Federal Register / Vol. 78, No. 1 / Wednesday, January 2, 2013 / Rules and Regulations 17 

1See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Public Law 111–203, 124 

Stat. 1376 (2010). The text of the Dodd-Frank Act 

Continued 

(1) Alternative Methods of Compliance 

(AMOCs): The Manager, International 

Branch, ANM–116, Transport Airplane 

Directorate, FAA, has the authority to 

approve AMOCs for this AD, if requested 

using the procedures found in 14 CFR 39.19. 

In accordance with 14 CFR 39.19, send your 

request to your principal inspector or local 

Flight Standards District Office, as 

appropriate. If sending information directly 

to the International Branch, send it to ATTN: 

Vladimir Ulyanov, Aerospace Engineer, 

International Branch, ANM–116, Transport 

Airplane Directorate, FAA, 1601 Lind 

Avenue SW., Renton, WA 98057–3356; 

telephone (425) 227–1138; fax (425) 227– 

1149. Information may be emailed to: 9- 

ANM-116-AMOC-REQUESTS@faa.gov. 

Before using any approved AMOC, notify 

your appropriate principal inspector, or 

lacking a principal inspector, the manager of 

the local flight standards district office/ 

certificate holding district office. The AMOC 

approval letter must specifically reference 

this AD. 

(2) Airworthy Product: For any requirement 

in this AD to obtain corrective actions from 

a manufacturer or other source, use these 

actions if they are FAA-approved. Corrective 

actions are considered FAA-approved if they 

are approved by the State of Design Authority 

(or their delegated agent). You are required 

to assure the product is airworthy before it 

is returned to service. 

(j) Related Information 

Refer to MCAI European Aviation Safety 

Agency Airworthiness Directive 2012–0034, 

dated February 29, 2012, and the service 

information identified in paragraphs (j)(1) 

and (j)(2) of this AD, for related information. 

(1) Airbus Mandatory Service Bulletin 

A330–32–3255, dated October 13, 2011. 

(2) Airbus Mandatory Service Bulletin 

A340–32–4291, dated October 13, 2011. 

(k) Material Incorporated by Reference 

(1) The Director of the Federal Register 

approved the incorporation by reference 

(IBR) of the service information listed in this 

paragraph under 5 U.S.C. 552(a) and 1 CFR 

part 51. 

(2) You must use this service information 

as applicable to do the actions required by 

this AD, unless the AD specifies otherwise. 

(i) Airbus Mandatory Service Bulletin 

A330–32–3255, dated October 13, 2011. 

(ii) Airbus Mandatory Service Bulletin 

A340–32–4291, dated October 13, 2011. 

(3) For service information identified in 

this AD, contact Airbus SAS—Airworthiness 

Office—EAL, 1 Rond Point Maurice Bellonte, 

31707 Blagnac Cedex, France; telephone +33 

5 61 93 36 96; fax +33 5 61 93 45 80; email 

airworthiness.A330–A340@airbus.com; 

Internet http://www.airbus.com. 

(4) You may review copies of the service 

information at the FAA, Transport Airplane 

Directorate, 1601 Lind Avenue SW., Renton, 

WA. For information on the availability of 

this material at the FAA, call 425–227–1221. 

(5) You may view this service information 

that is incorporated by reference at the 

National Archives and Records 

Administration (NARA). For information on 

the availability of this material at NARA, call 

202–741–6030, or go to: http:// 

www.archives.gov/federal-register/cfr/ibrlocations.html. 

Issued in Renton, Washington, on 

December 17, 2012. 

Kalene C. Yanamura, 

Acting Manager, Transport Airplane 

Directorate, Aircraft Certification Service. 

[FR Doc. 2012–31004 Filed 12–31–12; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 23 

RIN 3038–AC96 

Business Conduct and Documentation 

Requirements for Swap Dealers and 

Major Swap Participants; Extension of 

Compliance Date 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Extension of compliance dates; 

request for comment. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’) is 

changing the compliance dates for 

certain rules in the Commission’s 

regulations governing business conduct 

standards for swap dealers (‘‘SDs’’) and 

major swap participants (‘‘MSPs’’), and 

certain rules requiring SDs and MSPs to 

engage in portfolio reconciliation and to 

have certain documentation with their 

swap counterparties. The Commission is 

extending the compliance date for 

certain rules by four months, and up to 

six months for others. The extended 

compliance dates are intended to 

provide SDs and MSPs with additional 

time to achieve compliance with certain 

regulations. 

DATES: Compliance Dates: The 

compliance date for the regulations at 

17 CFR 23.201(b)(3)(ii), 23.402; 

23.410(c); 23.430; 23.431(a) through (c); 

23.432; 23.434(a)(2), (b), and (c); 23.440; 

23.450, and 23.505 is extended until 

May 1, 2013; the compliance date for 

the regulations at 17 CFR 23.502 and 

23.504 is extended until July 1, 2013. 

Comment Date: The Commission will, 

however, consider any comments 

received on or before February 1, 2013 

and may revise the modified 

compliance dates, if warranted. 

ADDRESSES: You may submit comments, 

identified by RIN number 3038–AC96 

and Business Conduct and 

Documentation Requirements for Swap 

Dealers and Major Swap Participants, by 

any of the following methods: 

• Agency Web site, www.cftc.gov, via 

its Comments Online process at http:// 

comments.cftc.gov/PublicComments/ 

ReleasesWithComments.aspx. Follow 

the instructions for submitting 

comments through the Web site. 

