2020-26536

Federal Register, Volume 86 Issue 2 (Tuesday, January 5, 2021) 
[Federal Register Volume 86, Number 2 (Tuesday, January 5, 2021)]
[Rules and Regulations]
[Pages 223-229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26536]


=======================================================================
-----------------------------------------------------------------------

COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 23

RIN 3038-AF08


Portfolio Reconciliation Requirements for Swap Dealers and Major
Swap Participants--Revision of ``Material Terms'' Definition

AGENCY: Commodity Futures Trading Commission.

ACTION: Interim final rule; request for comment.

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

SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is adopting, and invites comments on, an interim final rule
(``Interim Final Rule'') to amend the definition of ``material terms''
to maintain current portfolio reconciliation requirements for swap
dealers and major swap participants following the effective date of
changes to a recently amended Commission regulation.

DATES:
    Effective Date. This interim final rule is effective January 5,
2021.
    Comment Date: Comments must be received on or before March 8, 2021.
    Comments submitted by mail will be accepted as timely if they are
postmarked on or before that date.

ADDRESSES: You may submit comments, identified by RIN 3038-AF08, by any
of the following methods:
     CFTC Comments Portal: https://comments.cftc.gov. Select
the ``Submit Comments'' link for this rulemaking and follow the
instructions on the Public Comment Form.
     Mail: Send to Christopher Kirkpatrick, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Center, 1155 21st Street NW, Washington, DC 20581.
     Hand Delivery/Courier: Follow the same instructions as for
Mail, above.
    Please submit your comments using only one of these methods.
Submissions through the CFTC Comments Portal are encouraged.
    Instructions: All submissions received must include the agency name
and RIN number for this rulemaking. For additional details on
submitting comments, see the ``Public Participation'' heading of the
SUPPLEMENTARY INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Joshua Sterling, Director, (202) 418-
6056, [email protected]; Jacob Chachkin, Special Counsel, (202) 418-
5496, [email protected]; or Gregory Scopino, Special Counsel,
[email protected], 202-418-5175, Market Participants Division
(``MPD''), Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW, Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

    Commission regulation 23.502 \1\ requires swap dealers (``SDs'')
and major swap participants (``MSPs''), as defined in Sec.  1.3 of the
Commission's regulations,\2\ to reconcile their swap portfolios with
one another and provide non-SD and non-MSP counterparties with regular
opportunities for portfolio reconciliation.\3\ Commission regulation
23.500(i) defines ``portfolio reconciliation'' as any process by which
the two counterparties to one or more swaps exchange the material terms
and valuations of all swaps in the swap portfolio between the
counterparties and resolve any identified discrepancy in such material
terms and valuations.\4\ Commission regulation 23.500(g) defines
``material terms'' to mean the minimum ``primary economic terms'' of a
swap, as defined in appendix 1 of part 45 of the Commission's
regulations, with the exception of 24 enumerated terms that were
excluded from the definition of ``material terms'' as part of a
Commission effort to reduce the regulatory burden on SDs and MSPs by
eliminating the need to reconcile data field terms that were static or
did not

[[Page 224]]

impact the valuation of swaps.\5\ In explaining the rationale for
requiring SDs and MSPs to engage in portfolio reconciliation, the
Commission noted that portfolio reconciliation can identify and reduce
overall risk ``[b]y identifying and managing mismatches in key economic
terms and valuation for individual transactions across an entire
portfolio.'' \6\
---------------------------------------------------------------------------

    \1\ 17 CFR 23.502. Commission regulations referred to herein are
found at 17 CFR chapter I.
    \2\ 17 CFR 1.3.
    \3\ 17 CFR 23.502; see Confirmation, Portfolio Reconciliation,
Portfolio Compression, and Swap Trading Relationship Documentation
Requirements for Swap Dealers and Major Swap Participants, 77 FR
55904, 55926 (Sept. 11, 2012) (``Portfolio Reconciliation Final
Rule'').
    \4\ 17 CFR 23.500(i).
    \5\ 17 CFR 23.500(g).
    \6\ Portfolio Reconciliation Final Rule, 77 FR at 55927.
---------------------------------------------------------------------------

