75208 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

1 15 U.S.C. 78a et seq. All references in this 

release to the Exchange Act refer to the Securities 

Exchange Act of 1934, as amended by the DoddFrank Act. 

2The Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Pub. L. No. 111–203, H.R. 

4173). 

3See id. at Preamble. 

4See ‘‘Financial Regulatory Reform—A New 

Foundation: Rebuilding Financial Supervision and 

Regulation,’’ U.S. Department of the Treasury, pp. 

47–48 (June 17, 2009). 

5Section 712(d) of the Dodd-Frank Act provides 

that the Commission and the CFTC, in consultation 

with the Board of Governors of the Federal Reserve 

System (‘‘Federal Reserve’’), shall jointly further 

define the terms ‘‘swap,’’ ‘‘security-based swap,’’ 

‘‘swap dealer,’’ ‘‘security-based swap dealer,’’ ‘‘major 

swap participant,’’ ‘‘major security-based swap 

participant,’’ ‘‘eligible contract participant,’’ and 

‘‘security-based swap agreement.’’ These terms are 

defined in Sections 721 and 761 of the Dodd-Frank 

Act and, with respect to the term ‘‘eligible contract 

participant,’’ in Section 1a(18) of the Commodity 

Exchange Act (‘‘CEA’’), 7 U.S.C. 1a(18), as redesignated and amended by Section 721 of the 

Dodd-Frank Act. Further, Section 721(c) of the 

Dodd-Frank Act requires the CFTC to adopt a rule 

to further define the terms ‘‘swap,’’ ‘‘swap dealer,’’ 

‘‘major swap participant,’’ and ‘‘eligible contract 

participant,’’ and Section 761(b) of the Dodd-Frank 

Act requires the Commission to adopt a rule to 

further define the terms ‘‘security-based swap,’’ 

‘‘security-based swap dealer,’’ ‘‘major security-based 

swap participant,’’ and ‘‘eligible contract 

participant,’’ with regard to SBSs, for the purpose 

of including transactions and entities that have 

been structured to evade Title VII of the DoddFrank Act. Finally, Section 712(a) of the DoddFrank Act provides that the Commission and CFTC, 

after consultation with the Federal Reserve, shall 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 240 and 242 

[Release No. 34–63346; File No. S7–34–10] 

RIN 3235–AK80 

Regulation SBSR—Reporting and 

Dissemination of Security-Based Swap 

Information 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rules. 

SUMMARY: In accordance with Section 

763 (‘‘Section 763’’) and Section 766 

(‘‘Section 766’’) of Title VII (‘‘Title VII’’) 

of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act (the 

‘‘Dodd-Frank Act’’), the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) is proposing Regulation 

SBSR—Reporting and Dissemination of 

Security-Based Swap Information 

(‘‘Regulation SBSR’’) under the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’).1 Proposed Regulation 

SBSR would provide for the reporting of 

security-based swap information to 

registered security-based swap data 

repositories or the Commission and the 

public dissemination of security-based 

swap transaction, volume, and pricing 

information. Registered security-based 

swap data repositories would be 

required to establish and maintain 

certain policies and procedures 

regarding how transaction data are 

reported and disseminated, and 

participants of registered security-based 

swap data repositories that are securitybased swap dealers or major securitybased swap participants would be 

required to establish and maintain 

policies and procedures that are 

reasonably designed to ensure that they 

comply with applicable reporting 

obligations. Finally, proposed 

Regulation SBSR also would require a 

registered SDR to register with the 

Commission as a securities information 

processor on existing Form SIP. 

DATES: Comments should be received on 

or before January 18, 2011. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/final.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7– on the subject line; or 

• Use the Federal eRulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–34–10. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Internet Web site 

(http://www.sec.gov/rules/ 

proposed.shtml). Comments are also 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549 on official 

business days between the hours of 10 

a.m. and 3 p.m. All comments received 

will be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. 

FOR FURTHER INFORMATION CONTACT: 

Michael Gaw, Assistant Director, at 

(202) 551–5602, David Michehl, Senior 

Special Counsel, at (202) 551–5627, 

Sarah Albertson, Special Counsel, at 

(202) 551–5647, Natasha Cowen, Special 

Counsel, at (202) 551–5652, Yvonne 

Fraticelli, Special Counsel, at (202) 551– 

5654, Geoffrey Pemble, Special Counsel, 

at (202) 551–5628, Brian Trackman, 

Special Counsel, at (202) 551–5616, Mia 

Zur, Special Counsel, at (202) 551–5638, 

Kathleen Gray, Attorney, at (202) 551– 

5305, Division of Trading and Markets, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–7010. 

SUPPLEMENTARY INFORMATION: The 

Commission is proposing Regulation 

SBSR under the Exchange Act providing 

for the reporting of security-based swap 

information to registered security-based 

swap data repositories or the 

Commission, and the public 

dissemination of security-based swap 

transaction, volume, and pricing 

information. The Commission is 

soliciting comments on all aspects of the 

proposed rules and will carefully 

consider any comments received. 

I. Introduction 

A. Background 

On July 21, 2010, the President signed 

the Dodd-Frank Act into law.2 The 

Dodd-Frank Act was enacted to, among 

other things, promote the financial 

stability of the United States by 

improving accountability and 

transparency in the financial system.3

Title VII of the Dodd-Frank Act provides 

the Commission and the Commodity 

Futures Trading Commission (‘‘CFTC’’) 

with the authority to regulate over-thecounter (‘‘OTC’’) derivatives in light of 

the recent financial crisis, which 

demonstrated the need for enhanced 

regulation in the OTC derivatives 

markets. The Dodd-Frank Act is 

intended to close loopholes in the 

existing regulatory structure and to 

provide the Commission and the CFTC 

with effective regulatory tools to oversee 

the OTC derivatives markets, which 

have grown exponentially in recent 

years and are capable of affecting 

significant sectors of the U.S. economy. 

The primary goals of Title VII, among 

others, are to increase the transparency 

and efficiency of the OTC derivatives 

markets and to reduce the potential for 

counterparty and systemic risk.4

The Dodd-Frank Act provides that the 

CFTC will regulate ‘‘swaps,’’ the 

Commission will regulate ‘‘securitybased swaps’’ (‘‘SBSs’’), and the CFTC 

and the Commission will jointly 

regulate ‘‘mixed swaps.’’ 5 The DoddVerDate Mar<15>2010 16:04 Dec 01, 2010 Jkt 223001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 E:\FR\FM\02DEP2.SGM 02DEP2

hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 75209 

jointly prescribe regulations regarding ‘‘mixed 

swaps,’’ as may be necessary to carry out the 

purposes of Title VII. To assist the Commission and 

CFTC in further defining the terms specified above, 

and to prescribe regulations regarding ‘‘mixed 

swaps’’ as may be necessary to carry out the 

purposes of Title VII, the Commission and the 

CFTC sought comment from interested parties. See 

Securities Exchange Act Release No. 62717 (August 

13, 2010), 75 FR 51429 (August 20, 2010) (File No. 

S7–16–10) (advance joint notice of proposed 

rulemaking regarding definitions contained in Title 

VII of the Dodd-Frank Act) (‘‘Definitions Release’’). 

6A SDR is ‘‘any person that collects and 

maintains information or records with respect to 

transactions or positions in, or the terms and 

conditions of, security-based swaps entered into by 

third parties for the purpose of providing a 

centralized recordkeeping facility for security based 

swaps.’’ See Section 3(a)(75) of the Exchange Act, 

15 U.S.C. 78c(a)(75). The Commission is also 

proposing today new Rules 13n–1 through 13n–11 

under the Exchange Act relating to the SDR 

registration process, the duties of SDRs, and the 

core principles for operating a registered SDR. See 

Securities Exchange Act Release No. 63347 

(November 19, 2010) (‘‘SDR Registration Proposing 

Release’’). 

7Rules governing the reporting and dissemination 

of swaps are the subject of a separate rulemaking 

by the CFTC. 

8The Commission and the CFTC solicited 

comments on the Market Data Roundtable. See 

Securities Exchange Act Release No. 62863 

(September 8, 2010), 75 FR 55575 (September 13, 

2010). Comments received by the Commission are 

available at http://www.sec.gov/cgi-bin/rulingcomments?ruling=df-title-vii-real-time-reporting

&rule_path=/comments/df-title-vii/real-timereporting&file_num=DF%20Title%20VII%20- 

%20Real%20Time%20Reporting&action=

Show_Form&title=Real-Time%20Reporting%20-

%20Title%20VII%20Provisions%

20of%20the%20Dodd-Frank%20Wall%20Street%

20Reform%20and%20Consumer%

20Protection%20Act. 

9See http://www.sec.gov/spotlight/ 

regreformcomments.shtml. 

10See SDR Registration Proposing Release, supra 

note 6. 

11This analysis is based on a sample of dollarquoted, gold record transactions submitted to the 

Depository Trust & Clearing Corporation (‘‘DTCC’’) 

between August 1, 2009, and July 30, 2010. 

12 15 U.S.C. 78c–3(e). 

Frank Act amends the Exchange Act to 

require the Commission to adopt rules 

providing for, among other things (1) the 

reporting of SBSs to a registered 

security-based swap data repository 

(‘‘SDR’’) 6 or to the Commission; and 

(2) real-time public dissemination of 

SBS transaction, volume, and pricing 

information.7 To fulfill these 

requirements, the Commission today is 

proposing Regulation SBSR, which 

would be comprised of Rules 900 to 911 

under the Exchange Act. In preparation 

for the rulemakings required by the 

Dodd-Frank Act, the Commission and 

the CFTC held a joint public roundtable 

(the ‘‘Market Data Roundtable’’) on 

September 14, 2010, to gain further 

insight into many of the issues 

addressed in this proposal.8 In addition, 

the Commission has offered the 

opportunity for the public to express its 

views on the Commission rulemakings 

required by the Dodd-Frank prior to 

proposing rules.9 The rules proposed 

today generally take into account the 

views expressed at the Market Data 

Roundtable, as well as any comments 

received. 

In a separate release, the Commission 

is today proposing new rules under the 

Exchange Act governing the securitybased swap data repository registration 

process, duties, and core principles.10

Proposed Rules 13n–1 through 13n–11 

under the Exchange Act would, among 

other things, require SDRs to comply 

with the requirements and core 

principles described in Section 13(n) of 

the Exchange Act. An SDR also would 

be required to appoint a chief 

compliance officer and specify the 

duties of the chief compliance officer. 

Taken together, the rules that the 

Commission proposes today would 

establish comprehensive regulation of 

SBS data and thus provide transparency 

for SBSs to regulators and the markets. 

The proposed rules would require SBS 

transaction information to be (1) 

provided to registered SDRs in 

accordance with uniform data 

standards; (2) verified and maintained 

by registered SDRs, which would serve 

as secure, centralized recordkeeping 

facilities that are accessible by 

regulators and relevant authorities; and 

(3) publicly disseminated in a timely 

fashion by registered SDRs. In 

combination, these proposed rules are 

designed to promote transparency and 

efficiency in the SBS markets and create 

an infrastructure to assist the 

Commission and other regulators in 

performing their market oversight 

functions. 

In proposing these rules, the 

Commission is mindful that there may 

be differences between the SBS market 

and the other securities markets that the 

Commission regulates. For example, 

though the marketplace has developed 

standardized terms for various types of 

SBSs, contracts are nevertheless 

customizable. Furthermore, unlike 

bonds or equity securities, SBSs are not 

today readily fungible. The liquidity 

characteristics of SBSs also may differ 

in comparison with other markets. 

Relative to the overall equity markets, 

SBSs trade much less frequently, though 

the trading frequency of some illiquid 

equities would be comparable to that of 

some SBSs. The liquidity of SBSs 

compared to the bond market depends 

on the specifics of the SBS and the bond 

(e.g., Treasury, corporate, municipal). 

Many bonds do not have standardized 

SBS analogs and would therefore be 

more liquid than bespoke customizable 

SBS contracts that would function as 

the analog. But some market 

participants have found the SBSs 

written on some issuers and securities 

to be more liquid and readily tradable 

during certain periods of time than the 

underlying securities themselves. 

Another notable distinction is that the 

SBS market does not generally have the 

equivalent of a ‘‘retail’’ segment 

characterized by a high-volume of 

small-sized trades. Though some swaps 

on some interest rates, indices, and 

currencies may support high volumes, 

many SBSs trade infrequently. For 

example, an analysis by the staff of 

trading in single-name credit default 

swaps (‘‘CDS’’) show that approximately 

90% of single-name CDS on corporate 

issuers trade at an average of five times 

or less per day, with an average trade 

size of over $5 million.11 This same 

analysis shows that 89% of single-name 

CDS on sovereign issuers trade at an 

average of ten times or less per day, 

with an average trade size of over $12 

million. 

The Commission also is mindful that, 

both over time and as a result of 

Commission proposals to implement the 

Dodd-Frank Act, the further 

development of the SBS market may 

alter some of the specific calculus for 

future regulation of reporting and realtime public dissemination of SBS 

transaction information. During the 

process of implementing the DoddFrank Act and beyond, the Commission 

will therefore closely monitor 

developments in the SBS market. 

B. Overview of Security-Based Swap 

Reporting and Dissemination 

Requirements in the Dodd-Frank Act 

1. Security-Based Swap Reporting 

Requirements 

The Dodd-Frank Act adds several 

provisions to the Exchange Act that 

require the reporting of information 

relating to SBSs. Section 3C(e) of the 

Exchange Act 12 requires the 

Commission to adopt rules that provide 

for the reporting of SBS data as follows: 

(1) SBSs entered into before the date of 

enactment of Section 3C shall be 

reported to a registered SDR or the 

Commission no later than 180 days after 

the effective date of Section 3C (i.e., 540 

days after the enactment of the DoddFrank Act); and (2) SBSs entered into on 

or after the date of enactment of Section 

3C shall be reported to a registered SDR 

or to the Commission no later than the 

later of (1) 90 days after the effective 

date of Section 3C (i.e., 450 days after 

the enactment of the Dodd-Frank Act), 


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13 15 U.S.C. 78m–1(a)(1). 

14 15 U.S.C. 78m(1)(G). 

15 15 U.S.C. 78m(m)(1)(F). 

16 In addition, Section 13A(a)(2) of the Exchange 

Act requires the Commission to adopt an interim 

final rule providing for the reporting of SBSs 

entered into before the date of enactment of the 

Dodd-Frank Act the terms of which had not expired 

as of that date. To satisfy this requirement, the 

Commission adopted Rule 13Aa–2T under the 

Exchange Act, an interim final temporary rule for 

the reporting of such SBSs. See Securities Exchange 

Act Release No. 63094 (‘‘Interim Rule Release’’). 

17 15 U.S.C. 78(n)(4)(A)(i). 

18 15 U.S.C. 78(n)(4)(A)(ii). 

19These responsibilities of registered SDRs under 

Section 13(n)(5) of the Exchange Act, 15 U.S.C. 

78m(n)(5), will be the subject of a separate 

Commission rulemaking. See SDR Registration 

Proposing Release, supra note 6. 

20 15 U.S.C. 78m(m)(1)(B). 

21 15 U.S.C. 78m(m)(1)(C). 

22Section 3C(a)(1) of the Exchange Act provides 

that it shall be unlawful for any person to engage 

in a SBS unless that person submits such SBS for 

clearing to a clearing agency that is registered under 

the Exchange Act or a clearing agency that is 

exempt from registration under the Exchange Act if 

the SBS is required to be cleared. Section 3C(g)(1) 

of the Exchange Act provides that requirements of 

Section 3C(a)(1) will not apply to a SBS if one of 

the counterparties to the SBS (1) is not a financial 

entity; (2) is using SBSs to hedge or mitigate 

commercial risk; and (3) notifies the Commission, 

in a manner set forth by the Commission, how it 

generally meets its financial obligations associated 

with entering into non-cleared SBSs. 

23The reference in Section 13(m)(1)(C)(iii) of the 

Exchange Act to Section 3C(a)(6) of the Exchange 

Act is incorrect. Section 3C of the Exchange Act 

does not contain a paragraph (a)(6). 

24Section 3C(b)(1) of the Exchange Act requires 

the Commission to review on an ongoing basis each 

SBS, or any group, category, type, or class of SBS 

to make a determination that such SBS, or group, 

category, type, or class of SBS should be required 

to be cleared. 

25 15 U.S.C. 78m(m)(1)(A). 

26 15 U.S.C. 78m(m)(1)(E). 

27 15 U.S.C. 78m(m)(1)(D). 

28The Exchange Act does not define the term 

‘‘registered entity’’ or ‘‘registered entities.’’ The 

Commission believes that the term ‘‘registered 

entities’’ in Sections 13(m)(1)(F) and 13(n)(4)(A)(ii) 

of the Exchange Act includes registered SDRs 

because SDRs are required to register with the 

Commission pursuant to Section 13(n) of the 

Exchange Act, 15 U.S.C. 78m(n). 

29 15 U.S.C. 78m(n)(5)(D)(ii). 

or (2) such other time after entering into 

the SBS as the Commission may 

prescribe by rule or regulation. 

In addition, Section 13A(a)(1) of the 

Exchange Act 13 requires that each SBS 

that is not accepted for clearing by any 

clearing agency or derivatives clearing 

organization be reported to (1) an SDR, 

or (2) in the case in which there is no 

SDR that would accept such SBS, to the 

Commission, within such time period as 

the Commission may by rule or 

regulation prescribe. Section 

13(m)(1)(G) of the Exchange Act 14

provides, further, that each SBS 

(whether cleared or uncleared) shall be 

reported to a registered SDR. Section 

13(m)(1)(F) of the Exchange Act 15 states 

that the parties to a SBS, including 

agents of the parties to a SBS, shall be 

responsible for reporting SBS 

transaction information to the 

appropriate registered entity in a timely 

manner as may be prescribed by the 

Commission.16

Section 13(n)(4)(A)(i) of the Exchange 

Act 17 requires the Commission to 

prescribe standards that specify the data 

elements for each SBS that must be 

collected and maintained by each 

registered SDR. Further, Section 

13(n)(4)(A)(ii) of the Exchange Act 18

requires the Commission, in carrying 

out Section 13(n)(4)(A)(i) of the 

Exchange Act, to prescribe consistent 

data element standards applicable to 

registered entities and reporting 

counterparties. Under Section 13(n)(5) 

of the Exchange Act, a registered SDR 

must, among other things, maintain the 

SBS data it collects in the form and 

manner prescribed by the Commission, 

provide the Commission or its designee 

with direct electronic access, and make 

SBS data available on a confidential 

basis, upon request, to certain regulatory 

authorities.19

2. Security-Based Swap Dissemination 

Requirements 

Section 13(m)(1)(B) of the Exchange 

Act 20 authorizes the Commission to 

make SBS transaction and pricing data 

available to the public in such form and 

at such times as the Commission 

determines appropriate to enhance price 

discovery, subject to the general 

requirement in Section 13(m)(1)(C) of 

the Exchange Act 21 that all SBS 

transactions be subject to real-time 

public reporting. Section 13(m)(1)(C) 

authorizes the Commission to provide 

by rule for the public availability of SBS 

transaction, volume, and pricing data as 

follows: 

(1) With respect to those SBSs that are 

subject to the mandatory clearing 

requirement described in Section 

3C(a)(1) of the Exchange Act (including 

those SBSs that are excepted from the 

requirement pursuant to Section 3C(g) 

of the Exchange Act), the Commission 

shall require real-time public reporting 

for such transactions; 22

(2) With respect to those SBSs that are 

not subject to the mandatory clearing 

requirement described in Section 

3C(a)(1) of the Exchange Act, but are 

cleared at a registered clearing agency, 

the Commission shall require real-time 

public reporting for such transactions; 

(3) With respect to SBSs that are not 

cleared at a registered clearing agency 

and which are reported to a SDR or the 

Commission under Section 3C(a)(6),23

the Commission shall require real-time 

public reporting for such transactions, 

in a manner that does not disclose the 

business transactions and market 

positions of any person; and 

(4) With respect to SBSs that are 

determined to be required to be cleared 

under Section 3C(b) of the Exchange Act 

but are not cleared, the Commission 

shall require real-time public reporting 

for such transactions.24

Section 13(m)(1)(A) of the Exchange 

Act 25 states that the term ‘‘real-time 

public reporting’’ means to report data 

relating to a SBS transaction, including 

price and volume, as soon as 

technologically practicable after the 

time at which the SBS transaction has 

been executed. 

With respect to SBSs that are subject 

to Sections 13(m)(1)(C)(i) and (ii) of the 

Exchange—i.e., SBSs that are subject to 

the mandatory clearing requirement in 

Section 3C(a)(1) (including those SBSs 

that are not cleared pursuant to the 

exception in Section 3C(g)(1)) and SBSs 

that are not subject to the mandatory 

clearing requirement in Section 3C(a)(1) 

but are cleared—Section 13(m)(1)(E) of 

the Exchange Act 26 requires that the 

Commission’s rule providing for the 

public availability of SBS transaction 

and pricing data contain provisions to: 

(1) Ensure that such information does 

not identify the participants; (2) specify 

the criteria for determining what 

constitutes a large notional SBS 

transaction (block trade) for particular 

markets and contracts; (3) specify the 

appropriate time delay for reporting 

large notional SBS transactions (block 

trades) to the public; and (4) that take 

into account whether public disclosure 

will materially reduce market liquidity. 

Section 13(m)(1)(D) of the Exchange 

Act 27 authorizes the Commission to 

require registered entities 28 to publicly 

disseminate the SBS transaction and 

pricing data required to be reported 

under Section 13(m)(1) of the Exchange 

Act. In addition, Section 13(n)(5)(D)(ii) 

of the Exchange Act states that a 

registered SDR shall provide data ‘‘in 

such form and at such frequency as the 

Commission may require to comply 

with the public reporting requirements 

set forth in subsection (m).’’ 29

II. Description of Proposed Rules 

A. Overview 

In general, proposed Regulation SBSR 

would provide for the reporting of three 

broad categories of SBS information: 

(1) Information that would be required 

to be reported to a registered SDR in real 


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30See proposed Rule 900 (defining ‘‘real time’’ to 

mean, with respect to the reporting of SBS 

information, as soon as technologically practicable, 

but in no event later than 15 minutes after the time 

of execution of the SBS, and defining ‘‘time of 

execution’’ as the point at which the counterparties 

to a SBS become irrevocably bound under 

applicable law). See also infra Section III 

(discussing proposed rules relating to real-time 

public dissemination of SBS transaction 

information). 

31Proposed Rule 900 would provide definitions 

of various terms used in proposed Regulation SBSR 

and further provide that terms that appear in 

Section 3 of the Exchange Act, 15 U.S.C. 78c, would 

have the same meaning as in Section 3 and the rules 

or regulations thereunder. 

32 15 U.S.C. 78m(m)(1)(F). 

33 15 U.S.C. 78m[A(a)(3)]. 

34See 15 U.S.C. 78c(a)(71) (defining ‘‘securitybased swap dealer’’); 15 U.S.C. 78c(a)(67) (defining 

‘‘major security-based swap participant’’). See also 

supra note 5. 

35See proposed Rule 900 (defining ‘‘U.S. person’’ 

to mean a natural person that is a U.S. citizen or 

U.S. resident or a legal person that is organized 

under the corporate laws of any part of the United 

States or has its principal place of business in the 

United States). See also infra Section VIII 

(discussing application of proposed Regulation 

SBSR to cross-border SBS transactions). 

36See proposed Rules 908(a)(2) and (3) and infra 

Section VIII. 

37See infra Section VIII (discussing the 

requirements for the reporting of a SBS if the SBS 

is executed in the United States or through any 

means of interstate commerce, or is cleared through 

a registered clearing agency having its principal 

place of business in the United States). 

38See 15 U.S.C. 78c(a)(77) (defining ‘‘securitybased swap execution facility’’). The registration 

and regulation of SB SEFs is the subject of a 

separate Commission rulemaking. 

time and publicly disseminated; 30 (2) 

additional information that would be 

required to be reported to a registered 

SDR or, if there is no registered SDR that 

would receive such information, to the 

Commission, within specified 

timeframes, but that would not be 

publicly disseminated; and (3) 

information about ‘‘life cycle events’’, as 

defined in proposed Rule 900 31 and 

discussed below, that would be reported 

as a result of a change to information 

previously reported for a SBS. As 

described in greater detail below, 

proposed Regulation SBSR would 

identify the SBS transaction information 

that would be required to be reported, 

establish reporting obligations, and 

specify the timeframes for reporting and 

disseminating information. 

In addition, proposed Regulation 

SBSR would require a registered SDR to 

publicly disseminate the SBS 

information that would be required to 

be reported in real time. Proposed 

Regulation SBSR also would require a 

registered SDR to register with the 

Commission as a securities information 

processor (‘‘SIP’’) on existing Form SIP. 

B. Who Must Report 

Section 13(m)(1)(F) of the Exchange 

Act 32 provides that parties to a SBS 

(including agents of parties to a SBS) 

shall be responsible for reporting SBS 

transaction information to the 

appropriate registered entity in a timely 

manner as may be prescribed by the 

Commission. Section 13A(a)(3) of the 

Exchange Act 33 specifies the party 

obligated to report SBSs that are not 

accepted by any clearing agency or 

derivative clearing organization. 

Proposed Rule 901(a) would specify 

which counterparty is the ‘‘reporting 

party’’ for a SBS, thereby implementing 

Sections 13(m)(1)(F) and 13A(a)(3) of 

the Exchange Act, as follows: 

• With respect to a SBS in which only 

one counterparty is a security-based 

swap dealer (‘‘SBS dealer’’) or major 

security-based swap participant (‘‘major 

SBS participant’’),34 the SBS dealer or 

major SBS participant shall be the 

reporting party; 

• With respect to a SBS in which one 

counterparty is a SBS dealer and the 

other counterparty is a major SBS 

participant, the SBS dealer shall be the 

reporting party; and 

• With respect to any other SBS not 

described in the first two cases, the 

counterparties to the SBS shall select a 

counterparty to be the reporting party. 

The Exchange Act, as modified by the 

Dodd-Frank Act, does not explicitly 

specify which counterparty should be 

the reporting party for those SBSs that 

are cleared by a clearing agency or 

derivative clearing organization. The 

Commission preliminarily believes that, 

for the sake of uniformity and ease of 

applicability, the duty to report a SBS 

should attach to the same counterparty 

regardless of whether the SBS is cleared 

or uncleared. In addition, the 

Commission preliminarily believes that 

SBS dealers and major SBS participants 

generally should have the responsibility 

to report SBS transactions, as they are 

more likely than other counterparties to 

have appropriate systems in place to 

facilitate reporting. 

Accordingly, with respect to a SBS 

where both counterparties are U.S. 

persons,35 proposed Rule 901(a) would 

assign reporting responsibilities as 

follows: 

• With respect to a SBS in which only 

one counterparty is a SBS dealer or 

major SBS participant, the SBS dealer or 

major SBS participant would be the 

reporting party; 

• With respect to a SBS in which one 

counterparty is a SBS dealer and the 

other counterparty is a major SBS 

participant, the SBS dealer would be the 

reporting party; and 

• With respect to any other SBS not 

described in the first two cases, the 

counterparties to the SBS would select 

a counterparty to be the reporting party. 

Proposed Rule 901(a)(1) would 

provide that, where only one 

counterparty to a SBS is a U.S. person, 

the U.S. person would be the reporting 

party. The Commission preliminarily 

believes that, where only one 

counterparty is a U.S. person, assigning 

the reporting duty to the counterparty 

that is a U.S. person would help to 

assure compliance with the reporting 

requirements of proposed Regulation 

SBSR. 

In addition, it is possible that a SBS 

executed in the United States or through 

any means of interstate commerce, or 

that is cleared through a clearing agency 

having its principal place of business in 

the United States, could be executed 

between two counterparties neither of 

which is a U.S. person. Proposed Rule 

901(a)(3) would provide that, if neither 

party is a U.S. person but the SBS is 

executed in the United States or through 

any means of interstate commerce, or is 

cleared through a clearing agency 

having its principal place of business in 

the United States,36 the counterparties 

to the SBS would be required to select 

a counterparty to be the reporting 

party.37

To comply with the duty to report in 

real time itself, a reporting party likely 

would need to develop and maintain an 

internal order management system 

(‘‘OMS’’) capable of capturing all 

relevant SBS data and sending it in real 

time. The Commission further believes 

that each reporting party likely would 

need to establish and maintain an 

appropriate compliance program and 

support for the operation of the OMS 

and reporting mechanism, which could 

include transaction verification and 

validation protocols, and necessary 

technical, administrative, and legal 

support. However, proposed Rule 901(a) 

would not prevent a reporting party to 

a SBS from entering into an agreement 

with a third party to report the 

transaction on behalf of the reporting 

party. For example, for a SBS executed 

on a security-based swap execution 

facility (‘‘SB SEF’’) 38 or a national 

securities exchange, the SB SEF or 

national securities exchange could 

transmit a transaction report for the SBS 

to a registered SDR. By specifying the 

reporting party with the duty to report 

SBS information under proposed 

Regulation SBSR, the Commission does 

not intend to inhibit the development of 

commercial ventures to provide trade 

processing services to SBS 

counterparties. Nevertheless, a SBS 

counterparty that is a reporting party 

would retain the obligation to ensure 


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39Thus, a reporting party would be liable for a 

violation of proposed Rule 901 if, for example, a SB 

SEF acting on the reporting party’s behalf reported 

a SBS transaction to a registered SDR late or 

inaccurately. 

40See SDR Registration Proposing Release, supra 

note 6. 

41See infra Section III.B (discussing the 

categories of information to be provided for realtime reporting). 

42See infra Section IV.B (discussing those data 

elements required under Rule 901(d)(1)). 

43See infra Section IV.D (discussing the reporting 

of life cycle event information). A registered SDR 

would be required to adopt policies and procedures 

to determine, among other things, whether and how 

it would publicly disseminate reports of life cycle 

events. See proposed Rule 907(a)(4). 

that information is provided to a 

registered SDR in the manner and form 

required by proposed Regulation SBSR, 

even if the reporting party has entered 

into an agreement with a third party to 

report on its behalf.39

Request for Comment 

The Commission requests comment 

on all aspects of the proposal as to who 

would be responsible for reporting SBSs 

to a registered SDR. 

1. Do any entities currently have the 

functionality to report SBSs, as 

proposed, to data repositories? If so, 

who? Do commenters think it is likely 

that entities other than SBS 

counterparties will develop the 

functionality to report SBSs to 

registered SDRs? If so, what are these 

entities and how will they operate? 

2. Should the Commission require one 

or more entities other than a SBS 

counterparty, such as a registered SB 

SEF, a national securities exchange, a 

clearing agency, or a broker, to report 

SBSs? Or do commenters agree with the 

Commission’s approach of assigning the 

responsibility to report to a 

counterparty, while allowing the 

counterparty to have an agent (such as 

a SB SEF) act on its behalf? 

3. In practice, would reporting parties 

employ agents? Should the Commission 

encourage this? 

4. Are the obligations assigned in 

proposed Rule 901(a) sufficiently clear? 

5. For SBSs executed on a SB SEF or 

national securities exchange, would the 

counterparties to the SBS have the 

information necessary to know which 

counterparty would incur the reporting 

obligation? For example, for an 

anonymous SBS executed on a SB SEF 

and cleared by a clearing agency, would 

the counterparties know each other’s 

identities? If not, what steps could they 

take to obtain enough information to be 

able to ascertain which party has the 

reporting obligation? Could the SB SEF 

provide that information to the 

counterparties? Alternatively, should 

the reporting obligation be assigned to 

the SB SEF or other trading venue? 

6. In cases where counterparties 

would be required to select which 

counterparty would report the 

transaction, is additional Commission 

guidance likely to be necessary? Should 

the Commission adopt a default 

mechanism to allocate the reporting 

obligation in such cases? For example, 

if a SBS is between two SBS dealers, 

should the Commission mandate that 

the ‘‘seller’’ always have the 

responsibility for reporting? 

7. Do commenters agree with the 

Commission’s proposed approach for 

reporting for SBSs where only one 

counterparty is a U.S. person? If not, 

how should it be revised? 

8. Do commenters agree with the 

Commission’s proposed approach for 

reporting for SBSs where neither 

counterparty is a U.S. person? If not, 

how should it be revised? 

9. To what extent would reporting 

parties have to obtain new or update 

existing OMSs and establish appropriate 

compliance programs to satisfy the realtime reporting obligations of proposed 

Rule 901(c)? Would current systems be 

able to handle this responsibility? Could 

current systems be upgraded or would 

they have to be replaced completely? 

C. Where Information Is Reported 

Proposed Rule 901(b) would require a 

reporting party to report the information 

required under proposed Regulation 

SBSR to a registered SDR or, if there is 

no registered SDR that would accept the 

information, to the Commission. The 

Commission believes that it would be 

very unlikely that there would be a 

situation where a reporting party would 

be required to report to the Commission 

rather than a registered SDR. Proposed 

Rule 13n–5(b)(1)(ii) under the Exchange 

Act would require a registered SDR that 

accepts reports for any SBS in a 

particular asset class to accept reports 

for all SBSs in that asset class.40 Thus, 

a reporting party would not be able to 

report a SBS transaction to the 

Commission unless no registered SDR 

accepts transaction information for any 

SBS in the same asset class as the 

transaction. In addition, there currently 

exist entities that accept SBS transaction 

data in CDS and equity swaps that 

would likely be required to register as 

a SDR. 

Request for Comment 

10. Is the Commission’s belief that it 

would be unlikely to have a situation 

where a reporting party must report to 

the Commission rather than a registered 

SDR reasonable? 

11. Do commenters believe that there 

will be at least one registered SDR in 

each SBS asset class? 

12. Are there any SBS asset classes for 

which there might not be a registered 

SDR? 

III. Information To Be Reported in Real 

Time 

A. Introduction 

Proposed Rule 901 divides the SBS 

information that would be required to 

be reported into three broad categories: 

(1) Information that would be required 

to be reported in real time pursuant to 

proposed Rule 901(c) 41 and publicly 

disseminated pursuant to proposed Rule 

902; (2) additional information that 

would be required to be reported (but 

not publicly disseminated) pursuant to 

proposed Rule 901(d)(1) 42 within the 

timeframes specified in proposed Rule 

901(d)(2), which would vary depending 

on whether the transaction was 

executed and confirmed electronically 

or manually; and (3) life cycle event 

information that would be required to 

be reported under proposed Rule 

901(e).43

The Commission notes that, although 

only the information specified in 

proposed Rule 901(c) would be required 

to be reported in real time, proposed 

Rule 901(c) would not prevent a 

reporting party from reporting some or 

all of the additional information 

required under proposed Rule 901(d)(1) 

at the same time that it reports the 

information required under proposed 

Rule 901(c). In other words, proposed 

Rule 901 would not mandate separate 

reports for the SBS information required 

under paragraphs (c) and (d) of 

proposed Rule 901; if a reporting party 

wished to provide all of the information 

required under proposed Rule 901 in a 

single transaction report, it would be 

free to do so—provided it could provide 

all of the information within the 

timeframe required by proposed Rule 

901(c). 

B. Categories of Information To Be 

Provided for Real-time Reporting 

Proposed Rule 901(c) would set forth 

the categories of information pertaining 

to a SBS transaction that a reporting 

party would be required to report to a 

registered SDR in real time. For the 

reasons discussed below, the 

Commission preliminarily believes that 

the SBS information required to be 

reported under proposed Rule 901(c)— 

which the registered SDR would 

publicly disseminate pursuant to 


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44For example, the following types of CDS could 

each require a different list of data elements: Singlename CDS, index CDS, loan CDS, and CDS on assetbacked securities. 

45See proposed Rule 907(b)(4)(ii). 

46See proposed Rule 900. Section 13(m)(1)(A) of 

the Exchange Act defines ‘‘real time’’ in relation to 

the ‘‘execution’’ of the SBS, not when it is confirmed 

or cleared. 

47The Dodd-Frank Act amends the definition of 

‘‘security’’ under the Securities Act and Exchange 

Act to explicitly include SBSs, and the execution 

of the transaction will be the sale for purposes of 

the federal securities laws. See Securities Act 

Release No. 3591 (July 19, 2005), 70 FR 44722 

(August 3, 2005), notes 391 and 394 (explaining 

when a sale occurs under the Securities Act). 

48The Senate Report accompanying the DoddFrank Act indicates that ‘‘[m]arket participants— 

including exchanges, contract markets, brokers, 

clearing houses and clearing agencies–were 

consulted and affirmed that the existing 

communications and data infrastructure for the 

swaps markets could accommodate real time swap 

transaction and price reporting.’’ The Senate Report 

stated, further, that real time swap transaction and 

price reporting would narrow swap bid/ask spreads, 

make for a more efficient swaps market and benefit 

consumers and counterparties overall. See 156 

Cong. Rep. S5921 (July 15, 2010). In light of this 

acknowledgement of the benefits of real-time SBS 

transaction and price reporting, and the apparent 

feasibility of such reporting, the Commission 

believes that Congress intended for orally 

negotiated SBS transactions to be systematized as 

quickly as possible and reported in real time. 

49The generally acknowledged acronym for 

Coordinated Universal Time is ‘‘UTC,’’ rather than 

‘‘CUT.’’ The International Telecommunication 

Union, an agency of the United Nations that 

oversees information and communication 

technology issues, wanted Coordinated Universal 

Time to have the same symbol in all languages. 

English and French speakers wanted the initials of 

both their respective language’s terms to be used 

internationally: ‘‘CUT’’ for ‘‘coordinated universal 

time’’ and ‘‘TUC’’ for ‘‘temps universel coordonne ́.’’ 

This resulted in the final compromise of ‘‘UTC.’’ See 

http://www.nist.gov/physlab/div847/ 

utenist.cfm#cut. 

proposed Rule 902—would serve the 

objectives of Section 13(m) of the 

Exchange Act by enhancing price 

discovery in the SBS market. 

The Commission recognizes that the 

SBS market involves complex 

instruments and that reporting 

conventions continue to evolve. 

Consequently, in developing proposed 

Rule 901, the Commission explored 

various alternative approaches, 

including mandating by rule an 

enumerated list of all specific data 

elements to be reported. The 

Commission believes that such a list 

likely would have to vary by asset class 

(e.g., CDS and equity-based swaps), and 

would require further variations based 

on sub-asset type.44 The Commission 

understands, based on discussion with 

industry participants, that between 50 

and 100 or more separate data elements 

could be used to express a typical CDS. 

A Commission rule that attempted to 

identify each data element for each SBS 

asset class or sub-asset type could be 

less flexible in responding to changes in 

the marketplace, including the 

introduction of new types of SBSs, 

because it would be necessary for the 

Commission to amend its rules each 

time it sought to require the reporting of 

additional or different data elements. 

Accordingly, rather than enumerating 

each data element for each SBS asset 

class or sub-asset type that would be 

required to be reported, proposed Rule 

901(c) would instead specify the 

categories of information that would be 

required to be reported for each SBS 

transaction. Furthermore, proposed Rule 

907, discussed more fully below, would 

require each registered SDR to establish, 

maintain, and make publicly available 

policies and procedures that, among 

other things, specify the data elements 

of a SBS (or a life cycle event) that a 

reporting party would be required to 

report. These data elements would be 

required to include, at a minimum, the 

data elements required under proposed 

Rule 901(c) (for information that will be 

publicly disseminated) and proposed 

Rule 901(d) (for non-disseminated 

regulatory information). The 

Commission preliminarily believes that 

proposed Rule 901(c), together with 

these policies and procedures, would 

promote the reporting of uniform, 

material information for each SBS, 

while providing flexibility to account 

for changes to the SBS market over time. 

The Commission discusses below the 

SBS data that would be required to be 

reported in real time, and which would 

be publicly disseminated. 

1. Asset Class 

Proposed Rule 901(c)(1) would 

require the reporting party to report the 

asset class of the SBS and, if the SBS is 

an equity derivative, whether the SBS is 

a total return swap or is otherwise 

designed to offer risks and returns 

proportional to a position in the equity 

security or securities on which the SBS 

is based. Proposed Rule 900 would 

define ‘‘asset class’’ to mean those SBSs 

in a particular broad category, 

including, but not limited to, credit 

derivatives, equity derivatives, and 

loan-based derivatives. The Commission 

believes that identifying the asset class 

would provide market participants with 

basic information about the SBS 

transaction to identify the type of SBS 

being publicly reported. In addition, 

requiring the reporting party to indicate 

whether the SBS is an equity total 

return swap or is otherwise designed to 

offer risks and returns proportional to a 

position in the equity security or 

securities on which the SBS is based 

would enable a registered SDR to know 

if the SBS was excluded from being a 

block trade.45

2. Date and Time of Execution 

Proposed Rule 901(c)(4) would 

require the reporting party to report the 

date and time, to the second, of 

execution of a SBS, so that prices of 

transactions that are disseminated in 

real time can be properly ordered, and 

so the Commission can have a detailed 

record of when any given SBS was 

executed. In the absence of this 

information, market participants and 

regulators would not know whether 

transaction reports they are seeing 

reflect the current state of the market. 

The Commission preliminarily 

believes that the time at which the SBS 

transaction has been executed should be 

the point at which the counterparties to 

a SBS become irrevocably bound under 

applicable law.46 For example, in the 

context of SBSs, an oral agreement over 

the phone will create an enforceable 

contract, and the time of execution 

would be deemed to be the time that the 

parties to the telephone call agree to the 

material terms.47 The Commission 

recognizes that trades agreed to over the 

phone would need to be systematized 

for purposes of fulfilling this reporting 

requirement (as well as real-time 

reporting of other data elements) by 

being entered in an electronic system 

that assigns a time stamp. The 

Commission believes that it is 

consistent with Congress’ intent for 

orally negotiated SBS transactions to be 

systematized as quickly as possible so 

that they could be publicly 

disseminated using electronic means.48

The Commission is proposing that the 

date and time of execution be expressed 

using Coordinated Universal Time 

(‘‘UTC’’), a slight variation on Greenwich 

Mean Time.49 SBSs are traded globally, 

and the Commission expects that many 

SBSs subject to these reporting and 

dissemination rules would be executed 

between counterparties in different time 

zones. In the absence of a uniform 

standard, it might not be clear whether 

the date and time of execution were 

being expressed from the standpoint of 

the time zone of the first counterparty, 

the second counterparty, or the 

registered SDR itself. Mandating a 

common standard for expressing date 

and time is designed to alleviate any 

potential confusion on the part of 

registered SDRs, counterparties, other 

market participants, and the public as to 

when the SBS was executed. The 

Commission believes that UTC is an 

appropriate and well known standard 


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50One commenter identified the traded price as 

one of the elements that should be included in a 

SBS transaction report. See letter from James W. 

Toffey, Chief Executive Officer, Benchmark 

Solutions, to David A. Stawick, Secretary, CFTC, 

and Elizabeth M. Murphy, Secretary, Commission, 

dated October 1, 2010 (‘‘Benchmark Letter’’) at 2. 

51See proposed Rule 900 (defining ‘‘securitybased swap instrument’’ to mean each SBS in the 

same asset class, with the same underlying 

reference asset, reference issuer, or reference index). 

52One commenter believed that a SBS transaction 

report should include: (1) The traded price and 

execution time; (2) the counterparty type, including 

a designation for an ‘‘end user;’’ (3) the notional size 

of the transaction; and (4) contract ‘‘open interest.’’ 

See Benchmark Letter at 2. In addition, the 

commenter believed that the reference data for a 

SBS must include ‘‘standard attributes necessary to 

derive cash flows and any contingent claims that 

can alter or terminate payments’’ of the SBS. See id. 

at 1. As described above, the proposed rules would 

require the real-time reporting of price and time of 

execution, notional size, and an indication of 

whether a SBS is between two dealers. The 

proposed rules would not require the reporting of 

‘‘open interest.’’ However, another Commission 

rulemaking will provide regulators with the ability 

to monitor open SBS positions. See SDR 

Registration Proposing Release, supra note 6. 

suitable for purposes of reporting the 

time of execution of SBSs. 

3. Price 

Proposed Rule 901(c)(7) would 

require the reporting of the price of a 

SBS transaction, expressed in terms of 

the commercial conventions used in 

that asset class.50 The Commission 

recognizes that the price of a SBS 

generally would not be a simple 

number, as with stocks, but would be 

expressed in terms of the quoting 

conventions for that SBS. For example, 

a CDS may be quoted in terms of the 

economic spread—which is variously 

referred to as the ‘‘traded spread,’’ ‘‘quote 

spread,’’ or ‘‘composite spread’’— 

expressed as a number of basis points 

per annum. Alternately, CDS can be 

quoted in terms of prices representing a 

discount or premium over par. In 

contrast, an equity or loan total return 

swap may be quoted in terms of a 

LIBOR-based floating rate payment, 

expressed as a floating rate plus a fixed 

number of basis points. 

The Commission preliminarily 

believes that, because these quoting 

conventions are widely used and 

understood by SBS market participants, 

requiring the price of a SBS to be 

reported in terms of one of these 

existing quoting conventions would be 

consistent with the mandate in Section 

13(m)(1)(B) of the Exchange Act to 

enhance price discovery. As discussed 

further below, however, proposed Rule 

907(a)(1) would require a registered SDR 

to establish, maintain, and make 

publicly available policies and 

procedures that specify the data 

elements of a SBS that a reporting party 

must report, which would include the 

elements that constitute the price. The 

Commission preliminarily believes that, 

because of the many different 

conventions that exist to express the 

price in various SBS markets and the 

new conventions that might arise in the 

future, some flexibility should be given 

to registered SDRs to select appropriate 

conventions for denoting the price of 

different asset classes of SBSs. 

4. Other Terms of the SBS 

Proposed Rule 901(c) would require 

the reporting of, among other things, 

information that identifies the SBS 

instrument 51 and the specific asset(s) or 

issuer(s) of a security or indexes on 

which the SBS is based; the notional 

amount(s) of the SBS and the 

currenc(ies) in which the notional 

amount(s) is expressed; the effective 

date of the SBS; the scheduled 

termination date of the SBS; and the 

terms of any fixed or floating rate 

payments and the frequency of any 

payments. The Commission 

preliminarily believes that this 

information is fundamental to 

understanding the SBS transaction 

being publicly reported, and that a SBS 

transaction report that lacked such 

information would not be meaningful. 

For example, some types of SBSs are 

contractual agreements that generally 

involve the periodic exchange of cash 

flows from specified assets over a 

defined time period. These cash flows 

are based on the notional amount(s) of 

the SBS—i.e., the notional principal(s) 

of the SBS is used to calculate the 

periodic payments made under the 

agreement. Accordingly, information 

that identifies the asset(s), including a 

narrow-based index, or issuer(s) of the 

security or securities on which a SBS is 

based, the notional amount(s) of the SBS 

(including the currenc(ies) in which it is 

expressed), the effective date, and the 

scheduled termination date of that SBS 

are fundamental elements of the 

transaction that would enhance price 

discovery.52

The Commission anticipates that, for 

at least some standardized instruments, 

conventions about how a SBS 

instrument is referred to can become so 

well known that certain terms of the 

underlying contract can be assumed, 

and thus would not need to be 

specifically provided pursuant to other 

provisions of proposed Rule 901(c). 

5. Whether the SBS Will Be Cleared by 

a Clearing Agency 

Proposed Rule 901(c)(9) would 

require the reporting party to indicate 

whether or not the SBS will be cleared 

by a clearing agency. This factor can 

impact the price of the SBS. If a SBS is 

not cleared, one counterparty might 

charge a higher price to do the trade 

because of the counterparty credit risk 

it would incur (which might be 

significantly diminished if the SBS were 

centrally cleared). Because the use of a 

clearing agency to clear a SBS would 

thus impact price, knowing whether a 

SBS will be cleared should provide 

market participants with additional 

information that would be useful in 

assessing the reported price for a SBS, 

thus enhancing price discovery. 

Therefore, the Commission is proposing 

to require that this data element be 

reported in real time and publicly 

disseminated. 

6. Indication That a Transaction Is 

Between Two SBS Dealers 

Proposed Rule 901(c)(10) would 

require the reporting party to indicate if 

both counterparties to the SBS are SBS 

dealers. The Commission preliminarily 

believes that such an indication would 

enhance market transparency and 

provide more accurate information 

about the pricing of the SBS transaction, 

and thus about trading activity in the 

SBS market. Prices of transactions 

involving a dealer and non-dealer are 

typically ‘‘all-in’’ prices that include a 

mark-up or mark-down, while 

interdealer transaction prices typically 

do not. Thus, the Commission believes 

that requiring an indication of whether 

a SBS was an interdealer transaction or 

a transaction between a dealer and a 

non-dealer counterparty would enhance 

transparency by allowing market 

participants to more accurately assess 

the reported price for a SBS. 

7. If Applicable, an Indication That the 

SBS Transaction Does Not Accurately 

Reflect the Market 

In some instances, a SBS transaction 

might not reflect the current state of the 

market. Thus, publicly disseminating a 

report of that transaction without an 

indication to that effect could mislead 

market participants and other observers. 

The Commission does not expect that a 

registered SDR would be able to identify 

such cases. Therefore, proposed Rule 

901(c)(11) would require the reporting 

party to alert the registered SDR in such 

cases. This could occur, for example, if 

the reporting party were reporting the 

transaction late (i.e., over 15 minutes 

after the time of execution). An aged 

transaction by definition no longer 

represents the current state of the 

market, and a reporting party would 

therefore be required to indicate that the 


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53The registered SDR could deduce that a 

transaction has been reported late by looking to the 

time of execution, a data element required to be 

reported by proposed Rule 901(c)(4). However, if a 

registered SDR received a transaction report 

submitted with an anomalous time stamp, the 

registered SDR might not know whether the time 

stamp was correct and the trade was reported late, 

or whether the trade was reported in a timely 

fashion but the time stamp was inaccurate. 

Supplementing the time stamp with a ‘‘late’’ 

indicator would confirm to the registered SDR that 

the transaction was in fact being reported late. 

54See proposed Rule 907(a)(4); infra Section 

VI.A. 

transaction is being reported late.53

Other situations where this could occur 

are inter-affiliate transfers and 

assignments where the new 

counterparty has no opportunity to 

negotiate the terms, including the price, 

of taking on the position. In such cases, 

there might not be an arm’s length 

negotiation over the terms of the SBS 

transaction, and disseminating a report 

of the transaction report without noting 

that fact would be inimical to price 

discovery. Accordingly, the Commission 

preliminarily believes that a reporting 

party must note such circumstances in 

its real-time transaction report to a 

registered SDR. 

The Commission further notes that a 

registered SDR would be required to 

have policies and procedures that, 

among other things, describe how 

reporting parties shall report SBS 

transactions that, in the estimation of 

the registered SDR, do not accurately 

reflect the market.54 The Commission 

expects that these policies and 

procedures would require, among other 

things, different indicators being 

applied in different situations. 

8. Indication for Customized Trades 

Proposed Rule 901(c)(12) would 

provide that the reporting party must 

indicate if the SBS is customized to the 

extent that the other information 

provided pursuant to proposed Rule 

901(c) does not provide all of the 

material information necessary to 

identify such customized SBS or does 

not contain the data elements necessary 

to calculate the price of the SBS. The 

Commission believes that reporting 

highly customized SBS in this manner 

would promote transparency by 

providing market participants with 

knowledge of the transaction in a given 

asset class and on certain reference 

securities or issuers while, at the same 

time, making clear that the reported data 

elements would not, and would not be 

required to, provide sufficient 

information to fully understand all 

aspects of the customized transaction. 

The Commission preliminarily believes 

that requiring public dissemination of 

more detailed information about 

customized SBSs would be of limited 

utility in facilitating price discovery 

because of the unique nature of such 

transactions. 

Request for Comment 

The Commission requests comment 

generally on all aspects of the categories 

of information that would be required to 

be reported in real time for public 

dissemination. 

13. Do commenters agree with the 

proposed categories of information that 

would be required to be reported in real 

time for public dissemination? If not, 

what additional specific categories of 

information should be required to be 

reported in real time for public 

dissemination, and why? How would 

public dissemination of such additional 

information enhance price discovery or 

market liquidity? 

14. What categories of information, if 

any, should not be required to be 

reported in real time for public 

dissemination, and why? Would the 

public dissemination of certain 

information materially reduce market 

liquidity? If so, how, specifically, would 

dissemination of the particular 

information affect liquidity? Please 

supply data to support your answer. 

15. Does proposed Rule 901(c) 

provide adequate guidance with respect 

to the information that must be 

reported? If not, what additional 

guidance do commenters believe is 

necessary? 

16. Would the real-time dissemination 

of the categories of information 

specified in proposed Rule 901(c) serve 

the objectives of Section 13(m) of the 

Exchange Act by enhancing price 

discovery in the SBS market? If so, how? 

Would disclosure of certain categories 

of information not further price 

discovery? If so, why not? Please 

provide examples. 

17. Is it necessary to require 

dissemination of the date of execution, 

unless it is a date other than the current 

date? 

18. Do commenters agree that it 

would be feasible to require SBSs agreed 

to by phone to be entered into an 

electronic system that assigns a time 

stamp? Why or why not? 

19. Do commenters agree that the time 

of execution should be reported to the 

second? Why or why not? Should it be 

reported in a finer increment? 

20. Would requiring the reporting and 

dissemination of price in terms of the 

existing quoting conventions provide 

adequate information regarding the 

price of a SBS? Where more than one 

quoting or pricing convention exists 

within an asset class, what convention 

should be used? Should proposed 

Regulation SBSR require specific 

conventions to be used? 

21. Are there specific data elements 

that should be required to be reported 

to help understand the price of a SBS? 

If so, what are they, and do they vary 

by asset class? Or by some further 

categorization? 

22. Are there categories of SBSs that 

do not have an existing quoting 

convention? If so, how should ‘‘price’’ be 

expressed for those SBSs? What data 

elements should be required to be 

reported and disseminated to capture 

the price of such SBSs? 

23. Would information regarding 

whether a SBS is cleared impact the 

price of the SBS? If not, why not? 

Would the reporting party in all cases 

know whether the SBS transaction will 

be cleared? 

24. Would information concerning 

whether a SBS is a transaction between 

two SBS dealers enhance transparency 

and provide more accurate information 

about the pricing of the SBS? If not, why 

not? 

25. In a SBS executed on a SB SEF or 

national securities exchange, would a 

counterparty know in real time the 

category of its counterparty, e.g., 

whether its counterparty is a SBS 

dealer, a major SBS participant, or not? 

26. Do commenters agree that it 

would be appropriate for reporting 

parties to report whether a SBS 

transaction accurately reflects the 

market? How should such ‘‘off-market’’ 

transactions be defined? Could public 

dissemination of potential off-market 

transactions (e.g., related to portfolio 

compressions) make it more difficult for 

market participants to understand and 

analyze market pricing? 

27. Do commenters agree with the 

proposed approach for real-time 

reporting and public dissemination with 

respect to customized SBSs? Should the 

Commission require that additional 

information be reported and publicly 

disseminated for these SBSs? How 

practical would it be to report and 

publicly disseminate sufficient details 

about a customized SBSs in real time? 

Is there sufficient agreement over which 

SBSs should be considered customized 

for this purpose or is additional 

guidance needed? Is there a risk that 

this rule could be applied inconsistently 

by counterparties or across asset 

classes? Would public dissemination of 

information concerning customized 

SBSs materially reduce market 

liquidity? If so, why? 

28. Would real-time transaction 

reports of customized SBSs have price 

discovery value? If so, in what way and 

how much? If not, why not? Would 

price discovery be enhanced by 


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55See supra note 30 (noting that the ‘‘time of 

execution’’ would mean the point at which the 

counterparties to a SBS become irrevocably bound 

under applicable law). 

56The Commission notes, in addition, that the 

Senate report accompanying the Dodd-Frank Act 

indicates that ‘‘[m]arket participants—including 

exchanges, contract markets, brokers, clearing 

houses and clearing agencies—were consulted and 

affirmed that the existing communications and data 

infrastructure for the swaps markets could 

accommodate real time swap transaction and price 

reporting.’’ See 156 Cong. Rec. S5921 (July 15, 

2010). 

57See, e.g., CFTC and SEC, Public Roundtable to 

Discuss Swap Data, Swap Data Repositories, and 

Real Time Reporting, transcript available at http:// 

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

documents/file/derivative18sub091410.pdf, 

comments of Sean Bernardo, Managing Director of 

Tullett Prebon Americas Corp. and representing the 

Wholesale Market Brokers Association, at 297 

(‘‘From the brokers’ perspective, however you tell us 

to send those [transactions] straight to you, 

whatever the time frame is, we’re able to do that, 

whether it’s done voice, whether it’s done 

electronic, or whether it’s done hybrid’’), and at 310 

(‘‘From the brokers’ perspective, we already have 

these systems in place for 99 percent of these 

products already in some way, shape, or form. So, 

as far as upgrading them, we’re upgrading the 

systems on a regular basis. So, I think, again, we 

can accommodate the needs that you have, and we 

currently do a lot of the reporting and * * * 

processing with the firms’’). 

58One commenter believed that SBS transaction 

reports should be disseminated to the market 

within five minutes of execution, or as soon as 

technologically feasible. See Benchmark Letter at 2. 

The commenter noted that ‘‘the sooner post trade 

data is accessible to the market, the more effectively 

it can feed back into the update cycle of pre-trade 

information. Better pre-trade information allows 

investors to make more well-informed decisions 

regarding market values, risk and helps assure that 

investors achieve best execution.’’ Id. Another 

commenter argued that ‘‘voice/hybrid execution 

systems’’ should have the same reporting 

timeframes as venues that execute electronically, 

because ‘‘a bifurcated requirement could result in an 

inaccurate trade tape confusing the market and 

regulator alike,’’ and because ‘‘such a bifurcation 

might also create a ‘race to the slowest’ * * * as 

certain market participants, seeking to shroud their 

trading, favor slower reporting SEF’s with their 

business over more efficient and transparent 

counterparts.’’ See letter from James Cawley, CEO, 

Javelin Capital Markets, to SEC and CFTC (October 

20, 2010) (‘‘Javelin Letter’’) at 2. The Commission 

further notes that the Financial Industry Regulatory 

Authority (‘‘FINRA’’) requires its members to report 

transactions in corporate and agency debt securities 

to FINRA’s Transaction Reporting and Compliance 

Engine (‘‘TRACE’’) within 15 minutes of the time of 

execution. See FINRA Rule 6730(a). For purposes 

of TRACE reporting, the time of execution generally 

means the time when the parties to the trade agree 

to all of the terms of the transaction that are 

sufficient to calculate the dollar price of the trade. 

See FINRA Rule 6710(d). FINRA has indicated that, 

based on 2009 figures, approximately 98% of 

corporate bond trades were reported within 15 

minutes, 96% within ten minutes, and 92% within 

five minutes. See e-mail from Steve Joachim, 

Executive Vice President for Transparency Services, 

FINRA, to Michael Gaw, Assistant Director, 

Division of Trading and Markets, Commission 

(November 17, 2010). 

requiring public dissemination of 

additional details of a customized SBS 

at a later time? If so, what additional 

details of the transaction should be 

publicly disseminated, and when? 

29. Would any of the data elements 

specified in proposed Rule 901(c), if 

reported in real time, reveal the trading 

strategies or positions of any person? If 

so, how? 

30. What do commenters believe 

would be the costs of reporting and 

publicly disseminating the proposed 

categories of information for SBSs? Or 

the benefits? Please be specific in your 

responses, and quantify your answers to 

the extent possible. 

C. Definition of Real Time 

Proposed Rule 900 would define ‘‘real 

time’’ to mean, with respect to the 

reporting of SBS transaction 

information, ‘‘as soon as technologically 

practicable, but in no event later than 15 

minutes after the time of execution of 

the SBS transaction.’’ 55 The 

Commission preliminarily believes that 

this proposed definition of ‘‘real-time’’ 

reporting is consistent with Sections 

13(m)(1)(A) and (B) of the Exchange Act 

and technologically practicable in light 

of current industry practice.56 Based on 

its discussions with market participants, 

the Commission understands that much 

of the infrastructure necessary to 

support real-time reporting to a 

registered SDR may already be in 

place.57 The Commission understands, 

further, that the SBS market is almost 

entirely institutional, and large 

institutions have in place the systems 

and processes necessary to support 

trading and risk management of 

complex structured products. In many 

cases, trade details will already be 

systematized and little or no manual 

intervention would be necessary to 

aggregate or send the transaction data. 

In such cases, where it is 

technologically practicable for a 

reporting party to report the SBS 

transaction information required by 

proposed Rule 901(c) in one second, 

then it would be required to report the 

SBS transaction to a registered SDR in 

one second. 

The Commission recognizes that, in 

other cases, a SBS transaction might be 

negotiated orally, and some manual data 

entry might be necessary before a 

transaction report could be sent. At the 

same time, however, the Commission 

believes it is appropriate to encourage 

market participants to take steps to 

minimize manual handling of such 

transactions, because the Dodd-Frank 

Act requires price and volume 

information of all SBS transactions to be 

disseminated publicly as soon as 

technologically practicable after the 

time of execution. Furthermore, the 

Commission notes that real-time 

reporting under proposed Rule 901(c) 

would require only certain elements of 

the trade to be systematized and 

reported, not all of the data elements 

that are required for full regulatory 

reporting under proposed Rule 901(d). 

The Commission is, therefore, proposing 

a 15-minute outer boundary for realtime public reporting of the data 

elements specified in proposed Rule 

901(c) following the SBS’s time of 

execution.58

Under the proposed approach, a 

reporting party would not be permitted 

to delay submission of a transaction 

report required by proposed Rule 901(c) 

while preparing the information 

necessary to provide a transaction report 

under proposed Rule 901(d), even if the 

reporting party could prepare the latter 

in under 15 minutes. Assume, for 

example, that two counterparties 

execute a SBS on an electronic trading 

platform, which permits the collection 

and transmission of all information 

required by proposed Rule 901(c) in one 

second, and all other details of the SBS 

can be confirmed in eight minutes. The 

reporting party would not be permitted 

to wait eight minutes to send a single 

transaction report containing the 

information required under proposed 

Rules 901(c) and (d) to a registered SDR. 

Instead, the reporting party would be 

required to send the information 

required by proposed Rule 901(c) in one 

second—because one second in this 

example is as soon as technologically 

practicable—and to send the 

information required by proposed Rule 

901(d) in eight minutes. The 

Commission preliminarily believes that 

this approach is most conducive to price 

discovery. Collecting data elements that 

have less bearing on price discovery 

(such as those required by proposed 

Rule 901(d)) should not slow down the 

public dissemination of data elements 

that would facilitate price discovery 

(i.e., those required by proposed Rule 

901(c)). 

Request for Comment 

31. Do commenters agree with the 

proposed definition of ‘‘real time’’? 

Would it be technologically practicable 

in all cases to report the information 

that would be required under proposed 

Rule 901(c) within 15 minutes? If not, 

why not? Would it be technologically 

practicable for some, but not all, SBSs? 

Or some, but not all, of the data 

elements? If so, what are the 

differentiating factors? 

32. Should the Commission require 

shorter reporting time frames for certain 

SBS transactions? For example, should 

electronically executed SBSs be 


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59To the extent the Commission receives 

information that is reported under proposed Rule 

901(d), such information would be kept 

confidential, subject to the provisions of the 

Freedom of Information Act. 

60One commenter believes that a single source of 

reference data and a standard set of unique 

identifiers must be used across the industry (i.e., SB 

SEFs and SDRs) to ensure the comparability of 

similar contracts. The commenter urged the 

Commission to work with the industry to 

standardize terms and definitions of all reference 

data components and establish a single master 

reference data source. See Benchmark Letter at 1. 

See also Neal S. Wolin, Deputy Secretary of the 

Treasury, Remarks at Georgetown University 

McDonough School of Business (October 25, 2010), 

available at http://www.treas.gov/press/releases/ 

tg923.htm (stating that the Office of Financial 

Research (‘‘OFR’’) ‘‘is working with regulators and 

industry, laying the groundwork to standardize 

financial reporting and develop reference data that 

will identify and describe financial contracts and 

institutions. Data standardization will provide for 

more consistent and complete reporting, making the 

data available to decision makers easier to obtain, 

digest, and utilize. Over the coming weeks and 

months, the OFR will begin to define a set of 

standards for reporting of financial transaction and 

position data. The OFR will collaborate with the 

financial industry, data experts, and regulators to 

develop an approach to standardization that works 

for everyone’’). 

61 ‘‘Participant’’ would be defined as: (1) a U.S. 

person that is a counterparty to a SBS that is 

required to be reported to a registered SDR; or (2) 

a non-U.S. person that is a counterparty to a SBS 

that is (i) required to be reported to a registered 

SDR; and (ii) executed in the United States or 

through any means of interstate commerce, or 

cleared through a clearing agency having its 

principal place of business in the United States. See 

proposed Rule 900. 

reported as soon as technologically 

practical but in any event no later than 

5 seconds? 30 seconds? Some other 

period? What should that period be, and 

why? 

33. Should the Commission require 

longer reporting time frames for orally 

executed SBS transactions (such as 30 

minutes)? If so, what should that longer 

period be, and why? 

34. If there were a longer reporting 

time frame for orally executed SBSs, 

would the potential benefits of real-time 

public reporting be compromised? If so, 

how? If not, why not? Would this create 

an incentive for market participants to 

prefer oral negotiation of SBSs to delay 

real-time reporting of their transactions? 

35. In the context of real-time 

reporting of SBS transactions, what is 

‘‘technologically practicable’’? Should 

the Commission define that term 

specifically? What systems and 

processes would be necessary to report 

orally concluded SBSs as soon as 

technologically practicable? Does this 

imply a requirement that all such SBSs 

must be immediately systematized? 

36. What do commenters believe 

would be the costs of reporting the 

proposed data elements within 15 

minutes? What would be the benefits? 

Please be specific in your response, and 

quantify the costs and benefits to the 

extent possible. 