• Mail: 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. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

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 www.cftc.gov. You 

should submit only information that 

you wish to make available publicly. If 

you wish the Commission to consider 

information that may be exempt from 

disclosure under the Freedom of 

Information Act, a petition for 

confidential treatment of the exempt 

information may be submitted according 

to the established procedures in § 145.9 

of the Commission’s regulation, 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 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 

rulemaking 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. 

FOR FURTHER INFORMATION CONTACT: 

Frank Fisanich, Chief Counsel, 202– 

418–5949, ffisanich@cftc.gov, Jason A. 

Shafer, Attorney-Advisor, 202–418– 

5097, jshafer@cftc.gov, Division of Swap 

Dealer and Intermediary Oversight, or 

Sayee Srinivasan, Research Analyst, 

202–418–5309, ssrinivasan@cftc.gov, 

Office of the Chief Economist, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On July 21, 2010, President Obama 

signed the Dodd-Frank Act.1 Title VII of 


tkelley on DSK3SPTVN1PROD with 
18 Federal Register / Vol. 78, No. 1 / Wednesday, January 2, 2013 / Rules and Regulations 

may be accessed at http://www.cftc.gov/ 

LawRegulation/OTCDERIVATIVES/index.htm. 2Pursuant to Section 701 of the Dodd-Frank Act, 

Title VII may be cited as the ‘‘Wall Street 

Transparency and Accountability Act of 2010.’’ 3 7 U.S.C. 1 et seq. 4See Further Definition of ‘‘Swap Dealer,’’ 

‘‘Security-Based Swap Dealer,’’ ‘‘Major Swap 

Participant,’’ ‘‘Major Security-Based Swap 

Participant,’’ and ‘‘Eligible Contract Participant,’’ 77 

FR 30596 (May 23, 2012). 5See Further Definition of ‘‘Swap,’’ ‘‘SecurityBased Swap,’’ and ‘‘Security-Based Swap 

Agreement’’; Mixed Swaps; Security-Based Swap 

Agreement Recordkeeping, 77 FR 48208 (Aug. 13, 

2012). 6See Registration of Swap Dealers and Major 

Swap Participants, 77 FR 2613 (Jan. 19, 2012). 7 7 U.S.C 6s. 

8See Swap Dealer and Major Swap Participant 

Recordkeeping, Reporting, and Duties Rules; 

Futures Commission Merchant and Introducing 

Broker Conflicts of Interest Rules; and Chief 

Compliance Officer Rules for Swap Dealers, Major 

Swap Participants, and Futures Commission 

Merchants, 77 FR 20128 (Apr. 3, 2012). 9See Business Conduct Standards for Swap 

Dealers and Major Swap Participants With 

Counterparties, 77 FR 9734 (Feb. 17, 2012). 

10See Confirmation, Portfolio Reconciliation, 

Portfolio Compression, and Swap Trading 

Relationship Documentation Requirements for 

Swap Dealers and Major Swap Participants, 77 FR 

55904 (Sept. 11, 2012). 

11See supra note 8. 12 Id. 13Business Conduct Standards for Swap Dealers 

and Major Swap Participants With Counterparties, 

75 FR 80638 (proposed Dec. 22, 2010). 14Reopening and Extension of Comment Periods 

for Rulemakings Implementing the Dodd-Frank 

Wall Street Reform and Consumer Protection Act, 

75 FR 25274 (May 4, 2011). 15See supra note 9. 16See, e.g., § 23.402(b) (requiring SDs to obtain 

essential facts about their counterparty prior to 

execution of a transaction); § 23.430(a) (requiring 

SDs and MSPs to verify that a counterparty meets 

the eligibility standards for an eligible contract 

participant before offering to enter into or entering 

into a swap with such counterparty); and 

§ 23.431(a) (requiring SDs and MSPs to provide 

material information concerning a swap to its 

counterparty at a reasonably sufficient time prior to 

entering into the swap). 

17See § 23.402(d), (e), and (f). 

18The external business conduct standards final 

rule required that swap dealers and major swap 

participants must comply with the rules in subpart 

H of part 23 on the later of 180 days after the 

effective date of these rules or the date no which 

swap dealers or major swap participants are 

required to apply for registration pursuant to 

Commission rule 3.10. However, in a subsequent 

rulemaking, the compliance date for §§ 23.402; 

23.410(c); 23.430; 23.431(a)–(c); 23.432; 

23.434(a)(2), (b), and (c); 23.440; and 23.450 was 

deferred until January 1, 2013. See Confirmation, 

Portfolio Reconciliation, Portfolio Compression, 

and Swap Trading Relationship Documentation 

Requirements for Swap Dealers and Major Swap 

Participants, 77 FR 55904, 55942 (Sept. 11, 2012). 

19Confirmation, Portfolio Reconciliation, and 

Portfolio Compression Requirements for Swap 

Dealers and Major Swap Participants, 75 FR 8519 

(proposed Dec. 28, 2010). 

20Swap Trading Relationship Documentation for 

Swap Dealers and Major Swap Participants, 76 FR 

6715 (proposed Feb. 8, 2011). 

the Dodd-Frank Act 2 amended the 

Commodity Exchange Act (‘‘CEA’’) 3 to 

establish a comprehensive regulatory 

framework to reduce risk, increase 

transparency, and promote market 

integrity within the financial system by, 

among other things: (1) Providing for the 

registration and comprehensive 

regulation of SDs and MSPs; (2) 

imposing clearing and trade execution 

requirements on standardized derivative 

products; (3) creating rigorous 

recordkeeping and real-time reporting 

regimes; and (4) enhancing the 

Commission’s rulemaking and 

enforcement authorities with respect to 

all registered entities and intermediaries 

subject to the Commission’s oversight. 

