Federal Register / Vol. 77, No. 88 / Monday, May 7, 2012 / Proposed Rules 26709 

products will continue to be subject to 

FDA evaluation for safety and FSIS 

evaluation for suitability. Company 

costs and the agencies’ costs associated 

with these evaluations will not be 

affected by this proposed rule should it 

become final. The only change would be 

the process for listing the substances 

specified in this proposal after they 

have been approved. 

Regulatory Flexibility Act 

Pursuant to section 605(b) of the 

Regulatory Flexibility Act, 5 U.S.C. 

605(b), the FSIS Administrator has 

made a preliminary determination that 

this proposed rule will not have a 

significant impact on a substantial 

number of small entities. This 

determination is based primarily on the 

fact that the proposed rule would not 

affect the process for approving new 

uses of sodium benzoate, sodium 

propionate, and benzoic acid in meat or 

poultry products. This proposed rule 

would make the process of listing 

approved uses of these substances more 

efficient by eliminating the need for 

FSIS to conduct rulemaking each time a 

new use is approved. 

Paperwork Reduction Act 

This rule does not contain any new 

information collection or record keeping 

requirements that are subject to the 

Office of Management and Budget 

(OMB) approval under the Paperwork 

Reduction Act, 44 U.S.C. 3501, et seq. 

E-Government Act 

FSIS and USDA are committed to 

achieving the purposes of the EGovernment Act (44 U.S.C. 3601, et 

seq.) by, among other things, promoting 

the use of the Internet and other 

information technologies and providing 

increased opportunities for citizen 

access to Government information and 

services, and for other purposes. 

Executive Order 12988 

This proposed rule has been reviewed 

under Executive Order 12988, Civil 

Justice Reform. This proposed rule: (1) 

Has no retroactive effect; and (2) does 

not require administrative proceedings 

before parties may file suit in court 

challenging this rule. However, the 

administrative procedures specified in 9 

CFR 306.5, 381.35, and 590.300 through 

590.370, respectively, must be 

exhausted before any judicial challenge 

may be made of the application of the 

provisions of the proposed rule, if the 

challenge involves any decision of an 

FSIS employee relating to inspection 

services provided under the FMIA, 

PPIA, or EPIA. 

Additional Public Notification 

FSIS will announce the availability of 

this proposed rule on-line through the 

FSIS Web page located at http:// 

www.fsis.usda.gov/ 

regulations_&_policies/ 

Federal_Register_Proposed_Rules/ 

index.asp. 

FSIS also will make copies of this 

Federal Register publication available 

through the FSIS Constituent Update, 

which is used to provide information 

regarding FSIS policies, procedures, 

regulations, Federal Register notices, 

FSIS public meetings, and other types of 

information that could affect or would 

be of interest to our constituents and 

stakeholders. The Update is 

communicated via Listserv, a free email 

subscription service for industry, trade, 

and farm groups, consumer interest 

groups, allied health professionals, 

scientific professionals, and other 

individuals who have requested to be 

included. The Update also is available 

on the FSIS Web page. Through Listserv 

and the Web page, FSIS is able to 

provide information to a much broader, 

more diverse audience. 

In addition, FSIS offers an email 

subscription service which provides 

automatic and customized access to 

selected food safety news and 

information. This service is available at 

http://www.fsis.usda.gov/ 

news_and_events/email_subscription/. 

Options range from recalls to export 

information to regulations, directives, 

and notices. Customers can add or 

delete subscriptions themselves, and 

have the option to password-protect 

their accounts. 

List of Subjects in 9 CFR Part 424 

Food additives, Food packaging, Meat 

inspection, Poultry and poultry 

products. 

For the reasons set forth in the 

preamble, FSIS proposes to amend 9 

CFR part 424 as follows: 

PART 424—PREPARATION AND 

PROCESSING OPERATIONS 

1. The authority citation for part 424 

would continue to read as follows: 

Authority: 7 U.S.C. 450, 1901–1906; 21 

U.S.C. 451–470, 601–695; 7 CFR 2.18, 2.53. 

2. Revise § 424.23(a)(3) as follows: 

§ 424.23 Prohibited uses. 

* * * * * 

(a) * * * 

(3) Sorbic acid, calcium sorbate, 

sodium sorbate, and other salts of sorbic 

acid shall not be used in cooked 

sausages or any other meat; sulfurous 

acid and salts of sulfurous acid shall not 

be used in or on any meat; and niacin 

or nicotinamide shall not be used in or 

on fresh meat product; except that 

potassium sorbate, propylparaben 

(propyl p-hydroxybenzoate), and 

calcium propionate, may be used in or 

on any product, only as provided in 9 

CFR chapter III. 