    On September 17, 2020, the Commission adopted a final rule revising
parts 45, 46 and 49 of its regulations on swap data recordkeeping and
reporting requirements for swap data repositories (``SDRs''),
derivatives clearing organizations (``DCOs''), swap execution
facilities, derivatives contract markets, SDs, MSPs, and swap
counterparties that are neither SDs nor MSPs (``SDR Rule'').\7\ As part
of the SDR Rule, the Commission made significant changes to appendix 1
of part 45 of the Commission regulations, which, as discussed above, is
referenced in the definition of ``material terms'' set forth in
Commission regulation 23.500(g). As a result of these changes, among
other things, the new appendix 1 will no longer use the concept of
``primary economic terms'' and will no longer contain the data fields
that are explicitly referenced in Sec.  23.500(g).\8\
---------------------------------------------------------------------------

    \7\ See Swap Data Recordkeeping and Reporting Requirements, 85
FR 75503 (Nov. 25, 2020). The SDR Rule did not expressly contemplate
making changes to the Portfolio Reconciliation Final Rule for SDs
and MSPs.
    \8\ See 17 CFR 23.500(g).
---------------------------------------------------------------------------

II. Interim Final Rule

    To maintain the status quo for portfolio reconciliation
requirements under Sec.  23.502 and ensure that SDs and MSPs can
continue to engage in their required portfolio reconciliation exercises
without disruption, in this Interim Final Rule the Commission is
copying existing appendix 1 of part 45 as a new appendix 1 to subpart I
of part 23, and amending Sec.  23.500(g) to reference appendix 1 to
subpart I of part 23 instead of appendix 1 to part 45.\9\ By doing so,
the Commission will enable SDs and MSPs to avoid having to modify their
portfolio reconciliation procedures and practices under Sec.  23.502
despite the changes made by the SDR Rule. By this Interim Final Rule,
the Commission is making technical organizational changes to its
regulations to ensure that market participants will continue engaging
in portfolio reconciliation exercises in their current manner, without
disruption. Thus, the goal of these technical amendments is to maintain
the Commission's regulatory requirements in connection with portfolio
reconciliation without change. Without these amendments, market
participants would lack meaningful regulatory reference concerning how
to perform portfolio reconciliation exercises in light of changes made
to appendix 1 of part 45 by the SDR Rule.
---------------------------------------------------------------------------

    \9\ Because appendix 1 to subpart I of part 23 only will be used
as a reference in connection with the requirements for portfolio
reconciliation exercises, the appendix will include only those terms
that SDs and MSPs are required to reconcile under regulation 23.502.
    Because Sec.  45.5 is being amended by the SDR Rule and will no
longer discuss unique swap identifiers (``USIs''), for clarity the
Commission has changed only the explanatory comment in appendix 1
for each USI field from ``As provided in Sec.  45.5.'' to ``The USI
is a unique identifier assigned to all swap transactions which
identifies the transaction (the swap and its counterparties)
uniquely throughout its duration.'' The Commission believes this
change will mitigate possible confusion and serve to maintain
current portfolio reconciliation processes for SDs and MSPs.
---------------------------------------------------------------------------

III. Public Participation

    The Commission is issuing this Interim Final Rule to maintain the
status quo for portfolio reconciliation requirements under Sec.  23.502
and ensure that SDs and MSPs can continue to engage in their required
portfolio reconciliation exercises without disruption, as discussed
above. This approach enables these regulatory changes to take effect
sooner than would be possible with the publication of a notice of
proposed rulemaking in advance. Nonetheless, the Commission welcomes
public comments from interested persons regarding any aspect of its
consideration of, and the changes made by, this Interim Final Rule, as
well as the following pertaining to potential additional amendments in
the future.
    Should the Commission propose modifying appendix 1 to subpart I of
part 23 (as adopted by this Interim Final Rule) to make it more
consistent with appendix 1 to part 45 (as amended by the SDR Rule) or
make other changes? If yes, what specific modifications should the
Commission propose and why? In addition, should the Commission provide
that the reconciliation of a Unique Product Identifier (``UPI'')
constitutes the reconciliation of each other material term that is
included in the UPI? Why or why not?
    All comments must be submitted in English, or if not, accompanied
by an English translation. Please refer to the ADDRESSES section above.
Except as described below regarding confidential business information,
all comments are considered part of the public record and will be
posted as received to http://comments.cftc.gov for public inspection.
The information made available online includes personal identifying
information (such as name and address) which is voluntarily submitted
by the commenter. You should submit only information that you wish to
make available publicly.
    If you want to submit material that you consider to be confidential
business information as part of your comment, but do not want it to be
posted online, you must submit your comment by mail or hand delivery/
courier and include a petition for confidential treatment as described
in Sec.  145.9 of the Commission's regulations.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 145.9.
---------------------------------------------------------------------------