In the two years since its enactment, 

the Commission has finalized 41 rules 

to implement Title VII of the DoddFrank Act. Earlier this year, the 

Commission, jointly with the Securities 

and Exchange Commission, finalized 

the main foundational elements of the 

Dodd-Frank regulatory framework by 

adopting regulations further defining 

the terms ‘‘swap dealer’’ and ‘‘major 

swap participant,’’ 4 as well as the 

regulations further defining the term 

‘‘swap.’’ 5 The Commission also adopted 

regulations setting forth a 

comprehensive scheme for the 

registration process for SDs and MSPs.6

Other finalized rules include various 

substantive requirements applicable to 

SDs and MSPs under CEA section 4s,7

which address reporting and 

recordkeeping,8 business conduct 

standards,9 documentation standards,10

duties,11 and designation of chief 

compliance officers.12

Among other things, upon 

registration, an SD or MSP must submit 

documentation demonstrating its 

compliance with any Commission 

regulation issued pursuant to section 

4s(e), (f), (g), (h), (i), (j), (k), or (l) of the 

CEA that is applicable to it and for 

which the compliance date has passed. 

Such Commission regulations include 

business conduct standards under 

subpart H of part 23 of the 

Commission’s regulation promulgated 

under section 4s(h) of the CEA, 

documentation standards under subpart 

I of part 23 of the Commission’s 

regulations promulgated under section 

4s(i) of the CEA, and reporting and 

recordkeeping requirements under 

subpart F of part 23 of the Commission’s 

regulations promulgated under section 

4s(f) of the CEA. 

With respect to business conduct 

standards with counterparties, section 

4s(h) of the CEA provides the 

Commission with both mandatory and 

discretionary rulemaking authority to 

impose business conduct standards on 

SDs and MSPs in their dealings with 

counterparties, including Special 

Entities, and section 4s(i) of the CEA 

establishes swap documentation 

standards for SDs and MSPs. 

Pursuant to section 4s(h) of the CEA, 

on December 22, 2010, the Commission 

published in the Federal Register 

proposed subpart H of part 23 of the 

Commission’s regulations.13 There was 

a 60-day period for the public to 

comment on the proposing release. On 

May 4, 2011, the Commission published 

in the Federal Register a notice to reopen the public comment period for an 

additional 30 days, which ended on 

June 3, 2011.14 On February 17, 2012, 

the Commission adopted as final rules 

subpart H to part 23, which set forth 

business conduct standards for swap 

dealers and major swap participants in 

their dealings with counterparties.15 A 

number of the Commission’s rules 

under subpart H of part 23 require SDs 

and MSPs to provide or obtain specific 

information from their counterparties 

prior to entering into (or in some cases, 

offering to enter into) a swap with such 

counterparties.16 Subpart H of part 23 

permits SDs and MSPs to rely on 

written representations from their 

counterparties and standardized 

disclosures, each of which may require 

amendments or supplements to an SD’s 

or MSP’s relationship documentation 

with such counterparties prior to 

entering into a swap with such 

counterparties.17

SDs and MSPs are required to comply 

with the requirements found in subpart 

H to part 23 by January 1, 2013.18

Section 4s(i)(1) of the CEA requires 

SDs and MSPs to ‘‘conform with such 

standards as may be prescribed by the 

Commission by rule or regulation that 

relate to timely and accurate 

confirmation, processing, netting, 

documentation, and valuation of all 

swaps.’’ Under section 4s(i)(2), the 

Commission is required to adopt rules 

‘‘governing documentation standards for 

swap dealers and major swap 

participants.’’ The Commission 

proposed the regulations on swap 

confirmation, portfolio reconciliation, 

and portfolio compression on December 

28, 2010.19 In a separate rulemaking, on 

February 8, 2011, the Commission 

proposed regulations governing swap 

documentation, including what 

documentation would be required to be 

kept by the SD or MSP when it transacts 

with a counterparty that exercises its 

rights under the end-user clearing 

exception from the mandatory clearing 

requirement under section 2(h)(7) of the 

CEA.20 There was a 60-day comment 

period for both proposals. On 

September 11, 2012, the Commission 

issued final rules governing swap 


tkelley on DSK3SPTVN1PROD with 
Federal Register / Vol. 78, No. 1 / Wednesday, January 2, 2013 / Rules and Regulations 19 

21See supra note 10. 

22See § 23.502(a)(1). 

23See § 23.504(a)(2). 

24See § 23.505(a). 

25 77 FR 55904, 55941–42 (Sept. 11, 2012). 

26The current compliance schedule associated 

with § 23.504 is as follows: With respect to swap 

transactions with SDs, security-based swap dealers, 

MSPs, major security-based swap participants, or 

any private fund, as defined in section 202(a) of the 

Investment Advisers Act of 1940, that is not a thirdparty subaccount (defined below) and that executes 

200 or more swaps per month based on a monthly 

average over the 12 months preceding this adopting 

release (active funds), SDs and MSPs must comply 

with § 23.504 by January 1, 2013. With respect to 

swap transactions with commodity pools; private 

funds as defined in section 202(a) of the Investment 

Advisers Act of 1940 other than active funds; or 

persons predominantly engaged in activities that 

are in the business of banking, or in activities that 

are financial in nature as defined in section 4(k) of 

the Bank Holding Company Act of 1956, provided 

that the entity is not an account that is managed by 

an investment manager that (1) is independent of 

and unaffiliated with the account’s beneficial owner 

or sponsor, and (2) is responsible for the 

documentation necessary for the account’s 

beneficial owner to document swaps as required 

under section 4s(i) of the CEA (third-party 

subaccounts), SDs and MSPs must comply with 

§ 23.504 by April 1, 2013. With respect to swap 

transactions with any other counterparty, SDs and 

MSPs must comply with § 23.504 by July 1, 2013. 