* * * * * 

Done at Washington, DC, on May 1, 2012. 

Alfred V. Almanza, 

Administrator. 

[FR Doc. 2012–10871 Filed 5–4–12; 8:45 am] 

BILLING CODE 3410–DM–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 49 

RIN 3038–AD83 

Swap Data Repositories: Interpretative 

Statement Regarding the 

Confidentiality and Indemnification 

Provisions of Section 21(d) of the 

Commodity Exchange Act 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Proposed interpretative 

statement. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) is proposing this interpretative 

statement to provide guidance regarding 

the applicability of the confidentiality 

and indemnification provisions set forth 

in new section 21(d) of the Commodity 

Exchange Act (‘‘CEA’’) added by section 

728 of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(‘‘Dodd-Frank Act’’). The Commission 

requests comment on all aspects of the 

proposed interpretative statement. The 

proposed interpretative statement 

clarifies that the provisions of section 

21(d) should not operate to inhibit or 

prevent foreign regulatory authorities 

from accessing data in which they have 

an independent and sufficient 

regulatory interest, even if that data also 

has been reported pursuant to the CEA 

and Commission regulations. 

DATES: Comments must be received on 

or before June 6, 2012. 

ADDRESSES: Comments, identified by 

RIN number 3038–AD83, may be sent by 

any of the following methods: 

• Agency Web site, via its Comments 

Online process: http:// 

comments.cftc.gov. Follow the 

instructions for submitting comments 

through the Web site. 

• Mail: David A. Stawick, Secretary of 

the Commission, Commodity Futures 


srobinson on DSK4SPTVN1PROD with PROPOSALS
26710 Federal Register / Vol. 77, No. 88 / Monday, May 7, 2012 / Proposed Rules 

1 5 U.S.C. 552. 

2 17 CFR 145.9. 

3See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Pub. L. 111–203, 124 

Stat. 1376 (2010), available at http://www.cftc.gov/ 

LawRegulation/OTCDERIVATIVES/index.htm. 

4Pursuant to section 701 of the Dodd-Frank Act, 

Title VII may be cited as the ‘‘Wall Street 

Transparency and Accountability Act of 2010;’’ 

7 U.S.C. 1 et seq. 

5 7 U.S.C. 2(a)(13)(G). 

6Section 721 of the Dodd-Frank Act amends 

section 1a of the CEA to add a definition of the term 

‘‘swap data repository.’’ Pursuant to CEA section 

1a(48), the term ‘‘swap data repository means any 

person that collects and maintains information or 

records with respect to transactions or positions in, 

or the terms and conditions of, swaps entered into 

by third parties for the purpose of providing a 

centralized recordkeeping facility for swaps.’’ 

7 U.S.C. 1a(48). 

7See 7 U.S.C. 24a(c). See also Commission, Final 

Rulemaking: Swap Data Recordkeeping and 

Reporting Requirements, 77 FR 2136, Jan. 13, 2012 

(‘‘Data Final Rules’’). The Data Final Rules, among 

other things, set forth regulations governing SDR 

data collection and reporting responsibilities under 

part 45 of the Commission’s regulations. 

8The Commission’s regulations designate such 

regulators as either an ‘‘Appropriate Domestic 

Regulator’’ or an ‘‘Appropriate Foreign Regulator’’ 

in § 49.17(b). See Commission, Final Rulemaking: 

Swap Data Repositories: Registration Standards, 

Duties and Core Principles, 76 FR 54538, 54554 

Sept. 1, 2011 (‘‘SDR Final Rules’’). 

9 7 U.S.C. 24a(c)(7). 

10 7 U.S.C. 12. 

11 7 U.S.C. 24a(d). 

12See section 752(a) of the Dodd-Frank Act. 

13See letter from Gary Gensler, Chairman of the 

Commission, and Mary Schapiro, Chairman of the 

SEC, to Michel Barnier, European Commissioner for 

Internal Markets and Services, European 

Commission, dated June 8, 2011. 

14See SDR Final Rules at 54554. 

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. 

FOR FURTHER INFORMATION CONTACT: 

Adedayo Banwo, Counsel, Office of the 

General Counsel, at (202) 418.6249, 

abanwo@cftc.gov; With respect to 

questions relating to international 

consultation and coordination: 

Jacqueline Mesa, Director, Office of 

International Affairs, at (202) 418.5386, 

jmesa@cftc.gov, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW., 

Washington, DC 20581. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to http:// 

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 

(‘‘FOIA’’),1 a petition for confidential 

treatment of the exempt information 

may be submitted according to the 

procedures established in § 145.9 of the 

CFTC’s regulations.2 The Commission 

reserves the right, but shall have no 

obligation, to review, prescreen, filter, 

redact, refuse, or remove any or all of 

your submission from http:// 

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 FOIA. 

