2022-16774
[Federal Register Volume 87, Number 150 (Friday, August 5, 2022)]
[Notices]
[Pages 48001-48004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-16774]
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COMMODITY FUTURES TRADING COMMISSION
Agency Information Collection Activities: Notice of Intent To
Renew Collection 3038-0111, Margin Requirements for Uncleared Swaps for
Swap Dealers and Major Swap Participants--Cross-Border Application of
the Margin Requirements
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice.
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SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or
``Commission'') is announcing an opportunity for public comment on the
proposed renewal of a collection of certain information by the agency.
Under the Paperwork Reduction Act (``PRA''), Federal agencies are
required to publish notice in the Federal Register concerning each
proposed collection of information, including each proposed extension
of an existing collection of information, and to allow 60 days for
public comment. This notice solicits comments on the burdens associated
[[Page 48002]]
with the following aspects of the Commission's Margin Requirements for
Uncleared Swaps for Swap Dealers and Major Swap Participants--Cross-
Border Application of the Margin Requirements (``Final Rule''): (1)
requesting a comparability determination from the Commission; (2)
maintaining policies and procedures for compliance with the
Commission's special provisions for non-netting jurisdictions and non-
segregation jurisdictions; and (3) maintaining books and records
properly documenting that all of the requirements of the special
provisions for non-netting jurisdictions and non-segregation
jurisdictions are satisfied.
DATES: Comments must be submitted on or before October 4, 2022.
ADDRESSES: You may submit comments, identified by ``Margin Requirements
for Uncleared Swaps for Swap Dealers and Major Swap Participants--
Cross-Border Application of the Margin Requirements,'' Collection
Number 3038-0111, by any of the following methods:
The Agency's website, at https://comments.cftc.gov/.
Follow the instructions for submitting comments through the website.
Mail: Christopher Kirkpatrick, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW, Washington, DC 20581.
Hand Delivery/Courier: Same as ``Mail'' above.
Please submit your comments using only one method. All comments
must be submitted in English, or if not, accompanied by an English
translation. Comments will be posted as received to https://www.cftc.gov.
FOR FURTHER INFORMATION CONTACT: Dina Moussa, Attorney Advisor, Market
Participants Division, Commodity Futures Trading Commission, (202) 418-
5696 or [email protected], and refer to OMB Control No. 3038-0111.
SUPPLEMENTARY INFORMATION: Under the PRA, 44 U.S.C. 3501 et seq.,
Federal agencies must obtain approval from the Office of Management and
Budget (``OMB'') for each collection of information they conduct or
sponsor. ``Collection of Information'' is defined in 44 U.S.C. 3502(3)
and 5 CFR 1320.3 and includes agency requests or requirements that
members of the public submit reports, keep records, or provide
information to a third party. Section 3506(c)(2)(A) of the PRA, 44
U.S.C. 3506(c)(2)(A), requires Federal agencies to provide a 60-day
notice in the Federal Register concerning each proposed collection of
information, including each proposed extension of an existing
collection of information, before submitting the collection to OMB for
approval. To comply with this requirement, the CFTC is publishing
notice of the proposed extension of the existing collections of
information listed below. 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 OMB control number.
Title: Margin Requirements for Uncleared Swaps for Swap Dealers and
Major Swap Participants--Cross-Border Application of the Margin
Requirements (OMB Control No. 3038-0111). This is a request for an
extension of currently approved information collections.
Abstract: Section 731 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act,\1\ amended the Commodity Exchange Act
(``CEA''), 7 U.S.C. 1 et seq., to add, as Section 4s(e) thereof,
provisions concerning the setting of initial and variation margin
requirements for swap dealers (``SDs'') and major swap participants
(``MSPs'').\2\ Each SD and MSP for which there is a Prudential
Regulator, as defined in Section 1a(39) of the CEA,\3\ must meet margin
requirements established by the applicable Prudential Regulator, and
each SD and MSP for which there is no Prudential Regulator (``Covered
Swap Entities'' or ``CSEs'') must comply with the Commission's
Regulations governing margin on all swaps that are not centrally
cleared.
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\1\ Public Law 111-023, 124 Stat. 1376 (2010).
\2\ 7 U.S.C. 6s(e).
\3\ 7 U.S.C. 1a(39).