IV. Additional Reporting of Regulatory 

Information 

A. Introduction 

Proposed Rule 901(d) would require 

the reporting, within specified 

timeframes, of certain SBS transaction 

information that would not be publicly 

disseminated, in addition to the 

information required to be reported in 

real time pursuant to proposed Rule 

901(c) that would be publicly 

disseminated. The Commission believes 

that the information that would be 

reported pursuant to proposed Rule 

901(d) would facilitate regulatory 

oversight and monitoring of the SBS 

market by providing comprehensive 

information regarding SBS transactions 

and trading activity.59 The Commission 

believes, further, that this information 

would assist the Commission in 

detecting and investigating fraud and 

trading abuses in the SBS market. 

B. Data Elements Required Under 

Proposed Rule 901(d) 

The data elements that would be 

required to be reported by the reporting 

party for each SBS pursuant to proposed 

Rule 901(d) are discussed below. 

1. Unique Identifiers 

Proposed Rule 901(d) would require 

the reporting of a participant ID of each 

counterparty and, as applicable, the 

broker ID, desk ID, and trader ID of the 

reporting party. The Commission 

preliminarily believes that reporting of 

this information would help promote 

effective oversight, enforcement, and 

surveillance of the SBS market by the 

Commission and other regulators. For 

example, activity could be tracked by a 

particular participant, a particular desk, 

or a particular trader. Regulators could 

observe patterns and connections in 

trading activity, or examine whether a 

trader had engaged in questionable 

activity across different SBS 

instruments. These identifiers also 

would facilitate aggregation and 

monitoring of the positions of SBS 

counterparties, which could be of 

significant benefit for systemic risk 

management. 

The Commission understands that 

some efforts have been undertaken—in 

both the private and public sectors, both 

domestically and internationally—to 

establish a comprehensive and widely 

accepted system for identifying entities 

that participate not just in the SBS 

market, but in the financial markets 

generally. Such a system could be of 

significant benefit to regulators 

worldwide, as each market participant 

could readily be identified using a 

single reference code regardless of the 

jurisdiction or product market in which 

the market participant was engaging. 

Such a system also could be of 

significant benefit to the private sector, 

as market participants would have a 

common identification system for all 

counterparties and reference entities, 

and would no longer have to use 

multiple identification systems. The 

enactment of the Dodd-Frank Act and 

the establishment of a comprehensive 

system for reporting and dissemination 

of SBSs—and for reporting and 

dissemination of swaps, under the 

jurisdiction of the CFTC—offer a unique 

opportunity to facilitate the 

establishment of a comprehensive and 

widely accepted system for identifying 

entities that participate not just in the 

SBS market, but in the financial markets 

generally.60

The Commission preliminarily 

believes that a registered SDR must have 

a systematic means to identify and track 

all products and all persons involved in 

SBS transactions captured and recorded 

by the registered SDR. Therefore, the 

Commission is requiring that a ‘‘unique 

identification code’’ (‘‘UIC’’) be assigned 

to each such product or person (or unit 

thereof, such as a branch or desk of a 

financial institution). Thus, under 

proposed Regulation SBSR, the 

‘‘participant ID’’ would mean the UIC 

assigned to a participant.61 ‘‘Broker ID’’ 

would be defined as the UIC assigned to 

an entity acting as a broker for a 

participant. ‘‘Desk ID’’ would be defined 

as the UIC assigned to the trading desk 

of a participant or of a broker of a 

participant, and ‘‘trader ID’’ would be 

defined as the UIC assigned to a natural 

person who executes SBSs. 

Under the definition of ‘‘unique 

identification code’’ in proposed Rule 

900, a UIC would have to be assigned 

by or on behalf of an internationally 

recognized standards-setting body 

(‘‘IRSB’’) that imposes fees and usage 

restrictions that are fair and reasonable 

and not unreasonably discriminatory. 

The Commission seeks to avoid 

requiring market participants to 

participate in a system that would 

require them to pay unreasonable fees, 

or that would permit discrimination 

among potential users of the system. 

Thus, the definition of ‘‘UIC’’ would 

further provide that, if no standardssetting body meets these criteria, a 


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62For example, this would include, for a CDS, an 

indication of the counterparty purchasing 

protection and the counterparty selling protection, 

and the terms and contingencies of their payments 

to each other; and for other SBSs, an indication of 

which counterparty is long and which is short. This 

information could be useful to regulators in 

investigating suspicious trading activity. 

63The Commission believes that these elements 

would include, for a SBS that is not cleared, 

information related to the provision of collateral, 

such as the title and date of the relevant collateral 

agreement. 64One commenter believed that a SBS transaction 

report should include information necessary to 

derive cash flows and any contingent claims that 

could alter or terminate payments of the SBS. See 

Benchmark Letter at 1. This is similar to the 

information required by proposed Rule 

901(d)(1)(iii). 

65See 15 U.S.C. 78c[C(g)(2)]. 

66 15 U.S.C. 78c[C(g)(6)]. 

67The use of this exception, and further 

information required to be reported regarding this 

exception, will be the subject of another 

Commission rulemaking. Any comments regarding 

this exception should be submitted in connection 

with that proposal. 

registered SDR would be required to 

assign all necessary UICs using its own 

methodology. 

The Commission preliminarily 

believes that, if an IRSB meets these 

criteria, the UICs employed by a 

registered SDR must come from the 

IRSB, and participants of that registered 

SDR must take necessary steps to obtain 

UICs from that IRSB. However, it could 

take an extended period for an IRSB to 

assign, or establish protocols for 

assigning, UICs for all entities 

participating in the SBS market. A 

registered SDR would be required to use 

the UICs available from the IRSB’s 

system, while using its own 

methodology to assign the rest. In 

addition, the definition of ‘‘UIC’’ would 

provide that, if a standards-setting body 

meets these criteria but has not assigned 

a UIC to a particular person, unit of a 

person, or product, a registered securitybased swap data repository would be 

required to assign a UIC to that person, 

unit of a person, or product using its 

own methodology. 

The proposed definition of ‘‘UIC’’ 

would not require that a UIC be 

assigned ‘‘by’’ a IRSB itself. Rather, the 

proposed definition would provide only 

that the UIC be assigned ‘‘by or on behalf 

of’’ the IRSB. This is designed to 

preserve flexibility in how UICs may be 

assigned. An IRSB might establish the 

general protocols under which UICs are 

assigned, while another entity operating 

as an agent on behalf of the IRSB might 

assign the UICs pursuant to the 

protocols established by the IRSB. The 

proposed definition would allow for 

that possibility. 

2. Other Terms of the SBS 

Proposed Rule 901(d) would require 

identification of the amount(s) and 

currenc(ies) of any up-front payment(s) 

and a description of the terms and 

contingencies of the payment streams of 

each counterparty to the other; 62 the 

title of any master agreement, or any 

other agreement governing the 

transaction (including the title of any 

document governing the satisfaction of 

margin obligations), incorporated by 

reference and the date of any such 

agreement; and the data elements 

necessary to calculate the market value 

of a transaction.63 In addition, for a SBS 

that is not cleared, proposed Rule 901(d) 

would require a description of the 

settlement terms, including whether the 

SBS is cash-settled or physically settled, 

and the method for determining the 

settlement value.64

The Commission believes that each of 

these data elements would facilitate 

regulatory oversight of counterparties 

and the SBS market generally by 

providing information concerning 

counterparty obligations and risk 

exposures. For example, the reporting of 

data elements necessary to calculate the 

market value of a transaction would 

allow regulators to value an entity’s SBS 

positions and calculate the exposure 

resulting from those positions. The 

Commission understands, based on 

discussions with industry participants, 

that market participants currently 

provide this information regarding SBSs 

to data repositories. 

3. Clearing Information 

Proposed Rule 901(d) would require 

the reporting of the name of the clearing 

agency, if the SBS is cleared. The 

Commission believes that the identity of 

the clearing agency that cleared a SBS 

is fundamental information regarding a 

cleared SBS. This information would 

allow regulators to verify, if necessary, 

that a SBS was cleared, and to easily 

identify the clearing agency that cleared 

the transaction. 

Proposed Rule 901(d) also would 

require the reporting party to report, if 

the SBS is not cleared, whether the 

exception provided in Section 3C(g) of 

the Exchange Act was invoked. Section 

3C(g)(1) of the Exchange Act provides 

that the requirements of Section 3C(a)(1) 

will not apply to a SBS if one of the 

counterparties to the SBS: (1) Is not a 

financial entity; (2) is using SBSs to 

hedge or mitigate commercial risk; and 

(3) notifies the Commission, in a 

manner set forth by the Commission, 

how it generally meets its financial 

obligations associated with entering into 

non-cleared SBSs. The application of 

the clearing exception in Section 

3C(g)(1) of the Exchange Act is solely at 

the discretion of the SBS counterparty 

that satisfies these conditions.65 Section 

3C(g)(6) of the Exchange Act 66

authorizes the Commission, among 

other things, to request information 

from those persons claiming the clearing 

exception as necessary to prevent abuse 

of the exceptions described in Section 

3C(g) of the Exchange Act. The 

Commission believes that information 

regarding whether the exception in 

Section 3C(g)(1) was invoked for a noncleared SBS would assist the 

Commission in overseeing and 

monitoring the use of the exception. 

This information would be a necessary 

preliminary step in determining 

whether the exception was properly 

invoked.67

4. Execution Venue 

Proposed Rule 901(d) would require 

the reporting party to report the venue 

where the SBS was executed, or 

whether the SBS was executed 

bilaterally in the OTC market. The 

venue where a SBS is executed is 

necessary for investigating any potential 

improper behavior relating to the 

transaction. For example, regulators 

investigating a suspected abuse or other 

impropriety would need to know the 

execution venue in order to obtain 

records from the venue to assist in their 

investigation. 

Request for Comment 

The Commission requests comment 

on all aspects of the proposed additional 

information that would be required to 

be reported pursuant to proposed Rule 

901(d). 

37. Do commenters agree with the 

information that the Commission has 

proposed to be required to be reported 

pursuant to proposed Rule 901(d)? 

Should additional information be 

reported? If so, what information, and 

why? 

38. Are there any data elements 

proposed to be reported that 

commenters believe should not be 

reported? If so, why not? 

39. Should proposed Rule 901(d) also 

require reporting of the purpose of the 

SBS transaction (such as market making, 

directional trade, or asset hedge)? If so, 

what categories of purposes should be 

established, and why? 

40. Is it possible that inconsistencies 

in pricing conventions among SBS 

market participants could result in 

uninformative prices being reported to a 

registered SDR? Could a reporting party 

use variation in pricing conventions to 

obscure pricing information? Do 

commenters believe that proposed 

Regulation SBSR should prescribe the 


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68See proposed Rule 900 (defining ‘‘time of 

execution’’); supra Section III.B.2. 

69See proposed Rule 900 (defining ‘‘confirm’’). 

‘‘Confirmation’’ refers to the specific documentation 

that evidences the legally binding agreement. 

Section 15F(i)(2) of the Exchange Act provides that 

SBS dealers and major SBS participants shall 

conform with such standards as may be prescribed 

by the Commission that relate, among other things, 

to timely and accurate confirmation of SBSs. 

Requirements for confirmations issued by SBS 

dealers and major SBS participants will be the 

subject of a separate Commission rulemaking. 

specific pricing conventions that should 

be used? 

41. Does proposed Rule 901(d) 

provide adequate guidance with respect 

to the information that must be 

reported? 

42. Do commenters agree that the 

information described above regarding 

the material terms of a SBS would be 

useful for monitoring risk exposure and 

for other regulatory purposes? Why or 

why not? 

43. Would it be difficult or cost 

prohibitive for reporting parties to 

report such information? If so, why? 

44. Do SBS counterparties employ 

transaction-level collateral 

arrangements? If so, what specific 

information on transaction-level 

collateral information should be 

reported to a registered SDR? 

45. Do commenters agree that the 

participant ID of each counterparty, and, 

as applicable, the broker ID, desk ID, 

and trader ID of the reporting party or 

its broker would be useful information 

to be reported? Why or why not? Would 

these identifiers be helpful for 

conducting regulatory oversight, 

including measuring risk exposure? 

How costly would it be for participants 

to report this information for each SBS? 

46. Are there other entities that may 

play some part in the execution or 

reporting of a SBS transaction? If so, 

what are they? Should their 

identification information be reported to 

a registered SDR? 

47. Are there additional subunits of a 

legal person, besides the desk, that 

should be identified by a UIC? If so, 

what are those subunits and how should 

they be defined? 

48. Would the reporting party be in a 

position to know, in all cases, the 

participant ID of its counterparty? If a 

SBS is executed on a SB SEF, would the 

SB SEF be able to provide the reporting 

party the participant ID of the 

counterparty? If not, what alternative 

would be available to have this 

information reported? 

49. Does an IRSB currently exist or 

will one exist in the near future that 

could carry out the functions envisioned 

by proposed Regulation SBSR? What 

additional steps would need to be taken 

for that entity to carry out these 

functions? 

50. Who would own the intellectual 

property underlying the UICs assigned 

by or on behalf of an IRSB? Would a 

registered SDR have to pay fees to 

obtain UICs from an IRSB? If so, how 

much? What usage restrictions might 

the owners of the relevant intellectual 

property impose on registered SDRs or 

on consumers of the market data feed? 

Are any fees and usage restrictions 

imposed by an IRSB (or any entity that 

might become an IRSB) fair and 

reasonable and not unreasonably 

discriminatory? If not, in what way are 

they not? 

51. Are there any issues that could 

result from the Commission requiring 

that UICs only be assigned by or on 

behalf of an IRSB that imposes fees and 

usage restrictions that are fair and 

reasonable and not unreasonably 

discriminatory? Would imposing such a 

standard allow for any activity that 

could undermine the ability of market 

participants to effectively obtain or use 

the UICs as anticipated? In the 

alternative, should the Commission 

require that there be no fees related to 

the use of UICs? 

52. Would any end users of SBS 

market data disseminated by a 

registered SDR have to pay fees relating 

to an IRSB? If so, why? How much 

would these fees be? 

53. How do data repositories currently 

identify participants and products? If 

UICs cannot be assigned by or on behalf 

of an IRSB, would the current 

methodologies of data repositories be 

adequate for assigning UICs pursuant to 

proposed Regulation SBSR? What 

would be the likely costs to a registered 

SDR of assigning such UICs itself? 

54. What would be the potential 

impact on market participants and 

registered SDRs if no IRSB emerges and 

there are multiple SDRs per asset class 

assigning UICs? 

55. What additional steps can or 

should the Commission take to promote 

internationally recognized standards for 

UICs? 

56. Are there any other factors not 

already discussed that the Commission 

should take into account when 

considering voluntary consensus 

standards for UICs? 

C. Reporting Timeframes for Regulatory 

Information 

The Dodd-Frank Act does not specify 

the timeframes under which SBS 

transaction information, beyond that 

necessary to support real-time public 

dissemination for enhancing price 

discovery, must be reported to a 

registered SDR or to the Commission for 

regulatory purposes. However, the 

Commission preliminarily believes that, 

to further the objectives of the DoddFrank Act, SBS transaction information 

should be reported within a reasonable 

time following the time of execution— 

i.e., the point at which the 

counterparties to a SBS become 

irrevocably bound under applicable 

law—rather than waiting until the time 

a transaction is confirmed.68 For 

purposes of proposed Regulation SBSR, 

the time a transaction is confirmed 

means the production of a confirmation 

that is agreed to by the parties to be 

definitive and complete and that has 

been manually, electronically, or, by 

some other legally equivalent means, 

signed.69 Requiring reporting at or after 

the time a SBS transaction is confirmed, 

rather than at the time of execution, 

could encourage counterparties to delay 

confirming in order to delay the 

reporting of a transaction. 

The Commission recognizes that the 

amount of time required for 

counterparties to report the data 

elements that would be required to be 

reported under proposed Rule 901(d)(1) 

could vary depending upon, among 

other things, the extent to which the 

SBS is customized and whether the SBS 

is executed or confirmed electronically 

or manually. The Commission believes 

that the extent to which a SBS is 

executed or confirmed electronically is 

an indication of the degree to which the 

SBS is or could be systematized, and 

thus could directly impact the amount 

of time needed to report such SBS. For 

example, the Commission believes, 

based on discussions with industry 

participants, that the required 

information would be available 

relatively quickly for a SBS that is 

executed and confirmed electronically 

because most of the information 

required to be reported would already 

be in an electronic format. On the other 

hand, the Commission recognizes that, 

for those SBSs that are not executed or 

confirmed electronically, additional 

time may be needed to systematize the 

information required to be reported 

under proposed Rule 901(d) and put it 

into an acceptable format. Accordingly, 

proposed Rule 901(d)(2) would obligate 

a reporting party to report the 

regulatory, non-real-time information 

required to be reported under proposed 

Rule 901(d)(1) promptly, but in no event 

later than: 

• 15 minutes after the time of 

execution for a SBS that is executed and 

confirmed electronically; 

• 30 minutes after the time of 

execution for a SBS that is confirmed 


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70See infra Section IV.E.2 (discussing proposed 

Rule 901(g)). 

71 In a separate rulemaking today, the 

Commission is proposing to require a registered 

SDR to establish, maintain, and enforce policies and 

electronically but not executed 

electronically; or 

• 24 hours after execution for a SBS 

that is not executed or confirmed 

electronically. 

The Commission preliminarily 

believes that requiring a SBS that is 

executed and confirmed electronically 

to be reported promptly, but in no event 

later than 15 minutes after the time of 

execution, is appropriate because such 

SBS could be easily systematized (if it 

is not already), thus allowing the SBS to 

be reported within a time period similar 

to that required for real-time reporting. 

The Commission further believes that, 

for a SBS that is confirmed 

electronically but not executed 

electronically, additional time would be 

needed to report such SBS. However, 

the Commission preliminarily believes 

that 30 minutes would be a sufficient 

amount of time because such SBS 

already would be put into electronic 

form for confirmation, and thus likely 

could be easily systematized and would 

not require a significant amount of 

manual handling. 

Finally, since a SBS that is not 

executed or confirmed electronically 

would likely not already be 

systematized and could require a 

significant amount of manual 

intervention, the proposed rules would 

allow additional time for reporting. For 

this group of SBSs, the Commission 

seeks to balance the need to allow 

market participants sufficient time to 

determine the terms of their trade, with 

the need for regulators to have current 

and complete information about 

positions in the SBS market. 

Request for Comment 

The Commission requests general 

comments on the proposed reporting 

times and the basis for the proposed 

reporting times. 

57. Do commenters believe that there 

should be different reporting times 

based on whether a SBS is executed or 

confirmed manually or electronically? If 

so, why? If not, what other basis should 

be used to distinguish reporting 

timeframes, and why? Should all SBSs 

be reported in the same time frame? If 

so, what should the timeframe be, and 

why? 

58. Do commenters agree that the 

reporting time for a SBS that is executed 

and confirmed electronically should be 

15 minutes after the time of execution? 

Should that period be shorter, for 

example, 30 seconds, one minute, or 

five minutes? Why or why not? 

59. Do commenters agree that the 

reporting time for a SBS that is 

confirmed electronically but not 

executed electronically should be 30 

minutes after the time of execution? 

Should that period be shorter, for 

example, one minute, five minutes, or 

15 minutes? Why or why not? 

60. Do commenters agree that the 

reporting time for a SBS that is not 

executed or confirmed electronically 

should be 24 hours? Should that period 

be shorter—perhaps eight hours? 12 

hours? Should that period be longer— 

perhaps 36 hours? 48 hours? Why or 

why not? If the time period were greater 

than 24 hours, how significant would be 

the risks that regulators would not know 

of SBS positions recently taken by 

counterparties engaging in SBSs that are 

not executed or confirmed 

electronically? 

61. Do commenters agree with the 

proposed timeframes for reporting 

information required to be reported 

pursuant to proposed Rule 901(d)(1)? 

Would the timeframes in proposed Rule 

901(d)(2) provide adequate time for 

reporting the information that would be 

required to be reported under proposed 

Rule 901(d)(1)? If not, why not? Should 

the time frame for reporting be shorter 

or longer? Why or why not? 

62. Would public dissemination of 

information in the proposed timeframes 

materially reduce market liquidity? If 

so, for what types of SBSs? Why? What 

timeframe(s) would balance the 

concerns about market liquidity with 

the requirement for real-time reporting? 

63. Are there customized SBSs for 

which it would be too difficult or 

burdensome to report within 24 hours? 

How long do those SBS transactions 

currently take to report to a SDR? What 

steps would have to be taken to 

accelerate reporting for such SBS 

transactions? 

D. Reporting of Life Cycle Events 

Proposed Rule 901(e) would require 

the reporting of certain ‘‘life cycle event’’ 

information. Proposed Rule 900 would 

define a ‘‘life cycle event’’ to mean, with 

respect to a SBS, any event that would 

result in a change in the information 

reported to a registered SDR pursuant to 

proposed Rule 901, including a 

counterparty change resulting from an 

assignment or novation; a partial or full 

termination of the SBS; a change in the 

cash flows originally reported; for a SBS 

that is not cleared, any change to the 

collateral agreement; or a corporate 

action affecting a security or securities 

on which the SBS is based (e.g., a 

merger, dividend, stock split, or 

bankruptcy). Notwithstanding the 

above, a life cycle event shall not 

include the scheduled expiration of the 

SBS, a previously described and 

anticipated interest rate adjustment 

(such as a quarterly interest rate 

adjustment), or other event that does not 

result in any change to the contractual 

terms of the SBS. 

For any life cycle event that results in 

a change to information previously 

reported, proposed Rule 901(e) would 

require the reporting party to promptly 

provide updated information reflecting 

such change to the entity to which it 

reported the original transaction, using 

the transaction ID, except that: 

(1) If a reporting party ceases to be a 

counterparty to a SBS due to an 

assignment or novation, the new 

counterparty would be the reporting 

party following such assignment or 

novation, if the new counterparty is a 

U.S. person; and 

(2) If, following an assignment or 

novation, the new counterparty is not a 

U.S. person, the counterparty that is a 

U.S. person would be the reporting 

party following such assignment or 

novation. 

As discussed in greater detail below, 

proposed Rule 907(a)(1) would require 

the policies and procedures of a 

registered SDR to specify the data 

elements of a life cycle event that a 

reporting party would be required to 

report, which would include, at a 

minimum, the data elements specified 

in proposed Rules 901(c) and (d). 

Proposed Rule 901(g) would require a 

registered SDR to assign a transaction ID 

to each SBS reported by a reporting 

party. The assignment of a transaction 

ID, which would be included in a life 

cycle event report, would facilitate the 

reporting of life cycle event information 

by identifying the particular SBS 

transaction to which the life cycle event 

pertained.70

The reporting of life cycle event 

information would provide regulators 

with access to information about 

significant changes that occur over the 

duration of a SBS, including, for 

example, a counterparty change 

resulting from an assignment or 

novation, a change in the data elements 

necessary to calculate the value of the 

SBS, a partial or full termination of the 

SBS prior to the scheduled termination 

date of the SBS, or a modification of the 

periodic cash flows originally reported. 

The Commission preliminarily believes 

that the reporting of life cycle event 

information would help to assure that 

regulators have accurate and up-to-date 

information concerning outstanding 

SBSs and the current obligations and 

exposures of SBS counterparties.71


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procedures reasonably designed to calculate 

positions for all persons with open SBSs 

maintained by the registered SDR, and is requesting 

comment on whether a SDR should calculate (on at 

least a daily basis) the market value of each position 

in SBSs for which the registered SDR maintains 

transaction data. See SDR Registration Proposing 

Release, supra note 6 (proposing Rule 13n–5(b)(2) 

under the Exchange Act). 

72Cf. supra Section IV.B.1 (discussing participant 

IDs, broker IDs, desk IDs, and trader IDs, which 

could be used for multiple transactions across 

multiple asset classes). 

73See id. 

Request for Comment 

The Commission requests comment 

on all aspects of the proposed life cycle 

event reporting requirements. 

64. Do participants agree with the 

proposed definition of life cycle event? 

What life cycle event information 

should be reported? Should changes to 

all information that would be required 

to be reported under proposed Rules 

901(c) and (d) be updated, or only 

specific items? If so, which items, and 

why? 

65. Should a life cycle event report be 

formatted to include only the 

transaction ID and the updated 

information, or should it include the 

transaction ID, the updated information, 

and the other information that would be 

required to be reported under proposed 

Rules 901(c) and (d)? Should the 

Commission prescribe the format of a 

life cycle event report, or allow a 

registered SDR to determine the format 

of the report? 

66. Does the proposed rule provide 

adequate guidance concerning the life 

cycle events that would be required to 

be reported? If not, what areas require 

further guidance? Does the proposed 

rule provide adequate guidance 

regarding what information would be 

required to be reported for each life 

cycle event? 

67. What benefits would result from 

the reporting of life cycle events? What 

would be the costs of such reporting? 

68. Is it appropriate to require that life 

cycle events be reported promptly? If 

not, what should be the appropriate 

timeframe for reporting such events? 

E. Additional Requirements Applicable 

to Registered SDRs or Participants 

1. Time Stamp for Reported Information 

Proposed Rule 901(f) would require a 

registered SDR to time stamp, to the 

second, receipt of any information 

required to be submitted pursuant to 

proposed Rule 901(c), (d), or (e). The 

Commission believes that this 

requirement would help regulators to 

evaluate certain trading activity. For 

example, a reporting party’s pattern of 

submitting late transaction reports could 

be an indicator of weaknesses in the 

reporting party’s internal compliance 

processes. Accordingly, the Commission 

believes that the ability to compare the 

time of execution reported with the time 

of receipt of the report by the registered 

SDR could be an important component 

of surveillance activity conducted by 

regulators. 

2. Transaction Identifiers 

Proposed Rule 901(g) would require a 

registered SDR to assign a transaction ID 

to each SBS transaction reported to it. 

Proposed Rule 900 would define 

‘‘transaction ID’’ to mean the unique 

identification code assigned by a 

registered SDR to a specific SBS. The 

Commission preliminarily believes that, 

because each transaction is unique, it is 

not necessary or appropriate to look to 

an IRSB for assigning such identifiers. 

Accordingly, a registered SDR would be 

required to use its own methodology for 

assigning transaction IDs.72

The Commission preliminarily 

believes that a unique transaction ID 

would allow registered SDRs, regulators, 

and counterparties to more easily track 

a SBS over its duration and facilitate the 

reporting of life cycle events and the 

correction of errors in previously 

reported SBS information. The 

transaction ID of the original SBS would 

allow for the linking of the original 

report to a report of a life cycle event. 

Similarly, the transaction ID would be 

required to be included on an error 

report to identify the transaction to 

which the error report pertained. 

3. Counterparty ID Information 

As discussed above, proposed Rule 

901(d) would require the reporting of a 

participant ID of each counterparty and, 

as applicable, the broker ID, desk ID, 

and trader ID of the reporting party or 

its broker.73 For regulators to monitor 

the SBS positions of market 

participants, evaluate trading activity, 

and conduct effective oversight and 

enforcement of the SBS market, it is 

important that the applicable UICs for 

both counterparties to a SBS be 

available to regulators. 

Proposed Rule 901(d) would require 

the reporting party, for each SBS for 

which it is a reporting party, to report 

the participant ID of itself and its 

counterparty, and (as applicable) the 

reporting party’s broker ID, desk ID, and 

trader ID. The reporting party would not 

be required to report the broker ID, desk 

ID, and trader ID for its counterparty. 

However, nothing in proposed 

Regulation SBSR would prevent a 

reporting party from reporting, or 

providing for the reporting to a 

registered SDR, of its counterparty’s 

applicable UICs. For example, orders 

entered into an electronic trading 

system could be coded to include all 

relevant UICs. When the system 

matches two orders, it could bundle 

information about both orders 

(including the UICs) into a transaction 

report for the reporting party to report 

to a registered SDR, or the execution 

venue could provide the UICs directly 

to the registered SDR on behalf of the 

reporting party. Further, in a bilateral 

negotiated SBS, the counterparties 

could agree to have the non-reportingparty participant provide the applicable 

UICs to the reporting party for reporting 

to the registered SDR. 

The Commission preliminarily 

believes that, to the extent that it is not 

feasible or desirable in a particular SBS 

transaction for the reporting party to 

report UICs, proposed Regulation SBSR 

should contain some means for the 

registered SDR to obtain the applicable 

UICs from the counterparty that is not 

the reporting party. Accordingly, 

proposed Rule 906(a) would set forth a 

procedure designed to ensure that a 

registered SDR obtains applicable UICs 

for both counterparties to a SBS, not just 

the reporting party. Proposed Rule 

906(a) would require a registered SDR to 

identify any SBS reported to it for 

which the registered SDR did not have 

a participant ID and (if applicable), the 

broker ID, desk ID, and trader ID of each 

counterparty. Proposed Rule 906(a) 

would further require the registered 

SDR, once a day, to send a report to 

each participant identifying, for each 

SBS to which that participant is a 

counterparty, the SBS(s) for which the 

registered SDR lacks participant ID and 

(if applicable) broker ID, desk ID, and 

trader ID. Finally, under proposed Rule 

906(a), a participant that receives such 

a report would be required to provide 

the missing UICs to the registered SDR 

within 24 hours of receipt of the report. 

The Commission preliminarily 

believes that the registered SDR would 

be in the best position to know whether 

the reporting party had reported the 

UICs for its counterparty, and to request 

the missing UICs from any participant 

as necessary. In addition, the 

Commission recognizes that some 

reasonable period should be afforded to 

the registered SDR to determine what 

UICs have not been reported, to provide 

the report to each participant requesting 

such information, and for the 

participant to complete and return the 

report. The Commission preliminarily 

believes that it would be reasonable to 

require a registered SDR to produce only 

one such report per day, and to allow 

a participant up to 24 hours to complete 


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74See proposed Rule 900 (defining ‘‘parent’’ as a 

legal person that controls a participant); Rule 900 

(defining ‘‘ultimate parent’’ as a legal person that 

controls a participant and that itself has no parent); 

Rule 900 (defining ‘‘control’’ for purposes of 

proposed Regulation SBSR as the possession, direct 

or indirect, of the power to direct or cause the 

direction of the management and policies of a 

person, whether through the ownership of voting 

securities, by contract or otherwise. A person would 

be presumed to control another person if the 

person: (1) Is a director, general partner or officer 

exercising executive responsibility (or having 

similar status or functions); (2) directly or indirectly 

has the right to vote 25% or more of a class of 

voting securities or has the power to sell or direct 

the sale of 25% or more of a class of voting 

securities; or (3) in the case of a partnership, has 

the right to receive, upon dissolution, or has 

contributed, 25% or more of the capital). The 

proposed definitions of ‘‘parent’’ and ‘‘ultimate 

parent’’ are designed to identify particular 

categories of affiliated entities based on their ability 

to control a participant. Thus, a ‘‘parent’’ refers to 

a legal person that controls a participant, and the 

‘‘ultimate parent’’ refers to an entity that controls a 

participant but that itself has no parent and thus is 

not controlled by another entity. 

75See proposed Rule 900 (defining ‘‘affiliate’’ as 

any person that, directly or indirectly, controls, is 

controlled by, or is under common control with, a 

person). 

76See supra Section IV.B.1. 

77 In a separate rulemaking today, the 

Commission is proposing various requirements for 

registered SDRs that would include, among other 

things, standards regarding data that registered 

SDRs would be required to collect and maintain. 

See SDR Registration Proposing Release, supra note 

6. 

78See infra Section VI. 

and return the report with the requested 

information. 

4. Parent and Affiliate Information 

The Commission also preliminarily 

believes that, to be able to effectively 

report on participant positions to assist 

the Commission and other regulators in 

monitoring systemic risk, a registered 

SDR should be able to identify all SBS 

positions within the same ownership 

group. Therefore, the Commission is 

proposing Rule 906(b), which would 

require each participant of a registered 

SDR to provide to the registered SDR 

information sufficient to identify its 

ultimate parent(s) 74 and any 

affiliate(s) 75 of the participant that also 

are participants of the registered SDR. 

Proposed Rule 906(b) also would 

require a participant to promptly notify 

the registered SDR of any changes to 

that information. Under proposed Rule 

906(b), a participant would be required 

to provide this ownership and affiliation 

information to a registered SDR 

immediately upon becoming a 

participant (in other words, as soon as 

a SBS for which it is a counterparty is 

required to be reported to the registered 

SDR). As with other UICs,76 an ultimate 

parent ID would be the unique 

identification code assigned to an 

ultimate parent by or on behalf of an 

IRSB (or, if no standards-setting body 

meet the required criteria or the IRSB 

has not assigned a UIC to a particular 

person or unit thereof, by the registered 

SDR). 

Request for Comment 

The Commission requests comment 

on all aspects of the proposed time 

stamp and identifier requirements. 

69. Would it be feasible for a 

registered SDR to time stamp, to the 

second, information that would be 

submitted pursuant to proposed Rule 

901? Would some other time increment 

be appropriate? If so, why? 

70. Would requiring a transaction ID 

for each reported SBS help facilitate 

reporting of all events related to that 

SBS? If not, what alternative method 

should be required to allow for tracking 

of all events related to a SBS throughout 

its life? 

71. Would transaction IDs be helpful 

to counterparties? If so, how? 

72. Should registered SDRs have the 

sole responsibility to assign transaction 

IDs? Would it be feasible for other 

registered entities (e.g., exchanges or SB 

SEFs) to assign transaction IDs? 

73. Do existing SDRs that accept 

reports of SBSs assign transaction IDs or 

an equivalent identifier? If so, how? 

74. Do commenters agree that the 

applicable UICs for both counterparties 

to a SBS would be useful to regulators? 

Why or why not? 

75. Is the method set forth in 

proposed Rule 906(a) a practical way for 

the registered SDR to obtain the 

applicable UICs from the other 

counterparty if necessary? Why or why 

not? If not, what better mechanism 

should be required to ensure that a 

registered SDR has applicable UICs for 

both counterparties for any SBSs for 

which it acts as a repository? 

76. Do commenters agree with the 

proposal to require participants to 

provide the required UICs within 24 

hours? If not, why not? How long 

should the counterparty be given to 

complete the report? 

77. Would it be more practicable and 

less burdensome to require a registered 

SDR to post on its Web site (in an area 

accessible only to participants) reports 

identifying missing UICs and requiring 

participants to check these reports daily, 

rather than requiring the registered SDR 

to send these reports to participants 

each day, as provided in proposed Rule 

906(a)? 

78. Would it be unduly burdensome 

to require a registered SDR to 

periodically obtain information from 

each participant that identifies the 

participant’s ultimate parent(s) and any 

other participant(s) with which the 

counterparty is affiliated? If so, why? 

Would there be an easier method for 

assuring that such information is readily 

available to regulators? If so, what is it? 

79. How much information about its 

counterparty should a reporting party be 

expected to obtain? Would it be 

practical to require the reporting party 

to report applicable UICs on behalf of its 

counterparty? If not, what alternative do 

commenters propose? For example, 

should the Commission directly require 

each counterparty to report applicable 

UICs for each SBS? 

80. For SBSs executed on a SB SEF or 

on a national securities exchange where 

a reporting party might not know the 

identity of its counterparty, how should 

the reporting of counterparty UICs be 

addressed? Should the Commission 

require the SB SEF or national securities 

exchange to report to the registered 

SDR, at a minimum, the participant ID 

of the counterparty? 

81. Do commenters agree with the 

need for, and the goal of, having parent 

and affiliate information reported to a 

registered SDR? 

82. What difficulties do commenters 

envision in establishing and 

implementing a UIC system for ultimate 

parents and affiliates of participants of 

a registered SDR? 

6. Format of Reported Information 

a. Data Format 

To develop a meaningful reporting 

and dissemination regime for SBSs, the 

Commission believes that it is essential 

that all required information for all SBS 

transactions be reported in a uniform 

electronic format.77 Accordingly, 

proposed Rules 901(h) and 907(a)(2) 

together would mandate the use of a 

uniform reporting format for SBS 

information reported to a particular 

registered SDR. Specifically, proposed 

Rule 901(h) would require the reporting 

party to electronically transmit the 

information required to be reported by 

proposed Rule 901 in a format as 

required by the registered SDR. In 

addition, proposed Rule 907(a)(2) would 

require a registered SDR to have policies 

and procedures that specify the data 

format (which must be an open-source 

structured data format that is widely 

used by participants), connectivity 

requirements, and other protocols for 

submitting information.78

The Commission recognizes that this 

likely would require some change in 

existing practice, particularly with 

respect to highly customized 

transactions that may not be 

electronically executed or confirmed 

currently. However, the Commission 


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79FpML is based on XML (eXtensible Markup 

Language), the standard meta-language for 

describing data shared between applications. The 

Commission preliminarily believes that FpML 

would be an appropriate format for data reporting, 

in part because it is already widely understood and 

used and can be used across multiple asset classes. 

80The CUSIP number for a security uniquely 

identifies a company or issuer, the type of security, 

and other information about the instrument. From 

the CUSIP number for a debt instrument, for 

example, market participants are able to determine 

the issuer, the date of maturity, the interest rate, the 

coupon structure, and other terms of the 

instrument. 81 15 U.S.C. 78m[A(a)(2)(A)]. 

believes that such a requirement would 

provide significant benefits by allowing 

for more efficient use and analysis of the 

data. The Commission understands that, 

currently, information for certain SBSs 

is communicated using an open-source 

structured data format called Financial 

Products Markup Language (‘‘FpML’’), 

which is accepted and used industrywide and has a sufficiently flexible 

structure to accommodate new products 

and asset classes.79

Request for Comment 

The Commission requests comment 

on all aspects of the proposed rules 

regarding the electronic submission of 

information required under proposed 

Rule 901 and the formatting of 

information that would be required to 

be reported to a registered SDR. 

83. Are there different standard data 

formats currently in use depending on 

the type or class of SBS? 

84. Should the registered SDR have 

the flexibility to specify acceptable data 

formats, connectivity requirements, and 

other protocols for submitting 

information? Are there disadvantages to 

this approach? If so, what are they and 

how should they be addressed? 

85. Are there concerns with a 

registered SDR requiring use of FpML to 

report SBSs? If so, what are they? Are 

there any licensing fees associated with 

use of FpML? If so, what actions should 

the Commission take, if any, to help 

ensure wide availability of a common 

data format by all participants? 

86. Are commenters concerned that 

varying reporting formats would 

develop if there were more than one 

registered SDR in each asset class? If so, 

should there be a uniform reporting 

format across all registered SDRs? How 

would commenters recommend that the 

Commission achieve this goal? Should 

the Commission require all registered 

SDRs to use the same format and the 

same data elements? 

b. Reference Codes 

The Commission understands that 

there are—or could be developed— 

industry conventions for identifying 

SBSs or reference entities on which SBS 

are based through readily available 

reference codes comparable to the 

CUSIP identifier used for debt, equity, 

and certain derivative securities.80

Proposed Rule 903 would permit the 

use of codes in place of certain data 

elements for purposes of reporting and 

disseminating the information required 

under proposed Regulation SBSR, 

provided that the information needed to 

interpret such codes is widely available 

on a non-fee basis. Specifically, 

proposed Rule 903 would provide that 

a reporting party could provide 

information to a registered SDR 

pursuant to proposed Rule 901, and a 

registered SDR could publicly 

disseminate information pursuant to 

proposed Rule 902, using codes in place 

of certain data elements, provided that 

the information necessary to interpret 

such codes is widely available on a nonfee basis. 

The Commission preliminarily 

believes that it is appropriate for the 

information required to interpret any 

codes used for reporting SBSs be widely 

available on a non-fee basis. If the 

information necessary to interpret such 

codes were not widely available, or 

available only for a fee, SBS transaction 

and pricing data might not be 

meaningfully available to the public. In 

the absence of proposed Rule 903, a 

registered SDR potentially could use 

proprietary code information, thereby 

requiring all consumers of its SBS 

market data to purchase from the code 

creator information necessary to 

interpret the codes. 

Request for Comment 

The Commission requests comment 

on all aspects of the proposed rules 

regarding the use of reference codes. 

87. Do commenters agree it would be 

useful to permit the use of codes in 

place of specific data elements? Why or 

why not? 

88. Are such codes currently in use? 

How would proposed Rule 903 affect 

how market participants employ any 

existing codes? Should the Commission 

permit registered SDRs to publicly 

disseminate SBS information using 

existing codes? Are market participants 

able to understand the codes without 

having to pay licensing or other usage 

fees? 

89. Who might in the future develop 

any codes to be used in place of specific 

data elements? Would it be costly to 

develop these codes? 

90. Is it feasible for information 

necessary to interpret these codes to be 

widely available on a non-fee basis? If 

not, why not? Would codes be 

developed if developers were not able to 

charge fees for the information 

necessary to interpret the codes? How 

would permitting developers of codes to 

charge fees for information necessary to 

interpret the codes affect SBS market 

participants? Would SBS market 

participants effectively be compelled to 

purchase this information? 

91. If fees are necessary to protect the 

investment in intellectual property, 

what standards should be established to 

assure that such fees are fair and 

reasonable and not unreasonably 

discriminatory? 

92. Do commenters believe a better 

approach would be to permit the use of 

fee-based codes for reporting 

information to a registered SDR, 

provided that SBS transaction reports 

are disseminated by the registered SDR 

without the codes, or with codes that 

are widely available on a non-fee basis? 

Should a registered SDR be expected to 

pay any fees or be subject to any usage 

restrictions imposed by the code 

creator? Would these fees and usage 

restrictions impact the public’s access to 

the registered SDR’s market data feed? 

F. Reporting of Data for Historical SBSs 

Section 3C(e)(1) of the Exchange Act 

requires the Commission, no later than 

180 days after the effective date of 

Section 3C, to adopt rules providing for 

the reporting to a registered SDR or to 

the Commission of SBSs entered into 

before the date of enactment of Section 

3C. Section 3C(e)(2) of the Exchange Act 

requires the Commission to adopt rules 

that provide for the reporting of SBSs 

entered into on or after the date of 

enactment of Section 3C no later than 

the later of (1) 90 days after the effective 

date of Section 3C, or (2) such other 

time after entering into the SBS as the 

Commission may prescribe by rule or 

regulation. 

The statutory provision applicable to 

the reporting of SBSs entered into prior 

to the date of enactment does not limit 

the SBSs subject to the reporting. In 

contrast, the statutory provision 

requiring the Commission to adopt an 

interim final rule for the reporting of 

SBSs entered into prior to the effective 

date of the Dodd-Frank Act does limit 

the applicability of that rule to such 

SBSs that had ‘‘not expired as of the date 

of enactment.’’ 81 Indeed, the statutory 

language applicable in this proposal 

would not prohibit collection of SBS 

data on all SBSs entered into since the 

first SBS, whether or not those SBS 

positions remain open or have been 

closed. This would potentially capture a 

very large amount of data on SBSs going 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
75224 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

82See proposed Rule 900 (defining ‘‘preenactment security-based swap’’ to mean any SBS 

executed before July 21, 2010—the date of 

enactment of the Dodd-Frank Act—the terms of 

which had not expired as of that date). 

83See proposed Rule 900 (defining ‘‘effective 

reporting date,’’ with respect to a SDR, as the date 

six months after the registration date); proposed 

Rule 900 (defining ‘‘registration date,’’ with respect 

to a SDR, as the date on which the Commission 

registers the SDR, or, if the Commission registers 

the SDR before the effective date of proposed 

Regulation SBSR, the effective date of proposed 

Regulation SBSR). 

84 Information concerning historical SBSs would 

be reported, but would not be publicly 

disseminated. See proposed Rules 901(i) and 910. 

This reporting is consistent with the requirements 

contained in Rule 13Aa–2T(b)(1) under the 

Exchange Act, as the Commission recognizes that 

such information may not be available. See Interim 

Rule Release, supra note 16. Furthermore, if a 

reporting party has reported a SBS to a registered 

SDR pursuant to proposed Rule 901(i), the reporting 

party would become obligated to report to the 

registered SDR any life cycle events pertaining to 

that SBS. See proposed Rule 901(e). 

85 15 U.S.C. 78m(m)(1)(B). 

86 15 U.S.C. 78m(m)(1)(E)(iv). 

87This provision applies only with regard to SBSs 

described in clauses (i) and (ii) of Section 

13(m)(1)(C) of the Exchange Act, not SBSs 

described in clauses (iii) and (iv) of Section 

13(m)(1)(C). See supra Section I.B.2 (describing 

which SBSs fall into each of these four categories). 

back many years. The Commission 

preliminarily believes that an attempt to 

collect many years’ worth of 

transaction-level SBS data (including 

closed or expired SBSs) would not 

enhance the goal of price discovery, nor 

would it be particularly useful to 

regulators or market participants in 

implementing a forward-looking SBS 

reporting and dissemination regime. 

Furthermore, collecting, reporting, and 

processing all such data would involve 

substantial costs to market participants 

with little potential benefit. 

Accordingly, the Commission has 

proposed to limit the reporting of SBSs 

entered into prior to the date of 

enactment to those SBSs that had not 

expired as of that date (‘‘pre-enactment 

SBSs’’).82

The Commission acknowledges that 

reporting parties will not necessarily 

possess all of the information required 

by proposed Rule 901(c) and (d) with 

respect to pre-enactment SBSs or SBSs 

executed on or after July 21, 2010, and 

before the effective reporting date 83

(‘‘transitional SBSs’’) (and together with 

pre-enactment SBSs, ‘‘historical SBSs’’). 

Thus, proposed Rule 901(i) would 

require a reporting party to report all of 

the information required by proposed 

Rules 901(c) and (d) for any historical 

SBSs, to the extent such information is 

available.84 For example, a reporting 

party would not have to report the time 

stamp of a historical SBS if a time stamp 

had not already been captured. In 

addition, if the terms of a SBS had been 

amended since the initial time of 

execution, only the most current version 

of the SBS would be considered the 

historical SBS that had to be reported 

pursuant to proposed Rules 901(i) and 

910(a). 

By requiring reporting of preenactment SBS transactions, proposed 

Rule 901(i) would provide the 

Commission with insight as to 

outstanding notional size, number of 

transactions, and number and type of 

participants in the SBS market. This 

would provide a starting benchmark 

against which to assess the development 

of the SBS market over time and, thus, 

represent a first step toward a more 

transparent and well regulated market 

for SBSs. The data reported pursuant to 

proposed Rule 901(i) also could help the 

Commission prepare the reports that it 

is required to provide to Congress. 

Further, proposed Rule 901(i) would 

require market participants to inventory 

their positions in SBS to determine 

what information needs to be reported, 

which could benefit market participants 

by encouraging management review of 

their internal procedures and controls. 

The Commission notes that, 

especially with respect to CDSs, 

reporting parties may already have 

reported SBS information about 

historical SBSs to a data repository. 

Should such a data repository become 

registered with the Commission, the 

Commission would not require 

reporting parties to submit duplicate 

information to the registered SDR, 

except to the extent the reporting party 

has information in its possession that 

satisfies the provisions of proposed 

Rules 901(c) and (d) that had not 

previously been reported to the 

registered SDR. 

Request for Comment 

The Commission requests comment 

on all aspects of the proposed rules 

relating to pre-enactment SBSs and 

transitional SBSs. 

93. Do commenters agree with the 

proposed reporting requirements for 

historical SBSs? Should the 

Commission extend the reporting 

requirement to include SBSs that were 

entered into prior to the date of 

enactment of the Dodd-Frank Act that 

had expired as of that date? If so, what 

information should be reported with 

respect to these SBSs? Would this 

approach be feasible? What would be 

the benefits of such an approach? Who 

would use this information, and for 

what purpose(s)? What would be the 

costs of this approach? 

94. Would data concerning expired 

SBSs be of use to anyone? If so, who 

would use this information, and for 

what purpose? 

95. Should the proposed rule 

‘‘grandfather’’ all SBSs previously 

reported to a SDR regardless of whether 

the reporting party has information in 

its possession that satisfies the 

provisions of proposed Rule 901(c) and 

(d) that had not previously been 

reported to the registered SDR? 

V. Public Dissemination of SecurityBased Swap Transaction Information 

In seeking to carry out Congress’s 

mandate to require real-time public 

reporting for all SBSs, the Commission 

is mindful of Congress’s statement in 

Section 13(m)(1)(B) of the Exchange 

Act 85 that ‘‘[t]he purpose of [Section 

13(m)] is to authorize the Commission 

to make security-based swap transaction 

and pricing data available to the public 

in such form and at such times as the 

Commission determines appropriate to 

enhance price discovery.’’ Section 

13(m)(1)(E)(iv) of the Exchange Act 86

further provides that the rule 

promulgated by the Commission to 

carry out the real-time reporting 

mandate shall contain provisions that 

take into account whether the public 

disclosure will materially reduce market 

liquidity.87

By reducing information asymmetries, 

post-trade transparency has the 

potential to lower transaction costs, 

improve confidence in the market, 

encourage participation by a larger 

number of market participants, and 

increase liquidity in the SBS market. 

The current market is opaque. Market 

participants, even dealers, lack an 

effective mechanism to learn the prices 

at which other market participants 

transact. In the absence of post-trade 

transparency, market participants do not 

know whether the prices they are 

paying or would pay are higher or lower 

than what others are paying for the same 

SBS instruments. Currently, market 

participants resort to ‘‘screen-scraping’’ 

e-mails containing indicative quotation 

information to develop a sense of the 

market. Supplementing that effort with 

prompt last-sale information would 

provide all market participants with 

more extensive and more accurate 

information on which to make trading 

and valuation determinations. 

SBSs are complex derivative 

instruments, and there exists no single 

accepted way to model a SBS for pricing 

purposes. Post-trade pricing and volume 

information could allow valuation 

models to be adjusted to reflect how 

other market participants have valued a 

SBS instrument at a specific moment in 

time. Public, real-time dissemination of 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 75225 

88See Amy K. Edwards, Lawrence Harris, & 

Michael S. Piwowar, Corporate Bond Market 

Transparency and Transaction Costs, J. of Fin., Vol. 

62, at 1421–1451 (2007); Hendrik Bessembinder, 

William F. Maxwell, & Kumar Venkataraman, 

Market Transparency, Liquidity, Externalities and 

Institutional Trading Costs in Corporate Bonds, J. of 

Fin. Econ., Vol. 82, at 251–288 (2006). It should be 

noted that Amy Edwards, one of the co-authors of 

the first article cited, currently serves as an 

economist in the Commission’s Division of Risk, 

Strategy, and Financial Innovation. 

89Michael A. Goldstein, Edith S. Hotchkiss, & 

Erik R. Sirri, Transparency and Liquidity: A 

Controlled Experiment on Corporate Bonds, Rev. of 

Fin. Stud., Vol. 20, Issue 4, at 235–273 (2007), at 

269, 270. 

90See N.Y. Naik, A. Neuberger, & S. Viswanathan, 

Trade Disclosure Regulation in Markets with 

Negotiated Trades, Rev. of Fin. Stud., Vol. 2, Issue 

4, at 873–900 (1999). 

91See Ananth Madhavan, Consolidation, 

Fragmentation, and the Disclosure of Trading 

Information, Rev. of Fin. Stud., Vol. 8, Issue 3, at 

579–603 (1995). 

last-sale information also could aid 

dealers in deriving better quotations, 

because they would know the prices at 

which other market participants have 

traded. The same information could aid 

end users in evaluating current 

quotations, because they would be able 

to inquire from dealers why the 

quotations that the dealers are providing 

them differ from the prices of the most 

recent transactions. Furthermore, end 

users that could view last-sale 

information in real time would be able 

to test whether quotations offered by 

dealers before the last sale were close to 

the price at which the last sale was 

executed. In this manner, post-trade 

transparency could promote price 

competition and more efficient price 

discovery in the SBS market. 

In other markets, greater post-trade 

transparency has increased competition 

among market participants and reduced 

transaction costs. A number of studies 

of the corporate bond market, for 

example, have found that post-trade 

transparency, resulting from the 

introduction of TRACE, has reduced 

transaction costs.88

However, the structure of the SBS 

market and the way in which 

participants manage risk in this market 

might be sufficiently different from 

other financial markets to warrant 

different approaches to post-trade 

transparency. The SBS market is almost 

wholly institutional, unlike other 

securities markets where there is 

substantial retail participation. 

Moreover, the SBS market has many 

fewer market participants, fewer 

transactions, and larger trade sizes 

relative to other securities markets. It 

could be argued that post-trade 

transparency in the SBS market might 

not have the same effects as in other 

securities markets. Indeed, one study of 

TRACE stated that ‘‘[o]ur evidence 

suggests that the availability of last sale 

price information may have little impact 

on spreads for less active bonds’’ and 

that ‘‘[w]e do not find any effect 

(positive or negative) of transparency for 

very thinly traded bonds.’’ 89

It could be argued that post-trade 

transparency in the SBS market, 

particularly for large-sized trades, might 

even adversely impact liquidity by 

increasing the costs of dealers to hedge. 

In a typical SBS, one party (the ‘‘natural 

long’’) either has a risk position that it 

wishes to offset (because, for example, 

it is long the bonds of a reference 

company) or it wishes to establish a risk 

position. The natural long typically 

would approach one or more dealers to 

take the other side of the trade. If a 

dealer were to enter into a SBS with the 

natural long, the dealer typically would 

seek to lay off that risk as much as 

possible, perhaps with another dealer. 

Eventually, however, the risk would 

typically be assumed by a market 

participant (the ‘‘natural short’’) who is 

willing to assume the risk being laid off 

by the natural long. In the SBS market, 

dealers generally are not natural longs 

or natural shorts, because they do not 

seek to profit by taking long or short risk 

positions. Dealers profit, rather, by 

collecting spreads between the price at 

which they buy risk and the price at 

which they sell risk, and by charging 

commissions. 

The larger the natural long’s initial 

risk position, the more difficult it would 

likely be for a dealer that enters into an 

SBS with the natural long to lay off the 

risk. All other things being equal, it 

would likely be easier for the dealer to 

find another dealer or a natural short 

willing to take on a small risk than a 

larger one. This is the case even in an 

opaque market, such as the SBS market 

as it exists today. The difficulties in 

transferring the risk could be even 

greater if the transaction details of the 

initial SBS between the natural long and 

the dealer were publicly disseminated 

in real time. A dealer trying to engage 

in hedging transactions following an 

initial, large SBS trade could be put in 

a weaker bargaining position relative to 

subsequent counterparties, who could 

anticipate the structure of the hedge. 

In an opaque market, market 

participants have to rely primarily on 

their understanding of the market’s 

fundamentals to arrive at a price at 

which they would be willing to assume 

risk. With immediate real-time public 

dissemination of a block trade, however, 

market participants who might be 

willing to offset that risk—i.e., other 

dealers and natural shorts—could 

extract rents from a dealer that takes the 

risk from the natural long. Because the 

initial dealer would not internalize 

those higher costs, it would most likely 

seek to pass those costs on to the natural 

long in the form of a higher price for the 

initial SBS up front. Alternatively, the 

initial dealer could choose not to enter 

into the initial SBS if the dealer’s cost 

to hedge increased. In other words, 

increasing the dealer’s initial cost to 

hedge could increase costs to those 

seeking to take a natural long position 

both in the form of less favorable SBS 

prices for the natural long and 

potentially fewer counterparties for a 

natural long to transact with, if certain 

dealers were to scale back their activity 

in the SBS market. This could lead to 

less liquidity in the SBS market, and 

thus lower trading volume and less 

ability for market participants to manage 

risk.90 It also might be argued that 

increased post-trade transparency could 

drive large trades to other markets that 

offer the opacity desired by traders, 

creating fragmentation and harming 

price efficiency and liquidity. This 

possibility is consistent with the 

argument that large, informed traders 

may prefer a less transparent trading 

environment that allows them to 

minimize the price impact of their 

trades.91

Under this view of the SBS market, 

real-time public dissemination of SBS 

block trades could result in market 

inefficiencies, as evidenced by fewer 

transactions or less liquidity. If the 

natural long were unable or unwilling to 

assume higher costs for the initial SBS 

transaction, it might be left with an 

undesired level of risk, because the 

market has been unable to relocate the 

risk to others who are more willing or 

able to assume it. Furthermore, higher 

overall transaction costs could hurt 

dealers, even though they can pass on 

to the natural long the higher costs to 

hedge. This is because post-trade 

transparency could cause overall 

transaction volumes to decline, thereby 

reducing profits accruing to dealers, 

whether in the form of spreads or 

commissions. Furthermore, to the extent 

natural shorts are able under a posttrade transparency regime without a 

block trade exception to extract rents 

from natural longs (albeit indirectly), 

there could be a wealth transfer from 

natural longs to natural shorts. This 

could be viewed as inefficient, because 

the prices charged (and presumably 

obtained) by the natural shorts are not 

based solely on economic fundamentals, 

but also are impacted by the 

predicament of the natural longs (or 

dealers that have traded with the natural 

longs), where all market participants 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
75226 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

92See 15 U.S.C. 78m(m)(1)(E)(iv). 

know that the natural longs (or the 

dealers) have a large risk position that 

they presumably will wish to offset in 

the near future. 

On the other hand, fully and 

immediately disseminating SBS 

transactions to the public—even those 

of large notional size—could incentivize 

additional market participants to 

compete to purchase the risk that the 

natural long is trying to acquire or 

offset. In other words, the desire by 

natural shorts to extract rents from 

natural longs might be offset by more 

natural shorts competing to acquire the 

risk. In this view, greater post-trade 

transparency would result in lower 

rather than higher costs for natural longs 

to offset or acquire their risk positions. 

In the existing, opaque market for SBSs, 

any individual market participant 

possesses only incomplete knowledge of 

when transactions occur, and thus when 

opportunities arise to enter the market 

by offering to offset risk. Moreover, any 

individual market participant possesses 

only incomplete information about 

where others view the price of risk. 

Real-time public dissemination of both 

the price and full size of all SBS 

transactions, including block trades, 

could cause more market participants to 

bid to take on risk after seeing a report 

of the block trade. Moreover, full posttrade transparency of block trades 

would allow natural shorts to know the 

prices at which natural longs transacted, 

which would enable natural shorts to 

bid more efficiently to accept the risk, 

particularly if natural shorts used the 

post-trade information as an input to, 

rather than as a substitute for, their own 

independent valuation and pricing 

decisions. Currently, a natural short— 

without knowledge of the price at which 

the natural long transacted—could 

underprice its willingness to acquire the 

risk, resulting in a windfall profit for the 

dealer, who can capture a greater 

spread. 

Discussed in greater detail below are 

the provisions in proposed Regulation 

SBSR relating to post-trade 

transparency. In particular, the 

Commission is proposing Rules 907(b) 

and 902(b) relating to block trades, and 

is thereby taking into account the 

possibility that public disclosure 

required under the Dodd-Frank Act 

could materially reduce market liquidity 

for SBSs of large notional size.92 These 

proposed rules are designed to balance 

the benefits of post-trade transparency 

against the potential harm that could be 

done to dealers and natural longs that 

could face higher costs of transferring or 

hedging a large risk position after other 

market participants learn of the 

execution of a block trade. 

The Commission acknowledges that it 

would be difficult at this stage to 

accurately predict how post-trade 

transparency in general, or the 

particular methods of post-trade 

transparency discussed in this release, 

would affect the SBS market. The 

Commission is mindful that there are 

similarities and differences between the 

SBS market and the other securities 

markets that the Commission regulates, 

and that these similarities and 

differences may impact how post-trade 

transparency could affect the SBS 

market, in contrast to how post-trade 

transparency affects other securities 

markets. Moreover, the effects of 

immediate real-time dissemination 

could differ between the near term and 

the long term, particularly as the SBS 

market evolves in response to other 

regulatory actions. The Commission 

expects that, as post-trade transparency 

is implemented in the SBS market, new 

data will come to light that will inform 

the discussion and could cause 

subsequent revision of Regulation SBSR. 

Whatever approach is ultimately 

adopted, the Commission will study the 

development of the market closely, 

particularly with regard to block trades, 

and make subsequent revisions to the 

rules relating to post-trade transparency 

in the SBS market as necessary or 

appropriate. 

Request for Comment 

The Commission requests comment 

generally on how the Commission 

should address Congress’s instruction in 

Section 13(m)(1)(E)(iv) of the Exchange 

Act that, with respect to certain SBSs, 

the rule promulgated by the 

Commission to carry out the real-time 

reporting mandate shall contain 

provisions that take into account 

whether the public disclosure will 

materially reduce market liquidity. In 

particular: 

96. Would post-trade transparency 

have an effect on the SBS market similar 

to its effect in other securities markets? 

Why or why not? 

97. Academic studies of other 

securities markets generally have found 

that post-trade transparency reduces 

transaction costs and has not reduced 

market liquidity. How do those markets 

differ or compare to the SBS market? 

How would those similarities or 

differences affect post-trade 

transparency in the SBS market? 

98. The SBS market currently is 

almost wholly institutional. Would this 

characteristic impact the effect of posttrade transparency on the SBS market? 

If so, how and how much? Are the 

needs of market participants in the SBS 

market for access to transaction 

information different than the needs of 

market participants in other securities 

markets for access to transaction 

information? 

99. A significant amount of trading in 

the SBS market is currently carried out 

by only a limited number of market 

participants. Would this characteristic 

impact the effect of post-trade 

transparency on the SBS market? If so, 

how and how much? For example, is 

there a concern that it would be easier 

to determine the identity of the 

counterparties to a SBS transaction in 

certain instances based on the real-time 

transaction report? If so, what would be 

the harm, if any, of such knowledge? 

Would the answer differ depending 

upon the liquidity of the SBS 

instrument, or whether it was a 

customized SBS or not? 

100. Overall, the SBS market is 

significantly more illiquid than other 

securities markets that have post-trade 

transparency regimes. How would this 

characteristic impact, if at all, the effect 

of post-trade transparency on the SBS 

market? Do commenters believe that 

post-trade transparency could materially 

reduce market liquidity in the SBS 

market, or particular subsets thereof? 

Why and how? Please be specific in 

your response and provide data to the 

extent possible. 

101. In an illiquid market (such as the 

CDS market for smaller reference 

entities), there will likely be fewer lastsale prints than in a more liquid market 

(such as the CDS market for large 

corporate debt issuers). Would these few 

last-sale prints in the illiquid market 

have more, less, or the same value as 

prints in the more liquid market? Why 

or why not? 

102. How would a post-trade 

transparency regime in SBSs affect the 

liquidity of the underlying securities? 

For example, how, if at all, would the 

post-trade transparency regime affect 

liquidity in the corporate bond market? 

103. Should there be exceptions other 

than a block trading exception to posttrade transparency to avoid 

unnecessarily reducing market liquidity, 

e.g., for SBSs based on illiquid 

securities? Please be specific in your 

response and provide data to the extent 

possible. 

104. As noted above, Section 

13(m)(1)(E)(iv) of the Exchange Act 

provides that, with respect to real-time 

public dissemination of information 

about SBSs that are subject to 

mandatory clearing or that are not 

subject to mandatory clearing but are 

cleared regardless, the rule promulgated 

by the Commission regarding such 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
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93See 15 U.S.C. 78m(m)(1)(C). 

94One commenter has expressed support for this 

approach. See Benchmark Letter at 2 (arguing that 

trade reporting and dissemination, including the 

reference data and identifier system, ‘‘should be 

provided via a non-profit industry utility such as 

a SDR’’). See also letter from Larry E. Thompson, 

General Counsel, DTCC, to Mary Schapiro, 

Chairman, Commission, and Gary Gensler, 

Chairman, CFTC, at 1 (November 15, 2010) (stating 

that a registered SDR ‘‘should be able to provide 

* * * a framework for real-time reporting from 

swap execution facilities and derivatives 

clearinghouses’’). 

dissemination shall contain provisions 

‘‘that take into account whether the 

public disclosure will materially reduce 

market liquidity.’’ Do commenters 

believe that there are circumstances 

under which real-time public 

dissemination of information about SBS 

transactions, as contemplated by 

proposed Regulation SBSR, whether or 

not the transactions are block trades, 

would materially reduce market 

liquidity? If so, how, why, and under 

what circumstances would real-time 

public dissemination affect market 

liquidity? If market liquidity would be 

materially reduced, how do commenters 

believe that the Commission should 

address that issue, given the general 

requirement in Section 13(m)(1)(C) of 

the Exchange Act that the Commission 

generally shall require real-time public 

reporting for all SBSs? 

A. Registered SDRs as Entities With 

Duty To Disseminate 

The Dodd-Frank Act identifies four 

types of SBSs and states, with respect to 

each, that the Commission shall require 

real-time public reporting for such 

transactions.93 In implementing the 

requirements of the Dodd-Frank Act, the 

Commission preliminarily believes that 

the best approach would be to require 

registered SDRs to disseminate SBS 

transaction information, and to require 

other market participants to report such 

information to a registered SDR in real 

time, so that the registered SDR can in 

turn provide transaction reports to the 

public in real time.94 Under this 

approach, market participants would 

not have to obtain SBS market data from 

other potential sources of SBS 

transaction information—such as SB 

SEFs, clearing agencies, brokers, or the 

counterparties themselves—to obtain a 

comprehensive view of the SBS market. 

Requiring registered SDRs to be the 

registered entities with the duty to 

disseminate information would produce 

some degree of mandated consolidation 

of SBS transaction data and help to 

provide consistency in the form of the 

reported information. This approach is 

designed to limit the costs and difficulty 

to market participants of obtaining and 

assembling data feeds from multiple 

venues that might disseminate 

information using different formats. 

Multiple uniquely formatted data 

feeds could impair the ability of market 

participants to receive, understand, or 

compare SBS transaction data and thus 

undermine its value. The Commission is 

cognizant of this potential and seeks 

public comment on means to address 

this issue. One way to address that issue 

would be to dictate the exact format and 

mode of providing required SBS 

transaction data to the public. Although 

this approach could promote 

consistency, the Commission 

preliminarily believes that such an 

approach could inhibit innovation and 

the development of best practices, and 

could inadvertently omit key elements 

to a successful SBS transaction 

reporting system. The Commission also 

preliminarily believes that such an 

approach may be difficult to administer 

over time. 

The Commission understands that 

existing SDRs that accept SBS data do 

not currently have the functionality to 

publicly disseminate data in real time. 

The Commission notes that nothing in 

the proposal would prohibit a registered 

SDR from contracting with a vendor to 

carry out the dissemination function. 

