August 21, 2017
Mr. Amir Zaidi, Director
U.S. Commodity Futures Trading Commission
Division of Market OversightThree Lafayette Centre
1155 21st Street, NW
Washington, DC 20581
Re:

Review of Swap Reporting Rules

Dear Mr. Zaidi:
Citadel LLC 1 (“Citadel”) appreciates the opportunity to provide comments to the Division ofMarket Oversight (“DMO”) on its review of the swap data reporting rules in Parts 43, 45, and 49
of the Commodity Futures Trading Commission’s (the “Commission”) Regulations. We applaud
DMO’s initiative and fully support the goals of (a) improving the quality and accuracy of swaps
data and (b) streamlining reporting requirements for market participants.
We look forward to actively engaging with the Commission as amendments designed to refine
and enhance current reporting requirements are considered. At this stage, we provide the following
suggestions on DMO’s “Roadmap to Achieve High Quality Swaps Data” (the “Roadmap”).
I. Improving the Reporting of Package Transactions
We agree with the Roadmap’s proposal to “address ongoing issues of reporting packages.” Incertain asset classes, a significant percentage of overall trading activity is transacted as part of apackage. It is therefore critical that the Commission and market participants have accurate data
regarding the types of packages that are traded, and the amount of trading activity in each type.
This information should assist the Commission in evaluating how certain regulatory requirements
are best applied to package transactions, and would aid market participants in better understanding
swap market activity.
In order to accurately identify package transactions, we support a “Package ID” field thatwould be used to link separately reported components of a single package. In addition, it would
be useful to gather data on how many components are associated with a given package transaction
and whether any non-reported instruments are included. Finally, since packages are typically
priced and executed as a single trade, ideally one price for the entire package would be reported
rather than requiring market participants to impute a price for each leg. We note that CPMI1

Citadel is a global financial firm built around world-class talent, sound risk management, and innovative marketleading technology. For more than a quarter of a century, Citadel’s hedge funds and capital markets platforms havedelivered meaningful and measurable results to top-tier investors and clients around the world. Citadel operates inall major asset classes and financial markets, with offices in the world’s leading financial centers, including
Chicago, New York, San Francisco, Boston, London, Hong Kong, and Shanghai.
1

IOSCO has proposed to include additional data reporting fields for packages in its recent
consultative report. 2II. Streamlining the Reporting of Cleared Swaps
In accordance with the Roadmap objective of streamlining reporting workflows, we believe
there are ways to improve the reporting of cleared swaps. First, we urge the Commission toreconsider whether it is necessary to report an intended-to-be-cleared “alpha” swap to swap datarepositories (“SDRs”). For cleared swaps, current regulations require the reporting of (a) the“alpha” swap (representing the intended-to-be-cleared swap that temporarily exists prior to its
acceptance for clearing), (b) the subsequent cancellation of the “alpha” swap post-clearing
acceptance, and (c) the “beta” and “gamma” cleared swaps. This approach creates several
duplicate records in an extremely short window of time, given that the Commission’s straightthrough-processing rules result in many “alpha” swaps being successfully cleared (and thereforecancelled) almost immediately following execution. Consideration should be given to whether thereporting of “alpha” swaps to SDRs can be eliminated without impacting compliance with theseparate real-time public reporting requirements. Part 45 reporting would then focus only on thepost-clearing “beta” and “gamma” swaps, thereby simplifying reporting workflows for clearedswaps.
In addition, in our view the DCO is in the best position to maintain data on the post-clearing“beta” and “gamma” swaps. A DCO is party to every swap it clears and maintains comprehensive“golden source” data on such swaps for regulatory and risk management purposes, among others.
Swap data reporting would be greatly simplified if DCOs were responsible for maintaining SDR
data for cleared swaps, rather than redundantly reporting it to a third party SDR (and subsequently
updating and reconciling records with such SDR). Data aggregation would also be simplified forregulators, who could look to DCOs for SDR data on cleared swaps and to a separate SDR for dataon uncleared swaps.
III. Increasing the Utility of Real-time Public Reporting
We also agree with the Roadmap’s proposal to assess the Commission’s real-time public
reporting regulations based on the goals of “liquidity, transparency, and price discovery.” Market
research demonstrates that the introduction of real-time public reporting in the swaps market has
led to meaningful benefits for end investors, removing information asymmetries and facilitating
more accurate assessments of execution quality. 3
However, there are ways to further refine and enhance the framework, such as by streamlining
the data fields that are publicly reported. Unnecessary fields should be removed while certain2
See CPMI-IOSCO Harmonisation of critical OTC derivatives data elements (other than UTI and UPI) – third batch(June 2017), available at: http://www.bis.org/cpmi/publ/d160.pdf.
3See, e.g., Loon, Y. C., Zhong, Z. K., 2014. The impact of central clearing on counterparty risk, liquidity, andtrading: Evidence from the credit default swap market. Journal of Financial Economics 112 (1), 91-115; Loon, Y.
C., Zhong, Z. K., 2015. Does Dodd-Frank affect OTC transaction costs and liquidity? Evidence from real-time CDS
trade reports, Journal of Financial Economics.
2

select fields that would improve market transparency, such as the relevant DCO on a cleared swap,
should be considered for inclusion.
*

*

*

*

*

*

*

*

*

*

We appreciate the opportunity to provide comments on the Commission’s swap data reporting
requirements. Please feel free to call the undersigned at (312) 395-3100 with any questions
regarding these comments.
Respectfully,/s/ Stephen John Berger
Managing Director, Government & Regulatory Policy

3