77 FR 55904, 55940 (Sept. 11, 2012). However, in 

a final rule recently adopted by the Commission, 

the compliance schedules for active funds was 

amended by requiring private funds to calculate the 

number of swaps they enter as a monthly average 

over the past 12 months preceding November 1, 

2012. 

27Reporting, Recordkeeping, and Daily Trading 

Records Requirements for Swap Dealers and Major 

Swap Participants, 75 FR 76666 (proposed Dec. 9, 

2010). 

28See supra note 14. 

29See supra note 8. 

30See 77 FR 20128, 20165 (Apr. 3, 2012). 

§ 23.201(a)(1) is currently the subject of a staff noaction letter that was published on October 26, 

2012, which provided no-action relief from 

compliance with § 23.201(a)(1) until March 31, 

2013. See CFTC Letter No. 12–29, Request for NoAction Relief for Swap Dealers and Major Swap 

Participants from Compliance with Certain Internal 

Business Conduct Requirements Found in subpart 

F to part 23 of the CFTC’s Regulations (http:// 

www.cftc.gov/ucm/groups/public/@lrlettergeneral/ 

documents/letter/12–29.pdf). 

31See, e.g., Letter dated Dec. 4, 2012 from the 

International Swaps and Derivatives Association 

(‘‘ISDA’’) requesting exercise of Commission 

authority regarding part 23 Compliance Rules, 

Letter dated Nov. 27, 2012 (revised Dec. 6, 2012) 

from ISDA requesting exercise of Commission 

authority regarding part 23 compliance rules 

(‘‘ISDA Dec. 6 Letter’’), and Letter dated Nov. 20, 

2012 from ISDA requesting no-action relief from 

compliance with §§ 23.502 and 23.504. 

32The current compliance date for §§ 23.402; 

23.410(c); 23.430; 23.431(a)–(c); 23.432; 

23.434(a)(2), (b), and (c); 23.440; and 23.450 is 

January 1, 2013. See Confirmation, Portfolio 

Reconciliation, Portfolio Compression, and Swap 

Trading Relationship Documentation Requirements 

for Swap Dealers and Major Swap Participants, 77 

FR 55904, 55942 (Sept. 11, 2012); see also Business 

Conduct Standards for Swap Dealers and Major 

Swap Participants with Counterparties, 77 FR 9734, 

9823–27 (Feb. 17, 2012) (promulgating the relevant 

provisions of subpart H of part 23 of the 

Commission’s Regulations). 

33 77 FR at 55940. 

34See http://www2.isda.org/dodd-frankdocumentation-initiative/. 

35 ISDA’s first Dodd-Frank protocol is intended to 

facilitate compliance with the following Final 

Rules: Business Conduct Standards for Swap 

Dealers and Major Swap Participants With 

Counterparties, 77 FR 9734 (Feb. 17, 2012); Large 

Trader Reporting for Physical Commodity Swaps, 

76 FR 43851 (July 22, 2011); Position Limits for 

Futures and Swaps, 76 FR 71626 (Nov. 18, 2011); 

Continued 

confirmation (§ 23.501), portfolio 

reconciliation (§ 23.502), portfolio 

compression (§ 23.503), and swap 

trading relationship documentation 

(§ 23.504), and end user exception 

documentation (§ 23.505).21 Among 

other things, § 23.502 requires SDs and 

MSPs to agree in writing with each 

counterparty on the terms of conducting 

portfolio reconciliation.22 Section 

23.504 requires that an SD or MSP 

execute swap trading relationship 

documentation meeting the 

requirements of the rule with a 

counterparty prior to or 

contemporaneously with entering into a 

swap transaction with such 

counterparty.23 Section 23.505 requires, 

with an exception, that SDs and MSPs, 

when transacting with market 

participants claiming the exception to 

clearing under 2(h)(7) of the CEA, obtain 

documentation sufficient to provide a 

reasonable basis on which to believe 

that its counterparty meets the statutory 

conditions required for the exception.24

With regard to the portfolio 

reconciliation requirements found in 

§ 23.502, the Commission staggered the 

compliance dates by providing extended 

compliance dates for those SDs and 

MSPs that have not been previously 

regulated by a prudential regulator, and 

thus are least likely to have the 

infrastructure in place to begin regular 

reconciliation with their 

counterparties.25 SDs and MSPs that 

have been previously regulated by a 

prudential regulator need not comply 

with § 23.502 until December 11, 2012. 

SDs and MSPs that have not been 

previously regulated need not comply 

with § 23.502 until March 11, 2013. The 

earliest that an SD or MSP would be 

required to comply with the swap 

trading relationship documentation 

requirements found in § 23.504 is 

January 1, 2013.26 Additionally, the 

earliest that an SD or MSP would be 

required to comply with the 

documentation requirements found in 

§ 23.505 is December 31, 2012. 

