Supporting Statement of Commissioner Brian Quintenz Regarding Final Rules Amending the Swap Data Recordkeeping and Reporting Requirements (Part 45)
September 17, 2020
I am pleased to support these amendments to part 45 regulatory reporting, which hopefully represent the beginning of the end of this agency’s longstanding efforts to collect and utilize accurate, reliable swap data to further its regulatory mandates.
There is frequently a trade-off between being first and being right. That is especially true when it comes to regulation and specifically true when it comes to the CFTC’s historical approach to data reporting. Although the CFTC was the first regulator in the world to implement swap data reporting requirements, it did so only in a partial, non-descriptive, and non-technical fashion, which has led to the fact that, even today – more than 10 years after Dodd Frank – the Commission has great difficulty aggregating and analyzing data for uncleared swaps across swap data repositories (SDRs).
Since the CFTC first implemented its swap data reporting requirements, the CFTC has continued to lead global efforts to reach international consensus on those reporting requirements so that derivatives regulators can finally get a clear picture of the uncleared swaps landscape. I would like to recognize the diligent efforts of DMO staff to finally get us over the finish line.
Today’s amendments to part 45 regulatory reporting will provide the Commission with the homogeneous data it needs to readily analyze swap data for both cleared and uncleared swaps across jurisdictions. The final rule eliminates unnecessary reporting fields and implements internationally agreed to “critical data elements” (CDE fields) consistently with the detailed technical standards put forth by CPMI-IOSCO.
The final rule also provides reporting counterparties with a longer time to report trades accurately to an SDR by moving to a “T+1” reporting timeframe for swap dealer (SD), derivatives clearing organization (DCO), and swap execution facility (SEF) reporting parties, and a “T+2” reporting timeframe for non-SD/DCO/SEF reporting counterparties. I have long supported providing additional time for market participants to meet their regulatory reporting obligations given it is a matter of being right, not first. A later regulatory reporting deadline will help counterparties report the trade correctly the first time, instead of reporting an erroneous trade that then needs to be corrected later. This change also more closely harmonizes the CFTC’s and ESMA’s reporting deadlines.
For the first time, the final rule also requires SD reporting counterparties to report daily margin and collateral information for uncleared swaps to the Commission. However, the final rule would not require DCO reporting parties to report margin and collateral information with respect to cleared swaps. Instead, the Commission will continue to rely on the comprehensive margin and collateral data reported by DCOs pursuant to part 39. Importantly, in order to alleviate burdens on small reporting counterparties, non-SD/MSP reporting counterparties are not required to report valuation, margin, or collateral information to the Commission.
Although this final rule implements the lion’s share of regulatory reporting requirements, it is not quite the capstone of the Commission’s reporting efforts. The CDE technical guidance did not harmonize many data elements that are relevant to the physical commodity and equity swap asset classes. More work remains to be done with respect to how certain data elements should be reported, including how the prices and quantities of physical commodity swaps should be reported and how swaps on customized equity baskets should be represented. I know DMO will continue to play an active role through CPMI-IOSCO’s CDE governance process to ensure that additional guidance and specificity are provided regarding the data elements for these asset classes.
I support the CFTC’s efforts to adopt the CDE fields – the most basic data elements that are critical to the analysis and supervision of swaps activities – in a manner identical to other jurisdictions’ reporting fields. Over time and through cooperative arrangements with other jurisdictions, global aggregation and measurement of risk, including counterparty credit risk, can become a reality. However, as the Commission moves closer to achieving its goal of global data harmonization, in my opinion, it should keep in mind that the benefits of harmonization should always be balanced against the burdens and practical realities facing reporting counterparties. I think the final rule before us today strikes an appropriate balance on this point.
 See CPMI-IOSCO, Technical Guidance, Harmonization of Critical OTC Derivatives Data Elements (other than UTI and UPI) (Apr. 2018), available at https://www.bis.org/cpmi/publ/d175.pdf.