identify the original swap's USI and

SDR in reports on clearing swaps, and report clearing swaps' USIs and

SDR in terminations of the original swaps, the Commission believes it

will be able to reconcile those transactions when performing risk and

other analysis. As discussed in Section II.C.4.iii above, the

Commission has considered various alternatives to the adopted rules.

The Commission believes that the adopted amendments will provide the

Commission with the information it needs to perform its regulatory

obligations while minimizing

[[Page 41754]]

costs to market participants, SDRs, and DCOs.

In response to ISDA's comment that counterparties were unlikely to

build mechanisms to retain information on the SDR to which clearing

swaps were reported, the Commission believes that all swaps

counterparties should be aware of the SDR to which their swaps are

reported. The Commission notes that under existing Sec. 45.14(b) non-

reporting parties to swaps have obligations to correct any errors or

omissions in swaps data of which they become aware.

G. Examples of Cleared Swap Reporting Workflows Under the Adopted

Revisions

The following examples demonstrate the manner in which the adopted

revisions and additions to part 45 rules would operate in hypothetical

scenarios involving: (1) An off-facility swap not subject to the

clearing requirement with an SD/MSP reporting counterparty; and (2) a

swap executed on or pursuant to the rules of a SEF or DCM. All

references to part 45 appearing in the following examples refer to the

rules as adopted in this release. These examples are provided only for

illustrative purposes to demonstrate the applicability of certain rules

adopted in this release in hypothetical scenarios. The examples are not

intended to dictate any aspect of compliance, reporting or other

related processes and are not intended to cover all possible reporting

circumstances.

1. Off-Facility Swap Not Subject to the Clearing Requirement With SD/

MSP Reporting Counterparty

An off-facility swap that is not subject to the clearing

requirement is executed with an SD reporting counterparty. The SD

generates and assigns a USI for the swap pursuant to Sec. 45.5(b) and

reports all required swap creation data for the swap to SDR A pursuant

to Sec. 45.3(c). The SD submits the swap to a DCO for clearing and,

pursuant to Sec. 45.10(b), transmits to the DCO, at the time the swap

is submitted for clearing, the identity of SDR A and the USI for the

swap.

The DCO accepts the swap for clearing, extinguishing it and

replacing it with clearing swaps; the swap that was submitted for

clearing is now an original swap. The DCO generates and assigns a USI

to each clearing swap pursuant to Sec. 45.5(d) and, pursuant to Sec.

45.3(e), reports all required swap creation data for the clearing

swaps, including the original swap USI and all additional data fields

applicable to clearing swaps,\215\ to SDR B, which the DCO in this

example selected pursuant to Sec. 45.3(j)(2).

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\215\ Modifications to appendix 1 would require that PET data

include the original swap USI and all data categories and fields

applicable to clearing swaps. See infra, Section II.H.3.

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

Pursuant to Sec. 45.4(c), the DCO would report continuation data

for the original swap, including the original swap termination notice,

to SDR A using either the life cycle or state data methods, and using

the facilities, methods, or data standards provided or required by SDR

A.\216\ In addition to all other necessary continuation data, original

swap continuation data reported by the DCO, including the original swap

termination notice, would also include: The LEI of SDR B (the SDR to

which creation data for each clearing swap that replaced the particular

original swap was reported); \217\ the USI of the original swap as

transmitted to the DCO by the SD at the time the swap was submitted for

clearing; and the USI for each clearing swap.

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\216\ See 17 CFR 45.13(b).

\217\ The Commission notes that the amended Sec. 45.4(c)(2)(i)

requirement that the DCO include the LEI of the SDR to which all

required swap creation data for each clearing swap was reported by

the DCO applies whether or not swap data for the original and

clearing swaps is reported to the same SDR or to different SDRs. The

Commission expects that this information will be useful for

regulators with respect to their review of data pertaining to

cleared swap transactions, and to SDRs with respect to their

processing of swap data received, even when the original and

clearing swaps reside in the same SDR.

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

The DCO would also transmit to each counterparty to the clearing

swaps, as soon as technologically practicable after acceptance for

clearing, the USI of each clearing swap pursuant to Sec. 45.5(d)(2)

and the LEI of the SDR to which the clearing swap was reported pursuant

to Sec. 45.10(d)(1).

The DCO would have no further continuation data reporting

obligations with respect to the original swap thereafter. However, the

Commission notes that pursuant to Sec. 45.14, registered entities and

counterparties required to report swap data to an SDR must report any

known errors and omissions in the data reported.\218\ Additionally,

non-reporting counterparties are required to notify the reporting

counterparty of such errors or omissions.\219\ Finally, pursuant to

Sec. 49.10(a), SDR A would be required to accept and record any

original swap continuation data, including the original swap

termination.

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\218\ While the DCO would have no additional continuation data

reporting requirement with respect to the original swap after

reporting the termination upon acceptance for clearing, the DCO

remains obligated under Sec. 45.14 to correct errors and omissions

in the data reported by the DCO, including the termination notice.

For example, if a swap is submitted to, and accepted by, a DCO for

clearing, the DCO would report the termination notice of the

original swap to the SDR to which the creation data for the original

swap was reported. After submission of the termination notice to the

SDR, if the DCO should become aware of an error or omission in the

termination notice, the DCO is required, pursuant to Sec. 45.14, to

correct any errors and omissions in the data so reported as soon as

is technologically practicable after discovery of such errors or

omissions. Likewise, all reporting entities and swap counterparties

also remain obligated under Sec. 45.14 to correct errors and

omissions in all data reported by or on behalf of each entity and

swap counterparty to an SDR.

\219\ Pursuant to Sec. 45.14(b), if a counterparty to a swap

that is not the reporting counterparty as determined by Sec. 45.8

discovers any error or omission with respect to the continuation

data, including termination notice of the original swap, such non-

reporting counterparty is required to notify the DCO of each such

error or omission.

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2. Swaps Executed on or Pursuant to the Rules of a SEF or DCM

A swap is executed on or pursuant to the rules of a SEF or DCM. The

SEF/DCM generates and assigns a USI for the swap pursuant to Sec.

45.5(a) and reports all required swap creation data to SDR A pursuant

to Sec. 45.3(a). The SEF/DCM submits the swap to a DCO for clearing

and, pursuant to Sec. 45.10(a), transmits to the DCO, at the time the

swap is submitted for clearing, the identity of SDR A and the USI for

the swap.

The DCO accepts the swap for clearing, extinguishing it and

replacing it with clearing swaps; the swap that was submitted for

clearing is now an original swap. Under Sec. Sec. 45.5(d) and 45.3(e),

the DCO would generate and assign a USI to each clearing swap and

report all required swap creation data, including the original swap USI

and all additional data fields applicable to clearing swaps, for the

clearing swaps to registered SDR A, which, in this example, the DCO

selected pursuant to Sec. 45.3(j)(2).\220\

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\220\ Pursuant to Sec. 45.3(j)(2), the DCO could have selected

SDR B.

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Pursuant to Sec. 45.4(c), the DCO would report continuation data

for the original swap, including the original swap termination notice,

to SDR A using either the life cycle or state data methods, and using

the facilities, methods, or data standards provided or required by SDR

A. Such continuation data would include the LEI of SDR A (the SDR to

which creation data for each clearing swap that replaced the particular

original swap was reported), the USI of the original swap as

transmitted to the DCO by the SEF/DCM at the time the swap was

submitted for clearing, and the USI for each clearing swap.

The DCO would also transmit to each counterparty to the clearing

swaps, as soon as technologically practicable after

[[Page 41755]]

acceptance for clearing, the USI of each clearing swap pursuant to

Sec. 45.5(d)(2) and the LEI of the SDR to which the clearing swap was

reported pursuant to Sec. 45.10(d)(1).

The DCO would have no further continuation data reporting

obligations with respect to the original swap thereafter. However, the

Commission notes that pursuant to Sec. 45.14, registered entities and

counterparties required to report swap data to an SDR must report any

known errors and omissions in the data reported. Additionally, non-

reporting counterparties are also required to notify the reporting

counterparty of such errors or omissions.\221\ Finally, pursuant to

Sec. 49.10(a), SDR A would be required to accept and record the

original swap termination.

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\221\ See notes 220-221, supra.

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H. Primary Economic Terms Data--Amendments to Appendix 1 to Part 45--

Tables of Minimum Primary Economic Terms

The Commission's existing lists of minimum primary economic terms

for swaps in each swap asset class are found in tables in Exhibits A-D

of appendix 1 to part 45. Those tables include data elements that

reflect generic economic terms and conditions common to most

standardized products. They reflect the fact that PET data captures a

swap's basic nature and essential economic terms, and are provided in

order to ensure to the extent possible that all such essential terms,

where applicable, are included when required primary economic terms are

reported for each swap.

1. Proposed Amendments and Additions to Primary Economic Data Fields

The Commission proposed the following revisions to Exhibits A-D of

appendix 1, each of which is discussed in greater detail below: (1)

Modifications to existing PET data fields; (2) the addition of three

new PET data fields applicable to all reporting entities for all swaps;

and (3) the addition of a number of new data fields that must be

reported by DCOs for clearing swaps.\222\

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\222\ The Commission also proposes to revise each of the data

categories and fields that reference the clearing requirement

exception in CEA section 2(h)(7) to reflect that exceptions to, and

exemptions from, the clearing requirement, including the clearing

requirement exception in CEA section 2(h)(7), are set forth under

part 50 of the Commission's regulations. Additionally, the

Commission is making non-substantive edits to the following fields

in Exhibits A-D: Asset class; For a multi-asset class swap, an

indication of the primary asset class; For a multi-asset class swap,

an indication of the secondary asset class(es); and to the Clearing

member client account field in Exhibits C and D.

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i. Proposed Modifications to Existing PET Data Fields

The Commission proposed clarifying and conforming changes and minor

corrective modifications to the following existing PET data fields:

\223\

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\223\ See 80 FR 52544, 52558.

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The Unique Swap Identifier for the swap--The Commission

proposed to remove the explanatory note in the Comment section to this

data field in Exhibits A-D. The explanatory note is no longer necessary

because under proposed Sec. 45.5(d), the DCO would create the USI for

each clearing swap.

PET data fields that utilize a LEI \224\--The Commission

proposed conforming changes to the Comment sections to data fields in

Exhibits A-D that utilize the LEI to reflect that the CFTC has

designated an LEI system \225\ and to reflect that a substitute

identifier may be reported for natural person swap counterparties.

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\224\ These include the following fields in Exhibits A-D: The

Legal Entity Identifier of the reporting counterparty; If the swap

will be allocated, or is a post-allocation swap, the Legal Entity

Identifier of the agent; The Legal Entity Identifier of the non-

reporting party; Clearing venue; The identity of the counterparty

electing an exception or exemption to the clearing requirement under

Part 50 of this chapter (formerly The identity of the counterparty

electing the clearing requirement exception in CEA section 2(h)(7));

Exhibit A: An indication of the counterparty purchasing protection;

An indication of the counterparty selling protection; Information

identifying the reference entity; Exhibit D: Buyer, Seller.

\225\ The explanatory notes discussing a situation where no CFTC

designated LEI is yet available are no longer applicable. See

generally Order Extending the Designation of the Provider of Legal

Entity Identifiers To Be Used in Recordkeeping and Swap Data

Reporting Pursuant to the Commission's Regulations, 80 FR 44078

(Jul. 24, 2015).

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

If no CFTC-approved LEI for the non-reporting counterparty

is yet available, the internal identifier for the non-reporting

counterparty used by the swap data repository--The Commission proposed

to remove this data field in each of the Exhibits. As noted above, the

CFTC has designated an LEI, and these PET data fields are no longer

applicable.

For a mixed swap reported to two non-dually-registered

swap data repositories, the identity of the other swap data repository

(if any) to which the swap is or will be reported--The Commission

proposed to add an explanatory note to the Comment section for this

data field in Exhibits A-D providing that the field value is the LEI of

the other SDR to which the swap is or will be reported.

Block trade indicator--The Commission proposed to modify

the Comment section to this data field in Exhibits A-D to reflect that

the CFTC has issued a final rulemaking regarding Procedures To

Establish Appropriate Minimum Block Sizes for Large Notional Off-

Facility Swaps and Block Trades.\226\

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\226\ See, generally, Procedures To Establish Appropriate

Minimum Block Sizes for Large Notional Off-Facility Swaps and Block

Trades, Final Rule, 78 FR 32866 (May 31, 2013).

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Execution venue--The Commission proposed to modify the

explanatory note in the Comment section to this data field in Exhibits

A-D to reflect that the CFTC has designated an LEI system and to

require the reporting of only the LEI of the SEF or DCM for swaps

executed on or pursuant to the rules of a SEF or DCM.

Clearing indicator--The Commission proposed modifications

to the explanatory note in the Comment section to this data field in

Exhibits A-D to provide for the reporting of a Yes/No indication of

whether the swap will be submitted for clearing to a DCO.

Clearing venue--The Commission proposed modifications to

the Comment section of this data field in Exhibits A-D to provide for

the reporting of only the LEI of the derivatives clearing organization.

ii. Proposed Addition of New PET Data Fields Applicable to All

Reporting Entities for All Swaps

The Commission proposed to add to Exhibits A-D the following new

PET fields which would be applicable to all reporting entities for all

swaps: \227\

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\227\ See 80 FR 52544, 52558-59.

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

Asset class--This data field would provide the specific

asset class for the swap. Field values: Credit, equity, FX, interest

rates and other commodities.

An indication of whether the reporting counterparty is a

derivatives clearing organization with respect to the swap.

Clearing exception or exemption type--This field would

provide the type of clearing exception or exemption being claimed.

Field values: End user, Inter-affiliate or Cooperative.

iii. Proposed Addition of New PET Data Fields Applicable to DCOs for

Clearing Swaps

The Commission also proposed to modify Exhibits A-D in order to add

new PET fields specifically to be reported by DCOs for clearing

swaps.\228\ The proposed data fields that must be reported by DCOs for

clearing swaps include the following:

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\228\ See 80 FR 52544, 52559.

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

Clearing swap USIs--This data field would provide the USI

for each clearing swap that replaces the original swap,

[[Page 41756]]

other than the USI for which the PET data is currently being reported.

Original swap USI--This data field would provide the USI

for the original swap that was replaced by clearing swaps.\229\

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

\229\ See also Sec. Sec. 45.10(a)(1), (b)(1)(iii), (b)(2)(ii),

(c)(1)(iii), (c)(2)(ii), and (c)(3) (requiring entities with

reporting obligations to transmit to the DCO for swaps submitted for

clearing ``the identity of the swap data repository to which

required swap creation data is reported'' and the USI for the swap).

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

Original swap SDR--This data field would provide the LEI

of the SDR to which the original swap was reported.\230\

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

\230\ Id.

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

Clearing member LEI--This data field would provide the LEI

of the clearing member.

Clearing member client account--This data field would

provide the account number for the client, if applicable, of the

clearing member.

Origin (house or customer)--This data field would provide

information regarding whether the clearing member acted as principal

for a house trade or agent for a customer trade.

Clearing receipt timestamp--This data field would provide

the date and time at which the DCO received the original swap that was

submitted for clearing.

Clearing acceptance timestamp--This data field would

provide the date and time at which the DCO accepted the original swap

that was submitted for clearing.

3. Comments Received

i. General Comments

Eurex commented that there are no additional fields for clearing

swaps beyond those proposed which are necessary to understand a

clearing swap or the mechanics of the clearing process.\231\ JBA

cautioned that the definitions used in the markets are not always

consistent with those proposed by the NPRM, which places a significant

burden on small-sized market participants.\232\ JBA also noted

potential difficulties in reporting hybrid instruments because swaps

with multiple underlying assets may have their own market conventions

that do not fall under the categories in the proposed rules.\233\

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\231\ See Eurex Oct. 30, 2015 Letter, at 8.

\232\ See JBA Oct. 30, 2015 Letter, at 2-3.

\233\ See JBA Oct. 30, 2015 Letter, at 3.

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

Several commenters addressed how PET data fields can operate in the

context of agency and principal clearing models. LCH recommended that

the Commission require a PET data field indicating if a swap is cleared

following an agency or principal model.\234\ ISDA recommended combining

the ``Clearing indicator'' and ``Origin (house or customer)'' fields

into a single ``Cleared'' field with four possible values--not cleared,

intended to be cleared, cleared (principal), and cleared (agency).\235\

ISDA commented that the current reporting system results in DCOs

reporting principal cleared trades in a manner designed for agency

clearing model. ISDA commented that this is at odds with European Union

requirements and may result in data reported to multiple jurisdictions

that is not reconcilable.\236\ Eurex commented that, in the principal

model, the DCO may not know the identity of the clearing member's

client; if the DCO is required to report that client's identity, it

would be necessary for anyone trading part 45 reportable swaps to

possess an LEI.\237\

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\234\ See LCH Oct. 30, 2015 Letter, at 4.

\235\ See ISDA Oct. 30, 2015 Letter, at 9-10.

\236\ See ISDA Oct. 30, 2015 Letter, at 11.

\237\ See Eurex Oct. 30, 2015 Letter, at 8.

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LCH commented that the ``Original swap USI,'' ``Original swap

SDR,'' and ``Clearing member client account'' PET fields for clearing

swaps should only be required ``if applicable.'' \238\

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

\238\ See LCH Oct. 30, 2015 Letter, at 4.

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

ii. Comments on Specific Proposed PET Fields \239\

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

\239\ DTCC also commented on the proposed PET field for

``Clearing swap USIs,'' ``Original swap USIs,'' and ``Original swap

SDRs.'' See DTCC Oct. 30, 2015 Letter, at 8-9. These comments are

addressed in the discussions on proposed revisions to Sec. Sec.

45.5 and 45.8, supra Sections II.D and II.E.

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

ISDA supported the proposed modification of the clearing venue and

execution venue PET fields to require the submission of an LEI for such

venues.\240\ ISDA also supported the addition of the ``Asset class''

PET data field for all swaps.\241\ ISDA also commented on the removal

of internal counterparty identifiers as a valid submission for various

counterparty identification fields, noting that not all global

regulators require swap counterparties to obtain LEIs.\242\ ISDA

requested that the Commission continue to work with global regulators

to ensure uniform adoption of the LEI standard across jurisdictions.

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

\240\ See ISDA Oct. 30, 2015 Letter, at 8.

\241\ See id. at 9.

\242\ See id., at 8.

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

ISDA commented that the PET field for ``Block trade indicator''

should be removed rather than amended because block trade status only

affects part 43 reporting.\243\ ISDA questioned the value that block

trade status would provide the Commission when evaluating swap

data.\244\ Further, block trade status may change over the life of a

swap and there is no guidance in part 43 or part 45 on how to deal with

such changes.\245\

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\243\ See id. at 8.

\244\ See id. at 8.

\245\ See id. at 8.

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

Finally, ISDA commented on the proposed ``Clearing exception or

exemption type'' PET field, which would require the reporting party to

identify the clearing exception or exemption exercised for a particular

swap.\246\ ISDA commented that it could be challenging and costly for

firms to implement this change, while providing duplicative information

because exemption elections must already be provided to SDRs.\247\ ISDA

recommended that the ``Clearing exception or exemption type'' PET field

acceptable values be limited to ``inter-affiliate'' and ``other,''

because inter-affiliate trades can be identified under existing

reporting standards.

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\246\ See id. at 9.

\247\ See id. at 9.

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4. Final Rule Text

Having considered the comments provided in response to the NPRM,

the Commission is adopting the revisions to Appendix 1 of part 45 as

proposed.\248\ In response to the IDWG Request for Comment, some

commenters argued that the Commission should not require additional

data fields for reporting and should reduce the number of fields

currently required.\249\ The Commission explained in the NPRM that the

proposed modifications to existing PET data fields will add clarity to

the current reporting requirements. In regards to the additional

fields, the NPRM explained that the new fields will require the

reporting of information that is essential to the efficient operation

of reporting of

[[Page 41757]]

the swaps involved in a cleared swap transaction.\250\

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

\248\ The Commission has also noted ITV's comment requesting the

addition of an indicator that a swap was part of a package

transaction. See ITV Oct. 30, 2015 Letter, at 3. While this comment

is beyond the scope of the NPRM, the Commission would note that the

Technical Specifications Request for Comment solicits input on this

topic.

\249\ See CMC May 27, 2014 Letter, at 3 (recommending that the

Commission reduce the number and complexity of data fields required

to improve data reporting); CME letter at 17-19 (providing

recommendations on modification for specific data fields and arguing

against requiring certain additional reporting); DTCC May 27, 2014

Letter, at 3, appendix at 15 (suggesting that the Commission

consider whether requiring fewer data elements would better enable

the Commission and other regulators to fulfill their regulatory

obligations); International Energy Credit Association May 27, 2014

Letter, at 5-6 (arguing that existing swap data reporting

requirements do not need to be expanded and that data reporting

would be improved by reducing the current reporting burden); Swiss

Re May 27, 2014 Letter, at 5 (describing reporting difficulties for

specific data fields).

\250\ See 80 FR 52544, 52559.

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Regarding the proposed PET fields for clearing swaps, as noted in

the NPRM, the Commission believes such data elements would more

accurately capture the additional, unique features of clearing swaps

that are not relevant to uncleared swaps.\251\ The Commission has noted

the number of comments addressing the issue of reporting swaps cleared

under the principal, as opposed to agency, model of clearing. In

particular, the Commission has reviewed ISDA's comment on combining the

``Clearing indicator'' and ``Origin (house or customer)'' fields. While

the Commission is adopting those fields as proposed, the Commission

would note that in the Technical Specifications Request for Comment,

the Commission solicited input on a potential data element indicating

agency versus principal clearing model, and on reporting package

transactions.\252\

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\251\ See 80 FR 52544, 52559.

\252\ See Draft Technical Specifications for Certain Swap Data

Elements, Request for Comment (Dec. 22, 2015), available at http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/specificationsswapdata122215.pdf. (``Technical Specifications

Request for Comment'').

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

The Commission notes LCH's comment that certain PET data elements

should only be reported ``if applicable.'' The Commission notes that

appendix 1 to part 45 states that reporting parties should ``[e]nter N/

A for fields that are not applicable,'' which is repeated in the header

to every column in appendix 1. To ensure that reported swap data is

complete, the Commission would reiterate that any PET data field that

is not applicable to a particular swap should be marked ``N/A'' and not

left blank. Otherwise, the Commission cannot determine if a field is

inapplicable or if an applicable data element is missing.

The Commission declines to remove the ``Block trade indicator'' as

requested by ISDA because this indicator is necessary for a proper

review of market activity for surveillance and enforcement purposes.

The Commission would note that block trade status is most relevant for

part 43 real-time reporting purposes. Therefore, in response to ISDA's

request for guidance, the Commission would note that a swap's block

trade status should be determined as of the time of execution;

subsequent changes to notional amounts should not impact whether the

swap met the block trade threshold originally.

As for the ``Clearing exception or exemption type'' PET field, the

Commission has noted ISDA's comment that this field may be difficult to

implement. However, the Commission believes that additional PET fields

indicating clearing exception and exemption type are necessary for the

Commission to track compliance with Commission regulation Sec. 50.50.

While reporting counterparties are required under existing Sec.

50.50(b) to provide clearing exemption election forms with SDRs, the

existing swaps data reporting rules do not require that the reporting

counterparty indicate that such clearing exemption was elected for a

particular swap. Without such information provided as part of

transaction-specific swaps data, the Commission is unable to determine

which counterparties are relying on an exemption and how often such

elections are being made.\253\ This additional PET field will aid the

Commission in tracking compliance with the clearing mandate by

providing transaction specific information on why certain swaps were

uncleared.

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\253\ As noted above, in addition to the end-user exception to

the swap clearing requirement set forth in section 2(h)(7) of the

CEA and codified in part 50 of the Commission's regulations, the

Commission has published two exemptions to the swap clearing

requirement: The inter-affiliate exemption (Sec. 50.52) and the

financial cooperative exemption (Sec. 50.51).