Section 4s(f)(1) of the CEA requires 

SDs and MSPs to ‘‘make such reports as 

are required by the Commission by rule 

or regulation regarding the transactions 

and positions and financial condition of 

the registered swap dealer or major 

swap participant.’’ Under section 

4s(f)(1)(B)(i) and (ii) of the CEA, the 

Commission was authorized to prescribe 

the books and records requirements of 

‘‘all activities related to the business of 

swap dealers and major swap 

participants.’’ On December 9, 2010, the 

Commission proposed § 23.201, which 

set forth the records SDs and MSPs must 

maintain.27 After a 60-day period for the 

public to comment on the proposal, the 

Commission published a Federal 

Register notice that re-opened the 

comment period for an additional 30 

days ending on June 3, 2011.28 On April 

3, 2012, the Commission adopted final 

rules governing, among other 

requirements, general records 

requirements for SDs and MSPs 

(§ 23.201).29 The earliest that an SD or 

MSP would be required to comply with 

§ 23.201 is December 31, 2012.30

II. Compliance Date Extension for 

Certain Business Conduct and 

Documentation Requirements for Swap 

Dealers and Major Swap Participants 

Subsequent to the issuance of the 

above-identified rules, the Commission 

received requests from a variety of 

market participants for additional time 

to achieve compliance with the 

documentation requirements of such 

rules.31 More specifically, market 

participants requested that the 

Commission extend the compliance 

dates for the provisions of subpart H of 

part 23 that involve documentation,32

the compliance dates for the provisions 

of § 23.502 (Portfolio Reconciliation), 

which has a significant documentation 

component, and the compliance dates 

for the provisions of § 23.504 (Swap 

Trading Relationship Documentation),33

which also has a significant 

documentation component, to facilitate 

an orderly transition to the new 

regulatory regime. 

In their letter, ISDA states that in 

order to facilitate an efficient transition 

to compliance, it has sponsored a 

number of documentation protocols for 

its members and other market 

participants, where amendments or 

supplements required by the 

Commission’s regulations are effected 

through delivery of an adherence letter 

by each party to the underlying 

document to be amended (i.e., a master 

agreement), and provides for additional 

bilateral delivery requirements in order 

to effectuate the addition of 

supplemental terms.34

ISDA published its first Dodd-Frank 

protocol in August 2012, focused on 

facilitating compliance with several new 

Commission regulations, including 

those found in part 23.35 Pursuant to 


tkelley on DSK3SPTVN1PROD with 
20 Federal Register / Vol. 78, No. 1 / Wednesday, January 2, 2013 / Rules and Regulations 

Real-Time Public Reporting of Swap Transaction 

Data, 77 FR 1182 (Jan. 9, 2012); Swap Data 

Recordkeeping and Reporting Requirements, 77 FR. 

2136 (Jan. 13, 2012); Swap Dealer and Major Swap 

Participant Recordkeeping, Reporting, and Duties 

Rules; Futures Commission Merchant and 

Introducing Broker Conflicts of Interest Rules; and 

Chief Compliance Officer Rules for Swap Dealers, 

Major Swap Participants, and Futures Commission 

Merchants, 77 FR 20128 (Apr. 3, 2012); and Swap 

Data Recordkeeping and Reporting Requirements: 

Pre-Enactment and Transition Swaps, 77 FR 35200 

(June 12, 2012). However, the changes to 

compliance dates affected in this release do not 

address compliance with rules other than those 

specifically stated in the text above. 

36Commission regulation § 23.504(b)(4) requires 

SDs and MSPs to agree with their counterparties, 

prior to the execution of a swap, on the process for 

determining the value of such swap at any time 

from execution to the termination, maturity, or 

expiration of such swap. 

37As discussed in note 26 supra, the Commission 

imposed a staggered compliance schedule for 

§ 23.504, establishing three separate compliance 

dates based on the type of counterparty. The 

compliance date established herein—July 1, 2013— 

provides SDs and MSPs with a single compliance 

date for § 23.504, that is applicable for all types of 

counterparties. 

38The Commission’s decision to defer 

compliance does not reflect an endorsement of the 

industry-led effort, nor does it imply that the 

Commission has reviewed the documentation 

protocol for compliance with Commission rules. 

39 5 U.S.C. 553. 

40 5 U.S.C. 553(b). 

41 Id. 

42 5 U.S.C. 553(d). 

this first protocol, each party that 

submits an adherence letter must also 

deliver a completed questionnaire to 

another protocol participant for the 

addition of supplemental terms to be 

effective with respect to that protocol 

participant. To facilitate the delivery of 

completed questionnaires, ISDA, 

together with Markit, have developed a 

technology-based solution to automate 

the information-gathering process and 

provide sharing of submitted data and 

documents to permissioned 

counterparties. 

ISDA has represented to the 

Commission that, despite an extensive 

counterparty outreach and education 

effort by its members, only 17.5% of 

counterparties to prospective SDs and 

MSPs have submitted an adherence 

letter for its first Dodd-Frank protocol 

and less than 1% have submitted the 

completed questionnaires necessary for 

SDs and MSPs to make use of the 

protocol and integrate necessary 

counterparty information into their 

compliance systems. ISDA has 

represented that more time is needed for 

these counterparties to understand the 

Commission’s requirements, to 

understand the legal consequences of 

adhering to the protocol, and to gather 

the information needed to complete the 

questionnaire from principals and 

beneficial owners. 