SUPPLEMENTARY INFORMATION: In this 

release, the Commission addresses 

issues raised by foreign regulators with 

respect to the scope and application of 

the confidentiality and indemnification 

provisions of new section 21(d) of the 

CEA and proposes to clarify that these 

provisions should not operate to inhibit 

or prevent foreign regulatory authorities 

from accessing data in which they have 

an independent and sufficient 

regulatory interest. 

I. Background: Statutory and 

Regulatory Authorities 

On July 21, 2010, President Obama 

signed into law the Dodd-Frank Act.3

Title VIIamended the CEA to establish 

a comprehensive new regulatory 

framework for swaps and security-based 

swaps.4 The legislation was enacted 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 swap 

dealers and major swap participants; (2) 

imposing clearing and trade execution 

requirements on standardized derivative 

products; (3) creating robust 

recordkeeping and real-time reporting 

regimes; and (4) enhancing the 

Commission’s rulemaking and 

enforcement authorities with respect to, 

among others, all registered entities and 

intermediaries subject to the 

Commission’s oversight. 

To enhance transparency, promote 

standardization and reduce systemic 

risk, section 727 of the Dodd-Frank Act 

added to the CEA new section 

2(a)(13)(G),5 which requires all swaps— 

whether cleared or uncleared—to be 

reported to swap data repositories 

(‘‘SDRs’’).SDRs are new registered 

entities created by section 728 of the 

Dodd-Frank Act.6 SDRs are required to 

perform specified functions related to 

the collection and maintenance of swap 

transaction data and information.7

CEA section 21(c)(7) requires that 

SDRs make data available to certain 

domestic and foreign regulators 8 under 

specified circumstances.9 Separately, 

section 21(d) mandates that prior to 

receipt of any requested data or 

information from an SDR, a regulatory 

authority described in section 21(c)(7) 

shall agree in writing to abide by the 

confidentiality requirements described 

in section 8 of the CEA,10 and to 

indemnify the SDR and the Commission 

for any expenses arising from litigation 

relating to the information provided 

under section 8 of the CEA.11

Section 752 of the Dodd-Frank Act 

seeks to ‘‘promote effective and 

consistent global regulation of swaps,’’ 

and provides that the CFTC and foreign 

regulators ‘‘may agree to such 

information-sharing arrangements as 

may be deemed to be necessary or 

appropriate in the public interest. 

* * *’’ 12 In light of this statutory 

directive, the Commission has been 

working to provide sufficient access to 

SDR data to appropriate domestic and 

foreign regulatory authorities. 

On June 8, 2011, the Chairman of the 

CFTC and the Chairman of the 

Securities and Exchange Commission 

(‘‘Chairmen’’) jointly submitted a letter 

to Michel Barnier, European 

Commissioner for Internal Markets and 

Services,13 highlighting their desire for 

international cooperation. In the letter, 

the Chairmen expressed their belief that 

indemnification and notice 

requirements need not apply when a 

registered SDR is also registered in a 

foreign jurisdiction and the foreign 

regulator, acting within the scope of its 

jurisdiction, seeks information directly 

from the SDR. 

On September 1, 2011, the 

Commission adopted regulations 

implementing CEA section 21’s 

registration standards, duties, and core 

principles for SDRs. To implement the 

provisions of section 21(c)(7) and (d), 

the Commission adopted definitions 

and standards for determining access by 

domestic and foreign regulators to data 

maintained by SDRs. 

The Commission acknowledged in the 

SDR Final Rules that the CEA’s 

indemnification requirement could have 

the unintended effect of inhibiting 

direct access by other regulators to data 

maintained by SDRsdue to various 

home country laws and regulations.14

The SDR Final Rulesprovided that 


srobinson on DSK4SPTVN1PROD with PROPOSALS
Federal Register / Vol. 77, No. 88 / Monday, May 7, 2012 / Proposed Rules 26711 

15The term Appropriate Domestic Regulator is 

defined in 17 CFR 49.17(b)(1) as the Securities and 

Exchange Commission; each prudential regulator 

identified in section 1a(39) of the CEA. 7 U.S.C. 

1a(39); the financial Stability Oversight Council; the 

Department of Justice; any Federal Reserve Bank; 

the Office of Financial Research; and any other 

person the Commission deems appropriate. 