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

The asset class data field will assist the Commission in

identifying the asset class for swaps reported to registered SDRs

pursuant to part 45. The indication of whether the reporting

counterparty is a DCO with respect to the swap data field is consistent

with proposed Sec. 45.8(i), which designates the DCO as the reporting

counterparty for clearing swaps, and the existing PET data fields that

require certain information related to the registration status of the

counterparties to be included in PET data reporting.

III. Related Matters

A. Regulatory Flexibility Act

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

in promulgating rules, to consider the impact of those rules on small

entities.\254\ The rules proposed herein will have a direct effect on

SDRs, DCOs, SEFs, DCMs, SDs, MSPs, and non-SD/MSP counterparties who

are counterparties to one or more swaps and subject to the Commission's

jurisdiction. The Commission has previously established certain

definitions of ``small entities'' to be used by the Commission in

evaluating the impact of its rules on small entities in accordance with

the RFA.\255\ The Commission has previously determined that DCMs \256\

and DCOs \257\ are not small entities for the purpose of the RFA. The

Commission has also previously proposed that SDRs, SEFs, SDs, and MSPs

should not be considered to be small entities.\258\

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\254\ See 5 U.S.C. 601 et seq.

\255\ 47 FR 18618, 18618-21, Apr. 30, 1982.

\256\ Id.

\257\ 66 FR 45604, 45609, Aug. 29, 2001.

\258\ Swap Data Recordkeeping and Reporting, Notice of Proposed

Rulemaking, (``Part 45 NPRM'') 75 FR 76574, 76595 (Dec. 8, 2010)

(discussing why SDRs, SEFs, SDs, and MSPs should not be considered

small entities).

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

The Final Part 45 Rulemaking and preceding proposal discussed how

certain non-SD/MSP counterparties could be considered small entities in

certain limited situations, but concluded that part 45 does not have a

significant impact on a substantial number of small entities.\259\ The

modifications to part 45 adopted herein do not affect that conclusion,

or the reasoning behind it, and therefore the Commission does not

believe that these adopted rules will have a significant economic

impact on a substantial number of small entities. To the extent that

this rulemaking has any significant impact on small entities, it

removes some reporting obligations by explicitly putting the obligation

to terminate original swaps on DCOs accepting those swaps.

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\259\ Final Part 45 Rulemaking, 77 FR 2136, 2170-71 (discussion

for non-SD/MSP counterparties); Part 45 NPRM, 75 FR 76574, 76595

(discussion for non-SD/MSP counterparties).

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

Therefore, the Chairman, on behalf of the Commission, pursuant to 5

U.S.C. 605(b), hereby certifies that the adopted rules will not have a

significant economic impact on a substantial number of small entities.

B. Paperwork Reduction Act

The purposes of the Paperwork Reduction Act of 1995, 44 U.S.C. 3501

et seq. (``PRA'') are, among other things, to minimize the paperwork

burden to the private sector, to ensure that any collection of

information by a government agency is put to the greatest possible

uses, and to minimize duplicative information collections across the

government.\260\ The PRA applies to all information, regardless of form

or format, whenever the government is obtaining, causing to be

obtained, or soliciting information, and includes required disclosure

to third parties or the public, of facts or opinions, when the

information collection calls for answers to identical questions posed

to, or identical reporting or recordkeeping requirements imposed on,

ten or more persons.\261\ The

[[Page 41758]]

PRA requirements have been determined to include not only mandatory but

also voluntary information collections, and include both written and

oral communications.\262\ Under the PRA, an agency may not conduct or

sponsor, and a person is not required to respond to, a collection of

information unless it displays a currently valid control number from

the Office of Management and Budget (``OMB''). The OMB control number

for the information collection associated with part 45 swaps reporting

is 3038-0096.\263\ Because reporting entities under part 45 would also

be required to report swaps pursuant to part 43, where applicable, some

of the burden associated with swaps reporting under part 45 is covered

in the information collection covering real-time swaps reporting

pursuant to part 43.\264\

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\260\ See 44 U.S.C. 3501.

\261\ See 44 U.S.C. 3502.

\262\ See 5 CFR 1320.3(c)(1).

\263\ The NPRM improperly cited information collection 3038-

0089, rather than 3038-0096, as the collection relating to swaps

reporting under part 45. However, the NPRM's discussion of what

information is collected and the burden estimates for swaps

reporting under part 45 correctly described collection 3038-0096,

which is the basis of this PRA discussion.

\264\ See Information Collection 3038-0070; see also 77 FR 2136,

2174. (``The Commission notes, however, that these burdens should

not be considered additional to the costs of compliance with part

43, because the basic data reporting technology, processes, and

personnel hours and expertise needed to fulfill the requirements of

part 43 encompass both the data stream necessary for real-time

public reporting and the creation data stream necessary for

regulatory reporting.'').

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The Commission intends to amend existing collection 3038-0096 to

account for adjustments to reporting entities' swaps data reporting

systems necessitated by this release. Information collection 3038-0096

\265\ includes an estimate of burden hours and costs associated with

various requirements of part 45 swaps reporting and recordkeeping,\266\

including the reporting of creation data under Sec. 45.3 and

continuation data under Sec. 45.4,\267\ the maintenance of an internal

order management system (``OMS''), and personnel needed to maintain a

compliance program in support of an OMS system. The intended amendment

to the collection will add an estimate for the burden associated (a)

with changing reporting systems to comply with changes to the required

data to be reported under Sec. 45.3 and Sec. 45.4, and (b) with

requirements that DCOs potentially connect to all registered SDRs. The

Commission will be filing to update this information collection with

OMB prior to the effective date of this release. This update will be

publicly noticed and made available for comment in the Federal

Register.

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\265\ The Commission issued a notice of intent to renew

information collection 3038-0096 on August 7, 2015. See Notice of

Intent to Renew Collection 3038-0096, 80 FR 47477 (Aug. 7, 2015).

The Commission received no comments on this notice of intent to

renew. The comment file is available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1608. The Office of Management

and Budget approved without change the renewal of this information

collection on December 21, 2015.

\266\ Supporting documentation for the renewal of information

collection 3038-0096 is available at http://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201508-3038-002.

\267\ ``Creation data'' under Sec. 45.3 includes all PET data

fields listed in appendix 1 to part 45, as well as all

``confirmation data,'' which includes all terms of the swap matched

and agreed upon by the parties. ``Continuation data'' reporting

under Sec. 45.4 requires a reporting entity to ensure that all data

on a swap is kept current and accurate, including any changes to

primary economic terms.

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

The Commission received several comments on the costs associated

with part 45 swaps reporting that could implicate PRA burdens.\268\

Regarding the addition of PET fields applicable to all swaps, ISDA

commented that the PET field for ``clearing exception or exemption

type'' would be ``very challenging and costly'' to implement.\269\

However, neither ISDA nor any other commenter provided information

quantifying the cost to update reporting systems to account for the

modified and additional PET fields. As discussed more extensively in

Section III.C.9, the information required to be reported in the

modified ``clearing exception or exemption type'' is also already in

the possession of the reporting entity; changes to reporting systems

required to report this field would involve adding a known piece of

information to the message reported to an SDR. Regarding new PET fields

for clearing swaps, Eurex commented that DCOs would need to collect

data from the original swap counterparties or trading venue to be able

to report these fields.\270\ The information required to report these

PET fields is either generated by the DCO itself (such as clearing swap

USI, clearing member LEI, clearing member internal identifier, house/

customer account flag, and receipt and clearing timestamps) or should

be included in the clearing member's submission of a swap to the DCO

for clearing (such as the original swap USI and original swap SDR).

While the Commission believes that reporting entities already possess

information required to report the added and amended PET fields, the

Commission intends to amend collection 3038-0096 to account for changes

that reporting entities must make to their reporting systems to comply

with these new and amended fields.

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\268\ In addition, FSR requested that the Commission promulgate

rules to standardize data elements. See FSR Oct. 30, 2015 Letter, at

4. While this comment would relate to the burden of reporting for

part 45 purposes, it is beyond the scope of the NPRM. The Commission

would note Commission staff's efforts in connection with the

Technical Specifications Request for Comment, discussed in n. 42.

The Commission also received some comments suggesting that the

Commission not require the reporting of intended-to-be-cleared

original swaps, or require DCOs to report such swaps. See, e.g.,

CEWG Oct. 30, 2015 Letter, at 2-3; CMC Oct. 30, 2015 Letter, at 2.

While not requiring such reporting would reduce the burden on

original swap reporting entities, the NPRM and adopted amendments to

part 45 do not change the existing requirement to report such swaps.

Therefore, this comment is beyond the scope of the NPRM. See, supra,

Section II.B.4.iii.

\269\ ISDA Oct. 30, 2015 Letter, at 9.

\270\ See Eurex Oct. 30, 2015 Letter, at 5.

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Some commenters raised concerns that requiring DCOs to report

continuation data for original swaps to the SDR to which the original

swap was reported could increase costs for DCOs as they may need to

connect to SDRs to which they do not currently have a connection.\271\

The Commission understands that DCOs already may report terminations to

the original SDR, and to the extent these reporting systems are already

implemented the new rules will not introduce additional costs for these

DCOs. Moreover, the costs of additional SDR connections that may not

yet be in place are addressed by the Commission more fully below at

III.C.5. However, the Commission recognizes that requiring DCOs to

potentially connect to more than one SDR in order to report

continuation data for original swaps may require an update to the

existing information collection 3038-0096. The Commission will be

filing to update this information collection with OMB prior to the

effective date of this release. This update will be publicly noticed

and made available for comment in the Federal Register.

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\271\ See e.g., Eurex Oct. 30, 2015 Letter, at 5, 9; LedgerX

Oct. 30, 2015 Letter, at 2; LCH Oct. 30, 2015 Letter, at 3. The

Commission notes that another commenter stated that ``DCOs have

already made connections with the major CFTC-registered SDRs.''

(DTCC Oct. 30, 2015, Letter at 5).

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C. Cost-Benefit Considerations

1. Introduction

Section 15(a) of the CEA requires the Commission to consider the

costs and benefits of its actions before promulgating a regulation

under the CEA or issuing certain orders.\272\ 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

[[Page 41759]]

participants and the public; (2) efficiency, competitiveness, and

financial integrity of futures markets; (3) price discovery; (4) sound

risk management practices; and (5) other public interest

considerations. The Commission considers the costs and benefits

resulting from its discretionary determinations with respect to the

section 15(a) factors.

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\272\ 7 U.S.C. 19(a).

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The Commission is amending and making additions to Sec. Sec. 45.1,

45.3, 45.4, 45.5, 45.8, 45.10, and appendix 1 to part 45 in order to

provide clarity to counterparties to a swap and registered entities

regarding their part 45 reporting obligations with respect to cleared

swap transactions and to improve the efficiency of data collection and

maintenance associated with the reporting of the swaps involved in a

cleared swap transaction. The final rule adopts revisions to part 45 as

proposed in the NPRM.

2. Background

The swap data reporting framework adopted in the Final Part 45

Rulemaking \273\ was largely based on the mechanisms for the trading

and execution of uncleared swaps. The plain language of the existing

part 45 rules presumes the existence of a single, continuous swap both

prior to and after acceptance of a swap for clearing by a DCO. Under

that framework, registered entities and counterparties would each

report data with respect to a single swap when such swap is initially

executed, referred to as ``creation data,'' and over the course of the

swap's existence, referred to as ``continuation data.'' \274\

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\273\ See 77 FR 2136.

\274\ Section 45.1 defines ``required swap creation data'' as

primary economic terms data and confirmation data. Section 45.1

defines ``primary economic terms data'' as all of the data elements

necessary to fully report all of the primary economic terms of a

swap in the swap asset class of the swap in question and defines

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

agreed upon by the counterparties in confirming the swap. 17 CFR

45.1. For cleared swaps, confirmation data also includes the

internal identifiers assigned by the automated systems of the

derivatives clearing organization to the two transactions resulting

from novation to the clearing house. Id.

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The Commission has since had additional opportunities to consult

with industry and with other regulators, including the SEC,\275\ and to

observe how the part 45 regulations function in practice with respect

to swaps that are cleared, including how the implementation of part 45

interacts with the implementation of part 39 of the Commission's

regulations, which contains provisions applicable to DCOs.

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\275\ The SEC proposed certain new rules and rule amendments to

Regulation SBSR governing reporting in the context of security-based

swaps. See Regulation SBSR--Reporting and Dissemination of Security-

Based Swap Information, 80 FR 14740 (Mar. 19, 2015).

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In particular, Sec. 39.12(b)(6) provides that upon acceptance of a

swap by a DCO for clearing, the original swap is extinguished and

replaced by equal and opposite swaps, with the DCO as the counterparty

to each such swap.\276\ The original swap that is extinguished upon

acceptance for clearing is commonly referred to as the ``alpha'' swap

and the equal and opposite swaps that replace the original swap are

commonly referred to as ``beta'' and ``gamma'' swaps. The Commission is

of the view that the existing part 45 regulations should be amended to

better accommodate the multi-swap framework of Sec. 39.12(b)(6) by

explicitly addressing beta and gamma swaps as distinct swaps for

purposes of part 45 reporting.\277\

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\276\ See 17 CFR 39.12(b)(6) (requiring a DCO that clears swaps

to have rules providing that, upon acceptance of a swap by the [DCO]

for clearing: (i) The original swap is extinguished; (ii) the

original swap is replaced by an equal and opposite swap between the

[DCO] and each clearing member acting as principal for a house

trading or acting as agent for a customer trade). Subsequent to

adoption of the Final Part 45 Rulemaking, the Commission affirmed

that the multi-swap framework (comprising separate and unique

original and resulting swaps) should apply for part 45 reporting

purposes. See Statement of the Commission on the Approval of Chicago

Mercantile Exchange Rule 1001 (Mar. 6, 2013), at 6, available at:

http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/statementofthecommission.pdf.

\277\ The Commission also notes that a single swap reporting

framework for cleared swaps, as opposed to a multi-swap framework

like the one contemplated by Sec. 39.12(b)(6), would likely not be

consistent with the approach proposed by the SEC in its release

proposing certain new rules and rule amendments to Regulation SBSR.

See Regulation SBSR--Reporting and Dissemination of Security-Based

Swap Information, 80 FR 14740 (Mar. 19, 2015). The Commission

discusses the benefits associated with harmonizing its approach with

that of other regulators later in this release.

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The existing part 45 regulations do not explicitly address the

reporting of ``alpha,'' ``beta,'' and ``gamma'' swaps; however,

industry practice has evolved to address such reporting. The Commission

understands that market participants generally report part 45 data for

cleared swap transactions in conformance with the framework described

in Sec. 39.12(b)(6), where separate swaps (alphas, betas, and gammas)

are represented individually in reported swap data. The Commission

understands that under existing market practice: SEFs, DCMs and

reporting counterparties generally report required swap creation data

for alpha swaps to the SDR of their choice; DCOs that accept alpha

swaps for clearing generally report required swap creation data for the

beta and gamma swaps that result from clearing novation of the alpha

swap to the SDR of their choice (which may be different than the SDR to

which the alpha swap was reported); such DCOs do not in all cases

include the USI of the alpha swap in creation data reported for the

beta and gamma swaps; and that DCOs may inconsistently report, and SDRs

may inconsistently accept and process, alpha swap terminations.\278\

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\278\ While the above reflects the Commission's general

understanding of industry practice with respect to the reporting of

component parts of a cleared swap transaction, the Commission does

not possess complete information regarding certain details and

nuances of the reporting practices of different registered entities

and reporting counterparties. For instance, in some cases, the

Commission generally does not possess sufficient information to

ascertain the period of time between the DCO's acceptance of an

alpha swap for clearing and the DCO's report of creation data for

beta and gamma swaps. The Commission posed questions eliciting

specific details or nuances of industry practice that are likely to

have cost/benefit implications in the relevant sections of the NPRM.

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The gaps between the existing part 45 regulations, Sec.

39.12(b)(6), and certain industry practices, including those outlined

above, have likely contributed to a lack of certainty regarding the

applicability of the part 45 regulations to beta and gamma swaps,

including which registered entity or counterparty is required to report

creation data and/or continuation data for such swaps, and the manner

in which such swaps must be reported. The Commission understands that

this uncertainty presents compliance challenges for registered entities

and reporting counterparties.

Additionally, the lack of clarity regarding existing part 45

obligations with respect to beta and gamma swaps has impacted the

accuracy, quality, and usefulness of data that is reported for cleared

swaps. For instance, inconsistent DCO reporting of alpha swap USIs in

creation data for beta and gamma swaps hinders the Commission's ability

to trace the history of a cleared swap transaction from execution

between the original counterparties to clearing novation. Even in cases

where the Commission can ascertain the USI of a specific alpha swap

that was replaced by beta and gamma swaps, SDR data available to the

Commission at times misleadingly shows some alpha swaps as remaining

open between the original counterparties, when in actuality such swaps

have been extinguished through clearing novation. The inability to

determine whether an alpha swap has been terminated impedes the

Commission's ability to analyze cleared swap activity and to review

swap activity for compliance with the clearing

[[Page 41760]]

requirement.\279\ If alpha swaps have been terminated, yet appear to

remain open, then a risk of double counting swap notional exposures can

result, which would impede the Commission's ability to analyze and

study swaps market activity using accurate information. The inability

to link the different swaps in a cleared swap transaction also impedes

the Commission's ability to assess exposures of market participants in

the uncleared and cleared swaps markets. Additionally, certain creation

data fields that are currently populated for beta and gamma swaps prove

difficult to interpret by the Commission, and thus can result in

inconsistencies in their application and reporting among alpha, beta,

and gamma swaps, hindering the Commission's ability to interpret and

analyze data regarding beta and gamma swaps.

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\279\ Commission staff recently noted difficulty in evaluating

the proper de minimis level of activity for swap dealer registration

under Commission regulation 1.3(ggg), in part due to difficulties

linking alpha swaps with resulting beta and gamma swaps. See Swap

Dealer De Minimis Exception Preliminary Report (Nov. 18, 2015), at

13-14, available at http://www.cftc.gov/idc/groups/public/@swaps/documents/file/dfreport_sddeminis_1115.pdf. In the report, Staff

noted that the finalization and implementation of this final rule

release for reporting of cleared swaps should help to mitigate this

issue going forward.

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The revisions and additions that are being adopted in this final

rulemaking would amend part 45 to differentiate reporting requirements

for cleared and uncleared swap transactions, and which explicitly

address swap counterparty and registered entity reporting requirements

for each component (e.g., alpha, beta, and gamma) of a cleared swap

transaction. This rulemaking will remove uncertainty as to which

counterparty to a swap is responsible for reporting creation data for

each of the various components of a cleared swap transaction. The final

rule makes clear whose obligation it is to report the termination of

the original swap upon acceptance of a swap by a DCO for clearing.

These additional details include where, when, and how to report the

swap data pertaining to the establishment of the beta and gamma swaps

and the reporting of the termination message to the SDR that originally

received the swap data for the alpha swap. This final rule is also

intended to improve the efficiency of data collection and maintenance

associated with the reporting of the swaps involved in a cleared swap

transaction and to improve the accuracy, quality, and usefulness of

data that is reported for cleared swaps and alpha swaps that have been

extinguished due to clearing novation.

The Commission believes that the baseline for this consideration of

costs and benefits is generally the existing part 45 regulations, which

were adopted in 2011.\280\ However, as described above, in certain

circumstances, industry practice has been informed by certain

provisions of part 39 and by subsequent industry developments, and thus

does not necessarily reflect the plain language of the existing part 45

regulations. In those circumstances, the baseline for this

consideration of costs and benefits will be industry practice.

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\280\ See Swap Data Recordkeeping and Reporting Requirements,

Final Rule, 77 FR 2136 (Jan. 13, 2012).

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The following consideration of costs and benefits is organized

according to the rules and rule amendments put forth in this final

rulemaking. For each rule, the Commission summarizes the amendments

\281\ and identifies and discusses the costs and benefits attributable

to them, including a discussion of the commenters' suggestions with

regards to the costs and benefits of the amendments present in the IDWG

Request for Comment and the NPRM.\282\ The Commission then considers

the costs and benefits of certain alternatives to the rules put forth

in this final rulemaking, as well as the costs and benefits of all of

the rules jointly in light of the five public interest considerations

set out in section 15(a) of the CEA.

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\281\ As described in detail throughout Section II of this final

release, the Commission is also adopting a number of non-

substantive, conforming rule amendments in this release, such as

renumbering certain provisions and modifying the wording of existing

provisions to ensure consistency with the wording in newly proposed

definitions. Non-substantive amendments of this nature will not be

discussed in the cost-benefit portion of this final release.

\282\ See IDWG Request for Comment, 79 FR 16689 (Mar. 26, 2014);

NPRM, 80 FR 52544, 52570 (Aug. 31, 2015).

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The Commission notes that this consideration of costs and benefits

is based on the understanding that the swaps market functions

internationally, with many transactions involving U.S. firms taking

place across international boundaries, with some Commission registrants

being organized outside of the United States, with leading industry

members typically conducting operations both within and outside the

United States, and with industry members commonly following

substantially similar business practices wherever located. Where the

Commission does not specifically refer to matters of location, the

below discussion of costs and benefits refers to the effects of the

proposed rules on all swaps activity subject to the amended

regulations, whether by virtue of the activity's physical location in

the United States or by virtue of the activity's connection with or

effect on U.S. commerce under CEA section 2(i).\283\ The Commission

also notes that the existing part 45 regulations generally contemplate

situations where a swap may be required to be reported pursuant to U.S.

law and the law of another jurisdiction.\284\

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\283\ 7 U.S.C. 2(i). Section 2(i)(1) makes the swaps provisions

of the Dodd-Frank Act, and Commission regulations promulgated under

those provisions, applicable to activities outside the United States

that ``have a direct and significant connection activities in, or

effect on, commerce of the United States;'' while section 2(i)(2)

makes them applicable to activities outside the United States that

contravene Commission rules promulgated to prevent evasion of Dodd-

Frank. Application of section 2(i)(1) to the existing part 45

regulations with respect to SDs/MSPs and non-SD/non-MSP

counterparties is discussed in the Commission's non-binding

Interpretive Guidance and Policy Statement Regarding Compliance With

Certain Swap Regulations, 78 FR 45292 (July 26, 2013).

\284\ See 17 CFR 45.1 (defining ``International swap'' to mean a

swap required by U.S. law and the law of another jurisdiction to be

reported both to a swap data repository and to a different trade

repository registered with the other jurisdiction.); see also 17 CFR

45.3(h) (prescribing requirements with respect to international

swaps).

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3. Definitions--Amendments to Sec. 45.1

The adopted amendments to Sec. 45.1 revise the definition of

``derivatives clearing organization'' for purposes of part 45 to update

a reference to an existing definition of ``derivatives clearing

organization'' and make clear that part 45 applies to DCOs registered

with the Commission. The adopted amendments to Sec. 45.1 will also add

new definitions for ``original swaps'' (swaps that have been accepted

for clearing by a DCO, commonly referred to as ``alpha'' swaps) and

``clearing swaps'' (swaps created pursuant to the rules of a DCO that

have a DCO as a counterparty, including, but not limited to, any swap

that replaces an original swap that was extinguished upon acceptance

for clearing, commonly referred to as ``beta'' and ``gamma'' swaps).