In addition, ISDA states that 

Hurricane Sandy has hampered the 

ability of SDs, MSPs, and their 

counterparties to complete the 

documentation process necessary to 

comply with the Commission’s 

regulations within the original 

compliance periods. ISDA states that 

Hurricane Sandy shut down institutions 

and vendors, depleted staff and severely 

damaged development efforts in a 

number of compliance areas—producing 

a knock-on effect across institutional 

(and vendor) compliance efforts 

(including delays at Markit—the 

provider of protocol automation 

mechanisms). Further, specifically with 

respect to the January 1, 2013 

compliance date for subpart H of part 23 

of the Commission’s regulations, ISDA 

has represented that compliance 

obstacles are compounded by industry 

code freezes, which are typically put 

into effect near the calendar year-end to 

ensure a stable IT environment for the 

closing of books and records. The 

freezes limit the ability of firms to make 

adjustments to IT infrastructure related 

to the delivery of required disclosure 

and the re-onboarding of counterparties 

in accordance with the counterparty 

characteristics provided in response to 

the first Dodd-Frank protocol. 

Absent completion of the protocol 

process by a counterparty, or 

completion of bilateral amendments to 

trading documentation with the 

equivalent effect, an SD or MSP that 

continues to enter into swaps with such 

counterparty would be in violation of 

multiple Commission regulations 

contained in part 23. In order to avoid 

such violations of Commission 

regulations, ISDA has represented that 

many SDs and MSPs will stop entering 

into swaps with counterparties that 

have not completed the protocol process 

by December 31, 2012, which could 

result in a sudden and dramatic drop in 

the number of participants in the swap 

markets. ISDA states that the resulting 

decrease in liquidity would damage all 

market participants as well as the 

broader economy. 

ISDA has further represented that 

market participants are working 

diligently toward publishing a second 

Dodd-Frank protocol covering other 

Commission rules requiring 

documentation supplements, including 

§§ 23.502 and 23.504, but require 

additional time to complete the review 

process and implement the protocol. 

ISDA states that the pace of 

implementation of its second DoddFrank protocol has been adversely 

affected by the difficulty of reaching 

agreement on the valuation 

methodologies required by 

§ 23.504(b)(4),36 the developmental 

challenges to reaching the agreement on 

reconciliation processes required by 

§ 23.502(a)(1), the consumption of legal 

and operational resources by the 

implementation of the first Dodd-Frank 

protocol, and the effects of Hurricane 

Sandy discussed above. Accordingly, 

ISDA has represented that an extension 

of the compliance dates for §§ 23.502 

and 23.504 would allow for a smooth 

and orderly progression to compliance 

with such rules and avoid unnecessary 

market disruption. 

For reasons described above, the 

Commission has decided to defer the 

compliance dates for §§ 23.201(b)(3)(ii), 

23.402; 23.410(c); 23.430; 23.431(a)–(c); 

23.432; 23.434(a)(2), (b), and (c); 23.440; 

23.450; and 23.505 of subpart F, subpart 

H, and subpart I of part 23 until May 1, 

2013. In addition, the Commission has 

decided to defer the compliance dates 

for § 23.502 (Portfolio Reconciliation) 

and § 23.504 (Swap Trading 

Relationship Documentation) 37 of 

subpart I of part 23 until July 1, 2013.38

Compliance dates for all other 

provisions of subpart F, subpart H, and 

subpart I of part 23 remain unchanged. 

All market participants are subject to 

the new compliance dates regardless of 

whether they participate in any protocol 

sponsored by ISDA. 

III. Related Matters 

A. Administrative Law Matters and 

Request for Comments 

The Administrative Procedure Act 39

(‘‘APA’’) generally requires an agency to 

publish a notice of a proposed 

rulemaking in the Federal Register.40

This requirement does not apply, 

however, when the agency ‘‘for good 

cause finds * * * that notice and public 

procedure are impracticable, 

unnecessary, or contrary to the public 

interest.’’ 41 Moreover, while the APA 

requires generally that an agency 

publish an adopted rule in the Federal 

Register 30 days before it becomes 

effective, this requirement does not 

apply if the agency finds good cause to 

make the rule effective sooner.42

The Commission, for good cause, 

finds that notice and solicitation of 

comment regarding the amendments is 

impracticable, unnecessary and contrary 

to the public interest. As of December 3, 

2012, the CFTC has finalized over 41 

new rulemakings pursuant to the DoddFrank Act, with each rulemaking 

imposing significant new regulatory 

requirements on market participants. In 

the aggregate, the rulemakings establish 


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Federal Register / Vol. 78, No. 1 / Wednesday, January 2, 2013 / Rules and Regulations 21 

43The Commission’s decision to defer 

compliance does not reflect an endorsement of the 

industry-led effort, nor does it imply that the 

Commission has reviewed the documentation 

protocol for compliance with Commission rules. All 

market participants are subject to the new 

compliance dates regardless of whether they 

participate in the protocol. 

44 44 U.S.C. 3501 et seq. 

a robust and comprehensive registration 

and regulatory framework intended to 

achieve the overarching goals of the 

Dodd-Frank Act, as detailed in Section 

I above. In promulgating the final rules, 

the Commission constructed a phased 

implementation schedule that was 

intended to allow market participants to 

achieve full compliance through an 

orderly and effective process over a 

period of time. Market participants, 

including a trade association, buy-side 

firms and sell-side dealers, have 

represented to the Commission that they 

have been diligently preparing to 

comply with the part 23 rules, in 

accordance with the phased 

implementation schedule. The 

Commission anticipates that the phased 

implementation schedule for most rules 

promulgated under part 23 will 

continue, on schedule, without need for 

delay. 