Over time, as registered SDRs and SBS 

transaction reporting become more 

established, it is possible that 

alternative approaches for reporting and 

disseminating SBS transaction 

information could develop. Thus, the 

proposal would not prohibit registered 

SDRs that cover the same asset classes 

from acting together to create a central 

consolidator that would disseminate 

information for all SBSs in that asset 

class. Allowing registered SDRs to 

satisfy their dissemination obligation by 

providing information to a third party 

that would consolidate and disseminate 

information for all SBSs in an asset class 

might provide an economic incentive 

for registered SDRs to create, fund, and 

operate a single central consolidator. 

The Commission is sensitive to the 

possibility that there could emerge 

multiple registered SDRs in an asset 

class. Should this occur, the 

Commission and the markets would be 

confronted with the possibility that 

different registered SDRs could adopt 

different dissemination protocols, 

potentially creating fragmentation in 

SBS market data. Based on 

conversations with market participants, 

however, the Commission preliminarily 

believes that the most likely outcome is 

for the market to have only a few 

registered SDRs (although nothing in the 

Dodd-Frank Act prevents more from 

being established). Furthermore, even if 

multiple registered SDRs were to be 

established in an asset class, it is 

unclear whether market participants 

would have an incentive to spread their 

business across those multiple 

registered SDRs. The Commission seeks 

comment on the likelihood of multiple 

registered SDRs per asset class 

emerging; how that would likely affect 

market participant behavior; and what 

steps, if any, that the Commission 

should take to address any attendant 

regulatory issues that could arise. 

One step that the Commission could 

take would be to require one 

consolidated reporting entity to 

disseminate all SBS transaction data for 

that asset class, by requiring each 

registered SDR in an asset class to 

provide all of its SBS data to a ‘‘central 

processor’’ that would also be a 

registered SDR. There is substantial 

precedent for this approach in the 

equity markets, where market 

participants may access a consolidated 

quote for national markets system 

securities and a consolidated tape 

reporting executed transactions. A 

central processor could receive a data 

feed from each registered SDR, 

consolidate the information, and then 

publicly disseminate the consolidated 

data. However, this approach likely 

would take more time to implement and 

may not be warranted given the present 

SBS market structure. Furthermore, as 

noted above, the proposal would not 

prohibit registered SDRs that cover the 

same asset classes from determining on 

their own to act together to create a 

central processor. 

Another approach would be to require 

public dissemination pursuant to a ‘‘first 

touch’’ or ‘‘modified first touch’’ 

approach. For a first touch approach, a 

SBS dealer or major SBS participant that 

is a party to the SBS would be 

responsible for dissemination, and for 

SBSs in which no SBS dealer or major 

SBS participant is a party, the SDR 

would be responsible for dissemination. 

Under a modified first touch approach, 

a SB SEF or national securities exchange 

would be required to disseminate the 

information for those SBSs executed on 

the SB SEF or national securities 

exchange. In connection with either of 

these approaches, the Commission 

could allow a party required to 

disseminate to satisfy its obligation if it 

provided the information to a thirdparty consolidator that would 

disseminate the information for all SBSs 

in that asset class. However, if that did 

not occur in a timely manner—if, for 

example, the reporting parties could not 

agree on the practicalities of such an 

undertaking, or if not all reporting 

parties wanted to join—it would result 


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75228 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

95See infra Section V.C (discussing block trades). 

96The Commission notes that FINRA 

disseminates information on all transactions in 

TRACE-eligible securities immediately upon receipt 

of a transaction report. See FINRA Rule 6750(a). 

The Commission also notes that the Municipal 

Securities Rulemaking Board disseminates 

information on most transactions in municipal 

securities almost immediately. See http:// 

emma.msrb.org/EducationCenter/ 

FAQs.aspx?topic+AboutTrade. 

97See supra Section III.B (discussing the data 

elements required to be reported in real time by 

proposed Rule 901(c)). 

98See proposed Rule 907(a)(4). 

99See proposed Rules 907(a)(1) and (2). 

100See infra Section V.D (discussing proposed 

Rule 904, which deals with hours of operation of 

registered SDRs and related operational 

procedures). 

101See 15 U.S.C. 13m(m)(1)(C)(iv) (providing that, 

with respect to SBSs that are determined to be 

required to be cleared under Section 3C(b) but are 

not cleared, the Commission shall require real-time 

public reporting of such transactions). 

102 15 U.S.C. 13m(m)(1)(E)(ii). This provision 

applies with respect to SBSs that are subject to 

mandatory clearing and SBSs that are not subject 

to mandatory clearing but are cleared at a registered 

clearing agency. 

in less consolidation than the proposed 

approach to require registered SDRs to 

disseminate the SBS data. 

Request for Comment 

The Commission requests comment 

on all aspects of the proposed rules 

requiring registered SDRs to disseminate 

SBS information. 

105. Would requiring registered SDRs 

to disseminate SBS information be an 

effective means of dissemination? Why 

or why not? Would another approach be 

more effective? What would be the 

advantages, or disadvantages, of 

requiring different registered entities, in 

addition to or instead of registered 

SDRs, to disseminate SBS information? 

106. Would the presence of multiple 

disseminators increase the need for a 

consolidated data feed? Why or why 

not? 

107. Should the Commission require 

consolidation of data feeds now? Or 

over time if multiple registered SDRs 

begin to operate in an asset class? 

108. What are the costs and benefits 

of requiring registered SDRs to 

disseminate SBS data? Would this 

approach have an impact on an entity’s 

desire to become a registered SDR? Are 

other entities, such as SB SEFs, better 

suited to disseminate SBS data? How 

should the Commission balance the 

costs to particular entities with the 

benefits of greater consolidation of 

publicly disseminated SBS data? 

B. Dissemination in Real Time 

Proposed Rule 902(a) would require a 

registered SDR to publicly disseminate 

a transaction report of a SBS, other than 

a block trade,95 immediately upon (1) 

receipt of information about the SBS 

from a reporting party, or (2) re-opening 

following a period when the registered 

SDR was closed.96 The Commission 

preliminarily believes that 

‘‘immediately’’ as used in this context 

would require a wholly automated 

process to accept the incoming 

information, process the information to 

assure that only information required to 

be disseminated is disseminated, and 

disseminate a trade report through 

electronic means. The transaction report 

that is disseminated would be required 

to consist of all the information reported 

by the reporting party pursuant to 

proposed Rule 901(c),97 along with any 

indicator or indicators contemplated by 

the registered SDR’s policies and 

procedures.98 In addition, the registered 

SDR would be required to have policies 

and procedures that specify the specific 

data elements that must be reported to 

it and the format for reporting this 

information,99 which could help to 

provide greater uniformity in the 

disseminated transaction data. 

The Commission recognizes that there 

may be circumstances when a registered 

SDR’s systems might be unavailable for 

publicly disseminating transaction data. 

In such cases, as provided in proposed 

Rule 902, the registered SDR would be 

required to disseminate the transaction 

data immediately upon its reopening.100

C. Block Trades 

The Commission proposes to establish 

criteria for what constitutes a block 

trade and for specifying a time delay for 

disseminating certain information about 

a block trade to the public, for all SBSs 

except those that are determined to be 

required to be cleared under Section 

3C(b) of the Exchange Act but are not 

cleared.101 Proposed Rule 907(b) would 

establish criteria for what constitutes a 

block trade, and proposed Rule 902(b) 

would specify the time delay for 

disseminating certain information about 

a block trade to the public. 

1. Role of Registered SDRs Generally 

Proposed Rule 900 would define 

‘‘block trade’’ to mean a large notional 

SBS transaction that meets the criteria 

set forth in proposed Rule 907(b). 

Proposed Rule 907(b)(1) would require 

a registered SDR to establish and 

maintain written policies and 

procedures for calculating and 

publicizing block trade thresholds for 

all SBS instruments reported to the 

registered SDR in accordance with the 

criteria and formula for determining 

block size as specified by the 

Commission. In determining block trade 

thresholds, a registered SDR would be 

performing mechanical, non-subjective 

calculations. 

The Commission preliminarily 

believes that requiring a registered SDR 

to calculate and publicize block trade 

thresholds pursuant to its written 

policies and procedures would allow for 

a more streamlined and accurate 

process, as registered SDRs would have 

more ready access to the data necessary 

to make block trade calculations. 

Further, placing the responsibility on 

registered SDRs rather than reporting 

parties would eliminate the burden on 

reporting parties for making block trade 

calculations, and should provide greater 

uniformity in what constitutes a block 

trade. 

2. Block Trade Threshold 

As noted above, Section 13m(1)(E)(ii) 

of the Exchange Act 102 requires the 

Commission rule for real-time public 

dissemination of SBS transactions ‘‘to 

specify the criteria for determining what 

constitutes a large notional securitybased swap transaction (block trade).’’ In 

this release, the Commission is 

proposing general criteria that it would 

consider when setting specific block 

trade thresholds, but is not proposing 

specific thresholds at this time. The 

Commission believes that it would be 

appropriate to seek additional comment 

from the public, as well as to collect and 

analyze additional data on the SBS 

market, in the coming months. The 

Commission intends to propose specific 

block trade thresholds simultaneous 

with the adoption of Regulation SBSR 

(in whatever form it may ultimately 

take). 

The Commission preliminarily 

believes that the general criteria for 

what constitutes a large notional SBS 

transaction must be specified in a way 

that takes into account whether public 

disclosure of such transactions would 

materially reduce market liquidity, but 

presumably should be balanced by the 

general mandate of Section 13(m)(1) of 

the Exchange Act, which provides that 

data on SBS transactions must be 

publicly disseminated in real time, and 

in a form that enhances price discovery. 

In considering criteria for what 

constitutes a large notional SBS, the 

Commission notes that there are 

mechanisms by which reporting data on 

any SBS might impact liquidity. If the 

intent to trade were publicly reported 

prior to a transaction taking place (i.e., 

if there were pre-trade transparency), it 

would be reasonable to suppose that the 

marketplace would have an opportunity 

to react to this information in a way that 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 75229 

impacted the ability of such a 

transaction to be completed at the 

desired price, which might in turn 

impact the liquidity of such a market by 

causing participants to withdraw from 

trading or reduce the size of their trades. 

However, this effect could not 

manifest itself directly via post-trade 

transparency, since the transaction has 

already taken place. For post-trade 

transparency to have a negative impact 

on liquidity, market participants would 

need to be affected in a way that either: 

(1) Impacted their desire to engage in 

subsequent transactions unrelated to the 

first, or (2) impacted their ability to 

follow through with further actions after 

the reported transaction has been 

completed that they feel are a necessary 

consequence of the reported transaction. 

In instance (1), post-trade dissemination 

of transaction prices, without 

necessarily any reference to notional 

size, could impact the desire for certain 

market participants to trade if spreads 

narrowed, because price transparency 

led to an increased negotiating ability 

for market participants who otherwise 

would not have been privy to such 

information. But this same transparency 

also could lead to an increase in 

liquidity if other market participants 

increase their trading as a result of 

having access to new information or of 

narrower spreads. It may not be possible 

to estimate with any certainty which of 

these factors will outweigh the other as 

the SBS market continues to evolve. 

Analogs to other markets (such as fixed 

income or equities) may provide 

guidance; however, those markets each 

have structures and instruments that 

differ significantly from the SBS market. 

In determining whether there should 

be a delay in the disclosure of prices of 

SBS block trades, without necessarily 

any reference to notional size, the 

Commission is guided by the general 

mandate of Section 13(m)(1) of the 

Exchange Act, which provides that 

transaction information should be 

disseminated in a form that enhances 

price discovery. Nonetheless, the 

Commission recognizes that mandating 

disclosure of trades below a certain size 

would essentially signal to the market 

that a trade was at or above that size— 

that is to say, would signal that the trade 

was ‘‘of size’’—even when there is no 

disclosure of the precise size of the 

trade if it is above some threshold size. 

The Commission preliminarily believes 

that even in very illiquid markets 

transaction prices form the foundation 

of price discovery. Past transactions 

may not be indicative of those in the 

future, and may not themselves 

accurately reflect fundamental value, 

but they provide an objective starting 

point for participants to consider. 

Moreover, in an illiquid market, the low 

frequency of transactions and 

potentially wide variation of past prices 

inform participants as to uncertainty in 

pricing that they may expect in the 

future, which may not only influence 

trading decisions, but could also play a 

role in mark-to-market valuations and 

risk management. There does not seem 

to be a reason that post-trade price 

disclosure for large notional SBS 

transactions would be less relevant for 

price discovery than similar disclosure 

for other SBSs. Therefore, as described 

further below, the Commission is 

proposing that prices for block trades be 

disseminated in the same fashion as 

prices for non-block-trade transactions. 

In contrast, instance (2) above 

considers that disclosure that a block 

trade has taken place, with or without 

the exact size of the trade, may lead to 

a reduction in liquidity if one or both 

of the parties engaged in such a 

transaction need to take further actions 

in the marketplace after the reported 

transaction was completed and 

disseminated, and dissemination would 

inhibit their ability to take such action. 

In this situation, one or both of the 

parties might choose not to have 

participated in the original transaction. 

One reason an SBS counterparty 

might desire to take further action after 

an initial transaction is completed 

would be for hedging purposes. This 

hedge may take the form of re-entering 

the SBS market on the contra side, or 

hedging the exposure underlying the 

initial SBS by taking a contra position 

in the cash security market. Whether or 

not one or more parties to a transaction 

will be subsequently hedging its 

exposure after the transaction is 

complete cannot be discerned from data 

about the transaction. However, if a 

transaction is to be hedged, the size of 

the transaction would be a factor in how 

readily the hedge can be executed. 

For transactions that are sufficiently 

small, disseminating the exact size of 

the transaction would likely not provide 

other market participants with 

information that could be used to the 

detriment of the hedging party, since the 

hedging transaction would be 

indistinguishable from other market 

activity. However, for transactions that 

are sufficiently large, it may be the case 

that disseminating the size of such a 

transaction would provide a signal to 

other market participants that there is 

the potential, though not certainty, that 

a large transaction could take place in 

an SBS or a related security. Market 

participants might be able to use this 

information to their advantage in a way 

that disadvantages the hedging party 

and disincents that party from engaging 

in such types of SBS transactions. In 

this fashion, post-trade transparency for 

one transaction is transformed into pretrade signaling for another. 

To address this issue, the Commission 

preliminarily believes that the size of an 

SBS transaction that is sufficiently large 

to signal other market participants that 

there is the potential for a subsequent 

outsized transaction, should itself be 

suppressed to provide time for those 

subsequent transactions, if any, to be 

absorbed by the market. Moreover, the 

Commission recognizes that mandating 

disclosure of trades below a certain size 

would essentially signal to the market 

that a trade was at or above that size— 

that is to say, would signal that a trade 

was ‘‘of size’’—even when there is no 

disclosure of the precise size of the 

trade, if it is above some threshold size. 

There are a variety of metrics that can 

be used to determine the criteria for 

whether or not a SBS transaction should 

be considered a block trade. These 

include the absolute size of the 

transaction, the size of the transaction 

relative to other similar transactions, the 

size of the transaction relative to some 

measure of overall volume for that SBS 

instrument, and the size of the 

transaction relative to some measure of 

overall volume for the security or 

securities underlying the SBS. The most 

relevant metric would depend on the 

specific nature and timing of the 

hedging, which cannot be discerned 

from data about the transaction. 

However, if the goal of not publicly 

disseminating the size of a large 

notional SBS transaction is to prevent 

inadvertent signaling to the market of 

potential large subsequent transactions, 

then criteria should be chosen in a way 

that minimizes such signaling. 

This suggests the use of one or more 

metrics that can help distinguish 

ordinary transaction sizes from 

extraordinary transaction sizes. An 

ordinary transaction size would be one 

in which the size of subsequent hedging 

transactions (if any) would be 

indistinguishable from the rest of the 

market. Extraordinary transaction sizes 

would be those in which subsequent 

transactions could be distinguished 

from the rest of the market. 

One possibility could be to order the 

sizes of all transactions for a given SBS 

instrument and identify the top Npercent as large. However, it is not a 

priori obvious what percent should be 

used. Also, using a simple percentile 

threshold would not account for the 

distribution of trade sizes that could be 

widely dispersed or narrowly clustered. 

In addition, the distribution of the trade 

sizes could change over time. 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
75230 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

103See supra note 11. 

A second possibility would be to 

examine trade size data to determine if 

the distribution of trade sizes suggests 

thresholds that could be used to discern 

ordinary versus extraordinary trade size. 

The figure below plots the distribution 

of trade sizes, bucketed in bins of $5 

million, for over 370,000 single name 

corporate CDS transactions.103 Almost 

half of all trades have sizes of less than 

$5 million, and over 90% have sizes less 

than $15 million. There is a small 

cluster of trades between $15 million 

and $30 million, followed by a long tail 

beginning at $30 million and extending 

to over $100 million. 

BILLING CODE 8011–01–P 

These data would suggest two 

possible thresholds—$15 million or $30 

million. A cutoff of $15 million would 

have resulted in about 8% of trades 

executed over this time period being 

considered large notional, and a cutoff 

of $30 million would have resulted in 

about 1% of trades being considered 

large notional. 

The second figure below presents 

similar data for over 20,000 sovereign 

CDS transactions from the same source 

over the same time period. The plot 

suggests similar cutoff points, although 

there are notably many more 

transactions in the tail for sovereign 

CDS than there were for single-name 

corporate CDS. A cutoff of $15 million 

would result in about 26% of all trades 

being considered large notional, and a 

cutoff of $30 million would result in 

about 7.5% of all trades being 

considered large notional. 


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104See proposed Rule 900. 

BILLING CODE 8011–01–C 

Splitting the universe of transactions 

into single-name corporate CDS and 

sovereign CDS would not provide for 

potential differences between individual 

corporates or sovereigns that may have 

unique distributions or liquidity 

profiles. As a further consideration, the 

Commission notes that some SBSs may 

trade very infrequently, such as only a 

few times per month. Under these 

conditions, it would not be obvious how 

to distinguish an ordinary sized 

transaction from an extraordinary size. 

However, if a market were that illiquid 

it would most likely not be the case that 

subsequent hedging would be done in 

that same market. In such case, it is 

somewhat harder to see how the posttrade reporting of size would further 

impact the ability for one or more 

market participants to affect subsequent 

hedging transactions, since in such an 

illiquid market it may not be possible to 

hedge at all. 

The Commission also notes that this 

criterion considers only typical trade 

sizes within the CDS market without 

regard to overall daily, weekly, or 

monthly volume. This criterion also 

does not consider liquidity or volume in 

the underlying cash markets. Inclusion 

of volume metrics may be helpful in 

defining the criteria for what constitutes 

a block trade. For example, a single 

trade that is equivalent in size to a fullor half-day’s average volume may be 

considered out-sized. On the other 

hand, if a particular SBS trades only 

once or twice per day then every trade 

would be equivalent to a full or halfday’s average size. The Commission 

invites comment on if and how volume 

considerations should be included in 

the criteria for setting block trade 

thresholds. 

For the reasons discussed above, a 

simple metric based on recent trade 

sizes of SBSs designed to help 

distinguish ordinary from extraordinary 

trade sizes could address the issue of 

inadvertently signaling market 

participants that a potential large 

transaction in a specific SBS or 

underlying security may be forthcoming 

as the result of one or more participants 

hedging a just-completed large notional 

transaction. On the other hand, the 

Commission recognizes that requiring 

disclosure of the fact that a block trade 

took place may raise some of the same 

concerns as requiring disclosure of the 

exact size of the large trade, and that to 

mandate disclosure of trades below a 

certain size is tantamount to mandating 

disclosure that a large trade occurred, 

even if the precise size of the trade is 

not disclosed. The Commission is 

interested in and invites comment on 

whether there are other means by which 

the dissemination protocol for block 

trades could effectively not reveal the 

size of a block trade or mitigate the 

potential effects of revealing that a block 

trade took place, while still offering the 

price component in real time. For 

example, could the block trade be 

disseminated with a ‘‘proxy’’ size, such 

as the size of the block trade threshold 

or a randomized size, with no identifier 

showing that the trade is a block trade? 

Finally, the Commission preliminarily 

believes that it would not be appropriate 

to establish different block trade 

thresholds for similar instruments with 

different maturities. This is reflected in 

the proposed definition of ‘‘securitybased swap instrument,’’ which would 

mean ‘‘each security-based swap in the 

same asset class, with the same 

underlying reference asset, reference 

issuer, or reference index.’’ 104 The 

proposed definition would not include 

any distinction based on tenor or date 

until expiration. The Commission is 

proposing this approach for three 

reasons. First, the larger the number of 

distinctions between SBS instruments 

that are created by the proposed rule, 

the larger the number of potentially 


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75232 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

105Proposed Rule 901(c)(1) would require the 

reporting party to report, in real time, the asset class 

of the SBS and, if the SBS is an equity derivative, 

whether it is a total return swap or is otherwise 

designed to offer risks and returns proportional to 

a position in the equity security or securities on 

which the SBS is based. 

106As an example: Bank DEF wants to purchase 

ten million shares of Company XYZ and would like 

to avoid real-time public reporting of the purchase. 

If Bank DEF purchased those shares on a national 

securities exchange, the purchase would be 

reported in real time. However, Bank DEF could 

instead enter into a total return swap with ten 

million shares of XYZ as a reference asset and 

create an economically similar position. If the total 

return swap, but not the equity security transaction, 

were afforded a block trade exception under 

proposed Regulation SBSR, this disparate 

regulatory treatment might influence market 

participants’ investment choices. 

107SBS market participants typically value their 

holdings at the end of the business day. If no 

information about a block trade were made public 

until after the end of the business day (for example, 

if the block trade occurred at 15:00 UTC/noon EST 

but no public trade report were required until eight 

hours later, i.e., at 23:00 UTC/8:00 p.m. EST), all 

market participants would lose a potentially 

significant input into their valuation 

methodologies. This could be the case in particular 

for infrequently traded SBS instruments, where 

there are few last-sale prints. This would also likely 

be the case for market participants that hold SBS 

instruments in notional sizes similar to the 

undisseminated SBS block trade. A large position 

might be valued less on a per-unit basis than a 

smaller position, due to an illiquidity premium. 

Seeing the price of the block trade in real time 

could be useful for market participants that must 

value a larger SBS position, because the price of the 

reported block trade (even if the exact size is 

unknown) would also likely reflect an illiquidity 

premium to some extent. 

108FINRA rules require member broker-dealers to 

report transactions in corporate and agency debt 

securities to TRACE within 15 minutes. FINRA 

publicly disseminates a transaction report 

immediately upon receipt of the information. If the 

par value of the trade exceeds $5 million (in the 

case of investment grade bonds) or $1 million (in 

the case of non-investment-grade bonds) the 

quantity disseminated by TRACE will be either ‘‘5 

million+’’ or ‘‘1 million+’’. At no time will TRACE 

subsequently disseminate the full size of the trade. 

See TRACE User Guide, version 2.4 (last update 

March 31, 2010), at 50. 

illogical categorizations at the margins. 

For example, there would be little 

economic rationale to draw a distinction 

between SBSs alike in all respects 

except that they had maturities one day 

apart. Second, the Commission 

understands that SBSs in the same asset 

class, with the same underlying 

reference asset, reference issuer, or 

reference index have pricing impacts on 

each other, regardless of their 

maturities. This is because market 

participants typically price SBSs based 

on the same reference issuer or index 

along a curve, whereby prices at points 

along the curve where no hard data exist 

may be interpolated or extrapolated 

from different points along the curve 

where harder data (such as publicly 

disseminated last-sale prints) may exist. 

Thus, even if a SBS of an unusual 

maturity were traded only infrequently, 

the market in that SBS would likely be 

affected more by the characteristics of 

other SBSs based in the same asset 

class, with the same underlying 

reference asset, reference issuer, or 

reference index, rather than the fact that 

there is low liquidity in SBSs having 

that specific maturity. Third, a regime 

that differentiated SBSs based on 

maturities could invite market 

participants to fragment the market by 

creating SBSs with non-standard 

maturities in an effort to gain more 

favorable block trade treatment. 

3. Exclusions From Block Trade 

Definition 

Proposed Rule 907(b)(2)(i) would 

provide that a registered SDR shall not 

designate as a block trade any SBS that 

is an equity total return swap or is 

otherwise designed to offer risks and 

returns proportional to a position in the 

equity security or securities on which 

the security-based swap is based.105 A 

SBS can be designed as a synthetic 

substitute for a position in the 

underlying equity security or securities. 

There is no delay in the reporting of 

block trade transactions for equity 

securities in the United States. Proposed 

Rule 907(b)(2)(i) is designed to 

discourage SBS market participants 

from evading post-trade transparency in 

the equity securities markets by using 

synthetic substitutes in the SBS 

market.106

Proposed Rule 907(b)(2)(ii) would 

provide that a registered SDR shall not 

designate as a block trade any SBS 

contemplated by Section 13(m)(1)(C)(iv) 

of the Exchange Act, i.e., any SBS that 

is determined to be required to be 

cleared under Section 3C(b) of the 

Exchange Act, but that is not cleared. 

The Dodd-Frank Act expressly requires 

the Commission to mandate real-time 

public dissemination for SBSs that are 

determined to be required to be cleared 

but are not cleared. 

4. Public Dissemination of Block Trades 

Proposed Rule 902(b) would provide 

that a registered SDR shall publicly 

disseminate a transaction report of an 

SBS that constitutes a block trade 

immediately upon receipt of 

information about the block trade from 

the reporting party. The transaction 

report would be required to consist of 

all the information reported by the 

reporting party pursuant to proposed 

Rule 901(c), except for the notional size, 

plus the transaction ID and an indicator 

that the report represents a block trade. 

The Commission proposes that the 

registered SDR would be required to 

publicly disseminate a complete 

transaction report for such block trade 

(including the transaction ID and the 

full notional size) as follows: 

• Proposed Rule 902(b)(1) would 

provide that, if the SBS was executed on 

or after 05:00 UTC and before 23:00 

UTC of the same day (which 

corresponds to 12 midnight and 6 p.m. 

EST), the transaction report (including 

the transaction ID and the full notional 

size) shall be disseminated at 07:00 UTC 

of the following day (which corresponds 

to 2 a.m. EST of the following day). 

• Proposed Rule 902(b)(2) would 

provide that, if the SBS was executed on 

or after 23:00 UTC and up to 05:00 UTC 

of the following day (which corresponds 

to 6 p.m. until midnight EST), the 

transaction report (including the 

transaction ID and the full notional size) 

shall be disseminated at 13:00 UTC of 

that following day (which corresponds 

to 8 a.m. EST of the following day). 

Under proposed Rule 902(b), market 

participants would learn the price of an 

SBS block trade in real time, although 

not the notional size. The Commission 

preliminarily believes that this 

approach promotes the public’s interest 

in price discovery without subjecting 

the block trade counterparties to undue 

risk of a significant change in the price 

necessary to hedge the market risk 

created by entering into the block trade. 

Other market participants would know 

the SBS transaction was above a certain 

size, and it may be possible to infer the 

size or direction of a large trade before 

the size is publicly disseminated, based 

on the liquidity premium inferred from 

the reported trade price. The 

Commission recognizes that the 

disclosure that a block trade took place, 

even without disclosure of the exact 

size, can still implicate some of the 

concerns regarding subsequent hedging 

that were previously discussed. On the 

other hand, there would still be 

substantial risk for any other market 

participant that seeks to take long or 

short market positions solely to profit 

from the information that a block trade 

occurred, due to the uncertainty 

regarding the true size of the trade. 

Moreover, disseminating the price in 

real time could allow all market 

participants to obtain useful information 

about the block trade for valuation 

purposes, even though they would not 

learn about the full size of the block 

trade until later.107 The Commission 

notes that the approach that it is 

proposing here is similar to TRACE’s 

handling of block trades.108

Unlike TRACE, however, the 

Commission is proposing a second wave 

of transaction reporting, which would 

include the full notional size of the 


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109Market participants would be able to view the 

full notional size of a SBS transaction no sooner 

than eight hours and no more than 26 hours after 

the time of execution. A SBS block trade executed 

at 05:00 UTC would have its full size disseminated 

by a registered SDR at 07:00 UTC of the next day, 

which is 26 hours later. Any other SBS block trade 

would be disseminated after a shorter delay. For 

example, a SBS block trade executed at 17:00 UTC 

also would be disseminated with its full size at 

07:00 UTC of the next day, which is 14 hours later. 

A SBS block trade executed at 04:59:59 would have 

its full size disseminated by a registered SDR at 

13:00 UTC of that same day, just over eight hours 

later. 

110See infra Section V.E (discussing hours of 

operation of registered SDRs). 

block trade, after an appropriate delay. 

Under proposed Rules 907(b)(1) and (2), 

all block trades would have at least an 

eight-hour delay before the full notional 

size would be disseminated. Proposed 

Rule 907(b) would establish a cut-off 

time of 23:00 UTC, which correspond to 

6 p.m. EST. Block trades executed on or 

after 05:00 UTC (which corresponds to 

midnight EST) and up to 23:00 UTC (6 

p.m. EST) would have to have their full 

notional size disseminated by 07:00 

UTC, which corresponds to 2 a.m. EST. 

Thus, most block trades executed on a 

given U.S. day would have their full 

notional sizes disseminated overnight. 

However, block trades executed on or 

after 23:00 UTC (6 p.m. EST) and before 

05:00 UTC (midnight EST) would 

instead have their full notional sizes 

disseminated at 13:00 UTC, which 

corresponds to 8 a.m. EST of the 

following U.S. day. If there were only 

one point in the day when a registered 

SDR were required to disseminate the 

full notional sizes, block trades 

executed a short time before the second 

wave of dissemination would not 

benefit from the proposed delay in the 

dissemination of the notional size. 

Under the proposed approach, block 

trades executed during a period that 

runs roughly from the close of the U.S. 

business day to midnight EST would 

have their full sizes disseminated by a 

registered SDR at a time that 

corresponds to the opening of business 

on the next U.S. day. 

The Commission preliminarily 

believes that disseminating the full size 

of a block trade, albeit with a delay, 

would further promote price 

transparency while having only 

minimal costs. The ability to view the 

full notional size, although with a delay 

of between eight and 26 hours,109 would 

allow market participants to understand 

the full scope of activity in the market. 

At the same time, market participants 

that execute block trades would have at 

minimum eight hours to hedge or take 

other action to minimize their risks 

before the full size of their trades was 

disseminated. Based on preliminary 

discussions with market participants, 

the Commission believes that the 

proposed delay of between eight and 26 

hours, which in most cases would 

represent the better part of a business 

day, would allow sufficient time for the 

counterparties to the transaction to take 

follow-up action as needed. The 

Commission preliminarily believes, 

therefore, that these time periods strike 

a reasonable balance between the goals 

of post-trade transparency and of 

providing market participants that trade 

in large size a reasonable opportunity to 

mitigate their risks. 

Finally, proposed Rule 907(b)(3) 

would provide that, if a registered SDR 

is in normal closing hours or special 

closing hours 110 at a time when it 

would be required to disseminate 

information about a block trade 

pursuant to this section, the registered 

SDR shall instead disseminate 

information about the block trade 

immediately upon re-opening. Under 

proposed Rules 907(b)(1) and (2), a 

registered SDR could otherwise be 

required to disseminate the full report of 

a block trade, including the notional 

size, at a time when it is closed. 

5. No Delay in Reporting Block Trades 

to Registered SDR 

Because the registered SDR, rather 

than the reporting party, would have the 

responsibility to determine whether a 

transaction qualifies as a block trade, 

the reporting party would be required to 

report a SBS to a registered SDR or the 

Commission pursuant to the time frames 

set forth in Rules 901(c) and (d), 

regardless of whether the reporting 

party believes the transaction qualifies 

for block trade treatment. 

6. Block Trade Policies and Procedures 

Proposed Rule 907(b)(1) would 

provide that a registered SDR shall 

establish and maintain written policies 

and procedures for calculating and 

publicizing block trade thresholds for 

all SBS instruments reported to the 

registered SDR. At a minimum, a 

registered SDR would be required to 

establish written policies and 

procedures reasonably designed to: (1) 

Immediately determine whether a SBS 

reported to the registered SDR 

constitutes a block trade and, if so, (2) 

disseminate information about the block 

trade in a manner consistent with 

proposed Rule 902(b). 

As noted above, the specific threshold 

that a registered SDR would have to 

apply to make the block trade 

calculations will be established in a 

future Commission rulemaking. 

Request for Comment 

The Commission requests comment 

generally on all aspects of the proposed 

rules regarding block trades, including 

the proposed criteria and the proposed 

exclusions. In particular, the 

Commission specifically requests 

comment on the following issues: 

109. Do commenters agree with the 

approach of having a registered SDR 

calculate and publicize block size 

thresholds, in accordance with the 

criteria established by the Commission? 

Why or why not? If not, what would be 

an alternative approach? 

110. If there is more than one 

registered SDR for an asset class, how 

would the Commission ensure that all 

registered SDRs calculated the same 

block trade thresholds for the same SBS 

instrument? How should the 

Commission address this issue? Is it 

feasible to expect multiple registered 

SDRs in the same asset class to obtain 

each others’ market data feeds to obtain 

the data with which to calculate block 

trade thresholds? 

111. If commenters believe that there 

would be adverse price impact for 

traders if all information on block trades 

was made available in real time, do 

commenters have any studies or 

empirical evidence to support that 

assertion? What would be the long-term 

effects on the market if all market 

participants knew the full transaction 

details of all SBSs in real time? Would 

this impact liquidity? If so, how? 

112. Some participants in the Market 

Data Roundtable referred to the 

likelihood of ‘‘front running’’ if all 

information on block trades were made 

available in real time. How would front 

running occur in the SBS market if all 

the details of block trades were 

disseminated in real time? 

113. How do counterparties hedge 

large SBS trades? At what notional trade 

size does it become difficult to hedge a 

SBS such that a dissemination delay is 

necessary? How does this vary by asset 

class? How long does it take to complete 

a hedge? What characteristics of a SBS 

instrument or asset class affect the 

length of time needed to deploy the 

hedge? 

114. Does a counterparty’s ability to 

hedge a trade increase or decrease 

depending on market characteristics 

such as trading volume and trading 

frequency? Does this depend on asset 

class, and within an asset class does it 

depend on maturity or other contract 

characteristics? 

115. Do commenters agree that the 

criteria for determining whether or not 

a SBS transaction is considered a block 

trade should be based on a distribution 


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111See 15 U.S.C. 13m(m)(1)(C)(iii) (‘‘With respect 

to security-based swaps that are not cleared * * * 

and which are reported to a security-based swap 

of past trade sizes? Should overall 

volume also be considered? Should 

volume or trade sizes in the cash market 

be considered? 

116. Should block trade thresholds be 

determined with more granularity, such 

as on a SBS instrument by instrument 

basis? 

117. How often should thresholds be 

updated? What should be the 

appropriate look back period for data 

used to determine thresholds? 

118. Is there a preferred formulaic 

way of computing the thresholds from 

trade size or other distributions? Should 

a simple percentile cut-off be chosen? If 

so, how? Would a standard deviation 

metric be appropriate? 

119. How might trading change as a 

result of the chosen threshold? Could 

these provisions be gamed? Would 

market participants change their trading 

patterns to purposely skew the 

distribution to alter the threshold when 

they are next updated? 

120. For any criterion that takes into 

account trading activity in the SBS 

instrument, should inter-affiliate 

transactions or trades resulting from 

portfolio compressions be excluded? If 

so, why? Are there other types of SBSs 

that should be excluded? If so, why? 

How could those exclusions be defined 

so as to prevent market participants 

from inappropriately deeming a SBS as 

qualifying for an exclusion? 

121. Should there be a fixed 

minimum notional size threshold below 

which no SBS could be considered a 

block trade? If so, what should that 

threshold be and why? Should there be 

a different fixed minimum threshold for 

different asset classes or SBS 

instruments? If so, why? What would 

those different thresholds be? 

122. Do commenters agree with the 

proposed exclusions from the block 

trade determination? If so, why or why 

not? Should other kinds of transactions 

be prevented from having a block trade 

exception? 

123. Do commenters believe that 

block trades (however defined) should 

be treated differently from other trades 

for purposes of public dissemination? If 

so, why? If not, why not? 

124. What would be the effect of 

having no or only a short dissemination 

delay for a block trade report that 

includes the full notional size? Would it 

enhance or slow the speed of price 

discovery and the level of price 

efficiency in the market? Would it 

increase or decrease competition among 

market participants in general, or SBS 

dealers in particular? Would any shortterm increases in the cost of hedging be 

offset by reductions in the cost of 

hedging in the longer term? 

125. Do commenters agree with the 

proposed two-step process for public 

dissemination of a block trade? 

126. How likely is it that market 

participants would be able to infer the 

size or direction of a large trade before 

the size is publicly disseminated, based 

on the liquidity premium inferred from 

the reported traded price? Is it feasible 

to remove the liquidity premium 

component from the price of a large 

trade, leaving only a normalized price 

for a standard (non-block) size trade to 

be reported in real time, with the actual 

price including the liquidity premium 

component being reported only at the 

time that actual trade size is revealed? 

127. Would it be preferable to have a 

single transaction report for a block 

trade that contains all transaction 

details, including the notional size, but 

with a delay in dissemination of the 

complete trade report? If so, why? What 

should that delay be? Five minutes? Ten 

minutes? An hour? Three hours? At the 

end of the day? Why would this length 

of time be appropriate? 

128. Are there other means by which 

the dissemination protocol for block 

trades could effectively not reveal the 

size of the block trade while still 

offering the price component in real 

time? For example, could the block 

trade be disseminated with a ‘‘proxy’’ 

size, such as the size of the block trade 

threshold or a randomized size, with no 

identifier showing that the trade is a 

block trade? Even if that approach were 

to effectively not reveal the true size of 

the block, would it do so at the cost of 

creating misinformation in the market? 

129. Do commenters believe it is 

important for market participants to 

have pricing information from block 

trades to set end-of-day marks? When 

are these marks typically set? How 

valuable would it be in setting end-ofday marks to know the price of a SBS 

block trade, even without the full size? 

130. If the Commission were to adopt 

a requirement that the price and size of 

a block trade must be publicly 

disseminated before the time that 

market participants typically set marks, 

would that cause SBS counterparties to 

avoid executing block trades near that 

time? For example, assume the 

Commission were to require that the full 

transaction details of block trades had to 

be publicly disseminated by a registered 

SDR at 21:00 UTC/4:00 p.m. EST, and 

that even a block trade executed at 3:55 

p.m. EST had to be disseminated at 4 

p.m. EST. Would this cause market 

participants to shift block trading earlier 

or later in the day? If so, would there be 

any harm in such movement? 

131. Do commenters agree with the 

Commission’s proposed times for 

disseminating the full notional size of 

block trades? If not, what other times 

would be appropriate, and why? Would 

counterparties be able to effectively 

hedge large SBSs executed toward the 

end of the day during the time allowed 

by the proposed rules (i.e., between 

6 p.m. and midnight EST)? 

132. Do commenters believe it would 

be more appropriate for a registered SDR 

to disseminate the notional size of each 

block trade after a fixed period after the 

trade report for that SBS transaction is 

disseminated without the notional size, 

rather than requiring the registered SDR 

to disseminate the full trade reports in 

two ‘‘batches’’ during the day? If so, 

what would be an appropriate delay for 

disseminate the full notional size, and 

why? 

133. Under the Commission’s 

proposal, there would be at least an 

eight-hour delay between the time of 

execution of a block trade and when the 

full notional size is required to be 

disseminated by a registered SDR. Is an 

eight-hour minimum appropriate? 

Should that period be longer or shorter? 

Why? 

134. Would the Commission’s 

proposed times for disseminating block 

trade information with the full notional 

size included cause any disruptive 

change in trading patterns or activity for 

large SBS trades, for example by 

providing market participants the 

incentive to move block trading toward 

the very beginning of the day, or by 

prompting market participants to avoid 

trading around the release of block trade 

information at 07:00 UTC/2 a.m. EST 

and 13:00 UTC/8 a.m. EST? 

135. Would the public dissemination 

of block trades as proposed allow some 

market participants to infer the identity 

of the parties to the transaction or 

materially reduce market liquidity? If 

so, how? Can or should there be another 

means of suppressing the exact size of 

a block trade? 

D. SBS Information That Will Not Be 

Disseminated 

The Commission is proposing Rule 

902(c)(1), which would prohibit a 

registered SDR from disseminating the 

identity of either counterparty to a SBS, 

and Rule 902(c)(2), which would 

prohibit a registered SDR from 

disseminating, with respect to a SBS 

that is not cleared at a registered 

clearing agency and that is reported to 

a registered SDR, any information 

disclosing the business transactions and 

market positions of any person.111


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data repository or the Commission under section 

3C(a)(6), the Commission shall require real-time 

public reporting * * * in a manner that does not 

disclose the business transactions and market 

positions of any person.’’); 15 U.S.C. 13m(m)(1)(E)(i) 

(requiring that the Commission’s rules governing 

the dissemination of SBS transaction and pricing 

information ‘‘does not identify the participants’’). 

The Commission does not believe that the 

information that would be disseminated pursuant to 

proposed Regulation SBSR would disclose the 

business transactions, identities, or market 

positions of any person. 

112See proposed Rule 900 (defining ‘‘preenactment security based swap’’ and ‘‘transactional 

security-based swap’’). 

113See supra Section IV.F. 

114The Commission is aware that one current 

data repository, Warehouse Trust Company LLC, a 

subsidiary of DTCC, operates 24 hours a day for six 

days a week. 

115See 15 U.S.C. 78m(m)(1)(A). 116For example, a registered SDR could provide 

notices to its participants or publicize its normal 

closing hours in a conspicuous place on its Web 

site. 

In addition, proposed Rule 902(c)(3) 

would prohibit a registered SDR from 

publicly disseminating any information 

regarding a SBS reported pursuant to 

proposed Rule 901(i), which would 

require participants to report preenactment and transitional SBSs.112 The 

Commission preliminarily believes that 

price discovery would not be enhanced 

by publicly disseminating information 

about historical SBSs.113

Request for Comment 

136. Do commenters believe that 

information that would be disseminated 

pursuant to proposed Regulation SBSR 

would disclose the business 

transactions, identities, or market 

positions of any person? 

137. If so, what revisions to proposed 

Regulation SBSR do commenters believe 

would be necessary to avoid disclosing 

the business transactions, identities, or 

market positions of any person? 

E. Operating Hours of Registered SDRs 

1. Continuous Operation 

The Dodd-Frank Act does not 

explicitly address or prescribe the hours 

of operation of the real-time reporting 

and dissemination regime. However, to 

serve the goals of transparency and 

price discovery, the Commission 

believes that it is appropriate to 

implement a system of real-time 

reporting and dissemination that, in 

general, operates continuously.114

Accordingly, proposed Rule 904 would 

require a registered SDR to design its 

systems to allow for continuous receipt 

and dissemination of SBS data, except 

that a registered SDR would be 

permitted to establish ‘‘normal closing 

hours.’’ Such normal closing hours may 

occur only when, in the estimation of 

the registered SDR, the U.S. markets and 

other major markets are inactive. In 

addition, a registered SDR would be 

permitted to declare, on an ad hoc basis, 

special closing hours to perform routine 

system maintenance, subject to certain 

requirements. 

The Commission believes there are 

compelling reasons to adopt this 

approach. First, the market for SBSs is 

global, and the Commission believes the 

public interest is served by requiring 

continuous real-time dissemination of 

any SBS transactions that would be 

required to be reported to a registered 

SDR, no matter when they are executed. 

Second, a continuous dissemination 

regime would reduce the incentive for 

market participants to defer execution of 

SBS transactions until after regular 

business hours to avoid real-time posttrade transparency. Third, the 

Commission believes that this 

continuous dissemination regime would 

be ‘‘technologically practicable,’’ and 

thus consistent with the Dodd-Frank 

definition of what constitutes real-time 

dissemination.115

2. Normal Closing Hours and Special 

Closing Hours 

Although the Commission believes 

that continuous operation of a real-time 

reporting and dissemination regime 

should be the goal, the Commission 

recognizes the potential need for a 

registered SDR to establish normal 

closing hours to perform necessary 

system maintenance. Such normal 

closing hours should occur only when, 

in the estimation of the registered SDR, 

the U.S. markets and major foreign 

markets are inactive. Consequently, 

proposed Rule 904(a) would allow a 

registered SDR to establish normal 

closing hours during periods when, in 

its estimation, the U.S. market and 

major foreign markets are inactive. A 

registered SDR would be required to 

provide reasonable advance notice to 

participants and to the public of its 

normal closing hours.116

Further, the Commission recognizes 

that unexpected circumstances could 

arise that would require a registered 

SDR to temporarily make unavailable its 

systems for processing transaction 

reports and publicly disseminating 

transaction data. Consequently, 

proposed Rule 904(b) would permit a 

registered SDR to declare, on an ad hoc 

basis, special closing hours to perform 

system maintenance that cannot wait 

until normal closing hours. A registered 

SDR would be required, to the extent 

reasonably possible under the 

circumstances, to avoid scheduling 

special closing hours during when, in 

its estimation, the U.S. market and 

major foreign markets are most active, 

and to provide reasonable advance 

notice of its special closing hours to 

participants and to the public. 

Paragraphs (c) to (e) of proposed Rule 

904 would specify requirements for 

handling and disseminating reported 

data during a registered SDR’s normal 

and special closing hours. During 

normal closing hours and, to the extent 

reasonably practicable, during special 

closing hours, a registered SDR would 

be required to have the capability to 

receive and hold in queue transaction 

data it receives. Immediately upon 

system re-opening following normal 

closing hours (or opening following 

special closing hours, if it were able to 

hold incoming data in queue), the 

registered SDR would be required to 

publicly disseminate any transaction 

data required to be reported under 

proposed Rule 901(c) that it received 

and held in queue. If the registered SDR 

could not, while it was closed, receive 

and hold in queue information required 

to be reported, it would be required, 

immediately upon resuming normal 

operations, to send a notice to all 

participants that it had resumed normal 

operations but could not, while closed, 

receive and hold in queue such 

transaction information. Thereafter, any 

participant that had an obligation to 

report information, but was unable to do 

so because of the registered SDR’s 

inability to receive and hold data in 

queue, would be required to 

immediately report the information to 

the registered SDR. 

Regardless of the current operating 

status of a registered SDR, reporting 

parties would be required to submit 

information to the registered SDR under 

the same standards and permissible 

timing detailed in proposed Rule 901. If 

a party that has an obligation to report 

the transaction data is unable to do so 

because the registered SDR’s system is 

unable to receive and hold in queue 

such data, the reporting party would be 

required to report any information that 

it was obligated to report immediately 

after it received a notice that it was 

possible to do so. 

Request for Comment 

The Commission requests comment 

on all aspects of the proposed operating 

hours for registered SDRs. 

138. Do commenters agree with the 

provisions that would allow registered 

SDRs to have normal and special closing 

hours and the proposed process for 

receipt and dissemination of data during 

and after such hours? 

139. Is it reasonable for the 

Commission to provide registered SDRs 

with flexibility to set specific closing 


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117See proposed Rule 905(a)(2). 

118See also SDR Registration Proposing Release, 

supra note 6 (proposing Rule 13n–5 under the 

Exchange Act). 

119See proposed Rule 905(b)(1). The Commission 

is also proposing to require the registered SDR to 

establish and maintain written policies and 

procedures that, among other things, specify how 

reporting parties are to report corrections to 

previously submitted information and how 

information in the records of the SDR, upon being 

discovered to be erroneous, is to be corrected. See 

proposed Rule 907(a)(3); infra Section VI.A 

(discussing the policies and procedures of 

registered SDRs). 

120See proposed Rule 905(b)(2). 121See 15 U.S.C. 13m(m)(1)(G). 

times, or should the Commission adopt 

a rule that specifies hours of operation? 

140. Are there alternatives to allowing 

registered SDRs to close during normal 

and special closing hours? Would it be 

feasible for registered SDRs to operate 

without normal and special closing 

hours? 

F. Procedures for Correcting Errors 

Proposed Rule 905 would establish 

procedures to correct errors in reported 

and disseminated SBS information. The 

Commission recognizes that any system 

for transaction reporting must 

accommodate the possibility that certain 

data elements may be incorrectly 

reported. Proposed Rule 905 would 

establish error reporting procedures for 

counterparties and for registered SDRs. 

1. Counterparty Reporting Error 

Proposed Rule 905(a) would apply 

where a counterparty discovers an error 

after a SBS transaction has been 

reported. A counterparty that was not 

the reporting party would be required to 

promptly notify the reporting party of 

the error. A reporting party that 

discovers an error or receives 

notification of an error from its 

counterparty would be required to 

promptly submit to the entity to which 

it provided the original transaction 

report an amended report pertaining to 

the original transaction report. If the 

reporting party reported the initial 

transaction to a registered SDR, the 

reporting party must submit an 

amended report to the registered SDR in 

a manner consistent with the policies 

and procedures contemplated by 

proposed Rule 907(a)(3).117 The 

Commission preliminarily believes that 

it is reasonable to place the duty to 

submit a correction report on the 

reporting party, because the reporting 

party was responsible for submitting the 

initial transaction report. This approach 

should establish a clear duty and help 

to avoid the submission of duplicative 

error reports. 

2. Responsibility of Registered SDR To 

Correct 

Proposed Rule 905(b) outlines the 

duties of registered SDRs in correcting 

information and re-disseminating 

corrected information.118 If the 

registered SDR either discovers an error 

in the SBS information contained in its 

system or receives notice of an error 

from a counterparty, the registered SDR 

would be required to verify the accuracy 

of the terms of the SBS and, following 

such verification, promptly correct the 

information in its system.119 Proposed 

Rule 905 would further require that, if 

the erroneous information contains any 

information that falls into the categories 

enumerated in proposed Rule 901(c) as 

information required to be reported and 

disseminated in real time, the registered 

SDR would be required to publicly 

disseminate a corrected transaction 

report of the SBS promptly following 

verification of the trade by the parties to 

the SBS, with an indication that the 

report relates to a previously 

disseminated transaction.120

Proposed Rule 907(a)(3) would 

require a registered SDR to, among other 

things, establish and maintain written 

policies and procedures for determining 

how participants would be required to 

report corrections of prior reports. The 

registered SDR would have flexibility to 

specify the modifiers or indicators to 

allow reporting parties to submit reports 

distinguishing corrected trades from 

new trades and indicating the actual 

execution date and time. 

For example: Counterparty B (the 

reporting party) notices that there is an 

error in the reported notional amount of 

a SBS transaction. Counterparty B then 

would be required under proposed Rule 

905(a) to promptly notify the registered 

SDR to which it originally reported the 

trade of the error in the notional 

amount. Because the notional amount is 

one of the data elements that must be 

reported in real time under proposed 

Rule 901(c), the registered SDR would 

be required to immediately disseminate 

a corrected transaction report to the 

public, with a notation indicating that it 

is a corrected trade report. 

Request for Comment 

The Commission requests comment 

on all aspects of the proposed rules 

relating to procedures for correcting 

errors in reported and disseminated SBS 

information. 

141. Are the proposed obligations for 

submitting error reports sufficiently 

clear? 

142. Are additional requirements 

necessary? Are the proposed 

requirements adequate to assure that 

errors are corrected promptly and 

corrections are promptly disseminated 

as appropriate? If not, what additional 

procedures should be required? 

143. Do commenters agree with the 

proposed approach? Why or why not? 

144. Do commenters agree that error 

reports should be publicly 

disseminated? Why or why not? 

VI. Policies and Procedures of 

Registered SDRs 

In designing a comprehensive system 

of transaction reporting and post-trade 

transparency for all SBS—involving a 

constantly evolving market, thousands 

of participants, and potentially millions 

of transactions—the Commission 

preliminarily believes that it is not 

necessary or appropriate for it to specify 

by rule every detail of how this system 

should operate. On some matters, there 

may not be a single correct approach for 

maximizing transparency and price 

discovery; rather, it might be more 

important that there be a coordinated 

approach that all market participants 

understand and adhere to. 

The Commission believes that 

registered SDRs could play an important 

role in developing, operating, and 

improving the system for transaction 

reporting and post-trade transparency in 

SBS, as laid out by Congress in the 

Dodd-Frank Act. Registered SDRs are 

placed at the center of the market 

infrastructure, as the Dodd-Frank Act 

requires all SBSs, whether cleared or 

uncleared, to be reported to them.121

The Commission preliminarily believes 

that some reasonable flexibility should 

be given to registered SDRs to carry out 

their functions—by, for example, being 

able to specify data formats, 

connectivity requirements, and other 

protocols for submitting information to 

them. The Commission’s intent is to set 

out broad principles that registered 

SDRs and their participants would be 

required to follow, while providing 

registered SDRs with flexibility in 

determining the precise means of doing 

so. 

As discussed more fully below, a 

registered SDR would be required to 

establish and maintain certain policies 

and procedures, including policies and 

procedures to: (1) Enumerate the 

specific data elements of SBS or life 

cycle event that a reporting party must 

report; (2) specify one or more 

acceptable data formats, connectivity 

requirements, and other protocols for 

submitting information; (3) promptly 

correct information in its records that is 

discovered to be erroneous; (4) 

determine whether and how life cycle 

events and other SBSs that may not 

accurately reflect the market should be 


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Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 75237 

122See proposed Rule 907(c). 

123See SDR Registration Proposing Release, supra 

note 6, proposed Rule 13n–10. Furthermore, 

proposed Form SDR would require all of the 

policies and procedures required by proposed 

Regulation SBSR be submitted by a data repository 

registering with the Commission. See SDR 

Registration Proposing Release, supra note 6, 

Exhibit GG to proposed Form SDR. 

124 In the latter case, the Commission expects that 

the registered SDR would provide the reporting 

party the transaction ID after the reporting party 

reports the information required by proposed Rule 

901(c). The reporting party would then include the 

transaction ID with its submission of data required 

by proposed Rule 901(d), thereby allowing the 

registered SDR to match the real-time report and the 

subsequent regulatory report. 125See supra Section IV.E.2. 

126This could be the case, for example, with an 

inter-affiliate transfer. 

disseminated; (5) assign or obtain 

certain unique identifiers; (6) receive 

information concerning a participant’s 

ultimate parent and affiliated entities; 

and (7) handle block trades. 

A registered SDR also would be 

required to make its policies and 

procedures required by proposed 

Regulation SBSR publicly available on 

its Web site.122 This would allow all 

interested parties to understand how the 

registered SDR is utilizing the flexibility 

it has in operating the transaction 

reporting and dissemination system.123

The Commission anticipates that 

participants might make suggestions to 

the registered SDR for altering and 

improving that system, or developing 

new policies and procedures to address 

new products or circumstances, 

consistent with the principles set out in 

proposed Regulation SBSR. In 

conclusion, the Commission 

preliminarily believes that requiring 

registered SDRs to adopt and maintain 

policies and procedures, as required 

under proposed Rule 907, would 

improve compliance with proposed 

Regulation SBSR. 

A. Elements of Policies and Procedures 

Proposed Rule 907(a)(1) of Regulation 

SBSR would require a registered SDR to 

establish and maintain written policies 

and procedures that enumerate the 

specific data elements of a SBS or a life 

cycle event that a reporting party must 

report. These data elements would be 

required to include, at a minimum, 

those specified in proposed Rules 901(c) 

and (d). The Commission expects that 

the policies and procedures adopted 

under proposed Rule 907(a)(1) would 

explain to reporting parties how to 

report if all the SBS transaction data 

required by Rules 901(c) and (d) is being 

reported simultaneously, and how to 

report if responsive data are being 

provided at separate times.124

Proposed Rule 907(a)(2) would 

require a registered SDR to establish and 

maintain written policies and 

procedures that specify one or more 

acceptable data formats (each of which 

must be an open-source structured data 

format that is widely used by 

participants), connectivity 

requirements, and other protocols for 

submitting information. The 

Commission preliminarily believes that 

a registered SDR should have reasonable 

flexibility to design its systems and 

develop ways for participants to input 

information into those systems. 

Proposed Rule 907(a)(3) would 

require a registered SDR to establish and 

maintain written policies and 

procedures for specifying how reporting 

parties are to report corrections to 

previously submitted information, 

making corrections to information in its 

records that is subsequently discovered 

to be erroneous, and applying an 

appropriate indicator to any report 

required to be disseminated by 

proposed Rule 905(b)(2), which would 

denote that the report relates to a 

previously disseminated transaction. 

There could be a number of acceptable 

ways to carry out the general directive 

to correct erroneous information, and 

reasonable flexibility should be afforded 

a registered SDR in this regard. Use of 

transaction IDs assigned by the 

registered SDR would facilitate this 

process, as this would offer a clear way 

for participants and the registered SDR 

to refer to an earlier transaction.125 The 

Commission preliminarily believes that 

a registered SDR should be required to 

have an appropriate means to confirm 

that the information provided by the 

reporting party is indeed correct. 

Finally, the policies and procedures 

required by proposed Rule 907(a)(3) 

would have to address applying an 

appropriate indicator to any new 

transaction report required by proposed 

Rule 905(b)(2) that the report relates to 

a previously disseminated transaction. It 

is essential that market observers 

understand that the transaction report 

triggered by proposed Rule 905 does not 

represent a new transaction, but merely 

a correction to a previous transaction. 

Without some kind of indication to that 

effect, market observers could 

misunderstand the true state of the 

market. Therefore, the Commission 

preliminarily believes that the registered 

SDR must apply an appropriate 

indication to the publicly disseminated 

transaction report. 

Proposed Rule 907(a)(4) would 

require a registered SDR to establish and 

maintain written policies and 

procedures describing how reporting 

parties shall report—and, consistent 

with the enhancement of price 

discovery, how the registered SDR shall 

publicly disseminate—reports of, and 

adjustments due to, life cycle events; 

SBS transactions that do not involve an 

opportunity to negotiate any material 

terms, other than the counterparty; and 

any other SBS transactions that, in the 

estimation of the registered SDR, do not 

accurately reflect the market. As noted 

above, all SBS transactions must be 

reported to a registered SDR, pursuant 

to proposed Rules 901(c) and (d). 

However, some SBSs might not involve 

arm’s-length negotiations that reflect 

competitive price discovery.126

Similarly, there might be no price 

discovery in the case of an assignment 

where the new counterparty to which a 

SBS is assigned has no opportunity to 

negotiate a different price. Proposed 

Rule 907(a)(4) would provide some 

flexibility to a registered SDR regarding 

how to publicly disseminate transaction 

reports for such SBSs. The registered 

SDR could determine in some cases that 

an indication should be provided that 

explains the circumstances. Publicly 

disclosed policies and procedures 

would permit market observers to 

understand which indicators applied to 

which circumstances. The Commission 

expects that the policies and procedures 

would direct reporting parties to 

provide additional information to the 

registered SDR about the existence of 

such circumstances. Furthermore, the 

Commission preliminarily believes that 

all transactions reported late (i.e., over 

15 minutes after time of execution) 

should bear an indicator so that market 

participants know that the transaction 

was reported late. While there is likely 

to be value in disseminating the 

transaction report, all market 

participants should understand that the 

report is no longer timely and thus 

would not reflect the current market at 

the time of dissemination. 

Finally, the policies and procedures 

required by proposed Rule 907(a)(4) 

would be required to address applying 

an appropriate indicator to reports of, 

and adjustments due to, life cycle 

events. As with corrected transaction 

reports, it is essential that market 

observers understand that the 

transaction report triggered by a life 

cycle event does not represent a new 

transaction, but merely a change to the 

terms of a previously executed SBS. 

Without an indicator to that effect, 

market observers could misunderstand 

the true state of the market. Therefore, 

the Commission preliminarily believes 

that the registered SDR must apply an 

appropriate indicator to the publicly 

disseminated transaction report. 


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75238 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

127See SDR Registration Proposing Release, supra 

note 6, proposed Rule 13n-7 under the Exchange 

Act. 

128See id., proposed Rule 13n–8 under the 

Exchange Act (requiring every registered SDR to 

promptly report to the Commission, in a form and 

manner acceptable to the Commission, such 

information as the Commission determines to be 

necessary or appropriate for the Commission its 

duties under the Exchange Act and the rules and 

regulations thereunder). 

Proposed Rule 907(a)(5) would 

require a registered SDR to establish and 

maintain written policies and 

procedures for assigning: (1) A 

transaction ID to each SBS that is 

reported to it; and (2) UICs established 

by or on behalf of an IRSB (or, if such 

UICs are not yet able to be so assigned, 

for assigning UICs in a consistent 

manner using its own methodology). 

Proposed Rule 907(a)(6) would require a 

registered SDR to establish and maintain 

written policies and procedures for 

periodically obtaining from each 

participant information that identifies 

the participant’s ultimate parent(s) and 

any other participant(s) with which the 

counterparty is affiliated, using ultimate 

parent IDs and participant IDs. The 

Commission expects that the registered 

SDR’s policies and procedures would 

address the relationship between itself 

and an IRSB, and how UICs could be 

obtained from the IRSB or an agent or 

other person acting on its behalf. 

Furthermore, the Commission expects 

that, if an IRSB exists and the registered 

SDR is using UICs assigned by that IRSB 

or on its behalf, the registered SDR’s 

policies and procedures should explain 

how a participant could obtain 

applicable UICs from the IRSB. To the 

extent that the IRSB cannot provide 

certain UICs required of a participant by 

proposed Regulation SBSR, the 

registered SDR’s policies and 

procedures would be required to 

explain the process by which a 

participant could obtain such UICs from 

the registered SDR. 

Proposed Rule 907(d) would require a 

registered SDR to review and, as 

necessary, update its policies and 

procedures required by proposed 

Regulation SBSR at least annually, and 

to indicate the date on which they were 

last reviewed. Periodic review should 

help ensure that a registered SDR’s 

policies and procedures remain wellfunctioning over time. Indicating the 

date on which the policies and 

procedures were last reviewed would 

allow regulators and market participants 

to understand which version of the 

policies and procedures are current. The 

Commission is proposing recordkeeping 

and retention rules for registered SDRs 

in a separate rulemaking.127 Prior 

versions of a registered SDR’s policies 

and procedures would be records under 

that proposed rule, and thus would be 

required to be retained in accordance 

with those rules. Access to these records 

would permit the Commission, when 

conducting a review of past actions, to 

understand what policies and 

procedures were in force at the time. 

Proposed Rule 907(e) would require a 

registered SDR to have the capacity to 

provide to the Commission, upon 

request, information or reports related to 

the timeliness, accuracy, and 

completeness of data reported to it 

pursuant to proposed Regulation SBSR 

and the registered SDR’s policies and 

procedures thereunder.128 Under Title 

VII of the Dodd-Frank Act, the 

Commission is responsible for 

regulating and overseeing the SBS 

market. The Commission preliminarily 

believes that, to carry out this 

responsibility, it could be valuable to 

obtain information from each registered 

SDR related to the timeliness, accuracy, 

and completeness of data reported to it. 

Required data submissions that are 

untimely, inaccurate, or incomplete 

could compromise the regulatory data 

that the Commission would utilize to 

carry out its oversight responsibilities. 

Furthermore, required data submissions 

that are untimely, inaccurate, or 

incomplete could diminish the value of 

publicly disseminated reports that 

promote transparency and price 

discovery. Information or reports 

provided to the Commission by a 

registered SDR related to the timeliness, 

accuracy, and completeness of data 

could assist the Commission in 

examining for compliance with 

proposed Regulation SBS and in 

bringing enforcement or other 

administrative actions as necessary and 

appropriate. 

Request for Comment 

The Commission requests comment 

on all aspects of the proposed policies 

and procedures for registered SDRs. 

145. Do commenters agree, overall, 

with the proposed policies and 

procedures for registered SDRs? Why or 

why not? 

146. Should proposed Rule 907 

specify more detailed elements to be 

included in the required policies and 

procedures? If so, what should those 

elements be? Or, are the proposed 

policies and procedures too 

prescriptive? If so, in what way(s)? 

147. Should a registered SDR have 

flexibility to specify acceptable data 

formats, connectivity requirements, and 

other protocols for submitting 

information? Why or why not? Are there 

disadvantages to this approach? If so, 

how should they be addressed? 

148. Should all acceptable data 

formats be open-source structured data 

formats? What data formats are 

currently in use by SDRs? Would they 

qualify as open-source structured data 

formats? 

149. Assuming special indicators on 

certain publicly disseminated trade 

reports may be necessary, do 

commenters agree that a registered SDR 

should have the flexibility to determine 

and apply those indicators? If not, can 

commenters suggest another system for 

assigning relevant indicators? 

150. What kinds of special 

circumstances would warrant indicators 

for public dissemination? What should 

those indicators be? How should they be 

reflected on the publicly disseminated 

trade report? 

151. Should inter-affiliate transactions 

be publicly disseminated with an 

indicator? Should they be disseminated 

at all? Why or why not? 

152. Should portfolio compressions 

and terminations be publicly 

disseminated with an indicator? Should 

they be disseminated at all? Why or why 

not? 

153. Should a registered SDR have the 

flexibility to determine whether a SBS 

transaction does not accurately reflect 

the market or would not enhance price 

discovery if disseminated? If so, how 

should the registered SDR exercise such 

flexibility? What criteria should it use? 

What are examples of transactions that 

commenters believe should be reported 

to a registered SDR but should not be 

publicly disseminated? Why should 

they not be publicly disseminated? 

154. Multi-lateral netting and 

portfolio compression are post-trade 

processes designed to reduce gross 

exposure and leave only net exposure. 

These processes typically entail the 

termination of open contracts and the 

establishment of new contracts 

representing only the net position. How, 

if at all, should SBSs related to multilateral netting and portfolio 

compression be reported to and 

disseminated by a registered SDR? What 

if the netting involves a payment that is 

determined by market value? 

155. How should a registered SDR’s 

policies and procedures address the use 

of UICs assigned under the auspices of 

a voluntary consensus standards body? 

156. What are the costs for registered 

SDRs to adopt and implement the 

proposed policies and procedures? 

What are the benefits of requiring 

registered SDRs to adopt and implement 

these policies and procedures? 

157. Should a data repository seeking 

to register with the Commission be 


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129See supra Section II.B (noting that proposed 

Rule 901 would not prohibit a reporting party from 

having a third-party agent carry out reporting duties 

on its behalf). 

130See proposed Rule 906(c). 

131See 15 U.S.C. 78m(b)(2)(B). 

