The CFTC and the SEC Issue Interim Final Reporting
Rules for “Pre-Enactment Unexpired” Swaps andSecurity-Based Swaps
October 22, 2010
As required under the Dodd-Frank Act, the Commodities Futures Trading Commission (the“CFTC”) and the Securities Exchange Commission (the “SEC”)1 have issued interim rules withrespect to the reporting of swaps and security-based swaps entered into prior to July 21, 2010,
the date of enactment of the Dodd-Frank Act (the “enactment date”), that had not expired as ofthe enactment date (“pre-enactment unexpired swap transactions”).
Under the Dodd-Frank Act, a pre-enactment unexpired swap transaction must be reported to aregistered swap data repository or to the CFTC or the SEC, as applicable, by the later of (1) 30
days after the interim rules are issued or (2) such other period as the CFTC or the SEC, asapplicable, determines to be appropriate. Another provision of the Dodd-Frank Act requires
pre-enactment unexpired swap transactions to be reported to a registered swap data repository
or a registered security-based swap data repository (together, “SDRs”) or to the CFTC or theSEC, as applicable, by January 12, 2012. However, because there are no registered SDRs with thecapacity to accept the swap data and because further rulemaking is required by the SEC and theCFTC regarding the registration of SDRs and the definitions of various terms such as“substantial net position”, there are no immediate reporting obligations under the interim rules.
Instead, in anticipation of the reporting of pre-enactment unexpired swaps, parties who may berequired to report such transactions must retain records pertaining to the terms of preenactment unexpired swaps so that they will be able to comply with the reporting requirement
once the SDRs come into existence or if required to be provided directly to the CFTC or the SEC,
as applicable. These interim rules are effective until the earlier of (1) the adoption of final rulesor (2) January 12, 2012.

A. REPORTING OBLIGATION
A counterparty to a pre-enactment unexpired swap transaction is required to report to aregistered SDR or the CFTC or the SEC, as applicable, by the earlier of (1) the compliance dateestablished in the final rulemaking or (2) 60 days after a SDR becomes registered with the CFTC
or the SEC, as applicable, and becomes operational. The information required to be reportedwith respect to pre-enactment unexpired swap transactions includes:
a copy of the transaction confirmation (in electronic format, if available, or otherwise inwritten format); andthe time of trade execution, if available.

1SEC Release No. 34-63094 (October 13, 2010).

Memorandum – October 22, 2010

During the time that the interim rules are in effect, a counterparty may also be obligated toprovide information upon request by the CFTC or the SEC, as applicable, any information
related to these transactions.

B. REPORTING PARTY
The interim rules incorporate provisions of the Dodd-Frank Act for purposes of determining
which counterparty will be responsible for reporting pre-enactment unexpired swap
transactions. Where only one counterparty is a swap dealer or a major swap participant, suchparty will be required to report the transaction. Where one counterparty is a swap dealer andthe other counterparty is a major swap participant, the swap dealer will be required to report
the transaction. Where neither counterparty is a swap dealer or a major swap participant, thecounterparties to the transaction will be required to select the counterparty who will report thetransaction.

C. RECORDKEEPING
An interpretive Note to the interim rules includes a list of information relating to pre-enactment
unexpired swap transactions that should be retained in anticipation of reporting. It should benoted that this record retention requirement does not require a counterparty to create newrecords or reformat existing records. Such records include, but are not limited to, the following:

any information necessary to identify and value the transaction;the date and time of execution of the transaction;

in the case of swaps, information relevant to the price of the transaction and, in the case ofsecurity-based swaps, all information from which the price of the transaction was derived;

whether the transaction was accepted for clearing by any clearing agency or derivatives
clearing organization and, if so, the identity of such entity;



any modification(s) to the terms of the transaction; andthe final confirmation of the transaction.

D. CONFIDENTIALITY OF INFORMATION REPORTED
In the SEC release accompanying the interim final rule, the SEC stated that the informationcollected pursuant to the interim final rule will not be kept confidential and will be publicallyavailable. However, a reporting entity may request confidential treatment and have suchreported information withheld from the public in accordance with two exemption the Freedomof Information Act (“FOIA”) recognizes for commercial information. First, the FOIA provides
an exemption for “trade secrets and commercial or financial information obtained form a person
and privileged or confidential.” Second, the FOIA provides an exemption for matter that are“contained in or related to examination, operating, or condition reports prepared by, on behalfof, or for the use of an agency responsible for the regulation or supervision of financialinstitutions.” The SEC will consider any requests for confidential treatment under these two
exemption or other exemptions in the FOIA.

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Memorandum – October 22, 2010

E. PUBLIC COMMENT PERIODThe CFTC and the SEC included a public comment periods on the interim rules. The CFTC
provided a 30 day public comment period ending on November 15, 2010. The SEC provided a60 day public comment period ending on December 20, 2010.
The SEC is seeking comments on all aspects of its interim rule, including the definitions in theinterim rule, what specific information is necessary to derive the “price” of a security-based
swap transaction, any industry standard format for information regarding security-based
swaps, the appropriate counterparty to have the reporting obligation, what documents and data
are typically kept and maintained by market participants regarding security-based swaps, whatdocuments and data the SEC should require market participants to maintain and/or report
regarding security-based swaps and whether January 12, 2012 is a reasonable expiration date
for the interim rule unless the SEC adopts a permanent rule prior to that date.
***This memorandum is for general informational purposes and should not be regarded as legal advice.
Furthermore, the information contained in this memorandum does not represent, and should not beregarded as, the view of any particular client of Simpson Thacher & Bartlett LLP. Please contact yourrelationship partner if we can be of assistance regarding these important developments. The names andoffice locations of all of our partners, as well as additional memoranda, can be obtained from our website,www.simpsonthacher.com.

The contents of this publication are for informational purposes only. Neither this publication nor the lawyers who authored it are
rendering legal or other professional advice or opinions on specific facts or matters, nor does the distribution of this publication to
any person constitute the establishment of an attorney-client relationship. Simpson Thacher & Bartlett LLP assumes no liability inconnection with the use of this publication.

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Memorandum – October 22, 2010

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