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With regard to the cross-border application of the Commission's
margin rules, Section 2(i) \4\ of the CEA provides the Commission with
express authority over activities outside the United States relating to
swaps when certain conditions are met. Section 2(i) of the CEA provides
that the provisions of the CEA relating to swaps that were enacted by
the Wall Street Transparency and Accountability Act of 2010 (including
any rule prescribed or regulation promulgated under that Act), shall
not apply to activities outside the United States unless those
activities (1) have a direct and significant connection with activities
in, or effect on, commerce of the United States or (2) contravene such
rules or regulations as the Commission may prescribe or promulgate as
are necessary or appropriate to prevent the evasion of any provision of
the CEA that was enacted by the Wall Street Transparency and
Accountability Act of 2010.
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\4\ 7 U.S.C. 2(i).
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On May 31, 2016, the Commission published the Final Rule addressing
the cross-border application of its margin requirements for uncleared
swaps applicable to CSEs.\5\ The Final Rule contains a collection of
information under Commission Regulation 23.160(c) regarding requests
for comparability determinations, and information collections regarding
non-netting jurisdictions,\6\ and non-segregation jurisdictions.\7\
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\5\ 81 FR 34818 (May 31, 2016).
\6\ As used in the adopting release, a ``non-netting
jurisdiction'' is a jurisdiction in which a CSE cannot conclude,
with a well-founded basis, that the netting agreement with a
counterparty in that foreign jurisdiction meets the definition of an
``eligible master netting agreement'' set forth in Commission
Regulation 23.151, and as described in Section II.B.5.b of the
adopting release.
\7\ As used in the adopting release, a ``non-segregation
jurisdiction'' is a jurisdiction where inherent limitations in the
legal or operational infrastructure of the foreign jurisdiction make
it impracticable for the CSE and its counterparty to post initial
margin pursuant to custodial arrangements that comply with the
Commission's margin rules, as further described in Section II.B.4.b
of the adopting release.
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Under Commission Regulation 23.160(c)(1), a CSE that is eligible
for substituted compliance or a foreign regulatory agency that has
direct supervisory authority over one or more CSEs and that is
responsible for administering the relevant foreign jurisdiction's
margin requirements may request, individually or collectively, that the
Commission make a determination that a CSE that complies with margin
requirements in the relevant foreign jurisdiction would be deemed to be
in compliance with the Commission's corresponding margin rule (a
``comparability determination''). Once a comparability determination is
made for a jurisdiction, it applies for all entities or transactions in
that jurisdiction to the extent provided in the comparability
determination, as approved by the Commission and subject to any
conditions specified by the Commission. All CSEs, regardless of whether
they rely on a comparability determination, remain subject to the
Commission's examination and enforcement authority.
Commission Regulation 23.160(c)(2) requires that applicants for a
comparability determination provide copies of the relevant foreign
jurisdiction's margin requirements and descriptions of their
objectives, how they differ from the margin policy framework for non-
cleared, bilateral derivatives set forth by the Basel Committee on
Banking Supervision and the International Organization of
[[Page 48003]]
Securities Commissions, and how they address the elements of the
Commission's margin requirements. The applicant must identify the
specific legal and regulatory provisions of the foreign jurisdiction's
margin requirements that correspond to each element and, if necessary,
whether the relevant foreign jurisdiction's margin requirements do not
address a particular element.
Commission Regulation 23.160(d) includes a special provision for
non-netting jurisdictions. This provision allows CSEs that cannot
conclude after sufficient legal review with a well-founded basis that
the netting agreement with a counterparty in a foreign jurisdiction
meets the definition of an ``eligible master netting agreement'' set
forth in Commission Regulation 23.151 to nevertheless net uncleared
swaps in determining the amount of margin that they post, provided that
certain conditions are met. In order to avail itself of this special
provision, a CSE must treat the uncleared swaps covered by the
agreement on a gross basis in determining the amount of initial and
variation margin that it must collect, but may net those uncleared
swaps in determining the amount of initial and variation margin it must
post to the counterparty, in accordance with the netting provisions of
Commission Regulations 23.152(c) and 23.153(d). A CSE that enters into
uncleared swaps in ``non-netting'' jurisdictions in reliance on this
provision must have policies and procedures ensuring that it complies
with the special provision's requirements, and maintain books and
records properly documenting that all of the requirements of this
exception are satisfied.