132See, e.g., FINRA Conduct Rule 3010(b) 

(requiring FINRA member broker-dealers to 

establish and maintain written procedures ’’that are 

reasonably designed to achieve compliance with 

applicable securities laws and regulations, and the 

applicable Rules of [the NASD]’’; FINRA Conduct 

Rule 3012 (requiring FINRA member broker-dealers 

to establish and maintain written supervisory 

procedures to ensure that internal policies and 

procedures are followed and achieve their intended 

objectives). 

133See proposed Rule 900 (defining ‘‘U.S. person’’ 

to mean a natural person that is a U.S. citizen or 

U.S. resident or a legal person that is organized 

under the corporate laws of any part of the United 

States or has its principal place of business in the 

United States). 

required to provide the policies and 

procedures required by proposed Rule 

907 as part of its Form SDR submission? 

VII. Policies and Procedures of SBS 

Dealers and Major SBS Participants 

For the proposed SBS reporting 

requirements established by the DoddFrank Act to achieve the objective of 

enhancing price transparency and 

providing regulators with access to data 

to help carry out their oversight 

responsibilities, the information that 

participants provide to registered SDRs 

must be reliable. Accordingly, proposed 

Rule 906(c) would require a participant 

that is a SBS dealer or major SBS 

participant to establish, maintain, and 

enforce written policies and procedures 

that are reasonably designed to ensure 

compliance with the SBS transaction 

reporting obligations set forth in 

proposed Regulation SBSR and the 

policies and procedures of any 

registered SDR in which it is a 

participant. Such policies and 

procedures are intended to provide a 

system of controls that facilitate 

complete and accurate reporting of SBS 

information by these participants, 

consistent with their obligations under 

the Dodd-Frank Act and proposed 

Regulation SBSR. 

The Commission believes that 

proposed Rule 906(c) should result in 

greater accuracy and completeness of 

reported SBS transaction data. Without 

written policies and procedures, 

compliance with reporting obligations 

may depend too heavily on key 

individuals or unreliable processes. The 

Commission believes that requiring 

participants that are SBS dealers or 

major SBS participants to establish 

written policies and procedures should 

promote clear, reliable reporting that 

can continue independent of any 

specific individuals. The Commission 

further believes that requiring such 

participants to adopt and maintain 

policies and procedures relevant to their 

reporting responsibilities, as required 

under proposed Rule 906(c), would help 

to improve the degree and quality of 

overall compliance with the reporting 

requirements set out in proposed 

Regulation SBSR. 

The policies and procedures required 

by proposed Rule 906(c) should be 

designed to foster compliance with the 

real-time reporting requirements 

specified in proposed Rule 901(c), as 

well as the additional reporting 

requirements specified in proposed 

Rules 901(d) and (e). These policies and 

procedures, among other things, should 

address: (1) The reporting process and 

designation of responsibility for 

reporting SBS transactions; (2) the 

process for systematizing orally 

negotiated SBS transactions; (3) OMS 

outages or malfunctions, and when and 

how backup systems are to be used in 

connection with required reporting; (4) 

verification and validation of all 

information relating to SBS transactions 

reported to a registered SDR; (5) a 

training program for employees 

responsible for SBS transaction 

reporting; (6) control procedures 

relating to SBS transaction reporting 

and designation of personnel 

responsible for testing and verifying 

such policies and procedures; and (7) 

reviewing and assessing the 

performance and operational capability 

of any third party that carries out any 

duty required by proposed Regulation 

SBSR on behalf of the entity.129

Each participant that is a SBS dealer 

or major SBS participant also would be 

required to review and, as needed, 

update its policies and procedures at 

least annually.130 Periodic review 

should help ensure that a participant’s 

policies and procedures remain well 

functioning over time. 

The value of requiring policies and 

procedures in promoting regulatory 

compliance is well-established. For 

example, internal control systems have 

long been used to strengthen the 

integrity of financial reporting. Congress 

recognized the importance of internal 

control systems in the Foreign Corrupt 

Practices Act, which requires public 

companies to maintain a system of 

internal accounting controls.131 Brokerdealers also must maintain policies and 

procedures for various purposes.132 The 

Commission preliminarily believes that 

requiring participants that are SBS 

dealers or major SBS participants to 

adopt and maintain policies and 

procedures designed to promote 

compliance with proposed Regulation 

SBSR and the policies and procedures 

of any registered SDR of which it is a 

participant would be consistent with 

Congress’s goals in adopting the DoddFrank Act. 

Request for Comment 

The Commission requests comment 

on all aspects of the proposed 

requirement that participants that are 

SBS dealers or major SBS participants 

establish policies and procedures. 

158. Do commenters think proposed 

Rule 906(c) is necessary? Would SBS 

dealers and major SBS participants 

otherwise implement written policies 

and procedures to ensure compliance 

with the reporting obligations in 

proposed Regulation SBSR? 

159. Should proposed Rule 906(c) 

specify elements to be included in the 

required policies and procedures, such 

as those discussed above? If so, what 

elements should be included in the 

proposed rule, and why? 

VIII. Jurisdictional Matters 

Proposed Rule 908 is designed to 

clarify the application of proposed 

Regulation SBSR to cross-border SBS 

transactions and to non-U.S. persons.133

A. When is a SBS subject to Regulation 

SBSR? 

Proposed Rule 908(a) would require a 

SBS to be reported if the SBS: (1) Has 

at least one counterparty that is a U.S. 

person; (2) was executed in the United 

States or through any means of 

interstate commerce; or (3) was cleared 

through a registered clearing agency 

having its principal place of business in 

the United States. In addition, any SBS 

that is required to be reported to a 

registered SDR pursuant to proposed 

Rule 908(a) also would be required to be 

publicly disseminated by the registered 

SDR. The Commission preliminarily 

believes that, if there are sufficient 

jurisdictional ties to the United States to 

warrant reporting of the SBS, other 

market participants should have 

knowledge of the SBS transaction. 

The Commission preliminarily 

believes that, if a U.S. person executes 

a SBS anywhere in the world, that SBS 

should be reported to a registered SDR, 

pursuant to proposed Regulation SBSR. 

Because the U.S. person is assuming 

risk, U.S. regulators have an interest in 

ensuring that they have appropriate 

knowledge of the transaction. The 

Commission notes that it is proposing to 

define ‘‘U.S. person’’ in proposed Rule 

900 to mean ‘‘a natural person that is a 

U.S. citizen or U.S. resident or a legal 

person that is organized under the 

corporate laws of any part of the United 

States or has its principal place of 


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75240 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

134While U.S. regulators also would have access 

to information about the SBS through the U.S. 

clearing agency, requiring the SBS to be reported to 

a registered SDR would reduce the fragmentation of 

the regulatory data. 

135 15 U.S.C. 78q–1. 

136For example, assume that Clearing Agency A 

has its principal place of business in an E.U. 

member state, but is also registered as a clearing 

agency in the United States under Section 17A of 

the Exchange Act because it has sufficient contacts 

with U.S. participants to require registration under 

Section 17A. Assume further that Counterparty X 

executes a SBS with Counterparty Y, both X and Y 

are each domiciled in an E.U. member state, the 

SBS is executed in an E.U. member state and does 

not involve any means of interstate commerce in 

the United States. Under proposed Rule 908, this 

SBS would not be required to be reported to a 

registered SDR solely because it was cleared by a 

clearing agency registered under Section 17A. 

137See proposed Rule 900 (defining ‘‘participant’’ 

as (1) A U.S. person that is a counterparty to an SBS 

that is required to be reported to a registered SDR; 

or (2) A non-U.S. person that is a counterparty to 

an SBS that is (i) required to be reported to a 

registered SDR; and (ii) that is executed in the 

United States or through any means of interstate 

commerce, or cleared through a clearing agency 

having its principal place of business in the United 

States). 

business in the United States.’’ The 

Commission intends for this proposed 

definition to include branches and 

offices of U.S. persons. Because a 

branch or office has no separate legal 

existence under corporate law, the 

branch or office would be an integral 

part of the U.S. person itself. 

A SBS also would have to be reported 

if the SBS were executed in the United 

States or through any means of 

interstate commerce. For example, even 

if both counterparties are not U.S. 

persons, U.S. regulators have a strong 

interest in having knowledge of and 

being able to regulate any activity 

conducted within the United States or 

through any means of interstate 

commerce. 

Under proposed Rule 908(a)(3), a SBS 

would have to be reported pursuant to 

proposed Regulation SBSR—even if 

both counterparties are not U.S. 

persons—if the SBS were cleared 

through a clearing agency having its 

principal place of business in the 

United States. It is possible that two 

counterparties, neither of whom is a 

U.S. person, could execute a SBS 

outside the United States, but clear the 

SBS through a clearing agency having 

its principal place of business in the 

United States. The Commission 

preliminarily believes that such SBS 

should be reported to a registered SDR. 

If a SBS is cleared by a clearing agency 

having its principal place of business in 

the United States, U.S. regulators should 

have access to information regarding the 

SBS through a registered SDR.134

Moreover, if non-U.S. persons 

determined to clear a SBS through a 

clearing agency having its principal 

place of business in the United States, 

this suggests that the clearing agency 

has made the SBS eligible for clearing 

because at least some U.S. 

counterparties might wish to trade the 

SBS as well. Requiring the SBS to be 

reported to a registered SDR also would 

cause a transaction report of the SBS to 

be publicly disseminated, thus 

promoting price discovery for market 

participants in the United States and 

elsewhere. 

It is possible that there could be a 

clearing agency registered with the 

Commission under Section 17A of the 

Exchange Act 135 but having its 

principal place of business outside the 

United States. Although that clearing 

agency might service U.S. persons, it 

also would likely provide clearing 

services to many non-U.S. persons. The 

Commission does not intend for 

proposed Regulation SBSR to apply to 

such non-U.S. persons solely because 

they clear a SBS through a clearing 

agency registered with the Commission 

but not having its principal place of 

business in the United States.136

However, proposed Regulation SBSR 

would apply with respect to that SBS if 

either counterparty were a U.S. person, 

or if the SBS had been executed in the 

United States or through any means of 

interstate commerce (including by 

clearing through a clearing agency 

having its principal place of business in 

the United States). 

It should be noted that a registered 

SDR could receive reports of foreign 

SBS transactions that are not required to 

be reported pursuant to proposed Rule 

908(a). The registered SDR may 

determine to publicly disseminate 

reports of such foreign SBS transactions, 

but would not be required to do so by 

proposed Regulation SBSR. 

B. When is a counterparty to a SBS 

subject to Regulation SBSR? 

Proposed Rule 908(b) would provide 

that, notwithstanding any other 

provision of Regulation SBSR, no 

counterparty to a SBS would incur any 

obligation under Regulation SBSR 

unless it is: (1) A U.S. person; (2) a 

counterparty to a SBS executed in the 

United States or through any means of 

interstate commerce; or (3) a 

counterparty to a SBS cleared through a 

clearing agency having its principal 

place of business in the United States. 

For the reasons discussed above, the 

Commission preliminarily believes that, 

if a U.S. person executes a SBS 

anywhere in the world, that U.S. person 

should become subject to Regulation 

SBSR. 

Non-U.S. persons who are 

counterparties to U.S. persons could, 

therefore, have SBSs to which they are 

counterparties reported to and held by 

a registered SDR. If none of these SBSs 

were executed in the United States or 

through any means of interstate 

commerce, however, the non-U.S. 

person would not become a 

‘‘participant’’ of the registered SDR and 

would not become subject to proposed 

Regulation SBSR.137 Thus, the non-U.S. 

person would not have to provide any 

UICs pursuant to proposed Rule 906(a) 

or parent and affiliate information to a 

registered SDR pursuant to proposed 

Rule 906(b). 

C. An Example 

Assume that X (a U.S. bank) enters 

into an SBS with Y (a Japanese bank). 

The SBS is effected in Japan, involves 

no means of interstate commerce, and is 

not cleared by a clearing agency having 

its principal place of business in the 

United States. Because the SBS has at 

least one counterparty that is a U.S. 

person, proposed Rule 908(a)—which 

describes when an SBS is not required 

to be reported because it is outside the 

jurisdiction of the Exchange Act— 

would not apply. Therefore, the SBS 

must be reported to a registered SDR. X 

would be the reporting party, as 

proposed Rule 901(a)(1) provides that, 

where only one counterparty to an SBS 

is a U.S. person, the U.S. person shall 

be the reporting party. X also would be 

a participant because it is a U.S. person 

that is a counterparty to an SBS that is 

required to be reported to a registered 

SDR. However, Y would not be a 

participant under proposed Rule 900, 

and would incur no obligations under 

proposed Regulation SBSR. Although 

the SBS is required to be reported to a 

registered SDR, the SBS was not 

executed in the United States or through 

any means of interstate commerce, or 

cleared through a clearing agency 

having its principal place of business in 

the United States. Thus, the 

Commission anticipates that there 

would be some SBSs reported to and 

captured by a registered SDR where 

only one counterparty of the SBS is a 

participant. 

IX. Fair and Non-Discriminatory 

Access to SBS Market Data 

A. SBS Market Data Disseminated by 

Registered SDRs 

As noted above, the Commission 

preliminarily believes that post-trade 

transparency could spur significant 

improvements in the SBS market. Some 

of the benefits could include greater 

price competition, lower transaction 


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138See proposed Rule 13n–4(c)(1)(iv) under the 

Exchange Act. 

139See proposed Rule 13n–4(c)(1)(v) under the 

Exchange Act. 

140 15 U.S.C. 78k–1. 

141 15 U.S.C. 78c(a)(22)(A) (defining SIP as ‘‘any 

person engaged in the business of (i) collecting, 

processing, or preparing for distribution or 

publication, or assisting, participating in, or 

coordinating the distribution or publication of, 

information with respect to transactions in or 

quotations for any security (other than an exempted 

security) or (ii) distributing or publishing (whether 

by means of a ticker tape, a communications 

network, a terminal display device, or otherwise) on 

a current and continuing basis, information with 

respect to such transactions or quotations’’). SBSs 

are securities under the Exchange Act. See 15 

U.S.C. 78c(a)(10). Further, pursuant to proposed 

Regulation SBSR, a registered SDR would collect 

SBS transaction reports from participants and 

participate in the distribution of such reports and, 

thus, would be a SIP for purposes of the Exchange 

Act. 

142 15 U.S.C. 78k–1(c)(1). 

143 15 U.S.C. 78k–1(c)(1)(B). 

144 15 U.S.C. 78k–1(c)(1)(D). 

145 15 U.S.C. 78k–1(b)(1). 

146 15 U.S.C. 78c(a)(22)(B) (defining ‘‘exclusive 

processor’’ as any securities information processor 

or self-regulatory organization which, directly or 

indirectly, engages on an exclusive basis on behalf 

of any national securities exchange or registered 

securities association, or any national securities 

exchange or registered securities association which 

engages on an exclusive basis on its own behalf, in 

collecting, processing, or preparing for distribution 

or publication any information with respect to (1) 

transactions or quotations on or effected or made by 

means of any facility of such exchange or (2) 

quotations distributed or published by means of any 

electronic system operated or controlled by such 

association). 

147 15 U.S.C. 78k–1(b)(5). 

148See 15 U.S.C. 78k–1(b)(5)(A). 

149See 15 U.S.C. 78k–1(b)(5)(B). 

150See 15 U.S.C. 78k–1(b)(6) (providing that the 

Commission, by order, may censure or place 

limitations upon the activities, functions, or 

operations of any registered SIP or suspend for a 

period not exceeding 12 months or revoke the 

registration of any such processor, if the 

Commission finds, on the record after notice and 

opportunity for hearing, that such censure, placing 

of limitations, suspension, or revocation is in the 

public interest, necessary or appropriate for the 

protection of investors or to assure the prompt, 

accurate, or reliable performance of the functions of 

such SIP, and that such SIP has violated or is 

unable to comply with any provision of this title or 

the rules or regulations thereunder). 

151A registered SDR would register as a SIP by 

filing (existing) Form SIP with the Commission. 

costs, enhanced liquidity, and improved 

ability of market participants to value 

their positions. Therefore, fair access to 

last-sale data appears critical— 

particularly since registered SDRs 

would collectively have data on all 

SBSs executed in the market. The 

Commission preliminarily believes that 

market observers should not be forced to 

pay excessive fees or be subject to unfair 

usage restrictions imposed by registered 

SDRs. The Commission therefore seeks 

to ensure that these data feeds would be 

available to all market observers on 

terms that are fair and reasonable and 

not unreasonably discriminatory. 

In a separate rulemaking proposal 

regarding the registration and regulation 

of SDRs being issued today, the 

Commission is proposing rules that 

would require SDRs to comply with 

certain core principles. To comply with 

these core principles, an SDR would be 

required, among other things, to 

establish and enforce clearly stated and 

objective criteria that would permit fair, 

open, and not unreasonably 

discriminatory access to services offered 

and data that would be disseminated by 

the SDR, as well as fair, open, and not 

unreasonably discriminatory 

participation by market participants, 

market infrastructures, venues from 

which data could be submitted to the 

SDR, and third-party service providers 

that seek to connect or link with the 

SDR.138 In addition, an SDR would be 

required to establish policies and 

procedures for reviewing any 

prohibition or limitation of any person’s 

access to services offered, directly or 

indirectly, or data maintained and 

disseminated by the SDR, and—if it 

finds that the person has been 

discriminated against unfairly—granting 

to such person access to its services or 

data.139

A registered SDR also would become 

subject to certain provisions of Section 

11A of the Exchange Act140 because it 

would be a SIP, as defined by Section 

3(a)(22)(A) of the Exchange Act.141

Section 11A(c)(1) of the Exchange 

Act 142 provides that the Commission 

may prescribe rules applying to SIPs 

(among other entities) that would 

require them (among other things) to 

assure ‘‘the fairness and usefulness of 

the form and content’’ of the information 

that they disseminate,143 and to assure 

‘‘all other persons may obtain on terms 

which are not unreasonably 

discriminatory’’ the transaction 

information published or distributed by 

SIPs.144 Section 11A(c)(1) applies 

regardless of whether a SIP is registered 

with the Commission as such. 

Section 11A(b)(1) of the Exchange 

Act 145 provides that a SIP not acting as 

the ‘‘exclusive processor’’ 146 of any 

information with respect to quotations 

for or transactions in securities is 

exempt from the requirement to register 

with the Commission as a SIP unless the 

Commission, by rule or order, 

determines that the registration of such 

SIP ‘‘is necessary or appropriate in the 

public interest, for the protection of 

investors, or for the achievement of the 

purposes of [Section 11A].’’ Requiring a 

registered SDR to register with the 

Commission as a SIP would subject that 

entity to Section 11A(b)(5) of the 

Exchange Act,147 which provides that a 

registered SIP must notify the 

Commission whenever it prohibits or 

limits any person’s access to its services. 

Upon its own motion or upon 

application by any aggrieved person, the 

Commission could review the registered 

SIP’s action.148 If the Commission finds 

that the person has been discriminated 

against unfairly, it could require the SIP 

to provide access to that person.149

Section 11A(b)(6) of the Exchange Act 

also provides the Commission authority 

to take certain regulatory action as may 

be necessary or appropriate against a 

registered SIP.150

The Commission preliminarily 

believes that the additional authority 

over a registered SDR/SIP provided by 

Sections 11A(b)(5) and 11A(b)(6) of the 

Exchange Act would help ensure that 

these entities offer their SBS market 

data on terms that the Commission 

believes would be fair and reasonable 

and not unreasonably discriminatory. 

Therefore, the Commission 

preliminarily believes that the 

registration of SDRs as SIPs would be 

necessary or appropriate in the public 

interest, for the protection of investors, 

or for the achievement of the purposes 

of Section 11A of the Exchange Act. 

Section 11A of the Exchange Act 

establishes broad goals for the 

development of the securities markets 

and charges the Commission with 

establishing rules and policies that are 

designed to further these objectives. 

Section 11A(a) states, among other 

things, that it is in the public interest 

and appropriate for the protection of 

investors and the maintenance of fair 

and orderly markets to assure 

economically efficient execution of 

securities transactions; the availability 

to brokers, dealers, and investors of 

information with respect to quotations 

for and transactions in securities; and an 

opportunity for investors’ orders to be 

executed without the participation of a 

dealer. SIP registration could assist in 

achieving these objectives in the stilldeveloping SBS market. Therefore, the 

Commission preliminarily believes that 

the registration of SDRs as SIPs would 

be necessary or appropriate in the 

public interest, for the protection of 

investors, or for the achievement of the 

purposes of Section 11A. Accordingly, 

the Commission is proposing Rule 909, 

which would require a registered SDR to 

register with the Commission as a 

SIP.151

B. SBS Market Data Disseminated by 

Other Market Participants 

The measures described above are 

designed to ensure that SBS market data 


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152See 15 U.S.C. 78m(m)(1)(G). 

153For example, a SB SEF would have 

information about SBSs executed on its systems and 

could find that commercial opportunities exist to 

sell such information. 

disseminated by registered SDRs is 

available to the public on terms that are 

fair and reasonable and not 

unreasonably discriminatory. This is 

particularly important since all SBS 

must be reported to a registered SDR,152

and registered SDRs exclusively would 

have the responsibility under proposed 

Regulation SBSR to publicly 

disseminate SBS transaction data to the 

public. 

Nevertheless, other private sources of 

market data reflecting subsets of the SBS 

market could arise.153 Differences in 

access to that market data—for example, 

if some market participants could obtain 

the data sooner than others—could 

create an unfair competitive landscape. 

Therefore, the Commission is proposing 

Rule 902(d), which would impose a 

partial and temporary restriction on 

sources of SBS market data other than 

registered SDRs. Proposed Rule 902(d) 

would provide that no person (other 

than a registered SDR) shall make 

available to one or more persons (other 

than a counterparty) a transaction report 

of a SBS before the earlier of: (1) 15 

minutes after execution of the SBS; or 

(2) the time that a registered SDR 

publicly disseminates a report of that 

SBS. 

Under proposed Rule 902(d), the 

temporary restriction on other market 

participants that may wish to 

disseminate information relating to a 

SBS transaction would last no longer 

than 15 minutes. Under proposed 

Regulation SBSR, a transaction report of 

a SBS would be expected to be publicly 

disseminated within 15 minutes of 

execution. The Commission 

preliminarily believes that it is not 

necessary or appropriate to require other 

sources of market data to withhold 

dissemination of a transaction report 

beyond 15 minutes if a registered SDR 

is not able to do so in a timely fashion. 

Proposed Rule 902(d) would, however, 

permit the transfer of information of a 

SBS before dissemination by a 

registered SDR to a counterparty to that 

SBS. Therefore, one counterparty would 

be permitted to pass details of the SBS 

to the other counterparty, or a SB SEF 

on which the SBS was executed could 

pass details of the SBS to either or both 

of the counterparties. 

By proposing Rule 902(d), the 

Commission seeks to balance the goal of 

promoting robust and fair competition 

among all market participants—by 

allowing them to view the same 

comprehensive source of SBS market 

data at the same time—with that of 

allowing market participants to devise 

new value-added market data products. 

Request for Comment 

The Commission requests comment 

on all aspects of its proposal relating to 

fair and non-discriminatory access to 

SBS market data. In particular: 

160. Do commenters have any 

potential concerns with market 

participants’ access to data 

disseminated by registered SDRs? If so, 

what steps should the Commission do to 

address them? 

161. Do commenters agree with the 

proposal to require registered SDRs to 

register with the Commission as SIPs? 

Why or why not? 

162. Would SIP registration entail 

costs and burdens that are unreasonable 

or unnecessary in light of the 

requirements associated with SDR 

registration? What additional burdens, if 

any, would be associated with SIP 

registration? 

163. In the SDR Registration 

Proposing Release, the Commission is 

proposing a Form SDR that is similar to 

but separate from existing Form SIP. 

Should the Commission combine Forms 

SIP and Form SDR such that an SDR 

would register as a SIP and SDR using 

only one form? Or should the elements 

necessary for registration as an SDR be 

a supplement to Form SIP? Are there 

any specific items on Form SIP that 

should be added to Form SDR that 

would help to facilitate the registration 

process? 

164. Would it be beneficial for 

aggrieved persons to have the ability to 

request that the Commission review a 

registered SDR’s prohibition or 

limitation on access its services, as 

contemplated by Section 11A(b)(5) of 

the Exchange Act? Are there any 

concerns with applying Section 

11A(b)(5) to registered SDRs? 

165. Are there additional means by 

which the Commission can or should 

attempt to ensure that the market data 

fees and usage restrictions imposed by 

registered SDRs are fair and reasonable 

and not unreasonably discriminatory? If 

so, please describe. 

166. Should market participants other 

than a registered SDR be prohibited 

from distributing their SBS market data 

before transactions are disseminated by 

a registered SDR? Why or why not? 

167. Do commenters anticipate that 

market participants other than 

registered SDRs will seek to sell SBS 

market data? Do commenters have a 

view as to whether those additional 

market data products would compete 

with or complement the required market 

data feed from registered SDRs? 

168. Would proposed Rule 902(d) 

unnecessarily inhibit competition and 

innovation in the provision of valueadded market data services or products? 

Please be specific in your response. 

169. Are there alternative means to 

better ensure that all market participants 

have full and fair access to SBS market 

data other than placing a restriction on 

sources other than the registered SDRs? 

If so, what are they and why would they 

be preferable to the proposal? 

170. Would competitive forces act to 

ensure that all market participants have 

full and fair access to SBS market data? 

171. If commenters agree with 

proposed Rule 902(d), is 15 minutes an 

appropriate length to restrict market 

participants other than registered SDRs 

from disseminating SBS transaction 

data? Do commenters think that period 

is too long or too short? Please be 

specific in your response. 

172. Should market participants other 

than registered SDRs that publicly 

disseminate SBS transaction 

information be subject to the same 

requirements regarding dissemination of 

block trades as registered SDRs? 

X. Implementation Timeframes 

Proposed Rule 910 is designed to 

provide clarity as to SBS reporting and 

dissemination timelines and to establish 

a phased-in compliance schedule for 

those subject to proposed Regulation 

SBSR. The Commission acknowledges 

that the system for reporting and 

dissemination described in proposed 

Regulation SBSR would take a 

significant amount of time and 

resources to implement effectively. 

While the Commission is committed to 

fully implementing Congress’s directive 

to require real-time public reporting of 

all SBSs, market participants will need 

a reasonable period in which to acquire 

or configure the necessary systems, 

engage and train the necessary staff, and 

develop and implement the necessary 

policies and procedures to implement 

the proposed rules. The Commission 

preliminarily believes that the proposed 

compliance timeframes described below 

should provide sufficient time for 

reporting parties and SDRs to make the 

necessary technological and other 

preparations needed to begin reporting 

and disseminating SBS information, 

respectively, as required under 

proposed Regulation SBSR. 

A. Compliance Schedule 

The Commission is proposing a 

phased-in compliance schedule, with 

respect to a SDR that registers with the 

Commission, as follows: 


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154See supra Section IV.F (discussing reporting 

requirements for pre-enactment SBSs). 

155 15 U.S.C. 78c–3(e)(1). 

156See proposed Rule 900 (defining ‘‘registration 

date,’’ with respect to a SDR, as the date on which 

the Commission registers the SDR, or, if the 

Commission registers the SDR before the effective 

date of proposed Regulation SBSR, the effective 

date of proposed Regulation SBSR; and ‘‘effective 

reporting date,’’ with respect to a SDR, as the date 

six months after the registration date). 

157See supra Section IV.F (discussing reporting 

requirements for transitional SBSs). 

158Proposed Rule 906(c) would require each SBS 

dealer and major SBS participant to establish, 

maintain, and enforce written policies and 

procedures that are reasonably designed to ensure 

that it complies with any reporting obligations 

under proposed Regulation SBSR. 

159Proposed Rule 905, among other things, would 

require a registered SDR to correct erroneous 

information with respect to SBSs. 

160Proposed Rule 906(a) would require a 

registered SDR to notify participants at least once 

a day of SBSs for which the registered SDR lacks 

a participant ID, broker ID, desk ID, or trader ID. 

Proposed Rule 906(b) would require participants to 

provide to the registered SDR information sufficient 

to identify its ultimate parent(s) and any affiliate(s) 

of the participant that also are participants of the 

registered SDR. 

161As discussed in the SDR Registration 

Proposing Release, a data repository seeking to 

register with the Commission would have to 

provide the policies and procedures required by 

proposed Rule 907 as part of its application for 

registration. See SDR Registration Proposing 

Release, supra note 6. 

• Reporting of pre-enactment SBSs, 

no later than January 12, 2012. 

Proposed Rule 910(a) would require 

reporting parties to report to a registered 

SDR any pre-enactment SBSs subject to 

reporting under proposed Rule 901(i) no 

later than January 12, 2012 (180 days 

after the effective date of the DoddFrank Act).154 Proposed Rule 900 would 

define pre-enactment SBS to mean any 

SBS executed before July 21, 2010 (the 

date of enactment of the Dodd-Frank 

Act), the terms of which had not expired 

as of that date. The Commission notes 

that Section 3C(e)(1) of the Exchange 

Act 155 requires SBSs entered into before 

the date of enactment of Section 3C to 

be reported to a registered SDR or the 

Commission no later than 180 days after 

the effective date of Section 3C (i.e., no 

later than January 12, 2012). The 

proposed timeframe would help the 

Commission obtain relevant information 

about SBS transactions necessary to 

prepare reports required by the DoddFrank Act. Further, proposed Rule 910 

would help promote timely 

implementation of Regulation SBSR, 

and thereby facilitate achievement of 

the goals articulated in the Dodd-Frank 

Act. 

• Phase 1, six months after the 

registration date (i.e., the effective 

reporting date): 156 Reporting parties 

shall begin reporting, pursuant to 

proposed Rule 901, all SBS transactions 

executed on or after the effective 

reporting date; reporting parties also 

shall report to the registered SDR any 

transitional SBSs; 157 SBS dealers and 

major SBS participants shall comply 

with proposed Rule 906(c); 158

participants and the registered SDR 

must comply with proposed Rule 

905 159 (except with respect to 

dissemination) and proposed Rules 

906(a) and (b).160

The Commission preliminarily 

believes that, before reporting parties 

and other participants could be 

expected to comply with proposed 

Regulation SBSR, they must first know 

the policies and procedures of the 

registered SDR that would receive and 

hold transaction information regarding 

their SBSs.161 Phase 1 would provide 

time for SBS dealers and major SBS 

participants to establish their own 

policies and procedures, and implement 

necessary systems changes, for 

complying with proposed Regulation 

SBSR and the policies and procedures 

of the registered SDR. On the effective 

reporting date, participants would be 

required to begin reporting SBSs to the 

registered SDR in a manner consistent 

with proposed Rule 901, including 

providing the real-time reports required 

by proposed Rule 901(c) and the 

additional, regulatory SBS information 

required by proposed Rule 901(d). At 

that time, however, the registered SDR 

would not yet publicly disseminate any 

transaction reports. 

Also on the effective reporting date, 

the registered SDR would be required to 

begin preparing reports to each 

participant of any missing UICs, and 

any participant receiving such a report 

would have to begin providing the 

missing UICs to the registered SDR. The 

registered SDR and its participants also 

would become subject to the error 

correction requirements of proposed 

Rule 905 at this time, except that the 

registered SDR would not yet be 

required to publicly disseminate any 

corrected transaction reports (since it 

would not have disseminated a report of 

the initial transaction). 

Finally, the Commission notes that 

proposed Rules 901(i) (establishing 

reporting requirements for preenactment and transitional SBSs), 910(a) 

(requiring the reporting of preenactment SBSs by January 12, 2012), 

and 910(b)(2)(i) (requiring the reporting 

of transitional SBSs by the effective 

reporting date) are together designed to 

assure that a registered SDR would 

obtain a complete view of each 

participant’s open SBS positions by the 

time that the registered SDR is about to 

both receive and publicly disseminate 

transaction reports of SBSs. 

• Phase 2, nine months after the 

registration date: Wave 1 of public 

dissemination; the registered SDR 

would be required to comply with 

proposed Rules 902 and 905 (with 

respect to dissemination of corrected 

transaction reports) for 50 SBS 

instruments. 

Nine months after the registration 

date and three months after the effective 

reporting date, the registered SDR 

would be required to begin 

disseminating transaction reports as 

follows: The registered SDR, in 

consultation with the Commission’s 

staff, would select 50 SBS instruments 

for which it receives and holds 

transaction data. Beginning on the date 

nine months after the registration date 

and continuing every day thereafter, the 

registered SDR would be required to 

publicly disseminate transaction reports 

in real time for those 50 SBS 

instruments, including with respect to 

block trades. The three-month period 

between the beginning of Phase 2 and 

the beginning of Phase 3 would allow 

the registered SDR a sufficient number 

of days to calculate and publish the 

block trade levels for those 50 SBS 

instruments. Also in Phase 2, the 

registered SDR would be required to 

begin disseminating any corrected 

reports required by proposed Rule 905 

for those 50 SBS instruments. The 

Commission preliminarily believes, 

based on its experience implementing 

aspects of Regulation NMS, that the 

public dissemination of transaction 

reports for 50 SBS instruments is 

appropriate in Phase 2. 

• Phase 3, 12 months after the 

registration date: Wave 2 of public 

dissemination; the registered SDR must 

comply with proposed Rules 902 and 

905 (with respect to dissemination of 

corrected transaction reports) for an 

additional 200 SBS instruments. 

Twelve months after the registration 

date and six months after the effective 

reporting date, the registered SDR 

would be required, in consultation with 

the Commission’s staff, to select an 

additional 200 SBS instruments for 

which to publicly disseminate 

transaction reports in real time, apply 

the block trade exception with respect 

to those 250 SBS instruments, and 

disseminate any corrected transaction 

reports required by proposed Rule 905 

for those 250 SBS instruments. The 

Commission preliminarily believes, 

based on its experience implementing 

aspects of Regulation NMS, that the 

public dissemination of transaction 

reports for 250 SBS instruments is 

appropriate in Phase 3. 


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• Phase 4, 18 months after the 

registration date: Wave 3 of public 

dissemination; All SBSs reported to the 

registered SDR shall be subject to realtime public dissemination as specified 

in Rule 902. 

Eighteen months after the registration 

date, proposed Regulation SBSR would 

become operative with respect to every 

SBS transaction reported to and held by 

the registered SDR. The Commission 

preliminarily believes, based on its 

experience implementing aspects of 

Regulation NMS, that requiring public 

dissemination of all SBSs reported to 

the registered SDR is appropriate in 

Phase 4. 

B. Prohibition During Phase-In Period 

Proposed Rule 911 is designed to 

prevent evasion of the post-trade 

transparency rules. The rule would 

provide that a reporting party shall not 

report a SBS to a registered SDR in a 

phase-in period described in proposed 

Rule 910 during which the registered 

SDR is not yet required to publicly 

disseminate transaction reports for that 

SBS instrument unless: (1) The SBS also 

is reported to a registered SDR that is 

disseminating transaction reports for 

that SBS instrument, consistent with 

proposed Rule 902; or (2) no other 

registered SDR is able to receive, hold, 

and publicly disseminate transaction 

reports regarding that SBS instrument. 

The Commission is concerned that the 

development of new SDRs not be used 

to undermine the goal of post-trade 

transparency for SBSs. This could 

occur, for example, if a SDR were 

registered with the Commission, and— 

pursuant to proposed Rule 910—the 

SDR were in a phase-in period when it 

was not yet required to publicly 

disseminate transactions. Participants in 

an existing registered SDR could seek to 

report their SBSs to the second instead 

of the first registered SDR during the 

former’s phase-in period, to avoid 

having their SBS transactions publicly 

disseminated in real time. 

Under proposed Rule 911, 

counterparties would be permitted to 

report any SBS to the first registered 

SDR, even though the first registered 

SDR was in a phase-in period and not 

yet publicly disseminating transaction 

reports, because no other registered SDR 

could do so, either. However, if a later 

SDR registers and enters a phase-in 

period, participants would not be 

permitted to report SBSs exclusively to 

the subsequent registered SDR before it 

is required or able under proposed Rule 

910 to disseminate transaction reports, 

if an earlier registered SDR could 

receive, hold, and publicly disseminate 

transaction reports for that SBS. Thus, a 

participant could report the SBS to both 

registered SDRs: To the newer one, to 

assist with operational testing; and to 

the operating one, to ensure that a trade 

report for that SBS was publicly 

disseminated in real time. 

Request for Comment 

The Commission requests comment 

on all aspects of the proposed rules 

relating to the proposed implementation 

of proposed Regulation SBSR, as 

provided in proposed Rules 910 and 

911. 

173. Are the proposed timeframes for 

reporting with respect to pre-enactment 

SBSs sufficiently clear? 

174. Are the obligations applicable to 

registered SDRs, counterparties, and 

participants in each phase of the 

proposed phase-in schedule sufficiently 

clear? If not, what obligations are 

unclear? Please be specific in your 

response. 

175. Do commenters generally agree 

with the proposed phase-in approach to 

implementation of the reporting 

timeframes contained in proposed Rule 

910? Is the proposed phase-in schedule 

generally appropriate to allow reporting 

parties and registered SDRs sufficient 

time to implement the requirements of 

proposed Regulation SBSR? If not, why 

not? What period of time would be 

sufficient? 

176. Do commenters believe that 

registered SDRs would be able to meet 

the requirements of proposed Phase 1? 

Why or why not? If three months after 

the SDR’s registration date is not a 

sufficient amount of time to comply 

with proposed Rule 907, what amount 

of time would be sufficient? Do 

commenters believe that registered 

SDRs would need additional time to 

develop and implement certain policies 

and procedures that would be required 

under proposed Rule 907? If so, why, 

and which policies and procedures 

would require additional time to 

develop and implement? 

177. Do commenters believe that 

registered SDRs, reporting parties, and 

participants would be able to satisfy 

their respective obligations under 

proposed Phase 2 within the proposed 

time frame? Why or why not? Would 

SBS counterparties and participants be 

able to comply, respectively, with 

proposed Rules 901 and 906(b) and (c) 

within the time frame specified in Phase 

2? Why or why not? If not, what amount 

of time would be sufficient? Would 

counterparties or participants require 

additional time to comply with certain 

requirements in proposed Phase 2? If so, 

which requirement(s), and what 

additional amount of time would be 

necessary? Would counterparties and 

participants have adequate time to make 

any necessary systems changes to 

comply with the requirements in 

proposed Phase 2? 

178. Would registered SDRs be able to 

correct erroneous information and 

notify counterparties of missing UICs 

within the time frame specified in Phase 

2? Why or why not? If not, what amount 

of time would be adequate? 

179. Do commenters believe that 

registered SDRs would be able to begin 

publicly disseminating SBS 

information, including corrected 

reports, and publicizing block trade 

levels, as would be required in proposed 

Phase 3? Why or why not? Would any 

specific requirement in proposed Phase 

3 require additional time to implement? 

If so, which requirement(s), and what 

amount of time would be sufficient? 

180. Do commenters believe that realtime public dissemination of SBS 

transaction reports should be required 

to commence for 50 SBS instruments 

nine months after the registration date? 

Should that period be longer or shorter? 

For example, should it be 12 months 

after the registration date? If so, why? 

Should the first wave of public 

dissemination be for more SBS 

instruments—perhaps 100? 200? Why or 

why not? 

181. Do commenters generally agree 

with the proposed implementation 

schedule that would require public 

dissemination of SBSs in three Waves, 

as provided in proposed Phases 3, 4, 

and 5? Why or why not? If not, what 

approach would be more appropriate? 

182. Should there be longer periods 

between Waves? If so, how long? 

183. Is 50 SBSs an appropriate 

number of SBSs to include in proposed 

Phase 3? Why or why not? If not, what 

number would be appropriate? 

184. Is it appropriate to require public 

dissemination of an additional 200 SBSs 

in proposed Phase 4? Why or why not? 

185. What criteria should be used to 

choose the first 50 and second 200 SBSs 

be publically disseminated? 

186. Do commenters believe that 

registered SDRs would be able to begin 

publicly disseminating all SBSs 

reported to the SDR 18 months after 

registration, as would be required under 

proposed Phase 5? Why or why not? If 

18 months is not a sufficient amount of 

time, what amount of time would be 

sufficient? 

187. Do commenters agree with the 

objective of proposed Rule 911? Why or 

why not? 

188. Do commenters agree with the 

requirements of proposed Rule 911? 

Why or why not? Please be specific in 

your response. Do commenters believe 

that the Commission should take a 


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162 15 U.S.C. 78ee(c). 

163 15 U.S.C. 78c(a). 

164See 15 U.S.C. 78c(a)(10). 

165National securities exchanges also would be 

liable for fees in connection with transactions in 

SBSs that they execute. See 15 U.S.C. 78ee(b). 

166See 15 U.S.C. 78o(b)(8) (‘‘It shall be unlawful 

for any registered broker or dealer to effect any 

transaction in, or induce or attempt to induce the 

purchase or sale of, any security (other than or [sic] 

commercial paper, bankers’ acceptances, or 

commercial bills), unless such broker or dealer is 

a member of a securities association registered 

pursuant to section 78o–3 of this title or effects 

transactions in securities solely on a national 

securities exchange of which it is a member.’’). In 

addition, Rule 15b9–1(a) under the Exchange Act, 

17 CFR 240.15b9–1(a), provides that any broker or 

dealer required by Section 15(b)(8) of the Exchange 

Act to become a member of a registered national 

securities association shall be exempt from such 

requirement if it (1) is a member of a national 

securities exchange, (2) carries no customer 

accounts, and (3) has annual gross income derived 

from purchases and sales of securities otherwise 

than on a national exchange of which it is a member 

in an amount no greater than $1,000. The gross 

income limitation does not apply to income derived 

from transactions (1) for the dealer’s own account 

with or through another registered broker or dealer, 

or (2) through the Intermarket Trading System. See 

17 CFR 240.15b9–1(b). 

167See 15 U.S.C. 78o–8 (‘‘The term ‘dealer’ means 

any person engaged in the business of buying and 

selling securities (not including security-based 

swaps, other than security-based swaps with or for 

persons that are not eligible contract participants) 

for such person’s own account through a broker or 

otherwise’’); 15 U.S.C. 78c(71) (defining a securitybased swap dealer ‘‘any person who—(i) holds 

themself out as a dealer in security-based swaps; (ii) 

makes a market in security-based swaps; (iii) 

regularly enters into security-based swaps with 

counterparties as an ordinary course of business for 

its own account; or (iv) engages in any activity 

causing it to be commonly known in the trade as 

a dealer or market maker in security-based swaps’’). 

168See 15 U.S.C. 78c(a)(5). 

169See 15 U.S.C. 78c(a)(4). 

170 15 U.S.C. 78ee(f) (‘‘The Commission, by rule, 

may exempt any sale of securities or any class of 

sales of securities from any fee or assessment 

imposed by this section, if the Commission finds 

that such exemption is consistent with the public 

interest, the equal regulation of markets and brokers 

and dealers, and the development of a national 

market system.’’). 

different approach to preventing 

potential evasions of the post-trade 

transparency rules? If so, what approach 

would be more appropriate? Please be 

specific in your response. 

189. Under proposed Rule 910, the 

Commission would require a newly 

registered SDR to begin publicly 

disseminating trade reports for 50 SBS 

instruments beginning nine months 

after its registration date, and for an 

additional 200 SBS instruments 

beginning 12 months after its 

registration date. The registered SDR 

would be required at those times to 

calculate block trade thresholds in 

accordance with proposed Rule 907(b) 

and to disseminate reports of block 

trades in accordance with proposed 

Rule 902(b) with respect to those initial 

50 and subsequent 200 instruments. 

Under proposed Rule 902(b), the 

registered SDR would be required to 

publicly disseminate a transaction 

report of the block trade with all 

transaction details other than notional 

size, and to disseminate the full trade 

report (including the notional size) at a 

later time. Should the Commission 

instead, during the phase-in period, 

provide for different approaches to 

publicly disseminating block trades in 

order to measure their associated cost to 

market participants? The Commission 

could require—at least for the phase-in 

period, but perhaps beyond—that 

different SBS instruments or 

transactions be subject to different block 

trade dissemination rules, to provide the 

Commission and market participants the 

opportunity to assess the relative costs 

and benefits of different approaches. For 

example, one group of SBS instruments 

or transactions could be subject to block 

trade dissemination mechanism 

described in proposed Rule 902(b). A 

second group could be subject to a 

regime where the full details of the 

transaction (including notional size) 

were disseminated, but with a one-hour 

delay, a third group could be subject to 

a regime where the full details were 

disseminated with a three-hour delay, 

and so on. Would commentators 

support or oppose such an approach? 

Why? Are there other approaches that 

should be considered in order to 

evaluate the impact of different posttrade transparency regimes for block 

trades on market quality? How long 

should each portion of the phase-in 

continue and what variation in the 

number and type of SBS instruments or 

transactions would be needed in each 

group to support a statistical analysis to 

distinguish between the potentially 

different effects on the markets resulting 

from distinct post-trade dissemination 

requirements? 

XI. Section 31 Fees 

Section 31(c) of the Exchange Act 162

provides that a national securities 

association must pay fees based on the 

‘‘aggregate dollar amount of sales 

transacted by or through any member of 

such association otherwise than on a 

national securities exchange of 

securities * * * registered on a national 

securities exchange or subject to prompt 

last sale reporting pursuant to the rules 

of the Commission or a registered 

national securities association.’’ 

Pursuant to Section 761(a) of the DoddFrank Act,163 SBSs are securities.164

When proposed Regulation SBSR 

becomes effective, SBSs will be subject 

to prompt last-sale reporting pursuant to 

the rules of the Commission because 

they will be subject to real-time public 

dissemination. Therefore, a national 

securities association the members of 

which effect SBS sales other than on an 

exchange (including on a SB SEF) 

would be liable for Section 31 fees for 

any such sales.165 A national securities 

association typically obtains funds to 

pay its Section 31 fees by imposing on 

its members an offsetting fee on covered 

sales, and would likely take the same 

approach with respect to SBSs. 

Under the Exchange Act, brokers and 

dealers are required to join a national 

securities association.166 The DoddFrank Act also provides for the 

registration of SBS dealers 167 and 

correspondingly amends the definition 

of ‘‘dealer’’ under the Exchange Act to 

exempt from the definition of dealer any 

person engaged in the business of 

buying and selling SBSs, other than 

SBSs with or for persons that are not 

eligible contract participants.168 Under 

the new definition of ‘‘dealer,’’ a SBS 

dealer that buys and sells SBSs—other 

than with or for persons that are not 

eligible contract participants—would 

not be required to register as a dealer 

under the Exchange Act and thus would 

not be required to join a national 

securities association. 

Because the Dodd-Frank Act did not 

make corresponding changes for SBS 

brokers, a SBS broker would be 

considered a broker for purposes of the 

Exchange Act.169 Thus, brokers that buy 

or sell SBSs, SBS dealers that buy and 

sell SBSs with or for persons that are 

not eligible contract participants, and 

SBS dealers that buy and sell securities 

other than SBSs would be required to 

join a national securities association. 

However, SBS dealers that buy and sell 

only securities that are SBSs would not 

be required to register as dealers under 

the Exchange Act and thus would not be 

required to join a national securities 

association. 

The Commission is proposing to 

exempt SBSs from the calculation of 

Section 31 fees.170 This exemption is 

designed to provide a more level 

playing field among SBS market 

participants. A national securities 

association would be able to collect 

funds to pay its Section 31 fees only 

from SBS market participants that are 

required to register with it. It would be 

unable to collect such member fees from 

SBS dealers that are not required to 

register with it. Thus, absent an 

exemption for all SBSs, the burden of 

indirectly paying the Section 31 fees 

would fall on some SBS market 

participants but not others. 


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171 17 CFR 240.31(a)(10)(ii). 

172Section 991 of the Dodd-Frank Act provides, 

in relevant part: ‘‘(1) AMENDMENTS.—Section 31 

of the Securities Exchange Act of 1934 (15 U.S.C. 

78ee) is amended * * * in subsection (e)(2), by 

striking ‘September 30’ and inserting ‘September 

25’.’’ 

173See Section 712(a)(2) of the Dodd-Frank Act. 

174See Section 712(a)(7) of the Dodd-Frank Act. 175 44 U.S.C. 3501 et seq. 

In addition, the Commission proposes 

to revise Rule 31(a)(10)(ii) under the 

Exchange Act 171 to conform the 

definition of ‘‘due date’’ in that rule to 

Section 31(e)(2) of the Exchange Act, as 

amended by Section 991 of the DoddFrank Act. This amendment provides 

that certain fees and assessments 

required under Section 31 will be 

required to be paid by September 25, 

rather than September 30.172 The 

Commission proposes to make a 

corresponding amendment to the 

definition of ‘‘due date’’ in Rule 

31(a)(10)(ii) under the Exchange Act by 

replacing the reference to ‘‘September 

30’’ in that rule with a reference to 

‘‘September 25.’’ 

Request for Comment 

190. Do commenters agree with the 

proposal to exempt SBSs from Section 

31 fees? Why or why not? 

191. How much transaction volume in 

SBSs would the Commission be 

exempting from Section 31 fees on an 

annual basis? 

192. If the Commission did not 

exempt SBSs from Section 31 fees, how 

would a national securities association 

obtain funds to pay the fees? Would the 

offsetting fees imposed on members of 

the national securities association be 

fairly distributed? 

193. Do commenters agree that the 

proposed exemption would create a 

more level playing field among SBS 

market participants? Why or why not? 

194. Absent the proposed exemption 

from Section 31 fees for SBSs, would 

there be difficulties in collecting Section 

31 fees for mixed swaps (which are 

included with the definition of 

‘‘security-based swap’’ and are thus 

securities)? 

XII. General Request for Comment 

Title VII of the Dodd-Frank Act 

requires the SEC to consult and 

coordinate to the extent possible with 

the CFTC for the purposes of assuring 

regulatory consistency and 

comparability, to the extent possible,173

and states that in adopting rules, the 

CFTC and SEC shall treat functionally 

or economically similar products or 

entities in a similar manner.174

The CFTC is adopting rules related to 

the reporting of swaps and the public 

dissemination of swap transaction, 

pricing, and volume data, as required 

under Sections 723, 727, and 729 of the 

Dodd-Frank Act. Understanding that the 

Commission and the CFTC regulate 

different products and markets and, as 

such, appropriately may be proposing 

alternative regulatory requirements, the 

Commission requests comment on the 

impact of any differences between the 

Commission and CFTC approaches to 

the regulation of the reporting of swaps 

and SBSs and the public dissemination 

of swap and SBS transaction, pricing, 

and volume information. 

In addition, legislatures and 

regulators in other jurisdictions are 

undertaking efforts to improve 

regulation in the market for OTC 

derivatives, including security-based 

swaps. The Commission requests 

comment generally on the impact of any 

differences between the Commission’s 

proposed approach to the reporting and 

public dissemination of SBSs and that 

of any relevant foreign jurisdictions. 

195. Would the regulatory approaches 

under the Commission’s proposed 

rulemaking pursuant to Sections 763 

and 766 of the Dodd-Frank Act and the 

CFTC’s proposed rulemaking pursuant 

to Sections 723, 727, and 729 of the 

Dodd-Frank Act result in duplicative or 

inconsistent efforts on the part of market 

participants subject to both regulatory 

regimes or result in gaps between those 

regimes? If so, in what ways do 

commenters believe that such 

duplication, inconsistencies, or gaps 

should be minimized? 

196. Do commenters believe the 

approaches proposed by the 

Commission and the CFTC to regulate 

the reporting of swaps and SBSs, and 

the public dissemination of swap and 

SBS transaction, volume, and pricing 

information, are comparable? If not, 

why not? 

197. Do commenters believe there are 

approaches that would make the 

regulation of swap and SBS reporting 

and the public dissemination of swap 

and SBS transaction, volume, and 

pricing information more comparable? If 

so, what? 

198. Do commenters believe that it 

would be appropriate for the 

Commission to adopt an approach 

proposed by the CFTC that differs from 

our proposal? Is so, which one(s)? We 

request commenters to provide data, to 

the extent possible, supporting any such 

suggested approaches. 

199. If registered SDRs would also be 

assuming real-time reporting obligations 

under the CEA, should the phase-in 

schedules for reporting obligations for 

swaps and SBSs be coordinated? 

200. How will proposed Regulation 

SBSR interact with reporting and public 

dissemination regimes in other 

jurisdictions? Will there be significant 

differences? If so, would those 

differences result in regulatory 

arbitrage? If so, what steps, if any, 

should the Commission take to 

minimize opportunities for regulatory 

arbitrage? 

XIII. Paperwork Reduction Act 

Certain provisions of the proposed 

reporting rules proposed in this release 

contain ‘‘collection of information 

requirements’’ within the meaning of the 

Paperwork Reduction Act of 1995 

(‘‘PRA’’).175 The Commission is therefore 

submitting relevant information to the 

Office of Management and Budget 

(‘‘OMB’’) for review in accordance with 

44 U.S.C. 3507 and 5 CFR 1320.11. 

Compliance with the collection of 

information requirements would be 

mandatory. 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. Specific 

collections of information are discussed 

further below. 

A. Definitions—Rule 900 

Proposed Rule 900 of Regulation 

SBSR contains only definitions of 

relevant terms and, thus, would not be 

a ‘‘collection of information’’ within the 

meaning of the PRA. 

B. Reporting Obligations—Rule 901 of 

Regulation SBSR 

Proposed Rule 901 of Regulation 

SBSR contains ‘‘collection of 

information requirements’’ within the 

meaning of the PRA. The title of this 

collection is ‘‘Rule 901—Reporting 

Obligations.’’ 

1. Summary of Collection of Information 

The Dodd-Frank Act amended the 

Exchange Act to require the reporting of 

SBS transactions. Accordingly, the 

Commission is proposing Rule 901 

under the Exchange Act to implement 

this requirement. Proposed Rule 901 

would specify who reports SBS 

transactions, where such transactions 

are to be reported, what information is 

to be reported, and in what format. 

Counterparties to a SBS would be 

responsible for reporting the SBS to a 

registered SDR, or, if there is no 

registered SDR that would accept the 

SBS, to the Commission. Proposed Rule 

901 generally would divide the SBS 

information that must be reported into 

three categories: (1) Information that 

must be reported in real time pursuant 


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176Proposed Rule 901(c) would provide that, for 

each SBS for which it is the reporting party, the 

reporting party shall report the following 

information in real time: (1) The asset class of the 

SBS and, if the SBS is an equity derivative whether 

it is a total return swap or is otherwise designed to 

offer risks and returns proportional to a position in 

the equity security or securities on which the SBS 

is based; (2) information that identifies the SBS 

instrument and the specific asset(s) or issuer of a 

security on which the SBS is based; (3) the notional 

amount(s), and the currenc(ies) in which the 

notional amount(s) is expressed; (4) the date and 

time, to the second, of execution, expressed using 

UTC; (5) the effective date; (6) the scheduled 

termination date; (7) the price; (8) the terms of any 

fixed or floating rate payments, and the frequency 

of any payments; (9) whether or not the SBS will 

be cleared by a clearing agency; (10) if both 

counterparties to a SBS are SBS dealers, an 

indication to that effect; (11) if applicable, an 

indication that the transaction does not accurately 

reflect the market; and (12) if the SBS is customized 

to the extent that the information provided in items 

(1) through (11) does not provide all of the material 

information necessary to identify such customized 

SBS or does not contain the data elements 

necessary to calculate the price, an indication to 

that effect. See supra Section III.B. 

177Proposed Rule 901(d)(1) would provide that, 

in addition to the information required under 

proposed Rule 901(c), for each SBS for which it is 

the reporting party, the reporting party shall report: 

(1) The participant ID of each counterparty; (2) as 

applicable, the broker ID, desk ID, and trader ID of 

the reporting party; (3) the amount(s) and 

currenc(ies) of any up-front payment(s) and a 

description of the payment streams of each 

counterparty; (4) the title of any master agreement, 

or any other agreement governing the transaction 

(including the title of any document governing the 

satisfaction of margin obligations), incorporated by 

reference and the date of any such agreement; (5) 

the data elements necessary for a person to 

determine the market value of the transaction; (6) 

if the SBS will be cleared, the name of the clearing 

agency; (7) if the SBS is not cleared, whether the 

exception in Section 3C(g) of the Exchange Act was 

invoked; (8) if the SBS is not cleared, a description 

of the settlement terms, including whether the SBS 

is cash-settled or physically settled, and the method 

for determining the settlement value; and (9) the 

venue where the SBS was executed. Under 

proposed Rule 901(d)(2), any information required 

to be reported pursuant to paragraph (d)(1) must be 

reported promptly, but in no event later than: (1) 

15 minutes after the time of execution for a SBS that 

is traded and confirmed electronically; (2) 30 

minutes after the time of execution for a SBS that 

is confirmed electronically but not traded 

electronically; or (3) 24 hours after execution for a 

SBS that is not executed or confirmed 

electronically. See supra Sections IV.B. and C. 

178Proposed Rule 901(e) would require that, for 

any life cycle event, and any adjustment due to a 

life cycle event, that results in a change to 

information previously reported pursuant to 

proposed Rule 901(c) or (d), the reporting party 

shall promptly provide updated information 

reflecting such change to the entity to which it 

reported the original transaction, using the 

transaction ID, subject to two enumerated 

exceptions. However, if a reporting party ceases to 

be a counterparty to a SBS due to an assignment 

or novation, the new counterparty shall be the 

reporting party following such assignment or 

novation, if the new counterparty is a U.S. person. 

If, following an assignment or novation, the new 

counterparty is not a U.S. person, the counterparty 

that is a U.S. person shall be the reporting party. 

See supra Section IV.D. 

179See proposed Rule 900 (defining ‘‘reporting 

party’’ as the counterparty to an SBS with the duty 

to report information in accordance with proposed 

Regulation SBSR to a registered SDR, or if there is 

no registered SDR that would receive the 

information, to the Commission). 

180The Commission includes in its estimate of 

reporting parties clearing agencies, which under 

proposed Rule 901(e)(i) could become the reporting 

parties for SBS transactions where the original 

reporting party ceases to be a counterparty to the 

SBS following a novation of the transaction. See 

supra Section IV.D. 

181See 15 U.S.C. 78m(n). The Commission today 

is separately proposing several rules to implement 

this requirement. See SDR Registration Proposing 

Release, supra note 6. 

to proposed Rule 901(c); 176 (2) 

additional information that must be 

reported pursuant to proposed Rule 

901(d) within specified timeframes; 177

and (3) life cycle events that must be 

reported pursuant to proposed Rule 

901(e).178

Proposed Rule 901(i) would require 

the reporting of all of the information 

required by proposed Rules 901(c) and 

(d) for any pre-enactment SBSs or 

transitional SBSs, to the extent such 

information is available. 

Proposed Rule 901 also would impose 

certain duties on a registered SDR that 

receives SBS transaction data. Proposed 

Rule 901(f) would require a registered 

SDR to time stamp, to the second, its 

receipt of any information submitted to 

it pursuant to proposed Rule 901(c), (d), 

or (e). Proposed Rule 901(g) would 

require a registered SDR to assign a 

transaction ID to each SBS reported by 

a reporting party. 

2. Proposed Use of Information 

The SBS transaction information 

required to be reported pursuant to 

proposed Rule 901 would be used by 

registered SDRs, market participants, 

the Commission, and other regulators. 

The information reported by reporting 

parties pursuant to proposed Rule 901 

would be used by registered SDRs to 

publicly disseminate real-time reports of 

SBS transactions, as well as to offer a 

resource for regulators to obtain detailed 

information about the SBS market. 

Market participants would use the 

public market data feed to assess the 

current market for SBSs and for 

valuation purposes. The Commission 

and other regulators would use 

information about SBS transactions 

reported to and held by registered SDRs 

for prudential oversight and to monitor 

potential systemic risks, as well as to 

examine for improper behavior and to 

take enforcement actions, as 

appropriate. 

The transaction ID would be used on 

any subsequent transaction report or 

information submitted by a reporting 

party regarding that SBS (e.g., on an 

error report to identify the original 

transaction to which the error report 

pertains). 

3. Respondents 

Proposed Rule 901 would apply to 

reporting parties.179 The Commission 

preliminarily believes that up to 1,000 

entities could be reporting parties under 

proposed Rule 901(a), and that it is 

reasonable to use the figure of 1,000 

respondents for estimating collection of 

information burdens under the PRA. 

The Commission preliminarily believes, 

based on information currently available 

to it, that there are and would continue 

to be approximately 1,000 entities 

regularly engaged in the CDS 

marketplace, and that most of these 

entities are likely to regularly 

participate in other SBS markets.180

Accordingly, the Commission 

preliminarily believes that an estimate 

of 1,000 respondents (i.e., reporting 

parties) is appropriate. 

Proposed Rule 901 also would impose 

certain duties on registered SDRs. 

Pursuant to Section 13(n) of the 

Exchange Act, an SDR must register 

with the Commission.181 The 

Commission preliminarily believes that 

the number of SDRs seeking to register 

would not exceed ten. Accordingly, for 

purposes of estimating collection of 

information burdens under proposed 

Regulation SBSR, including proposed 

Rule 901, the Commission believes that 

it is reasonable to use ten as an estimate 

of the number of registered SDRs. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

a. For Reporting Parties 

Pursuant to proposed Rule 901, all 

SBS transactions must be reported to a 

registered SDR or to the Commission. 

Together, sections (a), (b), (c), (d), (e) 

and (h) of proposed Rule 901 set forth 

the parameters that market participants 

must follow to report SBS transactions. 

Proposed Rule 901(i) addresses the 

reporting of pre-enactment SBSs. The 

proposed SBS reporting requirements 

would impose initial and ongoing 

burdens on reporting parties. The 

Commission preliminarily believes that 

these burdens would be a function of, 

among other things, the number of 

reportable SBS transactions and the data 

elements required to be reported for 

each SBS transaction. 

Based on publicly available 

information and consultation with 

industry sources, the Commission 

preliminarily believes that even the 

most active participants in the SBS 

market do not enter into a large number 

of new SBSs on a daily basis. Rather, 

most regularly active SBS market 


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182See, e.g., http://www.dtcc.com/products/ 

derivserv/data_table_iii.php (weekly data as 

updated by DTCC). 

183The Commission’s estimate is based on 

internal analysis of available SBS market data. The 

Commission is seeking comment about the overall 

size of the SBS market. 

184The Commission notes that regulation of the 

SBS markets, including by means of proposed 

Regulation SBSR, could impact market participant 

behavior. 

185These figures are based on the following: 

[13,140,000/0.85] = 15,458,824. [((15,458,824 

estimated SBS transactions)/(1,000 estimated 

reporting parties))/(365 days/year)] = 42.35, or 

approximately 42 transactions per day. The 

Commission understands that many of these 

transactions may arise from previously executed 

SBS transactions. 

186This figure is based on discussions of 

Commission staff with various market participants 

and is calculated as follows: [((Sr. Programmer at 

160 hours) + (Sr. Systems Analyst at 160 hours) + 

(Compliance Manager at 10 hours) + (Director of 

Compliance at 5 hours) + (Compliance Attorney at 

20 hours)) × (1,000 reporting parties)] = 355,000 

burden hours, which is 355 hours per reporting 

party (assuming 1,000 reporting parties). The 

Commission preliminarily believes that information 

on SBS transactions is currently being retained by 

many market participants in the ordinary course of 

business. This may result in lesser burdens for 

those parties. 

187This figure is based on discussions of 

Commission staff with various market participants 

and is calculated as follows: [((Sr. Programmer at 

32 hours) + (Sr. Systems Analyst at 32 hours) + 

(Compliance Manager at 60 hours) + (Compliance 

Clerk at 240 hours) + (Director of Compliance at 24 

hours) + (Compliance Attorney at 48 hours)) × 

(1,000 reporting parties)] = 436,000 burden hours, 

which is 436 hours per reporting party. 

188This estimate is based on discussions of 

Commission staff with various market participants 

and is calculated as follows: [($250/gigabyte of 

storage capacity) × (4 gigabytes of storage) × (1,000 

reporting parties)] = $1,000,000. The Commission 

preliminarily believes that storage costs associated 

with saving relevant SBS information and 

documents would not vary significantly between 

the first year and subsequent years. Accordingly, 

the Commission has preliminarily estimated the 

initial and ongoing storage costs to be the same. 

Moreover, the per-entity annual data storage figure 

of $1,000 is an average. Some parties may face 

higher costs, while others would simply use 

existing storage resources. 

189This estimate is based on the following: [((355 

one-time burden hours for systems development) + 

(436 burden hours for annual costs)) × (1,000 

reporting parties)] = 791,000 burden hours, which 

corresponds to 791 burden hours per reporting 

party. 

190See supra note 188. 

191See supra note 187. 

192See supra note 188. 

participants enter into only a small 

number of new SBSs during any given 

time period, while a few larger dealers 

participate in the majority of SBS 

transactions. The Commission has 

sought available information in an effort 

to quantify the number of aggregate SBS 

transactions on an annual basis. 

According to publicly available data 

from DTCC, recently, there have been an 

average of approximately 36,000 CDS 

transactions per day,182 corresponding 

to a total number of CDS transactions of 

approximately 13,140,000 per year. The 

Commission preliminarily believes that 

CDSs represent 85% of all SBS 

transactions.183 Accordingly, and to the 

extent that historical market activity is 

a reasonable predictor of future 

activity,184 the Commission 

preliminarily estimates that the total 

number of SBS transactions that would 

be subject to proposed Rule 901 on an 

annual basis would be approximately 

15,460,000, which is an average of 

approximately 42 per reporting party 

per day.185

The Commission believes that 

reporting parties would face three 

categories of burdens to comply with 

proposed Rule 901 of Regulation SBSR. 

First, each reporting party would likely 

need to develop an internal order and 

trade management system (‘‘OMS’’) 

capable of capturing relevant SBS 

transaction information. The OMS 

would have to include or be connected 

to a system designed to store SBS 

transaction information. The 

Commission understands that it is 

current industry practice, in many 

cases, to add SBS transaction details to 

the transaction record post-execution in 

a process known as ‘‘enrichment.’’ 

Accordingly, the OMS would likely 

need to link both to the trade desk—to 

permit real-time transaction reporting 

under proposed Rule 901(c)—and to the 

back office—to facilitate reporting of 

complete transactions as required under 

proposed Rule 901(d). 