16 In the Commission’s view, it is appropriate to 

permit access to the swap data maintained by SDRs 

to Appropriate Domestic Regulators that have 

concurrent regulatory jurisdiction over such SDRs, 

without the application of the notice and 

indemnification provisions of sections 21(c)(7) and 

(d) of the CEA. See SDR Final Rules at 54554 n.163. 

Accordingly, these provisions do not apply to an 

Appropriate Domestic Regulator that has regulatory 

jurisdiction over an SDR registered with it pursuant 

to a separate statutory authority that is also 

registered with the Commission, if the Appropriate 

Domestic Regulator executes an MOU or similar 

information sharing arrangement with the 

Commission and the Commission, consistent with 

CEA section 21(c)(4)(A), designates the Appropriate 

Domestic Regulator to receive direct electronic 

access. See 17 CFR 17(d)(2). 

17The term Appropriate Foreign Regulator is 

defined in 17 CFR 49.17(b)(2) as a foreign regulator 

with an existing memorandum of understanding 

(‘‘MOU’’) or similar type of information sharing 

arrangement executed with the Commission, and/or 

a foreign regulator without an MOU as determined 

on a case-by-case basis by the Commission. 

18Section 725(f) of the Dodd-Frank Act amended 

section 8(e) of the CEA to include foreign central 

banks and ministries. 

19See SDR Final Rules at 54554. 

20 Id. 

21See 17 CFR 49.3(b). 

22Legislation has been introduced in Congress 

that would amend the CEA to eliminate or 

substantially limit the SDR indemnification 

provision. 

23See section 752(a) of the Dodd-Frank Act. 

24See public comment file in response to the 

proposal for the SDR Final Rules, available at 

http://comments.cftc.gov/PublicComments/ 

CommentList.aspx?id=939 and SDR Final Rules 

note 6 at 54539, supra. 

25This working group was jointly established by 

the Committee on Payment and Settlement Systems 

(‘‘CPSS’’) of the Bank of International Settlements 

and the Technical Committee of the International 

Organization of Securities Commissions (‘‘IOSCO’’). 

The Working Group Report presented a set of 

factors to consider in connection with the design, 

operation and regulation of SDRs. A significant 

focus of the Working Group Report is access to SDR 

data by appropriate regulators. The Working Group 

Report urges that a trade repository ‘‘should support 

market transparency by making data available to 

relevant authorities and the public in line with their 

respective information needs.’’ The Working Group 

Report is available at http://www.bis.org/publ/ 

cpss90.pdf. See also CPSS–IOSCO Consultative 

Report, Principles of Financial Market 

Infrastructures (March 2011) available at http:// 

www.bis.org/publ/cpss94.pdf. See also Financial 

Stability Board (‘‘FSB’’), Implementing OTC 

Derivatives Market Reforms, Oct. 25, 2010 (‘‘FSB 

Report’’); FSB, Derivative Market Reforms, Progress 

Report on Implementation, Apr. 15, 2010 (‘‘FSB 

Progress Report’’). 

26See comment letter from MFA. 

27See comment letters from CME and TriOptima. 

28See comment letter from DTCC. 

29See comment letter from ESMA. 

under specified circumstances, certain 

‘‘Appropriate Domestic Regulators’’ 15

may gain access to the swap data 

reported and maintained by SDRs 

without being subject to the notice and 

indemnification requirements of CEA 

sections 21(c)(7) and (d).16 In 

connection with foreign regulatory 

authorities, the Commission determined 

in the SDR Final Rules that confidential 

swap data reported to and maintained 

by an SDR may be accessed by an 

Appropriate Foreign Regulator 17

without the execution of a 

confidentiality and indemnification 

agreement when the Appropriate 

Foreign Regulator has supervisory 

authority over an SDR registered with it 

pursuant to foreign law and/or 

regulation that is also registered with 

the Commission. 