The terms original swap and clearing swaps will be used throughout

amended part 45 to help clarify reporting obligations for each swap

involved in a cleared swap transaction. Likewise, the Commission will

use the defined terms ``original swaps'' and ``clearing swaps''

throughout this consideration of costs and benefits. Given that these

terms are a product of this release and are not yet part of industry

nomenclature, the Commission will also use the terms ``alpha, beta, and

gamma'' throughout this consideration of costs and benefits when

discussing existing industry

[[Page 41761]]

practice and when helpful for purposes of clarification.\285\

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\285\ The Commission determined to utilize the proposed to be

defined terms ``original swap'' and ``clearing swaps'' in this

release rather than the industry terms ``alpha, beta, and gamma''

because while a cleared-swap transaction generally comprises an

original swap that is terminated upon novation and the equal and

opposite swaps that replace it, the Commission is aware of certain

circumstances in which a clearing swap may not involve the

replacement of an original swap (e.g., an open offer swap, as

discussed earlier in this release). See supra, Section II.A.

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The Commission notes that commenters did not submit any comments

relevant to the costs and benefits of the proposed amendments to Sec.

45.1.

i. Costs

The Commission does not anticipate that these definitions, in and

of themselves, impose additional costs on DCOs or market participants.

However, these definitions will be referenced in other proposed

substantive provisions and the costs and benefits of those substantive

requirements will be discussed in the relevant sections below.

ii. Benefits

As discussed earlier in this release, the plain language of the

existing part 45 regulations presumes the existence of one continuous

swap and does not explicitly acknowledge distinct reporting

requirements for the individual components (i.e., alphas, betas, and

gammas) of a cleared swap transaction. However, industry practice is

generally to report part 45 data for cleared swap transactions in

conformance with the multi-swap framework described in Sec.

39.12(b)(6) (i.e., to report alphas, betas, and gammas separately). The

definitions of original and clearing swaps, along with the other

revisions to part 45 covered in this release, will help align the part

45 regulations with part 39 and with certain industry practices and

will explicitly delineate the swap data reporting obligations

associated with each of the swaps involved in a cleared swap

transaction.\286\

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\286\ The Commission acknowledges that the alternative

approaches to the reporting of cleared swap transactions separately

discussed in Section III.C.10, Consideration of Alternatives, later

in this release could also provide these benefits for registered

entities and swap counterparties. However, for the reasons explained

in that section, the Commission is of the view that the proposed

approach is more consistent with industry practice than the

alternatives.

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4. Creation Data Reporting by DCOs--Amendments to Sec. 45.3

Existing Sec. 45.3 requires reporting to an SDR of two types of

``creation data'' generated in connection with a swap's creation:

``primary economic terms data'' and ``confirmation data.'' \287\

Regulation 45.3 governs what creation data must be reported, who must

report it, and deadlines for its reporting.

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\287\ Section 45.1 defines ``required swap creation data'' as

primary economic terms data and confirmation data. Section 45.1

defines ``primary economic terms data'' as all of the data elements

necessary to fully report all of the primary economic terms of a

swap in the swap asset class of the swap in question and defines

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

agreed upon by the counterparties in confirming the swap. 17 CFR

45.1. For cleared swaps, confirmation data also includes the

internal identifiers assigned by the automated systems of the

derivatives clearing organization to the two transactions resulting

from novation to the clearing house.'' Id.

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Amended Sec. 45.3(e) will govern creation data reporting

requirements for swaps that fall under the proposed definition of

clearing swaps. Amended Sec. 45.3(e) will also require a DCO, as

reporting counterparty under adopted Sec. 45.8(i),\288\ to report all

required swap creation data for each clearing swap as soon as

technologically practicable after acceptance of an original swap by a

DCO for clearing (in the event that the clearing swap replaces an

original swap) or as soon as technologically practicable after

execution of the clearing swap (in the event that the clearing swap

does not replace an original swap).\289\

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\288\ As discussed in greater detail below, adopted Sec.

45.8(i) will designate the DCO as the reporting counterparty for

clearing swaps.

\289\ As noted earlier in this release, the amended definition

of ``clearing swap'' is intended to encompass: (1) Swaps that

replace an original swap and to which the DCO is a counterparty

(i.e., swaps commonly known as betas and gammas) and (2) all other

swaps to which the DCO is a counterparty (even if such swap does not

replace an original swap). The Commission understands that there may

be instances in which a clearing swap does not replace an original

swap. For example, in the preamble to the part 39 adopting release,

the Commission noted that ``open offer'' systems are acceptable

under Sec. 39.12(b)(6), stating that ``Effectively, under an open

offer system there is no `original' swap between executing parties

that needs to be novated; the swap that is created upon execution is

between the DCO and the clearing member, acting either as principal

or agent.''). See Derivatives Clearing Organization General

Provisions and Core Principles, Final Rule 76 FR 69334, 69361 (Nov.

8, 2011).

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Swaps other than clearing swaps, including swaps that later become

original swaps by virtue of their acceptance for clearing by a DCO,

will continue to be reported as currently required under existing Sec.

45.3(a)-(d). The Commission is thus following an approach to creation

data reporting that will require reporting counterparties or SEFs/DCMs

to report creation data for swaps commonly known as alpha swaps, and

that will require DCOs to report creation data for swaps commonly known

as beta and gamma swaps, and for any other swaps to which the DCO is a

counterparty.\290\

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\290\ Because the reporting counterparty or SEF/DCM are

currently required under Part 45 to report a swap that would become

an original swap under this final release, there is no need to

conduct a cost-benefit consideration of this requirement.

Alternatives to the current reporting approach for original swaps

are discussed in the Consideration of Alternatives section, Section

III.C.10, below.

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With respect to confirmation data reporting, for swaps that are

intended to be cleared at the time of execution, the Commission is

amending Sec. 45.3(a), (b), (c)(1)(iii), (c)(2)(iii), and (d)(2) to

remove certain existing confirmation data reporting requirements. Under

the modified rules, SEFs/DCMs and reporting counterparties will

continue to be required to report PET data as part of their creation

data reporting, but will not be required to report confirmation data

for swaps that are intended to be submitted to a DCO for clearing at

the time of execution. Instead, the DCO will be required to report

confirmation data for clearing swaps pursuant to proposed Sec.

45.3(e).

The Commission is also amending Sec. 45.3(j), which will provide

that: for swaps executed on or pursuant to the rules of a SEF or DCM

(including swaps that become original swaps), the SEF or DCM will have

the obligation to choose the SDR for such swaps; for all other swaps

(including for off-facility swaps and/or clearing swaps) the reporting

counterparty (as determined under Sec. 45.8) will have the obligation

to choose the SDR.

The Commission has considered the letters sent by commenters to the

cost-benefit considerations of proposed amendments to Sec. 45.3.

Several comments were received on the elimination of the requirement

for reporting confirmation data for swaps that are intended to be

cleared. On the cost-benefit considerations front, Markit commented

that eliminating the requirement for reporting confirmation data for

swaps that are intended to be cleared, while still maintaining the

requirement to report primary economic terms data, will not benefit

reporting workflows and that there is little incremental cost to report

confirmation data as reporting systems are set-up to capture that

information already.\291\

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\291\ See Markit Oct. 30, 2015 Letter, at 2-3.

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With regards to eliminating the requirement for reporting

confirmation data, the Commission acknowledges that there might be

incremental cost savings due to the elimination of this requirement, as

suggested by commenters. Nevertheless, the Commission believes that

there is no cost associated with the elimination of

[[Page 41762]]

this requirement and that confirmation data requirements for clearing

swaps provide the Commission with a sufficient representation of the

confirmation data for a cleared swap transaction. As a result, the

Commission believes that there are benefits in the form of cost savings

that need to be considered in the elimination of this requirement.

Other commenters responded to the question of which entity should

be responsible for reporting creation data for swaps that will become

original swaps. Commenters were split on this question. Some commenters

suggested that the DCO, rather than the reporting counterparty, should

be responsible for reporting the creation data for that swap.\292\ CME

commented that assigning all the reporting obligations for original and

clearing swaps to the DCO is a better and simpler way to address alpha

swap reporting, and will eliminate the need to reconcile original and

clearing swaps across SDRs.\293\ CMC similarly commented that DCOs are

in the best position to report on swaps that are accepted or rejected

for clearing and should assume all reporting obligations for cleared

swaps, including all reporting of swaps that are intended to be

cleared.\294\ AIMA likewise suggested that if the Commission continues

the reporting requirements associated with original swaps, assigning

the reporting obligations to the DCOs will remove reporting burdens and

the risk of data fragmentation across SDRs.\295\

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\292\ See e.g., CME Oct. 30, 2015 Letter, at 2-3; CMC Oct. 30,

2015 Letter, at 2-3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30,

2015 Letter, at 3.

\293\ See CME Oct. 30, 2015 Letter, at 3.

\294\ See CMC Oct. 30, 2015 Letter, at 2.

\295\ See AIMA Oct. 30, 2015 Letter, at 6.

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Other commenters recommended that the Commission continue to

require the reporting counterparty to report creation data for those

swaps that will become original swaps.\296\ LCH commented that the

reporting counterparty of a trade should always be a party to the

transaction and therefore, in the case of a swap that will become an

original swap, the DCO would not be better suited than the SEF, DCM, or

reporting counterparty to report the creation data.\297\ Eurex

suggested that assigning the reporting obligation of original swap

creation data to the DCO may present a timeliness issue depending on

when the DCO receives the necessary information from the

counterparties.\298\ ISDA likewise agreed that the obligation to report

swaps that become original swaps should remain with the reporting

counterparty for that swap.\299\

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\296\ See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015

Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4.

\297\ See LCH Oct. 30, 2015 Letter, at 2.

\298\ See Eurex Oct. 30, 2015 Letter, at 4.

\299\ ISDA also commented in support of the Commission's

proposal to remove the provisions in Sec. 45.3 that excused a

reporting counterparty from reporting creation data for a swap

accepted for clearing before the primary economic terms reporting

deadline. See ISDA Oct. 30, 2015 Letter, at 4.

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Furthermore, certain commenters suggested that the reporting of any

creation data for swaps that will become original swaps is

unnecessary.\300\ AIMA commented that eliminating reporting for swaps

that are intended to be cleared at the time of execution will

significantly reduce complexity in the reporting regime and streamline

the reported data.\301\ AIMA also commented that the proposed reporting

approach for original swaps will not reduce data fragmentation.\302\

Similarly, EEI/EPSA suggested that there is little to no benefit to

original swap reporting for swaps that are intended to be cleared at

the time of execution and that counterparties should not be required to

report any creation data for such swaps.\303\

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\300\ See AIMA Oct. 30, 2015 Letter, at 2-6; EEI/EPSA Oct. 30,

2015 Letter, at 3; CEWG Oct. 30, 2015 Letter, at 2.

\301\ See AIMA Oct. 30, 2015 Letter, at 3.

\302\ See AIMA Oct. 30, 2015 Letter, at 4 (noting that reporting

original swap creation data to one SDR and reporting clearing swap

data to a different SDR may undermine data quality for the

Commission's supervisory purposes).

\303\ See EEI/EPSA Oct. 30, 2015 Letter, at 3.

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While the NPRM did not propose changing the existing obligation to

report swaps that become original swaps, and is therefore beyond the

scope of the NPRM, the Commission continues to believe that original

swaps contain essential information regarding the origins of cleared

swap transactions for market surveillance and audit-trail purposes. The

Commission's ability to trace the history of a cleared swap transaction

from execution between the original counterparties to clearing novation

relies on this information and this is a significant benefit to the

Commission in terms of understanding the market structure as well as

for surveillance purposes.

With respect to the issue of who reports creation data for those

swaps that will become original swaps, the Commission believes that the

requirement that the reporting counterparty report creation data for

those swaps that will become original swaps should remain. The

Commission believes there are significant benefits associated with

maintaining established industry workflows. Reporting counterparties

and registered entities have invested substantial time and resources to

report swaps (both cleared and not cleared) to SDRs, and DCOs have

invested substantial resources to report clearing swaps. The Commission

believes it would be efficient to make use of this existing

infrastructure and asking market participants to make changes to this

established workflow might be costly. The Commission acknowledges the

data fragmentation concerns raised by those that recommend DCOs report

original swap creation data. However, the Commission also recognizes

that requiring the DCOs, rather than the original reporting

counterparty, to report original swap creation data may present

challenges of its own.\304\ The Commission also believes that there are

significant benefits associated with maintaining accurate and timely

reporting of the required data fields and that this will outweigh data

fragmentation concerns for those situations where the original swap and

clearing swaps are reported to different SDRs.

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

\304\ See e.g., Eurex Oct. 30, 2015 Letter, at 4 (suggesting

there could be timeliness issue depending on when the DCO receives

necessary information from counterparties to report creation data).

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

The Commission has considered arguments made by the commenters with

respect to choice of SDR and believes that placing the obligation to

choose the SDR on the registered entity or counterparty that is

required to report the swap, rather than on another entity, will result

in more efficient data reporting. Allowing the first entity to report

data on a swap to choose the SDR will allow reporting entities to

select an SDR to which they have established connections; giving

another entity the ability to choose the SDR could require the first

reporting entities to connect to multiple SDRs. The Commission also

believes allowing the first reporting registered entity or counterparty

to choose the SDR will also promote competition among SDRs to provide

SDR services to a broad array of reporting entities.

This method of SDR selection also avoids the insertion of any

entity other than a party to the swap or facility where the transaction

is executed, into the decision as to how a registered entity or

counterparty fulfills its regulatory obligation to report initial

required swap creation data. As with the ``first-touch'' approach taken

with respect to the creation of USIs in part 45,\305\ the Commission

believes that the entity with the first reporting obligation should

select the SDR for that report. The Commission believes that such a

[[Page 41763]]

method of SDR selection will avoid delays in real-time reporting for

part 43 purposes. If DCOs were to select the SDR for an original swap,

the DCO would not be in a position to make such selection until after a

swap was accepted for clearing. Any delays in clearing would translate

into delays in reporting for both part 43 real-time reporting and part

45 reporting. Additionally, the registered entity or counterparty that

is required to report a swap pursuant to Sec. 45.8 may select an SDR

to which its technological systems are most suited or to which it

already has an established relationship, providing for the efficient

and accurate reporting of swap data. As a result, the Commission

believes that amendments to Sec. 45.3(j) simply codify existing

practice and will not impose any additional connection costs for DCOs

or SDRs. In addition, the Commission believes that allowing DCOs to

choose the SDRs to which they report creation and continuation data is

cost-minimizing for DCOs because it allows them to select the SDR which

is most cost effective.

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\305\ See Final Part 45 Rulemaking, 77 FR 2136, 2158 (Jan. 13,

2012).

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i. Costs

The Commission understands that under current industry practice,

DCOs commonly report to SDRs creation data for swaps that would fall

under the definition of clearing swaps. Accordingly, to the extent that

DCOs already have been reporting in conformance with adopted Sec.

45.3(e), the Commission does not expect the final rule to result in any

additional costs.

With respect to registered DCOs organized outside of the United

States, its territories, and possessions, that are subject to

supervision and regulation in a foreign jurisdiction, a home country

trade reporting regulatory regime may require the DCO to report swap

data to a trade repository in the home country jurisdiction. For

clearing swaps that a DCO would be required to report both to a

registered SDR pursuant to the amendments to part 45, and to a foreign

trade repository pursuant to a home country trade reporting regulatory

regime, the Commission acknowledged in the NPRM that a DCO could be

expected to incur some additional costs in satisfying both its CFTC and

home country reporting obligations, relative to a DCO that would only

be subject to part 45 reporting requirements. As also indicated in the

NPRM, DCOs are not currently required to provide such cost information

to the Commission, the Commission lacks access to the information

needed to assess the magnitude of the costs relating to compliance with

reporting obligations in multiple jurisdictions. In addition, the

Commission did not receive any comments on, nor estimates of, the costs

relating to compliance with reporting obligations in multiple

jurisdictions. In terms of any potential costs, the Commission expects

that industry technological innovations may effectively allow for

satisfaction of swap data reporting requirements across more than one

jurisdiction by means of a single data submission, and that a

streamlined reporting process or other technology and operational

enhancements could mitigate the cost of satisfying reporting

requirements for swaps that may be required to be reported to a foreign

trade repository under a home country regulatory regime as well as to a

registered SDR pursuant to amendments to part 45.\306\ Additionally,

the Commission anticipates that adopting an approach to the reporting

of cleared swaps in the United States that is, to the extent possible,

consistent with the approaches adopted in other jurisdictions may also

minimize compliance costs for entities operating in multiple

jurisdictions.\307\ The Commission also notes that any costs arising

from reporting swap data with respect to more than one jurisdiction

could already have been realized, to the extent that DCOs located

outside the United States are already reporting swap data to a

registered SDR in addition to reporting swap data to a trade repository

pursuant to a home country regulatory regime.

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\306\ As noted in the NPRM, the part 45 regulations contemplate

situations where a swap may be required to be reported pursuant to

U.S. law and the law of another jurisdiction. See 80 FR 52544, 52564

n. 138.

\307\ The Commission understands that the approach followed in

this final release for the reporting of cleared swaps (e.g.,

requiring separate reporting of alphas, betas, and gammas) is

largely consistent with the multi-swap approach adopted by a number

of jurisdictions, including, for example, the European Union,

Singapore, and Australia.

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Finally, with respect to choice of SDR, the Commission believes

that amendments to Sec. 45.3(j) will not impose any additional costs

because the amendments simply codify existing practice--the Commission

understands that the workflows that apply the proposed choice of SDR

obligations are already in place.

The Commission believes that allowing DCOs to choose the SDRs to

which they report creation and continuation data is cost-minimizing for

DCOs because it allows them to select the SDR which is most cost

effective. As discussed in greater detail below, the Commission

anticipates that DCOs that have affiliated SDRs will continue their

current practice of reporting clearing swaps to their affiliated

SDRs.\308\

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\308\ The Commission acknowledges several commenters at both the

IDWG Request for Comment and NPRM stages who commented on the costs

to reporting counterparties when reporting original swaps. See,

e.g., CME Oct. 30, 2015 Letter, at 6-7; CMC Oct. 30, 2015 Letter, at

2. However, the Commission has noted that the revisions to part 45

adopted in this release do not change the existing obligation of

those entities to report original swaps. Therefore, the costs

currently incurred by such reporting counterparties are not a factor

when considering the costs and benefits of the revisions adopted in

this release. The Commission does discuss those costs in the

Consideration of Alternatives, below at Section III.C.10.

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ii. Benefits

Amended Sec. 45.3(e) will explicitly articulate DCO part 45

reporting obligations with respect to clearing swaps (e.g., betas and

gammas).\309\ As explained above, existing Sec. 45.3 does not

explicitly acknowledge distinct reporting requirements for swaps

commonly known as alphas, betas, and gammas. The amendments explicitly

delineate creation data reporting obligations for each component of a

cleared swap transaction, which will improve the Commission's ability

to analyze data associated with such transactions.

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\309\ The Commission acknowledges that the alternatives

separately discussed in the Consideration of Alternatives section

later in this release could also provide these benefits for

registered entities and swap counterparties. However, for the

reasons explained in that section, the Commission is of the view

that the proposed approach is more consistent with industry practice

than the alternatives.

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Requiring DCOs to report required swap creation data for clearing

swaps to SDRs in the manner outlined in this release is expected to

result in uniform protocols and consistent reporting of the individual

components of a cleared swap transaction. The Commission believes that

the adopted reporting framework for cleared swaps will result in more

consistent reporting of all components of a cleared swap transaction,

including linkages between the related swaps, thereby increasing the

efficiency of the SDR data collection function and enhancing the

Commission's ability to utilize the data for regulatory purposes,

including for systemic risk mitigation, market monitoring, and market

abuse prevention.

With respect to confirmation data reporting, the Commission

anticipates that the removal of certain confirmation data reporting

requirements will result in decreased costs for swap counterparties

and/or registered entities that are currently gathering and conveying

electronically the information necessary to report

[[Page 41764]]

confirmation data for swaps that are intended to be submitted to a DCO

for clearing at the time of execution.\310\

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\310\ See CEWG May 27, 2014 Letter, at 4-5 (stating that

reporting confirmation data in addition to PET data is highly

redundant because confirmation data simply includes all of the PET

data matched and agreed to by the counterparties); ISDA May 27, 2014

Letter, at 6-8 (noting that ``Confirmation data should not be

required for an alpha trade that is intended for clearing at point

of execution, whether due to the clearing mandate or bilateral

agreement. Confirmation data for alpha swaps is not meaningful since

they will be terminated and replaced with cleared swaps

simultaneously or shortly after execution for which confirmation

data will be reported by the DCO.'').

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With respect to the adopted rule allowing the removal of certain

confirmation data reporting requirements for swaps that are intended to

be submitted to a DCO for clearing at the time of execution, the

Commission is of the view that the adopted confirmation data reporting

requirements for clearing swaps should provide the necessary

confirmation data with respect to cleared swap transactions. Given that

the adopted rules will require the DCO to report confirmation data for

clearing swaps, requiring an additional set of confirmation data

reporting for the now-terminated original swap, in addition to PET

data, would be duplicative and therefore unnecessary.

Finally, with respect to choice of SDR, under adopted Sec.

45.3(j), the party with the obligation to report the first data for a

swap has the discretion to select the SDR of its choice. This can be an

SDR with which the party already has a working relationship, an SDR

which is, in the registered entity or reporting counterparty's

estimation, most cost-effective, or an SDR that provides the best

overall service and product. The Commission believes that this

flexibility to select SDRs will minimize reporting errors and improve

reporting efficiencies by allowing the reporting entity to select an

SDR with which it has a connection and reporting systems in place. The

Commission also believes this approach will foster competition between

SDRs, as reporting entities such as SEFs/DCMs, SDs/MSPs, DCOs, and non-

SD/MSPs can select the SDR to which they will report. Further, allowing

the reporting entity to select the SDR will reduce costs, as reporting

counterparties and registered entities (other than DCOs) should not

have to establish a connection to more than one SDR unless they prefer

to do so. The Commission understands that Sec. 45.3(j) is consistent

with industry practice,\311\ and thus that the benefits described above

are already being realized.

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\311\ The Commission notes that industry practice with respect

to choice of SDR has likely been influenced in part by a variety of

factors, including, among others, the Commission's statement

regarding CME Rule 1001. See Statement of the Commission on the

Approval of CME Rule 1001 (Mar. 6, 2013), at 6. The Commission notes

that other DCOs have adopted similar rules. See, e.g., ICE Clear

Credit Rule 211.

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5. Continuation Data Reporting by DCOs--Adopted Amendments to Sec.

45.4

The Commission's amendments to Sec. 45.4, which governs the

reporting of swap continuation data to an SDR during a swap's existence

through its final termination or expiration, incorporate the

distinction between original swaps and clearing swaps. The Commission

is removing Sec. 45.4(b)(2)(ii), which requires a reporting

counterparty that is an SD or MSP to report valuation data for cleared

swaps daily; instead, the DCO will be the only swap counterparty

required to report swap continuation data, including valuation data,

for clearing swaps.

Notably, amended Sec. 45.4(c) will require a DCO to report all

required continuation data for original swaps, including original swap

terminations, to the SDR to which such original swap was reported.

Finally, adopted Sec. 45.4(c)(2) will require that continuation data

reported by DCOs include the following data fields as life cycle event

data or state data for original swaps pursuant to adopted Sec.

45.4(c)(1): (i) The LEI of the SDR to which each clearing swap that

replaced a particular original swap was reported by the DCO pursuant to

new Sec. 45.3(e); (ii) the USI of the original swap that was replaced

by the clearing swaps; and (iii) the USIs for each of the clearing

swaps that replace the original swap.