Second, each reporting party would 

have to implement a reporting 

mechanism. This would include a 

system that ‘‘packages’’ SBS transaction 

information from the reporting party’s 

OMS, sends such information, and 

tracks it. The reporting mechanism 

would also include necessary data 

transmission lines to the appropriate 

registered SDR. 

Third, each reporting party would 

have to establish an appropriate 

compliance program and support for the 

operation of the OMS and reporting 

mechanism. Relevant elements of the 

compliance program would include 

transaction verification and validation 

protocols; the ability to identify and 

correct erroneous transaction reports; 

and necessary technical, administrative, 

and legal support. Additional 

operational support would include new 

product development, systems 

upgrades, and ongoing maintenance. 

Internal Order Management. To 

comply with their reporting obligations, 

reporting parties would likely need to 

develop and maintain an internal OMS 

that can capture relevant SBS data. The 

Commission preliminarily estimates 

that capturing SBS data in a manner 

sufficient to comply with proposed Rule 

901 would impose an initial one-time 

aggregate burden of approximately 

355,000 burden hours, which 

corresponds to a burden of 355 hours for 

each reporting party.186 This estimate 

includes an estimate of the number of 

potential burden hours required to 

amend internal procedures, design or 

reprogram systems, and implement 

processes to ensure that SBS transaction 

data are captured and preserved. The 

Commission further preliminarily 

estimates that capturing SBS data in a 

manner sufficient to comply with 

proposed Rule 901 would impose an 

annual aggregate burden of 

approximately 436,000 burden hours, 

436 burden hours for each reporting 

party.187 This figure would include dayto-day support of the OMS, as well as 

an estimate of the amortized annual 

burden associated with system upgrades 

and periodic ‘‘re-platforming’’ (i.e., 

implementing significant updates based 

on new technology). The Commission 

preliminarily estimates that, to capture 

and maintain relevant information and 

documents, reporting parties could 

incur aggregate annual dollar cost 

burden (first-year and ongoing) of 

$1,000,000, which corresponds to 

$1,000 for each participant.188 The 

figure is an estimate of the hardware 

and associated maintenance costs for 

sufficient memory to capture and store 

SBS transactions, including redundant 

back-up systems. 

Summing these burdens, the 

Commission preliminarily estimates 

that the initial (i.e., first-year) aggregate 

annualized burden on reporting parties 

for internal order management under 

proposed Rule 901 would be 791,000 

burden hours, which corresponds to 791 

burden hours for each reporting 

party.189 The Commission preliminarily 

estimates that the initial aggregate 

annualized dollar cost burden would be 

$1,000,000, which would correspond to 

$1,000 for each reporting party.190 The 

Commission further preliminarily 

estimates that the ongoing aggregate 

annualized burden on reporting parties 

for internal order management under 

proposed Rule 901 would be 436,000 

burden hours, which corresponds to 436 

burden hours for each reporting 

party.191 The Commission preliminarily 

estimates that the ongoing aggregate 

annualized dollar cost burden would be 

$1,000,000, which corresponds to 

$1,000 for each reporting party.192

SBS Reporting Mechanism. Reporting 

parties would be required to incur 


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193This estimate is based on discussions of 

Commission staff with various market participants, 

as well as the Commission’s experience regarding 

connectivity between securities market participants 

for data reporting purposes. The Commission 

derived the total estimated expense from the 

following: [($100,000 hardware- and softwarerelated expenses, including necessary back-up and 

redundancy, per SDR connection) × (2 SDR 

connections per reporting party) × (1,000 reporting 

parties)] = $200,000,000. The Commission 

understands that many reporting parties already 

have established linkages to entities that may 

register as SDRs, which could significantly reduce 

the out-of-pocket costs associated with this 

establishing the reporting function contemplated by 

proposed Rule 901. 

194This figure is based on discussions with 

various market participants as follows: [((Sr. 

Programmer at 80 hours) + (Sr. Systems Analyst at 

80 hours) + (Compliance Manager at 5 hours) + 

(Director of Compliance at 2 hours) + (Compliance 

Attorney at 5 hours)) × (1,000 reporting parties)] = 

172,000 burden hours, which is 172 hours per 

reporting party. The Commission preliminarily 

believes that many dealers and major market 

participants already are reporting SBS data to some 

extent in the ordinary course of business. Thus, as 

a practical matter, these parties may face 

substantially lower burdens. 

195This figure is based on discussions of 

Commission staff with various market participants, 

as well as the Commission’s experience regarding 

connectivity between securities market participants, 

including alternative trading systems and selfregulatory organizations for data reporting 

purposes. The Commission derived the total 

estimated initial burden from the following: 

[(15,460,000 estimated total annual SBS 

transactions) × (0.005 hours/transaction)] = 77,300 

burden hours, which is 77.3 burden hours per 

reporting party. 

196This estimate is based on the following: [((172 

one-time burden hours) + (77.3 burden hours for 

ongoing costs)) × (1,000 reporting parties)] = 

249,300 burden hours, which corresponds to 249.3 

burden hours per reporting party. 

197See supra note 193. 

198See supra note 195. 

199See supra note 193. 

200See infra Section XIII.G. 

initial one-time costs to establish 

connectivity to a registered SDR to 

report SBS transactions. Depending on 

the number of SBS asset classes that a 

reporting party transacts in, and which 

registered SDRs accept the resulting SBS 

transaction reports, multiple 

connections to different registered SDRs 

could be necessary. For purposes of 

estimating relevant burdens, the 

Commission preliminarily estimates 

that, on average, each reporting party 

would require connections to two 

registered SDRs. The Commission bases 

this estimate on discussions with 

market participants. We recognize that, 

in light of the developing SBS market 

and regulatory structure, the actual 

average number of SDR connections 

maintained by each reporting party may 

be different. 

This estimate is based on the 

following factors. First, based on 

discussions with SBS market 

participants, the Commission 

understands that the majority of SBSs 

are comprised of CDS and equity-based 

swaps. Accordingly, the Commission 

preliminarily believes that transactions 

in these two asset classes would 

predominate. Moreover, the 

Commission preliminarily believes that 

SBS market participants may not all 

transact in each asset class. Thus, even 

if each registered SDR accepted 

transaction reports only for a single SBS 

asset class, the total number of 

connections needed by many reporting 

parties would likely be limited. Next, 

the Commission also preliminarily 

believes that, for operational efficiency, 

a reporting party would seek to use only 

one registered SDR per asset class for 

repository services. Accordingly, to the 

extent that a single registered SDR 

accepted SBSs in multiple asset classes, 

a reporting party would need fewer 

connections. Finally, a reporting party 

that required a significant number of 

connections to registered SDRs could 

engage a third party—for example, a 

dealer or connectivity services 

provider—instead of independently 

establishing its own connections. 

Accordingly, the Commission 

preliminarily believes that one 

connection may suffice for many 

reporting parties. 

On this basis, the Commission 

preliminarily estimates that the cost to 

establish and maintain connectivity to a 

registered SDR to facilitate the reporting 

required by proposed Rule 901 would 

impose an annual dollar cost burden of 

approximately $200,000,000, which 

corresponds to a dollar cost burden of 

$200,000 for each reporting party.193

Moreover, the Commission believes 

that establishing a reporting mechanism 

for SBS transactions would impose 

internal burdens on each reporting 

party, including the development of 

systems necessary to capture and send 

information from the entity’s OMS to 

the relevant registered SDR, as well as 

corresponding testing and support. The 

Commission preliminarily estimates an 

initial one-time aggregate burden of 

172,000 burden hours, which 

corresponds to a burden of 172 burden 

hours for each reporting party.194 In 

addition, the Commission preliminarily 

estimates that reporting specific SBS 

transactions to a registered SDR as 

required by proposed Rule 901 would 

impose an ongoing aggregate burden of 

77,300 burden hours, which 

corresponds to a burden of 

approximately 80 burden hours for each 

reporting party.195

Thus, the Commission preliminarily 

estimates that the initial (first-year) 

aggregate annualized burden on 

reporting parties for reporting under 

proposed Rule 901 would be 249,300 

burden hours, which corresponds to 

approximately 250 burden hours for 

each reporting party.196 The 

Commission preliminarily estimates 

that the initial aggregate annualized 

dollar cost burden would be 

$200,000,000, which corresponds to 

$200,000 for each reporting party.197 In 

addition, the Commission preliminarily 

estimates that the ongoing aggregate 

annualized burden on reporting parties 

under proposed Rule 901 would be 

77,300 burden hours, which 

corresponds to approximately 80 burden 

hours for each reporting party.198 The 

Commission preliminarily estimates 

that the ongoing aggregate annualized 

dollar cost burden would be 

$200,000,000, which corresponds to 

$200,000 for each reporting party.199

Compliance and Ongoing Support. As 

stated above, in complying with 

proposed Rule 901, each reporting party 

also would need to establish and 

maintain an appropriate compliance 

program and support for the operation 

of the OMS and reporting mechanism, 

which would include transaction 

verification and validation protocols, 

and necessary technical, administrative, 

and legal support. Additional 

operational support would include new 

product development, systems 

upgrades, and ongoing maintenance. 

The Commission preliminarily believes 

that initial burdens associated with this 

aspect of proposed Rule 901—i.e., the 

establishment of relevant compliance 

capability—would in significant part 

involve the development of appropriate 

policies and procedures, which, for 

those participants who are SBS dealers 

or major SBS participants, is addressed 

in connection with proposed Rule 

906(c).200 A reporting party also would 

need to design its OMS to include tools 

to ensure accurate, complete reporting. 

On an ongoing basis, a reporting party 

would need to employ appropriate 

technical and compliance staff to 

maintain and support the operation of 

its order management and reporting 

systems over time. 

The Commission preliminarily 

estimates that designing and 

implementing an appropriate 

compliance and support program would 

impose an initial, one-time aggregate 

burden of approximately 180,000 

burden hours, which corresponds to a 


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75250 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

201This figure is based on discussions with 

various market participants and is calculated as 

follows: [((Sr. Programmer at 100 hours) + (Sr. 

Systems Analyst at 40 hours) + (Compliance 

Manager at 20 hours) + (Director of Compliance at 

10 hours) + (Compliance Attorney at 10 hours)) × 

(1,000 reporting parties)] = 180,000 burden hours, 

which corresponds to 180 hours per reporting party. 

202This figure is based on discussions with 

various market participants and is calculated as 

follows: [((Sr. Programmer at 16 hours) + (Sr. 

Systems Analyst at 16 hours) + (Compliance 

Manager at 30 hours) + (Compliance Clerk at 120 

hours) + (Director of Compliance at 12 hours) + 

(Compliance Attorney at 24 hours)) × (1,000 

reporting parties)] = 218,000 burden hours, which 

is 218 hours per reporting party. 

203This estimate is based on the following: [((180 

one-time burden hours) + (218 annual burden 

hours)) × (1,000 reporting parties)] = 398,000 

burden hours, which corresponds to 398 burden 

hours per reporting party. 

204See supra note 202. 

205This figure is based on summing the initial 

aggregate annualized burdens for reporting parties 

under proposed Rule 901: [(791,000) + (249,300) + 

(398,000)] = 1,438,300 burden hours. 

206This figure is based on summing the estimated 

first-year aggregate annualized dollar cost burdens 

as follows: [($300,000,000) + ($1,000,000)] = 

$301,000,000. 

207This figure is based on summing estimated 

ongoing annual aggregate burdens as follows: 

[(436,000) + (77,300) + (218,000)] = 731,300 burden 

hours. 

208This figure is based on summing the estimated 

first-year aggregate annualized dollar cost burdens 

as follows: [($300,000,000) + ($1,000,000)] = 

$301,000,000. 

209The Commission is proposing Rules 13n–4(b), 

13n–5, and 13n–6 under the Exchange Act, which 

would relate to the duties, data collection and 

maintenance, and automated systems requirements 

for SDRs. See SDR Registration Proposing Release, 

supra note 6. 

210This figure is based on discussions with 

various market participants and is calculated as 

follows: [((Sr. Programmer at 80 hours) + (Sr. 

Systems Analyst at 20 hours) + (Compliance 

Manager at 8 hours) + (Director of Compliance at 

4 hours) + (Compliance Attorney at 8 hours)) × (10 

registered SDRs)] = 1,200 burden hours, which is 

120 hours per registered SDR. 

211This figure is based on discussions with 

various market participants as follows: [((Sr. 

Programmer at 60 hours) + (Sr. Systems Analyst at 

48 hours) + (Compliance Manager at 24 hours) + 

(Director of Compliance at 12 hours) + (Compliance 

Attorney at 8 hours)) x (10 SDRs)] = 1,520 burden 

hours, which is 152 hours per registered SDR. 

212This figure is based on the following: [(1,200) 

+ (1,520)] = 2,720 burden hours, which corresponds 

to 272 burden hours per registered SDR. 

213See supra note 211. 

214See SDR Registration Proposing Release, supra 

note 6. 

burden of 180 burden hours for each 

reporting party.201

The Commission further preliminarily 

estimates that maintaining a reporting 

party’s compliance and support program 

would impose an ongoing aggregate 

burden of approximately 218,000 

burden hours, which corresponds to a 

burden of 218 burden hours for each 

reporting party.202 This figure includes 

day-to-day support of the OMS, as well 

as an estimate of the amortized annual 

burden associated with system upgrades 

and periodic re-platforming (i.e., 

implementing significant updates based 

on new technology). 

Therefore, the Commission 

preliminarily estimates the initial 

aggregate annualized burden on 

reporting parties for compliance and 

ongoing support under proposed Rule 

901 would be 398,000 burden hours, 

which corresponds to 398 burden hours 

for each reporting party.203 The 

Commission further preliminarily 

estimates that the ongoing aggregate 

annualized burden on reporting parties 

for compliance and ongoing support 

under proposed Rule 901 would be 

218,000 burden hours, which 

corresponds to 218 burden hours for 

each reporting party.204

Aggregate Burdens. Thus, the 

Commission estimates that the total 

first-year burden—the initial aggregate 

annualized burden—on reporting 

parties associated with proposed Rule 

901 would be 1,438,300 burden hours, 

which corresponds to approximately 

1,438 burden hours per reporting 

party.205 In addition, the Commission 

preliminarily estimates that the initial 

aggregate annualized dollar cost burden 

on reporting parties associated with 

proposed Rule 901 would be 

$301,000,000, which corresponds to a 

dollar cost burden of $301,000 per 

reporting party.206

Likewise, the Commission estimates 

that the ongoing aggregate annual 

burdens on reporting parties associated 

with proposed Rule 901 would be 

731,300 burden hours, which 

corresponds to 731 burden hours per 

reporting party.207 In addition, the 

Commission preliminarily estimates 

that the ongoing, aggregate annualized 

dollar cost burden on reporting parties 

associated with proposed Rule 901 

would be $301,000,000, which 

corresponds to a dollar cost burden of 

$301,000 per reporting party.208

b. For Registered SDRs 

Proposed Rule 901(f) would require a 

registered SDR to time-stamp 

information that it receives. Proposed 

Rule 901(g) would require a registered 

SDR to assign a unique transaction ID to 

each SBS it receives. The Commission 

preliminarily believes that a registered 

SDR would need to design its systems 

to include these capabilities, but that 

such design elements would not pose 

additional significant burdens to 

incorporate in the context of designing 

and building the technological 

framework that would be required of a 

SDR to become registered.209 Therefore, 

the Commission preliminarily estimates 

that proposed Rules 901(f) and (g) 

would impose an initial one-time 

aggregate burden of 1,200 burden hours, 

which corresponds to 120 burden hours 

per registered SDR.210 This figure is 

based on an estimate of ten registered 

SDRs. Once operational, these elements 

of each registered SDR’s system would 

have to be supported and maintained. 

Accordingly, the Commission estimates 

that proposed Rule 901(f) and (g) would 

impose an annual aggregate burden of 

1,520 burden hours, which corresponds 

to 152 burden hours per registered 

SDR.211 This figure represents an 

estimate of the burden for a registered 

SDR for support and maintenance costs 

for the registered SDR’s systems to time 

stamp incoming submissions and assign 

transaction IDs. 

Thus, the Commission preliminarily 

estimates that the first-year aggregate 

annualized burden associated with 

proposed Rules 901(f) and (g) would be 

2,820 burden hours, which corresponds 

to 282 burden hours per registered 

SDR.212 Correspondingly, the 

Commission preliminarily estimates 

that the ongoing aggregate annualized 

burden associated with proposed Rules 

901(f) and (g) would be 1,520 burden 

hours, which corresponds to 152 burden 

hours per registered SDR.213

5. Recordkeeping Requirements 

Concurrently with proposed 

Regulation SBSR, the Commission is 

issuing the SDR Registration Proposing 

Release, which includes recordkeeping 

requirements for SBS transaction data 

received by a registered SDR pursuant to 

proposed Regulation SBSR. Specifically, 

proposed Rule 13n–5(b)(4) would 

require a registered SDR to maintain the 

transaction data that it collects for not 

less than five years after the applicable 

SBS expires, and historical positions 

and historical market values for not less 

than five years.214 Accordingly, SBS 

transaction reports received by a 

registered SDR pursuant to proposed 

Rule 901 would be required to be 

retained by the SDR for not less than 

five years. 

6. Collection of Information is 

Mandatory 

Each collection of information 

discussed above would be a mandatory 

collection of information. 

7. Confidentiality of Responses to 

Collection of Information 

Information collected pursuant to 

proposed Rule 901(c) would be widely 

available to the public to the extent it is 

incorporated into SBS transaction 

reports that are publicly disseminated 

by a registered SDR pursuant to 


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215See id. 216See proposed Rule 907(a)(4). 

217See SDR Registration Proposing Release, supra 

note 6. 

proposed Rule 902. A registered SDR 

would be under an obligation to 

maintain the confidentiality of any 

information collected pursuant to 

proposed Rule 901(d), pursuant to 

Sections 13(n)(5) of the Exchange Act 

and proposed Rule 13n–9 thereunder.215

To the extent that the Commission 

receives confidential information 

pursuant this collection of information, 

such information would be kept 

confidential, subject to the provisions of 

the Freedom of Information Act. 

8. Request for Comment 

The Commission requests public 

comment on its burden estimates. The 

Commission also solicits comment as 

follows: 

201. Is the proposed collection of 

information necessary for the 

performance of the functions of the 

agency? Would the information have 

practical utility? 

202. How accurate are the 

Commission’s preliminary estimates of 

the burdens of the proposed collection 

of information associated with proposed 

Rule 901? In particular, how many 

entities would incur collection of 

information burdens pursuant to 

proposed Rule 901? 

203. Would covered entities incur any 

initial burdens associated with systems 

design, programming, expanding 

systems capacity, and establishing 

compliance programs pursuant to 

proposed Rule 901? 

204. Would there be different or 

additional burdens associated with the 

collection of information under 

proposed Rule 901 that a covered entity 

would not undertake in the ordinary 

course of business? 

205. Are there additional burdens that 

the Commission has not addressed in its 

preliminary burden estimates? 

206. Can you suggest any ways to 

enhance the quality, utility, and clarity 

of the information to be collected? 

207. Can you suggest any ways to 

minimize the burden of collection of 

information on those who would be 

required to respond, including through 

the use of automated collection 

techniques or other forms of information 

technology? 

208. What entities may be subject to 

proposed Rule 901, whether specific 

classes of entities may be impacted, how 

many entities may be impacted, and 

will any such entity or class of entities 

be impacted differently than others? In 

addition, the Commission seeks 

comment on the accuracy of its 

estimates as to the number of 

participants in the SBS market that 

would be required to report information 

pursuant to proposed Rule 901. 

C. Public Dissemination of Transaction 

Reports—Rule 902 of Regulation SBSR 

Certain provisions of proposed Rule 

902 of Regulation SBSR contain 

‘‘collection of information requirements’’ 

within the meaning of the PRA. The title 

of this collection is ‘‘Rule 902—Public 

Dissemination of Transaction Reports.’’ 

1. Summary of Collection of Information 

Proposed Rule 902(a) generally would 

require that a registered SDR publicly 

disseminate a transaction report for each 

SBS transaction immediately upon 

receipt of information about the SBS 

submitted by a reporting party pursuant 

to proposed Rule 901(c), along with any 

indicator(s) contemplated by the 

registered SDR’s policies and 

procedures.216 If its systems are 

unavailable for publicly disseminating 

transaction data immediately upon 

receipt, the registered SDR would be 

required to disseminate the transaction 

data immediately upon re-opening. 

Pursuant to Rule 902(b), a registered 

SDR would be required to publicly 

disseminate a transaction report of a 

SBS that constitutes a block trade 

immediately upon receipt of 

information about the block trade from 

the reporting party. The transaction 

report would consist of all the 

information reported by the reporting 

party pursuant to proposed Rule 901(c), 

except for the notional size, plus the 

transaction ID and an indicator that the 

report represents a block trade. The 

registered SDR would be required to 

publicly disseminate a complete 

transaction report for such block trade 

(including the transaction ID and the 

full notional size) at a later time. 

Proposed Rule 902(c) would prohibit 

a registered SDR from disseminating: 

(1) the identity of either counterparty to 

a SBS; (2) with respect to a SBS that is 

not cleared at a registered clearing 

agency and that is reported to a 

registered SDR, any information 

disclosing the business transactions and 

market positions of any person; (3) any 

information regarding a SBS reported 

pursuant to proposed Rule 901(i). 

2. Proposed Use of Information 

The real-time public dissemination 

requirement contained in proposed Rule 

902 would provide post-trade 

transparency for SBS transactions, as 

required by the Dodd-Frank Act. 

Publicly disseminated reports of SBS 

transactions that are not block trades 

would include the full notional size. 

Publicly disseminated reports of SBS 

transactions that are block trades would 

occur pursuant to a two-step process. 

First, a real-time report would be 

disseminated without the notional size, 

but with an indication that the trade is 

a block trade as well as a transaction ID. 

At a later time, a follow-on report would 

be disseminated, including the notional 

size, with the transaction ID used to 

connect the second report to the first 

report. 

3. Respondents 

The collection of information 

associated with the proposed Rule 902 

would apply to registered SDRs. As 

noted above, the Commission 

preliminarily believes that an estimate 

of ten registered SDRs is reasonable for 

purposes of its analysis of potential 

burdens under the PRA. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

Although proposed Rule 902 would 

not prescribe a manner of public 

dissemination, the Commission 

anticipates that a registered SDR would 

establish a mechanism functionally 

similar to one established by TRACE, 

which is a system operated by FINRA 

for collecting and disseminating to the 

public reports of trades in corporate and 

agency debt securities. 

Simultaneously with this proposal, 

the Commission is proposing new Rules 

13n–1 through 13n–11 under the 

Exchange Act relating to the SDR 

registration process, the duties of SDRs, 

and their core principles.217 The SDR 

Registration Proposing Release covers 

anticipated collections of information 

with respect to various aspects of 

establishing and operating an SDR, 

including its start-up and ongoing 

operations. Proposed Rule 13n–5(b)(1) 

would set forth parameters each 

registered SDR would be required to 

follow with regard to collecting and 

maintaining transaction data. Every SDR 

would be required to (i) establish, 

maintain, and enforce written policies 

and procedures for the reporting of 

transaction data to the SDR and shall 

accept all transaction data that is 

reported in accordance with such 

policies and procedures; (ii) accept all 

SBSs in any asset class that are reported 

to it in accordance with its policies and 

procedures to the extent that it accepts 

any SBS in a particular asset class; (iii) 

establish, maintain, and enforce written 

policies and procedures to verify the 

accuracy of the transaction data that has 

been submitted to the SDR, including 


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75252 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

218See Section IV.D.2 (SDR Duties, Data 

Collection and Maintenance, Automated Systems, 

and Direct Electronic Access) of the SDR 

Registration Proposing Release. This estimate is 

based on discussions with industry members and 

market participants, including potential SDRs who 

would be required to register as SDRs under the 

Dodd-Frank Act, and includes time necessary to 

design and program a registered SDR’s system to 

calculate and disseminate initial and subsequent 

trade reports as well as annual costs associated with 

systems testing and maintenance necessary for the 

special handling of block trades. These figures do 

not include the development of policies and 

procedures necessary to calculate block trade levels 

pursuant to proposed Rule 907(b). 

219See SDR Registration Proposing Release, supra 

note 6 for the total burden associated with 

establishing SDR technology systems. The 

Commission derived this estimated burden from the 

following: [((Attorney at 1,400 hours) + 

(Compliance Manager at 1,600 hours) + 

(Programmer Analyst at 4,000 hours) + (Senior 

Business Analyst at 1,400 hours)) × (10 registered 

SDRs)] = 84,000 burden hours, which corresponds 

to 8,400 hours per registered SDR. 

220See SDR Registration Proposing Release, supra 

note 6 for the total ongoing annual burdens 

associated with operating and maintaining SDR 

technology systems. The Commission derived this 

estimated burden from the following: [((Attorney at 

840 hours) + (Compliance Manager at 960 hours) + 

(Programmer Analyst at 2,400 hours) + (Senior 

Business Analyst at 840 hours)) × (10 registered 

SDRs)] = 50,400 burden hours, which corresponds 

to 5,040 hours per registered SDR. 

221These estimates are based on the following: 

[(84,000 one-time burden hours) + (50,400 annual 

burden hours)] = 134,400 burden hours, which 

corresponds to 13,440 hours per registered SDR; 

[($20 million one-time dollar cost burden) + ([$12] 

million annual dollar cost burden) = $32 million 

cost burden, which corresponds to $3.2 million per 

registered SDR. 

222See SDR Registration Proposing Release, supra 

note 6. 

clearly identifying the source for each 

trade side and the pairing method (if 

any) for each transaction in order to 

identify the level of quality of the 

transaction data; and (iv) promptly 

record the transaction data it receives. 

The SDR Registration Proposing Release 

describes the relevant burdens and costs 

that complying with proposed Rule 

13n–5(b)(1) would entail. 

The Commission preliminarily 

believes that a registered SDR would be 

able to integrate the capability to 

publicly disseminate real-time SBS 

transaction reports required under 

proposed Rule 902 as part of its overall 

system development for transaction 

data. Accordingly, the Commission 

believes that the burdens associated 

with enabling and maintaining 

compliance with proposed Rule 902 

would, as a practical matter, represent a 

portion of a registered SDR’s overall 

systems development budget and 

process. Based on discussions with 

industry participants, the Commission 

preliminarily estimates that to 

implement and comply with the realtime public dissemination requirement 

of proposed Rule 902, each registered 

SDR would incur a burden equal to an 

additional 20% of the first-year and 

ongoing burdens discussed in the SDR 

Registration Proposing Release.218

On this basis, the Commission 

preliminarily estimates that the initial 

one-time aggregate burden imposed by 

the proposed Rule 902 for development 

and implementation of the systems 

needed to disseminate the required 

transaction information, including the 

necessary software and hardware, 

would be approximately 84,000 hours 

and a dollar cost of $20 million, which 

would correspond to a burden of 8,400 

hours and a dollar cost of $2 million for 

each registered SDR.219 In addition, the 

Commission preliminarily estimates 

that annual aggregate burden (initial and 

ongoing) imposed by the proposed Rule 

902 would constitute approximately 

50,400 hours and a dollar cost of $12 

million, which would correspond to a 

burden of 5,040 hours and a dollar cost 

of $1.2 million for each registered 

SDR.220 Thus, the Commission 

preliminarily estimates that the total 

first-year (initial) aggregate annualized 

burden on registered SDRs associated 

with real-time public dissemination 

requirement under proposed Rule 902 

would be approximately 134,400 hours 

and a dollar cost of $32 million, which 

would correspond to a burden of 13,440 

hours and a dollar cost of $3.2 million 

for each registered SDR.221

5. Recordkeeping Requirements 

Pursuant to proposed Rule 13n–7(b) 

under the Exchange Act,222 a registered 

SDR would be required to keep and 

preserve at least one copy of all 

documents, including all documents 

and policies and procedures required by 

the Exchange Act and the rules or 

regulations thereunder, for a period of 

not less than five years, the first two 

years in a place that is immediately 

available to the staff of the Commission 

for inspection and examination. This 

requirement would encompass real-time 

SBS transaction reports disseminated by 

the registered SDR. Accordingly, SBS 

transaction reports disseminated by a 

registered SDR pursuant to proposed 

Rule 902 would be required to be 

retained for not less than five years. 

6. Collection of Information Is 

Mandatory 

Each collection of information 

discussed above would be a mandatory 

collection of information. 

7. Confidentiality of Responses to 

Collection of Information 

Information collected pursuant to 

proposed Rule 902 would be widely 

available to the extent that it is 

incorporated into SBS transaction 

reports that are publicly disseminated 

by a registered SDR pursuant to 

proposed Rules 902(a) and (b). However, 

a registered SDR would be under an 

obligation to maintain the 

confidentiality of any information that 

is not subject to public dissemination. 

To the extent that the Commission 

receives confidential information 

pursuant to this collection of 

information, such information would be 

kept confidential, subject to the 

provisions of the Freedom of 

Information Act. 

8. Request for Comment 

The Commission requests public 

comment on its burden estimates. The 

Commission also solicits comment as 

follows: 

209. Is the proposed collection of 

information necessary for the 

performance of the functions of the 

agency? Would the information have 

practical utility? 

210. How accurate are the 

Commission’s preliminary estimates of 

the burdens of the proposed collection 

of information associated with proposed 

Rule 902? In particular, how many 

entities would incur collection of 

information burdens pursuant to 

proposed Rule 902? 

211. Would registered SDRs incur any 

initial burdens associated with systems 

design, programming, expanding 

systems capacity, and establishing 

compliance programs pursuant to 

proposed Rule 902? 

212. Would there be different or 

additional burdens associated with the 

collection of information under 

proposed Rule 902 that a registered SDR 

would not undertake in the ordinary 

course of business? 

213. Are there additional burdens that 

the Commission has not addressed in its 

preliminary burden estimates? 

214. Can you suggest any ways to 

enhance the quality, utility, and clarity 

of the information to be collected? 

215. Can you suggest any ways to 

minimize the burden of collection of 

information on those who would be 

required to respond, including through 

the use of automated collection 

techniques or other forms of information 

technology? 

D. Coded Information—Rule 903 of 

Regulation SBSR 

The Commission does not believe that 

proposed Rule 903 would be a 

‘‘collection of information’’ within the 

meaning of the PRA because the rule 

would merely permit reporting parties 

and registered SDRs to use codes in 

place of certain data elements, subject to 


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Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 75253 

223See proposed Rule 904(c). 

224See proposed Rule 904(e). 

225See SDR Registration Proposing Release, supra 

note 6. 

226The requirement in proposed Rule 904(e) for 

the participants to report information to the 

registered SDR upon receiving a notice that the 

registered SDR resumed its normal operations is 

already part of the participant’s reporting 

obligations under proposed Rule 901 and is already 

contained in the burden estimate for the proposed 

Rule 901. 

227This figure is based on the Commission’s 

experience as follows: [(Operations Specialist at 3 

hours/month) × (12 months/year) × (10 registered 

SDRs)] = 360 burden hours. 

228See SDR Registration Proposing Release, supra 

note 6. 

229See id., proposed Rule 13n–7(b) under the 

Exchange Act. 

certain conditions. The rule would offer 

subject entities greater flexibility in 

meeting the obligations specified 

elsewhere in proposed Regulation SBSR 

related to the reporting of SBS 

transactions. 

E. Operating Hours of Registered 

Security-Based Swap Data 

Repositories—Rule 904 of Regulation 

SBSR 

Certain provisions of proposed Rule 

904 contain ‘‘collection of information 

requirements’’ within the meaning of the 

PRA. The title of this collection is ‘‘Rule 

904—Operating Hours of Registered 

Security-Based Swap Data Repositories.’’ 

1. Summary of Collection of Information 

Proposed Rule 904 would require a 

registered SDR to operate continuously, 

subject to two exceptions. First, a 

registered SDR could establish normal 

closing hours during periods when, in 

its estimation, the U.S. market and 

major foreign markets are inactive. A 

registered SDR would be required to 

provide reasonable advance notice to 

participants and to the public of its 

normal closing hours. Second, a 

registered SDR could declare, on an ad 

hoc basis, special closing hours to 

perform system maintenance that 

cannot wait until normal closing hours. 

A registered SDR would, to the extent 

reasonably possible under the 

circumstances, be required to avoid 

scheduling special closing hours during 

when, in its estimation, the U.S. market 

and major foreign markets are most 

active; and provide reasonable advance 

notice of its special closing hours to 

participants and to the public. 

Paragraphs (c) and (e) of proposed 

Rule 904 would specify requirements 

for handling and disseminating reported 

data during a registered SDR’s normal 

and special closing hours. First, during 

normal closing hours and, to the extent 

reasonably practicable, during special 

closing hours, a registered SDR would 

be required to have the capability to 

receive and hold in queue transaction 

data it receives.223 Second, if a 

registered SDR could not hold in queue 

transaction data to be reported, it would 

be required, immediately upon 

resuming normal operations, to send a 

notice to all participants that it has 

resumed normal operations and to 

immediately disseminate the transaction 

data required to be reported under 

proposed Rule 901(c) and received from 

the participants following the notice.224

Two of the requirements contained in 

Rule 904 constitute requirements 

already contained in other proposed 

rules. First, the requirement in Rule 

904(d) that, immediately upon system 

re-opening, a registered SDR would be 

required to publicly disseminate any 

transaction data required to be reported 

under proposed Rule 901(c) and held in 

queue, is also contained in the proposed 

Rule 902(a). Second, the requirement in 

proposed Rule 904(e) that, if a reporting 

party that has an obligation to report 

transaction data could not to do so 

because a registered SDR’s system was 

unavailable, it would be required to 

submit that information immediately 

after it receives a notice that it is 

possible to do so, is already implicitly 

contained in proposed Rule 901. 

2. Proposed Use of Information 

The information that would be 

provided pursuant to proposed Rule 904 

is necessary to allow participants and 

the public to know the normal and 

special closing hours of the registered 

SDR, and to allow participants to take 

appropriate action in the event that the 

registered SDR cannot accept SBS 

transaction reports from participants. 

3. Respondents 

Proposed Rule 904 would apply to all 

registered SDRs. As noted above, the 

Commission preliminarily estimates 

that there would be ten registered SDRs. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

The Commission preliminarily 

estimates that that the one-time, initial 

burden, as well as ongoing annualized 

burden for each registered SDR 

associated with proposed Rule 904 

would be minimal, because registered 

SDRs would already have undertaken 

necessary steps in compliance with 

other proposed rules. First, 

simultaneously with this proposal, the 

Commission is proposing the SDR 

Registration Proposed Rules, including 

proposed Rules 13n–1 through 240– 

13n–11.225 The SDR Registration 

Proposed Rules cover collections of 

information with respect to various 

aspects of establishing and operating a 

registered SDR, including, implicitly, its 

hours of operation.226

The Commission preliminarily 

believes that the requirements for a 

registered SDR to provide reasonable 

advance notice to participants and to 

the public of its normal and special 

closing hours, as well as to provide a 

notice to participants that it is possible 

to report transaction data to a registered 

SDR after its system was unavailable, 

would entail a minor burden. On this 

basis, the Commission preliminarily 

estimates that the annual aggregate 

burden (first-year and ongoing) imposed 

by proposed Rule 904 would be 360 

hours, which corresponds to 36 hours 

per registered SDR.227

5. Recordkeeping Requirements 

Concurrently with proposed 

Regulation SBSR, the Commission is 

proposing the SDR Registration 

Proposed Rules.228 Proposed Rule 13n– 

7(b) would require a registered SDR to 

keep and preserve at least one copy of 

all documents, including all documents 

and policies and procedures required by 

the Exchange Act and the rules or 

regulations thereunder, for a period of 

not less than five years, the first two 

years in a place that is immediately 

available to the staff of the Commission 

for inspection and examination.229 This 

requirement would encompass notices 

issued by a registered SDR to 

participants under proposed Rule 904. 

6. Collection of Information is 

Mandatory 

Each collection of information 

discussed above would be a mandatory 

collection of information. 

7. Confidentiality of Responses to 

Collection of Information 

The Commission anticipates that any 

notices issued by a registered SDR to its 

participants would be publicly 

available. 

8. Request for Comment 

The Commission requests public 

comment on its burden estimates. The 

Commission also solicits comment as 

follows: 

216. Is the proposed collection of 

information necessary for the 

performance of the functions of the 

agency? Would the information have 

practical utility? 

217. How accurate are the 

Commission’s preliminary estimates of 

the burdens of the proposed collection 

of information associated with proposed 

Rule 904? In particular, how many 


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75254 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

230The Commission preliminarily believes that 

the actual submission of amended transaction 

reports required under proposed Rule 905(a)(2) 

would not result in a material burden because this 

would be done electronically though the reporting 

system that the reporting party must develop and 

maintain to comply with proposed Rule 901. The 

burdens associated with such a reporting system are 

addressed in the Commission’s analysis of proposed 

Rule 901. See supra Section XIII.B.4.a and notes 

193–195. 

231See supra notes 194 and 198. 

232See supra notes 201 and 202. 

233This figure is calculated as follows: [(((172 

burden hours one-time development of reporting 

system) × (0.05)) + ((80 burden hours annual 

maintenance of reporting system) × (0.05)) + ((180 

entities would incur collection of 

information burdens pursuant to 

proposed Rule 904? 

218. Would the burdens imposed 

under proposed Rule 904 be different or 

additional to those that a registered SDR 

would undertake in the ordinary course 

of business? 

219. Are there additional burdens that 

the Commission has not addressed in its 

preliminary burden estimates? 

220. Can you suggest any ways to 

enhance the quality, utility, and clarity 

of the information to be collected? 

221. Can you suggest any ways to 

minimize the burden of collection of 

information on those who would be 

required to respond, including through 

the use of automated collection 

techniques or other forms of information 

technology? 

F. Correction of Errors in Security-Based 

Swap Information—Rule 905 of 

Regulation SBSR 

Certain provisions of proposed Rule 

905 of Regulation SBSR contain 

‘‘collection of information requirements’’ 

within the meaning of the PRA. The title 

of this collection is ‘‘Rule 905— 

Correction of Errors in Security-Based 

Swap Information.’’ 

1. Summary of Collection of Information 

Proposed Rule 905 would establish 

duties for SBS counterparties and 

registered SDRs to correct errors in 

information that previously has been 

reported. 

Counterparty Reporting Error. Under 

proposed Rule 905(a)(1), where a 

counterparty that was not the reporting 

party for a SBS discovers an error in the 

information reported with respect to 

such SBS, the counterparty shall 

promptly notify the reporting party of 

the error. Under proposed Rule 

905(a)(2), where a reporting party for a 

SBS transaction discovers an error in 

the information reported with respect to 

a SBS, or receives notification from its 

counterparty of an error, the reporting 

party shall promptly submit to the 

entity to which the SBS was originally 

reported an amended report pertaining 

to the original transaction report. The 

reporting party would submit an 

amended report to the registered SDR in 

a manner consistent with the policies 

and procedures of the registered SDR 

required pursuant to proposed Rule 

907(a)(3). 

Duty of Registered SDR to Correct. 

Proposed Rule 905(b) would set forth 

the duties of a registered SDR relating to 

corrections. If the registered SDR either 

discovers an error in a transaction on its 

system or receives notice of an error 

from a counterparty, proposed Rule 

905(b)(1) would require the registered 

SDR to verify the accuracy of the terms 

of the SBS and, following such 

verification, promptly correct the 

erroneous information contained in its 

system. Proposed Rule 905(b)(2) would 

further require that, if the erroneous 

transaction information contained any 

data that fall into the categories 

enumerated in proposed Rule 901(c) as 

information required to be reported in 

real time, the registered SDR would be 

required to publicly disseminate a 

corrected transaction report of the SBS 

promptly following verification of the 

SBS by the counterparties to the SBS, 

with an indication that the report relates 

to a previously disseminated 

transaction. 

2. Proposed Use of Information 

The SBS transaction information 

required to be reported pursuant to 

proposed Rule 905 would be used by 

registered SDRs, participants, the 

Commission, and other regulators. 

Participants would be able to use such 

information to evaluate and manage 

their own risk positions and satisfy their 

duties to report corrected information to 

a registered SDR. A registered SDR 

would need the required information to 

correct its own records, in order to 

maintain an accurate record of a 

participant’s positions as well as to 

disseminate corrected information. The 

Commission and other regulators would 

need the corrected information to have 

an accurate understanding of the market 

for surveillance and oversight purposes. 

3. Respondents 

Proposed Rule 905 would apply to 

participants of a registered SDR. As 

noted above, the Commission has 

estimated that there may be 1,000 

entities regularly engaged in the CDS 

marketplace. In addition, the 

Commission estimates that there may be 

up to 4,000 SBS counterparties that 

transact SBSs much less frequently. The 

Commission preliminarily believes that 

these SBS counterparties would not be 

reporting parties. However, these 

additional 4,000 counterparties would 

be ‘‘participants’’ as defined by proposed 

Rule 900. Accordingly, with respect to 

burdens applicable to all SBS 

counterparties, the Commission 

preliminarily believes that it is 

reasonable to use the estimate of 5,000 

respondents for purposes of estimating 

collection of information burdens under 

the PRA. 

Proposed Rule 905 also would apply 

to registered SDRs. As noted above, the 

Commission preliminarily estimates 

there would be ten registered SDRs. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

The Commission preliminarily 

believes that promptly submitting an 

amended transaction report to the 

appropriate registered SDR after 

discovery of an error as required under 

proposed Rule 905(a)(2) would impose 

a burden on reporting parties. Likewise, 

the Commission preliminarily believes 

that promptly notifying the relevant 

reporting party after discovery of an 

error as required under proposed Rule 

905(a)(1) would impose a burden on 

non-reporting-party participants. 

With respect to reporting parties, the 

Commission preliminarily believes that 

proposed Rule 905(a) would impose an 

initial, one-time burden associated with 

designing and building the reporting 

party’s reporting system to be capable of 

submitting amended SBS transactions to 

a registered SDR. In addition, reporting 

parties would be required to support 

and maintain the error reporting 

function.230

The Commission preliminarily 

believes that designing and building 

appropriate reporting system 

functionality to comply with proposed 

Rule 905(a)(2) would be a component of, 

and represent an incremental ‘‘add-on’’ 

to, the cost to build a reporting system 

and develop a compliance function as 

required under proposed Rule 901. 

Based on discussions with industry 

participants, the Commission 

preliminarily estimates this incremental 

burden to be equal to 5% of the onetime and annual burdens associated 

with designing and building a reporting 

system that is in compliance with 

proposed Rule 901,231 plus 10% of the 

corresponding one-time and annual 

burdens associated with developing the 

reporting party’s overall compliance 

program required under proposed Rule 

901.232 Thus, for reporting parties, the 

Commission preliminarily estimates 

that proposed Rule 905(a) would impose 

an initial (first-year) aggregate burden of 

52,400 hours, which is 52.4 burden 

hours per reporting party,233 and an 


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burden hours one-time compliance program 

development) × (0.1)) + ((218 burden hours annual 

support of compliance program) × (0.1))) × (1,000 

reporting parties)] = 52,400 burden hours, which is 

52.4 burden hours per reporting party. 234This figure is calculated as follows: [(((80 

burden hours annual maintenance of reporting 

system) × (0.05)) + ((218 burden hours annual 

support of compliance program) × (0.1))) × (1,000 

reporting parties)] = 25,800 burden hours, which is 

25.8 burden hours per reporting party. 

235This figure is based on the following: [(4 error 

notifications per non-reporting-party participant per 

day) × (365 days/year) × (Compliance Clerk at 0.5 

hours/report) × (4,000 non-reporting-party 

participants)] = 2,920,000 burden hours, which 

corresponds to 730 burden hours per non-reportingparty participant. The Commission preliminarily 

believes that participants already monitor their SBS 

transactions and positions in the ordinary course of 

business. Thus, the Commission preliminarily 

believes that, as a practical matter, proposed Rule 

905 would not result in any significant new 

burdens for these participants. 

236This figure is based on the following: 

[((15,458,824 estimated annual SBS transactions)/ 

(4,000 estimated non-reporting-party participants))/ 

(365 days/year)] = 10.58, or approximately 11 

transactions per day. See supra note 185. The 

Commission understands that many of these 

transactions may arise from previously executed 

SBS transactions. 

237 In other words, the Commission is estimating 

that one-third of all SBS transactions will require 

an amended report to be submitted to the registered 

SDR pursuant to proposed Rule 905(a). For 

purposes of its PRA analysis, the Commission is 

further assuming that the both the non-reportingparty participant and the reporting party discover 

all errors. The Commission recognizes that, as a 

practical matter, there may be instances where one 

party fails to detect an error. 

238See supra note 6. 239This figure is based on the following: [(Sr. 

Programmer at 80 hours) + (Compliance Manager at 

160 hours) + (Compliance Attorney at 250 hours) 

+ (Compliance Clerk at 120 hours) + (Sr. System 

Analyst at 80 hours) + (Director of Compliance at 

40 hours)] = 730 burden hours. 

240This figure is based on the following: [(Sr. 

Programmer at 160 hours) + (Compliance Manager 

at 320 hours) + (Compliance Attorney at 500 hours) 

+ (Compliance Clerk at 240 hours) + (Sr. System 

Analyst at 160 hours) + (Director of Compliance at 

80 hours)] = 1,460 burden hours. 

241This figure is based on the following: [(730 

burden hours to develop protocols) + (1,460 burden 

hours annual support)) × (10 registered SDRs)] = 

21,900 burden hours, which corresponds to 2,190 

burden hours per registered SDR. 

242This figure is based on the following: [(1,460 

burden hours annual support) × (10 registered 

SDRs)] = 14,600 burden hours, which corresponds 

to 1,460 burden hours per registered SDR. 

243See SDR Registration Proposing Release, supra 

note 6. 244See id. 245See SDR Registration Proposing Release, supra 

note 6. 

ongoing aggregate annualized burden of 

25,800 hours, which is 25.8 burden 

hours per reporting party.234

With regard to non-reporting-party 

participants, the Commission 

preliminarily believes that proposed 

Rule 905(a) would impose an initial and 

ongoing burden associated with 

promptly notifying the relevant 

reporting party after discovery of an 

error as required under proposed Rule 

905(a)(1). The Commission 

preliminarily estimates that the annual 

burden would be 2,920,000 hours, 

which corresponds to 730 burden hours 

per non-reporting-party participant.235

This figure is based on the 

Commission’s preliminary estimates of 

(1) 4,000 non-reporting-party 

participants; (2) 11 transactions per day 

per non-reporting-party participant; 236

and (3) an error rate of one-third 

(33%),237 or approximately 4 

transactions per day per non-reportingparty participant. 

Proposed Rule 905(b) would require a 

registered SDR to develop protocols 

regarding the reporting and correction of 

erroneous information. The Commission 

preliminarily believes, however, that 

this duty would represent only a minor 

extension of other duties for which the 

Commission is estimating burdens, and 

consequently, would not impose 

substantial additional burdens on a 

registered SDR. A registered SDR would 

be required to have the ability to collect 

and maintain SBS transaction reports 

and update relevant records under the 

SDR Registration Proposing Release.238

Likewise, a registered SDR would have 

the capacity to disseminate additional, 

corrected SBS transaction reports under 

proposed Rule 902. The Commission 

preliminarily believes that the burdens 

associated with proposed Rule 905— 

including systems development, 

support, and maintenance—are 

addressed in the Commission’s analysis 

of those other rules. Thus, the 

Commission preliminarily believes that 

proposed Rule 905(b) would impose 

only an incremental additional burden 

on registered SDRs. The Commission 

preliminarily estimates that to develop 

and publicly provide the necessary 

protocols would impose on each 

registered SDR an initial one-time 

burden of approximately 730 burden 

hours.239 The Commission estimates 

that to review and update such 

protocols on an ongoing basis would 

impose an annual burden on each SDR 

of approximately 1,460 burden hours.240

Accordingly, the Commission 

preliminarily estimates that the initial 

(first-year) aggregate annualized burden 

on registered SDRs under proposed Rule 

905 would be 21,900 burden hours, 

which corresponds to 2,190 burden 

hours for each registered SDR.241 The 

Commission further preliminarily 

estimates that the ongoing aggregate 

annualized burden on registered SDRs 

under proposed Rule 905 would be 

14,600 burden hours, which 

corresponds to 1,460 burden hours for 

each registered SDR.242

5. Recordkeeping Requirements 

Concurrently with proposed 

Regulation SBSR, the Commission is 

proposing the SDR Registration 

Proposed Rules, which would include 

recordkeeping requirements for SBS 

transaction data received by a registered 

SDR pursuant to proposed Regulation 

SBSR.243 Specifically, proposed Rule 

13n–5(b)(5) under the Exchange Act 

would require a registered SDR to 

maintain the transaction data for not 

less than five years after the applicable 

SBS expires and historical positions and 

historical market values for not less than 

five years. Accordingly, SBS transaction 

reports received by a registered SDR 

pursuant to proposed Rule 905 would 

be required to be retained for not less 

than five years. 

With respect to information 

disseminated by a registered SDR in 

compliance with proposed Rule 

905(b)(2), proposed Rule 13n–7(b) under 

the Exchange Act would require a 

registered SDR to keep and preserve at 

least one copy of all documents, 

including all policies and procedures 

required by the Exchange Act and the 

rules or regulations thereunder for a 

period of not less than five years, the 

first two years in a place that is 

immediately available to the staff of the 

Commission for inspection and 

examination.244 This requirement 

would encompass amended real-time 

SBS transaction reports disseminated by 

the registered SDR. Accordingly, SBS 

transaction reports disseminated by a 

registered SDR pursuant to proposed 

Rule 905(b)(2) would be required to be 

retained for not less than five years. 

6. Collection of Information Is 

Mandatory 

Each collection of information 

discussed above would be a mandatory 

collection of information. 

7. Confidentiality of Responses to 

Collection of Information 

Information collected pursuant to 

proposed Rule 905 would be widely 

available to the extent that it corrects 

information previously reported 

pursuant to proposed Rule 901(c) and 

incorporated into SBS transaction 

reports that are publicly disseminated 

by a registered SDR pursuant to 

proposed Rule 902. Generally, however, 

a registered SDR would be under an 

obligation to maintain the 

confidentiality of any information 

collected pursuant to proposed Rule 

901, pursuant to Sections 13(n)(5) of the 

Exchange Act and proposed Rule 13n– 

9 thereunder.245 To the extent that the 

Commission receives confidential 

information pursuant this collection of 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
75256 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

246The Commission has derived the total 

estimated burdens based on the following estimates, 

which are based on the information provided to the 

Commission: (Senior Systems Analyst at 40 hours) 

+ (Sr. Programmer at 40 hours) + (Compliance 

Manager at 16 hours) + (Director of Compliance at 

8 hours) + (Compliance Attorney at 8 hours) = 112 

burden hours. 

247The Commission has derived the total 

estimated burdens based on the following estimates, 

which are based on the information provided to the 

Commission: (Senior Systems Analyst at 24 hours) 

+ (Sr. Programmer at 24 hours) + (Compliance Clerk 

at 260 hours) = 308 burden hours. 

information, such information would be 

kept confidential, subject to the 

provisions of the Freedom of 

Information Act. 

8. Request for Comment 

The Commission requests public 

comment on its burden estimates. The 

Commission also solicits comment as 

follows: 

222. Is the proposed collection of 

information necessary for the 

performance of the functions of the 

agency? Would the information have 

practical utility? 

223. How accurate are the 

Commission’s preliminary estimates of 

the burdens of the proposed collection 

of information associated with proposed 

Rule 905? In particular, how many 

entities would incur collection of 

information burdens pursuant to 

proposed Rule 905? 

224. Would covered entities incur any 

initial burdens associated with systems 

design, programming, expanding 

systems capacity, and establishing 

compliance programs pursuant to 

proposed Rule 905? 

225. What entities may be subject to 

proposed Rule 905? In what ways would 

these entities be impacted? Would any 

such entity or class of entities be 

impacted differently than others? 

226. How many entities might be 

impacted by proposed Rule 905? Are the 

Commission’s preliminary estimates as 

to the number of participants in the SBS 

market that would be required to report 

and retain information pursuant to the 

proposed rule accurate? 

227. Are there additional burdens that 

the Commission has not addressed in its 

preliminary burden estimates? 

228. Can you suggest any ways to 

enhance the quality, utility, and clarity 

of the information to be collected? 

229. Can you suggest any ways to 

minimize the burden of collection of 

information on those who would be 

required to respond, including through 

the use of automated collection 

techniques or other forms of information 

technology? 

G. Other Duties of Participants—Rule 

906 of Regulation SBSR 

Certain provisions of proposed Rule 

906 of Regulation SBSR contain 

‘‘collection of information requirements’’ 

within the meaning of the PRA. The title 

of this collection is ‘‘Rule 906—Duties of 

All Participants.’’ 

1. Summary of Collection of Information 

Proposed Rule 906(a) would set forth 

a procedure designed to ensure that a 

registered SDR obtains relevant ID 

information for both counterparties to a 

SBS, not just the IDs of the reporting 

party. Proposed Rule 906(a) would 

require a registered SDR to identify any 

SBS reported to it for which it does not 

have participant ID and (if applicable) 

broker ID, desk ID, and trader ID of each 

counterparty. Proposed Rule 906(a) 

would further require the registered 

SDR, once a day, to send a report to 

each participant identifying, for each 

SBS to which that participant is a 

counterparty, the SBS(s) for which the 

registered SDR lacks participant ID and 

(if applicable) broker ID, desk ID, and 

trader ID. Additionally, under proposed 

Rule 906(a), a participant that receives 

such a report would be required to 

provide the missing ID information to 

the registered SDR within 24 hours. 

Proposed Rule 906(b) would require a 

participant to provide a registered SDR 

with information identifying the 

participant’s ultimate parent(s) and 

affiliate(s) that may also be participants 

of the registered SDR. Additionally, 

under proposed Rule 906(b), the 

participant would be required to 

promptly notify the registered SDR of 

any changes to the information 

provided. 

Proposed Rule 906(c) would require 

each participant that is a SBS dealer or 

major SBS participant to establish, 

maintain, and enforce written policies 

and procedures that are reasonably 

designed to ensure compliance with any 

SBS transaction reporting obligations in 

a manner consistent with proposed 

Regulation SBSR and the registered 

SDR’s applicable policies and 

procedures. In addition, proposed Rule 

906(c) would require each such 

participant to review and update its 

policies and procedures at least 

annually. 

2. Proposed Use of Information 

The information required to be 

provided by participants pursuant to 

proposed Rule 906(a) would complete 

missing elements of SBS transaction 

reports so that the registered SDR would 

have, and could make available to 

regulators, accurate and complete 

records for reported SBS. 

Similarly, proposed Rule 906(b) 

would be used to ensure that the 

registered SDR would have, and could 

make available to regulators, accurate 

and complete records for reported SBS 

regarding participant parents and 

affiliates. The Commission would use 

this information in its ongoing efforts to 

monitor and enforce compliance with 

the federal securities laws, including 

proposed Regulation SBSR. 

The policies and procedures required 

under proposed Rule 906(c) would be 

used by participants to aid in their 

compliance with proposed Regulation 

SBSR, and also used by the Commission 

as part of its ongoing efforts to monitor 

and enforce compliance with the federal 

securities laws, including proposed 

Regulation SBSR. 

3. Respondents 

Proposed Rules 906(a) and (b) would 

apply to all participants of registered 

SDRs. Based on the information 

currently available to the Commission, 

the Commission preliminarily estimates 

that there may be up to 5,000 

participants. Proposed Rule 906(c) 

would apply to participants that are SBS 

dealers or major SBS participants. The 

Commission believes that such entities 

would constitute the majority of 

reporting parties, so that it is reasonable 

to use the figure of 1,000 respondents 

for purposes of estimating collection of 

information burdens under the PRA. 

Proposed Rule 906 also imposes 

certain duties on registered SDRs. As 

noted above, the Commission is 

preliminarily estimating that there 

would be ten registered SDRs. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

Proposed Rule 906(a) would require a 

registered SDR, once a day, to send a 

report to each participant identifying, 

for each SBS to which that participant 

is a counterparty, the SBS(s) for which 

the registered SDR lacks participant ID 

and (if applicable) broker ID, desk ID, 

and trader ID. The Commission 

preliminarily estimates that there would 

be a one-time, initial burden of 112 

burden hours for a registered SDR to 

create a report template and develop the 

necessary systems and processes to 

produce a daily report required by 

proposed Rule 906(a).246 Further, the 

Commission preliminarily estimates 

that there would be an ongoing 

annualized burden of 308 burden hours 

for a registered SDR to generate and 

issue the daily reports, and to enter into 

its systems the ID information supplied 

by participants in response to the daily 

reports.247

Accordingly, the Commission 

preliminarily estimates that the initial 


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248The Commission derived its estimate from the 

following: [(112 + 308 burden hours) × (10 

registered SDRs)] = 4,200 burden hours, which 

corresponds to 420 burden hours per registered 

SDR. 

249The Commission derived its estimate from the 

following: [(308 burden hours) × (10 registered 

SDRs)] = 3,080 burden hours, which corresponds to 

308 burden hours per registered SDR. 

250This figure is based on the following: [(7 

missing information reports per non-reporting-party 

participant per day) × (365 days/year) × 

(Compliance Clerk at 0.1 hours/report) × (5,000 

participants)] = 1,277,500 burden hours, which 

corresponds to 255.5 burden hours per participant. 

251This figure is based on the following: 

[((15,458,824 estimated annual SBS transactions)/ 

5,000 estimated participants))/(365 days/year)] = 

8.47, or approximately 9 transactions per day. See 

supra note 185. The Commission understands that 

many of these transactions may arise from 

previously executed SBS transactions. 

252 In other words, the Commission is estimating 

that 80% of the time the reporting party would not 

know and thus would not be able to report the 

necessary UICs of its counterparty. Therefore, a 

registered SDR would have to obtain the missing 

UICs through the process described in proposed 

Rule 906(a). 

253 During the first year, the Commission 

preliminarily estimates each participant would 

submit its initial report and one update report. In 

subsequent years, the Commission preliminarily 

estimates that each participant would submit two 

update reports. 

254This figure is based on the following: 

[(Compliance Clerk at 0.5 hours per report) × (2 

reports/year/SDR connection) × (2 SDR 

connections/participant) × (5,000 participants)] = 

10,000 burden hours, which corresponds to 2 

burden hours per participant. 

255This figure is based on the following: [(Sr. 

Programmer at 40 hours) + (Compliance Manager at 

40 hours) + (Compliance Attorney at 40 hours) + 

(Compliance Clerk at 40 hours) + (Sr. Systems 

Analyst at 32 hours) + (Director of Compliance at 

24 hours)] = 216 burden hours per covered 

participant. 

256See Securities Exchange Act Release Nos. 

62174 (May 26, 2010), 75 FR 32556 (June 8, 2010) 

(proposing Rule 613 of Regulation NMS); 61908 

(April 14, 2010), 75 FR 21456 (proposing large 

trader reporting system). 

257This figure is based on the following: [(Sr. 

Programmer at 8 hours) + (Compliance Manager at 

24 hours) + (Compliance Attorney at 24 hours) + 

(Compliance Clerk at 24 hours) + (Sr. Systems 

Analyst at 16 hours) + (Director of Compliance at 

24 hours)] = 120 burden hours per covered 

participant. 

258This figure is based on the following: [(216 + 

120 burden hours) × (1,000 covered participants)] 

= 336,000 burden hours. 

259This figure is based on the following: [(120 

burden hours) × (1,000 covered participants)] = 

120,000 burden hours. 

260This figure is based on the following: [(4,200 

burden hours for registered SDRs under proposed 

Rule 906(a)) + (1,277,500 burden hours for nonreporting-party participants under proposed Rule 

906(a)) + (10,000 burden hours for participants 

under proposed Rule 906(b)) + (336,000 burden 

hours for covered participants under proposed Rule 

906(c))] = 1,627,700 burden hours. 

261This figure is based on the following: [(3,080 

burden hours for registered SDRs under proposed 

Rule 906(a)) + (1,277,500 burden hours for nonreporting-party participants under proposed Rule 

906(a)) + (10,000 burden hours for participants 

under proposed Rule 906(b)) + (120,000 burden 

hours for covered participants under proposed Rule 

906(c))] = 1,410,580 burden hours. 

262See supra note 6. 

aggregate annualized burden for 

registered SDRs under proposed Rule 

906(a) would be 4,200 burden hours, 

which corresponds to 420 burden hours 

per registered SDR.248 The Commission 

preliminarily estimates that the ongoing 

aggregate annualized burden for 

registered SDRs under proposed Rule 

906(a) would be 3,080 burden hours, 

which corresponds to 308 burden hours 

per registered SDR.249

In addition, proposed Rule 906(a) 

would require any participant that 

receives a daily report from a registered 

SDR to provide the missing UICs to the 

registered SDR within 24 hours. The 

Commission preliminarily estimates 

participants that are reporting parties 

would bear no initial or ongoing 

burdens under proposed Rule 906(a). 

This estimate is based on the 

Commission’s preliminary belief that a 

reporting party would structure its 

reporting program to be in compliance 

with proposed Regulation SBSR, and 

consequently, would send complete 

information as relates to itself for each 

SBS transaction submitted to a 

registered SDR. The Commission further 

preliminarily estimates that the initial 

and ongoing annualized burden under 

proposed Rule 906(a) to participants 

that are not reporting parties would be 

1,277,500 burden hours, which 

corresponds to 255.5 burden hours per 

participant.250 This figure is based on 

the Commission’s preliminary estimates 

of (1) 5,000 participants; (2) 9 

transactions per day per participant; 251

and (3) a missing information rate of 

80%,252 or approximately 7 transactions 

per day per participant. 

Proposed Rule 906(b) would require 

every participant to provide the 

registered SDR an initial parent/affiliate 

report and subsequent reports, as 

needed. The Commission preliminarily 

estimates that each participant would 

submit two reports each year.253 In 

addition, the Commission preliminarily 

estimates that there would be 5,000 

participants and that each one may 

connect to two registered SDRs. 

Accordingly, the Commission 

preliminarily estimates that the initial 

and ongoing aggregate annualized 

burden associated with proposed Rule 

906(b) would be 10,000 burden hours, 

which corresponds to 2 burden hours 

per participant.254

Proposed Rule 906(c) would require 

each participant that is a SBS dealer or 

major SBS participant to establish, 

maintain, and enforce written policies 

and procedures that are reasonably 

designed to ensure compliance with any 

SBS transaction reporting obligations in 

a manner consistent with proposed 

Regulation SBSR and the registered 

SDR’s applicable policies and 

procedures. Proposed Rule 906(c) would 

also require the review and updating of 

such policies and procedures at least 

annually. The Commission preliminary 

estimates that the one-time, initial 

burden for each covered participant to 

adopt written policies and procedures 

as required under proposed Rule 906(c) 

would be approximately 216 burden 

hours.255 Drawing on the Commission’s 

experience with other rules that require 

entities to establish and maintain 

policies and procedures,256 this figure is 

based on the estimated number of hours 

to develop a set of written policies and 

procedures, program systems, 

implement internal controls and 

oversight, train relevant employees, and 

perform necessary testing. 

In addition, the Commission 

preliminarily estimates the burden of 

maintaining such policies and 

procedures, including a full review at 

least annually, as required by proposed 

Rule 906(c), would be approximately 

120 burden hours for each covered 

participant.257 This figure includes an 

estimate of hours related to reviewing 

existing policies and procedures, 

making necessary updates, conducting 

ongoing training, maintaining internal 

controls systems, and performing 

necessary testing. Accordingly, the 

Commission preliminarily estimates 

that the initial aggregate annualized 

burden associated with proposed Rule 

906(c) would be 336,000 burden hours, 

which corresponds to 336 burden hours 

per covered participant.258 The 

Commission preliminarily estimates 

that the ongoing aggregate annualized 

burden associated with proposed Rule 

906(c) would be 120,000 burden hours, 

which corresponds to 120 burden hours 

per covered participant.259

Therefore, the Commission 

preliminarily estimates that the initial 

aggregate annualized burden associated 

with proposed Rule 906 would be 

1,518,200 burden hours,260 and the 

ongoing aggregate annualized burden 

would be 1,301,080 burden hours for all 

covered entities.261

5. Recordkeeping Requirements 

Concurrently with proposed 

Regulation SBSR, the Commission is 

issuing the SDR Registration Proposing 

Release, which would include 

recordkeeping requirements for SBS 

transaction data received by a registered 

SDR pursuant to proposed Regulation 

SBSR.262 Specifically, proposed Rule 

13n–5(b)(5) under the Exchange Act 

would require a registered SDR to 


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263See id. 

maintain the transaction data for not 

less than five years after the applicable 

SBS expires and historical positions and 

historical market values for not less than 

five years. 

With regard to other information that 

a registered SDR may receive from 

participants pursuant to proposed Rule 

906, proposed Rule 13n–7(b) would 

require a registered SDR to keep and 

preserve at least one copy of all 

documents, including all documents 

and policies and procedures required by 

the Exchange Act and the rules or 

regulations thereunder for a period of 

not less than five years, the first two 

years in a place that is immediately 

available to the staff of the Commission 

for inspection and examination.263 This 

requirement would encompass materials 

received by a registered SDR from 

participants pursuant to proposed Rule 

906. 

6. Collection of Information Is 

Mandatory 

Each collection of information 

discussed above would be a mandatory 

collection of information. 

7. Confidentiality of Responses to 

Collection of Information 

A registered SDR would be under an 

obligation to maintain the 

confidentiality of any information 

collected pursuant to proposed Rule 

906. To the extent that the Commission 

receives confidential information 

pursuant this collection of information, 

such information would be kept 

confidential, subject to the provisions of 

the Freedom of Information Act. 

8. Request for Comment 

The Commission requests public 

comment on its burden estimates. The 

Commission also solicits comment as 

follows: 

230. Is the proposed collection of 

information necessary for the 

performance of the functions of the 

agency? Would the information have 

practical utility? 

231. In what ways would entities 

covered by Rule 906 be impacted? 

Would any such entity or class of 

entities be impacted differently than 

others? 