The confidentiality and 

indemnification provisions of new CEA 

section 21 apply only when a regulatory 

authority seeks access to data from an 

SDR. In the SDR Final Rules, the 

Commission noted that section 8(e) of 

the CEA provides for the Commission 

(as opposed to an SDR) to share 

confidential information in its 

possession with any department or 

agency of the Government of the United 

States, or with any foreign futures 

authority, department or agency of any 

foreign government or political 

subdivision thereof,18 acting within the 

scope of its jurisdiction.19

The SDR Final Rules became effective 

on October 31, 2011.20 Under these 

rules, trade repositories may apply to 

the Commission for full registration as 

SDRs.Pending the adoption and 

effectiveness of other, related regulatory 

provisions and definitions, however, 

such registrations are deemed 

‘‘provisional.’’ 21

II. Considerations Relevant to the 

Commission’s Proposed Interpretative 

Statement 22

A. International Considerations 

As noted above, section 752(a) of the 

Dodd-Frank Act directs the Commission 

to consult and coordinate with foreign 

regulatory authorities regarding the 

establishment of consistent 

international standards for the 

regulation of swaps and various ‘‘swap 

entities.’’ Section 752(a) also provides 

that the Commission ‘‘may agree to such 

information-sharing arrangements [with 

foreign regulatory authorities] as may be 

deemed to be necessary or appropriate 

in the public interest’’ or for the 

protection of investors and 

counterparties.23

The Commission is committed to a 

cooperative international approach to 

the registration and regulation of SDRs, 

and consulted extensively with various 

foreign regulatory authorities in 

promulgating both its proposed and 

final regulations concerning SDRs.24

The Commission notes that the SDR 

Final Rules are largely consistent with 

the recommendations and goals of the 

May 2010 ‘‘CPSS–IOSCO Consultative 

Report, Considerations for Trade 

Repositories in the OTC Derivatives 

Market’’ (‘‘Working Group Report’’).25

B. Public Comments on SDR Regulations 

In developing the SDR Final Rules, 

the Commission received several 

comments regarding access to SDR data 

by foreign regulatory authorities and the 

confidentiality and indemnification 

provisions of CEA section 21(d). The 

Commission has considered these 

comments in formulating this proposed 

interpretation but requests further 

comment concerning the specific 

interpretative statement proposed. 

Managed Funds Association (‘‘MFA’’) 

requested that the Commission actively 

participate in facilitating foreign 

regulatory access and confirming a 

foreign regulator’s authority in 

connection with any SDR data request.26

The CME Group Inc. (‘‘CME’’) argued 

against the Commission designating any 

third party to receive swap data, and 

TriOptima suggested that the 

Commission ‘‘adopt as flexible an 

interpretation as possible’’ regarding the 

indemnification provisions in CEA 

section 21(d).27

The Depository Trust & Clearing 

Corporation (‘‘DTCC’’) stated that the 

‘‘indemnification provisions should not 

apply in situations where regulators are 

carrying out regulatory responsibilities, 

acting in a manner consistent with 

international agreements and 

maintaining the confidentiality of 

data.’’ 28 Additionally, the Commission 

received a comment letter from the 

European Securities and Markets 

Authority (‘‘ESMA’’) 29 stating that it 

believes the indemnification provision 

‘‘undermines’’ principles of trust and 

consultation. 

C. Consultations With Foreign 

Regulatory Authorities 

Consistent with the international 

harmonization envisioned by section 

752 of the Dodd-Frank Act, the 

Commission has engaged in 

consultations with foreign regulatory 

authorities regarding the Commission’s 

regulations relating to the Dodd-Frank 

Act. During these consultations, many 

foreign regulatory authorities have 

expressed concern about the difficulty 

in complying with the indemnification 

provisions of CEA section 21(d). 

As a consequence of these 

consultations with foreign regulatory 


srobinson on DSK4SPTVN1PROD with PROPOSALS
26712 Federal Register / Vol. 77, No. 88 / Monday, May 7, 2012 / Proposed Rules 

30 F. Hoffmann-LaRoche, Ltd. v. Empagran S.A., 

542 U.S. 155, 164 (2004). In Hoffmann-LaRoche, the 

Supreme Court also stated that canons of statutory 

construction ‘‘assume that legislators take account 

of the legitimate sovereign interests of other nations 

when they write American laws.’’ Id. 

31 Id. at 164–165. 

32Rest. 3d., Third Restatement Foreign Relations 

Law section 403 (scope of a statutory grant of 

authority must be construed in the context of 

international law and comity including, as 

appropriate, the extent to which regulation is 

consistent with the traditions of the international 

system). 

33The Commission notes that access to data held 

by trade repositories is a concept under discussion 

and development among international regulators. 

At the request of the FSB, CPSS and IOSCO have 

established a working group of relevant authorities 

to produce a forthcoming report regarding 

authorities’ access to trade repository data. 