Commission Regulation 23.160(e) includes a special provision for
non-segregation jurisdictions that allows non-U.S. CSEs that are
Foreign Consolidated Subsidiaries (``FCS'') (as defined in Commission
Regulation 23.160(a)(1)) and foreign branches of U.S. CSEs to engage in
swaps in foreign jurisdictions where inherent limitations in the legal
or operational infrastructure make it impracticable for the CSE and its
counterparty to post collateral in compliance with the custodial
arrangement requirements of the Commission's margin rules, subject to
certain conditions. In order to rely on this special provision, a FCS
or foreign branch of a U.S. CSE is required to satisfy all of the
conditions of the rule, including that (1) inherent limitations in the
legal or operational infrastructure of the foreign jurisdiction make it
impracticable for the CSE and its counterparty to post any form of
eligible initial margin collateral for the uncleared swap pursuant to
custodial arrangements that comply with the Commission's margin rules;
(2) foreign regulatory restrictions require the CSE to transact in
uncleared swaps with the counterparty through an establishment within
the foreign jurisdiction and do not permit the posting of collateral
for the swap in compliance with the custodial arrangements of
Commission Regulation 23.157 in the United States or a jurisdiction for
which the Commission has issued a comparability determination under
Commission Regulation 23.160(c) with respect to Commission Regulation
23.157; (3) the CSE's counterparty is not a U.S. person and is not a
CSE, and the counterparty's obligations under the uncleared swap are
not guaranteed by a U.S. person; (4) the CSE collects initial margin in
cash on a gross basis, and posts and collects variation margin in cash,
in accordance with specific requirements; (5) for each broad risk
category, as set out in Commission Regulation 23.154(b)(2)(v), the
total outstanding notional value of all uncleared swaps in that broad
risk category, as to which the CSE is relying on under Commission
Regulation 23.160(e), may not exceed 5 percent of the CSE's total
outstanding notional value for all uncleared swaps in the same broad
risk category; (6) the CSE has policies and procedures ensuring that it
is in compliance with the requirements of this provision; and (7) the
CSE maintains books and records properly documenting that all of the
requirements of this provision are satisfied.
With respect to the collection of information, the CFTC invites
comments on:
Whether the proposed collections of information are
necessary for the proper performance of the functions of the
Commission, including whether the information will have a practical
use;
The accuracy of the Commission's estimate of the burdens
of the proposed collections of information, including the validity of
the methodology and assumptions used;
Ways to enhance the quality, usefulness, and clarity of
the information to be collected; and
Ways to minimize the burdens of collection of information
on those who are to respond, including through the use of appropriate
automated electronic, mechanical, or other technological collection
techniques or other forms of information technology; e.g., permitting
electronic submission of responses.
You should submit only information that you wish to make available
publicly. If you wish the Commission to consider information that you
believe is exempt from disclosure under the Freedom of Information Act,
a petition for confidential treatment of the exempt information may be
submitted according to the procedures established in Sec. 145.9 of the
Commission's Regulations.\8\
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\8\ 17 CFR 145.9.
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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 https://www.cftc.gov that it may deem to be
inappropriate for publication, such as obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of the information collection requests will be retained in
the public comment file and will be considered as required under the
Administrative Procedure Act and other applicable laws, and may be
accessible under the Freedom of Information Act.
Burden Statement--Information Collection for Comparability
Determinations:
The Commission estimates that approximately 53 CSEs may request a
comparability determination pursuant to Commission Regulation
23.160(c).\9\ The Commission notes that any foreign regulatory agency
that has direct supervisory authority over one or more CSEs and that is
responsible for administering the relevant foreign jurisdiction's
margin requirements may also apply for a comparability determination.
However, once a comparability determination is made for a jurisdiction,
it will apply for all entities or transactions in that jurisdiction to
the extent provided in the determination, as approved by the
Commission. To date, the Commission has issued a comparability
determination for 3 jurisdictions.\10\ Accordingly, the Commission
estimates that it will receive requests from the 13
[[Page 48004]]
remaining jurisdictions within the G20,\11\ in addition to Switzerland.