    The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse or remove any or all of your
submission from http://comments.cftc.gov that it may deem to be
inappropriate for publication, such as obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of the rulemaking will be retained in the rulemaking record
and will be considered as required under the Administrative Procedure
Act (``APA'') \11\ and other applicable laws, and may be accessible
under the Freedom of Information Act.\12\
---------------------------------------------------------------------------

    \11\ 5 U.S.C. 553 et seq.
    \12\ 5 U.S.C. 552.
---------------------------------------------------------------------------

IV. Related Matters

A. Administrative Procedure Act

    The APA generally requires federal agencies to publish a notice of
proposed rulemaking and provide an opportunity for public comment
before issuing a new rule.\13\ However, an agency may issue a new rule
without a pre-publication public comment period when it for ``good
cause'' finds that prior notice and comment is ``impracticable,
unnecessary, or contrary to the public interest.'' \14\ The Commission
has determined that there is good cause to find that a pre-publication
comment period is unnecessary because this Interim Final Rule involves
technical, ministerial changes that simply move the placement of the
current requirements from one part of the Commission's regulations
(part 45) to another (part 23) to retain the status quo for purposes of
part 23's mandated portfolio reconciliation exercises.\15\ For this

[[Page 225]]

reason, the Commission finds that it is unnecessary to publish notice
of these amendments under section 553(b)(3)(B) of the APA.
---------------------------------------------------------------------------

    \13\ See 5 U.S.C. 553(b).
    \14\ See 5 U.S.C. 553(b)(3)(B).
    \15\ Further, if the Commission were to provide an opportunity
for notice and comment prior to the amendments' effectiveness, the
SDR Rule may take effect during the intervening period, causing
confusion regarding SD and MSP portfolio reconciliation
requirements.
---------------------------------------------------------------------------

    For the same reason, the Commission also finds good cause to
dispense with the 30-day delayed effective date requirement under
section 553(d)(3) of the APA.\16\ Accordingly, the amendments will be
effective immediately upon publication in the Federal Register.
---------------------------------------------------------------------------

    \16\ 5 U.S.C. 553(d)(3).
---------------------------------------------------------------------------

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act \17\ requires federal agencies to
consider whether the rules they propose will have a significant
economic impact on a substantial number of small entities and, if so,
to provide a regulatory flexibility analysis regarding the economic
impact on those entities. Because, as discussed above, the Commission
is not required to publish a notice of proposed rulemaking for this
rule, a regulatory flexibility analysis is not required.\18\
---------------------------------------------------------------------------

    \17\ 5 U.S.C. 601 et seq.
    \18\ See 5 U.S.C. 603(a).
---------------------------------------------------------------------------

C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (``PRA'') \19\ imposes certain
requirements on Federal agencies, including the Commission, in
connection with their conducting or sponsoring any collection of
information, as defined by the PRA. The Commission may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless it displays a currently valid Office of Management
and Budget control number.
---------------------------------------------------------------------------

    \19\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    Because it maintains the status quo under Sec.  23.502, this final
rulemaking will not impose any new recordkeeping or information
collection requirements, or other collections of information.