The Commission has considered the costs and benefits raised by

commenters on the proposed addition of Sec. 45.4(c) and its

requirement that DCOs report continuation data for original swaps,

including terminations. The Commission believes that the adopted

revisions to Sec. 45.4(c) are broadly in line with existing industry

practice, and set out specific obligations that will ensure

continuation data is properly reported and reflected in the data that

the Commission uses to fulfill its regulatory obligations. The

Commission notes that it may be more burdensome for the counterparties

to the original swaps, rather than the DCO, to report terminations, as

the counterparty would have to receive a message from the DCO

confirming that the original swap was accepted for clearing and then

translate that message from the DCO into a termination message to the

SDR. Particularly, this may be most burdensome to commercial end-users

executing swaps on SEFs or DCMs who might otherwise have no reporting

obligations and who may not have the infrastructure in place to report

as quickly or as efficiently as DCOs.\312\ The Commission's proposed

rules largely avoid these costs for commercial end-users.

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\312\ See, supra, n. 26, discussing reporting obligations for

end-users trading on-facility cleared swaps.

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i. Costs

Existing Sec. 45.4(b)(2) requires that both SDs/MSPs and DCOs

report daily valuation data for cleared swaps. The removal of Sec.

45.4(b)(2)(ii) will eliminate the existing valuation data reporting

requirement for SDs/MSPs, leaving DCOs as the sole entity responsible

for daily valuation data reporting. As DCOs are currently required to

report valuation data for cleared swaps, they will not bear any

additional costs as a result of this proposed amendment.

While DCOs are currently required to report continuation data on

``cleared swaps,'' including terminations, to SDRs under existing Sec.

45.4,\313\ the adopted rule clarifies reporting obligations as they

relate to swaps that become original swaps. The Commission understands

that DCOs frequently assume responsibility to report the termination of

swaps that become alpha swaps, but that DCOs do not consistently report

such alpha swap terminations or do not report them in the form required

by the alpha swap SDR. Some DCOs that do not currently have

connectivity to the SDR where the SEF/DCM or original counterparties

first reported the swap will incur costs associated with establishing

such connectivity. DCOs will also realize costs associated with the

termination notice and submissions correcting previously erroneously

reported or omitted data. However, DCO reporting of alpha swap

terminations has not been uniform and may vary by DCO and SDR. The

Commission is aware that, in some instances, DCOs currently report

alpha swap terminations to the original SDR that received the original

submission of the intended to be cleared swap. To the extent that DCOs

have implemented systems to report alpha swap terminations to the

original swap SDR, the amended rules thus will not introduce any new

costs for those DCOs.

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\313\ Section 45.4(b) as effective prior to this rule release,

required DCOs to report continuation data on all swaps cleared by

the derivatives clearing organization, including life cycle event

data or state data.

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The Commission received three comments concerning the costs and

benefits of the proposed amendments to

[[Page 41765]]

Sec. 45.4 in two different contexts. In commenting on the NPRM, LCH

and Eurex expressed concerns with the infrastructure required to have

the DCO connected to every SDR chosen by the SD/MSP for which the DCO

clears and report terminations according to the technical requirements

of each SDR.\314\ Eurex specifically indicated that the cost of

implementing the required infrastructure would have significant time

and financial costs. In commenting on the IDWG Request for Comment, one

foreign central counterparty now acting pursuant to a DCO Exemptive

Order cited a specific cost for connecting to a new SDR as involving at

least 150 man-days.\315\ Based on the most recent industry compensation

reports, the median cost to a firm for 150 working days by a computer

programmer in the finance industry would be $61,000 per DCO to SDR

connection.\316\ Considering that each DCO must have a connection to at

least one registered SDR currently to report beta and gamma swaps under

current industry practice, and considering that there are only four

registered SDRs, each DCO could be expected to incur at most $183,000

to connect to all registered SDRs. This cost would be reduced to the

extent that the DCO has existing connections to more than one SDR or if

it clears swaps for clearing members whose original swaps are reported

to a limited number of SDRs.

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\314\ See Eurex Oct. 30, 2015 Letter, at 4-5; LCH Oct. 30, 2015

Letter, at 3.

\315\ See OTC Hong Kong May 27, 2014 Letter, at 2-3 (contending

that setup, application development, and testing to interface with

each SDR is likely to require at least 150 man-days, and that a more

cost-effective framework would be to require the original

counterparty to report termination of the alpha once it receives

confirmation that the alpha has been accepted for clearing, and that

the original counterparty would already have in place technical and

operational interfaces with the SDR of its choice. The commenter

also contended that the burden on DCOs of additional reporting

outweighs the benefits to the CFTC).

\316\ See SIFMA Report, Management & Professional Earnings in

the Securities Industry 2013 (October 2013), available at http://www.sifma.org/research/item.aspx?id=8589940603. This estimate is

based on the median total compensation for a Programmer (Code 1604)

($91,050), on an hourly basis assuming 1,800 hours worked per year

($50.83) and an eight hour work day.

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With respect to additional data fields, as discussed above, adopted

Sec. 45.4(c)(2) will add three data fields (the LEI of the SDR to

which creation data for the clearing swaps was reported, the USI of the

original swap, and USIs of the clearing swaps) to the life cycle event

data or to state data reported by DCOs as continuation data for

original swaps.\317\ All three of these data fields are either already

in use or can be created by the SDR and reported by the DCO. While

requiring the reporting of additional fields imposes costs, DCOs should

already possess the information needed for these fields, and the

Commission believes that the extra costs to DCOs associated with

adopted Sec. 45.4(c)(2) would be minimal. The Commission requested

relevant information and quantitative estimates regarding the costs

associated with creating and using these fields but did not receive

any. As discussed in Section II.C.4.iv above, the Commission would

encourage SDRs and DCOs to standardize messages for terminating

original swap, which should alleviate some of the burden on DCOs.

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\317\ ``Required swap continuation data'' is defined in Sec.

45.1 and includes ``life cycle event data'' or ``state data''

(depending on which reporting method is used) and ``valuation

data.'' Each of these data types is defined in Sec. 45.1. ``Life

cycle event data'' means all of the data elements necessary to fully

report any life cycle event. ``State data'' means all of the data

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

all of the primary economic terms of a swap. 17 CFR 45.1.

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ii. Benefits

Adopted Sec. 45.4(c) will ensure that data concerning original

swaps remains current and accurate, allowing the Commission to

ascertain whether an original swap was terminated through clearing

novation. Original swap data that does not reflect the current state of

the swap frustrates the use of swap data for regulatory purposes,

including, but not limited to, assessing market exposures between

counterparties and evaluating compliance with the clearing

mandate.\318\ The Commission is of the view that, to the extent that

DCOs' current practices are not currently in conformance with the

adopted rule, requiring the DCO to report continuation data for

original swaps is the most efficient and effective method to ensure

that data concerning original swaps remains current and accurate as the

DCO, through its rules, determines when an original swap is terminated

and thus has the quickest and easiest access to authoritative

information concerning termination of the original swap.

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\318\ See Swap Dealer De Minimis Exception Preliminary Report,

(Nov. 18, 2015), at 13-14, available at http://www.cftc.gov/idc/groups/public/@swaps/documents/file/dfreport_sddeminis_1115.pdf.

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Adopted Sec. 45.4(c) will ensure that part 45 explicitly addresses

DCO part 45 continuation data reporting obligations with respect to

original swaps (i.e., alphas).\319\ Existing Sec. 45.4(b), which

addresses ``continuation data reporting for cleared swaps,'' requires

DCOs to report continuation data for ``all swaps cleared by a [DCO],''

but does not explicitly address the multi-swap framework provided in

Sec. 39.12(b)(6).\320\ Therefore, uncertainty persists as to whether,

under existing Sec. 45.4(b) the DCO must report continuation data for

the alpha, beta and gamma swaps. The inconsistent interpretation of

this reporting requirement leads to substantial differences in

reporting of cleared swaps and presents challenges for regulatory

oversight. The continuation data reporting requirements adopted in this

rule will make explicit that the DCO has the obligation to report

continuation data for original swaps that have been terminated and the

clearing swaps that replace a terminated original swap.

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\319\ The Commission acknowledges that the alternatives

separately discussed in the Consideration of Alternatives, Section

III.C.10, could also provide these benefits for registered entities

and swap counterparties. However, for the reasons explained in that

section, the Commission is of the view that the proposed approach is

superior to the alternatives.

\320\ As discussed earlier in this release, Sec. 39.12(b)(6)

provides that upon acceptance of a swap by a DCO for clearing, the

original swap is extinguished and replaced by equal and opposite

swaps, with the DCO as the counterparty to each such swap. See 17

CFR 39.12(b)(6).

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The Commission believes that the removal of the requirement that

SDs and MSPs report daily valuation data for cleared swaps from Sec.

45.4(b)(2) can result in cost savings to the extent that any SDs and

MSPs are not currently relying on no-action relief.\321\ In addition,

because there are fewer DCOs than non-DCO reporting counterparties,

placing the responsibility to report valuation data solely on the DCO

will result in a more consistent and standardized valuation reporting

scheme, as there would be a dramatic decrease in the number of

potential valuation data submitters to SDRs. This will benefit SDRs,

regulators, and the public because it would facilitate data aggregation

and improve the Commission's ability to analyze SDR data and to satisfy

its risk and market oversight responsibilities, including measurement

of the notional amount of outstanding swaps in the market.

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\321\ See CFTC No-Action Letter No. 12-55 (Dec. 17, 2012); CFTC

No-Action Letter No. 13-34 (Jun. 26, 2013); CFTC No-Action Letter

No. 14-90 (Jun. 30, 2014); and CFTC No-Action Letter No.15-38 (Jun.

15, 2015). Staff no-action relief from the requirements of Sec.

45.4(b)(2)(ii) has been in effect since the initial compliance date

for part 45 reporting.

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Adopted Sec. 45.4(c)(2) will require DCOs to report three

important continuation data fields for original swaps which will assist

regulators in tracing the history of, and associating

[[Page 41766]]

the individual swaps involved in, a cleared swap transaction, from

execution of the original swap through the life of each clearing swap

that replaces an original swap, regardless of the SDR(s) to which the

original and clearing swaps are reported. The newly required

continuation data elements to be reported by the DCOs for original

swaps will ensure that original swap continuation data includes

sufficient information to identify, by USI, any clearing swaps created

from the same original swap, as well as the SDR where those clearing

swaps reside. As such, the Commission expects that review of any

particular swap in a registered SDR will include a listing of all other

relevant USIs with respect to that swap (e.g., original swap and

clearing swaps). The Commission believes that this requirement will

help ensure the availability of information necessary to link original

swaps and clearing swaps, even if those swaps are reported to different

SDRs. The ability to link original and clearing swaps across multiple

SDRs will decrease data fragmentation and will increase the ability of

the Commission to accurately aggregate cleared swap data across various

SDRs. As a result, adopted Sec. 45.4(c)(2) will improve the ease of

use for cleared swaps data, which will enhance the Commission's ability

to perform its regulatory duties, including to protect market

participants and the public.

6. USI Creation by DCOs--Sec. 45.5(d)

Existing Sec. 45.5 requires that each swap subject to the

Commission's jurisdiction be identified in all swap recordkeeping and

data reporting by a USI. The rule establishes different requirements

for the creation and transmission of USIs depending on whether the swap

is executed on a SEF or DCM or executed off-facility with or without an

SD or MSP reporting counterparty. Existing Sec. 45.5 also provides

that for swaps executed on or pursuant to the rules of a SEF or DCM,

the SEF or DCM creates the USI, and for swaps not executed on or

pursuant to the rules of a SEF or DCM, the USI is created by an SD or

MSP reporting counterparty, or by the SDR if the reporting counterparty

is not an SD or MSP.

Amended rule Sec. 45.5(d) will require a DCO to generate and

assign a USI for a clearing swap upon, or as soon as technologically

practicable after, acceptance of an original swap by the DCO for

clearing (in the event the clearing swap replaces an original swap) or

execution of a clearing swap (in the event that the clearing swap does

not replace an original swap), and prior to reporting the required swap

creation data for the swap. Amended Sec. 45.5(d) contains provisions

governing creation and assignment of USIs by the DCO that are

consistent with analogous provisions governing creation and assignment

of USIs by SEFs, DCMs, SDs, MSPs, and SDRs.

All comments received with respect to amended Sec. 45.5(d) were

supportive of the change and there were no comments with regards to the

costs and benefits of this amendment.

i. Costs

The Commission believes that adopted Sec. 45.5(d) is largely

consistent with industry practice and will not result in any additional

costs for DCOs. Any DCOs that will not be in complete conformance with

the adopted rule may need to enhance their existing technological

protocols in order to create USIs in house, but these marginal costs

would likely be lower than the costs associated with obtaining a USI

with a separate USI-creating entity. The Commission believes that

creating USIs in-house, rather than with a different USI creating

entity, is less costly for DCOs and the Commission did not receive any

data on that comparison or on any other quantifiable cost structures

associated with Sec. 45.5(d).

ii. Benefits

As noted above, the existing part 45 regulations do not explicitly

address the assignment of USIs to swaps that fall within the adopted

definition of clearing swaps. Explicitly requiring DCOs to generate,

assign, and transmit USIs for clearing swaps will provide regulatory

certainty with respect to the generation and assignment of USIs for

clearing swaps. The adopted rule will also help ensure consistent and

uniform USI creation and assignment for such swaps and will allow

regulators to better identify and trace the swaps generally involved in

cleared swap transactions, from execution of the original swap through

the life of each clearing swap.

7. Determination of the Reporting Counterparty for Clearing Swaps--

Sec. 45.8

Current Sec. 45.8 establishes a hierarchy under which the

reporting counterparty for a particular swap depends on the nature of

the counterparties involved in the transaction. DCOs are not included

in the existing Sec. 45.8 hierarchy. The Commission is adopting Sec.

45.8(i) in order to identify DCOs in the hierarchy as the reporting

counterparty for clearing swaps.

One commenter supported proposed Sec. 45.8(i) as it promoted

efficiency in reporting by explicitly designating the DCO as the

reporting party for clearing swaps.\322\ There were no other comments

with respect to the costs and benefits of this amendment.

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\322\ See AIMA Oct. 30, 2015 Letter, at 6.

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i. Costs

The Commission believes that the adopted amendments to Sec. 45.8,

in and of themselves, will not impose any additional costs on

registered entities or reporting counterparties. The Commission

believes that the rule simply reflects established reporting

arrangements, which, to the Commission's understanding, is for the DCO

to submit data to the SDR for swaps that would fall within the

definition of clearing swaps.

ii. Benefits

As noted above, clearing swaps are not explicitly acknowledged in

existing Sec. 45.3, and DCOs are not identified as reporting

counterparties in the reporting counterparty hierarchy of Sec. 45.8.

The Commission acknowledges the comment by AIMA that one benefit of

proposed Sec. 45.8(i) is that it improves efficiency in reporting by

explicitly designating the DCO as the reporting party for clearing

swaps. In addition, the Commission expects that modifications to the

Sec. 45.8 reporting counterparty hierarchy will eliminate ambiguity

regarding which registered entity or swap counterparty is required to

report required creation data for clearing swaps, explicitly

delineating the nature and extent of DCO reporting obligations, and

affording market participants and SDRs a more precise and accurate

understanding of reporting obligations under part 45.

8. Reporting to a Single Swap Data Repository--Sec. 45.10

Existing Sec. 45.10 requires that all swap data for a given swap

must be reported to a single SDR, which must be the same SDR to which

creation data for that swap is first reported. The time and manner in

which such data must be reported to a single SDR depends on whether the

swap is executed on a SEF or DCM or executed off-facility with or

without an SD/MSP reporting counterparty. The Commission is amending

Sec. 45.10 to require DCOs to report all data for a particular

clearing swap to a single SDR. Moreover, consistent with current

industry practice, amended Sec. 45.10(d)(3) will require the DCO to

report all required swap creation data for each clearing swap that

replaces a particular original swap (i.e., the beta and gamma that

[[Page 41767]]

replace a particular alpha) to a single SDR, such that all required

creation data and all required continuation data for all clearing swaps

that can be traced back to the same original swap will be reported to

the same SDR (although not necessarily the same SDR as the original

swap).

i. Costs

The Commission does not expect DCOs to incur any new costs

associated with ensuring that clearing swap data is reported to a

single SDR because the requirements of the adopted rule are, to the

Commission's understanding, consistent with current DCO reporting

practice.

ii. Benefits

The Commission believes that the benefit of reporting data

associated with each clearing swap to a single SDR is that all required

creation data, all required continuation data for related clearing

swaps and, by extension, USIs linking clearing swaps to the original

swap, will be stored with the same SDR. This will minimize confusion on

the part of SDRs and regulators regarding which swaps are still active

and which ones have been terminated. The Commission notes that the

benefits of reporting all data for clearing swaps to the same SDR are

currently being realized, as it is current industry practice for DCOs

to report swaps that will fall under the amended definition of clearing

swaps in conformance with adopted Sec. 45.10(d)(3).

9. PET Data--Adopted Amendments to the Primary Economic Terms Data

Tables

The Commission's current lists of minimum (required) primary

economic terms for swaps in each swap asset class are found in tables

in Exhibits A-D of appendix 1 to part 45. With this final release, the

Commission has modified the descriptions of some PET fields applicable

to all swaps, added some PET fields applicable to all swaps, and added

some PET fields applicable only to clearing swaps. For PET fields

applicable to clearing swaps, the Commission is adding several new data

elements under the heading ``Additional Data Categories and Fields for

Clearing Swaps'' to Exhibits A-D in order to more accurately capture

the additional, unique features of clearing swaps that are not relevant

to original swaps or uncleared swaps. The newly proposed data fields

include: The USI for the clearing swap; the USI for the original swap;

the SDR to which the original swap was reported; clearing member LEI,

clearing member client account origin, house or customer account;

clearing receipt timestamp; and clearing acceptance timestamp.

As for PET field modifications and additions relevant for all

swaps, the Commission is also adding several new required data

elements, which will be applicable to all swaps, and making conforming

changes to some existing data elements. The newly added fields include:

Asset class, an indication of whether the reporting counterparty is a

DCO with respect to the swap, and clearing exception or exemption

types.

The Commission has received various comments with respect to the

proposed changes to the primary economic terms data but few that

address the cost and benefits of the changes are summarized below.\323\

ISDA commented on the proposed ``Clearing exception or exemption type''

PET field, which would require the reporting party to identify the

clearing exemption exercised for a particular swap.\324\ ISDA commented

that it could be challenging and costly for firms to implement this

change, while providing no new information because exception and

exemption elections must already be provided to SDRs. Because existing

reporting standards can identify inter-affiliate trades, ISDA

recommended that the ``Clearing exception or exemption type'' PET field

acceptable values be limited to ``inter-affiliate'' and ``other.''

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\323\ One commenter cautioned that the definitions used in the

markets are not always consistent with those proposed by the NPRM,

which places a significant burden on small-sized market

participants. See JBA Oct. 30, 2015 Letter, at 2-3. Because the only

new fields either relate solely to clearing swap reporting (and

therefore affect only DCOs), reference terms defined in the

Regulations (such as ``Asset class''), or reference the application

of certain provisions of the Regulations (such as ``Clearing

Exception or Exemption Type''), the Commission believes the terms in

the new PET data fields are sufficiently clear to avoid any costs or

burden cited by this commenter.

\324\ See ISDA Oct. 30, 2015 Letter, at 9.

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With respect to ISDA's comment, SDs are already required already to

submit to SDRs information on any clearing exception or exemption

elections made by their counterparties pursuant to part 50. The

Commission believes that reporting information on clearing exception or

exemption elections on a transactional basis, in the manner described

in the proposed changes to the primary economic terms, should not

substantially increase costs on reporting counterparties.

i. Costs

The Commission emphasizes that, as a result of the amendments to

the PET data tables for clearing swaps, the newly added data fields for

clearing swaps will be reported exclusively by DCOs. While there might

be costs associated with reporting newly added data fields, the

Commission believes that DCOs are better situated than swap

counterparties to report the additional fields for clearing swaps

without the substantial costs and operational burdens because DCOs

already possess certain information, or other registered entities and

swap counterparties are required to transmit the information to DCOs,

regarding those fields. For example, the data necessary to report the

adopted ``original swap SDR'' field is currently required to be

transmitted to the DCO under existing Sec. 45.5, and the Commission

understands that data required by the amended ``clearing receipt

timestamp'' and ``clearing acceptance timestamp'' fields may already be

generated and present in DCO systems--such DCOs would just have to

transfer those timestamps to the reporting system for each clearing

swap. Similarly, the Commission understands that house or customer

account designations are already collected and maintained in relation

to certain part 39 reporting obligations. Hence, there will be no

additional cost in collecting the information necessary to report the

``origin (house or customer)'' field, and marginal costs might stem

from conveying the information in part 45 swap data reports. The

Commission solicited comments on the extent to which DCOs may already

possess the information required by the amended additional fields and

the costs associated with obtaining and/or reporting such information

but did not receive any comments or estimates on this topic.

While the Commission requested the data needed to quantify the cost

of the addition of three data fields applicable to all reporting

entities (asset class, DCO indicator, and clearing exception or

exemption type), the Commission did not receive any quantifiable

estimates of costs associated with creating and using these fields from

commenters. The Commission believes that the costs associated with

these additional fields will not be substantial since the information

necessary to report these data elements is likely to be readily

available in connection with the execution of swaps, with some marginal

costs stemming from the requirement to include the information in PET

data reported to an SDR (to the extent that such information is not

already reported). The Commission understands that in at least some

cases, market practice is to report some of the information required by

the proposed

[[Page 41768]]

three new data fields applicable to all reporting entities for all

swaps.

ii. Benefits

The Commission believes that the additions to the list of minimum

primary economic terms will result in a variety of benefits. Clearing

swap PET fields, such as USI for the original swap or the SDR to which

the original swap was reported, can facilitate the monitoring of each

original swap by SDRs and regulators. Clearing swap PET fields can also

prevent potential double-counting of swap transactions or notional

amounts, thus improving the accuracy of SDR data for use by the

Commission in such activities as evaluating swap dealer de minimis

thresholds. Other proposed fields such as clearing member LEI or

clearing member client account information will facilitate the

Commission's assessment of risk management of market participants,

promoting the protection of the financial integrity of the markets and

the protection of market participants and the public.

The new PET fields for all swaps also will benefit the Commission

in performing its regulatory obligations. The asset class data field

will assist the Commission in determining the asset class for swaps

reported to SDRs, enhancing the Commission's ability to identify swaps

activity in each asset class as well as the capability to use the data

for regulatory purposes. The indication of whether the reporting

counterparty is a DCO with respect to the swap data field will help the

Commission monitor DCOs' compliance with reporting of clearing swap

data elements, and improve the Commission's ability to analyze swap

data relating to cleared swap transactions. The clearing exception or

exemption types data field will enable the Commission to ascertain the

specific exception or exemption from the clearing requirement that was

elected and will assist in the evaluation of compliance with the

clearing requirement, as well as assessing market activity in uncleared

swaps.

10. Consideration of Alternatives

The Commission considered the costs and benefits of certain

alternatives raised by commenters in response to the IDWG Request for

Comment and the NPRM, including whether part 45 should require intended

to be cleared swaps (original swaps) to be reported to registered SDRs.

Some commenters noted that reporting of alpha swaps is beneficial and

should continue to be required,\325\ while other commenters contended

that alpha swaps should not be required to be reported to an SDR and

questioned the benefits of requiring the reporting of alpha swaps.\326\

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\325\ See TR SEF May 27, 2014 Letter, at 10; AFR May 27, 2014

Letter, at 5; Markit May 27, 2014 Letter, at 25; and DTCC May 27,

2014 Letter, at 17-18.

\326\ See AIMA Oct. 30, 2015 Letter, at 2-6; EEI/EPSA Oct. 30,

2015 Letter, at 3; CEWG Oct. 30, 2015 Letter. At 2; SIFMA May 27,

2014 Letter, at 4; CEWG May 27, 2014 Letter, at 15; CME May 27, 2014

Letter, at 2-3

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Some commenters stated that the Commission should require clearing

swaps to be reported to the same SDR as original swaps, so that the

entire history of a swap would reside at the same SDR.\327\ A number of

commenters suggested that part 45 should place swap data reporting

obligations solely on DCOs, including with respect to swaps that are

intended to be cleared at the time of execution and accepted for

clearing by a DCO (swaps commonly known as ``alpha'' swaps) and swaps

resulting from clearing (swaps commonly known as ``beta'' and ``gamma''

swaps).\328\ However, other commenters noted that it would not be

appropriate to require a DCO to report information related to the

execution of an alpha swap.\329\

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\327\ See DTCC Oct. 30, 2015 Letter, at 3; DTCC May 27, 2014

Letter, at 2-3, appendix at 4, 21 (arguing that the Commission

should adopt a ``single SDR'' rule to ensure that all of the data

for a swap is available in one SDR); ISDA May 27, 2014 Letter, at

44.