The number of burden hours associated with such requests is estimated
to be 40 hours. Accordingly, the respondent burden for this collection
is estimated to be as follows:
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\9\ Currently, there are approximately 108 swap entities
provisionally registered with the Commission. The Commission
estimates that of the approximately 108 swap entities that are
provisionally registered, approximately 53 are CSEs for which there
is no Prudential Regulator, and are therefore subject to the
Commission's margin rules.
\10\ See Comparability Determination for Japan: Margin
Requirements for Uncleared Swaps for Swap Dealers and Major Swap
Participants, 81 FR 63376 (Sep. 15, 2016); Comparability
Determination for the European Union: Margin Requirements for
Uncleared Swaps for Swap Dealers and Major Swap Participants, 82 FR
48394 (Oct. 18, 2017); and Comparability Determination for
Australia: Margin Requirements for Uncleared Swaps for Swap Dealers
and Major Swap Participants, 84 FR 12908 (Apr. 3, 2019). The
Commission subsequently amended its comparability determination for
Japan. See Amendment to Comparability Determination for Japan:
Margin Requirements for Uncleared Swaps for Swap Dealers and Major
Swap Participants, 84 FR 12074 (Apr. 1, 2019).
\11\ The Group of 20 (``G20'') is comprised of foreign leaders
and central bank managers from the top 19 countries with the largest
economies along with the European Union.
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Estimated Number of Respondents: 14.
Estimated Average Burden Hours per Respondent: 40.
Estimated Total Annual Burden Hours: 560.
Frequency of Collection: Once.
There are no capital costs or operating and maintenance costs
associated with this collection.
Burden Statement--Information Collection for Non-Netting
Jurisdictions:
The Commission is revising its estimate of the burden for this
collection to reflect the current number of registrants subject to the
Commission's margin requirements for uncleared swaps. Specifically, the
Commission estimates that approximately 53 CSEs may rely on Commission
Regulation 23.160(d).\12\ Furthermore, the Commission estimates that
these CSEs would incur an average of 10 annual burden hours to maintain
books and records properly documenting that all of the requirements of
this exception are satisfied (including policies and procedures
ensuring compliance). Accordingly, the respondent burden for this
collection is estimated to be as follows:
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\12\ See n.9, supra. Because all of these CSEs are eligible to
use the special provision for non-netting jurisdictions, the
Commission estimates that 53 CSEs may rely on Commission Regulation
23.160(d).
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Estimated Number of Respondents: 53.
Estimated Average Burden Hours per Respondent: 10.
Estimated Total Annual Burden Hours: 530.
Frequency of Collection: Once; As needed.
There are no capital costs or operating and maintenance costs
associated with this collection.
Burden Statement--Information Collection for Non-Segregation
Jurisdictions:
The Commission estimates that there are eight jurisdictions for
which the first two conditions specified above for non-segregation
jurisdictions are satisfied and where FCSs and foreign branches of U.S.
CSEs that are subject to the Commission's margin rules may engage in
swaps. The Commission estimates that approximately 12 FCSs or foreign
branches of U.S. CSEs may rely on Commission Regulation 23.160(e) in
some or all of these jurisdictions. The Commission estimates that each
FCS or foreign branch of a U.S. CSE relying on this provision would
incur an average of 20 annual burden hours to maintain books and
records properly documenting that all of the requirements of this
provision are satisfied (including policies and procedures for ensuring
compliance) with respect to each jurisdiction as to which they rely on
the special provision. Thus, based on the estimate of eight non-
segregation jurisdictions, the Commission estimates that each of the
approximately 12 FCSs and foreign branches of U.S. CSEs that may rely
on this provision will incur an estimated 160 average burden hours per
year (i.e., 20 average burden hours per jurisdiction multiplied by 8).
Accordingly, the respondent burden for this collection is estimated to
be as follows:
Estimated Number of Respondents: 12.
Estimated Average Burden Hours per Respondent: 160.
Estimated Total Annual Burden Hours: 1,920.
Frequency of Collection: Once; As needed.
There are no capital costs or operating and maintenance costs
associated with this collection.
(Authority: 44 U.S.C. 3501 et seq.)
Dated: August 1, 2022.
Robert Sidman,
Deputy Secretary of the Commission.
[FR Doc. 2022-16774 Filed 8-4-22; 8:45 am]
BILLING CODE 6351-01-P