D. Consideration of Costs and Benefits

    Section 15(a) of the CEA \20\ requires the Commission to ``consider
the costs and benefits'' of its actions before promulgating a
regulation under the CEA. Section 15(a) further specifies that the
costs and benefits shall be evaluated in light of five broad areas of
market and public concern: (1) Protection of market participants and
the public; (2) 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.
---------------------------------------------------------------------------

    \20\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------

    This Interim Final Rule does not impose any substantive regulatory
obligations on any person. Rather, the Commission is adopting technical
amendments to part 23 of its regulations to maintain the status quo for
portfolio reconciliation requirements under Sec.  23.502 and ensure
that SDs and MSPs can continue to engage in their required portfolio
reconciliation exercises without disruption, as discussed above.
Accordingly, relative to the status quo baseline there are no material,
quantifiable costs or benefits associated with this rulemaking. This
Interim Final Rule does not impact the efficiency, competitiveness, and
financial integrity of the futures markets because this Interim Final
Rule is nothing more than a technical, administrative action that moves
specific requirements from part 45 of the Commission's regulations to
part 23.

E. Antitrust Laws

    Section 15(b) of the CEA \21\ 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 as well as the policies and purposes of the CEA,
in issuing any order or adopting any Commission rule or regulation
(including any exemption under section 4(c) or 4c(b)), or in requiring
or approving any bylaw, rule, or regulation of a contract market or
registered futures association established pursuant to section 17 of
the CEA.
---------------------------------------------------------------------------

    \21\ 7 U.S.C. 19(b).
---------------------------------------------------------------------------

    The Commission believes that the public interest to be protected by
the antitrust laws is the promotion of competition. The Commission has
considered this Interim Final Rule to determine whether it is
anticompetitive and has identified no anticompetitive effects. Having
done so, it also has not identified any less anticompetitive means of
achieving the purposes of the CEA.

List of Subjects in 17 CFR Part 23

    Authority delegations (Government agencies), Commodity futures,
Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, the Commodity Futures
Trading Commission amends 17 CFR part 23 as set forth below:

PART 23--SWAP DEALERS AND MAJOR SWAP PARTICIPANTS

0
1. The authority citation for part 23 continues to read as follows:

    Authority:  7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1, 6c, 6p, 6r, 6s, 6t,
9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21.

    Section 23.160 also issued under 7 U.S.C. 2(i); Sec. 721(b),
Pub. L. 111-203, 124 Stat. 1641 (2010).


0
2. In Sec.  23.500, revise paragraph (g) to read as follows:


Sec.  23.500   Definitions.

* * * * *
    (g) Material terms means the minimum primary economic terms as
defined in appendix 1 of subpart I of part 23 of this chapter.
* * * * *

0
3. Add Appendix 1 to subpart I of part 23 to read as follows:

Part 23, Subpart I, Appendix 1

 Exhibit A--Minimum Primary Economic Terms Data--Credit Swaps and Equity
                                  Swaps
------------------------------------------------------------------------
   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  The USI is a unique identifier
                                          assigned to all swap
                                          transactions which identifies
                                          the transaction (the swap and
                                          its counterparties) uniquely
                                          throughout its duration.
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 derivatives clearing
 organization with respect to the swap.
The Legal Entity Identifier of the non-  As provided in Sec.   45.6, or
 reporting party.                         substitute identifier for a
                                          natural person.
The Unique Product Identifier assigned   As provided in Sec.   45.7.
 to the swap.

[[Page 226]]

 
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 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.
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.
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.
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 B--Minimum Primary Economic Terms Data--Foreign Exchange
                              Transactions
                    [Other than cross-currency swaps]
------------------------------------------------------------------------
       Data fields for all swaps                     Comment
------------------------------------------------------------------------
Asset Class............................  Field values: Credit, equity,
                                          FX, interest rates, other
                                          commodities.
The Unique Swap Identifier for the swap  The USI is a unique identifier
                                          assigned to all swap
                                          transactions which identifies
                                          the transaction (the swap and
                                          its counterparties) uniquely
                                          throughout its duration.
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 derivatives clearing
 organization with respect to the swap.
The Legal Entity Identifier of the non-  As provided in Sec.   45.6, or
 reporting party.                         substitute identifier for a
                                          natural 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.
Contract type..........................  E.g., forward, non-deliverable
                                          forward (NDF), non-deliverable
                                          option (NDO), vanilla option,
                                          simple exotic option, complex
                                          exotic option.
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.
Clearing exception or exemption type...  The type of clearing exception
                                          or exemption being claimed.
                                          Field values: End user, Inter-
                                          affiliate or Cooperative.