Notwithstanding the Commission’s 

efforts to implement the business 

conduct standards rules required under 

the Dodd-Frank Act in a timely manner, 

the Commission has determined that, 

due to circumstances beyond the 

Commission’s control, a short delay in 

the implementation schedule for a 

limited set of part 23 rules is necessary. 

As discussed in greater detail in Section 

II above, ISDA has represented that, 

despite an extensive counterparty 

outreach and education effort by its 

members, a relatively small percentage 

of counterparties have fully executed 

the necessary documentation to comply 

with the provisions of subpart H of part 

23 that involve documentation. ISDA 

has represented that more time is 

needed for these counterparties to 

understand the Commission’s 

requirements, to understand the legal 

consequences of adhering to the 

required documentation, and to gather 

the information needed to complete the 

questionnaire from principals and 

beneficial owners. ISDA further 

represented that without additional time 

to address that relatively narrow scope 

of documentation rules, a sudden and 

dramatic drop in the number of 

participants in the swap markets could 

occur, and the resulting decrease in 

liquidity would damage all market 

participants as well as the broader 

economy. 

The extended compliance dates 

provided herein do not include all 

business conduct standards 

promulgated by the Commission. 

Specifically, compliance dates for 

§ 23.410(a) and (b), § 23.433, and 

§ 23.434(a)(1) are not being extended. 

Consequently, fundamental 

counterparty protections relating to (i) 

prohibitions on fraud, manipulation and 

abusive practices, (ii) fair dealings in 

communications, and (iii) reasonable 

diligence regarding recommended 

swaps would not be affected by delayed 

compliance. 

Accordingly, for the reasons 

discussed above, the Commission finds 

good cause to extend the compliance 

dates for a short period, for a limited 

number of rules promulgated under part 

23, to enable market participants to 

continue the work necessary to achieve 

full compliance. Specifically, the 

compliance date for §§ 23.201(b)(3)(ii), 

23.402; 23.410(c); 23.430; 23.431(a) 

through (c); 23.432; 23.434(a)(2), (b), 

and (c); 23.440; 23.450, and 23.505 is 

delayed until May 1, 2013, providing an 

additional 4 months from the original 

compliance date. Likewise, the 

compliance date for § 23.502 and 

§ 23.504 is deferred until July 1, 2013, 

providing an additional 6 months from 

the original date.43 Compliance dates for 

all other provisions of part 23 remain 

unchanged. The Commission anticipates 

that the amended compliance dates will 

enable market participants to achieve 

full compliance with the affected rules 

prior to the expiration of the amended 

compliance period. 

Although the Commission is 

dispensing with prior notice of 

proposed rulemaking, the Commission 

is soliciting written comments on the 

changes to compliance dates affected by 

this release within 30 days after 

publication of this release in the Federal 

Register. The Commission will consider 

those comments and make changes to 

the amendments if necessary. 

B. Paperwork Reduction Act 

Under the Paperwork Reduction Act 

of 1995 (PRA), 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 control number.44 The 

changes to compliance dates affected by 

this release will not impose any new 

recordkeeping or information collection 

requirements, or other collections of 

information that require approval of the 

Office of Management and Budget under 

the PRA. The Commission invites 

public comment on the accuracy of its 

estimate that no additional information 

collection requirements or changes to 

existing collection requirements would 

result from the rules proposed herein. 

C. Considerations of the Costs and 

Benefits 

Section 15(a) of the CEA requires the 

Commission to consider the costs and 

benefits of its actions before 

promulgating a regulation under the 

CEA or issuing an order. Section 15(a) 

further specifies that the costs and 

benefits shall be evaluated in light of the 

following 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. 

1. Background 

The Commission is changing its 

compliance dates for amendments to 

specific sections of subparts H, I and F 

of part 23 of the Commission 

regulations. Subpart H to part 23 sets 

forth business conduct standards for 

SDs and MSPs in their dealings with 

counterparties. SDs and MSPs are 

required to comply with the 

requirements found in subpart H to part 

23 by January 1, 2013. The changes to 

compliance dates for §§ 23.402; 

23.410(c); 23.430; 23.431(a) through (c); 

23.432; 23.434(a)(2), (b), and (c); 23.440; 

and 23.450 contained in subpart H rules 

will extend the compliance dates for 

these provisions until May 1, 2013. 

Compliance dates for all other 

provisions of subpart H of part 23 

remain unchanged. 

With regard to the portfolio 

reconciliation requirements found in 

§ 23.502, for those SDs and MSPs that 

have been previously regulated by a 

prudential regulator, the Commission 

had provided for a compliance date of 

December 11, 2012. The compliance 

date for SDs and MSPs that have not 

been previously regulated was March 

11, 2013. The earliest that an SD or MSP 

would be required to comply with the 

swap trading relationship 

documentation requirements of § 23.504 

is January 1, 2013. The earliest that an 

SD or MSP would be required to comply 

with the end user documentation 

requirements of § 23.505 is December 

31, 2012. The changes to compliance 

dates for §§ 23.502 and 23.504 

contained in subpart I will extend the 

compliance dates for these provisions 

until July 1, 2013. The changes to 

compliance dates for § 23.505 will 

extend the compliance date for this rule 

until May 1, 2013. 

With regard to the general records 

requirements found in § 23.201 of 


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22 Federal Register / Vol. 78, No. 1 / Wednesday, January 2, 2013 / Rules and Regulations 

subpart F of part 23, the earliest that an 

SD or MSP would be required to comply 

with such requirements is December 31, 

2012. The changes to compliance dates 

for § 23.201 will extend the compliance 

date for certain provisions of this rule 

until May 1, 2013. 