\328\ See CMC Oct. 30, 2015 Letter, at 2-3; CME Oct. 30, 2015

Letter, at 2-3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30, 2015

Letter, at 3; CMC May 27, 2014 Letter, at 1, 3, 6; NFPEA May 27,

2014 Letter, at 12; EEI/EPSA May 27, 2014 Letter, at 3, 14; ITV May

27, 2014 Letter, at 3, 17; CEWG May 27, 2014 Letter, at 16; CME May

27, 2014 Letter, at 20; and NFP Electric Associations May 27, 2014

Letter, at 4.

\329\ See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015

Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4; LCH May 29, 2014

Letter, at 10.

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In light of these comments, the Commission considered the costs and

benefits of six alternatives in comparison to the costs and benefits of

the proposed rule: (1) Requiring original and clearing swaps to be

reported to the same SDR chosen by the reporting counterparty or SEF/

DCM; (2) requiring original and clearing swaps to be reported to the

same SDR chosen by the DCO accepting the swap for clearing; (3)

requiring only one report for each swap intended for clearing, that is,

not requiring original (alpha) swaps to be reported separately from

clearing swaps, with the SDR chosen by the reporting counterparty or

SEF/DCM; (4) requiring only one report for each swap intended for

clearing as in (3), but with the SDR chosen by the DCO accepting the

swap for clearing; (5) requiring the DCO to report both the original

swap and all resulting clearing swaps, to the SDR of its choosing; and

(6) requiring the original swap reporting counterparty to report the

creation and the termination of the original swap.\330\

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\330\ The Commission highlighted the first four alternatives in

its NPRM, and added the last two in light of comments provided in

response to the NPRM.

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The first two alternatives each require swaps that become original

swaps and the resulting clearing swaps to be reported to the same SDR.

If such swaps were reported to the same SDR, there would be no need for

certain requirements in proposed Sec. 45.4(c) that extra fields, such

as clearing swap SDR, be included in the report to the SDR for the

clearing swap to link the clearing swap to an original swap on a

different SDR. Similarly, the need for certain clearing swap PET data

fields, such as the identity of the original SDR, intended to be used

for linking purposes, might not be necessary. This would reduce costs

to the extent that certain PET data fields would not be required to

link the original and clearing swaps. The first approach would require

DCOs to connect to multiple SDRs to the same extent as the adopted

rules. However, the second approach could require reporting

counterparties or SEFs/DCMs to connect to multiple SDRs, which could

increase costs for a larger number of market participants.

Because the adopted rule more closely reflects current industry

practice relative to the alternative, there would be some potentially

significant one-time costs, including the costs of changes to existing

systems, associated with changing practices to conform to the

alternatives. Additionally, a substantial portion of aggregation costs

for regulators, and, likely, market participants, arises from the

current landscape, which includes multiple SDRs. The adopted

requirements to link original and clearing swaps at multiple SDRs is a

relatively minor burden compared with the existing burden on the

Commission, and potentially other regulators, in reconciling swap data

for a cleared swap transaction across multiple SDRs without data

elements linking the original and clearing swaps. Additionally, costs

associated with monitoring and aggregation would likely be mitigated by

the continuation data fields of adopted Sec. 45.4(c)(2), which would

enable regulators to more effectively connect original swaps at one SDR

with clearing swaps at another SDR. Also, as noted in Section

II.B.4.iv, above, these options could also introduce delays in

reporting under

[[Page 41769]]

both part 43 and part 45, which could undermine the price discovery

function of real-time reporting.

Regarding who would choose the single SDR, the SDR could be chosen

by the reporting counterparty (or DCM or SEF) or by the DCO. Under

either of the first two alternatives, one registered entity or

counterparty's choice of SDR would bind a second registered entity or

counterparty to also report to that SDR, which could be an SDR that the

second registered entity or counterparty would not otherwise select.

Allowing the reporting counterparty or SEF/DCM to choose the SDR would

enable the reporting party to choose the SDR with the best combination

of prices and service, and thus may promote competition among SDRs.

Allowing the DCO to choose the SDR for both original and clearing swaps

would likely result in the DCO always choosing the same SDR, which may

be the SDR that is affiliated with the DCO (that is, shares the same

parent company). This would reduce costs for DCOs since they would need

to maintain connectivity with only one SDR, but would limit the ability

of SDRs to compete since DCOs could choose to report only to SDRs with

which they are affiliated.\331\

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\331\ The Commission requested comment on the extent to which

SDRs compete on the basis of price or service and the extent to

which SDRs are chosen on the basis of relationships with registered

entities and reporting counterparties. Markit commented on DCOs

using affiliated SDRs for reporting, which is addressed in the

Antitrust Considerations, Section III.D, below.

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

Under the third and fourth alternatives, there would be no

requirement to report intended to be cleared swaps (original swaps)

separately from the resulting clearing swaps. Rather, there would only

be one report for each cleared swap transaction. This would be a change

from current swap market practice. As with the first two alternatives,

the choice of SDR could be made by the reporting counterparty as

determined under current Sec. 45.8, or by the DCO as under adopted

Sec. 45.8(i). If there is only one report for each cleared swap

transaction, there would be ongoing cost savings associated with the

need to make fewer reports to SDRs. As with the first two alternatives,

there would be no need for the requirement in adopted Sec. 45.4(c)

that extra fields, such as clearing swap SDR, be included in the report

to the SDR to link the clearing swap to an original swap on a different

SDR, and market participants and the Commission could access all

information about a single cleared swap transaction at a single SDR.

This would also reduce costs relative to the adopted rule. However, the

benefits of separate reports for original and clearing swaps would be

foregone and there may be a less complete record of the history of each

cleared swap. Moreover, it would be more difficult for the Commission

to determine the original counterparties, original execution time, and

other vital information on the original swap for market surveillance or

enforcement purposes. It may be possible to reclaim these benefits

through requiring additional fields in each cleared swap report,

although this would also increase costs and would require DCOs to

receive and report information beyond what is otherwise required for

clearing purposes. Additionally, because the adopted rule more closely

reflects current industry practice relative to these alternatives,

there would be some potentially significant one-time costs, including

the costs of changes to existing systems, associated with changing

practices to conform to the alternatives. The effects of who chooses

the SDR are similar to the effects described for the first two

alternatives.

Under the fifth alternative, the DCO would report both the swap

that becomes the original swap (including creation data and

termination) and all clearing swaps resulting from clearing of the

original swap. While one DCO and some end-users supported this

alternative as simplifying work flows and reducing costs to original

swaps counterparties,\332\ other DCOs opposed requiring DCOs to report

original and clearing swaps because DCOs would not have all information

required to report original swaps.\333\ While recognizing that this

alternative could reduce costs for reporting counterparties, the

Commission declined to adopt this alternative as DCOs would not have

all information necessary to submit such reports. Further, the

Commission declined to adopt this alternative because of negative

impacts on the timeliness of reporting real-time pricing information

under part 43.

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\332\ See CME Oct. 30, 2015 Letter, at 6-7; CMC Oct. 30, 2015

Letter, at 2-3.

\333\ See LCH Oct. 30, 2015 Letter, at 2; Eurex Oct. 30, 2015

Letter, at 4.

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Finally, under the sixth alternative, the reporting counterparty to

the original swap would be required to report the termination of that

swap upon acceptance for clearing. As addressed above in the discussion

of final Sec. 45.4, the Commission believes that DCOs would be in a

better position to report the termination of the original swap, and

would have all information necessary to report such terminations.

The Commission has determined not to adopt the alternatives listed

above because the final rule is more consistent with current industry

practice than such alternatives. The Commission understands that

reporting counterparties and registered entities are already set up to

report alpha swaps to registered SDRs (whether or not such swaps are

intended to be cleared at the time of execution) and that DCOs are

already set up to report beta and gamma swaps that result from

acceptance of a swap for clearing, and have been making such reports.

Accordingly, the industry has already incurred the costs of setting up

a system for reporting cleared swap transactions to SDRs (including

separate reports for swaps that would fall within the proposed

definitions of original and clearing swaps). Changing this system to

conform to an alternative rule would have certain costs to reporting

entities.

The Commission also believes that clarifying distinct reporting

requirements in part 45 for alphas (swaps that become original swaps)

and betas and gammas (clearing swaps that replace original swaps)

presents a full history of each cleared swap transaction and permits

the Commission and other regulators to identify and analyze each

component part of such transactions. The Commission also continues to

believe that placing the part 45 reporting obligation on the

counterparty or registered entity closest to the source of, and with

the easiest and fastest access to, complete and accurate data regarding

a swap fosters accuracy and completeness in swap data reporting. In

light of these benefits, the Commission will maintain the current

industry practice of separately reporting both alpha swaps (i.e., swaps

that would become original swaps under the proposed rules) and beta and

gamma swaps (i.e., clearing swaps as defined under the proposed rules).

Additionally, the multi-swap reporting approach adopted in this

rule is largely consistent with the approach proposed by the SEC in its

release proposing certain new rules and rule amendments to Regulation

SBSR,\334\ and is also largely consistent with the approach adopted by

several foreign regulators.\335\ Given that the swaps market is global

in nature, the Commission anticipates that adopting

[[Page 41770]]

an approach to the reporting of cleared swaps in the United States that

is consistent with the approaches adopted in other jurisdictions may

minimize compliance costs for entities operating in multiple

jurisdictions.

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\334\ See Regulation SBSR--Reporting and Dissemination of

Security-Based Swap Information, 80 FR 14740 (Mar. 19, 2015).

\335\ The Commission's understanding is that a number of

jurisdictions, including the European Union, Singapore, and

Australia, for example, also account for a multi-swap approach to

the reporting of cleared swaps.

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11. Section 15(a) Factors

Section 15(a) of the CEA requires the Commission to consider the

effects of its actions in light of the following five factors:

(1) Protection of market participants and the public. In the Final

Part 45 Rulemaking, the Commission stated that the data reporting

requirements of part 45 provided for protection of market participants

and the public by providing regulatory agencies with a wealth of

previously unavailable data in a unified format, greatly enhancing the

ability of market and systemic risk regulators to perform their

oversight and enforcement functions.\336\ The Commission believes that

the adopted amendments outlined in this final release will enhance

these protections by explicitly providing how and by whom each of the

swaps involved in a cleared swap transaction should be reported. In

particular, by requiring DCOs to electronically report the creation

data and continuation data for clearing swaps, the Commission believes

that data on all clearing swaps associated with a specific original

swap will be aggregated at the same SDR, provided by a single entity

and readily available for accurate and complete analysis. This will

also allow the Commission and other regulators to access all data

pertaining to related clearing swaps from a single SDR. These

enhancements should allow for efficiencies in oversight and enforcement

functions, resulting in improved protection of market participants and

the public.

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\336\ 77 FR 2136, 2188.

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(2) The efficiency, competitiveness and financial integrity of the

markets. In the Final Part 45 Rulemaking, the Commission stated that

the swap data reporting requirements of part 45 would enhance the

financial integrity of swap markets.\337\ The Commission also stated

that part 45's streamlined reporting regime, including the counterparty

hierarchy used to select the reporting counterparty, could be

considered efficient in that it assigns greater reporting

responsibility to more sophisticated entities more likely to be able to

realize economies of scale and scope in reporting costs.\338\ The

Commission believes that the amendments in this final release will

further enhance this efficiency by requiring DCOs to report where they

are the party best equipped to do so.\339\ In addition, by explicitly

delineating reporting responsibilities associated with each component

of a cleared swap transaction, the adopted rules should result in

improved reliability and consistency of the swaps data reported,

further enhancing the financial integrity of the swap markets.

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

\337\ Id. at 2189.

\338\ Id.

\339\ As noted earlier in this release, the Commission's

understanding is that the DCO is the entity that should have the

easiest and quickest access to full information with respect to PET

data and confirmation data for clearing swaps, as well with respect

to terminations of original swaps.

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

The rule confirming that the reporting counterparty or SEF/DCM has

the right to choose the SDR for the original swap can promote

competition among SDRs. However, the Commission also acknowledges that

by allowing DCOs to choose the SDR to which they report, competition

for SDR services can be impacted as a result of DCOs reporting to their

affiliated SDR, that is, an SDR that shares the same parent company as

the DCO. Any such impact on competition will be a consequence of

business decisions designed to realize costs savings associated with

the affiliations between DCOs and SDRs. The Commission notes that

section 21 of the CEA permits a DCO to register as an SDR.

(3) Price Discovery. In the Final Part 45 Rulemaking, the

Commission stated that the swap data reporting requirements of part 45

did not have a material effect on the price discovery process.\340\ The

Commission believes that the adopted amendments also will not have a

material effect on price discovery.

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

\340\ 77 FR 2136, 2189 (Jan. 13, 2012).

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

(4) Risk Management. In the Final Part 45 Rulemaking, the

Commission stated that the data reporting requirements of part 45 did

not have a material effect on sound risk management practices.\341\ The

Commission believes that the adopted amendments also will not have a

material effect on sound risk management practices.

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

\341\ Id. at 2189.

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

(5) Other Public Interest Considerations. In the Final Part 45

Rulemaking, the Commission stated that the data reporting requirements

will allow regulators to readily acquire and analyze market data, thus

streamlining the surveillance process.\342\ The Commission

preliminarily believes that the amendments outlined in this release

will enhance this consideration by providing certainty about how and by

whom each of the swaps involved in a cleared swap transaction should be

reported.

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\342\ Id.

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As noted earlier in this release, the multi-swap reporting approach

proposed in this final release is largely consistent with the

approaches proposed by the SEC and adopted by several foreign

regulators. Given that the swaps market is global in nature, the

Commission anticipates that adopting an approach that is consistent

with the approaches adopted by other regulators may further other

public interest considerations by reducing compliance costs for

entities operating in multiple jurisdictions.

D. Antitrust Considerations

Section 15(b) of the CEA requires the Commission to take into

consideration the public interest to be protected by the antitrust

laws, and endeavor to take the least anticompetitive means of achieving

the objectives of the CEA, in issuing any order or adopting any

Commission rule or Regulation. The Commission evaluated the amendments

to Part 45 in the context of 7 U.S.C. 2(a)(13)(G) and 7 U.S.C. 24a,

which were adopted by Congress as part of the Dodd-Frank Act. These

provisions require each swap, whether cleared or uncleared, to be

reported to a registered SDR. The Dodd-Frank Act was enacted to reduce

systemic risk, increase transparency, and promote market integrity by,

among other things, creating rigorous data reporting regimes with

respect to swaps, including real time reporting.\343\ As noted in this

release, the Commission has adopted these amendments to help ensure

that cleared swaps transactions are reported to SDRs in a consistent

and accurate way to allow the Commission to evaluate market risk and

monitor for abusive trading practices.

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\343\ 77 FR 2136, 2137.

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

In the Final Part 45 Rulemaking, the Commission identified choice

of SDR as one area of the rules that could potentially have an impact

on competition.\344\ In that release, the Commission stated that the

adopted rule governing who makes the initial creation data report and

selects the SDR ``favors market competition, avoids injecting the

Commission into a market decision, and leaves the choice of SDR to be

influenced by market forces and possible market innovations.'' \345\

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

\344\ 77 FR 2136, 2149.

\345\ 77 FR 2136, 2149.

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In the NPRM proposing amendments on cleared swap reporting, the

Commission asked for comments on any anticompetitive impacts of the

proposed

[[Page 41771]]

cleared swaps reporting rules.\346\ In response to the NPRM, the

Commission received two comments directly addressing competitive

concerns. DTCC and Markit both commented that allowing a DCO to select

the SDR for clearing swaps will impact competition as some DCOs have

affiliated SDRs, which may allow DCOs to bundle clearing services with

SDR services.\347\

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

\346\ 80 FR 52571.

\347\ See Markit Oct. 30, 2015 Letter, at 3-5; DTCC Oct. 30,

2015 Letter, at 7.

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

DTCC commented that allowing the DCO to report to an affiliated

SDR, particularly after the original swap has already been reported to

a different SDR, will further entrench DCOs' vertical integration in

trade execution, clearing, and data reporting.\348\ DTCC argued that

this would, in turn, increase barriers to entry for exchanges,

clearinghouses, and independent SDRs that are unaffiliated with

DCOs.\349\ As an alternative, DTCC proposed to grant the registered

entity or reporting counterparty that is obligated to report the

original swap the ability to select the SDR to which the clearing swaps

must be reported by the DCO.\350\

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

\348\ See DTCC Oct. 30, 2015 Letter, at 7.

\349\ See DTCC Oct. 30, 2015 Letter, at 7.

\350\ See DTCC Oct. 30, 2015 Letter, at 7.

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Markit argued that allowing the DCO to select the SDR to which

clearing swaps are reported would provide regulatory approval for

anticompetitive tying of clearing and reporting services.\351\ Markit

contrasted the current marketplace for clearing services with what

existed in March 2013 when the Commission approved CME Rule 1001, and

alleged that concentration has increased since 2013.\352\ In support,

Markit argued that one DCO--which is affiliated with an SDR--clears 87

percent of global credit index swaps.\353\ As an alternative to the

Commission's proposal, Markit proposed that the reporting counterparty

for an original swap be permitted, at its discretion, to both report

the resulting clearing swaps and select the SDR to which the clearing

swaps are reported. Under Markit's proposal, the reporting counterparty

to the original swap would also be permitted to delegate this reporting

and SDR selection responsibility to the DCO.\354\

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

\351\ See Markit Oct. 30, 2015 Letter, at 4.

\352\ See Markit Oct. 30, 2015 Letter, at 4.

\353\ See Markit Oct. 30, 2015 Letter, at 4-5.

\354\ See Markit Oct. 30, 2015 Letter, at 5.

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The Commission has taken into consideration the public interest to

be protected by the antitrust laws, and endeavored to take the least

anticompetitive means of achieving the objectives of the CEA in

adopting this final rule. Having considered the comments raised by DTCC

and Markit, the Commission believes that the amendments to part 45

concerning choice of SDR announced in this release meet this least-

anticompetitive-means standard.

The mix of entities reporting swaps to the various SDRs illustrates

how the choice of SDR currently operates in the marketplace. Presently

there are four registered SDRs to which swaps may be reported. Two of

the SDRs (CME and ICE Trade Vault) are affiliated with DCOs and contain

swaps data reported by those DCOs, as well as data reported by SEFs,

SDs, and non-SD/MSP market participants. These SDRs receive swap data

on uncleared swaps, as well as both the original swaps and clearing

swaps from cleared swap transactions. One SDR (DTCC) is a subsidiary of

a large financial services utility and has ownership and governance

ties to a number of swap dealers. DTCC receives swap data from a number

of those swap dealers, as well as SEFs, non-SD/MSP market participants,

and at least one DCO. DTCC receives swaps reporting for a large number

of uncleared swaps, as well as original swaps whose associated clearing

swaps are reported at either DTCC or a DCO-affiliated SDR. The fourth

SDR (Bloomberg) is corporately affiliated with a SEF and available to

accept data from, among others, SEFs/DCMs, DCOs, and reporting

counterparties. Also relevant to this discussion, some SD/MSPs and SEFs

report swaps to multiple SDRs. Some SDs and SEFs, even those with

corporate affiliations or ownership links to SDRs, report some swaps to

SDRs to which they have no such connections. The mix of swaps reported

to each SDR (uncleared, original and clearing swaps) and the mix of

reporting entities using each SDR are the result of market

participants' decisions on how to fulfill reporting obligations.

Consumers of SDR services under these amendments are the entities

with the first reporting obligation on a swap: SEFs/DCMs for uncleared

or original swaps executed on-facility; reporting counterparties

(primarily swap dealers, but also non-SD/MSP market participants) for

uncleared or original swaps executed off-facility; and DCOs for

clearing swaps. The amendments place the choice of SDR for each

individual swap with the entity first required to report data on that

swap. The amendments do not place the choice of SDR with a single

entity or counterparty with respect to more than one swap. In other

words, the choice of SDR will be made as to a particular swap when a

registered entity or reporting counterparty that is required to report

the swap makes the first report of all creation data on a particular

swap.\355\ Because each reporting entity responsible for the first

report of a swap would have its choice of SDR, the Commission does not

believe that the amendments to Part 45 in this release will

significantly impact the mix of swaps reported to each SDR and the mix

of reporting entities using each SDR, as described above.

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\355\ As discussed in section III.C.4. above, Sec. 45.3(j)

provides that the registered entity or counterparty required to

report swap creation data has the choice of SDR when fulfilling its

obligations under Sec. Sec. 45.3(a)-(e).

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

In determining which entity may select the SDR for the original and

separately for clearing swap components of a cleared swap transaction,

the Commission considered three alternatives that potentially could

achieve the objectives of the CEA: (a) Allowing the entity initially

reporting an original swap to select the SDR for both the original and

clearing swaps, by requiring clearing swaps to be reported to the same

SDR as the original swaps they replace; (b) allowing the DCO to select

the SDR for both the original and clearing swaps; or (c) allowing the

entity first reporting a swap to select the SDR, specifically by

allowing the original swap reporting entity to select the SDR for the

original swap and the DCO to select the SDR for the clearing swaps. Of

the three, the Commission considers its ultimate decision--option (c)--

to be the least anticompetitive to satisfy its regulatory objectives.

Both option (a) and (b) hold significant potential for a particular

constituency group--namely swap dealers or DCOs, respectively-- to

assume an outsized role in shaping the evolving SDR landscape to favor

the competitive interests of particular SDRs to which they have

financial ties.\356\ In contrast, option (c) minimizes this potential

by diffusing the SDR selection role across different categories of

reporting entities. No reporting entity (such as an individual DCO) or

group of similarly situated reporting entities

[[Page 41772]]

(such as SDs that have an ownership interest in an SDR) would be able

to dictate where another reporting entity reports a swap. As a result,

swaps reporting should not become concentrated in a single SDR

associated with either DCOs or SDs. On the contrary, even assuming that

all SDs choose to report all original and uncleared swaps to DTCC while

ICE and CME report all clearing swaps to their affiliated SDRs, swaps

reporting will be diffused across at least three SDRs. At the same

time, the adopted amendments allow reporting entities to take advantage

of costs savings and efficiencies by selecting an SDR with which the

reporting entity has an existing relationship.

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

\356\ As noted, DTCC has ownership and governance ties to a

number of swap dealers. Additionally, some swap dealers in the DTCC

ownership consortium have ownership and/or governance ties to

certain SEFs. Accordingly, the Commission sees a strong incentive

for swap dealers and swap dealer-affiliated SEFs to select DTCC as

the SDR to the extent this part 45 amendment grants them authority

to do so.

Conversely, the Commission foresees a strong likelihood that

DCO's that have affiliate SDRs, will select their respective SDR

affiliates to the extent this part 45 amendment grants them

authority to do so and doing so is consistent with their core

principle obligations. As discussed below, the CME Group DCO

currently has a rule providing that all swaps that it clears be

reported to the CME-affiliated SDR.