232. What would be the burdens on 

participants to provide to a registered 

SDR and keep updated information 

about their ultimate parents and 

affiliates that are also participants? 

233. How many entities might be 

impacted by proposed Rule 906? Are the 

Commission’s preliminary estimates as 

to the number of participants in the SBS 

market that would be required to report 

and retain information pursuant to the 

proposed rule accurate? 

234. Can you suggest any ways to 

enhance the quality, utility, and clarity 

of the information to be collected? 

235. Can you suggest any ways to 

minimize the burden of collection of 

information on those who would be 

required to respond, including through 

the use of automated collection 

techniques or other forms of information 

technology? 

236. Would proposed Rule 906 create 

any additional burdens not discussed 

here? If so, please identify and quantify 

these burdens. 

H. Policies and Procedures of Registered 

Security-Based Swap Data 

Repositories—Rule 907 of Regulation 

SBSR 

Certain provisions of proposed Rule 

907 of Regulation SBSR contain 

‘‘collection of information requirements’’ 

within the meaning of the PRA. The title 

of this collection is ‘‘Rule 907—Policies 

and Procedures of Registered SecurityBased Swap Data Repositories.’’ The 

Commission is applying for a new OMB 

Control Number for this collection in 

accordance with 44 U.S.C. 3507(j) and 5 

CFR 1320.13. 

1. Summary of Collection of Information 

Proposed Rule 907 would require a 

registered SDR to establish and maintain 

compliance with written policies and 

procedures: (1) That enumerate the 

specific data elements of a SBS or a life 

cycle event that a reporting party would 

report; (2) that specify data formats, 

connectivity requirements, and other 

protocols for submitting information; 

(3) for specifying how reporting parties 

are to report corrections to previously 

submitted information, making 

corrections to information in its records 

that is subsequently discovered to be 

erroneous, and applying an appropriate 

indicator to any transaction report 

required to be disseminated by 

proposed Rule 905(b)(2), which would 

denote that the report relates to a 

previously disseminated transaction; 

(4) describing how reporting parties 

shall report and, consistent with the 

enhancement of price discovery, how 

the registered SDR shall publicly 

disseminate, reports of, and adjustments 

due to, life cycle events; SBS 

transactions that do not involve an 

opportunity to negotiate any material 

terms, other than the counterparty; and 

any other SBS transactions that, in the 

estimation of the registered SDR, do not 

accurately reflect the market; (5) for 

assigning transaction IDs and UICs 

related to its participants; and (6) for 

periodically obtaining from each 

participant information that identifies 

the participant’s ultimate parent(s) and 

any other participant(s) with which the 

counterparty is affiliated, using 

applicable UICs. 

In addition, proposed Rule 907(b)(1) 

would require a registered SDR to 

establish and maintain written policies 

and procedures for calculating and 

publicizing block trade thresholds for 

all SBS instruments reported to the 

registered SDR in accordance with the 

criteria and formula for determining 

block size as specified by the 

Commission. 

Under proposed Rules 907(c) and (d), 

a registered SDR would be required to 

make its policies and procedures 

publicly available on its website, and 

review, and update as necessary, its 

policies and procedures at least 

annually, indicating the date on which 

they were last reviewed. Finally, 

proposed Rule 907(e) would require a 

registered SDR to have the capacity to 

provide to the Commission, upon 

request, information or reports related to 

the timeliness, accuracy, and 

completeness of data reported to it 

pursuant to proposed Regulation SBSR 

and the registered SDR’s policies and 

procedures thereunder. 

2. Proposed Use of Information 

The policies and procedures required 

under proposed Rule 907 would be used 

by registered SDRs to aid in their 

compliance with Regulation SBSR, and 

also used by the Commission as part of 

its ongoing efforts to monitor and 

enforce compliance with the federal 

securities laws, including proposed 

Regulation SBSR. These policies and 

procedures also would be used by 

participants of a registered SDR to 

understand the specific data elements of 

SBS transactions that they must report, 

the specific data formats they would be 

required to use, and for understanding 

what constitutes a block trade in a SBS 

instrument. Furthermore, market 

participants would use the information 

about block trades calculated and 

publicized by a registered SDR to 

understand the block trade thresholds 

for specific SBS instruments, and for 

understanding the registered SDR’s 

dissemination protocols generally. 

Finally, any information or reports 

provided to the Commission pursuant to 

proposed Rule 907(e) would be used by 

the Commission to assess the timeliness, 

accuracy, and completeness of data 

reported pursuant to proposed 

Regulation SBSR and as part of its 

general oversight of the SBS markets. 


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264This figure is based on the following: [(Sr. 

Programmer at 1,667 hours) + (Compliance Manager 

at 3,333 hours) + (Compliance Attorney at 5,000 

hours) + (Compliance Clerk at 2,500 hours) + (Sr. 

System Analyst at 1,667 hours) + (Director of 

Compliance at 833 hours)] = 15,000 burden hours 

per registered SDR. 

265See infra at note 256. 

266This figure includes time necessary to design 

and program systems and implement policies and 

procedures to calculate and publish block trade 

thresholds for all SBS instruments reported to the 

registered SDR, as would be required by proposed 

Rule 907(b). It also includes time necessary to 

design and program systems and implement 

policies and procedures to determine which 

reported trades would not be considered block 

trades. This figure also includes time necessary to 

design and program systems and implement 

policies and procedures to assign certain IDs, as 

would be required by proposed Rule 907(a)(5). 

267This figure is based on the following: [(Sr. 

Programmer at 3,333 hours) + (Compliance Manager 

at 6,667 hours) + (Compliance Attorney at 10,000 

hours) + (Compliance Clerk at 5,000 hours) + (Sr. 

System Analyst at 3,333 hours) + (Director of 

Compliance at 1,667 hours)] = 30,000 burden hours 

per registered SDR. 

268See SDR Registration Proposing Release, supra 

note 6, proposed Rules 13n–5(b)(1)(iii) and 13n– 

5(b)(3) under the Exchange Act. 

269This figure is based on the following: [((15,000 

burden hours per registered SDR) + (30,000 burden 

hours per registered SDR)) × (10 registered SDRs)] 

= 450,000 initial annualized aggregate burden hours 

during the first year. 

270This figure is based on the following: [(Sr. 

Programmer at 3,333 hours) + (Compliance Manager 

at 6,667 hours) + (Compliance Attorney at 10,000 

hours) + (Compliance Clerk at 5,000 hours) + (Sr. 

System Analyst at 3,333 hours) + (Director of 

Compliance at 1,667 hours)] = 30,000 burden hours 

per registered SDR. 

271This figure is based on the following: [(30,000 

burden hours per registered SDR) × (10 registered 

SDRs)] = 300,000 ongoing, annualized aggregate 

burden hours. 

272See SDR Registration Proposing Release, supra 

note 6. 

273See id., proposed Rule 13n–7(b) under the 

Exchange Act. 

3. Respondents 

As noted above, the Commission 

preliminarily estimates that ten 

registered SDRs would be subject to 

proposed Rule 907. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

The Commission preliminarily 

estimates that the one-time, initial 

burden for a registered SDR to adopt 

written policies and procedures as 

required under proposed Rule 907 

would be approximately 15,000 

hours.264 Drawing on the Commission’s 

experience with other rules that require 

entities to establish and maintain 

policies and procedures,265 this figure is 

based on the estimated number of hours 

to develop a set of written policies and 

procedures, program systems, 

implement internal controls and 

oversight, train relevant employees, and 

perform necessary testing.266 In 

addition, the Commission preliminarily 

estimates the annual burden of 

maintaining such policies and 

procedures, including a full review at 

least annually, making available its 

policies and procedures on the 

registered SDR’s website, and compiling 

statistics on non-compliance, as 

required under proposed Rule 907, 

would be approximately 30,000 hours 

for each registered SDR.267 This figure 

includes an estimate of hours related to 

reviewing existing policies and 

procedures, making necessary updates, 

conducting ongoing training, 

maintaining relevant systems and 

internal controls systems, calculating 

and publishing block trade thresholds, 

performing necessary testing, 

monitoring participants, and compiling 

data. 

The Commission preliminarily 

believes that, as part of its core 

functions, a registered SDR would have 

the capacity to provide to the 

Commission, upon request, information 

or reports related to the timeliness, 

accuracy, and completeness of data 

reported to it pursuant to proposed 

Regulation SBSR and the registered 

SDR’s policies and procedures. 

Proposed Rule 13n–5(b) would require a 

registered SDR to establish, maintain, 

and enforce written policies and 

procedures to satisfy itself by reasonable 

means that the transaction data that has 

been submitted to the security-based 

swap data repository is accurate, and 

also to ensure that the transaction data 

and positions that it maintains are 

accurate.268 The Commission 

preliminarily believes that these 

capabilities would enable a registered 

SDR to provide the Commission 

information or reports as may be 

requested pursuant to proposed Rule 

907(e). Thus, the Commission does not 

believe that proposed Rule 907(e) would 

impose any additional burdens on a 

registered SDR. 

Based on the Commission’s 

experience and input from selfregulatory organizations, the 

Commission preliminarily believes that 

a registered SDR would need to hire 15 

full-time staff to fulfill the obligations 

outlined in proposed Rule 907. 

Accordingly, the Commission 

preliminarily estimates that the initial 

annualized burden associated with 

proposed Rule 907 would be 

approximately 45,000 hours per 

registered SDR, which corresponds to an 

initial annualized aggregate burden of 

approximately 450,000 hours.269 The 

Commission preliminarily estimates 

that the ongoing annualized burden 

associated with proposed Rule 907 

would be approximately 30,000 hours 

per registered SDR,270 which 

corresponds to an ongoing annualized 

aggregate burden of approximately 

300,000 hours.271

5. Recordkeeping Requirements 

Concurrently with proposed 

Regulation SBSR, the Commission is 

proposing the SDR Proposed Rules.272

Specifically, proposed Rule 13n–7(b) 

would require a registered SDR to keep 

and preserve at least one copy of all 

documents, including all documents 

and policies and procedures required by 

the Exchange Act and the rules or 

regulations thereunder, for a period of 

not less than five years, the first two 

years in a place that is immediately 

available to the staff of the Commission 

for inspection and examination.273 This 

requirement would encompass policies 

and procedures established by a 

registered SDR pursuant to proposed 

Rule 907. This requirement would also 

encompass any information or reports 

provided to the Commission pursuant to 

proposed Rule 907(e). 

6. Collection of Information Is 

Mandatory 

Each collection of information 

discussed above would be a mandatory 

collection of information. 

7. Confidentiality of Responses to 

Collection of Information 

All of the policies and procedures 

required by proposed Rule 907 would 

have to be made available by a 

registered SDR on its website and would 

not, therefore, be confidential. Any 

information obtained by the 

Commission from a registered SDR 

pursuant to proposed Rule 907(e) 

relating to the timeliness, accuracy, and 

completeness of data reported to the 

registered SDR would be for regulatory 

purposes and would be kept 

confidential. 

8. Request for Comment 

The Commission requests public 

comment on its burden estimates. The 

Commission also solicits comment as 

follows: 

1. Is the proposed collection of 

information necessary for the 

performance of the functions of the 

agency? Would the information have 

practical utility? 

2. How many entities might be 

impacted by proposed Rule 907? Are the 

Commission’s preliminary estimates as 

to the number of registered SDRs that 

would be subject to proposed Rule 907 

accurate? 

3. How accurate are the Commission’s 

preliminary estimates of the burdens of 


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75260 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

274 17 CFR 249.1001. 275 17 CFR 242.609(b). 

276See supra note 6. 277This figure is based on the following: 

[(Compliance Attorney at 150 hours) + (Compliance 

Clerk at 250 hours)] = 400 burden hours per SDR. 

See SDR Registration Proposing Release, supra note 

6 at notes 183 and 234. 278This figure is based on the following: 

[(Compliance Attorney at 37.5 hours) + 

(Compliance Clerk at 62.5 hours) × (10 registrants)] 

= 400 burden hours. 

279See SDR Registration Proposing Release, supra 

note 6. 

the proposed collection of information 

associated with proposed Rule 907? 

4. Can you suggest any ways to 

enhance the quality, utility, and clarity 

of the information to be collected? 

5. Does the Commission’s proposed 

Rule 907 minimize burdens by reserving 

to registered SDRs the flexibility to 

develop and implement tailored policies 

and procedures, or would more 

specificity in the rule text better 

minimize associated burdens? 

6. Can you suggest any ways to 

minimize the burden of collection of 

information on those who would be 

required to respond, including through 

the use of automated collection 

techniques or other forms of information 

technology? 

7. Would proposed Rule 907 create 

any additional burdens not discussed 

here? If so, please identify and quantify 

these burdens. 

I. Jurisdictional Matters—Rule 908 of 

Regulation SBSR 

The Commission preliminarily does 

not believe that proposed Rule 908 

would be a ‘‘collection of information’’ 

within the meaning of the PRA, as the 

rule would merely describe the 

jurisdictional reach of proposed 

Regulation SBSR. The Commission 

requests comment on this preliminary 

assessment of proposed Rule 908. 

Would proposed Rule 908 impose any 

collection of information requirements 

that the Commission has not 

considered? 

J. Registration of Security-Based Swap 

Data Repository as Securities 

Information Processor—Rule 909 of 

Regulation SBSR 

Certain provisions of proposed Rule 

909 contain ‘‘collection of information 

requirements’’ within the meaning of the 

PRA. The title of this collection is ‘‘Rule 

909—Registration of Security-Based 

Swap Data Repository as Securities 

Information Processor.’’ 

1. Summary of Collection of Information 

Proposed Rule 909 would require a 

registered SDR to register with the 

Commission as a SIP. To comply with 

this requirement, a registered SDR 

would need to submit a Form SIP.274 As 

a registered SIP, a registered SDR would 

be required to keep its Form SIP current, 

and submit amendments as required by 

Rule 609(b) of Regulation NMS under 

the Exchange Act.275

2. Proposed Use of Information 

The information required by proposed 

Rule 909 would permit the Commission 

to register a registered SDR as a SIP, and 

to maintain updated information about 

the registered SDR/SIP over time. 

3. Respondents 

The Commission preliminarily 

estimates that there would be ten 

registered SDRs. Thus, the Commission 

preliminarily estimates that ten entities 

would have to register as SIPs as 

required by proposed Rule 909. 

4. Total Initial and Annual Reporting 

and Recordkeeping Burdens 

As described in the SDR Registration 

Proposing Release,276 an entity wishing 

to register with the Commission as a 

registered SDR would have to submit 

proposed Form SDR, which is modeled 

after existing Form SIP. The 

Commission has estimated the burden 

for completing Form SIP to be 400 

hours. Therefore, the Commission also 

has estimated the burden for completing 

proposed Form SDR to be 400 hours 

(specifically, 150 hours of legal 

compliance work and 250 hours of 

clerical compliance work).277 Any entity 

that is required to complete proposed 

Form SDR also would have to complete 

Form SIP. Because of the substantial 

overlap in the forms, much of the 

burden for completing Form SIP would 

be subsumed in completing proposed 

Form SDR. Therefore, the Commission 

preliminarily estimates that, having 

completed a proposed Form SDR, an 

entity would need only one-quarter of 

the time to then complete Form SIP, or 

100 hours (specifically, 37.5 hours of 

legal compliance work and 62.5 hours of 

clerical compliance work). Accordingly, 

the Commission is preliminarily 

estimating that the one-time initial 

registration burden for all registered 

SDR/SIPs would be 1,000 hours.278

With regard to ongoing burdens, the 

Commission preliminarily estimates 

that the aggregate annualized burden for 

providing amendments to Form SIP 

would be one-tenth of the burden to 

complete the initial form or 400 burden 

hours, which corresponds to 40 burden 

hours for each registered SDR. This 

figure is based on a preliminary estimate 

that each of ten registered SDRs would 

submit one amendment on Form SIP 

each year. SIP registration also would 

require a registered SDR to provide 

notice to the Commission of 

prohibitions or limitations on access to 

its services. The Commission 

preliminarily believes that the notice 

would be a simple form, and that 

prohibitions or limitations on access to 

information provided by a registered 

SDR would be not be prevalent. Thus, 

the Commission does not believe that 

providing such notice would result in 

any material burden. The Commission 

solicits comments as to the accuracy of 

these estimates. 

5. Recordkeeping Requirements 

Pursuant to proposed Rule 13n–7(b) 

under the Exchange Act,279 a registered 

SDR would be required to keep and 

preserve at least one copy of all 

documents, including all documents 

and policies and procedures required by 

the Exchange Act and the rules or 

regulations thereunder, for a period of 

not less than five years, the first two 

years in a place that is immediately 

available to the staff of the Commission 

for inspection and examination. This 

requirement would encompass any 

regulatory documents and related work 

papers completed by the registered SDR 

as part of its business, including Form 

SIP as required by proposed Rule 909. 

6. Collection of Information Is 

Mandatory 

Each collection of information 

discussed above would be a mandatory 

collection of information. 

7. Confidentiality of Responses to 

Collection of Information 

Form SIP is not confidential. 

8. Request for Comment 

The Commission requests public 

comment on its burden estimates. The 

Commission also solicits comment as 

follows: 

8. How many entities might be 

impacted by proposed Rule 909? Are the 

Commission’s preliminary estimates as 

to the number of registered SDRs that 

would be subject to proposed Rule 909 

accurate? 

9. How accurate are the Commission’s 

preliminary estimates of the burdens of 

the proposed collection of information 

associated with proposed Rule 909? 

Given that a SDR would be required to 

complete Form SDR to register with the 

Commission, how long would it take to 

also complete Form SIP? 

10. How many amendments per year 

would a registered SDR/SIP have to file 

to Form SIP? What would be the average 

burden per amendment? 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 75261 

280See Public Law 111–203 Preamble. 

281With respect to CDSs, for example, the 

Government Accountability Office found that 

‘‘comprehensive and consistent data on the overall 

market have not been readily available,’’ that 

‘‘authoritative information about the actual size of 

the CDS market is generally not available,’’ and that 

regulators currently are unable ‘‘to monitor 

activities across the market.’’ Government 

Accountability Office, ‘‘Systemic Risk: Regulatory 

Oversight and Recent Initiatives to Address Risk 

Posed by Credit Default Swaps,’’ GAO–09–397T 

(March 2009), at 2, 5, 27. See Robert E. Litan, ‘‘The 

Derivatives Dealers’ Club and Derivatives Market 

Reform,’’ Brookings Institution (April 7, 2010) at 

15–20; Michael Mackenzie, Era of an opaque swaps 

market ends, Fin. Times (June 25, 2010). 

282The BIS semi-annual reports on the swap 

markets summarizes developments in the OTC 

derivatives markets. The report breaks down trading 

volumes and other statistics for various classes of 

derivatives, including CDS, interest rate and foreign 

exchange derivatives, and equity and commodity 

derivatives. The report covers derivatives trading 

within the G10 countries. The most recent report, 

available at http://www.bis.org/statistics/derstats.

htm, covers the period through the last quarter of 

2009. 

283See ‘‘Financial Regulatory Reform—A New 

Foundation: Rebuilding Financial Supervision and 

Regulation,’’ U.S. Department of the Treasury, at 

47–48 (June 17, 2009). 

11. Can you suggest any ways to 

enhance the quality, utility, and clarity 

of the information to be collected? 

12. Can you suggest any ways to 

minimize the burden of collection of 

information on those who would be 

required to respond, including through 

the use of automated collection 

techniques or other forms of information 

technology? 

13. Would proposed Rule 909 or SIP 

registration create burdens for registered 

SDRs or other entities not contemplated 

here? If so, please identify and quantify 

these burdens. 

K. Phase-In Period—Rule 910 of 

Regulation SBSR 

The Commission preliminarily does 

not believe that proposed Rule 910 

would be a ‘‘collection of information’’ 

within the meaning of the PRA. 

Proposed Rule 910 merely describes 

when a registered SDR and its 

participants would be required to 

comply with the various parts of 

proposed Regulation SBSR, and would 

not create any additional collection of 

information requirements. The 

Commission requests public comment 

on its burden estimates. The 

Commission also solicits comment 

whether proposed Rule 910 imposes any 

collection of information requirements 

that the Commission has not 

considered. 

L. Prohibition During Phase-In Period— 

Rule 911 of Regulation SBSR 

The Commission preliminarily does 

not believe that proposed Rule 911 

would be a ’’collection of information’’ 

within the meaning of the PRA. 

Proposed Rule 911 would restrict the 

ability of a reporting party to report a 

SBS to one registered SDR rather than 

another, but would not otherwise create 

any duties or impose any collection of 

information requirements beyond those 

already required by proposed Rule 901. 

The Commission requests public 

comment on its burden estimates. The 

Commission also solicits comment 

whether proposed Rule 911 imposes any 

collection of information requirements 

that the Commission has not 

considered. 

M. Amendments to Rule 31 

The proposed amendments to Rule 31 

under the Exchange Act do not contain 

any ‘‘collection of information 

requirements’’ within the meaning of the 

PRA. Rule 31(a)(11) sets forth a list of 

‘‘exempt sales’’ to which Section 31 fees 

do not apply. The proposed amendment 

of Rule 31 would add ‘‘security-based 

swaps’’ to the list of ‘‘exempt sales,’’ and 

thereby exempt SBSs from Section 31 

fees. The proposed amendment would 

require no collection of information, nor 

would it impose any burden on parties 

to SBS transactions. The Commission 

requests public comment on its burden 

estimates. The Commission also solicits 

comment whether the proposed 

amendment to Rule 31 imposes any 

collection of information requirements 

that the Commission has not 

considered. 

XIV. Cost-Benefit Analysis 

On July 21, 2010, the President signed 

the Dodd-Frank Act into law. The DoddFrank Act was enacted to, among other 

things, promote the financial stability of 

the United States by improving 

accountability and transparency in the 

financial system.280 Subtitle B of Title 

VII designates the Commission to 

oversee the SBS markets and develop 

appropriate regulations. 

The OTC derivatives markets, which 

have been described as opaque,281 have 

grown exponentially in recent years 282

and are capable of affecting significant 

sectors of the U.S. economy. One of the 

primary goals of Title VII is to increase 

the transparency and efficiency of the 

OTC derivatives market and to reduce 

the potential for counterparty and 

systemic risk.283

The Dodd-Frank Act amends the 

Exchange Act to require the 

Commission to adopt rules providing 

for, among other things: (1) The 

reporting of SBS to a registered SDR or 

to the Commission; and (2) real-time 

public dissemination of SBS 

transaction, volume, and pricing 

information. To accomplish this 

mandate, the Commission today is 

proposing Regulation SBSR, a set of 

reporting and related rules for SBS 

transactions. 

In general, proposed Regulation SBSR 

would provide for the reporting of SBS 

information that falls into three broad 

categories: (1) Information that must be 

reported in real time pursuant to 

proposed Rule 901(c); (2) additional 

information that must be reported 

pursuant to proposed Rule 901(d) 

within specified timeframes, depending 

on whether the transaction is traded or 

confirmed electronically or manually; 

and (3) life cycle events that must be 

reported pursuant to proposed Rule 

901(e). Proposed Regulation SBSR 

would require registered SDRs to 

publicly disseminate certain SBS 

information in real time. Proposed 

Regulation SBSR would identify the 

SBS information that would be required 

to be reported, establish reporting 

obligations, and specify the timeframes 

for reporting and disseminating 

information. Proposed Regulation SBSR 

would require SBS market participants 

and registered SDRs to establish 

appropriate policies and procedures 

governing the transaction reporting 

process. In addition, proposed 

Regulation SBSR would require each 

registered SDR to register with the 

Commission as a SIP. Together, 

Regulation SBSR is designed to provide 

a more transparent market for SBSs. 

Broadly, the Commission anticipates 

that Regulation SBSR may have several 

overarching benefits to the SBS markets. 

These include the following: 

Improvements in Market Quality. The 

Commission’s rules on reporting and 

public dissemination of SBS transaction 

data could have very significant benefits 

to the SBS market. Comprehensive, 

timely, and accurate reporting should 

allow for better regulation of the SBS 

market, which should promote greater 

confidence and participation in the 

market. Post-trade transparency could 

result in lower transaction costs, greater 

price competition, and greater 

participation in the market. These 

benefits could extend beyond the SBS 

market to the securities markets more 

generally, which are increasingly 

interconnected. 

Improved Risk Management. As SBS 

market participants implement 

transaction reporting programs, they 

would be required to review their 

current positions in SBSs and report 

those open positions to a registered 

SDR. Incorporating all positions into an 

OMS sufficient to permit ongoing 

reporting as required under proposed 

Regulation SBSR could result in a direct 

and immediate benefit to market 


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75262 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

284See Section 719 of the Dodd-Frank Act. 

participants by potentially reducing the 

risk associated with current open 

positions. Further, because proposed 

Regulation SBSR would require market 

participants to inventory their positions 

in SBS to determine what needs to be 

reported, the proposal should enable 

more robust risk monitoring and 

management going forward. 

Economies and Greater Efficiency. 

Automation and systems development 

associated with SBS transaction 

reporting required by proposed 

Regulation SBSR could provide market 

participants new tools to process 

transactions at a lower expense per 

transaction. Such increased efficiency 

would enable participants to handle 

increased volumes of SBSs with less 

marginal expense, or existing volumes 

of SBSs with greater efficiency. In 

addition, proposed Regulation SBSR is 

designed to further the development of 

internationally recognized standards for 

establishing reference identifiers in the 

financial services industry. A common 

set of reference identifiers for 

participants and products could yield 

significant efficiencies in both the 

public and private sectors. Information 

about financial firms operating in 

different functional areas and different 

jurisdictions could more readily be 

identified by regulators. In addition, 

financial firms could eliminate the use 

of multiple proprietary reference 

systems and move to a single, widely 

accepted system. 

Improved Commission Oversight. SBS 

transaction reporting under proposed 

Regulation SBSR would provide a 

means for the Commission to gain a 

better understanding of the SBS 

market—including aggregate positions 

both in specific SBS instruments and 

positions taken by individual entities or 

groups—by requiring transaction data 

both on newly executed SBS and 

unexpired pre-enactment SBS to be 

reported to a registered SDR. The 

reporting of SBS transactions should 

thus provide the Commission and other 

regulators a better understanding of the 

current risks in the SBS market. For 

example, having such data available 

would help Commission staff to analyze 

the SBS market as a whole in a manner 

that is not possible currently. In this 

way, Regulation SBSR would support 

the Commission’s supervisory function 

over the SBS market, as required by 

Congress in the Dodd-Frank Act. 

Further, proposed Regulation SBSR 

should facilitate completing the reports 

the Commission is required to provide 

to Congress on SBSs and the SBS 

marketplace.284

While the Commission believes that 

proposed Regulation SBSR would result 

in significant benefits to SBS market 

participants, the Commission is 

cognizant that the proposed rules would 

entail costs, as more fully discussed 

below. The proposed rules could, for 

example, require market participants to 

begin retaining additional data related 

to SBS transactions. The rules also 

could require market participants to 

modify existing internal processes and 

systems. The Commission estimates that 

the rules comprising proposed 

Regulation SBSR could affect 5,000 

participants, including 1,000 reporting 

parties, and several million SBSs 

annually. 

The Commission is sensitive to the 

costs and benefits associated with 

proposed Regulation SBSR. The 

Commission requests comment on the 

costs and benefits associated with the 

individual rules, and its cost-benefit 

analysis thereof, including 

identification and assessments of any 

costs and benefits not discussed in this 

analysis. The Commission also seeks 

comment on the accuracy of any of the 

benefits identified and also welcomes 

comments on the accuracy of any of the 

cost estimates. Finally, the Commission 

encourages commenters to identify, 

discuss, analyze, and supply relevant 

data, information, or statistics regarding 

any such costs or benefits. 

A. Definitions—Rule 900 of Regulation 

SBSR 

1. Benefits 

By defining key terms, proposed Rule 

900 would provide increased clarity 

about the scope and application of 

proposed Regulation SBSR. This should 

help market participants subject to the 

proposal understand their obligations 

and make appropriate compliance 

plans. Clearly defined terms should also 

help the Commission in its oversight 

responsibilities. 

2. Costs 

The Commission preliminarily 

believes that proposed Rule 900 would 

not entail any material costs to market 

participants. Proposed Rule 900 would 

define terms used in Regulation SBSR. 

The rule would not impose any 

obligation or duty. 

3. Request for Comment 

The Commission requests comment 

on the costs and benefits of proposed 

Rule 900 discussed above, as well as 

any costs and benefits not already 

described that could result. The 

Commission also requests data to 

quantify any potential costs or benefits. 

In addition, the Commission requests 

comment on the following: 

248. How can the Commission more 

accurately estimate the costs and 

benefits of proposed Rule 900? 

249. Would proposed Rule 900 create 

any additional costs or benefits not 

discussed here? 

B. Reporting Obligations—Rule 901 of 

Regulation SBSR 

Pursuant to proposed Rule 901, all 

SBS transactions must be reported. 

Together, sections (a), (b), (c), (d), (e), 

(h), and (i) of proposed Rule 901 set 

forth the parameters that SBS 

counterparties must follow to report 

SBS transactions to a registered SDR or, 

if there is no registered SDR that would 

accept the information, to the 

Commission. Proposed Rule 901(a) 

would specify which counterparty 

would be the ‘‘reporting party’’ for a SBS 

transaction. Proposed Rule 901(b) 

would require a reporting party to report 

the information required under 

proposed Rule 901 to a registered SDR 

or, if there is no registered SDR that 

would accept the information, to the 

Commission. Proposed Rule 901 divides 

the SBS information that would be 

required to be reported into three broad 

categories: (1) Information that would be 

required to be reported in real time 

pursuant to proposed Rule 901(c) and 

publicly disseminated pursuant to 

proposed Rule 902; (2) additional 

information that would be required to 

be reported pursuant to proposed Rule 

901(d)(1) within the timeframes 

specified in proposed Rule 901(d)(2); 

and (3) life cycle events that must be 

reported pursuant to proposed Rule 

901(e), the timeframes for which would 

vary depending on whether the 

transaction was executed and confirmed 

electronically or manually. The 

information that would be reported 

under proposed Rule 901(d)(1) would 

not be publicly disseminated. Proposed 

Rule 901(i) would require the reporting 

of the information detailed in proposed 

Rules 901(c) and (d), to the extent such 

information is available, for preenactment SBSs and transitional SBSs. 

Proposed Rule 901(f) would require a 

registered SDR to time stamp, to the 

second, its receipt of any information 

submitted to it pursuant to proposed 

Rules 901(c), (d), or (e). Proposed Rule 

901(g) would require a registered SDR to 

assign a transaction ID to each SBS 

reported by a reporting party. 

1. Benefits 

The SBS transaction information 

required to be reported pursuant to 

proposed Rule 901 would benefit 

market participants and the SBS 


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285See, e.g., 15 U.S.C. 78m(n)(5)(D) (requiring a 

registered SDR to provide the Commission with 

direct electronic access to its data). 

286See Section 719 of the Dodd-Frank Act. 

marketplace. First, the Commission 

preliminarily believes that, by setting 

out the requirements for the reporting of 

each SBS transaction to a registered 

SDR, proposed Rule 901 would provide 

the registered SDR with the SBS 

transaction information necessary to 

support public dissemination, as 

required by proposed Rule 902. 

Additionally, by requiring real-time 

reporting of certain SBS transaction 

data, proposed Rule 901, together with 

proposed Rule 902, would provide the 

necessary framework to enable public 

dissemination of SBS transactions in 

real time as required under proposed 

Rule 902. Together, proposed Rules 901 

and 902 will enable market participants 

and regulatory authorities to know the 

current state of the SBS markets and 

track it over time. 

To comply with proposed Rule 901, 

reporting parties—which are the largest 

and most actively engaged participants 

in the SBS market—would likely need 

to establish and maintain OMSs capable 

of supporting real-time and additional 

reporting. The Commission anticipates 

that proposed Rule 901 would have the 

effect of promoting efforts by reporting 

parties to inventory their positions in 

SBSs, as each determines what 

information needs to be reported. This 

effect could encourage management 

review of internal procedures and 

controls by these reporting parties. 

In addition, proposed Rule 901 would 

provide a means for the Commission to 

gain a better understanding of the SBS 

market, including the size and scope of 

that market, as the Commission would 

have access to data held by a registered 

SDR.285 Having such data available 

should help Commission staff to analyze 

the SBS market as a whole and identify 

risks. In this way, proposed Rule 901 

would support the Commission’s 

supervisory function over the SBS 

market as required by Congress in the 

Dodd-Frank Act. Proposed Rule 901 also 

could facilitate the reports the 

Commission is required to provide to 

Congress on SBS and the SBS 

marketplace.286

The information reported by reporting 

parties pursuant to proposed Rule 901 

would be used by registered SDRs to 

publicly disseminate real-time reports of 

SBS transactions, and to retain SBS 

transaction and position information for 

use by regulators. The reporting 

requirements of proposed Rule 901 are 

designed to ensure that important 

information about SBSs is reported and, 

ultimately available to market 

participants, through the market data 

feed disseminated by a registered SDR. 

The Commission further preliminarily 

believes that the time stamp and 

transaction ID required to be added by 

the registered SDR under proposed 

Rules 901(f) and (g) would facilitate data 

management by the registered SDR, as 

well as market supervision and 

oversight by the Commission and other 

regulatory authorities. 

Generally, the availability of 

additional market information, along 

with the ability of the Commission and 

other regulators to use information 

about SBS transactions reported to and 

held by registered SDRs, would result in 

more robust prudential and systemic 

regulation. The Commission and other 

regulators would use information about 

SBS transactions reported to and held 

by registered SDRs to conduct both 

prudential and systemic regulation, as 

well as to examine for improper 

behavior and to take enforcement 

actions, as appropriate. Specifying 

general types of information to be 

reported and publicly disseminated 

could increase the efficiency and level 

of standardization in the SBS market. 

Proposed Rule 901 would prescribe 

only broad categories of SBS data to be 

reported. However, proposed Rule 

907(a)(1) would require each registered 

SDR to enumerate specific data 

elements to be reported, and to specify 

acceptable data formats. This approach 

would provide for the efficient 

accommodation of evolving industry 

conventions in the reporting of SBS 

data. The requirement that all trades be 

reported to a registered SDR for public 

dissemination, regardless of trading 

venue, would reduce the coordination 

costs that would exist if numerous 

parties were independently 

disseminating SBS data. In this way, 

proposed Rule 901 would increase the 

uniformity in the SBS data that is 

disseminated under proposed Rule 902. 

Proposed Rule 901(i) would also 

provide important benefits. By requiring 

reporting of pre-enactment and 

transitional SBS transactions, proposed 

Rule 901(i) would provide the 

Commission with insight as to 

outstanding notional size, number of 

transactions, and number and type of 

participants in the SBS market. This 

would provide a starting benchmark 

against which to assess the development 

of the SBS market over time and, thus, 

represents a first step toward a more 

transparent and well regulated market 

for SBSs. The data reported pursuant to 

proposed Rule 901(i) also could help the 

Commission prepare the reports that it 

is required to provide to Congress. 

Further, proposed Rule 901(i) would 

require market participants to inventory 

their positions in SBS to determine 

what information needs to be reported, 

which could benefit market participants 

by encouraging management review of 

their internal procedures and controls. 

The transaction ID required by 

proposed Rule 901(g) also would 

provide an important benefit by 

facilitating the reporting of subsequent, 

related SBS transactions that may be 

submitted to a registered SDR (e.g., a 

transaction report regarding a SBS life 

cycle event, or report to correct an error 

in a previously submitted report). 

Regulators also would benefit by having 

an easy way to refer to specific prior 

transactions. 

Proposed Rule 901 would require 

reporting parties, to the extent they do 

not already possess systems for 

electronically capturing and 

transmitting data about their SBS 

transactions, to build or otherwise 

obtain such systems. Such systems 

would be necessary to report data 

within the timeframes set forth in 

proposed Rules 901(c) and (d), because 

it is unlikely that manual processes 

could capture and report in real time the 

numerous data elements relating to a 

SBS. There could be substantial benefits 

in the form of reduced operational risk 

in requiring all reporting parties to have 

such capability. Systematizing all SBS 

transaction information more quickly 

would support effective risk 

management, as counterparties, 

registered SDRs, clearing agencies (in 

some cases), and regulators would 

obtain accurate knowledge of new SBS 

transactions more quickly. Reporting 

parties that obtain such systems could 

see additional benefits in being able to 

process and risk manage their existing 

positions more effectively, or use their 

expanded capability to participate 

further in the SBS market. 

Finally, proposed Rule 901 could 

result in significant benefits by 

encouraging the creation and 

widespread use of generally accepted 

standards for reference information. 

Proposed Rule 901 would require the 

reporting of a participant ID of each 

counterparty and, as applicable, the 

broker ID, desk ID, and trader ID of the 

reporting party or its broker. The 

Commission preliminarily believes that 

reporting of this information would help 

ensure effective oversight, enforcement, 

and surveillance of the SBS market by 

the Commission and other regulators. 

For example, activity could be tracked 

by a particular participant, a particular 

desk, or a particular trader. Regulators 

could observe patterns and connections 

in trading activity, or examine whether 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
75264 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

287See, e.g., http://www.dtcc.com/products/ 

derivserv/data_table_iii.php (weekly data as 

updated by DTCC). 

288The Commission’s estimate is based on 

internal analysis of available SBS market data. The 

Commission is seeking comment about the overall 

size of the SBS market. 289The Commission notes that regulation of the 

SBS markets, including by means of proposed 

Regulation SBSR, could impact market participant 

behavior. 

290These figures are based on the following: 

[13,140,000/0.85] = 15,458,824. [((15,458,824 

estimated SBS transactions)/(1,000 estimated 

reporting parties))/(365 days/year)] = 42.35, or 

approximately 42 transactions per day. The 

Commission understands that many of these 

transactions may arise from previously executed 

SBS transactions. 

291This estimate is based on the following: [((Sr. 

Programmer (160 hours) at $285 per hour) + (Sr. 

Systems Analyst (160 hours) at $251 per hour) + 

(Compliance Manager (10 hours) at $294 per hour) 

+ (Director of Compliance (5 hours) at $426 per 

hour) + (Compliance Attorney (20 hours) at $291 

per hour) × (1,000 reporting parties)] = $96,650,000. 

The Commission preliminarily believes that 

information on SBS transactions is currently being 

retained by counterparties in the ordinary course of 

business, and as a practical matter should not result 

in any significant new burdens. 

a trader had engaged in questionable 

trading activity across different SBS 

instruments. These identifiers also 

would facilitate aggregation and 

monitoring of the positions of SBS 

counterparties, which could be of 

significant benefit for prudential 

oversight and systemic risk 

management. 

The Commission understands that 

some efforts have been undertaken—in 

both the private and public sectors, both 

domestically and internationally—to 

establish a comprehensive and widely 

accepted system for identifying entities 

that participate not just in the SBS 

market, but in the financial markets 

generally. Such a system would be of 

significant benefit to regulators 

worldwide, as each market participant 

could readily be identified using a 

single reference code regardless of the 

jurisdiction or product market in which 

the market participant was engaging. 

Such a system also could be of 

significant benefit to the private sector, 

as market participants would have a 

common identification system for all 

counterparties and reference entities, 

and would no longer have to use 

multiple proprietary nomenclature 

systems. The enactment of the DoddFrank Act and the establishment of a 

comprehensive system for reporting and 

dissemination of SBSs—and for 

reporting and dissemination of swaps, 

under jurisdiction of the CFTC—offer a 

unique opportunity to facilitate the 

establishment of a comprehensive and 

widely accepted system for identifying 

entities that participate not just in the 

SBS market, but in the financial markets 

generally. 

2. Costs 

a. For Reporting Parties 

The proposed SBS reporting 

requirements would impose initial and 

ongoing costs on reporting parties. The 

Commission preliminarily believes that 

these costs would be a function of, 

among other things, the number of 

reportable SBS transactions and the data 

elements required to be collected for 

each SBS transaction. 

The Commission obtained 

information from publicly available 

sources and consulted with industry 

participants in an effort to quantify the 

number of aggregate SBS transactions on 

an annual basis. According to publicly 

available data from DTCC, recently, 

there have been an average of 

approximately 36,000 CDS transactions 

per day,287 corresponding to a total 

number of CDS transactions of 

approximately 13,140,000 per year. The 

Commission preliminarily believes that 

CDSs represent 85% of all SBS 

transactions.288 Accordingly, and to the 

extent that historical market activity is 

a reasonable predictor of future 

activity,289 the Commission 

preliminarily estimates that the total 

number of SBS transactions that would 

be subject to proposed Rule 901 on an 

annual basis would be approximately 

15,460,000, which is an average of 

approximately 42 per reporting party 

per day.290

The Commission believes that SBS 

market participants would face three 

categories of costs to comply with 

proposed Rule 901. First, each market 

participant would have to develop an 

internal OMS capable of capturing 

relevant SBS transaction information so 

that it can be reported. The Commission 

understands that, because of the manner 

in which participants transact certain 

SBSs with certain transaction details 

being added post-execution, an OMS 

would likely need to link both to a 

market participant’s trade desk—to 

permit real-time transaction reporting— 

and to the market participant’s back 

office—to facilitate reporting of 

complete transactions as required under 

proposed Rule 901. The OMS would 

also have to include or be connected to 

a system designed to store SBS 

transaction information. 

Second, each reporting party would 

have to implement a reporting 

mechanism. This would include a 

system that ‘‘packages’’ SBS transaction 

information from the entity’s OMS, 

sends the information, and tracks it. The 

reporting mechanism would also 

include necessary data transmission 

lines to the appropriate registered SDR. 

Third, each reporting party would 

have to establish an appropriate 

compliance program and support for the 

operation of the OMS and reporting 

mechanism. Relevant elements of the 

compliance program would include 

transaction verification and validation 

protocols, the ability to identify and 

correct erroneous transaction reports, 

necessary technical, administrative, and 

legal support. Additional operational 

support would include new product 

development, systems upgrades, and 

ongoing maintenance. 

Based on conversations with industry 

participants, the Commission 

preliminarily believes that the reporting 

timeframes mandated by proposed 

Rules 901(c), (d), and (e) may be costly 

to achieve for reporting parties that do 

not currently have the capabilities to 

perform those functions in those time 

frames, requiring additional expenditure 

of resources to satisfy these 

requirements. For example, reporting 

parties that do not currently have the 

capability to capture SBS trade 

information and provide it to a 

registered SDR in real time would be 

required by proposed Regulation SBSR 

to obtain such capability. 

Proposed Rule 901 would not provide 

an explicit list of data elements. Instead, 

proposed Regulation SBS would 

provide a registered SDR with flexibility 

to determine the specifics of the form 

and format for data to be reported under 

proposed Rule 901. Thus, to the extent 

reported and disseminated SBS 

transaction data are not uniform, market 

participants and regulators could face a 

cost to standardize and interpret them. 

Internal Order Management. To 

comply with their reporting obligations, 

reporting parties would be required to 

develop and maintain an internal OMS 

that can capture relevant SBS data. The 

Commission preliminarily estimates 

that, to capture SBS data in a manner 

sufficient to facilitate reporting under 

proposed Rule 901 would impose an 

initial one-time aggregate cost of 

approximately $96,650,000, which 

corresponds to $96,650 for each 

reporting party.291 This estimate 

includes an estimate of the costs 

required to amend internal procedures, 

design or reprogram systems, and 

implement processes to ensure that SBS 

transaction data are captured and 

preserved. The Commission further 

preliminarily estimates that capturing 

SBS data in a manner sufficient to 

facilitate reporting under proposed Rule 

901 would impose an ongoing annual 

aggregate cost of approximately 

$73,144,000, which corresponds to 


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292This estimate is based on the following: [((Sr. 

Programmer (32 hours) at $285 per hour) + (Sr. 

Systems Analyst (32 hours) at $251 per hour) + 

(Compliance Manager (60 hours) at $294 per hour) 

+ (Compliance Clerk (240 hours) at $59 per hour) 

+ (Director of Compliance (24 hours) at $426 per 

hour + (Compliance Attorney (48 hours) at $291 per 

hour) × (1,000 reporting parties)] = $73,144,000. 

293This estimate is based on discussions of 

Commission staff with various market participants 

and is calculated as follows: [$250/gigabyte of 

storage capacity × (4 gigabytes of storage) × (1,000 

participants)] = $1,000,000. The Commission 

preliminarily believes that storage costs associated 

with saving relevant SBS information and 

documents would not vary significantly between 

the first year and subsequent years. Accordingly, 

the Commission has preliminarily estimated the 

initial and ongoing storage costs to be the same. 

Moreover, the Commission believes the per-entity 

annual data storage figure of $1,000 to be a 

reasonable average. Some reporting parties may face 

higher costs, while others would simply use 

existing storage resources. 

294This estimate is based on the following: 

[(($96,650 + $73,144 + $1,000) × (1,000 reporting 

parties)] = $170,794,000, which corresponds to 

$170,794 burden hours per reporting party. 

295This is estimate is based on the following: 

(($73,144 + $1,000) × 1,000 reporting parties) = 

$74,144,000. 

296The Commission derived this estimate as 

follows. First, the Commission believes that 

initially there would be only a limited number of 

registered SDRs, and that the number would not 

exceed ten. Many reporting parties might transact 

in only some classes of SBSs. Thus, even if each 

registered SDR accepted transaction reports only for 

a single SBS asset class, the total number of 

connections needed by many reporting parties 

would likely be limited. The Commission also 

preliminarily believes that, for operational 

efficiency, a participant would seek to use only one 

registered SDR per asset class to obtain repository 

services. Next, reporting parties that required a 

significant number of connections to registered 

SDRs could engage a third party—a dealer or 

connectivity services provider—instead of 

independently establishing their own connections. 

Accordingly, the Commission preliminarily 

believes that one connection may suffice for many 

reporting parties. 

297This estimate is based on discussions of 

Commission staff with various market participants, 

as well as the Commission’s experience regarding 

connectivity between securities market participants 

for data reporting purposes. The Commission 

derived the total estimated expense from the 

following: ($100,000 hardware- and softwarerelated expenses, including necessary backup and 

redundancy, per SDR connection) × (2 SDR 

connections per reporting party) × (1,000 reporting 

parties) = $200,000,000. 

298This figure is based on discussions with 

various market participants and is calculated as 

follows: [((Sr. Programmer (80 hours) at $285 per 

hour) + (Sr. Systems Analyst (80 hours) at $251 per 

hour) + (Compliance Manager (5 hours) at $294 per 

hour) + (Director of Compliance (2 hours) at $426 

per hour) + (Compliance Attorney (5 hours) at $291 

per hour) × (1,000 reporting parties)] = $46,657,000. 

The Commission preliminarily believes that 

information on SBS transactions is currently being 

retained by market participants in the ordinary 

course of business, and as a practical matter should 

not result in any significant new costs. 

299The Commission preliminarily believes that 

the costs of having an operational reporting system 

capable of effectively processing these transactions 

are covered in the cost estimates for a compliance 

and ongoing support system. See infra notes 302 to 

305. The Commission preliminarily believes that 

the actual reporting of transactions represents an 

incremental additional cost. The referenced figure 

is based on discussions with various market 

participants and is calculated as follows: 

[(Compliance Clerk (40 hours) at $59 per hour) + 

(Sr. Computer Operator (40 hours) at $76 per hour)) 

× (1,000 reporting parties)] = $5,400,000. 

300This estimate is based on the following: 

(($46,657 + $5,400 + $200,000) × (1,000 reporting 

parties)) = $252,057,000, which corresponds to 

$252,057 per reporting party. 

301This estimate is based on the following: 

(($5,400 + $200,000) × (1,000 reporting parties)) = 

$205,400,000, which corresponds to $205,400 per 

reporting party. 

$73,144 for each reporting party.292 This 

figure would include day-to-day support 

of the OMS, as well as an estimate of the 

amortized annual cost associated with 

system upgrades and periodic ‘‘replatforming’’ (i.e., implementing 

significant updates based on new 

technology). In addition, to capture and 

maintain relevant information and 

documents, the Commission 

preliminarily estimates that all reporting 

parties could incur an initial and 

ongoing aggregate annualized cost of 

$1,000,000, which corresponds to 

$1,000 for each reporting party.293 The 

figure is an estimate of the hardware 

and associated maintenance costs for 

sufficient memory to capture and store 

SBS transactions, including redundant 

back-up systems. 

Summing these costs, the Commission 

preliminarily estimates the initial 

aggregate annualized cost for reporting 

parties for internal order management 

under proposed Rule 901 would be 

$170,794,000, which corresponds to 

$170,794 for each reporting party.294

The Commission further preliminarily 

estimates that the ongoing aggregate 

annualized costs on reporting parties for 

internal order management under 

proposed Rule 901 would be 

$74,144,000, which corresponds to 

$74,144 for each reporting party.295

SBS Reporting Mechanism. Each 

reporting party would incur initial onetime costs to establish connectivity with 

and report SBS transactions to a 

registered SDR. Depending on the 

number of SBS asset classes that a 

reporting party transacts in and which 

registered SDRs accept the resulting SBS 

transaction reports, multiple 

connections to different registered SDRs 

could be necessary. For purposes of 

estimating relevant costs, the 

Commission preliminarily estimates 

that, on average, each reporting party 

would require connections to two 

registered SDRs.296

On this basis, the Commission 

preliminarily estimates that the cost to 

establish and maintain connectivity to a 

registered SDR to facilitate the reporting 

required by proposed Rule 901 would 

impose an annual (first-year and 

ongoing) aggregate cost of 

approximately $200,000,000, which 

corresponds to $200,000 for each 

reporting party.297 The Commission 

understands that many reporting parties 

already have established linkages to 

entities that may register as SDRs, 

which could significantly reduce the 

out-of-pocket costs associated with this 

establishing the reporting function 

contemplated by proposed Rule 901. 

Moreover, the Commission believes 

that establishing a reporting mechanism 

for SBS transactions would impose 

internal costs on each reporting party, 

including the development of systems 

necessary to capture and send 

information from the entity’s OMS to 

the relevant registered SDR, as well as 

corresponding testing and support. The 

Commission preliminarily estimates an 

initial one-time aggregate cost of 

$46,657,000, which corresponds to an 

initial one-time cost of $46,657 for each 

reporting party.298 In addition, the 

Commission preliminarily estimates 

that reporting specific SBS transactions 

to a registered SDR as required by 

proposed Rule 901 would impose an 

annual aggregate cost (first-year and 

ongoing) of approximately $5,400,000, 

which corresponds to approximately 

$5,400 for each reporting party.299

Thus, the Commission preliminarily 

estimates the initial, aggregate 

annualized cost for reporting parties 

submitting SBS transaction reports 

under proposed Rule 901 would be 

$252,057,000, which corresponds to 

$252,057 for each reporting party.300

The Commission further preliminarily 

estimates that the ongoing, aggregate 

annualized cost on reporting parties for 

submitting SBS transaction reports 

under proposed Rule 901 would be 

$205,400,000, which corresponds to 

$205,400 for each reporting party.301

Compliance and Ongoing Support. As 

stated above, in complying with 

proposed Rule 901, each reporting party 

also would need to establish and 

maintain an appropriate compliance 

program and support for the operation 

of the OMS and reporting mechanism, 

which would include transaction 

verification and validation protocols 

and necessary technical, administrative, 

and legal support. Additional 

operational support would include new 

product development, systems 

upgrades, and ongoing maintenance. 

The Commission preliminarily believes 

that initial costs associated with this 

aspect of proposed Rule 901—i.e., the 

establishment of relevant compliance 

capability—would also involve in 

significant part the development of 


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302This figure is based on discussions with 

various market participants and is calculated as 

follows: [((Sr. Programmer (100 hours) at $285 per 

hour) + (Sr. Systems Analyst (40 hours) at $251 per 

hour) + (Compliance Manager (20 hours) at $294 

per hour) + (Director of Compliance (10 hours) at 

$426 per hour) + (Compliance Attorney (10 hours) 

at $291 per hour) × (1,000 reporting parties)] = 

$51,590,000. 

303This figure is based on discussions with 

various market participants and is calculated as 

follows: [((Sr. Programmer (16 hours) at $285 per 

hour) + (Sr. Systems Analyst (16 hours) at $251 per 

hour) + (Compliance Manager (30 hours) at $294 

per hour) + (Compliance Clerk (120 hours) at $59 

per hour) + (Director of Compliance (12 hours) at 

$426 per hour) + (Compliance Attorney (24 hours) 

at $291 per hour) × (1,000 reporting parties)] = 

$36,572,000. 

304This estimate is based on the following: 

(($51,590 + $36,572) × (1,000 reporting parties)] = 

$88,162,000, which corresponds to $88,162 per 

reporting party. 

305See supra note 303. 

306This estimate is based on the following: 

(($170,794 + $252,057 + $88,162) × (1,000 reporting 

parties)) = $511,013,000, which corresponds to 

$511,013 per reporting party. 

307This estimate is based on the following: 

(($74,144 + $205,400 + $36,572) × (1,000 reporting 

parties)) = $316,116,000, which corresponds to 

$316,116 per reporting party. 

308See SDR Registration Proposing Release, supra 

note 6. 

309This figure is based on discussions with 

various market participants and is calculated 

follows: [(Sr. Programmer (80 hours) at $285 per 

hour) + (Sr. Systems Analyst (20 hours) at $251 per 

hour) + (Compliance Manager (8 hours) at $294 per 

hour) + (Director of Compliance (4 hours) at $426 

per hour) + (Compliance Attorney (8 hours) at $291 

per hour) × (10 registered SDRs)] = $342,040. 

310This figure is based on discussions with 

various market participants and is calculated as 

follows: [(Sr. Programmer (60 hours) at $285 per 

hour) + (Sr. Systems Analyst (48 hours) at $251 per 

hour) + (Compliance Manager (24 hours) at $294 

per hour) + (Director of Compliance (12 hours) at 

$426 per hour) + (Compliance Attorney (8 hours) 

at $291 per hour) × (10 registered SDRs)] = 

$436,440. 

311This figure is based on the following: ($34,016 

+ $42,240) × (10 registered SDRs) = $778,480, which 

corresponds to $77,848 per registered SDR. 

312See supra note 310. 

appropriate policies and procedures, 

which, for those participants who are 

SBS dealers or major SBS participants, 

is addressed in connection with 

proposed Rule 906(c). A reporting party 

would need to design its OMS to 

include tools to ensure accurate, 

complete reporting and employ 

appropriate technical and compliance 

staff to maintain and support the 

operation of its OMS on an ongoing 

basis. 

The Commission preliminarily 

estimates that designing and 

implementing an appropriate 

compliance and support program would 

impose an initial one-time aggregate 

cost of approximately $51,590,000, 

which corresponds to a cost of $51,590 

for each reporting party.302 The 

Commission further preliminarily 

estimates that maintaining its 

compliance and support program would 

impose an ongoing annual aggregate 

cost of approximately $36,572,000, 

which corresponds to a cost of $36,572 

for each reporting party.303 This figure 

includes day-to-day support of the 

OMS, as well as an estimate of the 

amortized annual cost associated with 

system upgrades and periodic ‘‘replatforming.’’ 

Therefore, the Commission 

preliminarily estimates the initial 

aggregate annualized costs to reporting 

parties for compliance and ongoing 

support under proposed Rule 901 would 

be $88,162,000, which corresponds to 

$88,162 for each reporting party.304 The 

Commission further preliminarily 

estimates that the ongoing aggregate 

annualized cost on reporting parties for 

compliance and ongoing support under 

proposed Rule 901 would be 

$36,572,000, which corresponds to 

$36,572 for each reporting party.305

Summing these costs, the Commission 

preliminarily estimates that the initial, 

aggregate annualized costs associated 

with proposed Rule 901 would be 

$511,013,000, which corresponds to 

$511,013 per reporting party.306 The 

Commission preliminarily estimates 

that the ongoing aggregate annualized 

costs associated with proposed Rule 901 

would be $316,116,000, which 

corresponds to $316,116 per reporting 

party.307

Finally, the Commission notes that it 

is possible that the costs associated with 

required reporting pursuant to proposed 

Regulation SBSR could represent a 

barrier to entry for new, smaller firms 

that might not have the ability or desire 

to comply with these reporting 

requirements. To the extent that 

proposed Regulation SBSR causes new 

firms not to enter the SBS market, this 

would be a cost of the proposal. 

Nevertheless, the Commission 

preliminarily believes that firms would 

be able to contract with third-party 

service providers, which could facilitate 

their compliance with proposed 

Regulation SBSR. Accordingly, the 

Commission preliminarily does not 

believe it likely that proposed Rule 901 

would, as a practical matter, act as a 

barrier to new entrants. The 

Commission requests comment on this 

issue. 

Reference information. The 

Commission, in proposed Regulation 

SBSR, is not requiring the development 

of internationally recognized standards 

for reference information that could be 

used across the financial services 

industry. Therefore, the Commission 

believes that the costs of developing and 

sustaining such a system should not be 

considered costs of proposed Regulation 

SBSR. However, proposed Regulation 

SBSR would require a registered SDR 

and its participants to use UICs 

generated by such a system, if such 

system is able to generate such UICs. 

Although the Commission believes there 

would be long-term benefits for using 

UICs generated by such a system, there 

could be short-term costs imposed on 

reporting parties to convert to such a 

system. In addition, under these 

internationally recognized standards, 

users of the reference information could 

have to pay reasonable fees to support 

the system. These fees also would 

represent costs of proposed Rule 901. 

The Commission requests comment on 

this issue and any potential costs 

associated with the potential future use 

of internationally recognized standards. 

b. For Registered SDRs 

Proposed Rule 901(f) would require a 

registered SDR to time stamp, to the 

second, its receipt of any information 

submitted to it pursuant to proposed 

Rules 901(c), (d), or (e). Proposed Rule 

901(g) would require a registered SDR to 

assign a transaction ID to each SBS 

reported by a reporting party. The 

Commission preliminarily believes that 

these requirements would not be 

significant in the context of designing 

and building the technological 

framework that would be required of an 

SDR to become registered.308 Therefore, 

the Commission preliminarily estimates 

that proposed Rules 901(f) and (g) 

would impose an initial aggregate onetime cost of $342,040, which 

corresponds to $34,204 per registered 

SDR.309 This figure is based on an 

estimate of ten registered SDRs. With 

regard to ongoing costs, the Commission 

preliminarily estimates that proposed 

Rules 901(f) and (g) would impose an 

ongoing aggregate annual cost of 

$436,440, which corresponds to $43,644 

per registered SDR.310 This figure 

represents an estimate of the support 

and maintenance costs for the time 

stamp and transaction ID assignment 

elements of a registered SDR’s systems. 

Thus, the Commission preliminarily 

estimates that the initial aggregate 

annualized cost associated with 

proposed Rules 901(f) and (g) would be 

$778,480, which corresponds to $77,848 

per registered SDR.311 Correspondingly, 

the Commission preliminarily estimates 

that the ongoing aggregate annualized 

cost associated with proposed Rules 

901(f) and (g) would be $436,440, which 

corresponds to $43,644 per registered 

SDR.312


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313 In the circumstances necessitating a registered 

SDR’s systems to be unavailable for publicly 

disseminating transaction data, the registered SDR 

would have to disseminate the transaction data 

immediately upon its re-opening. Proposed Rule 

902(c) would prohibit the dissemination of certain 

information. See supra note 100 and accompanying 

text. 

314See Gjergji Cici, Scott Gibson, John J. Merrick, 

Jr., ‘‘Missing the Marks? Dispersion in Corporate 

Bond Valuations Across Mutual Funds,’’ draft paper 

available at http://papers.ssrn.com/sol3/ 

papers.cfm?abstract_id=1104508. 

3. Request for Comment 

The Commission requests comment 

on the costs and benefits of proposed 

Rule 901 discussed above, as well as 

any costs and benefits not already 

described that could result. The 

Commission also requests data to 

quantify any potential costs or benefits. 

In addition, the Commission requests 

comment on the following: 

250. How can the Commission more 

accurately estimate the costs and 

benefits? 

251. What are the costs currently 

borne by entities covered by proposed 

Rule 901 with respect to the retention of 

records of SBS transactions? 

252. How many entities would be 

affected by the proposed rule? How 

many transactions would be subject to 

the proposed rule? 

253. Are there additional costs 

involved in complying with the rule 

that have not been identified? What are 

the types, and amounts, of the costs? 

254. Would the obligations imposed 

on reporting parties by proposed Rule 

901 be a significant enough barrier to 

entry to cause some firms not to enter 

the SBS market? If so, how many firms 

might decline to enter the market? How 

can the cost of their not entering the 

market be tabulated? How should the 

Commission weigh such costs, if any, 

against the anticipated benefits from 

increased transparency to the SBS 

market from the proposal, as discussed 

above? 

255. Can commenters assess the 

benefits of having comprehensive and 

accurate reporting of SBS transactions to 

registered SDRs, which would provide 

access to such information to the 

Commission and other regulators? What 

would have been the benefits to the SBS 

market if such regulatory oversight had 

been in place sooner? 

256. What benefits and costs would 

there be to converting to a reference 

identification system established by or 

on behalf of an IRSB? What fees might 

be charged to support such a system? 

How much would those fees be? Who 

would have to pay them? 

257. Would there be additional 

benefits from the proposed rule that 

have not been identified? 

C. Public Dissemination of Transaction 

Reports—Rule 902 of Regulation SBSR 

Generally, proposed Rule 902 would 

require the public dissemination of SBS 

transaction information. Proposed Rule 

902(a) would set out the core 

requirement that a registered SDR, 

immediately upon receipt of a SBS 

transaction report of a SBS, must 

publicly disseminate information about 

the SBS, except in the case of a block 

trade, that must consist of all the 

information reported by the reporting 

party pursuant to proposed Rule 901, 

plus any indicator or indicators 

contemplated by the registered SDR’s 

policies and procedures that are 

required by proposed Rule 907.313

Proposed Rule 902(b) would require a 

registered SDR to publicly disseminate 

a transaction report of a block trade 

immediately upon receipt of 

information about the block trade from 

the reporting party. The transaction 

report would consist of all the 

information reported by the reporting 

party pursuant to proposed Rule 901(c), 

except for the notional size, plus the 

transaction ID and an indicator that the 

report represents a block trade. The 

registered SDR would be required to 

publicly disseminate a complete 

transaction report for such block trade 

(including the transaction ID and the 

full notional size) at a later time. 

1. Benefits 

By reducing information asymmetries, 

post-trade transparency has the 

potential to lower transaction costs, 

improve confidence in the market, 

encourage participation by a larger 

number of market participants, and 

increase liquidity in the SBS market. 

The current market is opaque. Market 

participants, even dealers, lack an 

effective mechanism to learn the prices 

at which other market participants 

transact. In the absence of post-trade 

transparency, market participants do not 

know whether the prices they are 

paying or would pay are higher or lower 

than what others are paying for the same 

SBS instruments. Currently, market 

participants resort to ‘‘screen-scraping’’ 

e-mails containing indicative quotation 

information to develop a sense of the 

market. Supplementing that effort with 

prompt last-sale information would 

provide all market participants with 

more extensive and more accurate 

information on which to make trading 

and valuation determinations. 

SBSs are complex derivative 

instruments, and there exists no single 

accepted way to model a SBS for pricing 

purposes. Post-trade pricing and volume 

information could allow valuation 

models to be adjusted to reflect how 

SBS counterparties have valued a SBS 

instrument at a specific moment in time. 

Public, real-time dissemination of lastsale information also could aid dealers 

in deriving better quotations, because 

they would know the prices at which 

other market participants have recently 

traded. This information could aid end 

users in evaluating current quotations, 

because they could inquire from dealers 

why the quotations that the dealers are 

providing them differ from the prices of 

recently executed transactions. 

Furthermore, end users would be 

afforded the means of testing whether 

quotations offered by dealers before the 

last sale were close to the price at which 

the last sale was executed. In this 

manner, post-trade transparency could 

promote price competition and more 

efficient price discovery, and ultimately 

lower transaction costs in the SBS 

market. 

Post-trade transparency of SBSs, as 

required by proposed Rule 902, could 

benefit the financial markets generally 

by improving market participants’ 

ability to value SBSs, particularly if the 

trade information is used as an input to, 

rather than as a substitute for, 

independent valuations and pricing 

decisions by other market participants. 

In transparent markets with sufficient 

liquidity, valuations generally can be 

derived from recent quotations and/or 

last-sale prices. However, in opaque 

markets or markets with low liquidity, 

recent quotations or last-sale prices may 

not exist or, if they do exist, may not be 

widely available. Therefore, market 

participants holding assets that trade in 

opaque markets or markets with low 

liquidity frequently rely instead on 

pricing models. These models might be 

based on assumptions subject to the 

evaluator’s discretion, and can be 

imprecise. Thus, market participants 

holding the same asset but using 

different valuation models might arrive 

at significantly different values for the 

same asset. 

Valuation models could be improved 

to the extent that they consider last-sale 

reports of the asset to be valued, reports 

of related assets, or reports of 

benchmark products that include the 

asset to be valued or closely related 

assets, even if those reports are dated. 

There is evidence to suggest that posttrade transparency helps reduce the 

range of valuations of assets that trade 

in illiquid markets.314 Thus, post-trade 

transparency in the SBS market could 

result in more accurate valuations of 

SBSs generally—particularly if trade 

information is used as an input to, 


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315 15 U.S.C. 78m(m)(1)(E)(iv). 

rather than a substitute for, independent 

valuations by other market 

participants—as it would allow all 

market participants to know how SBS 

counterparties priced the SBS at a 

specific point in time. Especially with 

complex instruments, investment 

decisions generally are predicated a 

significant amount of due diligence to 

value the instruments properly. A posttrade transparency system permits other 

market participants to derive at least 

some informational benefit from 

obtaining the views of the two 

counterparties who did a particular 

trade. 

Furthermore, better valuations could 

create a benefit in the form of more 

efficient capital allocation, which is 

premised on accurate knowledge of 

asset prices. Asset prices that are too 

high could result in a misallocation of 

capital, as investors demand more of an 

asset that cannot deliver an economic 

risk-adjusted return. By the same token, 

assets that are inappropriately 

undervalued could represent investment 

opportunities that will likely not receive 

enough capital because investors do not 

realize that a good risk-adjusted return 

is available. To the extent that posttrade transparency of SBS transactions 

enables asset valuations to move closer 

to their fundamental value, capital 

could be more efficiently allocated. 