34Regarding the Commission’s access to SDR 

data, section 21(b)(1)(A) of the CEA states that the 

Commission ‘‘shall prescribe standards that specify 

the data elements for each swap that shall be 

collected and maintained by each registered swap 

data repository.’’ Section 21(c)(1) of the CEA 

requires registered SDRs to ‘‘accept data prescribed 

by the Commission for each swap under subsection 

(b).’’ Therefore, with respect to Commission access 

to data held in registered SDRs, the Commission 

authorities, and pursuant to the 

mandate for cooperation under section 

752, the Commission concludes that 

further guidance is necessary to ensure 

that appropriate access by foreign 

regulatory authorities is not 

unnecessarily inhibited. For example, 

the Commission has learned that foreign 

regulatory authorities have asked 

whether a recognition regime with 

respect to SDRs, and/or access by 

foreign authorities that do not regulate 

an SDR, would conflict with 

§ 49.17(d)(3) and § 49.18(c) of the SDR 

Final Rules, which refer to registration 

with Appropriate Foreign Regulators. 

Foreign regulatory authorities have also 

taken action to harmonize regulatory 

reporting rules. 

While the SDR Final Rules address 

foreign regulators with supervisory 

authority and regulatory responsibility, 

the Commission is proposing the 

following interpretative statement, 

pursuant to section 752, to ensure that 

foreign regulators receive sufficient 

access to data reported to SDRs where 

such foreign regulators have an 

independent and sufficient regulatory 

interest. 

III. Commission Proposed 

Interpretative Statement 

In this proposed interpretative 

statement, the CFTC provides guidance 

regarding the confidentiality and 

indemnification provisions of CEA 

section 21(d). As noted above, the 

Commission seeks comment from 

interested members of the public on all 

aspects of this proposed interpretative 

statement. 

A. Data Reported to Registered SDRs 

The Commission understands that 

some registered SDRs also maybe 

registered, recognized or otherwise 

authorized in a foreign jurisdiction and 

may accept swap data reported pursuant 

to the foreign regulatory regime. The 

Commission concludes that the 

confidentiality and indemnification 

provisions of CEA section 21(d) 

generally apply only to such data 

reported pursuant to the CEA and 

Commission regulations. 

The Commission further concludes 

that the confidentiality and 

indemnification provisions should not 

operate to inhibit or prevent foreign 

regulatory authorities from accessing 

data in which they have an independent 

and sufficient regulatory interest (even 

if that data also has been reported 

pursuant to the CEA and Commission 

regulations). 

Accordingly, and consistent with the 

Commission’s SDR Final Rules, the 

Commission proposes to interpret CEA 

section 21(d) such that a registered SDR 

would not be subject to the 

confidentiality and indemnification 

provisions of that section if: 

• Such registered SDR also is 

registered, recognized or otherwise 

authorized in a foreign jurisdiction’s 

regulatory regime; and 

• The data sought to be accessed by 

a foreign regulatory authority has been 

reported to such registered SDR 

pursuant to the foreign jurisdiction’s 

regulatory regime. 

This proposed interpretative guidance 

is grounded in principles of 

international law and comity. For 

example, in F. Hoffmann-La Roche Ltd. 

v. Empagran S.A., the U.S. Supreme 

Court, in reviewing the extraterritorial 

applicability of a different federal 

statute, stated that extraterritorial 

jurisdiction should be construed, where 

ambiguous, ‘‘to avoid unreasonable 

interference with the sovereign 

authority of other nations.’’ 30 In cases 

considering concepts of international 

law and comity in evaluating the 

extraterritorial scope of federal statutes, 

the Supreme Court has noted that the 

principles in the Third Restatement of 

Foreign Relations Law are relevant to 

the interpretation of U.S. law.31

Specifically, section 403 of the Third 

Restatement of Foreign Relations Law 

states, in relevant part: 

Whether exercise of jurisdiction over a 

person or activity is unreasonable is 

determined by evaluating all relevant factors, 

including, where appropriate: 

(a) The link of the activity to the territory 

of the regulating state, i.e., the extent to 

which the activity takes place within the 

territory, or has substantial, direct, and 

foreseeable effect upon or in the territory; 

(b) The connections, such as nationality, 

residence, or economic activity, between the 

regulating state and the person principally 

responsible for the activity to be regulated, or 

between that state and those whom the 

regulation is designed to protect; 

(c) The character of the activity to be 

regulated, the importance of regulation to the 

regulating state, the extent to which other 

states regulate such activities, and the degree 

to which the desirability of such regulation 

is generally accepted; 

(d) The existence of justified expectations 

that might be protected or hurt by the 

regulation; 

(e) The importance of the regulation to the 

international political, legal, or economic 

system; 

(f) The extent to which the regulation is 

consistent with the traditions of the 

international system; 

(g) The extent to which another state may 

have an interest in regulating the activity; 

and 

(h) The likelihood of conflict with 

regulation by another state.32

To avoid unreasonable interference 

with the sovereign authority of foreign 

regulators, this proposed interpretative 

statement is supported and 

underpinned by principles of 

international law and comity. 