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

In the context of this rulemaking, the Commission believes that the

concerns of DTCC and Market are misdirected. The criticism of both

commenters pivots on the fundamental view that ``the proposed rule

unnecessarily permits DCOs to bundle services'' and that

anticompetitive consequences flow from such bundling.\357\ The instant

amendment, however, merely specifies who, in a particular circumstance,

will select the SDR to which a particular swap will be reported; the

amendment neither permits nor prohibits DCO/SDR bundling--it does not

speak to the issue at all. To the extent that a particular DCO reports

all of its swaps to a particular SDR (pursuant to a DCO rule or

otherwise), it must do so consistent with its core principle

obligations, including Core Principle N.\358\ This amendment does not

alter or otherwise impact that obligation. DCO registration is

contingent upon ongoing compliance with Core Principle N.\359\ Thus the

question of whether a particular DCO may be restraining trade or

imposing an anticompetitive burden through the manner in which it

exercises its Sec. 45.3(j) SDR-choice (including under a theory of

anticompetitive tying) is properly addressed as a matter of DCO

compliance with Core Principle N.\360\

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

\357\ DTCC Oct. 30, 2015 Letter, at, p. 7; see also, Markit Oct.

30, 2015 Letter, at 4 (``proposed policy would provide regulatory

approval for anticompetitive tying of clearing and regulatory

reporting services'').

\358\ CEA section 5b(c)(2)(N), 7 U.S.C.7a-1(c)(2)(N). DCO Core

Principle N provides that unless necessary or appropriate to achieve

the purposes of this Act, a derivatives clearing organization shall

not--(i) adopt any rule or take any action that results in any

unreasonable restraint of trade; or (ii) impose any material

anticompetitive burden.

\359\ See CEA section 5b(c)(2)(A)(i), 7 U.S.C. 7a-1(c)(2)(A)(i);

17 CFR 39.10(a).

\360\ Currently, CME Rule 1001 provides that the CME Group DCO

will report all swaps resulting from its clearing to the CME Group

SDR. After consideration pursuant to section 5c(c)(5) of the CEA and

Commission regulation 40.5, the Commission granted CME's request for

approval of Rule 1001 on March 6, 2013. See Statement of the

Commission (``Statement''), available at http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/statementofthecommission.pdf.

In granting the request for approval, the Commission determined,

among other things, that under the then-current facts and

circumstances Rule 1001 was not inconsistent with DCO Core Principle

N. As the Statement expressly stated, however, the Commission's

determination was based on the ``present facts and circumstances,''

and that ``CME has a continuing obligation to implement its Rule

1001 in a manner consistent with the Commission's regulations and

the DCO Core Principles, including Core Principle N, based on the

relevant facts and circumstances as they may change over time.''

Statement at 12. The Commission expects that DCOs will continue to

monitor industry circumstances and amend their rules and conduct as

necessary to remain in statutory and regulatory compliance as

industry conditions evolve. More specifically in the context of

compliance with Core Principle N, the Commission expects such

ongoing monitoring to include attention to the competitive impact of

DCO rules and conduct in appropriately defined relevant antitrust

product and geographic markets, and assessment of whether particular

DCO rules or conduct transgress antitrust laws, including Sherman

Act sections 1 and 2, 15 U.S.C. 1 and 2.

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

IV. Compliance Dates

Because some revisions and additions to part 45 create new

reporting obligations or clarify existing reporting obligations, while

some remove obligations presently covered by no-action or other relief,

the Commission is adopting this release on a bifurcated basis. The

deletion of former Sec. 45.4(b)(2)(ii), requiring that SD/MSP

counterparties to clearing swaps report valuation data on those swaps,

shall be effective upon publication in the Federal Register.

Compliance with all other revisions and additions to part 45

adopted in this release shall be required one hundred and eighty (180)

days after this release is published in the Federal Register. The

Commission has noted comments on the need for market participants,

SDRs, DCOs, and other affected parties to update systems to comply with

the proposed changes to part 45.\361\ Therefore, the Commission is

adopting the revisions and additions to part 45 with compliance dates

for new obligations that will provide sufficient time to update and

test reporting systems.

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

\361\ See JBA Oct. 30, 2015 Letter, at 2 (requesting delayed

implementation); DTCC Oct. 30, 2015 Letter, at 9 (requesting that

all changes to PET fields be required prospectively only, and not

for existing swaps; requesting implementation time of 6 months);

ISDA Oct. 30, 2015 Letter, at 12 (requesting delayed implementation,

but deferring to SDRs and DCOs on timeline for such implementation);

LCH Oct.30, 2015 Letter, at 2 (recommending at least 12 months for

DCOs and SDRs to coordinate on solution for reporting).

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

List of Subjects in 17 CFR Part 45

Data recordkeeping requirements and data reporting requirements,

Swaps.

For the reasons stated in the preamble, the Commodity Futures

Trading Commission amends 17 CFR part 45 as set forth below:

PART 45--SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS

0

1. The authority citation for part 45 is revised to read as follows:

Authority: 7 U.S.C. 6r, 7, 7a-1, 7b-3, 12a, and 24a, as amended

by Title VII of the Wall Street Reform and Consumer Protection Act

of 2010, Pub. L. 111-203, 124 Stat. 1376 (2010), unless otherwise

noted.

0

2. Amend Sec. 45.1 as follows:

0

a. Add a definition for ``clearing swap'' in alphabetical order;

0

b. Revise the definition of ``derivatives clearing organization''; and

0

c. Add a definition for ``original swap'' in alphabetical order.

The additions and revisions read as follows:

Sec. 45.1 Definitions.

* * * * *

Clearing swap means a swap created pursuant to the rules of a

derivatives clearing organization that has a derivatives clearing

organization as a counterparty, including any swap that replaces an

original swap that was extinguished upon acceptance of such original

swap by the derivatives clearing organization for clearing.

* * * * *

Derivatives clearing organization means a derivatives clearing

organization, as defined by Sec. 1.3(d) of this chapter, that is

registered with the Commission.

* * * * *

Original swap means a swap that has been accepted for clearing by a

derivatives clearing organization.

* * * * *

0

3. Revise Sec. 45.3 to read as follows:

Sec. 45.3 Swap data reporting: Creation data.

Registered entities and swap counterparties must report required

swap creation data electronically to a swap data repository as set

forth in this section and in the manner provided in Sec. 45.13(b). The

rules governing acceptance and recording of such data by a swap data

repository are set forth in Sec. 49.10 of this chapter. The reporting

obligations of swap counterparties with respect to swaps executed prior

to the applicable compliance date and in existence on or after July 21,

2010, the date of enactment of the Dodd-Frank Act, are set forth in

part 46 of this chapter. This section and Sec. 45.4 establish the

general swap data

[[Page 41773]]

reporting obligations of swap dealers, major swap participants, non-SD/

MSP counterparties, swap execution facilities, designated contract

markets, and derivatives clearing organizations to report swap data to

a swap data repository. In addition to the reporting obligations set

forth in this section and in Sec. 45.4, registered entities and swap

counterparties are subject to other reporting obligations set forth in

this chapter, including, without limitation, the following: Swap

dealers, major swap participants, and non-SD/MSP counterparties are

also subject to the reporting obligations with respect to corporate

affiliations reporting set forth in Sec. 45.6; swap execution

facilities, designated contract markets, swap dealers, major swap

participants, and non-SD/MSP counterparties are subject to the

reporting obligations with respect to real time reporting of swap data

set forth in part 43 of this chapter; counterparties to a swap for

which an exception to, or an exemption from, the clearing requirement

has been elected under part 50 of this chapter are subject to the

reporting obligations set forth in part 50 of this chapter; and, where

applicable, swap dealers, major swap participants, and non-SD/MSP

counterparties are subject to the reporting obligations with respect to

large traders set forth in parts 17 and 18 of this chapter. Paragraphs

(a) through (d) of this section apply to all swaps except clearing

swaps, while paragraph (e) applies only to clearing swaps.

(a) Swaps executed on or pursuant to the rules of a swap execution

facility or designated contract market. For each swap executed on or

pursuant to the rules of a swap execution facility or designated

contract market, the swap execution facility or designated contract

market must report all primary economic terms data for the swap, as

defined in Sec. 45.1, as soon as technologically practicable after

execution of the swap. If the swap is not intended to be submitted to a

derivatives clearing organization for clearing at the time of

execution, the swap execution facility or designated contract market

must report all confirmation data for the swap, as defined in Sec.

45.1, as soon as technologically practicable after execution of the

swap.

(b) Off-facility swaps subject to the clearing requirement. For all

off-facility swaps subject to the clearing requirement under part 50 of

this chapter, except for those off-facility swaps for which an

exception to, or exemption from, the clearing requirement has been

elected under part 50 of this chapter, and those off-facility swaps

covered by CEA section 2(a)(13)(C)(iv), required swap creation data

must be reported as provided in paragraph (b) of this section.

(1) The reporting counterparty, as determined pursuant to Sec.

45.8, must report all primary economic terms data for the swap, within

the applicable reporting deadline set forth in paragraph (b)(1)(i) or

(ii) of this section.

(i) If the reporting counterparty is a swap dealer or a major swap

participant, the reporting counterparty must report all primary

economic terms data for the swap as soon as technologically practicable

after execution, but no later than 15 minutes after execution.

(ii) If the reporting counterparty is a non-SD/MSP counterparty,

the reporting counterparty must report all primary economic terms data

for the swap as soon as technologically practicable after execution,

but no later than one business hour after execution.

(2) [Reserved]

(c) Off-facility swaps not subject to the clearing requirement,

with a swap dealer or major swap participant reporting counterparty.

For all off-facility swaps not subject to the clearing requirement

under part 50 of this chapter, all off-facility swaps for which an

exception to, or an exemption from, the clearing requirement has been

elected under part 50 of this chapter, and all off-facility swaps

covered by CEA section 2(a)(13)(C)(iv), for which a swap dealer or

major swap participant is the reporting counterparty, required swap

creation data must be reported as provided in paragraph (c) of this

section.

(1) Credit, equity, foreign exchange, and interest rate swaps. For

each such credit swap, equity swap, foreign exchange instrument, or

interest rate swap:

(i) The reporting counterparty, as determined pursuant to Sec.

45.8, must report all primary economic terms data for the swap, within

the applicable reporting deadline set forth in paragraph (c)(1)(i)(A)

or (B) of this section.

(A) If the non-reporting counterparty is a swap dealer, a major

swap participant, or a non-SD/MSP counterparty that is a financial

entity as defined in CEA section 2(h)(7)(C), or if the non-reporting

counterparty is a non-SD/MSP counterparty that is not a financial

entity as defined in CEA section 2(h)(7)(C) and verification of primary

economic terms occurs electronically, then the reporting counterparty

must report all primary economic terms data for the swap as soon as

technologically practicable after execution, but no later than 30

minutes after execution.

(B) If the non-reporting counterparty is a non-SD/MSP counterparty

that is not a financial entity as defined in CEA section 2(h)(7)(C),

and if verification of primary economic terms does not occur

electronically, then the reporting counterparty must report all primary

economic terms data for the swap as soon as technologically practicable

after execution, but no later than 30 minutes after execution.

(ii) If the swap is not intended to be submitted to a derivatives

clearing organization for clearing at the time of execution, the

reporting counterparty must report all confirmation data for the swap,

as defined in Sec. 45.1, as soon as technologically practicable after

confirmation, but no later than: 30 minutes after confirmation if

confirmation occurs electronically; or 24 business hours after

confirmation if confirmation does not occur electronically.

(2) Other commodity swaps. For each such other commodity swap:

(i) The reporting counterparty, as determined pursuant to Sec.

45.8, must report all primary economic terms data for the swap, within

the applicable reporting deadline set forth in paragraph (c)(2)(i)(A)

or (B) of this section.

(A) If the non-reporting counterparty is a swap dealer, a major

swap participant, or a non-SD/MSP counterparty that is a financial

entity as defined in CEA section 2(h)(7)(C), or if the non-reporting

counterparty is a non-SD/MSP counterparty that is not a financial

entity as defined in CEA section 2(h)(7)(C) and verification of primary

economic terms occurs electronically, then the reporting counterparty

must report all primary economic terms data for the swap as soon as

technologically practicable after execution, but no later than two

hours after execution.

(B) If the non-reporting counterparty is a non-SD/MSP counterparty

that is not a financial entity as defined in CEA section 2(h)(7)(C),

and if verification of primary economic terms does not occur

electronically, then the reporting counterparty must report all primary

economic terms data for the swap as soon as technologically practicable

after execution, but no later than two hours after execution.

(ii) If the swap is not intended to be submitted to a derivatives

clearing organization for clearing at the time of execution, the

reporting counterparty must report all confirmation data for the swap,

as defined in Sec. 45.1, as soon as technologically practicable after

confirmation, but no later than: 30 Minutes after confirmation if

confirmation occurs electronically; or 24

[[Page 41774]]

business hours after confirmation if confirmation does not occur

electronically.

(d) Off-facility swaps not subject to the clearing requirement,

with a non-SD/MSP reporting counterparty. For all off-facility swaps

not subject to the clearing requirement under part 50 of this chapter,

all off-facility swaps for which an exception to, or an exemption from,

the clearing requirement has been elected under part 50 of this

chapter, and all off-facility swaps covered by CEA section

2(a)(13)(C)(iv), in all asset classes, for which a non-SD/MSP

counterparty is the reporting counterparty, required swap creation data

must be reported as provided in paragraph (d) of this section.

(1) The reporting counterparty, as determined pursuant to Sec.

45.8, must report all primary economic terms data for the swap, as soon

as technologically practicable after execution, but no later than 24

business hours after execution.

(2) If the swap is not intended to be submitted to a derivatives

clearing organization for clearing at the time of execution, the

reporting counterparty must report all confirmation data for the swap,

as defined in Sec. 45.1, as soon as technologically practicable after

confirmation, but no later than 24 business hours after confirmation.

(e) Clearing swaps. As soon as technologically practicable after

acceptance of an original swap by a derivatives clearing organization

for clearing, or as soon as technologically practicable after execution

of a clearing swap that does not replace an original swap, the

derivatives clearing organization, as reporting counterparty, must

report all required swap creation data for the clearing swap. Required

swap creation data for clearing swaps must include all confirmation

data and all primary economic terms data, as those terms are defined in

Sec. 45.1 and as included in appendix 1 to this part.

(f) Allocations. For swaps involving allocation, required swap

creation data shall be reported to a single swap data repository as

follows.

(1) Initial swap between reporting counterparty and agent. The

initial swap transaction between the reporting counterparty and the

agent shall be reported as required by Sec. 45.3(a) through (d). A

unique swap identifier for the initial swap transaction must be created

as provided in Sec. 45.5.

(2) Post-allocation swaps--(i) Duties of the agent. In accordance

with this section, the agent shall inform the reporting counterparty of

the identities of the reporting counterparty's actual counterparties

resulting from allocation, as soon as technologically practicable after

execution, but not later than eight business hours after execution.

(ii) Duties of the reporting counterparty. The reporting

counterparty must report all required swap creation data for each swap

resulting from allocation to the same swap data repository to which the

initial swap transaction is reported as soon as technologically

practicable after it is informed by the agent of the identities of its

actual counterparties. The reporting counterparty must create a unique

swap identifier for each such swap as required in Sec. 45.5.

(iii) Duties of the swap data repository. The swap data repository

to which the initial swap transaction and the post-allocation swaps are

reported must map together the unique swap identifiers of the initial

swap transaction and of each of the post-allocation swaps.

(g) Multi-asset swaps. For each multi-asset swap, required swap

creation data and required swap continuation data shall be reported to

a single swap data repository that accepts swaps in the asset class

treated as the primary asset class involved in the swap by the swap

execution facility, designated contract market, or reporting

counterparty making the first report of required swap creation data

pursuant to this section. The registered entity or reporting

counterparty making the first report of required swap creation data

pursuant to this section shall report all primary economic terms for

each asset class involved in the swap.

(h) Mixed swaps. (1) For each mixed swap, required swap creation

data and required swap continuation data shall be reported to a swap

data repository registered with the Commission and to a security-based

swap data repository registered with the Securities and Exchange

Commission. This requirement may be satisfied by reporting the mixed

swap to a swap data repository or security-based swap data repository

registered with both Commissions.

(2) The registered entity or reporting counterparty making the

first report of required swap creation data pursuant to this section

shall ensure that the same unique swap identifier is recorded for the

swap in both the swap data repository and the security-based swap data

repository.

(i) International swaps. For each international swap, the reporting

counterparty shall report as soon as practicable to the swap data

repository the identity of the non-U.S. trade repository not registered

with the Commission to which the swap is also reported and the swap

identifier used by the non-U.S. trade repository to identify the swap.

If necessary, the reporting counterparty shall obtain this information

from the non-reporting counterparty.

(j) Choice of SDR. The entity with the obligation to choose the

swap data repository to which all required swap creation data for the

swap is reported shall be the entity that is required to make the first

report of all data pursuant to this section, as follows:

(1) For swaps executed on or pursuant to the rules of a swap

execution facility or designated contract market, the swap execution

facility or designated contract market shall choose the swap data

repository;

(2) For all other swaps, the reporting counterparty, as determined

in Sec. 45.8, shall choose the swap data repository.

Sec. 45.4 [Amended]

0

4. Effective June 27, 2016, remove Sec. 45.4 (b)(2)(ii).

0

5. Effective July 27, 2016, revise Sec. 45.4 to read as follows:

Sec. 45.4 Swap data reporting: Continuation data.

Registered entities and swap counterparties must report required

swap continuation data electronically to a swap data repository as set

forth in this section and in the manner provided in Sec. 45.13(b). The

rules governing acceptance and recording of such data by a swap data

repository are set forth in Sec. 49.10 of this chapter. The reporting

obligations of registered entities and swap counterparties with respect

to swaps executed prior to the applicable compliance date and in

existence on or after July 21, 2010, the date of enactment of the Dodd-

Frank Act, are set forth in part 46 of this chapter. This section and

Sec. 45.3 establish the general swap data reporting obligations of

swap dealers, major swap participants, non-SD/MSP counterparties, swap

execution facilities, designated contract markets, and derivatives

clearing organizations to report swap data to a swap data repository.

In addition to the reporting obligations set forth in this section and

in Sec. 45.3, registered entities and swap counterparties are subject

to other reporting obligations set forth in this chapter, including,

without limitation, the following: Swap dealers, major swap

participants, and non-SD/MSP counterparties are also subject to the

reporting obligations with respect to corporate affiliations reporting

set forth in Sec. 45.6; swap execution facilities, designated contract

markets, swap dealers, major swap participants, and non-SD/MSP

counterparties are subject to the reporting obligations with respect

[[Page 41775]]

to real time reporting of swap data set forth in part 43 of this

chapter; and, where applicable, swap dealers, major swap participants,

and non-SD/MSP counterparties are subject to the reporting obligations

with respect to large traders set forth in parts 17 and 18 of this

chapter.

(a) Continuation data reporting method generally. For each swap,

regardless of asset class, reporting counterparties and derivatives

clearing organizations required to report swap continuation data must

do so in a manner sufficient to ensure that all data in the swap data

repository concerning the swap remains current and accurate, and

includes all changes to the primary economic terms of the swap

occurring during the existence of the swap. Reporting entities and

counterparties fulfill this obligation by reporting either life cycle

event data or state data for the swap within the applicable deadlines

set forth in this section. Reporting counterparties and derivatives

clearing organizations required to report swap continuation data for a

swap may fulfill their obligation to report either life cycle event

data or state data by reporting:

(1) Life cycle event data to a swap data repository that accepts

only life cycle event data reporting;

(2) State data to a swap data repository that accepts only state

data reporting; or

(3) Either life cycle event data or state data to a swap data

repository that accepts both life cycle event data and state data

reporting.

(b) Continuation data reporting for clearing swaps. For all

clearing swaps, required continuation data must be reported as provided

in this section.

(1) Life cycle event data or state data reporting. The derivatives

clearing organization, as reporting counterparty, must report to the

swap data repository either:

(i) All life cycle event data for the swap, reported on the same

day that any life cycle event occurs with respect to the swap; or

(ii) All state data for the swap, reported daily.

(2) Valuation data reporting. Valuation data for the swap must be

reported by the derivatives clearing organization, as reporting

counterparty, daily.

(c) Continuation data reporting for original swaps. For all

original swaps, required continuation data, including terminations,

must be reported to the swap data repository to which the swap that was

accepted for clearing was reported pursuant to Sec. 45.3(a) through

(d) in the manner provided in Sec. 45.13(b) and in this section, and

must be accepted and recorded by such swap data repository as provided

in Sec. 49.10 of this chapter.

(1) Life cycle event data or state data reporting. The derivatives

clearing organization that accepted the swap for clearing must report

to the swap data repository either:

(i) All life cycle event data for the swap, reported on the same

day that any life cycle event occurs with respect to the swap; or

(ii) All state data for the swap, reported daily.

(2) In addition to all other necessary continuation data fields,

life cycle event data and state data must include all of the following:

(i) The legal entity identifier of the swap data repository to

which all required swap creation data for each clearing swap was

reported by the derivatives clearing organization pursuant to Sec.

45.3(e);

(ii) The unique swap identifier of the original swap that was

replaced by the clearing swaps; and

(iii) The unique swap identifier of each clearing swap that

replaces a particular original swap.

(d) Continuation data reporting for uncleared swaps. For all swaps

that are not cleared by a derivatives clearing organization, including

swaps executed on or pursuant to the rules of a swap execution facility

or designated contract market, the reporting counterparty must report

all required swap continuation data as provided in this section.

(1) Life cycle event data or state data reporting. The reporting

counterparty for the swap must report to the swap data repository

either all life cycle event data for the swap or all state data for the

swap, within the applicable deadline set forth in paragraphs (d)(1)(i)

or (ii) of this section.

(i) If the reporting counterparty is a swap dealer or major swap

participant:

(A) Life cycle event data must be reported on the same day that any

life cycle event occurs, with the sole exception that life cycle event

data relating to a corporate event of the non-reporting counterparty

must be reported no later than the second business day after the day on

which such event occurs.

(B) State data must be reported daily.

(ii) If the reporting counterparty is a non-SD/MSP counterparty:

(A) Life cycle event data must be reported no later than the end of

the first business day following the date of any life cycle event; with

the sole exception that life cycle event data relating to a corporate

event of the non-reporting counterparty must be reported no later than

the end of the second business day following such event.

(B) State data must be reported daily.

(2) Valuation data reporting. Valuation data for the swap must be

reported by the reporting counterparty for the swap as follows:

(i) If the reporting counterparty is a swap dealer or major swap

participant, the reporting counterparty must report all valuation data

for the swap, daily.

(ii) If the reporting counterparty is a non-SD/MSP counterparty,

the reporting counterparty must report the current daily mark of the

transaction as of the last day of each fiscal quarter. This report must

be transmitted to the swap data repository within 30 calendar days of

the end of each fiscal quarter. If a daily mark of the transaction is

not available for the swap, the reporting counterparty satisfies this

requirement by reporting the current valuation of the swap recorded on

its books in accordance with applicable accounting standards.

0

6. Revise Sec. 45.5 to read as follows:

Sec. 45.5 Unique swap identifiers.

Each swap subject to the jurisdiction of the Commission shall be

identified in all recordkeeping and all swap data reporting pursuant to

this part by the use of a unique swap identifier, which shall be

created, transmitted, and used for each swap as provided in paragraphs

(a) through (f) of this section.

(a) Swaps executed on or pursuant to the rules of a swap execution

facility or designated contract market. For each swap executed on or

pursuant to the rules of a swap execution facility or designated

contract market, the swap execution facility or designated contract

market shall create and transmit a unique swap identifier as provided

in paragraphs (a)(1) and (2) of this section.

(1) Creation. The swap execution facility or designated contract

market shall generate and assign a unique swap identifier at, or as

soon as technologically practicable following, the time of execution of

the swap, and prior to the reporting of required swap creation data.