Better valuations resulting from posttrade transparency of SBSs also could 

reduce prudential and systemic risks. 

Some financial institutions, including 

many of the most systemically 

important financial institutions, have 

large portfolios of SBSs. The financial 

system could benefit if the portfolios of 

these institutions were more accurately 

valued. To the extent that post-trade 

transparency affirms the valuation of an 

institution’s portfolio, regulators, the 

individual firm, and the market as a 

whole could be more certain as to 

whether the firm would or would not 

pose prudential or systemic risks. In 

some cases, however, post-trade 

transparency in the SBS market might 

cause an individual firm to revalue its 

positions and lower the overall value of 

its portfolio. The sooner that accurate 

valuations can be made, the more 

quickly that regulators and the 

individual firm could take appropriate 

steps to minimize the firm’s prudential 

risk profile, and the more quickly that 

regulators and other market participants 

could take appropriate steps to address 

any systemic risk concerns raised by 

that firm. 

In addition, proposed Rule 902 is 

designed to maximize the availability of 

information regarding SBS transactions 

to all market participants in a way that 

the Commission preliminarily believes 

‘‘take[s] into account whether the public 

disclosure will materially reduce market 

liquidity.’’ 315 Post-trade transparency, 

as contemplated by proposed Rule 902, 

could reduce information asymmetries 

among SBS market participants and 

thereby benefit market liquidity in at 

least two ways. First, it could reduce the 

informational asymmetries between 

market participants, allowing dealers to 

set quotes using information beyond 

their own order flow. This could help 

smaller dealers or other market 

participants to enter the market by 

reducing the informational advantage 

and bargaining power of large dealers. 

Second, investors with hedging needs 

who are at an informational 

disadvantage to dealers and would have 

more information as to trade prices. 

Such investors also could more 

accurately price the trade, which would 

encourage their participation in the SBS 

market. Better informed market 

participation by both dealers and 

investors—through greater fairness in 

access to relevant pricing information— 

could result in benefits in the form of an 

increase in overall market liquidity. 

Finally, real-time public 

dissemination of SBS transaction 

reports could have effects on the overall 

volume of the SBS market, which could 

have certain benefits. Greater 

transparency could result in greater 

confidence in the SBS market, resulting 

in more market participants being 

willing to trade, or the same number of 

market participants being willing to 

trade more often. These additional 

transactions could result in better 

allocation of risk across the financial 

system. On the other hand, there could 

be a benefit even if fewer SBS 

transactions occur because of proposed 

Regulation SBSR. This could be the case 

if market participants that are unable or 

unwilling to properly manage the 

attendant risks of participation in the 

SBS market are deterred from 

participating, or if there were a 

reduction in the number of SBS 

transactions where there is a significant 

information asymmetry between the 

counterparties. In the latter case, there 

could be a benefit if uninformed parties 

are deterred from unwittingly taking on 

imprudent positions in SBSs. 

2. Costs 

A potential cost of post-trade 

transparency that is often cited by 

market participants, particularly 

dealers, is that it increases inventory 

risks. Dealers often enter trades with 

their customers as a liquidity supplier. 

A potential consequence of post-trade 

transparency is that dealers trying to 

hedge inventory following a trade are 

put in a weaker bargaining position 

relative to subsequent counterparties, 

and will either raise the liquidity fee 

charged to their clients or refuse to 

accommodate such trades. Such 

behavior could lead to lower trading 

volume and reduce the ability of market 

participants to manage risk, both of 

which could have a negative welfare 

effect on all market participants. 

In an opaque market, market 

participants have to rely primarily on 

their understanding of the market’s 

fundamentals to arrive at a price at 

which they would be willing to assume 

risk. With immediate real-time public 

dissemination of a block trade, however, 

market participants who might be 

willing to offset that risk—i.e., other 

dealers and natural shorts—could 

extract rents from a dealer that takes a 

large risk position from a counterparty. 

Because the initial dealer would not 

internalize those higher costs, it would 

most likely seek to pass those costs on 

to the counterparty in the form of a 

higher price for the initial SBS. This 

could lead to less liquidity in the SBS 

market, and thus lower trading volume 

and less ability for market participants 

to manage risk. It also might be argued 

that increased post-trade transparency 

could drive large trades to other markets 

that offer the opacity desired by traders, 

creating fragmentation and harming 

price efficiency and liquidity. This 

possibility is consistent with the 

argument that large, informed traders 

may prefer a less transparent trading 

environment that allows them to 

minimize the price impact of their 

trades. Real-time public dissemination 

of SBS transaction information, 

therefore, could cause certain market 

participants to trade less frequently or to 

exit the market completely. It would be 

difficult at this stage to estimate the 

likelihood of this occurring and, if does 

occur, what the costs would be. The 

Commission invites comment on this 

issue. 

Another potential cost of post-trade 

transparency in the SBS market, as 

contemplated by proposed Rule 902, is 

that last-sale prints, particularly in 

infrequently traded products, could be 

the result of unusual conditions that do 

not reflect the economic fundamentals 

of the SBS instrument. For instance, if 

a large market participant failed 

resulting in the liquidation of its 

portfolio, fire sale prices could have the 

effect of requiring other market 

participants to unduly mark down the 

value of their portfolios. This could 

cause additional market stress, 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 75269 

316See SDR Registration Proposing Release, supra 

note 6. 

317See Section V.D.2 (SDR Duties, Data 

Collection and Maintenance, Automated Systems, 

and Direct Electronic Access) of the SDR 

Registration Proposing Release. This estimate is 

based on the input from potential SDRs and 

includes time necessary to design and program a 

registered SDR’s system to calculate and 

disseminate initial and end of day block trade 

reports as well as annual costs associated with 

systems testing and maintenance necessary for the 

special handling of block trades. These figures do 

not include the development of policies and 

procedures necessary to calculate block trade 

thresholds pursuant to proposed Rule 907(b). 

318The Commission derived this estimate from 

the following: [ (Attorney (1,400 hours) at $316 per 

hour) + (Compliance Manager (1,600 hours) at $294 

per hour) + (Programmer Analyst (4,000 hours) at 

$190 per hour) + (Senior Business Analyst (1,400 

hours) at $234 per hour) × (10 registered SDRs)) + 

($2,000,000 for necessary hardware and software)] 

= $40,004,000. See SDR Registration Proposing 

Release, supra note 6 at Section VI.B.2 (estimating 

the total cost associated with establishing SDR 

technology systems). 

319The Commission derived this estimate from 

the following: [(Attorney (840 hours) at $316 per 

hour) + (Compliance Manager (960 hours) at $294 

per hour) + (Programmer Analyst (2,400 hours) at 

$190 per hour) + (Senior Business Analyst (840 

hours) at $234 per hour) × (10 registered SDRs)) + 

($1,200,000 for necessary hardware and software 

upgrades)] = $24,002,400. See SDR Registration 

Proposing Release, supra note 6, at Section VI.B.2 

(estimating the annual ongoing cost associated with 

operating and maintaining SDR technology 

systems). 

320This estimate is based on the following: 

[(($4,000,400) + ($2,400,240)) × (10 registered 

SDRs)] = $64,006,400, which corresponds to 

$6,400,640 per registered SDR. 

321See SDR Registration Proposing Release, supra 

at note 6. 

particularly through the triggering of 

additional margin calls. In these 

circumstances, independent evaluations 

and decision-making that incorporates 

post-trade information can be important 

to stabilizing the markets. 

Simultaneously with this proposal, 

the Commission is proposing new Rules 

13n–1 through 13n–11 under the 

Exchange Act relating to the SDR 

registration process, the duties of SDRs, 

and their core principles.316 The SDR 

Registration Proposing Release covers 

anticipated collections of information 

with respect to various aspects of 

establishing and operating an SDR, 

including its start-up and ongoing 

operations, and describes the costs that 

complying with the proposed rules 

would entail. The Commission 

preliminarily believes that a registered 

SDR would be able to integrate the 

functions outlined in new Rules 13n–1 

through 13n–11 with the capability to 

publicly disseminate real-time SBS 

transaction reports required under 

proposed Rule 902 as part of its overall 

system development. Accordingly, the 

Commission believes that the costs 

associated with enabling and 

maintaining compliance with proposed 

Rule 902 would, as a practical matter, 

represent a portion of the SDR’s overall 

systems development budget and 

process. For purposes of the PRA, the 

Commission preliminarily estimated 

that implementing and complying with 

the real-time public dissemination 

requirement of proposed Rule 902 

would add an additional 20% to the 

start-up and ongoing operational 

expenses that would otherwise be 

required of a registered SDR.317

On this basis, the Commission 

preliminarily estimates that the initial 

one-time aggregate costs associated with 

real-time public dissemination for 

development and implementation of the 

systems needed to disseminate the 

required transaction information and for 

necessary software and hardware would 

be $40,004,000 million, which 

corresponds to $4,000,400 per registered 

SDR.318 In addition, the Commission 

preliminarily estimates that aggregate 

annual costs for systems and 

connectivity upgrades associated with 

real-time public dissemination would be 

$24,002,400 million, which corresponds 

to $2,400,240 per registered SDR.319

Thus, the initial aggregate costs 

associated with proposed Rule 902 

would be $64,006,400, which 

corresponds to $6,400,640 per registered 

SDR.320

The SDR Registration Proposed Rules 

also address additional costs on 

registered SDRs that are not included 

here.321

3. Request for Comment 

The Commission requests comment 

on the costs and benefits of proposed 

Rule 902 discussed above, as well as 

any costs and benefits not already 

described that could result. The 

Commission also requests data to 

quantify any potential costs or benefits. 

In addition, the Commission requests 

comment on the following: 

258. What would be the costs and 

benefits of post-trade transparency in 

the SBS market, both in the long and the 

short term? How would post-trade 

transparency alter the existing market 

structure? 

259. How would post-trade 

transparency in the SBS market affect 

the ability to hedge? Would hedging 

become more costly or less costly over 

time? Why? 

260. Would post-trade transparency 

have the same costs and benefits on the 

SBS market similar as on other 

securities markets? Why or why not? 

261. The SBS market is currently 

almost wholly institutional. Would this 

characteristic impact the costs and 

benefits of post-trade transparency on 

the SBS market? If so, how and how 

much? Are the needs of market 

participants in the SBS market for 

access to transaction information 

different than the needs of market 

participants in other securities markets 

for access to transaction information? 

262. A significant amount of trading 

in the SBS market is currently carried 

out by only a limited number of market 

participants. Would this characteristic 

impact the costs and benefits of posttrade transparency on the SBS market? 

If so, how and how much? For example, 

is there a concern that it would be easier 

to determine the identity of the 

counterparties to a SBS transaction in 

certain instances based on the real-time 

transaction report? If so, what would be 

the harm, if any, of such knowledge? 

Would the answer differ depending 

upon the liquidity of the SBS 

instrument, or whether it was a 

customized SBS or not? 

263. The SBS market is generally 

more illiquid than other securities 

markets that have post-trade 

transparency regimes. How would this 

characteristic impact, if at all, the effect 

the costs and benefits of post-trade 

transparency on the SBS market? Do 

commenters believe that post-trade 

transparency could materially reduce 

market liquidity in the SBS market, or 

particular subsets thereof? Why and 

how? Please be specific in your 

response and provide data to the extent 

possible. 

264. How would a post-trade 

transparency regime in SBSs affect the 

costs of trading in the underlying 

securities? For example, how, if at all, 

would the post-trade transparency 

regime affect liquidity in the corporate 

bond market? 

265. Academic studies of other 

securities markets generally have found 

that post-trade transparency reduces 

transaction costs and has not reduced 

market liquidity. How do those markets 

differ or compare to the SBS market? 

How would those similarities or 

differences affect post-trade 

transparency in the SBS market? 

266. Do commenters believe that posttrade transparency could materially 

reduce market liquidity in the SBS 

market, or particular subsets thereof? 

Why and how? 

267. Would proposed Rule 902 create 

any additional costs or benefits not 

discussed here? 

268. Are there any ways that the 

Commission can study the costs and 

benefits of the dissemination delay for 

the size of a block trade by creating 

different initial requirements by entities 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
75270 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

322The Commission is aware of one such product 

identification system that involves six-digit 

reference entity identifiers and three-digit reference 

obligations identifiers as well as a standard threedigit maturity identifier. 

323See SDR Registration Proposing Release, supra 

note 6. 

or assets classes as part of the phase-in 

of the rule? 

D. Coded Information—Rule 903 of 

Regulation SBSR 

To facilitate the reporting and 

dissemination of SBS transactions, as 

would be required under proposed 

Rules 901 and 902, the Commission 

understands that there may—or could 

be developed—industry conventions for 

identifying SBSs or reference entities on 

which SBS are based through readily 

available reference codes. Proposed 

Rule 903 addresses this possibility. 

Specifically, proposed Rule 903 would 

provide that a reporting party could 

provide information to a registered SDR 

pursuant to proposed Rule 901, and a 

registered SDR could publicly 

disseminate information pursuant to 

proposed Rule 902, using codes in place 

of certain data elements, provided that 

the information necessary to interpret 

such codes is widely available on a nonfee basis. 

1. Benefits 

The use of such codes by a registered 

SDR and its participants could give rise 

to significant potential benefits. First, 

the use of codes could greatly improve 

the efficiency and accuracy of the trade 

reporting system by streamlining the 

provision of data to the registered SDR. 

Reporting just the code could replace 

several data elements that otherwise 

would have to be reported separately. 

Second, the development of a public 

coding system could also support 

greater transparency. Coded transaction 

reports with key identifying information 

for SBS transactions could facilitate the 

aggregation of market transactions, 

particularly when the records are 

dispersed across different registered 

SDRs. Third, the aggregation of SBS 

transaction data through codes would 

also facilitate more efficient market 

analysis studies, surveillance activities, 

and system risk monitoring by 

regulators by streamlining the 

presentation of the SBS transaction data. 

Without robust, common identifying 

information, the process of aggregating 

market data across asset classes and 

entities could be impaired, increasing 

the effort required for market analysis 

activities. 

2. Costs 

Proposed Rule 903 could impose 

certain costs on current SBS market 

participants. Some SBS market 

participants have developed private 

coding systems.322 To the extent that 

these systems are not widely available, 

proposed Rule 903 would prohibit their 

adoption for use by registered SDRs and 

their participants in connection with the 

reporting and dissemination of SBS 

transactions required under proposed 

Regulation SBSR. Consequently, the 

owners of these systems may no longer 

be able to market and generate income 

(i.e., licensing fees) from these systems, 

or recover development costs associated 

with their systems. 

The Commission preliminarily 

believes that proposed Rule 903 would 

not impose any material costs on 

registered SDRs or their participants. 

The development and use of a coding 

system that is widely available on a 

non-fee basis would instead likely 

reduce the costs associated with 

reporting and disseminating SBS 

transactions as required under proposed 

Rules 901 and 902, as market 

participants would not have to incur 

any fees to use codes. 

3. Request for Comment 

The Commission requests comment 

on the costs and benefits of proposed 

Rule 903 discussed above, as well as 

any costs and benefits not already 

described that could result. The 

Commission also requests data to 

quantify any potential costs or benefits. 

In addition, the Commission requests 

comment on the following: 

269. How can the Commission more 

accurately estimate the costs and 

benefits? 

270. Would proposed Rule 903 entail 

any benefits or costs not considered by 

the Commission? 

271. Are there costs the Commission 

has not considered with respect to the 

use of coding systems that are widely 

available on a non-fee basis? Would the 

use of these coding systems in fact 

reduce the costs associated with the 

obligations under proposed Rules 901 

and 902? 

272. Are there coding systems that are 

widely available on a non-fee basis? 

What, if any, costs may be associated 

with requiring the use of a coding 

system that is widely available on a 

non-fee basis? 

273. What would be the costs and 

benefits of permitting the use of codes 

that are available for a fee? Could 

allowing the use of such codes create a 

regulatory monopoly in favor of the 

owner of the code’s intellectual 

property? 

E. Operating Hours of Registered 

SDRs—Rule 904 of Regulation SBSR 

Proposed Rule 904 would require a 

registered SDR to design its systems to 

allow for continuous receipt and 

dissemination of SBS data, except that 

a registered SDR would be permitted to 

establish ‘‘normal closing hours.’’ Such 

normal closing hours may occur only 

when, in the estimation of the registered 

SDR, the U.S. markets and other major 

markets are inactive. In addition, a 

registered SDR would be permitted to 

declare, on an ad hoc basis, special 

closing hours to perform routine system 

maintenance, subject to certain 

requirements. 

1. Benefits 

The Commission preliminarily 

believes that it would be beneficial to 

require a registered SDR to continuously 

receive and disseminate SBS transaction 

information. The market for SBS is 

global, and the Commission believes the 

public interest would be served by 

requiring continuous real-time 

dissemination of any SBS transactions 

(with a sufficient nexus to the United 

States to require reporting into a 

registered SDR), no matter when they 

are executed. Thus, if U.S. participants 

execute SBSs in Japan while the U.S. 

markets are closed, market participants 

around the word would still be able to 

view real-time reports of such 

transactions. Further, the Commission 

believes a continuous dissemination 

regime would eliminate the temptation 

for market participants to defer 

execution of SBS transactions until after 

regular business hours to avoid realtime post-trade transparency. 

Paragraphs (c) to (e) of proposed Rule 

904 would specify requirements for 

handling and disseminating reported 

data during a registered SDR’s normal 

and special closing hours. The 

Commission believes that these 

provisions would provide benefits in 

that they clarify how SBSs executed 

while a registered SDR is in normal or 

special closing hours would be reported 

and disseminated. 

2. Costs 

The Commission believes that a 

registered SDR would not incur 

significant costs in connection with 

proposed Rule 904. The Commission 

today is also proposing Rules 13n–1 

through 13n–11 under the Exchange Act 

that would deal with SDR registration, 

duties, data collection and maintenance, 

automated systems and other issues.323

That proposal covers expenses with 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 75271 

324The Commission derived this number as 

follows: [(Operations Specialist (24 hours) at $114 

per hour) × (10 potential registered SDRs)] = 

$27,360, which corresponds to $2,736 per registered 

SDR. 

325The Commission preliminarily believes that 

the actual submission of amended transaction 

reports required under proposed Rule 905(a)(2) 

would not result in material, independent costs 

because this would be done electronically though 

the reporting system that the reporting party must 

develop and maintain to comply with proposed 

Rule 901. The costs associated with such a 

reporting system are addressed in the Commission’s 

analysis of proposed Rule 901. See supra Section 

XIV.B.2 and notes 298–301. 

326See supra notes 298 and 299. 

327See supra notes 302 and 303. 

328This figure is calculated as follows: [((($46,657 

one-time development of reporting system) × (0.05)) 

+ (($5,400 annual maintenance of reporting system) 

× (0.05)) + (($51,590 one-time compliance program 

development) × (0.1)) + (($36,572 annual support of 

compliance program) × (0.1))) × (1,000 reporting 

parties)] = $11,419,000, which is $11,419 per 

reporting party. 

329This figure is calculated as follows: [((($5,400 

annual maintenance of reporting system) × (0.05)) 

+ (($36,572 annual support of compliance program) 

× (0.1))) × (1,000 reporting parties)] = $3,927,000, 

which is $3,927 per reporting party. 

respect to many aspects of establishing 

and operating an SDR, including, 

implicitly, its hours of operation. 

The requirement for a registered SDR 

to provide reasonable advance notice to 

participants and to the public of its 

normal and special closing hours, and to 

provide notice to participants that the 

SDR is available to accept transaction 

data after its system was unavailable 

would likely entail a only a modest 

annual cost. The Commission 

preliminarily estimates that the initial 

and ongoing aggregate annual cost 

would be $27,360, which corresponds to 

$2,736 per registered SDR.324

There would be additional costs, but 

these costs are subsumed in the costs 

associated with proposed Rules 901 and 

902. For example, the requirement for 

reporting parties to report information 

to the registered SDR upon receiving a 

notice that the registered SDR has 

resumed its normal operations would be 

part of the reporting parties’ reporting 

obligations under proposed Rule 901. 

The requirement to disseminate 

transaction reports held in queue should 

not present any costs in addition to 

those already contained in proposed 

Rule 902. 

3. Request for Comment 

The Commission requests comment 

on the costs and benefits of proposed 

Rule 904 discussed above, as well as 

any costs and benefits not already 

described. The Commission also 

requests data to quantify any potential 

costs or benefits. In addition, the 

Commission requests comment on the 

following: 

274. How can the Commission more 

accurately estimate the costs and 

benefits for handling and disseminating 

reported SBS transaction data during a 

registered SDR’s normal and special 

closing hours? 

275. Would proposed Rule 904 create 

any additional costs or benefits not 

discussed here? 

F. Correction of Errors in Security-Based 

Swap Information—Rule 905 of 

Regulation SBSR 

Proposed Rule 905(a) would establish 

procedures for correcting errors in 

reported and disseminated SBS 

information, recognizing that that any 

system for transaction reporting must 

accommodate for the possibility that 

certain data elements may be incorrectly 

reported. Proposed Rule 905(b) would 

set forth the duties of a registered SDR 

to verify disputed information and make 

necessary corrections. If the registered 

SDR either discovers an error in a 

transaction on its system or receives 

notice of an error from a counterparty, 

proposed Rule 905(b)(1) would require 

the registered SDR to verify the accuracy 

of the terms of the SBS and, following 

such verification, promptly correct the 

erroneous information contained in its 

system. Proposed Rule 905(b)(2) would 

further require that, if the erroneous 

transaction information contained any 

data that fall into the categories 

enumerated in proposed Rule 901(c) as 

information required to be reported in 

real time, the registered SDR would be 

required to publicly disseminate a 

corrected transaction report of the SBS 

promptly following verification of the 

trade by the counterparties to the SBS. 

1. Benefits 

The Commission preliminarily 

believes that proposed Rule 905 would 

enhance the overall reliability of SBS 

transaction data that would be required 

to be reported. Requiring participants to 

promptly correct erroneous transaction 

information should help ensure the 

timeliness, accuracy, and completeness 

of reported transaction information. 

Providing more accurate SBS 

transaction data to a registered SDR 

could benefit participants by helping 

them ensure that their books are marked 

accurately and reduce operational risks 

that arise when counterparties do not 

have the same understanding of the 

details of a SBS transaction. 

Furthermore, requiring corrected SBS 

transaction information be reported to a 

registered SDR helps ensure that the 

Commission and other regulars have an 

accurate view of the prudential and 

systemic risks in the SBS market. 

2. Costs 

The Commission preliminarily 

believes that promptly submitting an 

amended transaction report to the 

appropriate registered SDR after 

discovery of an error as required under 

proposed Rule 905(a)(2) would impose 

costs on reporting parties. Likewise, the 

Commission preliminarily believes that 

promptly notifying the relevant 

reporting party after discovery of an 

error as required under proposed Rule 

905(a)(1) would impose costs on nonreporting-party participants. 

With respect to reporting parties, the 

Commission preliminarily believes that 

proposed Rule 905(a) would impose an 

initial, one-time cost associated with 

designing and building the reporting 

party’s reporting system to be capable of 

submitting amended SBS transactions to 

a registered SDR. In addition, reporting 

parties would face ongoing costs 

associated with supporting and 

maintaining the error reporting 

function.325

The Commission preliminarily 

believes that designing and building 

appropriate reporting system 

functionality to comply with proposed 

Rule 905(a)(2) would be a component of, 

and represent an incremental ‘‘add-on’’ 

to, the cost to build a reporting system 

and develop a compliance function as 

required under proposed Rule 901. 

Based on discussions with industry 

participants, the Commission 

preliminarily estimates this incremental 

burden to be equal to 5% of the onetime and annual costs associated with 

designing and building a reporting 

system that is in compliance with 

proposed Rule 901,326 plus 10% of the 

corresponding one-time and annual 

costs associated with developing the 

reporting party’s overall compliance 

program required under proposed Rule 

901.327 Thus, for reporting parties, the 

Commission preliminarily estimates 

that proposed Rule 905(a) would impose 

an initial (first-year) aggregate cost of 

$11,419,000, which is $11,419 per 

reporting party,328 and an ongoing 

aggregate annualized burden of 

$3,927,000, which is $3,927 per 

reporting party.329

With regard to non-reporting-party 

participants, the Commission 

preliminarily believes that proposed 

Rule 905(a) would impose an initial and 

ongoing cost associated with promptly 

notifying the relevant reporting party 

after discovery of an error as required 

under proposed Rule 905(a)(1). The 

Commission preliminarily estimates 

that such annual cost would be 

$172,280,000, which corresponds to 

$43,070 per non-reporting-party 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
75272 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

330This figure is based on the following: [(4 error 

notifications per non-reporting-party participant per 

day) × (365 days/year) × (Compliance Clerk (0.5 

hours/report) at $59 per hour) × (4,000 nonreporting-party participants)] = $172,280,000, 

which corresponds to $43,070 per non-reportingparty participant. The Commission preliminarily 

believes that participants already monitor their SBS 

transactions and positions in the ordinary course of 

business. Thus, the Commission preliminary 

believes that, as a practical matter, proposed Rule 

905 would not result in any significant new 

burdens for these participants. 

331This figure is based on the following: 

[((15,458,824 estimated annual SBS transactions)/ 

(4,000 estimated non-reporting-party participants))/ 

(365 days/year)] = 10.58, or approximately 11 

transactions per day. See supra note 185. The 

Commission understands that many of these 

transactions may arise from previously executed 

SBS transactions. 

332 In other words, the Commission is estimating 

that one-third of all SBS transactions will require 

an amended report to be submitted to the registered 

SDR pursuant to proposed Rule 905(a). For 

purposes of its PRA analysis, the Commission is 

further assuming that both the non-reporting-party 

participant and the reporting party discover all 

errors. The Commission recognizes that, as a 

practical matter, there may be instances where one 

party fails to detect an error. 

333See SDR Registration Proposing Release, supra 

note 6. 

334See id. 

335This figure is based on the following: [(Sr. 

Programmer (80 hours) at $285 per hour) + 

(Compliance Manager (160 hours) at $294 per hour) 

+ (Compliance Attorney (250 hours) at $291 per 

hour) + (Compliance Clerk (120 hours) at $59 per 

hour) + (Sr. Systems Analyst (80 hours) at $251 per 

hour) + (Director of Compliance (40 hours) at $426 

per hour) = $186,790. 

336This figure is based on the following: [(Sr. 

Programmer (160 hours) at $285 per hour) + 

(Compliance Manager (320 hours) at $294 per hour) 

+ (Compliance Attorney (500 hours) at $291 per 

hour) + (Compliance Clerk (240 hours) at $59 per 

hour) + (Sr. Systems Analyst (160 hours) at $251 

per hour) + (Director of Compliance (80 hours) at 

$426 per hour)] = $373,580. 

337This figure is based on the following: 

[($186,790 to develop protocols) + ($373,580 for 

annual support)) × (10 registered SDRs)] = 

$5,603,700, which corresponds to $560,370 per 

registered SDR. 

338This figure is based on the following: 

[($373,580 for annual support per registered SDR) 

× (10 registered SDRs)] = $3,735,800, which 

corresponds to $373,580 per registered SDR. 

participant.330 This figure is based on 

the Commission’s preliminary estimates 

of (1) 4,000 non-reporting-party 

participants; (2) 11 transactions per day 

per non-reporting-party participant;331

and (3) an error rate of one-third 

(33%),332 or approximately 4 

transactions per day per non-reportingparty participant. 

For registered SDRs, the ability to 

verify disputed information, process a 

transaction report cancellation, accept a 

new SBS transaction report, and update 

relevant records are all capabilities that 

the registered SDR would have to 

implement to comply with its 

obligations under proposed Regulation 

SDR.333 Likewise, a registered SDR 

would be required to have the capacity 

to re-disseminate SBS transaction 

reports pursuant to proposed Rule 902. 

The Commission preliminarily believes 

that the costs associated with 

establishing these capabilities, 

including systems development, 

support, and maintenance, are largely 

addressed in the Commission’s analysis 

of those rules.334 The Commission 

preliminarily estimates that to develop 

and publicly provide the necessary 

protocols for carrying out these 

functions would impose on each 

registered SDR a cost of $186,790.335

The Commission estimates that to 

review and update such protocols 

would impose an annualized cost on 

each registered SDR of $373,580.336

Accordingly, the Commission 

preliminarily estimates that the initial 

aggregate annualized cost on registered 

SDRs under proposed Rule 905 would 

be $5,603,700, which corresponds to 

$560,370 for each registered SDR.337

The Commission further preliminarily 

estimates that the ongoing aggregate 

annualized cost on registered SDRs 

under proposed Rule 905 would be 

$3,735,800, which corresponds to 

$373,580 for each registered SDR.338

3. Request for Comment 

The Commission requests comment 

on the costs and benefits of proposed 

Rule 905 discussed above, as well as 

any costs and benefits not already 

described that could result. The 

Commission also requests data to 

quantify any potential costs or benefits. 

In addition, the Commission requests 

comment on the following: 

276. How can the Commission more 

accurately estimate the costs and 

benefits related to correcting errors in 

reported and disseminated SBS 

information? 

277. Would proposed Rule 905 create 

any additional costs or benefits not 

discussed here? 

G. Other Duties of Participants—Rule 

906 of Regulation SBSR 

Proposed Rule 906(a) would set forth 

a procedure designed to ensure that a 

registered SDR obtains relevant ID 

information for both counterparties to a 

SBS, not just the IDs of the reporting 

party. Proposed Rule 906(a) would 

require a registered SDR to identify any 

SBS reported to it for which it does not 

have participant ID and (if applicable) 

broker ID, desk ID, and trader ID of each 

counterparty. For such transactions, the 

registered SDR would be required to 

send a report, once a day, to each 

participant seeking the missing 

information. Under proposed Rule 

906(a), a participant that receives such 

a report would be required to provide 

the missing ID information to the 

registered SDR within 24 hours. 

Proposed Rule 906(b) would require 

participants to provide a registered SDR 

with information identifying the 

participant’s affiliate(s) that may also be 

participants of the registered SDR, as 

well as its ultimate parent(s). 

Additionally, under proposed Rule 

906(b) participants would be required to 

promptly notify the registered SDR of 

any changes to the information 

previously provided. 

Proposed Rule 906(c) would require a 

participant that is a SBS dealer or major 

SBS participant to establish, maintain, 

and enforce written policies and 

procedures that are reasonably designed 

to ensure compliance with any SBS 

transaction reporting obligations in a 

manner consistent with proposed 

Regulation SBSR and the registered 

SDR’s applicable policies and 

procedures. In addition, proposed Rule 

906(c) would require each such 

participant to review and update its 

policies and procedures at least 

annually. 

1. Benefits 

The Commission preliminarily 

believes that proposed Rule 906(a) 

would enable each registered SDR to 

obtain more complete records, 

consistent with the goals of the DoddFrank Act. Also, proposed Rule 906(a) 

would provide regulators with a more 

comprehensive picture of SBS 

transactions, thus enabling more robust 

surveillance and supervision of the SBS 

markets. More complete SBS records 

would provide the Commission 

necessary information to investigate 

specific transactions and respond 

effectively when issues arise in the SBS 

markets. 

Proposed Rule 906(b) is designed to 

enhance the Commission’s ability to 

monitor and surveil the SBS markets. 

Obtaining this ultimate parent(s) and 

affiliate(s) information would be helpful 

for understanding the risk profile of not 

only individual counterparties, but for 

large financial groups. The Commission 

further preliminarily believes that it is 

important that the participants promptly 

notify the registered SDR of any changes 

to the information regarding ultimate 

parent(s) and affiliate(s), as this would 

impact the value of the data that the 

registered SDR would be retaining for 

regulatory purposes. 

Furthermore, proposed Rule 906(b) 

could result in significant benefits by 

encouraging the creation and 

widespread use of generally accepted 

standards for reference information. The 

Commission understands that some 

efforts have been undertaken—in both 


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339The Commission derived its estimate from the 

following: [(Senior Systems Analyst (40 hours) at 

$251 per hour) + (Sr. Programmer (40 hours) at $285 

per hour) + (Compliance Manager (16 hours) at 

$294 per hour) + (Director of Compliance (8 hours) 

at $426 per hour) + (Compliance Attorney (8 hours) 

at $291)] = $30,832. 

340The Commission derived its estimate from the 

following: [(Senior Systems Analyst (24 hours) at 

$251 per hour) + (Sr. Programmer (24 hours) at $285 

per hour) + (Compliance Clerk (260 hours) at $59 

per hour)] = $29,244. 

341The Commission derived its estimate from the 

following: [($30,832 + $29,244) × (10 registered 

SDRs)] = $600,760, which corresponds to $60,076 

per registered SDR. 

342The Commission derived its estimate from the 

following: [($29,244) × (10 registered SDRs)] = 

$292,440, which corresponds to $29,244 per 

registered SDR. 

343This figure is based on the following: [(7 

missing information reports per participant per day) 

× (365 days/year) × (Compliance Clerk (0.1 hours) 

at $59 per hour) × (5,000 participants)] = 

$75,372,500, which corresponds to $15,074.50 per 

participant. 

344This figure is based on the following: 

[((15,458,824 estimated annual SBS transactions)/ 

(5,000 estimated participants))/(365 days/year)] = 

8.47, or approximately 9 transactions per day. See 

supra note 290. The Commission understands that 

many of these transactions may arise from 

previously executed SBS transactions. 

the private and public sectors, both 

domestically and internationally—to 

establish a comprehensive and widely 

accepted system for identifying entities 

that participate not just in the SBS 

market, but in the financial markets 

generally. Such a system would be of 

significant benefit to regulators 

worldwide, as each market participant 

could readily be identified using a 

single reference code regardless of the 

jurisdiction or product market in which 

the market participant was engaging. 

Such a system also could be of 

significant benefit to the private sector, 

as market participants would have a 

common identification system for all 

counterparties and reference entities, 

and would no longer have to use 

multiple proprietary nomenclature 

systems. The enactment of the DoddFrank Act and the establishment of a 

comprehensive system for reporting and 

dissemination of SBSs—and for 

reporting and dissemination of swaps, 

under jurisdiction of the CFTC—offer a 

unique opportunity to facilitate the 

establishment of a comprehensive and 

widely accepted system for identifying 

entities that participate not just in the 

SBS market, but in the financial markets 

generally. 

The Commission preliminarily 

believes that proposed Rule 906(c) 

could provide benefits to SBS market 

participants and the market as a whole. 

Proposed Rule 906(c) would enhance 

the overall reliability SBS transaction 

data that is required to be reported to a 

registered SDR pursuant to proposed 

Rule 901. Requiring SBS dealers and 

major SBS participants to adopt and 

maintain written policies and 

procedures addressing compliance with 

proposed Regulations SBSR should 

result in more reliable reporting of SBS 

transaction data. More reliable reporting 

would benefit counterparties to SBS 

transactions, and the market more 

generally, by increasing the usefulness 

of the disseminated data, and would 

benefit regulators using and analyzing 

the reported data. In addition, requiring 

participants that are SBS dealers or 

major SBS participants—the entities 

that engage in the most SBS 

transactions—to implement policies and 

procedures could reduce the incidence 

of outages, reporting system 

malfunctions, or interruptions by 

addressing how they may be prevented 

and, in the event one occurs, how it 

could be resolved with the least 

negative impact. 

The Commission preliminarily 

believes that requiring each participant 

that is a SBS dealer or major SBS 

participant to adopt and maintain 

written policies and procedures related 

to the reporting of SBS transactions may 

have additional benefits. Proposed Rule 

906(c) should foster compliance efforts 

more generally among participants. 

With written policies and procedures, a 

participant’s compliance with its 

reporting obligations would not be 

overly dependent on any specific 

individual. Higher quality reporting of 

SBS transaction data should generate 

greater confidence among SBS market 

participants and benefit the market as a 

whole. Over time, participants and the 

Commission also would be able to 

compare different approaches and 

develop best practices for the reporting 

of SBS transactions. Best practices 

would be valuable to the participants, 

the Commission, and market as a whole 

by supporting more complete and 

accurate SBS transaction reporting. 

Comparing the written policies and 

procedures adopted and maintained by 

covered participants would also support 

Commission supervision and oversight 

of SBS transaction reporting. For 

example, the failure of a SBS dealer or 

major SBS participant to adopt and 

maintain appropriate policies and 

procedures as required under proposed 

Rule 906(c) could serve as an important 

indicator of other compliance issues. 

Proposed Rule 906(c) could thus 

provide the Commission a means to 

address such concerns proactively. 

2. Costs 

Proposed Rule 906(a) would require a 

registered SDR, once a day, to send a 

report to each participant identifying, 

for each SBS to which that participant 

is a counterparty, the SBS(s) for which 

the registered SDR lacks participant ID 

and (if applicable) broker ID, desk ID, 

and trader ID. The Commission 

preliminarily estimates that each 

registered SDR would face a one-time, 

initial cost of $30,832 to create a report 

template and develop the necessary 

systems and processes to produce a 

daily report required by proposed Rule 

906(a).339 The Commission further 

preliminarily believes that there would 

be an ongoing annual cost for a 

registered SDR to generate and issue the 

daily reports, and to enter into its 

systems the ID information supplied by 

participants in response to the daily 

reports, of approximately $29,244.340

Accordingly, the Commission 

preliminarily estimates that the initial 

aggregate annualized cost for registered 

SDRs associated with proposed Rule 

906(a) would be approximately 

$600,760, which corresponds to $60,076 

per registered SDR.341 The Commission 

preliminarily estimates that the ongoing 

aggregate annualized cost for registered 

SDRs associated with proposed Rule 

906(a) would be approximately 

$292,440, which corresponds to $29,244 

per for registered SDR.342

Proposed Rule 906(a) would require a 

participant that receives a daily report 

from a registered SDR to provide the 

missing UICs to the registered SDR 

within 24 hours. Proposed Rule 906(a) 

would impose initial and ongoing costs 

on participants to complete and return 

the reports received from a registered 

SDR. The Commission preliminarily 

estimates that proposed Rule 906(a) 

would not result in any initial or 

ongoing costs for participants that are 

reporting parties. This estimate is based 

on the Commission’s preliminary belief 

that a reporting party would structure 

its reporting program to be in 

compliance with proposed Regulation 

SBSR, and consequently, would send 

complete information as relates to itself 

for each SBS transaction submitted to a 

registered SDR. The Commission further 

preliminarily estimates that proposed 

Rule 906(a) would result in an initial 

and ongoing aggregate annualized cost 

for participants of approximately 

$75,372,500, which corresponds to a 

cost of approximately $15,100 per 

participant.343 This figure is based on 

the Commission’s preliminary estimates 

of (1) 5,000 participants; (2) 9 

transactions per day per participant; 344

and (3) a missing information rate of 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
75274 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

345 In other words, the Commission is estimating 

that 80% of the time the reporting party would not 

know and thus would not be able to report the 

necessary UICs of its counterparty. Therefore, a 

registered SDR would have to obtain the missing 

UICs through the process described in proposed 

Rule 906(a). 

346This figure is based on the following: 

[(Compliance Clerk (0.5 hours) at $59 per hour) × 

(1 report)] = $29.50. 

347 During the first year, the Commission 

preliminarily believes each participant would 

submit its initial report and one update report. In 

subsequent years, the Commission preliminarily 

estimates that each participant would submit two 

update reports. 

348This figure is based on the following: [($29.50/ 

report) × (2 reports/year/SDR connection) × (2 SDR 

connections/participant) × (5,000 participants)] = 

$590,000, which corresponds to $118 per 

participant. 

349The Commission derived its estimate from the 

following: [(Sr. Programmer (40 hours) at $285 per 

hour) + (Compliance Manager (40 hours) at $294 

per hour) + (Compliance Attorney (40 hours) at 

$291 per hour) + (Compliance Clerk (40 hours) at 

$59 per hour) + (Sr. Systems Analyst (32 hours) at 

$251 per hour) + (Director of Compliance (24 hours) 

at $426 per hour)] = $52,440 per covered 

participant. 

350See supra note 256. 

351The Commission derived its estimate from the 

following: [(Sr. Programmer (8 hours) at $285 per 

hour) + (Compliance Manager (24 hours) at $294 

per hour) + (Compliance Attorney (24 hours) at 

$291 per hour) + (Compliance Clerk (24 hours) at 

$59 per hour) + (Sr. Systems Analyst (16 hours) at 

$251 per hour) + (Director of Compliance (24 hours) 

at $426 per hour)] = $29,736 per participant. 

352The Commission derived its estimate from the 

following: [($52,440 + $29,736) × (1,000 covered 

participants)] = $82,176,000. 

353The Commission derived its estimate from the 

following: [($29,736) × (1,000 covered participants)] 

= $29,736,000. 

354This figure is based on the following: 

[($600,760 for registered SDRs under proposed Rule 

906(a)) + ($75,372,500 for non-reporting-party 

participants under proposed Rule 906(a)) + 

($945,000 for participants under proposed Rule 

906(b)) + ($82,176,000 for covered participants 

under proposed Rule 906(c))] = $159,094,260. 

355This figure is based on the following: 

[($297,360 for registered SDRs under proposed Rule 

906(a)) + ($75,372,500 for non-reporting-party 

participants under proposed Rule 906(a)) + 

($945,000 for participants under proposed Rule 

906(b)) + ($29,736,000 for covered participants 

under proposed Rule 906(c))] = $106,350,860. 

80%,345 or approximately 7 transactions 

per day per participant. 

Proposed Rule 906(b) would require 

every participant to provide a registered 

SDR an initial parent/affiliate report, 

using ultimate parent IDs and 

participant IDs, and updating that 

information, as necessary. The 

Commission preliminarily estimates 

that the cost for each participant to 

submit an initial or update report would 

be $29.50.346 The Commission 

preliminarily estimates that each 

participant would submit two reports 

each year.347 In addition, the 

Commission preliminarily estimates 

that there may be 5,000 SBS participants 

and that each one may connect to two 

registered SDRs. Accordingly, the 

Commission preliminarily estimates 

that the initial and ongoing aggregate 

annualized cost associated with 

proposed Rule 906(b) would be 

$590,000, which corresponds to $118 

per participant.348

The Commission, in proposed 

Regulation SBSR, is not requiring the 

development of internationally 

recognized standards for reference 

information (such participant IDs or 

ultimate parent IDs) that could be used 

across the financial service industry. 

Therefore, the Commission believes that 

the costs of developing and sustaining 

such a system should not be considered 

costs of proposed Regulation SBSR. 

However, proposed Regulation SBSR 

would require a registered SDR and its 

participants to use UICs generated by 

such a system, if such system were able 

to generate such UICs. Although the 

Commission believes there would be 

long-term benefits for using UICs 

generated by such a system, there could 

be short-term costs imposed on 

reporting parties to convert to such a 

system. In addition, under these 

internationally recognized standards, 

users of the reference information could 

have to pay reasonable fees to support 

the system. These fees also would 

represent costs of proposed Rule 901. 

The Commission requests comment on 

this issue and any potential costs 

associated with the potential future use 

of internationally recognized standards. 

Proposed Rule 906(c) would require 

each participant that is a SBS dealer or 

major SBS participant to establish, 

maintain, and enforce written policies 

and procedures that are reasonably 

designed to ensure compliance with any 

SBS transaction reporting obligations in 

a manner consistent with proposed 

Regulation SBSR and the registered 

SDR’s applicable policies and 

procedures. Proposed Rule 906(c) would 

also require the review and updating of 

such policies and procedures at least 

annually. The Commission 

preliminarily estimates that developing 

and implementing written policies and 

procedures as required under the 

proposed rule could result in a one-time 

initial cost to each covered participant 

of approximately $52,440.349 Drawing 

on the Commission’s experience with 

other rules that require entities to 

establish and maintain policies and 

procedures,350 this figure includes the 

estimated cost to develop a set of 

written policies and procedures, 

program systems, implement internal 

controls and oversight, train relevant 

employees, and perform necessary 

testing. In addition, the Commission 

preliminarily estimates that the 

annualized cost to maintain such 

policies and procedures, including a full 

review at least annually, as required 

under the proposed rule, would be 

approximately $29,736 for each covered 

participant.351 This figure is based on an 

estimate of the cost to review existing 

policies and procedures, make any 

necessary updates, conduct ongoing 

training, maintain relevant systems and 

internal controls systems, and perform 

necessary testing. 

Accordingly, the Commission 

preliminarily estimates that the initial 

aggregate annualized cost associated 

with proposed Rule 906(c) would be 

approximately $82,176,000, which 

corresponds to $82,176 per covered 

participant.352 The Commission 

preliminarily estimates that the ongoing 

aggregate annualized cost associated 

with proposed Rule 906(c) would be 

approximately $29,736,000, which 

corresponds to $29,736 per covered 

participant.353

In total, the Commission preliminarily 

believes that proposed Rule 906 would 

result in an initial, aggregate annualized 

cost of $159,094,260,354 and an ongoing, 

aggregate annualized cost of 

$106,350,860 for all covered entities.355

3. Request for Comment 

The Commission requests comment 

on the costs and benefits of proposed 

Rule 906 discussed above, as well as 

any costs and benefits not already 

described that could result. The 

Commission also requests data to 

quantify any potential costs or benefits. 

In addition, the Commission requests 

comment on the following: 

278. How can the Commission more 

accurately estimate the costs and 

benefits? 

279. Would proposed Rule 906 create 

any additional costs or benefits not 

discussed here? 

280. What would be the costs and 

benefits of having reference identifiers 

established under the auspices of an 

IRSB—for participants? For registered 

SDRs? What fees might be charged to 

support such a system? How much 

would those fees be? Who would have 

to pay them? 

281. What would be the costs to verify 

ultimate parent and affiliate information 

under the auspices of an IRSB and 

maintain it over time? What would be 

the benefits of having such information 

verified and maintained? 

282. To what extent do participants 

already have policies and procedures in 

place for reporting information to an 

SDR? To what extent would proposed 

Rule 906(c) impose costs on covered 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 75275 

participants that they have not already 

incurred? 

H. Policies and Procedures of Registered 

SDRs—Rule 907 of Regulation SBSR 

Proposed Rule 907 would require a 

registered SDR to establish and maintain 

compliance with written policies and 

procedures: (1) That enumerate the 

specific data elements of an SBS or a life 

cycle event that a reporting party would 

report; (2) that specify data formats, 

connectivity requirements, and other 

protocols for submitting information; (3) 

for specifying how reporting parties are 

to report corrections to previously 

submitted information, making 

corrections to information in its records 

that is subsequently discovered to be 

erroneous, and applying an appropriate 

indicator to any transaction report 

required to be disseminated by 

proposed Rule 905(b)(2), which would 

denote that the report relates to a 

previously disseminated transaction; (4) 

describing how reporting parties shall 

report and, consistent with the 

enhancement of price discovery, how 

the registered SDR shall publicly 

disseminate, reports of, and adjustments 

due to, life cycle events; SBS 

transactions that do not involve an 

opportunity to negotiate any material 

terms, other than the counterparty; and 

any other SBS transactions that, in the 

estimation of the registered SDR, do not 

accurately reflect the market; (5) for 

assigning transaction IDs and UICs 

related to its participants; and (6) for 

periodically obtaining from each 

participant information that identifies 

the participant’s ultimate parent(s) and 

any other participant(s) with which the 

counterparty is affiliated, using 

applicable UICs. 

In addition, proposed Rule 907(b) 

would require a registered SDR to 

establish and maintain written policies 

and procedures for calculating and 

publicizing block trade thresholds for 

all SBS instruments reported to the 

registered SDR in accordance with the 

criteria and formula for determining 

block size as specified by the 

Commission. 

Under proposed Rules 907(c) and (d), 

a registered SDR would be required to 

make its policies and procedures 

publicly available on its Web site, and 

review, and update as necessary, its 

policies and procedures at least 

annually, indicating the date on which 

they were last reviewed. Finally, 

proposed Rule 907(e) would require a 

registered SDR to have the capacity to 

provide to the Commission, upon 

request, information or reports related to 

the timeliness, accuracy, and 

completeness of data reported to it 

pursuant to proposed Regulation SBSR 

and the registered SDR’s policies and 

procedures thereunder. 

1. Benefits 

In proposed Regulation SBSR, the 

Commission is establishing a number of 

broad policy goals for implementing 

Title VII of the Dodd-Frank Act. 

Proposed Rule 907 would permit a 

registered SDR some flexibility 

regarding how to meet those goals. In 

many cases, there could be many ways 

that that these goals could be carried out 

effectively, and it may not be necessary 

or appropriate in all cases to establish 

one particular way by rule. By requiring 

a registered SDR, in proposed Rule 907, 

to develop policies and procedures for 

completing many of the details of an 

SBS transaction reporting and 

dissemination system, the Commission 

seeks to harness the knowledge and 

experience of registered SDRs and 

harness market incentives to develop 

the policies and procedures that are 

most effective in meeting the policy 

goals in an efficient manner. The 

Commission expects that, over time, 

registered SDRs, participants, and the 

Commission could identify best 

practices for the reporting and 

dissemination of SBS transactions. 

Proposed Rules 907(a)(1) and (2) 

would require a registered SDR to 

develop and maintain policies and 

procedures to specify the data elements 

of a SBS or a life cycle event that a 

reporting party must report, as well as 

the data formats, connectivity 

requirements, and other protocols for 

submitting information. The 

Commission preliminarily believes that 

assigning this responsibility to a 

registered SDR would provide a level of 

flexibility and transparency that is 

necessary in this developing market. 

Furthermore, this approach would allow 

registered SDRs (perhaps, but not 

necessarily, after consultation with their 

participants) to quickly identify and 

address potential weaknesses in the SBS 

transaction reporting process as set out 

under proposed Regulation SBSR. 

Proposed Rule 907(a)(3) would 

require a registered SDR to establish and 

maintain compliance with policies and 

procedures for specifying how reporting 

parties are to report corrections to 

previously submitted information, 

making corrections to information in its 

records that is subsequently discovered 

to be erroneous, and applying an 

appropriate indicator to any transaction 

report required to be disseminated by 

proposed Rule 905(b)(2), which would 

denote that the report relates to a 

previously disseminated transaction. 

The Commission preliminarily believes 

that a registered SDR is in the best 

position to determine how these 

corrections are submitted, and believes 

that a consistent regime for the 

submission of correction by participants 

would benefit all market participants. 

Proposed Rule 907(a)(4) would 

require a registered SDR to develop and 

maintain policies and procedures that 

describe how reporting parties would 

report and, consistent with the 

enhancement of price discovery, how 

the registered SDR would publicly 

disseminate reports of, and adjustments 

to, life cycle events; SBS transactions 

that do not involve an opportunity to 

negotiate any material terms, other than 

the counterparty; and any other SBS 

transactions that, in the estimation of 

the registered SDR, do not accurately 

reflect the market. The Commission 

believes that the entire SBS market 

could benefit if a registered SDR, using 

its knowledge of the market, would 

develop consistent and transparent 

standards when certain SBS might have 

characteristics that reduce or eliminate 

entirely their price discovery value. For 

example, while an inter-affiliate SBS 

transaction would be required to be 

reported (so that the registered SDR 

obtains information about the legal 

owner), it could be disseminated with 

indication that the transaction was not 

at arm’s length. 

Proposed Rule 907(a)(5) would 

require a registered SDR to establish and 

maintain compliance with policies and 

procedures for assigning a transaction 

ID to each SBS that is reported to it, and 

for assigning UICs, including participant 

IDs, ultimate parent IDs, desk IDs, 

broker IDs, and trader IDs. As noted 

above, all such UICs would have to be 

assigned by or on behalf of an IRSB (or, 

if no standards-setting body meet the 

required criteria or the IRSB has not 

assigned a UIC to a particular person or 

unit thereof, by the registered SDR). 

Proposed Rule 906 could result in 

significant benefits by encouraging the 

creation and widespread use of 

internationally recognized standards for 

reference information. The Commission 

preliminarily believes that reporting of 

information using UICs would promote 

effective oversight, enforcement, and 

surveillance of the SBS market by the 

Commission and other regulators. For 

example, activity could be tracked by a 

particular participant, a particular desk, 

or a particular trader. Regulators could 

observe patterns and connections in 

trading activity, or examine whether a 

trader had engaged in questionable 

trading activity across different SBS 

instruments. UICs also could facilitate 

aggregation and monitoring of the 

positions of SBS counterparties, which 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
75276 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

356The Commission derived its estimate from the 

following: [(Sr. Programmer (1,667 hours) at $285 

per hour) + (Compliance Manager (3,333 hours) at 

$294 per hour) + (Compliance Attorney (5,000 

hours) at $291 per hour) + (Compliance Clerk (2500 

hours) at $59 per hour) + (Sr. Systems Analyst 

(1,667 hours) at $251 per hour) + (Director of 

Compliance (833 hours) at $426 per hour)] = 

$3,830,722 per SDR. The Commission preliminarily 

believes that potential SDRs that have similar 

policies and procedures in place may find that 

these costs would be lower, while potential SDRs 

that do not have similar policies and procedures in 

place may find that the potential costs would be 

higher. 

357This figure includes time necessary to design 

and program systems and implement policies and 

procedures to calculate and publish block trade 

thresholds for all SBS instruments reported to the 

registered SDR as required by proposed Rule 907(b). 

It also includes time necessary to design and 

program systems and implement policies and 

procedures to determine which reported trades 

would not be considered block trades pursuant to 

proposed Rule 907(b). This figure also includes 

time necessary to design and program systems and 

implement policies and procedures to assign certain 

IDs, as required by proposed Rule 907(a)(5). 

358The Commission derived its estimate from the 

following: [Sr. Programmer (3,333 hours) at $285 

per hour) + (Compliance Manager (6,667 hours) at 

$294 per hour) + (Compliance Attorney (10,000 

hours) at $291 per hour) + (Compliance Clerk (5,000 

hours) at $59 per hour) + (Sr. Systems Analyst 

(3,333 hours) at $251 per hour) + (Director of 

Compliance (1,667 hours) at $426 per hour)] = 

$7,661,728 per registered SDR. The Commission 

preliminarily believes that potential SDRs that have 

similar policies and procedures in place may find 

that these costs would be lower, while potential 

SDRs that do not have similar policies and 

procedures in place may find that the potential 

costs would be higher. 

359The Commission derived its estimate from the 

following: [((3,830,722) + ($7,661,728)) × (10 

registered SDRs)] = $114,924,500. 

360The Commission derived its estimate from the 

following: [($7,661,728) × (10 registered SDRs)] = 

$76,617,280. 

could be of significant benefit for 

prudential and systemic risk 

management. 

The Commission understands that 

some efforts have been undertaken—in 

both the private and public sectors, both 

domestically and internationally—to 

establish a comprehensive and widely 

accepted system for identifying entities 

that participate not just in the SBS 

market, but in the financial markets 

generally. Such a system would be of 

significant benefit to regulators 

worldwide, as each market participant 

could readily be identified using a 

single reference code regardless of the 

jurisdiction or product market in which 

the market participant was engaging. 

Such a system also could be of 

significant benefit to the private sector, 

as market participants would have a 

common identification system for all 

counterparties and reference entities, 

and would no longer have to use 

multiple identification systems. The 

enactment of the Dodd-Frank Act and 

the establishment of a comprehensive 

system for reporting and dissemination 

of SBSs—and for reporting and 

dissemination of swaps, under the 

jurisdiction of the CFTC—offer a unique 

opportunity to facilitate the 

establishment of a comprehensive and 

widely accepted system for identifying 

entities that participate not just in the 

SBS market, but in the financial markets 

generally. 

Furthermore, requiring a registered 

SDR to establish and maintain 

compliance with written policies and 

procedures could result in more 

accurate reporting by reporting parties, 

and thus more reliable dissemination of 

SBS transaction data. Higher quality 

reporting and dissemination of SBS 

transaction data should generate greater 

confidence among registered SDRs, 

market participants, and regulators, thus 

strengthening the SBS market the 

market as a whole. 

The Commission preliminarily 

believes that requiring a registered SDR 

to calculate and publish block trade 

thresholds pursuant to proposed Rule 

907(b) should help market participants, 

the Commission, and other regulators 

monitor block trade thresholds and 

track changes in the market for 

particular SBS instruments over time. 

The Commission preliminarily believes 

that a registered SDR is best placed to 

deliver these benefits, because an SDR 

has access to the necessary data and the 

ability to calculate and publicize the 

block trade thresholds efficiently. 

The Commission preliminarily 

believes that requiring a registered SDR 

to make publicly available on its Web 

site the policies and procedures 

required by proposed Regulation SBSR, 

pursuant to proposed Rule 907(c), 

would promote greater understanding of 

and compliance with such policies and 

procedures. Periodic review of the 

policies and procedures would also 

ensure that they are up-to-date. 

Finally, proposed Rule 907(e) would 

require a registered SDR to have the 

capacity to provide to the Commission, 

upon request, information or reports 

related to the timeliness, accuracy, and 

completeness of data reported to it 

pursuant to proposed Regulation SBSR 

and the registered SDR’s policies and 

procedures thereunder. There could be 

benefits in obtaining information from 

each registered SDR related to the 

timeliness, accuracy, and completeness 

of data reported to the registered SDR. 

Required data submissions that are 

untimely, inaccurate, or incomplete 

could compromise the regulatory data 

that the Commission would utilize to 

carry out its oversight responsibilities. 

Furthermore, required data submissions 

that are untimely, inaccurate, or 

incomplete could diminish the value of 

publicly disseminated reports that 

promote transparency and price 

discovery. Information or reports 

provided to the Commission by a 

registered SDR related to the timeliness, 

accuracy, and completeness of data 

could assist the Commission in 

examining for compliance with 

proposed Regulation SBS and in 

bringing enforcement or other 

administrative actions as necessary and 

appropriate. 

2. Costs 

The Commission preliminarily 

estimates that ten registered SDRs 

would be subject to proposed Rule 907, 

and that developing and implementing 

written policies and procedures as 

required under proposed Rule 907 could 

result in an initial, one-time cost to each 

registered SDR of approximately 

$3,831,000.356 This figure includes the 

estimated cost to develop a set of 

written policies and procedures, 

program systems, implement internal 

controls and oversight, train relevant 

employees, perform necessary testing, 

monitor participants, and compile 

data.357 In addition, the Commission 

preliminarily estimates that the 

annualized cost to maintain such 

policies and procedures, including a full 

review at least annually; making its 

policies and procedures publicly 

available on its Web site; and 

developing the capacity to provide the 

Commission information or reports 

related to the timeliness, accuracy, and 

completeness of data reported to it 

pursuant to proposed Regulation SBSR 

and the registered SDR’s policies and 

procedures would be approximately 

$7,662,000 for each registered SDR.358

This figure is based on an estimate of 

the cost to review existing policies and 

procedures, make necessary updates, 

conduct ongoing training, maintain 

relevant systems and internal controls 

systems, calculate and publish block 

trade thresholds, perform necessary 

testing, monitor participants, and collect 

data. Accordingly, the Commission 

preliminarily estimates that the initial 

annualized cost associated with 

proposed Rule 907 would be 

approximately $11,492,500 per 

registered SDR, which corresponds to an 

initial annualized aggregate cost of 

approximately $114,924,500.359 The 

Commission preliminarily estimates 

that the ongoing annualized cost 

associated with proposed Rule 907 

would be approximately $7,662,000 per 

registered SDR, which corresponds to an 

ongoing annualized aggregate cost of 

approximately $76,617,000.360 These 

figures are based, in part, on the 


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361See supra note 256. 

362See SDR Registration Proposing Release, supra 

note 6, proposed Rules 13n–5(b)(1)(iii) and 13n– 

5(b)(3) under the Exchange Act. 

363 15 U.S.C. 78k–1(b)(5). 

364See 15 U.S.C. 78k–1(b)(5)(A). 

365See 15 U.S.C. 78k–1(b)(5)(B). 

366 15 U.S.C. 78k–1(b)(6). 

367Section 11A(b)(6) of the Exchange Act 

provides that the Commission, by order, may 

censure or place limitations upon the activities, 

functions, or operations of any registered SIP or 

suspend for a period not exceeding 12 months or 

revoke the registration of any such processor, if the 

Continued 

Commission’s experience with other 

rules that require entities to establish 

and maintain compliance with policies 

and procedures.361

In addition, proposed Rule 907(a)(5) 

could impose certain costs on registered 

SDRs in connection with the use of 

internationally recognized standards for 

reference information. The Commission, 

in proposed Regulation SBSR, is not 

requiring the development of such 

standards that could be used across the 

financial service industry. Therefore, 

the Commission believes that the costs 

of developing and sustaining such a 

system should not be considered costs 

of proposed Regulation SBSR. However, 

proposed Regulation SBSR would 

require a registered SDR to use UICs 

generated by such a system, if such 

system is able to generate such UICs. 

Although the Commission believes there 

would be long-term benefits for using 

UICs generated by such a system, there 

could be short-term costs imposed on 

registered SDRs to convert to such a 

system. In addition, under these 

internationally recognized standards, 

users of the reference information could 

have to pay reasonable fees to support 

the system. These fees also would 

represent costs of proposed Rule 901. 

The Commission requests comment on 

this issue and any potential costs 

associated with the potential future use 

of internationally recognized standards. 

There could be a potential cost of 

proposed Rule 907 in that registered 

SDRs would retain flexibility to shape 

the details of a SBS trade reporting and 

dissemination system. It could be that 

such flexibility could result in varying 

approaches by each registered SDR and, 

thus, complicate the reporting of SBS 

transactions, impede the use of SBS 

transaction information that is publicly 

disseminated, or make market oversight 

more difficult. These potential costs 

could be avoided were the Commission 

to implement more of the details 

through rulemaking. The Commission 

requests comment on the costs, if any, 

associated with providing a registered 

SDR a certain amount of flexibility, and 

how those costs should be balance with 

the potential benefits as discussed above 

of providing the registered SDRS with 

flexibility. 

Finally, with respect to proposed Rule 

907(e), the Commission preliminarily 

believes that, as part of its core 

functions, a registered SDR would have 

the capacity to provide to the 

Commission, upon request, information 

or reports related to the timeliness, 

accuracy, and completeness of data 

reported to it pursuant to proposed 

Regulation SBSR and the registered 

SDR’s policies and procedures. 

Proposed Rule 13n–5(b) would require a 

registered SDR to establish, maintain, 

and enforce written policies and 

procedures to satisfy itself by reasonable 

means that the transaction data that has 

been submitted to the security-based 

swap data repository is accurate, and 

also to ensure that the transaction data 

and positions that it maintains are 

accurate.362 The Commission 

preliminarily believes that these 

capabilities would enable a registered 

SDR to provide the Commission 

information or reports as may be 

requested pursuant to proposed Rule 

907(e). Thus, the Commission does not 

believe that proposed Rule 907(e) would 

impose any additional costs on a 

registered SDR. 

3. Request for Comment 

The Commission requests comment 

on the costs and benefits of proposed 

Rule 907 discussed above, as well as 

any costs and benefits not already 

described that could result. The 

Commission also requests data to 

quantify any potential costs or benefits. 

In addition, the Commission requests 

comment on the following: 

283. How can the Commission more 

accurately estimate the costs and 

benefits? 

284. Would proposed Rule 907 create 

any additional costs or benefits not 

discussed here? 

285. Is it a potential cost that the 

policies and procedures sufficiently 

detailed such that participants would be 

able to know what is required of them? 

286. What are the costs and benefits 

of allowing a registered SDR some 

flexibility to determine whether certain 

SBSs may not have price discovery 

value and to use certain indicators to 

that effect in the publicly disseminated 

transaction reports? 

287. What costs would be imposed on 

a registered SDR to use UICs that had 

been established by or on behalf of an 

IRSB? Would the registered SDR have to 

pay fees to support the system? To 

whom? How much would the fees be? 

What would be the costs of transitioning 

to such a system? How would these 

overall costs compare to the costs that 

would be incurred by a registered SDR 

to assign UICs using its own 

methodology? 

288. What are the costs of allowing 

registered SDRs flexibility to shape 

many of the details of a SBS trade 

reporting and dissemination system? 

What are the benefits? 

I. Jurisdictional Matters—Rule 908 of 

Regulation SBSR 

1. Benefits 

The Commission believes that, in 

proposing Rule 908, the Commission 

has no discretion about which entities 

or SBSs are subject to the Exchange Act, 

as amended by the Dodd-Frank Act. A 

federal agency does not have the power 

to expand or circumscribe the reach of 

U.S. law. Therefore, because the 

Commission has no discretion in the 

matter, there are no benefits to proposed 

Rule 908 other than those inherent in 

the Exchange Act, as amended by the 

Dodd-Frank Act. 

2. Costs 

Similarly, because the Commission 

has no discretion in the matter, there are 

no costs to proposed Rule 908 other 

than those inherent in the Exchange 

Act, as amended by the Dodd-Frank Act. 

J. Registration of Security-Based Swap 

Data Repository as Securities 

Information Processor—Rule 909 of 

Regulation SBSR 

Proposed Rule 909 would require 

each registered SDR also to register with 

the Commission as a SIP on existing 

Form SIP. 

1. Benefits 

The Commission preliminarily 

believes that SIP registration of a 

registered SDR would help ensure fair 

access to important SBS transaction data 

reported to and publicly disseminated 

by the registered SDR. Requiring a 

registered SDR to register with the 

Commission as a SIP would subject it to 

Section 11A(b)(5) of the Exchange 

Act,363 which provides that a registered 

SIP must notify the Commission 

whenever it prohibits or limits any 

person’s access to its services. Upon its 

own motion or upon application by any 

aggrieved person, the Commission could 

review the SIP’s action.364 If the 

Commission finds that the person has 

been discriminated against unfairly, it 

could require the SIP to provide access 

to that person.365 Section 11A(b)(6) of 

the Exchange Act 366 also provides the 

Commission authority to take certain 

regulatory action as may be necessary or 

appropriate against a registered SIP.367


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
75278 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

Commission finds, on the record after notice and 

opportunity for hearing, that such censure, placing 

of limitations, suspension, or revocation is in the 

public interest, necessary or appropriate for the 

protection of investors, or to assure the prompt, 

accurate, or reliable performance of the functions of 

such SIP, and that such SIP has violated or is 

unable to comply with any provision of this title or 

the rules or regulations thereunder. 