[[Page 227]]

 
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.
------------------------------------------------------------------------


   Exhibit C--Minimum Primary Economic Terms Data--Interest Rate Swaps
                    [Including cross-currency swaps]
------------------------------------------------------------------------
       Data fields for all swaps                     Comment
------------------------------------------------------------------------
Asset Class............................  Field values: Credit, equity,
                                          FX, interest rates, other
                                          commodities.
The Unique Swap Identifier for the swap  The USI is a unique identifier
                                          assigned to all swap
                                          transactions which identifies
                                          the transaction (the swap and
                                          its counterparties) uniquely
                                          throughout its duration.
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 derivatives clearing
 organization with respect to the swap.
The Legal Entity Identifier of the non-  As provided in Sec.   45.6, or
 reporting counterparty.                  substitute identifier for a
                                          natural 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.
Contract type..........................  E.g., swap, swaption, option,
                                          basis swap, index swap.
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.
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 D--Minimum Primary Economic Terms Data--Other Commodity Swaps
------------------------------------------------------------------------
        Data field for all swaps                     Comment
------------------------------------------------------------------------
Asset Class............................  Field values: Credit, equity,
                                          FX, interest rates, other
                                          commodities.

[[Page 228]]

 
The Unique Swap Identifier for the swap  The USI is a unique identifier
                                          assigned to all swap
                                          transactions which identifies
                                          the transaction (the swap and
                                          its counterparties) uniquely
                                          throughout its duration.
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 derivatives clearing
 organization with respect to the swap.
The Legal Entity Identifier of the non-  As provided in Sec.   45.6, or
 reporting party.                         substitute identifier for a
                                          natural 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.
Contract type..........................  E.g., swap, swaption, option,
                                          basis swap, index swap.
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
                                          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 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 229]]

* * * * *

    Issued in Washington, DC, on November 25, 2020, by the
Commission.
Robert Sidman,
Deputy Secretary of the Commission.

    Note:  The following appendices will not appear in the Code of
Federal Regulations.

Appendices to Portfolio Reconciliation Requirements for Swap Dealers
and Major Swap Participants--Revision of ``Material Terms''
Definition--Voting Summary and Chairman's and Commissioners' Statements

Appendix 1--Voting Summary

    On this matter, Chairman Tarbert and Commissioners Quintenz,
Behnam, Stump, and Berkovitz voted in the affirmative. No
Commissioner voted in the negative.

Appendix 2--Statement of Commissioner Dan M. Berkovitz

    I support today's interim final rule that will maintain the
continuity of swap portfolio reconciliation requirements for swap
dealers. In September 2012, the Commission established in regulation
23.502 the requirement for swap dealers to regularly reconcile key
material terms of swaps in portfolios with certain counterparties.
These portfolios can include hundreds, thousands, and even tens of
thousands of individual swap transactions. Regularly reconciling
economic terms that determine the periodic payments made on swap
portfolios reduces the likelihood of significant disputes and
potential payment shortfalls or interruptions. Reducing these events
reduces risk in the financial system, particularly during times of
market stress.\1\
---------------------------------------------------------------------------

    \1\ See Confirmation, Portfolio Reconciliation, Portfolio
Compression, and Swap Trading Relationship Documentation
Requirements for Swap Dealers and Major Swap Participants, 77 FR
55904, 55927 (Sept. 11, 2012).
---------------------------------------------------------------------------

    On September 17, 2020, the Commission adopted a final rule
revising parts 45, 46, and 49 of its regulations on swap data
recordkeeping and reporting requirements. In the amendments,
significant changes were made to material terms that are cross-
referenced in regulation 23.502. The unintended consequence would be
to render the portfolio reconciliation requirement ineffective when
the swap data regulations go into effect in approximately 60 days.
The IFR corrects this unintended consequence by reestablishing the
same material economic terms identified for regulation 23.502,
thereby maintaining the status quo for the portfolio reconciliation
requirement. This is a necessary action to maintain the risk
reducing effects of that requirement.

[FR Doc. 2020-26536 Filed 1-4-21; 8:45 am]
BILLING CODE 6351-01-P