The unique swap identifier shall consist of a single data field that

contains two components:

(i) The unique alphanumeric code assigned to the swap execution

facility or designated contract market by the Commission for the

purpose of identifying the swap execution facility or designated

contract market with respect to unique swap identifier creation; and

(ii) An alphanumeric code generated and assigned to that swap by

the automated systems of the swap execution facility or designated

contract

[[Page 41776]]

market, which shall be unique with respect to all such codes generated

and assigned by that swap execution facility or designated contract

market.

(2) Transmission. The swap execution facility or designated

contract market shall transmit the unique swap identifier

electronically as follows:

(i) To the swap data repository to which the swap execution

facility or designated contract market reports required swap creation

data for the swap, as part of that report;

(ii) To each counterparty to the swap, as soon as technologically

practicable after execution of the swap;

(iii) To the derivatives clearing organization, if any, to which

the swap is submitted for clearing, as part of the required swap

creation data transmitted to the derivatives clearing organization for

clearing purposes.

(b) Off-facility swaps with a swap dealer or major swap participant

reporting counterparty. For each off-facility swap where the reporting

counterparty is a swap dealer or major swap participant, the reporting

counterparty shall create and transmit a unique swap identifier as

provided in paragraphs (b)(1) and (2) of this section.

(1) Creation. The reporting counterparty shall generate and assign

a unique swap identifier as soon as technologically practicable after

execution of the swap and prior to both the reporting of required swap

creation data and the transmission of data to a derivatives clearing

organization if the swap is to be cleared. The unique swap identifier

shall consist of a single data field that contains two components:

(i) The unique alphanumeric code assigned to the swap dealer or

major swap participant by the Commission at the time of its

registration as such, for the purpose of identifying the swap dealer or

major swap participant with respect to unique swap identifier creation;

and

(ii) An alphanumeric code generated and assigned to that swap by

the automated systems of the swap dealer or major swap participant,

which shall be unique with respect to all such codes generated and

assigned by that swap dealer or major swap participant.

(2) Transmission. The reporting counterparty shall transmit the

unique swap identifier electronically as follows:

(i) To the swap data repository to which the reporting counterparty

reports required swap creation data for the swap, as part of that

report;

(ii) To the non-reporting counterparty to the swap, as soon as

technologically practicable after execution of the swap; and

(iii) To the derivatives clearing organization, if any, to which

the swap is submitted for clearing, as part of the required swap

creation data transmitted to the derivatives clearing organization for

clearing purposes.

(c) Off-facility swaps with a non-SD/MSP reporting counterparty.

For each off-facility swap for which the reporting counterparty is a

non-SD/MSP counterparty, the swap data repository to which primary

economic terms data is reported shall create and transmit a unique swap

identifier as provided in paragraphs (c)(1) and (2) of this section.

(1) Creation. The swap data repository shall generate and assign a

unique swap identifier as soon as technologically practicable following

receipt of the first report of required swap creation data concerning

the swap. The unique swap identifier shall consist of a single data

field that contains two components:

(i) The unique alphanumeric code assigned to the swap data

repository by the Commission at the time of its registration as such,

for the purpose of identifying the swap data repository with respect to

unique swap identifier creation; and

(ii) An alphanumeric code generated and assigned to that swap by

the automated systems of the swap data repository, which shall be

unique with respect to all such codes generated and assigned by that

swap data repository.

(2) Transmission. The swap data repository shall transmit the

unique swap identifier electronically as follows:

(i) To the counterparties to the swap, as soon as technologically

practicable following creation of the unique swap identifier; and

(ii) To the derivatives clearing organization, if any, to which the

swap is submitted for clearing, as soon as technologically practicable

following creation of the unique swap identifier.

(d) Clearing swaps. For each clearing swap, the derivatives

clearing organization that is a counterparty to such swap shall create

and transmit a unique swap identifier as provided in paragraphs (d)(1)

and (2) of this section.

(1) Creation. The derivatives clearing organization shall generate

and assign a unique swap identifier upon, or as soon as technologically

practicable after, acceptance of an original swap by the derivatives

clearing organization for clearing or execution of a clearing swap that

does not replace an original swap, and prior to the reporting of

required swap creation data for the clearing swap. The unique swap

identifier shall consist of a single data field that contains two

components:

(i) The unique alphanumeric code assigned to the derivatives

clearing organization by the Commission for the purpose of identifying

the derivatives clearing organization with respect to unique swap

identifier creation; and

(ii) An alphanumeric code generated and assigned to that clearing

swap by the automated systems of the derivatives clearing organization,

which shall be unique with respect to all such codes generated and

assigned by that derivatives clearing organization.

(2) Transmission. The derivatives clearing organization shall

transmit the unique swap identifier electronically as follows:

(i) To the swap data repository to which the derivatives clearing

organization reports required swap creation data for the clearing swap,

as part of that report; and

(ii) To its counterparty to the clearing swap, as soon as

technologically practicable after acceptance of a swap by the

derivatives clearing organization for clearing or execution of a

clearing swap that does not replace an original swap.

(e) Allocations. For swaps involving allocation, unique swap

identifiers shall be created and transmitted as follows.

(1) Initial swap between reporting counterparty and agent. The

unique swap identifier for the initial swap transaction between the

reporting counterparty and the agent shall be created as required by

paragraphs (a) through (c) of this section, and shall be transmitted as

follows:

(i) If the unique swap identifier is created by a swap execution

facility or designated contract market, the swap execution facility or

designated contract market must include the unique swap identifier in

its swap creation data report to the swap data repository, and must

transmit the unique identifier to the reporting counterparty and to the

agent.

(ii) If the unique swap identifier is created by the reporting

counterparty, the reporting counterparty must include the unique swap

identifier in its swap creation data report to the swap data

repository, and must transmit the unique identifier to the agent.

(2) Post-allocation swaps. The reporting counterparty must create a

unique swap identifier for each of the individual swaps resulting from

allocation, as soon as technologically practicable after it is informed

by the agent of the identities of its actual counterparties, and must

transmit each such unique swap identifier to:

(i) The non-reporting counterparty for the swap in question.

(ii) The agent.

(iii) The derivatives clearing organization, if any, to which the

swap

[[Page 41777]]

is submitted for clearing, as part of the required swap creation data

transmitted to the derivatives clearing organization for clearing

purposes.

(f) Use. Each registered entity or swap counterparty subject to the

jurisdiction of the Commission shall include the unique swap identifier

for a swap in all of its records and all of its swap data reporting

concerning that swap, from the time it creates or receives the unique

swap identifier as provided in this section, throughout the existence

of the swap and for as long as any records are required by the CEA or

Commission regulations to be kept by that registered entity or

counterparty concerning the swap, regardless of any life cycle events

or any changes to state data concerning the swap, including, without

limitation, any changes with respect to the counterparties to or the

ownership of the swap. This requirement shall not prohibit the use by a

registered entity or swap counterparty in its own records of any

additional identifier or identifiers internally generated by the

automated systems of the registered entity or swap counterparty, or the

reporting to a swap data repository, the Commission, or another

regulator of such internally generated identifiers in addition to the

reporting of the unique swap identifier.

0

7. Revise Sec. 45.8 to read as follows:

Sec. 45.8 Determination of which counterparty must report.

The determination of which counterparty is the reporting

counterparty for all swaps, except clearing swaps, shall be made as

provided in paragraphs (a) through (h) of this section. The

determination of which counterparty is the reporting counterparty for

all clearing swaps shall be made as provided in paragraph (i) of this

section.

(a) If only one counterparty is a swap dealer, the swap dealer

shall be the reporting counterparty.

(b) If neither counterparty is a swap dealer, and only one

counterparty is a major swap participant, the major swap participant

shall be the reporting counterparty.

(c) If both counterparties are non-SD/MSP counterparties, and only

one counterparty is a financial entity as defined in CEA section

2(h)(7)(C), the counterparty that is a financial entity shall be the

reporting counterparty.

(d) If both counterparties are swap dealers, or both counterparties

are major swap participants, or both counterparties are non-SD/MSP

counterparties that are financial entities as defined in CEA section

2(h)(7)(C), or both counterparties are non-SD/MSP counterparties and

neither counterparty is a financial entity as defined in CEA section

2(h)(7)(C):

(1) For a swap executed on or pursuant to the rules of a swap

execution facility or designated contract market, the counterparties

shall agree which counterparty shall be the reporting counterparty.

(2) For an off-facility swap, the counterparties shall agree as one

term of their swap which counterparty shall be the reporting

counterparty.

(e) Notwithstanding the provisions of paragraphs (a) through (d) of

this section, if both counterparties to a swap are non-SD/MSP

counterparties and only one counterparty is a U.S. person, that

counterparty shall be the reporting counterparty.

(f) Notwithstanding the provisions of paragraphs (a) through (e) of

this section, if neither counterparty to a swap is a U.S. person, but

the swap is executed on or pursuant to the rules of a swap execution

facility or designated contract market or otherwise executed in the

United States, or is cleared by a derivatives clearing organization:

(1) For such a swap executed on or pursuant to the rules of a swap

execution facility or designated contract market, the counterparties

shall agree which counterparty shall be the reporting counterparty.

(2) For an off-facility swap, the counterparties shall agree as one

term of their swap which counterparty shall be the reporting

counterparty.

(g) If a reporting counterparty selected pursuant to paragraphs (a)

through (f) of this section ceases to be a counterparty to a swap due

to an assignment or novation, the reporting counterparty for reporting

of required swap continuation data following the assignment or novation

shall be selected from the two current counterparties as provided in

paragraphs (g)(1) through (4) of this section.

(1) If only one counterparty is a swap dealer, the swap dealer

shall be the reporting counterparty and shall fulfill all counterparty

reporting obligations.

(2) If neither counterparty is a swap dealer, and only one

counterparty is a major swap participant, the major swap participant

shall be the reporting counterparty and shall fulfill all counterparty

reporting obligations.

(3) If both counterparties are non-SD/MSP counterparties, and only

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

reporting counterparty and shall fulfill all counterparty reporting

obligations.

(4) In all other cases, the counterparty that replaced the previous

reporting counterparty by reason of the assignment or novation shall be

the reporting counterparty, unless otherwise agreed by the

counterparties.

(h) For all swaps executed on or pursuant to the rules of a swap

execution facility or designated contract market, the rules of the swap

execution facility or designated contract market must require each swap

counterparty to provide sufficient information to the swap execution

facility or designated contract market to enable the swap execution

facility or designated contract market to report all swap creation data

as provided in this part.

(1) To achieve this, the rules of the swap execution facility or

designated contract market must require each market participant placing

an order with respect to any swap traded on the swap execution facility

or designated contract market to include in the order, without

limitation:

(i) The legal entity identifier of the market participant placing

the order.

(ii) A yes/no indication of whether the market participant is a

swap dealer with respect to the product with respect to which the order

is placed.

(iii) A yes/no indication of whether the market participant is a

major swap participant with respect to the product with respect to

which the order is placed.

(iv) A yes/no indication of whether the market participant is a

financial entity as defined in CEA section 2(h)(7)(C).

(v) A yes/no indication of whether the market participant is a U.S.

person.

(vi) If applicable, an indication that the market participant will

elect an exception to, or an exemption from, the clearing requirement

under part 50 of this chapter for any swap resulting from the order.

(vii) If the swap will be allocated:

(A) An indication that the swap will be allocated.

(B) The legal entity identifier of the agent.

(C) An indication of whether the swap is a post-allocation swap.

(D) If the swap is a post-allocation swap, the unique swap

identifier of the initial swap transaction between the reporting

counterparty and the agent.

(2) To achieve this, the swap execution facility or designated

contract market must use the information obtained pursuant to paragraph

(h)(1) of this section to identify the counterparty that is the

reporting counterparty pursuant to the CEA and this section.

(i) Clearing swaps. Notwithstanding the provisions of paragraphs

(a) through (h) of this section, if the swap is a clearing swap, the

derivatives clearing organization that is a counterparty to such swap

shall be the reporting

[[Page 41778]]

counterparty and shall fulfill all reporting counterparty obligations

for such swap.

0

8. Revise Sec. 45.10 to read as follows:

Sec. 45.10 Reporting to a single swap data repository.

All swap data for a given swap, which shall include all swap data

required to be reported pursuant to parts 43 and 45 of this chapter,

must be reported to a single swap data repository, which shall be the

swap data repository to which the first report of required swap

creation data is made pursuant to this part.

(a) Swaps executed on or pursuant to the rules of a swap execution

facility or designated contract market. To ensure that all swap data,

including all swap data required to be reported pursuant to parts 43

and 45 of this chapter, for a swap executed on or pursuant to the rules

of a swap execution facility or designated contract market is reported

to a single swap data repository:

(1) The swap execution facility or designated contract market that

reports required swap creation data as required by Sec. 45.3 shall

report all such data to a single swap data repository. As soon as

technologically practicable after execution, the swap execution

facility or designated contract market shall transmit to both

counterparties to the swap, and to the derivatives clearing

organization, if any, that will clear the swap, both:

(i) The identity of the swap data repository to which required swap

creation data is reported by the swap execution facility or designated

contract market; and

(ii) The unique swap identifier for the swap, created pursuant to

Sec. 45.5.

(2) Thereafter, all required swap creation data and all required

swap continuation data reported for the swap reported by any registered

entity or counterparty shall be reported to that same swap data

repository (or to its successor in the event that it ceases to operate,

as provided in part 49 of this chapter).

(b) Off-facility swaps with a swap dealer or major swap participant

reporting counterparty. To ensure that all swap data, including all

swap data required to be reported pursuant to parts 43 and 45 of this

chapter, for off-facility swaps with a swap dealer or major swap

participant reporting counterparty is reported to a single swap data

repository:

(1) If the reporting counterparty reports primary economic terms

data to a swap data repository as required by Sec. 45.3:

(i) The reporting counterparty shall report primary economic terms

data to a single swap data repository.

(ii) As soon as technologically practicable after execution, but no

later than as required pursuant to Sec. 45.3, the reporting

counterparty shall transmit to the other counterparty to the swap both

the identity of the swap data repository to which primary economic

terms data is reported by the reporting counterparty, and the unique

swap identifier for the swap created pursuant to Sec. 45.5.

(iii) If the swap will be cleared, the reporting counterparty shall

transmit to the derivatives clearing organization at the time the swap

is submitted for clearing both the identity of the swap data repository

to which primary economic terms data is reported by the reporting

counterparty, and the unique swap identifier for the swap created

pursuant to Sec. 45.5.

(2) Thereafter, all required swap creation data and all required

swap continuation data reported for the swap, by any registered entity

or counterparty, shall be reported to the swap data repository to which

swap data has been reported pursuant to paragraph (b)(1) or (2) of this

section (or to its successor in the event that it ceases to operate, as

provided in part 49 of this chapter).

(c) Off-facility swaps with a non-SD/MSP reporting counterparty. To

ensure that all swap data, including all swap data required to be

reported pursuant to parts 43 and 45 of this chapter, for such swaps is

reported to a single swap data repository:

(1) If the reporting counterparty reports primary economic terms

data to a swap data repository as required by Sec. 45.3:

(i) The reporting counterparty shall report primary economic terms

data to a single swap data repository.

(ii) As soon as technologically practicable after execution, but no

later than as required pursuant to Sec. 45.3, the reporting

counterparty shall transmit to the other counterparty to the swap the

identity of the swap data repository to which primary economic terms

data was reported by the reporting counterparty.

(iii) If the swap will be cleared, the reporting counterparty shall

transmit to the derivatives clearing organization at the time the swap

is submitted for clearing the identity of the swap data repository to

which primary economic terms data was reported by the reporting

counterparty.

(2) The swap data repository to which the swap is reported as

provided in paragraph (c) of this section shall transmit the unique

swap identifier created pursuant to Sec. 45.5 to both counterparties

and to the derivatives clearing organization, if any, as soon as

technologically practicable after creation of the unique swap

identifier.

(3) Thereafter, all required swap creation data and all required

swap continuation data reported for the swap, by any registered entity

or counterparty, shall be reported to the swap data repository to which

swap data has been reported pursuant to paragraph (c)(1) of this

section (or to its successor in the event that it ceases to operate, as

provided in part 49 of this chapter).

(d) Clearing swaps. To ensure that all swap data for a given

clearing swap, and for clearing swaps that replace a particular

original swap or that are created upon execution of the same

transaction and that do not replace an original swap, is reported to a

single swap data repository:

(1) The derivatives clearing organization that is a counterparty to

such clearing swap shall report all required swap creation data for

that clearing swap to a single swap data repository. As soon as

technologically practicable after acceptance of an original swap by a

derivatives clearing organization for clearing or execution of a

clearing swap that does not replace an original swap, the derivatives

clearing organization shall transmit to the counterparty to each

clearing swap the legal entity identifier of the swap data repository

to which the derivatives clearing organization reported the required

swap creation data for that clearing swap.

(2) Thereafter, all required swap creation data and all required

swap continuation data reported for that clearing swap shall be

reported by the derivatives clearing organization to the swap data

repository to which swap data has been reported pursuant to paragraph

(d)(1) of this section (or to its successor in the event that it ceases

to operate, as provided in part 49 of this chapter).

(3) For clearing swaps that replace a particular original swap, and

for equal and opposite clearing swaps that are created upon execution

of the same transaction and that do not replace an original swap, the

derivatives clearing organization shall report all required swap

creation data and all required swap continuation data for such clearing

swaps to a single swap data repository.

0

9. Revise Appendix 1 to part 45 to read as follows:

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

[[Page 41779]]

Exhibit A--Minimum Primary Economic Terms Data--Credit Swaps and Equity

Swaps

[Enter N/A for fields that are not applicable]

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

Data categories and fields for all

swaps Comment

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

Asset Class............................ Field values: Credit, equity,

FX, interest rates, other

commodities.

The Unique Swap Identifier for the swap As provided in Sec. 45.5.

The Legal Entity Identifier of the As provided in Sec. 45.6, or

reporting counterparty. substitute identifier for a

natural person.

An indication of whether the reporting Yes/No.

counterparty is a swap dealer with

respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a major swap

participant with respect to the swap.

If the reporting counterparty is not a Yes/No.

swap dealer or a major swap

participant with respect to the swap,

an indication of whether the reporting

counterparty is a financial entity as

defined in CEA section 2(h)(7)(C).

An indication of whether the reporting Yes/No.

counterparty is a derivatives clearing

organization with respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a U.S. person.

An indication that the swap will be Yes/No.

allocated.

If the swap will be allocated, or is a As provided in Sec. 45.6, or

post-allocation swap, the Legal Entity substitute identifier for a

Identifier of the agent. natural person.

An indication that the swap is a post- Yes/No.

allocation swap.

If the swap is a post-allocation swap, As provided in Sec. 45.5.

the unique swap identifier of the

initial swap transaction between the

reporting counterparty and the agent.

The Legal Entity Identifier of the non- As provided in Sec. 45.6, or

reporting party. substitute identifier for a

natural person.

An indication of whether the non- Yes/No.

reporting counterparty is a swap

dealer with respect to the swap.

An indication of whether the non- Yes/No.

reporting counterparty is a major swap

participant with respect to the swap.

If the non-reporting counterparty is Yes/No.

not a swap dealer or a major swap

participant with respect to the swap,

an indication of whether the non-

reporting counterparty is a financial

entity as defined in CEA section

2(h)(7)(C).

An indication of whether the non- Yes/No.

reporting counterparty is a U.S.

person.

The Unique Product Identifier assigned As provided in Sec. 45.7.

to the swap.

If no Unique Product Identifier is

available for the swap because the

swap is not sufficiently standardized,

the taxonomic description of the swap

pursuant to the CFTC-approved product

classification system.

If no CFTC-approved UPI and product

classification system is yet

available, the internal product

identifier or product description used

by the swap data repository.

An indication that the swap is a multi- Field values: Yes, Not

asset swap. applicable.

For a multi-asset class swap, an Generally, the asset class

indication of the primary asset class. traded by the desk trading the

swap for the reporting

counterparty. Field values:

Credit, equity, FX, interest

rates, other commodities.

For a multi-asset class swap, an Field values: Credit, equity,

indication of the secondary asset FX, interest rates, other

class(es). commodities.

An indication that the swap is a mixed Field values: Yes, Not

swap. applicable.

For a mixed swap reported to two non- Field value: LEI of the other

dually- registered swap data SDR to which the swap is or

repositories, the identity of the will be reported.

other swap data repository (if any) to

which the swap is or will be reported.

An indication of the counterparty Field values: LEI, or

purchasing protection. substitute identifier for a

natural person.

An indication of the counterparty Field values: LEI, or

selling protection. substitute identifier for a

natural person.

Information identifying the reference The entity that is the subject

entity. of the protection being

purchased and sold in the

swap. Field values: LEI, or

substitute identifier for a

natural person.

Contract type.......................... E.g., swap, swaption, forward,

option, basis swap, index

swap, basket swap.

Block trade indicator.................. Indication (Yes/No) of whether

the swap qualifies as a block

trade or large notional swap.

Execution timestamp.................... The date and time of the trade,

expressed using Coordinated

Universal Time (``UTC'').

Execution venue........................ The swap execution facility or

designated contract market on

or pursuant to the rules of

which the swap was executed.

Field values: LEI of the swap

execution facility or

designated contract market, or

``off-facility'' if not so

executed.

Start date............................. The date on which the swap

starts or goes into effect.

Maturity, termination or end date...... The date on which the swap

expires.

The price.............................. E.g., strike price, initial

price, spread.

The notional amount, and the currency

in which the notional amount is

expressed.

The amount and currency (or currencies)

of any up-front payment

[[Page 41780]]

 

Payment frequency of the reporting A description of the payment

counterparty. stream of the reporting

counterparty, e.g., coupon.

Payment frequency of the non-reporting A description of the payment

counterparty. stream of the non-reporting

counterparty, e.g., coupon.

Timestamp for submission to swap data Time and date of submission to

repository. the swap data repository,

expressed using UTC, as

recorded by an automated

system where available, or as

recorded manually where an

automated system is not

available.

Clearing indicator..................... Yes/No indication of whether

the swap will be submitted for

clearing to a derivatives

clearing organization.

Clearing venue......................... LEI of the derivatives clearing

organization.

If the swap will not be cleared, an Yes/No.

indication of whether an exception to,

or an exemption from, the clearing

requirement has been elected with

respect to the swap under part 50 of

this chapter.

The identity of the counterparty Field values: LEI, or

electing an exception or exemption to substitute identifier for

the clearing requirement under part 50 natural person.

of this chapter.

Clearing exception or exemption type... The type of clearing exception

or exemption being claimed.

Field values: End user, Inter-

affiliate or Cooperative.

Indication of collateralization........ Is the swap collateralized, and

if so to what extent? Field

values: Uncollateralized,

partially collateralized, one-

way collateralized, fully

collateralized.

Any other term(s) of the swap matched Use as many fields as required

or affirmed by the counterparties in to report each such term.

verifying the swap.

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

Exhibit A--Minimum Primary Economic Terms Data--Credit Swaps and Equity

Swaps

[Enter N/A for fields that are not applicable]

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

Additional data categories and fields

for clearing swaps Comment

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

Clearing swap USIs..................... The USIs of each clearing swap

that replaces the original

swap that was submitted for

clearing to the DCO, other

than the USI for which the PET

data is currently being

reported (as ``USI'' field

above).

Original swap USI...................... The USI of the original swap

submitted for clearing to the

DCO that is replaced by

clearing swaps.

Original swap SDR...................... LEI of SDR to which the

original swap was reported.

Clearing member LEI.................... LEI of Clearing member.

Clearing member client account......... Clearing member client account

number.

Origin (house or customer)............. An indication whether the

clearing member acted as

principal for a house trade or

agent for a customer trade.

Clearing receipt timestamp............. The date and time at which the

DCO received the original swap

for clearing, expressed using

UTC.