368See supra Section XII.J. 

369See SDR Registration Proposing Release, supra 

note 6. 

370The Commission derived its estimate from the 

following: [(Compliance Attorney (37.5 hours) at 

$291 per hour) + (Compliance Clerk (62.5 hours) at 

$59 per hour)] = $14,600. See Section XII(J) supra; 

SDR Registration Proposing Release, supra note 6. 

371The Commission derived its estimate from the 

following: [($1,460/2)] = $730. See infra note 372. 

372The Commission derived its estimate from the 

following: [($14,600) × (0.1)] = $1,460. See supra 

note 370. 

373The Commission derived its estimate from the 

following: [(($14,600) + ($730)) × (10 registered 

SDRs)] = $153,300. See supra notes 370 and 371. 

374The Commission derived its estimate from the 

following: [($1,460) × (10 registered SDRs)] = 

$14,600. See supra notes 372. 375See Section 719 of the Dodd-Frank Act. 

The Commission preliminarily believes 

that potential consumers of SBS market 

data would benefit from the 

Commission having the additional 

authority over a registered SDR/SIP 

provided by Sections 11A(b)(5) and 

11A(b)(6) of the Exchange Act to help 

ensure that these entities offer their SBS 

market data on terms that are fair and 

reasonable and not unreasonably 

discriminatory. 

2. Costs 

The Commission preliminarily 

believes that the costs of proposed Rule 

909 would be minimal. As noted above, 

proposed Rule 909 would impose an 

initial one-time cost on each registered 

SDR associated with the submission of 

Form SIP.368 The Commission notes that 

Form SDR, which all SDRs would be 

required to complete and submit to the 

Commission pursuant to proposed Rule 

13n-1 under the Exchange Act,369 and 

Form SIP are similar in many respects. 

Thus, the Commission preliminarily 

believes that a registered SDR, which 

must complete Form SDR, would be 

able to complete Form SIP more easily 

and with less cost than otherwise would 

be the case. The Commission 

preliminarily estimates that the onetime cost to each SDR to complete Form 

SIP would be about one-quarter the cost 

of completing proposed Form SDR, or 

approximately $14,600.370 In addition, 

the Commission preliminarily estimates 

that each SDR would incur 

approximately one half of the ongoing 

annual costs—corresponding to an 

average of six months of operations— 

during the first year. The Commission 

preliminarily estimates this cost would 

be approximately $730 per SDR/SIP.371

With regard to ongoing costs, the 

Commission preliminarily estimates 

that the aggregate annualized cost for 

providing amendments to Form SIP 

would be one-tenth of the cost to 

complete the initial Form SIP, or 

approximately $1,460 per SDR/SIP.372

This figure is based on a preliminary 

estimate that each registered SDR would 

submit one amendment on Form SIP 

each year. SIP registration also would 

require a registered SDR to provide 

notice to the Commission of 

prohibitions or limitations on access to 

its services. The Commission 

preliminarily believes that the notice 

would be a simple form, and that 

prohibitions or limitations on access to 

information provided by a registered 

SDR would be not be prevalent. Thus, 

the Commission does not believe that 

providing such notice would result in 

economically significant costs. 

Accordingly, the Commission 

preliminarily estimates that the initial 

aggregate annualized costs associated 

with proposed Rule 909 would be 

approximately $153,300, which 

corresponds to $15,330 per registered 

SDR.373 The Commission further 

preliminary estimates that the ongoing 

aggregate annualized costs associated 

with proposed Rule 909 would be 

approximately $14,600, or an ongoing 

annual cost of approximately $1,460 for 

each registered SDR/SIP.374 The 

Commission solicits comments as to the 

accuracy of these estimates. 

3. Request for Comment 

The Commission requests comment 

on the costs and benefits of proposed 

Rule 909 discussed above, as well as 

any costs and benefits not already 

described that could result. The 

Commission also requests data to 

quantify any potential costs or benefits. 

In addition, the Commission requests 

comment on the following: 

289. How can the Commission more 

accurately estimate the costs and 

benefits? 

290. Would proposed Rule 909 create 

any additional costs or benefits not 

discussed here? 

291. Are the Commission’s 

preliminary estimates reasonable? 

292. Is SIP registration likely to 

impose costs not addressed? If so, what 

are they? 

K. Implementation of Security-Based 

Swap Reporting and Dissemination— 

Rule 910 of Regulation SBSR 

1. Benefits 

Proposed Rule 910 addresses 

implementation of the obligations 

imposed by proposed Regulation SBSR. 

Proposed Rule 910(a) would require a 

reporting party to report to a registered 

SDR any pre-enactment SBSs subject to 

reporting under proposed Rule 901(i) no 

later than January 12, 2012 (180 days 

after the effective date of the DoddFrank Act). The proposed timeframe 

would help ensure that the Commission 

has relevant information about SBS 

transactions necessary to prepare 

reports required by the Dodd-Frank 

Act.375 Further, proposed Rule 910 

would help ensure timely 

implementation of Regulation SBSR, 

and thereby facilitate achievement of 

the goals articulated in the Dodd-Frank 

Act. 

Proposed Rule 910(b) would establish 

a phase-in period for each SDR that 

registers with the Commission, as well 

as its participants. The phase-in period 

would give both the registered SDR and 

its participants a reasonable period in 

which to acquire or configure the 

necessary systems, engage and train the 

necessary staff, and develop and 

implement the necessary policies and 

procedures to implement the proposed 

rules. In the absence of the measured 

and incremental approach specified in 

proposed Rule 910(b), market 

participants might not evaluate and 

develop their systems, processes, and 

procedures with sufficient care and 

analysis. Furthermore, without the 

phase-in period afforded by proposed 

Rule 910(b), registered SDRs and their 

participants could be forced to devote 

an undue amount of capital and 

resources to becoming compliant with 

proposed Regulation SBSR, thus 

diverting capital and resources from 

other productive endeavors. 

2. Costs 

The Commission preliminarily 

believes that proposed Rule 910(a) 

would not require reporting parties to 

materially change their current practices 

or operations with respect to 

recordkeeping for the pre-enactment 

SBSs or transitional SBSs. Any 

reporting party, as part of its regular 

business operations, would already 

maintain records covering most if not all 

of the data elements associated with a 

SBS. Furthermore, proposed Rule 910(a) 

would not require reporting parties to 

report any data elements (such as the 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 75279 

376See supra Section XIV.B.2. 

377 17 CFR 240.31. 

378 15 U.S.C. 78ee. 

379See 15 U.S.C. 78c(a)(10). 

380The Commission is also proposing to make a 

technical correction to Rule 31(a)(10)(ii), to correct 

a date (from ‘‘September 30’’ to ‘‘September 25’’), as 

required by the Dodd-Frank Act. The Commission 

does not believe there are any material costs or 

benefits to this change. 

time of execution) that were not already 

available. Therefore, proposed Rule 

910(a) would not require reporting 

parties to search for or reconstruct any 

missing data elements. 

To comply with the reporting 

obligations of proposed Rule 910(a), 

reporting parties likely would incur 

many of the costs that they otherwise 

would incur in order to comply with 

proposed Rule 901.376 Because of the 

substantial overlap between the costs 

necessitated by proposed Rule 910 and 

proposed Rule 901 (for reporting 

parties) and proposed Rule 902, the 

Commission preliminarily estimates 

that that the initial annualized, cost for 

each reporting party associated with 

proposed Rule 910 would be de 

minimis. 

The Commission preliminarily 

estimates two types of costs associated 

with proposed Rule 910(b): One 

stemming from the possibility that the 

phase-in period is too long and the other 

stemming from the possibility that the 

phase-in period is too short. If the 

phase-in period were too long, the 

benefits from better recordkeeping and 

regulatory information, as well as from 

post-trade transparency in the SBS 

market, would be inappropriately 

delayed. However, if the phase-in 

period were too short, market 

participants might not have enough time 

to develop appropriate systems and 

procedures to effectively implement 

proposed Regulation SBSR. In 

proposing Rule 910(b), the Commission 

seeks an appropriate balance between 

these two considerations. 

3. Request for Comment 

The Commission requests comment 

on the costs and benefits of proposed 

Rule 910 discussed above, as well as 

any costs and benefits not already 

described that could result. The 

Commission also requests data to 

quantify any potential costs or benefits. 

In addition, the Commission requests 

comment on the following: 

293. How can the Commission more 

accurately estimate the costs and 

benefits? 

294. Would proposed Rule 910 create 

any additional costs or benefits not 

discussed here? 

295. How many entities would be 

affected by the rule? 

296. Are there additional costs 

involved in complying with the 

proposed rule that have not been 

identified? What are the types, and 

amounts, of the costs? 

297. Are there additional benefits 

from the rule that have not been 

identified? If so, please identify and 

quantify to the extent feasible. 

L. Prohibition During Phase-In Period— 

Rule 911 of Regulation SBSR 

Proposed Rule 911 would provide 

that a reporting party to a SBS would 

not report a SBS to a registered SDR in 

a phase-in period described in proposed 

Rule 910 during which the registered 

SDR is not yet required to publicly 

disseminate transaction reports for that 

SBS instrument unless: (1) The SBS is 

also reported to an registered SDR that 

is disseminating transaction reports for 

that SBS instrument consistent with 

proposed Rule 902; or (b) No other 

registered SDR is able to receive, hold, 

and publicly disseminate transaction 

reports regarding that SBS instrument. 

1. Benefits 

The Commission preliminarily 

believes that proposed Rule 911 would 

have two clear benefits to the 

marketplace. First, it is meant to 

preserve the goal of post-trade 

transparency for SBSs, as codified in the 

Dodd-Frank Act, even as new SDRs are 

phased in, as specified in proposed Rule 

910, during which time they may have 

no obligation or only a limited 

obligation to publicly disseminate SBS 

data. Second, the proposed rule would 

prevent reporting parties from engaging 

in regulatory arbitrage by avoiding 

reporting SBS data to an existing 

registered SDR that is publicly 

disseminating SBS transaction reports 

and instead reporting only to a new SDR 

subject to a phase-in period, in an effort 

to avoid having their SBS transactions 

publicly disseminated in real time. 

Proposed Rule 911 would prohibit such 

conduct. 

2. Costs 

The Commission believes that the 

costs imposed by proposed Rule 911 on 

reporting parties and registered SDRs 

would be minimal, as the rule would 

restrict the ability of a reporting party to 

report a SBS to one registered SDR 

rather than another, but would not 

otherwise create any quantifiable costs 

beyond those already required by 

proposed Rule 901. To the extent there 

are costs, they may include the 

following. First, proposed Rule 911 

potentially could dampen competition 

among those entities considering 

registering as SDRs. Potential SDR 

registrants could perceive the proposed 

rule as a barrier to entry to the 

marketplace insofar as their business 

may be limited during the phase-in 

period. Second, as a result of proposed 

Rule 911, there may be some costs 

associated with double-reporting of SBS 

information—both to an existing SDR as 

well as to a new SDR in a phase-in 

period. Indeed, proposed Rule 911 

contemplates the potential of such 

double-reporting. This could result 

require regulators to incur costs to 

accurately identify double-counted 

transactions, where the same SBS 

transaction is captured by two different 

registered SDRs. 

3. Request for Comment 

The Commission requests comment 

on the costs and benefits of proposed 

Rule 911 discussed above, as well as 

any costs and benefits not already 

described that could result. The 

Commission also requests data to 

quantify any potential costs or benefits. 

In addition, the Commission requests 

comment on the following: 

298. How can the Commission more 

accurately estimate the costs and 

benefits? 

299. Would proposed Rule 911 create 

any additional costs or benefits not 

discussed here? 

M. Amendments to Rule 31 

Rule 31 under the Exchange Act 377

sets forth a procedure for the calculation 

and collection of fees payable under 

Section 31 of the Exchange Act.378 The 

Dodd-Frank Act classifies SBSs as 

securities,379 thereby subjecting them to 

Section 31 fees. The proposed 

amendment to Rule 31 would add 

‘‘security-based swaps’’ to the list of 

‘‘exempt sales,’’ and thereby exempt 

SBSs from Section 31 fees.380

The Commission preliminarily 

believes that the proposed amendments 

to Rule 31 would have a neutral effect 

on existing costs and benefits. It would 

not impose any additional costs or 

impact the transaction fees currently 

paid on other securities transactions. 

Likewise, because market participants 

have never monitored or collected fees 

on SBS transactions, there would be no 

benefit to exempting these transactions 

from Section 31 fees other than that 

affected entities would not have to take 

any steps to pay fees on SBS 

transactions. 

However, eliminating Section 31 fee 

for SBS transactions theoretically could 

result in slightly higher fees on 

transactions in other securities that 

would not benefit from a Section 31 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
75280 Federal Register / Vol. 75, No. 231 / Thursday, December 2, 2010 / Proposed Rules 

381See 15 U.S.C. 78ee(j). 

382The Commission derived its estimate from the 

following: [($511,013,000 proposed Rule 901 firstyear costs on reporting parties) + ($778,480 

proposed Rule 901 first-year costs on registered 

SDRs) + ($64,006,400 proposed Rule 902 first-year 

costs on registered SDRs) + ($27,360 proposed Rule 

904 first-year costs on registered SDRs) + 

($11,419,000 proposed Rule 905 first-year costs on 

reporting parties) + ($5,603,700 proposed Rule 905 

first-year costs on registered SDRs) + ($172,280,000 

proposed Rule 905 first-year costs on non-reporting 

parties) + ($82,176,000 proposed Rule 906 first-year 

costs on reporting parties) + ($600,760 proposed 

Rule 906 first-year costs on registered SDRs) + 

($75,962,500 proposed Rule 906 first-year costs on 

all SDR participants) + ($114,927,000 proposed 

Rule 907 first-year costs on registered SDRs) + 

($153,300 proposed Rule 909 first-year costs on 

registered SDRs)] = $1,038,947,500. 

383The Commission derived its estimate from the 

following: [($316,116,000 proposed Rule 901 

ongoing annual costs on reporting parties) + 

($436,440 proposed Rule 901 ongoing annual costs 

on registered SDRs) + ($24,002,400 proposed Rule 

902 ongoing annual costs on registered SDRs) + 

($27,360 proposed Rule 904 ongoing annual costs 

on registered SDRs) + ($3,927,000 proposed Rule 

905 ongoing annual costs on reporting parties) + 

($3,735,800 proposed Rule 905 ongoing annual 

costs on registered SDRs) + ($172,280,000 proposed 

Rule 905 ongoing annual costs on non-reporting 

parties) + ($29,736,000 proposed Rule 906 ongoing 

annual costs on reporting parties) + ($292,440 

proposed Rule 906 ongoing annual costs on 

registered SDRs) + ($75,962,500 proposed Rule 906 

ongoing annual costs on all SDR participants) + 

($76,617,000 proposed Rule 907 ongoing annual 

costs on registered SDRs) + ($14,600 proposed Rule 

909 ongoing annual costs on registered SDRs)] = 

$703,147,540. 

384The Commission derived its estimate from the 

following: [($342,040 proposed Rule 901 one-time 

costs on registered SDRs) + ($40,004,000 proposed 

Rule 902 one-time costs on registered SDRs) + 

($1,867,900 proposed Rule 905 one-time costs on 

registered SDRs) + ($308,320 proposed Rule 906 

one-time costs on registered SDRs) + ($38,310,000 

proposed Rule 907 one-time costs on registered 

SDRs) + ($146,000 proposed Rule 909 one-time 

costs on registered SDRs)] = $80,978,260. 

385The Commission derived its estimate from the 

following: [($436,440 proposed Rule 901 ongoing 

annual costs on registered SDRs) + ($24,002,400 

proposed Rule 902 ongoing annual costs on 

registered SDRs) + ($27,360 proposed Rule 904 

ongoing annual costs on registered SDRs) + 

($3,735,800 proposed Rule 905 ongoing annual 

costs on registered SDRs) + ($292,440 proposed 

Rule 906 ongoing annual costs on registered SDRs) 

+ ($76,617,000 proposed Rule 907 ongoing annual 

costs on registered SDRs) + ($14,600 proposed Rule 

909 ongoing annual costs on registered SDRs)] = 

$105,126,400. 

386See SDR Registration Proposing Release, supra 

note 6. 

387See id. 

388The Commission derived its estimate from the 

following: [($80,978,260) + ($214,913,592)] = 

$295,891,852. 

389The Commission derived its estimate from the 

following: [($105,126,400) + ($140,302,120)] = 

$245,428,520. 

390 15 U.S.C. 78c(f). 

391 15 U.S.C. 78w(a)(2). 

392See supra note 88. 

exemption. Section 31 requires the 

Commission to adjust Section 31 fees so 

that such rates are reasonably likely to 

produce aggregate fee collections that 

equal amounts prescribed under Section 

31.381 Thus, although the Commission 

may exempt certain securities from 

Section 31, it cannot reduce the total 

amount of fees that it is required to 

collect under Section 31. An exemption 

granted to certain securities could, 

therefore, result in a higher rate paid on 

transactions in the other, non-exempted 

securities. 

The Commission requests comment 

on the costs and benefits of the 

proposed amendments to Rule 31, as 

well as any costs and benefits not 

already described that could result. The 

Commission also requests data to 

quantify any potential costs or benefits. 

N. Aggregate Total Costs 

Based on the foregoing, the 

Commission preliminarily estimates 

that proposed Regulation SBSR would 

impose an aggregate total first-year cost 

of approximately $1,038,947,500 on all 

covered entities.382 This amount 

includes an estimated total first-year 

cost of approximately $852,850,500 on 

participants (reporting parties and nonreporting parties), and approximately 

$186,097,000 on registered SDRs. The 

Commission preliminarily estimates 

that proposed Regulation SBSR would 

impose a total ongoing annualized 

aggregate cost of approximately 

$703,147,540 for all covered entities.383

This amount includes an estimated total 

ongoing annualized cost of 

approximately $598,021,500 on 

participants (reporting parties and nonreporting parties), and approximately 

$105,126,040 on registered SDRs. 

With regard to registered SDRs, the 

Commission preliminarily estimates 

that proposed Regulation SBSR would 

impose an initial aggregate one-time 

cost of approximately $80,978,260,384

and an ongoing aggregate annual cost of 

$105,126,400.385 The Commission 

further preliminarily estimates that the 

proposed SDR registration rules would 

impose an initial aggregate one-time 

cost of approximately $214,913,592,386

and an ongoing aggregate annual cost of 

approximately $140,302,120 on 

registered SDRs.387 Summing these 

estimates, proposed Regulation SBSR 

and the proposed SDR registration rules 

would impose initial costs on registered 

SDRs of approximately $295,891,852,388

and ongoing annualized costs on 

registered SDRs of approximately 

$245,428,520.389

XV. Consideration of Burden on 

Competition and Promotion of 

Efficiency, Competition, and Capital 

Formation 

Section 3(f) of the Exchange Act 390

requires the Commission, whenever it 

engages in rulemaking and is required to 

consider or determine whether an action 

is necessary or appropriate in the public 

interest, to consider whether the action 

would promote efficiency, competition, 

and capital formation. In addition, 

Section 23(a)(2) of the Exchange Act 391

requires the Commission, when making 

rules under the Exchange Act, to 

consider the impact of such rules on 

competition. Section 23(a)(2) also 

prohibits the Commission from adopting 

any rule that would impose a burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. 

A. Analysis of Proposed Regulation 

SBSR 

The Commission preliminarily 

believes that public availability of 

transaction and pricing data for SBSs, as 

required by the Dodd-Frank Act and 

implemented by proposed Regulation 

SBSR, would promote efficiency, 

competition, and capital formation by 

reducing information asymmetries, 

lowering transaction costs, and 

encouraging market participation from a 

larger number of firms. Public, real-time 

dissemination of last-sale information 

aids dealers in deriving appropriate 

quotations, and aids investors in 

evaluating current quotations—thus 

furthering efficient price discovery. 

Increased transparency ultimately 

should provide the opportunity for 

increased competition among market 

participants and thus contribute to a 

more efficient market. The Commission 

believes that knowledge that all market 

participants are subject to the same 

reporting rules and can see the same 

price information creates certainty, 

fosters investor confidence, and 

promotes participation in the markets. 

The Commission’s experience with 

other asset classes is that post-trade 

transparency reduces transaction costs. 

For example, a number of studies have 

found that post-trade transparency in 

the corporate bond market, resulting 

from the introduction of TRACE, has 

reduced transaction costs.392 Post-trade 

transparency could have the same effect 

in the SBS market, although the 

Commission acknowledges that the 

differences between the SBS market and 

other securities markets might be 

sufficiently great that post-trade 

transparency might not have the same 

effects in the SBS market. The 

Commission requests comment on 

whether post-trade transparency would 

have a similar effect on the SBS market 

as it has in other securities markets— 

and if not, why not. To the extent that 

post-trade transparency in the SBS 


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393See supra note 314. 

market would lower transaction costs, 

this would be evidence of greater 

competition and efficiency. 

Furthermore, money saved in 

transaction costs can assist in additional 

capital formation. 

The proposed rules on block trades of 

SBSs are designed to minimize any 

adverse impact on efficiency, 

competition, and capital formation. 

Though temporarily withholding the 

full size of a block trade may have some 

immediate adverse effect on efficiency, 

as other market participants would lack 

complete real-time information about 

large transactions, the Commission’s 

approach is designed to promote 

efficiency in the longer-term, by 

allowing SBS market participants to 

engage in large transactions without the 

risk of other market participants using 

this information in ways that promote 

artificial and adverse short-term price 

movements. Encouraging such market 

participants to continue to execute in 

large size is designed to promote 

efficiency, competition, and capital 

formation. The Commission requests 

comment on the effect of its proposed 

block trade rules on these 

considerations. 

Proposed Regulation SBSR is 

designed to provide the Commission 

and other regulators with detailed, upto-date information about both positions 

of particular entities and financial 

groups as well as positions by multiple 

market participants in particular 

instruments. A well-regulated SBS 

market—where the Commission and 

other regulators have access to 

information about all SBS transactions 

captured and retained in the registered 

SDRs—could increase the confidence in 

the soundness and fairness of the 

market, potentially drawing additional 

participants and thereby increasing 

efficiency. The Commission and other 

regulators also would have greater 

information with which to surveil the 

SBS market and bring appropriate 

enforcement actions. Together, these 

regulatory factors should have a positive 

impact on efficiency, competition, and 

capital formation. 

The Commission preliminarily 

believes that post-trade transparency in 

the SBS market could improve market 

participants’ ability to value SBSs. In 

transparent markets with sufficient 

liquidity, valuations generally can be 

derived from recent quotations and/or 

last-sale prices. However, in opaque 

markets or markets with low liquidity, 

recent quotations or last-sale prices may 

not exist or, if they do exist, may not be 

widely available. Therefore, market 

participants holding assets that trade in 

opaque markets or markets with low 

liquidity frequently rely instead on 

pricing models. These models might be 

based on assumptions subject to the 

evaluator’s discretion, and can be 

imprecise. Thus, market participants 

holding the same asset but using 

different valuation models might arrive 

at significantly different values for the 

same asset. 

The Commission preliminarily 

believes that post-trade transparency, 

even in relatively illiquid markets— 

such as corporate bonds or SBSs—could 

represent an improvement over relying 

on valuation models alone, particularly 

if post-trade information is used as an 

input to, rather than a substitute for, 

independent valuation and pricing 

decisions by other market participants. 

Market participants might devise means 

to consider last-sale reports of the asset 

to be valued, reports of related assets, or 

reports of benchmark products that 

include the asset to be valued or closely 

related assets. There is evidence to 

suggest that post-trade transparency 

helps reduce the range of valuations of 

assets that trade in illiquid markets.393

The Commission preliminarily believes 

that post-trade transparency in the SBS 

market could result in more accurate 

valuations of SBSs generally, as all 

market participants would have the 

benefit of knowing how counterparties 

to an SBS valued the SBS at a specific 

moment in time. Especially with 

complex instruments, investment 

decisions generally are predicated on a 

significant amount of due diligence to 

value the instrument properly. A posttrade transparency system permits other 

market participants to derive at least 

some informational benefit from 

obtaining the views of the two 

counterparties who traded that 

instrument. 

Better valuations could have a 

significant impact on efficiency and 

capital allocation. Efficient allocation of 

capital is premised on accurate 

knowledge of asset prices. Overvaluing 

asset prices could result in a 

misallocation of capital, as investors 

seek to obtain more of an asset that 

cannot deliver the anticipated riskadjusted return. By the same token, 

assets that are inappropriately 

undervalued represent investment 

opportunities that might go unpursued, 

because investors do not realize that a 

good risk-adjusted return is available. 

To the extent that post-trade 

transparency enables asset valuations to 

move closer to their fundamental 

values, capital may be more efficiently 

allocated. 

Better valuations resulting from posttrade transparency also could reduce 

prudential and systemic risks. Some 

financial institutions, including many of 

the most systemically important 

financial institutions, have large 

portfolios of SBSs. The financial system 

would benefit greatly if the assets of 

these institutions were more accurately 

valued. To the extent that post-trade 

transparency affirms the valuation of an 

institution’s portfolio, regulators, the 

individual firm, and the market as a 

whole would have more certainty as to 

whether the firm would or would not 

pose prudential or systemic risks. In 

some cases, however, post-trade 

transparency in the SBS market might 

cause an individual firm to revalue its 

positions and lower the overall value of 

its portfolio. The sooner that accurate 

valuations can be made, the more 

quickly that regulators and the 

individual firm can take appropriate 

steps to minimize the firm’s prudential 

risk profile, and the more quickly that 

regulators and other market participants 

can take appropriate steps to address 

any systemic risk concerns raised by 

that firm. 

Finally, the Commission has 

considered how proposed Regulation 

SBSR could affect market participation 

generally, measured by both the number 

of market participants and the number 

of SBSs executed. The regulatory 

environment created by proposed 

Regulation SBSR would permit all 

market participants to see last-sale 

prices in real time, and could thereby 

incentivize more market participants to 

enter the market, trade more frequently, 

and compete with large dealers on price. 

Reducing information asymmetries is 

pro-competitive, because it reduces the 

competitive advantage that certain 

market participants have solely because 

they have access to more or better 

information about the market. Reducing 

information asymmetries also reduces 

the likelihood that a less-informed 

market participant would enter into a 

trade at an imprudent price. To the 

extent that fewer such trades occur, 

efficiency and capital formation could 

be improved. Moreover, proposed 

Regulation SBSR could result in greater 

confidence in the market generally, 

which could have a beneficial impact on 

efficiency, competition, and capital 

formation. 

It is also possible that implementing 

post-trade transparency in the SBS 

market and the costs of complying with 

proposed Regulation SBSR could cause 

some market participants to execute 

fewer SBSs or to exit the market 

completely. This could result in a 

detrimental impact on efficiency, 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2
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394See 15 U.S.C. 78ee(j). 

395Public Law 104–121, Title II, 110 Stat. 857 

(1996) (codified in various sections of 5 U.S.C., 15 

U.S.C. and as a note to 5 U.S.C. 601). 

396 5 U.S.C. 601 et seq. 

397 5 U.S.C. 603(a). 

398Although Section 601(b) of the RFA defines 

the term ‘‘small entity,’’ the statute permits agencies 

to formulate their own definitions. The Commission 

has adopted definitions for the term ‘‘small entity’’ 

for the purposes of Commission rulemaking in 

accordance with the RFA. Those definitions, as 

relevant to this proposed rulemaking, are set forth 

in Rule 0–10 under the Exchange Act, 17 CFR 

240.0–10. See Securities Exchange Act Release No. 

18451 (January 28, 1982), 47 FR 5215 (February 4, 

1982) (File No. AS–305). 

399 5 U.S.C. 605(b). 

400See 17 CFR 240.0–10(a). 

401 17 CFR 240.17a–5(d). 

402See 17 CFR 240.0–10(c). 

competition, and capital formation. For 

example, certain market participants 

that are currently active in the SBS 

market might find the costs of 

complying with proposed Regulation 

SBSR too high. If these market 

participants respond by reducing their 

trading activity or exiting the market 

completely, competition could suffer 

because there would be fewer 

participants competing in the market. 

Moreover, efficiency could suffer 

because risk that otherwise might have 

been allocated to the market participant 

optimally suited to manage it would, if 

that participant has left the market, 

necessarily have to reside at a 

suboptimal location. Moreover, capital 

formation could be negatively impacted 

if market participants with risks to 

hedge find it more difficult or costly to 

find a counterparty with which to 

transact and instead reserve more 

capital against the risk of loss. 

On the other hand, the possibility 

exists that, in certain circumstances, 

efficiency, competition, and capital 

formation would be positively impacted 

even if fewer SBS transactions occur 

because of proposed Regulation SBSR. 

This could be the case if market 

participants that are unable or unwilling 

to properly manage the attendant risks 

of participation in the SBS market are 

deterred from participating, or if there 

were a reduction in the number of SBS 

transactions where there is a significant 

information asymmetry between the 

counterparties. In the latter case, 

efficiency, competition, and capital 

formation could benefit if uninformed 

parties are deterred from unwittingly 

taking on imprudent positions in the 

SBS market. 

It is difficult at this stage to ascertain 

how proposed Regulation SBSR and 

other measures to implement the DoddFrank Act might increase or decrease 

participation in the SBS market, and 

what impacts such an increase or 

decrease might have on efficiency, 

competition, and capital formation. 

However, the Commission requests 

comment on those impacts. 

B. Analysis of Amendments to Rule 31 

Under the Exchange Act 

The Commission preliminarily 

believes that the proposed amendments 

to Rule 31 under the Exchange Act 

would have no significant impact on 

efficiency, competition, and capital 

formation. Exempting SBSs from 

Section 31 fees should have little or no 

impact on the overall amount of fees 

collected by the Commission, as the 

Commission is required to adjust the fee 

rate to a level that is reasonably likely 

to produce the aggregate fee collections 

stipulated in Section 31(d).394

Exempting SBSs from Section 31 fees 

would result in other classes of 

securities that remain subject to Section 

31 fees continuing to bear the burden of 

meeting the aggregate fee collection. 

Allowing SBSs to become subject to 

Section 31 fees, however, could result in 

a competitive imbalance between 

brokers and SBS dealers. Specifically, 

the burden for funding Section 31 fees 

would fall on brokers, rather than SBS 

dealers. Exempting SBSs from Section 

31 fees, therefore, would avoid this 

concern and any impact it might have 

on the development of the SBS market. 

The Commission requests comment 

on all aspects of this analysis and, in 

particular, on whether proposed 

Regulation SBSR and the proposed 

amendments to Rule 31 under the 

Exchange Act would place a burden on 

competition, as well as the effect of the 

proposal on efficiency, competition, and 

capital formation. Commenters are 

requested to provide empirical data and 

other factual support for their views, if 

possible. 

XVI. Consideration of Impact on the 

Economy 

For purposes of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (‘‘SBREFA’’) 395 the Commission 

must advise the OMB whether the 

proposed regulation constitutes a 

‘‘major’’ rule. Under SBREFA, a rule is 

considered ‘‘major’’ where, if adopted, it 

results or is likely to result in: (1) An 

annual effect on the economy of $100 

million or more (either in the form of an 

increase or a decrease); (2) a major 

increase in costs or prices for consumers 

or individual industries; or (3) 

significant adverse effect on 

competition, investment or innovation. 

If a rule is ‘‘major,’’ its effectiveness will 

generally be delayed for 60 days 

pending Congressional review. 

The Commission requests comment 

on the potential impact of proposed 

Regulation SBSR on the economy on an 

annual basis, on the costs or prices for 

consumers or individual industries, and 

on competition, investment, or 

innovation. Commenters are requested 

to provide empirical data and other 

factual support for their view to the 

extent possible. 

XVII. Regulatory Flexibility Act 

Certification 

The Regulatory Flexibility Act 

(‘‘RFA’’) 396 requires federal agencies, in 

promulgating rules, to consider the 

impact of those rules on small entities. 

Section 603(a) of the Administrative 

Procedure Act,397 as amended by the 

RFA, generally requires the Commission 

to undertake a regulatory flexibility 

analysis of all proposed rules, or 

proposed rule amendments, to 

determine the impact of such 

rulemaking on ‘‘small entities.’’ 398

Section 605(b) of the RFA 399 states that 

this requirement shall not apply to any 

proposed rule or proposed rule 

amendment which, if adopted, would 

not have a significant economic impact 

on a substantial number of small 

entities. 

For purposes of Commission 

rulemaking in connection with the RFA, 

a small entity includes: (1) When used 

with reference to an ‘‘issuer’’ or a 

‘‘person,’’ other than an investment 

company, an ‘‘issuer’’ or ‘‘person’’ that, 

on the last day of its most recent fiscal 

year, had total assets of $5 million or 

less; 400 or (2) a broker-dealer with total 

capital (net worth plus subordinated 

liabilities) of less than $500,000 on the 

date in the prior fiscal year as of which 

its audited financial statements were 

prepared pursuant to Rule 17a–5(d) 

under the Exchange Act,401 or, if not 

required to file such statements, a 

broker-dealer with total capital (net 

worth plus subordinated liabilities) of 

less than $500,000 on the last day of the 

preceding fiscal year (or in the time that 

it has been in business, if shorter); and 

is not affiliated with any person (other 

than a natural person) that is not a small 

business or small organization.402

Based on input from SBS market 

participants and its own information, 

the Commission preliminarily believes 

that the majority of SBS transactions 

have at least one counterparty that is 

either as SBS dealer or major SBS 

participant, and that these entities— 

whether registered broker-dealers or 

not—would exceed the thresholds 

defining ‘‘small entities’’ set out above. 

Accordingly, neither of these types of 

entities would likely qualify as small 

entities for purposes of the RFA. 


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403See Office of the Comptroller of the Currency, 

‘‘Quarterly Report on Bank Trading and Derivatives 

Activities Second Quarter 2010’’ (2010). 

Moreover, even in cases where one of 

the counterparties to an SBS is not 

covered by these definitions, the 

Commission preliminarily does not 

believe that any such entities would be 

‘‘small entities’’ as defined in 

Commission Rule 0–10. Feedback from 

industry participants and the 

Commission’s own information about 

the SBS market indicate that only 

persons or entities with assets 

significantly in excess of $5 million 

participate in the SBS market. For 

example, as revealed in a current survey 

conducted by Office of the Comptroller 

of the Currency, 99.9% of CDS positions 

by U.S. Commercial Banks and Trusts 

are held by those with assets over $10 

billion.403 Given the magnitude of this 

figure, and the fact that it so far exceeds 

$5 million, the Commission 

preliminarily believes that the vast 

majority of, if not all, SBS transactions 

are between large entities for purposes 

of the RFA. 

In addition, the Commission 

preliminarily believes that the entities 

likely to register as SDRs would not be 

small entities. Based on input from SBS 

market participants and its own 

information, the Commission 

preliminarily believes that most if not 

all the registered SDRs would be part of 

large business entities, and that all 

registered SDRs would have assets 

exceeding $5 million and total capital 

exceeding $500,000. Therefore, the 

Commission preliminarily believes that 

none of the registered SDRs would be 

small entities. 

On this basis, the Commission 

preliminarily believes that the number 

of SBS transactions involving a small 

entity as that term is defined for 

purposes of the RFA would be de 

minimis. Moreover, the Commission 

does not believe that any aspect of 

proposed Regulation SBSR would be 

likely to alter the type of counterparties 

presently engaging in SBS transactions. 

Therefore, the Commission 

preliminarily does not believe that 

proposed Regulation SBSR would 

impact any small entities. 

For the foregoing reasons, the 

Commission certifies that Regulation 

SBSR would not have a significant 

economic impact on a substantial 

number of small entities for purposes of 

the RFA. The Commission encourages 

written comments regarding this 

certification. The Commission requests 

that commenters describe the nature of 

any impact on small entities, indicate 

whether they believe that participants 

and registered SDRs are unlikely to be 

small entities, and provide empirical 

data to support their responses. 

XVIII. Statutory Basis and Text of 

Proposed Rule 

The Commission is proposing to 

adopt Regulation SBSR, and Rule 900– 

911 thereunder, pursuant to the 

Exchange Act. 

List of Subjects in 17 CFR Parts 240 and 

242 

Brokers, Reporting and recordkeeping 

requirements, Securities. 

In accordance with the foregoing, 

Title 17, Chapter II of the Code of 

Federal Regulations is amended as 

follows. 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

1. The authority citation for part 240 

continues to read in part as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 

78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p, 

78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a– 

20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4, 

80b–11, and 7201 et seq.; and 18 U.S.C. 1350, 

unless otherwise noted. 

* * * * * 

2. Amend § 240.31 by: 

a. Removing ‘‘September 30’’ at the 

beginning of paragraph (a)(10)(ii) and 

adding in its place ‘‘September 25’’; 

b. Removing the ‘‘and’’ at the end of 

paragraph (a)(11)(vii); 

c. Removing the period at the end of 

paragraph (a)(11)(viii) and adding in its 

place ‘‘; and’’; 

d. Adding paragraph (a)(11)(ix); and 

e. Adding new paragraph (a)(19) to 

read as follows: 

§ 240.31 Section 31 transaction fees. 

(a) * * * 

(11) * * * 

(ix) Any sale of a security-based swap. 

* * * * * 

(19) The term security-based swap has 

the same definition as provided in 

Section 3(a)(68) of the Act (15 U.S.C. 

78c(a)(68)). 

* * * * * 

PART 242—REGULATIONS M, SHO, 

ATS, AC, NMS, AND SBSR AND 

CUSTOMER MARGIN REQUIREMENTS 

FOR SECURITY FUTURES 

3. The authority citation for part 242 

continues to read as follows: 

Authority: 15 U.S.C. 77g, 77q(a), 77s(a), 

78b, 78c, 78g(c)(2), 78i(a), 78j, 78k–l(c), 78l, 

78m, 78n, 78o(b), 78o(c), 78o(g), 78q(a), 

78q(b), 78q(h), 78w(a), 78dd–1, 78mm, 80a– 

23, 80a–29, and 80a–37, unless otherwise 

noted. 

4. The part heading for part 242 is 

revised as set forth above. 

5. Add §§ 242.900, 242.901, 242.902, 

242.903, 242.904, 242.905, 242.906, 

242.907, 242.908, 242.909, 242.910, and 

242.911 to read as follows: 

§ 242.900 Definitions. 

Terms used in this Regulation SBSR 

(§§ 242.900 through 242.911) that 

appear in Section 3 of the Exchange Act 

(15 U.S.C. 78c) have the same meaning 

as in Section 3 of the Exchange Act (15 

U.S.C. 78c) and the rules or regulations 

thereunder. In addition, the following 

definitions shall apply: 

Affiliate means any person that, 

directly or indirectly, controls, is 

controlled by, or is under common 

control with, a person. 

Asset class means those securitybased swaps in a particular broad 

category, including, but not limited to, 

credit derivatives, equity derivatives, 

and loan-based derivatives. 

Block trade means a large notional 

security-based swap transaction that 

meets the criteria set forth in 

§ 242.907(b). 

Broker ID means the UIC assigned to 

a person acting as a broker for a 

participant. 

Confirm means the production of a 

confirmation that is agreed to by the 

parties to be definitive and complete 

and that has been manually, 

electronically, or, by some other legally 

equivalent means, signed. 

Control means, for purposes of 

§§ 242.900 through 242.911, the 

possession, direct or indirect, of the 

power to direct or cause the direction of 

the management and policies of a 

person, whether through the ownership 

of voting securities, by contract, or 

otherwise. A person is presumed to 

control another person if the person: 

(1) Is a director, general partner or 

officer exercising executive 

responsibility (or having similar status 

or functions); 

(2) Directly or indirectly has the right 

to vote 25 percent or more of a class of 

voting securities or has the power to sell 

or direct the sale of 25 percent or more 

of a class of voting securities; or 

(3) In the case of a partnership, has 

the right to receive, upon dissolution, or 

has contributed, 25 percent or more of 

the capital. 

Derivatives clearing organization 

means the same as provided under the 

Commodity Exchange Act. 

Desk ID means the UIC assigned to the 

trading desk of a participant or of a 

broker of a participant. 


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Effective reporting date, with respect 

to a security-based swap data repository, 

means the date six months after the 

registration date. 

Exchange Act means the Securities 

Exchange Act of 1934 (15 U.S.C. 78a, et 

seq.), as amended. 

Life cycle event means, with respect to 

a security-based swap, any event that 

would result in a change in the 

information reported to a registered 

security-based swap data repository 

under § 242.901, including a 

counterparty change resulting from an 

assignment or novation; a partial or full 

termination of the security-based swap; 

a change in the cash flows originally 

reported; for a security-based swap that 

is not cleared, any change to the 

collateral agreement; or a corporate 

action affecting a security or securities 

on which the security-based swap is 

based (e.g., a merger, dividend, stock 

split, or bankruptcy). Notwithstanding 

the above, a life cycle event shall not 

include the scheduled expiration of the 

security-based swap, a previously 

described and anticipated interest rate 

adjustment (such as a quarterly interest 

rate adjustment), or other event that 

does not result in any change to the 

contractual terms of the security-based 

swap. 

Parent means a legal person that 

controls a participant. 

Participant means: 

(1) A U.S. person that is a 

counterparty to a security-based swap 

that is required to be reported to a 

registered security-based swap data 

repository; or 

(2) A non-U.S. person that is a 

counterparty to a security-based swap 

that is: 

(i) Required to be reported to a 

registered security-based swap data 

repository; and 

(ii) Executed in the United States or 

through any means of interstate 

commerce, or cleared through a clearing 

agency that has its principal place of 

business in the United States. 

Participant ID means the UIC assigned 

to a participant. 

Phase-in period means the period 

immediately after a security-based swap 

data repository has registered with the 

Commission during which it is not 

required to disseminate security-based 

swap data pursuant to an 

implementation schedule, as provided 

in § 242.910. 

Pre-enactment security-based swap 

means any security-based swap 

executed before July 21, 2010 (the date 

of enactment of the Dodd-Frank Act 

(Pub. L. 111–203, H.R. 4173)), the terms 

of which had not expired as of that date. 

Price means the price of a securitybased swap transaction, expressed in 

terms of the commercial conventions 

used in that asset class. 

Product ID means the UIC assigned to 

a security-based swap instrument. 

Publicly disseminate means to make 

available through the Internet or other 

electronic data feed that is widely 

accessible and in machine-readable 

electronic format. 

Real time means, with respect to the 

reporting of security-based swap 

information, as soon as technologically 

practicable, but in no event later than 15 

minutes after the time of execution of 

the security-based swap transaction. 

Registered security-based swap data 

repository means a security-based swap 

data repository that is registered with 

the Commission pursuant to Section 

13(n) of the Exchange Act (15 U.S.C. 

78m(n)) and any rules or regulations 

thereunder. 

Registration date, with respect to a 

security-based swap data repository, 

means the date on which the 

Commission registers the security-based 

swap data repository, or, if the 

Commission registers the security-based 

swap data repository before the effective 

date of §§ 242.900 through 242.911. 

Reporting party means the 

counterparty to a security-based swap 

with the duty to report information in 

accordance with §§ 242.900 through 

242.911 to a registered security-based 

swap data repository, or if there is no 

registered security-based swap data 

repository that would receive the 

information, to the Commission. 

Security-based swap instrument 

means each security-based swap in the 

same asset class, with the same 

underlying reference asset, reference 

issuer, or reference index. 

Time of execution means the point at 

which the counterparties to a securitybased swap become irrevocably bound 

under applicable law. 

Trader ID means the UIC assigned to 

a natural person who executes securitybased swaps. 

Transaction ID means the unique 

identification code assigned by a 

registered security-based swap data 

repository to a specific security-based 

swap. 

Transitional security-based swap 

means a security-based swap executed 

on or after July 21, 2010, and before the 

effective reporting date. 

Ultimate parent means a legal person 

that controls a participant and that itself 

has no parent. 

Ultimate parent ID means the UIC 

assigned to an ultimate parent of a 

participant. 

Unique Identification Code or UIC 

means the unique identification code 

assigned to a person, unit of a person, 

or product by or on behalf of an 

internationally recognized standardssetting body that imposes fees and usage 

restrictions that are fair and reasonable 

and not unreasonably discriminatory. If 

no standards-setting body meets these 

criteria, a registered security-based swap 

data repository shall assign all necessary 

UICs using its own methodology. If a 

standards-setting body meets these 

criteria but has not assigned a UIC to a 

particular person, unit of a person, or 

product, a registered security-based 

swap data repository shall assign a UIC 

to that person, unit of a person, or 

product using its own methodology. 

U.S. person means a natural person 

that is a U.S. citizen or U.S. resident or 

a legal person that is organized under 

the corporate laws of any part of the 

United States or has its principal place 

of business in the United States. 

§ 242.901 Reporting obligations. 

(a) Reporting party. The reporting 

party shall be as follows: 

(1) Where only one counterparty to a 

security-based swap is a U.S. person, 

the U.S. person shall be the reporting 

party; 

(2) Where both counterparties to a 

security-based swap are U.S. persons: 

(i) With respect to a security-based 

swap in which only one counterparty is 

a security-based swap dealer or major 

security-based swap participant, the 

security-based swap dealer or major 

security-based swap participant shall be 

the reporting party; 

(ii) With respect to a security-based 

swap in which one counterparty is a 

security-based swap dealer and the 

other a major security-based swap 

participant, the security-based swap 

dealer shall be the reporting party; and 

(iii) With respect to any other 

security-based swap not described in 

paragraphs (a)(2)(i) and (ii) of this 

section, the counterparties to the 

security-based swap shall select a 

counterparty to be the reporting party. 

(3) If neither counterparty is a U.S. 

person but the security-based swap 

meets the criteria of § 242.908(a)(2) or 

(a)(3), the counterparties to the securitybased swap shall select a counterparty 

to be the reporting party. 

(b) Recipient of security-based swap 

information. For each security-based 

swap for which it is the reporting party, 

the reporting party shall provide the 

information required by §§ 242.900 

through 242.911 to a registered securitybased swap data repository or, if there 

is no registered security-based swap 


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data repository that would accept the 

information, to the Commission. 

(c) Information to be reported in real 

time. For each security-based swap for 

which it is the reporting party, the 

reporting party shall report the 

following information in real time: 

(1) The asset class of the securitybased swap and, if the security-based 

swap is an equity derivative, whether it 

is a total return swap or is otherwise 

designed to offer risks and returns 

proportional to a position in the equity 

security or securities on which the 

security-based swap is based; 

(2) Information that identifies the 

security-based swap instrument and the 

specific asset(s) or issuer(s) of any 

security on which the security-based 

swap is based; 

(3) The notional amount(s), and the 

currency(ies) in which the notional 

amount(s) is expressed; 

(4) The date and time, to the second, 

of execution, expressed using 

Coordinated Universal Time (UTC); 

(5) The effective date; 

(6) The scheduled termination date; 

(7) The price; 

(8) The terms of any fixed or floating 

rate payments, and the frequency of any 

payments; 

(9) Whether or not the security-based 

swap will be cleared by a clearing 

agency; 

(10) If both counterparties to a 

security-based swap are security-based 

swap dealers, an indication to that 

effect; 

(11) If applicable, an indication that 

the transaction does not accurately 

reflect the market; and 

(12) If the security-based swap is 

customized to the extent that the 

information provided in paragraphs 

(c)(1) through (11) of this section does 

not provide all of the material 

information necessary to identify such 

customized security-based swap or does 

not contain the data elements necessary 

to calculate the price, an indication to 

that effect. 

(d) Additional information that must 

be reported. (1) In addition to the 

information required under paragraph 

(c) of this section, for each securitybased swap for which it is the reporting 

party, the reporting party shall report: 

(i) The participant ID of each 

counterparty; 

(ii) As applicable, the broker ID, desk 

ID, and trader ID of the reporting party; 

(iii) The amount(s) and currency(ies) 

of any up-front payment(s) and a 

description of the terms and 

contingencies of the payment streams of 

each counterparty to the other; 

(iv) The title of any master agreement, 

or any other agreement governing the 

transaction (including the title of any 

document governing the satisfaction of 

margin obligations), incorporated by 

reference and the date of any such 

agreement; 

(v) The data elements necessary for a 

person to determine the market value of 

the transaction; 

(vi) If the security-based swap will be 

cleared, the name of the clearing agency; 

(vii) If the security-based swap is not 

cleared, whether the exception in 

Section 3C(g) of the Exchange Act was 

invoked; 

(viii) If the security-based swap is not 

cleared, a description of the settlement 

terms, including whether the securitybased swap is cash-settled or physically 

settled, and the method for determining 

the settlement value; and 

(ix) The venue where the securitybased swap was executed. 

(2) Any information required to be 

reported pursuant to paragraph (d)(1) of 

this section must be reported promptly, 

but in no event later than: 

(i) Fifteen minutes after the time of 

execution for a security-based swap that 

is executed and confirmed 

electronically; 

(ii) Thirty minutes after the time of 

execution for a security-based swap that 

is confirmed electronically but not 

executed electronically; or 

(iii) Twenty-four hours after the time 

of execution for a security-based swap 

that is not executed or confirmed 

electronically. 

(e) Duty to report any life cycle event 

of a security-based swap. For any life 

cycle event, and any adjustment due to 

a life cycle event, that results in a 

change to information previously 

reported pursuant to paragraph (c), (d), 

or (i) of this section, the reporting party 

shall promptly provide updated 

information reflecting such change to 

the entity to which it reported the 

original transaction, using the 

transaction ID, subject to the following 

exceptions: 

(1) If a reporting party ceases to be a 

counterparty to a security-based swap 

due to an assignment or novation, the 

new counterparty shall be the reporting 

party following such assignment or 

novation, if the new counterparty is a 

U.S. person. 

(2) If, following an assignment or 

novation, the new counterparty is not a 

U.S. person, the counterparty that is a 

U.S. person shall be the reporting party 

following such assignment or novation. 

(f) Time stamping incoming 

information. A registered security-based 

swap data repository shall time stamp, 

to the second, its receipt of any 

information submitted to it pursuant to 

paragraph (c), (d), or (e) of this section. 

(g) Assigning transaction ID. A 

registered security-based swap data 

repository shall assign a transaction ID 

to each security-based swap reported by 

a reporting party. 

(h) Format of reported information. 

The reporting party shall electronically 

transmit the information required under 

this section in a format required by the 

registered security-based data 

repository, and in accordance with any 

applicable policies and procedures of 

the registered security-based swap data 

repository. 

(i) Reporting of pre-enactment and 

transitional security-based swaps. With 

respect to any pre-enactment securitybased swap or transitional securitybased swap, the reporting party shall 

report all of the information required by 

paragraphs (c) and (d) of this section, to 

the extent such information is available. 

§ 242.902 Public dissemination of 

transaction reports. 

(a) Dissemination of transaction 

reports. Except in the case of a block 

trade, a registered security-based swap 

data repository shall publicly 

disseminate a transaction report of a 

security-based swap immediately upon 

receipt of information about the 

security-based swap from a reporting 

party, or upon re-opening following a 

period when the registered securitybased swap data repository was closed. 

The transaction report shall consist of 

all the information reported by the 

reporting party pursuant to § 242.901, 

plus any indicator or indicators 

contemplated by the registered securitybased swap data repository’s policies 

and procedures that are required by 

§ 242.907. 

(b) Dissemination of block trades. A 

registered security-based swap data 

repository shall publicly disseminate a 

transaction report of a security-based 

swap that constitutes a block trade 

immediately upon receipt of 

information about the block trade from 

the reporting party. The transaction 

report shall consist of all the 

information reported by the reporting 

party pursuant to § 242.901(c), except 

for the notional size, plus the 

transaction ID and an indicator that the 

report represents a block trade. The 

registered security-based swap data 

repository shall publicly disseminate a 

complete transaction report for such 

block trade (including the transaction ID 

and the full notional size) as follows: 

(1) If the security-based swap was 

executed on or after 05:00 UTC and 

before 23:00 UTC of the same day, the 

transaction report (including the 

transaction ID and the full notional size) 


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shall be disseminated at 07:00 UTC of 

the following day. 

(2) If the security-based swap was 

executed on or after 23:00 UTC and up 

to 05:00 UTC of the following day, the 

transaction report (including the 

transaction ID and the full notional size) 

shall be disseminated at 13:00 UTC of 

that following day. 

(3) Notwithstanding the foregoing, if a 

registered security-based swap data 

repository is in normal closing hours or 

special closing hours at a time when it 

would be required to disseminate 

information about a block trade 

pursuant to this section, the registered 

security-based swap data repository 

shall instead disseminate information 

about the block trade immediately upon 

re-opening. 

(c) Non-disseminated information. A 

security-based swap data repository 

shall not disseminate: 

(1) The identity of either counterparty 

to a security-based swap; 

(2) With respect to a security-based 

swap that is not cleared at a registered 

clearing agency and that is reported to 

a registered security-based swap data 

repository, any information disclosing 

the business transactions and market 

positions of any person; or 

(3) Any information regarding a 

security-based swap reported pursuant 

to § 242.901(i). 

(d) Temporary restriction on other 

market data sources. No person other 

than a registered security-based swap 

data repository shall make available to 

one or more persons (other than a 

counterparty) transaction information 

relating to a security-based swap before 

the earlier of 15 minutes after the time 

of execution of the security-based swap; 

or the time that a registered securitybased swap data repository publicly 

disseminates a report of that securitybased swap. 

§ 242.903 Coded information. 

A reporting party may provide 

information to a registered securitybased swap data repository pursuant to 

§ 242.901 and a registered securitybased swap data repository may 

publicly disseminate information 

pursuant to § 242.902 using codes in 

place of certain data elements, provided 

that the information necessary to 

interpret such codes is widely available 

on a non-fee basis. 

§ 242.904 Operating hours of registered 

security-based swap data repositories. 

A registered security-based swap data 

repository shall have systems in place to 

continuously receive and disseminate 

information regarding security-based 

swaps pursuant to §§ 242.900 through 

242.911, subject to the following 

exceptions: 

(a) A registered security-based swap 

data repository may establish normal 

closing hours during periods when, in 

its estimation, the U.S. market and 

major foreign markets are inactive. A 

registered security-based swap data 

repository shall provide reasonable 

advance notice to participants and to 

the public of its normal closing hours. 

(b) A registered security-based swap 

data repository may declare, on an ad 

hoc basis, special closing hours to 

perform system maintenance that 

cannot wait until normal closing hours. 

A registered security-based swap data 

repository shall: to the extent reasonably 

possible under the circumstances, avoid 

scheduling special closing hours during 

when, in its estimation, the U.S. market 

and major foreign markets are most 

active; and provide reasonable advance 

notice of its special closing hours to 

participants and to the public. 

(c) During normal closing hours, and 

to the extent reasonably practicable 

during special closing hours, a 

registered security-based swap data 

repository shall have the capability to 

receive and hold in queue information 

regarding security-based swaps that has 

been reported pursuant to §§ 242.900 

through 242.911. 

(d) When a registered security-based 

swap data repository re-opens following 

normal closing hours or special closing 

hours, it shall disseminate transaction 

reports of security-based swaps held in 

queue, in accordance with the 

requirements of § 242.902. 

(e) If a registered security-based swap 

data repository could not receive and 

hold in queue transaction information 

that was required to be reported 

pursuant to §§ 242.900 through 242.911, 

it must immediately upon re-opening 

send a message to all participants that 

it has resumed normal operations. 

Thereafter, any participant that had an 

obligation to report information to the 

registered security-based swap data 

repository pursuant to §§ 242.900 

through 242.911, but could not do so 

because of the registered security-based 

swap data repository’s inability to 

receive and hold in queue data, must 

immediately report the information to 

the registered security-based swap data 

repository. 

§ 242.905 Correction of errors in securitybased swap information. 

(a) Duty of counterparties to correct. 

Any counterparty to a security-based 

swap that discovers an error in 

information previously reported 

pursuant to §§ 242.900 through 242.911 

shall correct such error in accordance 

with the following procedures: 

(1) If a counterparty that was not the 

reporting party for a security-based 

swap discovers an error in the 

information reported with respect to 

such security-based swap, the 

counterparty shall promptly notify the 

reporting party of the error; and 

(2) If the reporting party for a securitybased swap transaction discovers an 

error in the information reported with 

respect to a security-based swap, or 

receives notification from its 

counterparty of an error, the reporting 

party shall promptly submit to the 

entity to which the security-based swap 

was originally reported an amended 

report pertaining to the original 

transaction report. If the reporting party 

reported the initial transaction to a 

registered security-based swap data 

repository, the reporting party shall 

submit an amended report to the 

registered security-based swap data 

repository in a manner consistent with 

the policies and procedures 

contemplated by § 242.907(a)(3). 

(b) Duty of registered security-based 

swap data repository to correct. A 

registered security-based swap data 

repository shall: 

(1) Upon discovery of the error or 

receipt of a notice of the error from a 

reporting party, verify the accuracy of 

the terms of the security-based swap 

and, following such verification, 

promptly correct the erroneous 

information regarding such securitybased swap contained in its system; and 

(2) If such erroneous information falls 

into any of the categories of information 

enumerated in § 242.901(c), publicly 

disseminate a corrected transaction 

report of the security-based swap 

promptly following verification of the 

trade by the parties to the security-based 

swap, with an indication that the report 

relates to a previously disseminated 

transaction. 

§ 242.906 Other duties of participants. 

(a) Reporting by non-reporting-party 

counterparty. A registered securitybased swap data repository shall 

identify any security-based swap 

reported to it for which the registered 

security-based swap data repository 

does not have the participant ID and (if 

applicable) the broker ID, desk ID, and 

trader ID of each counterparty. Once a 

day, a registered security-based swap 

data repository shall send a report to 

each participant identifying, for each 

security-based swap to which that 

participant is a counterparty, the 

security-based swap(s) for which the 

registered security-based swap data 

repository lacks participant ID and (if 


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applicable) broker ID, desk ID, and 

trader ID. A participant that receives 

such a report shall provide the missing 

information to the registered securitybased swap data repository within 24 

hours. 

(b) Duty to provide ultimate parent 

and affiliate information. Each 

participant of a registered security-based 

swap data repository shall provide to 

the registered security-based swap data 

repository information sufficient to 

identify its ultimate parent(s) and any 

affiliate(s) of the participant that also are 

participants of the registered securitybased swap data repository, using 

ultimate parent IDs and participant IDs. 

A participant shall promptly notify the 

registered security-based swap data 

repository of any changes to that 

information. 

(c) Policies and procedures of 

security-based swap dealers and major 

security-based swap participants. Each 

participant that is a security-based swap 

dealer or major security-based swap 

participant shall establish, maintain, 

and enforce written policies and 

procedures that are reasonably designed 

to ensure that it complies with any 

obligations to report information to a 

registered security-based swap data 

repository in a manner consistent with 

§§ 242.900 through 242.911 and the 

registered security-based swap data 

repository’s applicable policies and 

procedures. Each such participant shall 

review and update its policies and 

procedures at least annually. 

§ 242.907 Policies and procedures of 

registered security-based swap data 

repositories. 

(a) General policies and procedures. 

With respect to the receipt, reporting, 

and dissemination of data pursuant to 

§§ 242.900 through 242.911, a registered 

security-based swap data repository 

shall establish and maintain written 

policies and procedures: 

(1) That enumerate the specific data 

elements of a security-based swap or a 

life cycle event that a reporting party 

must report, which shall include, at a 

minimum, the data elements specified 

in § 242.901(c) and (d); 

(2) That specify one or more 

acceptable data formats (each of which 

must be an open-source structured data 

format that is widely used by 

participants), connectivity 

requirements, and other protocols for 

submitting information; 

(3) For specifying how reporting 

parties are to report corrections to 

previously submitted information, 

making corrections to information in its 

records that is subsequently discovered 

to be erroneous, and applying an 

appropriate indicator to any transaction 

report required to be disseminated by 

§ 242.905(b)(2) that the report relates to 

a previously disseminated transaction; 

(4) Describing how reporting parties 

shall report and, consistent with the 

enhancement of price discovery, how 

the registered security-based swap 

depository shall publicly disseminate, 

reports of, and adjustments due to, life 

cycle events; security-based swap 

transactions that do not involve an 

opportunity to negotiate any material 

terms, other than the counterparty; and 

any other security-based swap 

transactions that, in the estimation of 

the registered security-based swap data 

repository, do not accurately reflect the 

market; 

(5) For assigning: 

(i) A transaction ID to each securitybased swap that is reported to it; and 

(ii) UICs established by or on behalf 

of an internationally recognized 

standards-setting body that imposes fees 

and usage restrictions that are fair and 

reasonable and not unreasonably 

discriminatory (or, if no standardssetting body meets these criteria or a 

standards-setting body meets these 

criteria but has not assigned a UIC to a 

particular person, unit of a person, or 

product, using its own methodology). 

(6) For periodically obtaining from 

each participant information that 

identifies the participant’s ultimate 

parent(s) and any other participant(s) 

with which the counterparty is 

affiliated, using ultimate parent IDs and 

participant IDs. 

(b) Policies and procedures regarding 

block trades. (1) A registered securitybased swap data repository shall 

establish and maintain written policies 

and procedures for calculating and 

publicizing block trade thresholds for 

all security-based swap instruments 

reported to the registered security-based 

swap data repository in accordance with 

the criteria and formula for determining 

block size as specified by the 

Commission. 

(2) Exceptions. Notwithstanding the 

above, a registered security-based swap 

data repository shall not designate as a 

block trade any security-based swap: 

(i) That is an equity total return swap 

or is otherwise designed to offer risks 

and returns proportional to a position in 

the equity security or securities on 

which the security-based swap is based; 

or 

(ii) Contemplated by Section 

13(m)(1)(C)(iv) of the Exchange Act (15 

U.S.C. 78m(m)(1)(C)(iv)). 

(c) Public availability of policies and 

procedures. A registered security-based 

swap data repository shall make the 

policies and procedures required by 

§§ 242.900 through 242.911 publicly 

available on its Web site. 

(d) Updating of policies and 

procedures. A registered security-based 

swap data repository shall review, and 

update as necessary, the policies and 

procedures required by §§ 242.900 

through 242.911 at least annually. Such 

policies and procedures shall indicate 

the date on which they were last 

reviewed. 

(e) A registered security-based swap 

data repository shall have the capacity 

to provide to the Commission, upon 

request, information or reports related to 

the timeliness, accuracy, and 

completeness of data reported to it 

pursuant to §§ 242.900 through 242.911 

and the registered security-based swap 

data repository’s policies and 

procedures thereunder. 

§ 242.908 Jurisdictional matters. 

(a) Notwithstanding any other 

provision of §§ 242.900 through 

242.911, no security-based swap is 

required to be reported to a registered 

security-based swap data repository, 

and no registered security-based swap 

data repository is required to publicly 

disseminate a report of a security-based 

swap, unless the security-based swap: 

(1) Has at least one counterparty that 

is a U.S. person; 

(2) Was executed in the United States 

or through any means of interstate 

commerce; or 

(3) Was cleared through a clearing 

agency having its principal place of 

business in the United States. 

(b) Notwithstanding any other 

provision of §§ 242.900 through 

242.911, a counterparty to a securitybased swap shall not incur any 

obligation under §§ 242.900 through 

242.911 unless it is: 

(1) A U.S. person; 

(2) A counterparty to a security-based 

swap executed in the United States or 

through any means of interstate 

commerce; or 

(3) A counterparty to a security-based 

swap cleared through a clearing agency 

having its principal place of business in 

the United States. 

§ 242.909 Registration of security-based 

swap data repository as a securities 

information processor. 

A registered security-based swap data 

repository shall also register with the 

Commission as a securities information 

processor on Form SIP (§ 249.1001 of 

this chapter). 

§ 242.910 Implementation of securitybased swap reporting and dissemination. 

(a) Reporting of pre-enactment 

security-based swaps. The reporting 

party shall report to a registered 


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security-based swap data repository any 

pre-enactment security-based swaps no 

later than January 12, 2012 (180 days 

after the effective date of the DoddFrank Act (Pub. L. 111–203, 124 Stat. 

1376)). 

(b) Phase-in of compliance dates. A 

registered security-based swap data 

repository and its participants shall be 

subject to the following phased-in 

compliance schedule: 

(1) Phase 1, six months after the 

registration date (i.e., the effective 

reporting date): 

(i) Reporting parties shall report to the 

registered security-based swap data 

repository any transitional securitybased swaps. 

(ii) With respect to any security-based 

swap executed on or after the effective 

reporting date, reporting parties shall 

comply with §§ 242.901. 

(iii) Participants and the registered 

security-based swap data repository 

shall comply with § 242.905 (except 

with respect to dissemination) and 

§ 242.906(a) and (b). 

(iv) Participants that are SBS dealers 

or major SBS participants shall comply 

with § 242.906(c). 

(2) Phase 2, nine months after the 

registration date: Wave 1 of public 

dissemination—The registered securitybased swap data repository shall comply 

with § 242.902 and 242.905 (with 

respect to dissemination of corrected 

transaction reports) for 50 securitybased swap instruments. 

(3) Phase 3, 12 months after the 

registration date: Wave 2 of public 

dissemination The registered securitybased swap data repository shall comply 

with § 242.902 and 242.905 (with 

respect to dissemination of corrected 

transaction reports) for an additional 

200 security-based swap instruments. 

(4) Phase 4, 18 months after the 

registration date: Wave 3 of public 

dissemination—All security-based 

swaps reported to the registered 

security-based swap data repository 

shall be subject to real-time public 

dissemination as specified in § 242.902. 

§ 242.911 Prohibition during phase-in 

period. 

A reporting party shall not report a 

security-based swap to a registered 

security-based swap data repository in a 

phase-in period described in § 242.910 

during which the registered securitybased swap data repository is not yet 

required or able to publicly disseminate 

transaction reports for that securitybased swap instrument unless: 

(a) The security-based swap is also 

reported to a registered security-based 

swap data repository that is 

disseminating transaction reports for 

that security-based swap instrument 

consistent with § 242.902; or 

(b) No other registered security-based 

swap data repository is able to receive, 

hold, and publicly disseminate 

transaction reports regarding that 

security-based swap instrument. 

By the Commission. 

Dated: November 19, 2010. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–29710 Filed 12–1–10; 8:45 am] 

BILLING CODE 8011–01–P 


hsrobinson on DSK69SOYB1PROD with PROPOSALS2