B. Foreign Regulatory Access 

In the Commission’s view, a foreign 

regulator’s access to data held in a 

registered SDR that also is registered, 

recognized, or otherwise authorized in a 

foreign jurisdiction’s regulatory regime, 

where the data sought to be accessed 

has been reported pursuant to that 

regulatory regime, should be governed 

by such foreign jurisdiction’s regulatory 

regime. The Commission concludes that 

application of the requirements of CEA 

section 21(d) in these circumstances is 

unreasonable in light of, among other 

things, the importance of such data to 

the foreign jurisdiction’s regulatory 

regime, foreign regulators’ interest in 

unfettered access to such data, and the 

traditions of mutual trust and 

cooperation among international 

regulators.33

Therefore, the Commission proposes 

that a foreign regulator’s access to data 

from a registered SDR that also is 

registered, recognized, or otherwise 

authorized in a foreign jurisdiction’s 

regulatory regime, where the data to be 

accessed has been reported pursuant to 

that regulatory regime, will be dictated 

by that foreign jurisdiction’s regulatory 

regime and not by the CEA or 

Commission regulations. Such access is 

appropriate, in the Commission’s view, 

even if the applicable data is also 

reported to the registered SDR pursuant 

to the Commission’s Data Final Rules.34


srobinson on DSK4SPTVN1PROD with PROPOSALS
Federal Register / Vol. 77, No. 88 / Monday, May 7, 2012 / Proposed Rules 26713 

concludes that the direct electronic access 

provisions of CEA section 21(c)(4) apply only to 

such data that the SDR is required to accept under 

section 21(c)(1), which is further defined by part 45 

of the Commission’s regulations. In this respect, the 

Commission concludes that its direct electronic 

access applies only to such data reported pursuant 

to section 21 and Commission regulations 

promulgated thereunder. 

35As noted above, CEA section 8(e) allows the 

Commission to share confidential information in its 

possession obtained in connection with the 

administration of the CEA with ‘‘any department or 

agency of the Government of the United States’’ or 

with any foreign futures authority or a department, 

central bank or ministry, or agency of a foreign 

government or political subdivision thereof, acting 

within the scope of its jurisdiction. The 

Commission acknowledges the difficulty that 

registered SDRs may face in determining what data 

or reporting falls within the jurisdiction of a 

regulatory authority. In this regard, the Commission 

is considering a separate release regarding section 

2(i) of the CEA. 

Additionally, the Commission 

reiterates that a foreign regulatory 

authority, like domestic regulators, can 

nonetheless receive confidential data, 

without the execution of a 

confidentiality and indemnification 

agreement, from the Commission (as 

opposed to an SDR) pursuant to section 

8(e) of the CEA.35 Such data sharing and 

access would be governed by the 

confidentiality provisions of section 8 of 

the CEA. 

C. Request for Comment 

The Commission requests comment 

on all aspects of its proposed 

interpretative statement. In particular, 

the Commission requests comment on 

the following issue: How would the 

timing and implementation of foreign 

jurisdictions’ regulatory regimes affect 

the Commission’s proposed 

interpretative guidance? 

By the Commission. 

Dated: Issued in Washington, DC, on April 

30, 2012. 

David A. Stawick, 

Secretary of the Commission. 

Appendices To Swap Data Repositories: 

Interpretative Statement Regarding the 

Confidentiality and Indemnification 

Provisions of Section 21(d) of the 

Commodity Exchange Act Interpretive 

Statement—Commission Voting 

Summary and Statements of 

Commissioners 

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 votes in the negative. 

Appendix 2—Statement of Chairman 

Gary Gensler 

I support the proposed interpretative 

statement regarding the application of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank Act) 

indemnification provisions for swap data 

repositories (SDRs). The Commission is 

working closely with international regulators 

on a collaborative approach regarding how 

data may be accessed by regulators. The 

proposed guidance, which benefited from 

international input, states the Commission’s 

view that foreign regulators will not be 

subject to the indemnification provisions in 

the Dodd-Frank Act if the SDR is registered, 

recognized or otherwise authorized by 

foreign law and the data to be accessed is 

reported to the SDR pursuant to foreign law. 

The public will now have an opportunity to 

comment on the proposed guidance, and I 

look forward to the public’s input. 