Clearing acceptance timestamp.......... The date and time at which the

DCO accepted the original swap

for clearing, expressed using

UTC.

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

Exhibit B--Minimum Primary Economic Terms Data--Foreign Exchange

Transactions (Other Than Cross-Currency Swaps)

[Enter N/A for fields that are not applicable]

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

Data fields for all swaps Comment

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

Asset Class............................ Field values: Credit, equity,

FX, interest rates, other

commodities.

The Unique Swap Identifier for the swap As provided in Sec. 45.5.

The Legal Entity Identifier of the As provided in Sec. 45.6, or

reporting counterparty. substitute identifier for a

natural person.

An indication of whether the reporting Yes/No.

counterparty is a swap dealer with

respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a major swap

participant with respect to the swap.

If the reporting counterparty is not a Yes/No.

swap dealer or a major swap

participant with respect to the swap,

an indication of whether the reporting

counterparty is a financial entity as

defined in CEA section 2(h)(7)(C).

An indication of whether the reporting Yes/No.

counterparty is a derivatives clearing

organization with respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a U.S. person.

An indication that the swap will be Yes/No.

allocated.

If the swap will be allocated, or is a As provided in Sec. 45.6, or

post-allocation swap, the Legal Entity substitute identifier for a

Identifier of the agent. natural person.

An indication that the swap is a post- Yes/No.

allocation swap.

[[Page 41781]]

 

If the swap is a post-allocation swap, As provided in Sec. 45.5.

the unique swap identifier of the

initial swap transaction between the

reporting counterparty and the agent.

The Legal Entity Identifier of the non- As provided in Sec. 45.6, or

reporting party. substitute identifier for a

natural person.

An indication of whether the non- Yes/No.

reporting counterparty is a swap

dealer with respect to the swap.

An indication of whether the non- Yes/No.

reporting counterparty is a major swap

participant with respect to the swap.

If the non-reporting counterparty is Yes/No.

not a swap dealer or a major swap

participant with respect to the swap,

an indication of whether the non-

reporting counterparty is a financial

entity as defined in CEA section

2(h)(7)(C).

An indication of whether the non- Yes/No.

reporting counterparty is a U.S.

person.

The Unique Product Identifier assigned As provided in Sec. 45.7.

to the swap.

If no Unique Product Identifier is

available for the swap because the

swap is not sufficiently standardized,

the taxonomic description of the swap

pursuant to the CFTC-approved product

classification system.

If no CFTC-approved UPI and product

classification system is yet

available, the internal product

identifier or product description used

by the swap data repository.

An indication that the swap is a multi- Field values: Yes, Not

asset swap. applicable.

For a multi-asset class swap, an Generally, the asset class

indication of the primary asset class. traded by the desk trading the

swap for the reporting

counterparty. Field values:

Credit, equity, FX, interest

rates, other commodities.

For a multi-asset class swap, an Field values: Credit, equity,

indication of the secondary asset FX, interest rates, other

class(es). commodities.

An indication that the swap is a mixed Field values: Yes, Not

swap. applicable.

For a mixed swap reported to two non- Field value: LEI of the other

dually-registered swap data SDR to which the swap is or

repositories, the identity of the will be reported.

other swap data repository (if any) to

which the swap is or will be reported.

Contract type.......................... E.g., forward, non-deliverable

forward (NDF), non-

deliverable option (NDO),

vanilla option, simple exotic

option, complex exotic option.

Block trade indicator.................. Indication (Yes/No) of whether

the swap qualifies as a block

trade or large notional swap.

Execution timestamp.................... The date and time of the trade,

expressed using Coordinated

Universal Time (``UTC'').

Execution venue........................ The swap execution facility or

designated contract market on

or pursuant to the rules of

which the swap was executed.

Field values: LEI of the swap

execution facility or

designated contract market, or

``off-facility'' if not so

executed.

Currency 1............................. ISO code.

Currency 2............................. ISO code.

Notional amount 1...................... For currency 1.

Notional amount 2...................... For currency 2.

Exchange rate.......................... Contractual rate of exchange of

the currencies.

Delivery type.......................... Physical (deliverable) or cash

(non-deliverable).

Settlement or expiration date.......... Settlement date, or for an

option the contract expiration

date.

Timestamp for submission to swap data Time and date of submission to

repository. the swap data repository,

expressed using Coordinated

Universal Time (``UTC''), as

recorded by an automated

system where available, or as

recorded manually where an

automated system is not

available.

Clearing indicator..................... Yes/No indication of whether

the swap will be submitted for

clearing to a derivatives

clearing organization.

Clearing venue......................... LEI of the derivatives clearing

organization.

If the swap will not be cleared, an Yes/No.

exception to, or an exemption from,

the clearing requirement has been

elected with respect to the swap under

part 50 of this chapter.

The identity of the counterparty Field values: LEI, or

electing an exception or exemption to substitute identifier, for a

the clearing requirement under part 50 natural person.

of this chapter.

Clearing exception or exemption type... The type of clearing exception

or exemption being claimed.

Field values: End user, Inter-

affiliate or Cooperative.

Indication of collateralization........ Is the trade collateralized,

and if so to what extent?

Field values:

Uncollateralized, partially

collateralized, one-way

collateralized, fully

collateralized.

Any other term(s) of the trade matched E.g., for options, premium,

or affirmed by the counterparties in premium currency, premium

verifying the trade. payment date; for non-

deliverable trades, settlement

currency, valuation (fixing)

date; indication of the

economic obligations of the

counterparties. Use as many

fields as required to report

each such term.

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

[[Page 41782]]

Exhibit B--Minimum Primary Economic Terms Data--Foreign Exchange

Transactions (Other Than Cross-Currency Swaps)

[Enter N/A for fields that are not applicable]

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

Additional data categories and fields

for clearing swaps Comment

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

Clearing swap USIs..................... The USIs of each clearing swap

that replaces the original

swap that was submitted for

clearing to the DCO, other

than the USI for which the PET

data is currently being

reported (as ``USI'' field

above).

Original swap USI...................... The USI of the original swap

submitted for clearing to the

DCO that is replaced by

clearing swaps.

Original swap SDR...................... LEI of SDR to which the

original swap was reported.

Clearing member LEI.................... LEI of Clearing member.

Clearing member client account......... Clearing member client account

number.

Origin (house or customer)............. An indication whether the

clearing member acted as

principal for a house trade or

agent for a customer trade.

Clearing receipt timestamp............. The date and time at which the

DCO received the original swap

for clearing, expressed using

UTC.

Clearing acceptance timestamp.......... The date and time at which the

DCO accepted the original swap

for clearing, expressed using

UTC.

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

Exhibit C--Minimum Primary Economic Terms Data--Interest Rate Swaps

(Including Cross-Currency Swaps)

[Enter N/A for fields that are not applicable]

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

Data fields for all swaps Comment

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

Asset Class............................ Field values: Credit, equity,

FX, interest rates, other

commodities.

The Unique Swap Identifier for the swap As provided in Sec. 45.5.

The Legal Entity Identifier of the As provided in Sec. 45.6, or

reporting counterparty. substitute identifier for a

natural person.

An indication of whether the reporting Yes/No.

counterparty is a swap dealer with

respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a major swap

participant with respect to the swap.

If the reporting counterparty is not a Yes/No.

swap dealer or a major swap

participant with respect to the swap,

an indication of whether the reporting

counterparty is a financial entity as

defined in CEA section 2(h)(7)(C).

An indication of whether the reporting Yes/No.

counterparty is a derivatives clearing

organization with respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a U.S. person.

An indication that the swap will be Yes/No.

allocated.

If the swap will be allocated, or is a As provided in Sec. 45.6, or

post-allocation swap, the Legal Entity substitute identifier for a

Identifier of the agent. natural person.

An indication that the swap is a post- Yes/No.

allocation swap.

If the swap is a post-allocation swap, As provided in Sec. 45.5.

the unique swap identifier of the

initial swap transaction between the

reporting counterparty and the agent.

The Legal Entity Identifier of the non- As provided in Sec. 45.6, or

reporting counterparty. substitute identifier for a

natural person.

An indication of whether the non- Yes/No.

reporting counterparty is a swap

dealer with respect to the swap.

An indication of whether the non- Yes/No.

reporting counterparty is a major swap

participant with respect to the swap.

If the non-reporting counterparty is Yes/No.

not a swap dealer or a major swap

participant with respect to the swap,

an indication of whether the non-

reporting counterparty is a financial

entity as defined in CEA section

2(h)(7)(C).

An indication of whether the non- Yes/No.

reporting counterparty is a U.S.

person.

The Unique Product Identifier assigned As provided in Sec. 45.7.

to the swap.

If no Unique Product Identifier is ...............................

available for the swap because the

swap is not sufficiently standardized,

the taxonomic description of the swap

pursuant to the CFTC-approved product

classification system.

If no CFTC-approved UPI and product ...............................

classification system is yet

available, the internal product

identifier or product description used

by the swap data repository.

An indication that the swap is a multi- Field values: Yes, Not

asset swap. applicable.

For a multi-asset class swap, an Generally, the asset class

indication of the primary asset class. traded by the desk trading the

swap for the reporting

counterparty. Field values:

Credit, equity, FX, interest

rates, other commodities.

For a multi-asset class swap, an Field values: Credit, equity,

indication of the secondary asset FX, interest rates, other

class(es). commodities.

An indication that the swap is a mixed Field values: Yes, Not

swap. applicable.

[[Page 41783]]

 

For a mixed swap reported to two non- Field value: LEI of the other

dually-registered swap data SDR to which the swap is or

repositories, the identity of the will be reported.

other swap data repository (if any) to

which the swap is or will be reported.

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

basis swap, index swap.

Block trade indicator.................. Indication (Yes/No) of whether

the swap qualifies as a block

trade or large notional swap.

Execution timestamp.................... The date and time of the trade,

expressed using Coordinated

Universal Time (``UTC'').

Execution venue........................ The swap execution facility or

designated contract market on

or pursuant to the rules of

which the swap was executed.

Field values: LEI of the swap

execution facility or

designated contract market, or

``off-facility'' if not so

executed.

Start date............................. The date on which the swap

starts or goes into effect.

Maturity, termination or end date...... The date on which the swap

expires or ends.

Day count convention...................

Notional amount (leg 1)................ The current active notional

amount.

Notional currency (leg 1).............. ISO code.

Notional amount (leg 2)................ The current active notional

amount.

Notional currency (leg 2).............. ISO code.

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

rate payer? Yes/No/Not

applicable.

Payer (floating rate leg 1)............ If two floating legs, the payer

for leg 1.

Payer (floating rate leg 2)............ If two floating legs, the payer

for leg 2.

Direction.............................. For swaps: Whether the

principal is paying or

receiving the fixed rate. For

float-to-float and fixed-to-

fixed swaps: Indicate N/A.

For non-swap instruments and

swaptions: Indicate the

instrument that was bought or

sold.

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

Fixed rate.............................

Fixed rate day count fraction.......... E.g., actual 360.

Floating rate payment frequency........

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

Floating rate index name/rate period... E.g., USD-Libor-BBA.

Timestamp for submission to swap data Time and date of submission to

repository. the swap data repository,

expressed using UTC, as

recorded by an automated

system where available, or as

recorded manually where an

automated system is not

available.

Clearing indicator..................... Yes/No indication of whether

the swap will be submitted for

clearing to a derivatives

clearing organization.

Clearing venue......................... LEI of the derivatives clearing

organization.

If the swap will not be cleared, an Yes/No.

indication of whether an exception to,

or an exemption from, the clearing

requirement has been elected with

respect to the swap under part 50 of

this chapter.

The identity of the counterparty Field values: LEI, or

electing an exception or exemption to substitute identifier, for a

the clearing requirement under part 50 natural person.

of this chapter.

Clearing exception or exemption type... The type of clearing exception

or exemption being claimed.

Field values: End user, Inter-

affiliate or Cooperative.

Indication of collateralization........ Is the swap collateralized, and

if so to what extent? Field

values: Uncollateralized,

partially collateralized, one-

way collateralized, fully

collateralized.

Any other term(s) of the swap matched E.g., early termination option

or affirmed by the counterparties in clause. Use as many fields as

verifying the swap. required to report each such

term.

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

Exhibit C--Minimum Primary Economic Terms Data--Interest Rate Swaps

(Including Cross-Currency Swaps)

[Enter N/A for fields that are not applicable]

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

Additional data categories and fields

for clearing swaps Comment

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

Clearing swap USIs..................... The USIs of each clearing swap

that replaces the original

swap that was submitted for

clearing to the DCO, other

than the USI for which the PET

data is currently being

reported (as ``USI'' field

above).

Original swap USI...................... The USI of the original swap

submitted for clearing to the

DCO that is replaced by

clearing swaps.

Original swap SDR...................... LEI of SDR to which the

original swap was reported.

Clearing member LEI.................... LEI of Clearing member.

Clearing member client account......... Clearing member client account

number.

Origin (house or customer)............. An indication whether the

clearing member acted as

principal for a house trade or

agent for a customer trade.

Clearing receipt timestamp............. The date and time at which the

DCO received the original swap

for clearing, expressed using

UTC.

[[Page 41784]]

 

Clearing acceptance timestamp.......... The date and time at which the

DCO accepted the original swap

for clearing, expressed using

UTC.

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

Exhibit D--Minimum Primary Economic Terms Data--Other Commodity Swaps

[Enter N/A for fields that are not applicable]

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

Data field for all swaps Comment

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

Asset Class............................ Field values: Credit, equity,

FX, interest rates, other

commodities.

The Unique Swap Identifier for the swap As provided in Sec. 45.5.

The Legal Entity Identifier of the As provided in Sec. 45.6, or

reporting counterparty. substitute identifier for a

natural person.

An indication of whether the reporting Yes/No.

counterparty is a swap dealer with

respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a major swap

participant with respect to the swap.

If the reporting counterparty is not a Yes/No.

swap dealer or a major swap

participant with respect to the swap,

an indication of whether the reporting

counterparty is a financial entity as

defined in CEA section 2(h)(7)(C).

An indication of whether the reporting Yes/No.

counterparty is a derivatives clearing

organization with respect to the swap.

An indication of whether the reporting Yes/No.

counterparty is a U.S. person.

An indication that the swap will be Yes/No.

allocated.

If the swap will be allocated, or is a As provided in Sec. 45.6, or

post-allocation swap, the Legal Entity substitute identifier for a

Identifier of the agent. natural person.

An indication that the swap is a post- Yes/No.

allocation swap.

If the swap is a post-allocation swap, As provided in Sec. 45.5.

the unique swap identifier of the

initial swap transaction between the

reporting counterparty and the agent.

The Legal Entity Identifier of the non- As provided in Sec. 45.6, or

reporting party. substitute identifier for a

natural person.

An indication of whether the non- Yes/No.

reporting counterparty is a swap

dealer with respect to the swap.

An indication of whether the non- Yes/No.

reporting counterparty is a major swap

participant with respect to the swap.

If the non-reporting counterparty is Yes/No.

not a swap dealer or a major swap

participant with respect to the swap,

an indication of whether the non-

reporting counterparty is a financial

entity as defined in CEA section

2(h)(7)(C).

An indication of whether the non- Yes/No.

reporting counterparty is a U.S.

person.

The Unique Product Identifier assigned As provided in Sec. 45.7.

to the swap.

If no Unique Product Identifier is

available for the swap because the

swap is not sufficiently standardized,

the taxonomic description of the swap

pursuant to the CFTC-approved product

classification system.

If no CFTC-approved UPI and product

classification system is yet

available, the internal product

identifier or product description used

by the swap data repository.

An indication that the swap is a multi- Field values: Yes, Not

asset swap. applicable.

For a multi-asset class swap, an Generally, the asset class

indication of the primary asset class. traded by the desk trading the

swap for the reporting

counterparty. Field values:

Credit, equity, FX, interest

rates, other commodities.

For a multi-asset class swap, an Field values: Credit, equity,

indication of the secondary asset FX, interest rates, other

class(es). commodities.

An indication that the swap is a mixed Field values: Yes, Not

swap. applicable.

For a mixed swap reported to two non- Field value: LEI of the other

dually- registered swap data SDR to which the swap is or

repositories, the identity of the will be reported.

other swap data repository (if any) to

which the swap is or will be reported.

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

basis swap, index swap.

Block trade indicator.................. Indication (Yes/No) of whether

the swap qualifies as a

``block trade'' or ``large

notional off-facility swap''

as defined in part 43 of the

CFTC's regulations.

Execution timestamp.................... The date and time of the trade,

expressed using Coordinated

Universal Time (``UTC''), as

recorded by an automated

system where available, or as

recorded manually where an

automated system is not

available.

[[Page 41785]]

 

Execution venue........................ The swap execution facility or

designated contract market on

or pursuant to the rules of

which the swap was executed.

Field values: LEI of the swap

execution facility or

designated contract market, or

``off-facility'' if not so

executed.

Timestamp for submission to swap data Time and date of submission to

repository. the swap data repository,

expressed using UTC, as

recorded by an automated

system where available, or as

recorded manually where an

automated system is not

available.

Start date............................. The date on which the swap

commences or goes into effect

(e.g., in physical oil, the

pricing start date).

Maturity, termination, or end date..... The date on which the swap

expires or ends (e.g., in

physical oil, the pricing end

date).

Buyer.................................. The counterparty purchasing the

product: (E.g., the payer of

the fixed price (for a swap),

or the payer of the floating

price on the underlying swap

(for a put swaption), or the

payer of the fixed price on

the underlying swap (for a

call swaption). Field values:

LEI, if available, or

substitute identifier, for a

natural person.

Seller................................. The counterparty offering the

product: (E.g., the payer of

the floating price (for a

swap), the payer of the fixed

price on the underlying swap

(for a put swaption), or the

payer of the floating price on

the underlying swap (for a

call swaption). Field values:

LEI, or substitute identifier,

for a natural person.

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

for the quantity on the swap.

E.g., barrels, bushels,

gallons, pounds, tons.

Quantity............................... The amount of the commodity

(the number of quantity units)

quoted on the swap.

Quantity frequency..................... The rate at which the quantity

is quoted on the swap. E.g.,

hourly, daily, weekly,

monthly.

Total quantity......................... The quantity of the commodity

for the entire term of the

swap.

Settlement method...................... Physical delivery or cash.

Price.................................. The price of the swap. For

options, the strike price.

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

for the price of the swap.

Price currency......................... ISO code.

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

the buyer (if applicable). For

swaptions, applies to the

underlying swap.

Buyer pay averaging method............. The averaging method used to

calculate the index of the

buyer pay index. For

swaptions, applies to the

underlying swap.

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

the seller (if applicable).

For swaptions, applies to the

underlying swap.

Seller pay averaging method............ The averaging method used to

calculate the index of the

seller pay index. For

swaptions, applies to the

underlying swap.

Grade.................................. If applicable, the grade of the

commodity to be delivered,

e.g., the grade of oil or

refined product.

Option type............................ Descriptor for the type of

option transaction. E.g., put,

call, straddle.

Option style........................... E.g., American, European,

European Daily, European

Monthly, Asian.

Option premium......................... The total amount paid by the

option buyer.

Hours from through..................... For electric power, the hours

of the day for which the swap

is effective.

Hours from through time zone........... For electric power, the time

zone prevailing for the hours

during which electricity is

transmitted.

Days of week........................... For electric power, the profile

applicable for the delivery of

power.

Load type.............................. For electric power, the load

profile for the delivery of

power.

Clearing indicator..................... Yes/No indication of whether

the swap will be submitted for

clearing to a derivatives

clearing organization.

Clearing venue......................... LEI of the derivatives clearing

organization.

If the swap will not be cleared, an Yes/No.

indication of whether an exception to,

or an exemption from, the clearing

requirement has been elected with

respect to the swap under part 50 of

this chapter.

The identity of the counterparty Field values: LEI, or

electing an exception or exemption to substitute identifier, for a

the clearing requirement under part 50 natural person.

of this chapter.

Clearing exception or exemption type... The type of clearing exception

or exemption being claimed.

Field values: End user, Inter-

affiliate or Cooperative.

Indication of collateralization........ Is the swap collateralized, and

if so to what extent? Field

values: Uncollateralized,

partially collateralized, one-

way collateralized, fully

collateralized.

Any other term(s) of the swap matched Use as many fields as required

or affirmed by the counterparties in to report each such term.

verifying the swap.

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

[[Page 41786]]

Exhibit D--Minimum Primary Economic Terms Data--Other Commodity Swaps

[Enter N/A for fields that are not applicable]

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

Additional data categories and fields

for clearing swaps Comment

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

Clearing swap USIs..................... The USIs of each clearing swap

that replaces the original

swap that was submitted for

clearing to the DCO, other

than the USI for which the PET

data is currently being

reported (as ``USI'' field

above).

Original swap USI...................... The USI of the original swap

submitted for clearing to the

DCO that is replaced by

clearing swaps.

Original swap SDR...................... LEI of SDR to which the

original swap was reported.

Clearing member LEI.................... LEI of Clearing member.

Clearing member client account......... Clearing member client account

number.

Origin (house or customer)............. An indication whether the

clearing member acted as

principal for a house trade or

agent for a customer trade.

Clearing receipt timestamp............. The date and time at which the

DCO received the original swap

for clearing, expressed using

UTC.

Clearing acceptance timestamp.......... The date and time at which the

DCO accepted the original swap

for clearing, expressed using

UTC.

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

Issued in Washington, DC, on June 14, 2016, by the Commission.

Christopher J. Kirkpatrick,

Secretary of the Commission.

Note: The following appendices will not appear in the Code of

Federal Regulations.

Appendices to Amendments to Swap Data Recordkeeping and Reporting

Requirements for Cleared Swaps--Commission Voting Summary and

Chairman's Statement

Appendix 1--Commission Voting Summary

On this matter, Chairman Massad and Commissioners Bowen and

Giancarlo voted in the affirmative. No Commissioner voted in the

negative.

Appendix 2--Statement of Chairman Timothy G. Massad

Regular reporting of data on swaps is a key component of the

swaps reforms that were agreed to by the G-20 leaders and codified

in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Since taking office, a priority of mine has been to improve data

quality and to simplify reporting obligations for market

participants. I know that my fellow Commissioners Bowen and

Giancarlo share this goal. That is why I am very pleased that today,

the Commission has acted unanimously to improve the process for

reporting data on cleared swaps.

This final rule will significantly enhance data quality and

reduce reporting costs in a number of ways. It streamlines the

reporting process to ensure there are not duplicate records of a

swap, which can lead to double counting that can distort the data.

It makes sure that accurate valuations of swaps are provided on an

ongoing basis. And it eliminates some needless reporting

requirements for swap dealers and major swap participants. This rule

provides clarity and certainty in a number of areas, and will

improve our ability to trace a swap through all phases of its

lifecycle. Ultimately, it will provide us with a better picture of

the swaps market, and enhance our ability to identify the buildup of

risk that may pose a threat to the financial system.

Today's final rule reflects the largely positive feedback we

received on our proposal, which was released in August, 2015. We

very much appreciate the input that market participants have given

us.

This effort is just one piece of our work to ensure accuracy and

completeness in data reporting, to harmonize data standards, and to

improve data quality, while avoiding excessive burdens and

duplication. For example, our other efforts will include the

development of technical specifications for the reporting of 120

priority data elements, which will lead to greater consistency and

standardization in reporting. We are also leading international

efforts on data harmonization, including the development of tools

that will allow regulators to identify swaps and swap activity by

product type and transaction type throughout the life of a swap.

I thank CFTC staff for their hard work on this rule, as well as

the market participants who took the time to provide us feedback.

And I also thank my fellow Commissioners Bowen and Giancarlo for

their careful consideration and unanimous support for this measure.

[FR Doc. 2016-14414 Filed 6-24-16; 8:45 am]

BILLING CODE 6351-01-P

 

Last Updated: June 27, 2016