The changes to compliance dates 

being adopted do not change the 

substance of the rules; rather, they 

merely provide additional time by 

which parties can comply. As such, the 

costs and benefits of the Commission’s 

action relate only to the additional time 

provided. 

2. Costs 

The Commission does not anticipate 

there being any new, quantifiable costs 

attributable to these changes to 

compliance dates being adopted because 

it is only extending the compliance 

dates for certain requirements in part 23 

of the Commission’s regulations. At the 

same time, however, the Commission is 

mindful that a delay in the protections 

afforded by the regulations could result 

in costs to the public, even if the same 

is not amenable to quantification. The 

Commission believes, however, that 

these costs are mitigated by the 

maintenance of various other provisions 

relating to (i) prohibitions on fraud, 

manipulation and abusive practices, (ii) 

fair dealings in communications, and 

(iii) reasonable diligence regarding 

recommended swaps. These provisions 

are unaffected by delayed compliance 

from this extension. The Commission 

invites comments from the public on 

any costs, quantitative and qualitative, 

arising from the delay granted by the 

changes to compliance dates being 

adopted. 

3. Benefits 

The additional time for compliance 

provided for in this release will yield 

substantial benefit for market 

participants and the public alike. 

Absent this extension, market 

participants would be required to 

implement temporary solutions while 

the more permanent, industry wide 

solutions described earlier are finalized. 

The Commission believes that this 

duplication of efforts to achieve 

compliance would impose extensive 

burdens and costs on parties without 

any concomitant benefit to the public. 

Moreover, the Commission is concerned 

that based on the representations made 

by market participants, absent the 

changes to compliance dates being 

adopted, market participants might exit 

the market or curtail their swaps activity 

due to a lack of legal certainty and 

protection afforded by Commission 

relief. If that were to occur, the 

Commission expects that reduced 

market liquidity would increase the 

costs of hedging, which would then be 

passed on the public in the form of 

higher costs. 

4. Section 15(a) 

Section 15(a) of the CEA requires the 

Commission to consider the effects of its 

actions in light of the following five 

factors: 

a. Protection of Market Participants and 

the Public 

The Commission believes that by 

extending the compliance date for 

certain regulations in part 23, market 

participants will be able to continue to 

participate in the swaps market without 

concerns about potential consequences 

of failure to comply with the specified 

regulations. This will, in turn, protect 

the public by ensuring that the economy 

does not suffer as a result of any 

unintended consequences that may have 

arisen if market participants exited the 

swaps market. The Commission 

recognizes that any delay in compliance 

with the aforementioned business 

conduct and documentation 

requirements continues to leave the 

public without the protections and 

attendant benefits of those 

requirements. However, the 

Commission believes that delaying 

compliance for only certain business 

conduct and documentation 

requirements, while retaining the 

original compliance dates for 

fundamental counterparty protections 

relating to (i) prohibitions on fraud, 

manipulation and abusive practices, (ii) 

fair dealings in communications, and 

(iii) reasonable diligence regarding 

recommended swaps, will mitigate 

those effects while avoiding this risk 

that market participants will exit the 

market due to legal uncertainty. 

b. Efficiency, Competitiveness, and 

Financial Integrity of Markets 

The Commission believes that 

extending the compliance dates for the 

aforementioned rules will help protect 

the efficiency and competitiveness of 

the markets by obviating the need to 

stop transacting in swaps due to delay 

in complying with specific Commission 

regulations. It will also strengthen the 

financial integrity of markets by 

ensuring that market participants do not 

transact in the swaps markets while not 

being in full compliance with these 

regulations. 

c. Price Discovery 

If concerns regarding non-compliance 

results in a reduction in participation by 

a large number of market participants, 

such a decrease in swaps activity will 

adversely impact the price discovery 

process of the swaps markets. 

d. Sound Risk Management 

If counterparties refrain from 

transacting in swaps, the ability of other 

market participants to hedge their risks 

using these instruments may suffer. By 

mitigating the concerns of market 

participants regarding compliance with 

Commission rules, the changes to 

compliance dates being adopted herein 

help ensure that, while firms diligently 

complete the compliance requirements, 

they can continue entering into swap 

transactions to hedge their business and 

investment risks. 

e. Other Public Interest Considerations 

The Commission has not identified an 

impact on other public interest 

considerations, other than those 

mentioned above, as a result of the 

changes to compliance dates being 

adopted herein, but seeks comment as to 

any potential impact on this and other 

15(a) factors. 

Issued in Washington, DC on December 18, 

2012, by the Commission. 

Sauntia S. Warfield, 

Assistant Secretary of the Commission. 

Appendix to Business Conduct and 

Documentation Requirements for Swap 

Dealers and Major Swap Participants— 

Commission Voting Summary 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Gensler and 

Commissioners Sommers, Chilton, O’Malia 

and Wetjen voted in the affirmative; no 

Commissioner voted in the negative. 

[FR Doc. 2012–30885 Filed 12–31–12; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Food and Drug Administration 

21 CFR Parts 520 and 558 

[Docket No. FDA–2012–N–0002] 

New Animal Drugs; Meloxicam; 

Nicarbazin 

AGENCY: Food and Drug Administration, 

HHS. 

ACTION: Final rule. 

SUMMARY: The Food and Drug 

Administration (FDA) is amending the 

animal drug regulations to reflect 


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