Appendix 3—Statement of 

Commissioner Jill E. Sommers 

I concur in the issuance of this Proposed 

Interpretative Statement Regarding the 

Confidentiality and Indemnification 

Provisions of Section 21(d) of the Commodity 

Exchange Act (Proposed Interpretive 

Statement). It provides some additional 

clarification with respect to how the 

Commission intends to interpret the 

application of the Section 21(d) 

indemnification provisions beyond what the 

Commission stated when it finalized the 

swap data repository (SDR) rules. See Swap 

Data Repositories: Registration Standards, 

Duties and Core Principles, 76 FR 54,538 

(Sept. 1, 2011). However, a legislative fix is 

the only real solution to providing 

appropriate regulators, both foreign and 

domestic, with timely access to relevant data. 

I agree with Commissioner O’Malia that the 

Commission should publicly support repeal 

of the indemnification provisions, and note 

that the SEC has already done so. 

When finalizing the SDR rules, the 

Commission stated that a foreign regulator 

may have direct access to confidential swap 

data reported to and maintained by an SDR 

registered with the Commission without 

executing a Confidentiality and 

Indemnification Agreement when the SDR is 

also registered with the foreign regulator and 

the foreign regulator is acting in a regulatory 

capacity with respect to the SDR. See id. at 

54,554. The Proposed Guidance clarifies that 

this should be the case even if the data the 

foreign regulator seeks also has been reported 

pursuant to the CEA and Commission 

regulations. 

Aside from making this point, the 

Proposed Interpretive Statement does not 

provide any information that cannot be 

otherwise gleaned from the SDR final rules, 

with one notable exception. The final SDR 

rules define an ‘‘Appropriate Foreign 

Regulator’’ as one that has supervisory 

authority over an SDR that is registered with 

the foreign regulator and with the CFTC. The 

Proposed Interpretive Statement expands this 

concept to SDRs that are registered, 

recognized, or otherwise authorized in a 

foreign jurisdiction’s regulatory regime. 

Thus, registration and recognition are 

equivalent. This is a welcome clarification 

and a step in the right direction. 

I should note that the indemnification 

provisions of Section 21(d) may have an 

adverse effect on U.S. regulators too. The 

Proposed Interpretive Statement touches on a 

distinction drawn in Part 49 between 

‘‘Appropriate Domestic Regulators,’’ which 

include a number of domestic regulatory 

authorities, and an ‘‘Appropriate Domestic 

Regulator with Regulatory Responsibility 

over a Swap Data Repository’’ (a single entity 

subcategory of Appropriate Domestic 

Regulators, namely, the Securities and 

Exchange Commission (SEC)). Only the latter 

category of domestic regulator (i.e. the SEC) 

is exempt from the indemnification 

provisions of Section 21(d). While it makes 

sense that the SEC should be able to receive 

SDR data directly from an SDR absent an 

indemnification agreement, I encourage 

comments as to whether other Appropriate 

Domestic Regulators should have similar 

access. 

Appendix 4—Statement of 

Commissioner Scott D. O’Malia 

I concur in support of the Commission’s 

proposed interpretative statement (‘‘Proposed 

Interpretative Statement’’) regarding the 

confidentiality and indemnification 

provisions of Section 21(d) of the Commodity 

Exchange Act (‘‘CEA’’). 

Ultimately, Congress should repeal the 

confidentiality and indemnification 

provisions of Section 21(d) of the CEA and 

the Commission should publicly support that 

repeal. Absent a legislative fix, however, I 

believe the Commission is taking the right 

step to allay the concerns expressed by many 

foreign regulatory authorities. 

I am somewhat concerned that the 

Proposed Interpretative Statement does not 

address one important issue. Specifically, the 

Proposed Interpretative Statement would not 

provide foreign regulatory authorities with 

access to swaps data if those authorities had 

not yet finalized their regulations. In order to 

better understand the public’s view on this 

issue, I have added a question seeking 

comment on how the timing and 

implementation of foreign jurisdictions’ 

regulatory regimes should affect the 

Commission’s final interpretation. 

Lastly, I am pleased that this Proposed 

Interpretative Statement is based on 

principles of international harmonization 

and comity. The Commission should 

continue to consult with foreign regulatory 

authorities in a manner consistent with 

international agreements regarding the 

registration of swap data repositories and the 

sharing of swaps data. In my view, these 

principles should establish the foundation of 

the Commission’s forthcoming rulemaking 

concerning the extraterritorial application of 

the Dodd-Frank Act to foreign-based entities. 

Several foreign jurisdictions are in the 

process of finalizing new rules for the 

regulation of swaps and it is important that 

those rules provide a level and competitive 

playing field for U.S. firms as well. 

[FR Doc. 2012–10918 Filed 5–4–12; 8:45 am] 

BILLING CODE 6351–01–P 


srobinson on DSK4SPTVN1PROD with PROPOSALS