[Federal Register Volume 75, Number 234 (Tuesday, December 7, 2010)]
[Proposed Rules]
[Pages 76140-76183]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29994]



[[Page 76139]]

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Part III





Commodity Futures Trading Commission





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17 CFR Part 43



Real-Time Public Reporting of Swap Transaction Data; Proposed Rule

Federal Register / Vol. 75 , No. 234 / Tuesday, December 7, 2010 / 
Proposed Rules

[[Page 76140]]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 43

RIN 3038-AD08


Real-Time Public Reporting of Swap Transaction Data

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is 
proposing rules to implement new statutory provisions enacted by Title 
VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act 
(the ``Dodd-Frank Act''). Specifically, in accordance with Section 727 
of the Dodd-Frank Act, the Commission is proposing rules to implement a 
new framework for the real-time public reporting of swap transaction 
and pricing data for all swap transactions. Additionally, the 
Commission is proposing rules to address the appropriate minimum size 
and time delay relating to block trades on swaps and large notional 
swap transactions.

DATES: Comments must be received by February 7, 2011.

ADDRESSES: You may submit comments, identified by RIN number 3038-AD08, 
by any of the following methods:
    <bullet> Federal eRulemaking Portal at http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Agency Internet Web site, via Its Comments Online Process: 
http://comments.cftc.gov. Follow the instructions for submitting 
comments through the Internet Web site.
    <bullet> Mail: David A. Stawick, Secretary of the Commission, 
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st 
Street, NW., Washington, DC 20581.
    <bullet> Hand Delivery/Courier: Same as mail above.
    All comments must be submitted in English, or if not, accompanied 
by an English translation. Comments will be posted as received on 
http://www.cftc.gov. You should submit only information that you wish 
to make publicly available. If you wish the Commission to consider 
information that is exempt from disclosure under the Freedom of 
Information Act, a petition for confidential treatment of the exempt 
information may be submitted according to the established procedures in 
Commission Regulation Sec.  145.9.\1\
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    \1\ 17 CFR 145.9.
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    The Commission reserves the right, but shall not have the 
obligation, to review, pre-screen, filter, redact, refuse, or remove 
any or all of your submission from www.cftc.gov that it may deem to be 
inappropriate for publication, such as obscene language. All 
submissions that have been redacted or removed from the Commission's 
Internet Web site, but that contain comments on the merits of the 
rulemaking, will be retained in the public comment file and will be 
considered as required under the Administrative Procedure Act, 5 U.S.C. 
551 et seq., and other applicable laws, and may be accessible under the 
Freedom of Information Act, 5 U.S.C. 552.

FOR FURTHER INFORMATION CONTACT: Thomas Leahy, Associate Director, 
Division of Market Oversight, 202-418-5278, <a href="/cdn-cgi/l/email-protection#10647c7571786950737664733e777f66"><span class="__cf_email__" data-cfemail="7d0911181c15043d1e1b091e531a120b">[email protected]</span></a>; or Jeffrey 
L. Steiner, Special Counsel, Division of Market Oversight, 202-418-
5482, <a href="/cdn-cgi/l/email-protection#a6ccd5d2c3cfc8c3d4e6c5c0d2c588c1c9d0"><span class="__cf_email__" data-cfemail="741e0700111d1a110634171200175a131b02">[email protected]</span></a>; Commodity Futures Trading Commission, Three 
Lafayette Center, 1155 21st Street, NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
II. Explanation of the Proposed Rules
    A. Overview
    1. Introduction
    2. Parties Responsible for Reporting Swap Transaction and 
Pricing Data to a Registered Entity
    3. Parties Responsible for Publicly Disseminating Swap 
Transaction and Pricing Data in Real-Time
    4. Proposed Effective Date and Implementation Schedule
    B. Section-by-Section Analysis
    1. Proposed Section 43.1--Purpose, Scope and Rules of 
Construction
    2. Proposed Section 43.2--Definitions
    3. Proposed Section 43.3--Method and Timing for Real-Time Public 
Reporting
i. Responsibilities of the Reporting Party To Report Data
ii. Responsibilities of Swap Markets To Publicly Disseminate Swap 
Transaction and Pricing Data in Real-Time
iii. Requirements for Registered SDRs
iv. Requirements for Third-Party Service Providers
v. Availability of Real-Time Swap Transaction and Pricing Data
vi. Errors or Omissions
vii. Hours of Operation
viii. Recordkeeping Requirements
ix. Fees Charged by Registered SDRs
x. Consolidated Public Dissemination of Swap Data
    4. Proposed Section 43.4 and Appendix A to Proposed Part 43--
Swap Transaction and Pricing Data to be Publicly Disseminated in 
Real-Time
i. Ensuring the Anonymity of the Parties to a Swap
ii. Unique Product Identifiers
iii. Price-Forming Continuation Data
iv. Reporting and Public Dissemination of Notional or Principal 
Amount
v. Appendix A to Proposed Part 43
vi. Examples to Illustrate the Public Reporting of Real-Time Swap 
Transaction and Pricing Data
    5. Proposed Section 43.5--Block Trades and Large Notional Swaps
i. Parties to a Block Trade or Large Notional Swap
ii. Block Trades on Swaps
iii. Large Notional Swaps
iv. Time-Stamp and Reporting Requirements for Block Trades and Large 
Notional Swaps
v. Responsibilities of Registered SDRs in Determining the 
Appropriate Minimum Block Size
vi. Formula to Calculate the Appropriate Minimum Block Size
vii. Distribution Test
viii. Multiple Test
ix. Responsibilities of Swap Markets in Determining Minimum Block 
Trade Sizes
x. Responsibilities of the Parties to a Swap in Determining the 
Appropriate Minimum Large Notional Swap Size
xi. Time Delay in the Real-Time Public Reporting of Block Trades and 
Large Notional Swaps
xii. Prohibition of Aggregation of Trades
III. Related Matters
A. Cost-Benefit Analysis
    1. Introduction
    2. Summary of Proposed Requirements
    3. Costs
    4. Benefits
B. Paperwork Reduction Act
    1. Introduction
    2. Information Provided by Reporting Entities/Persons
i. Reporting Requirement
ii. Public Dissemination Requirement
iii. Recordkeeping Requirement
iv. Determination of Appropriate Minimum Block Size
    3. Information Collection Comments
C. Regulatory Flex Act

I. Background

    On July 21, 2010, President Obama signed the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (``Dodd-Frank Act'').\2\ Title VII 
of the Dodd-Frank Act \3\ amended the Commodity Exchange Act (``CEA'') 
\4\ to establish a comprehensive, new regulatory framework for swaps 
and security-based swaps.\5\ The legislation was enacted to reduce 
risk, increase transparency and promote market integrity within the 
financial system by, among other things: (1) Providing for the

[[Page 76141]]

registration and comprehensive regulation of swap dealers and major 
swap participants (``MSPs''); (2) imposing mandatory clearing and trade 
execution requirements on standardized derivative products; (3) 
creating robust recordkeeping and real-time reporting regimes; and (4) 
enhancing the Commodity Futures Trading Commission's (``Commission'' or 
``CFTC'') rulemaking and enforcement authorities with respect to, among 
others, all registered entities and intermediaries subject to the 
Commission's oversight.
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    \2\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the 
Dodd-Frank Act may be accessed at http://www.cftc.gov./
LawRegulation/OTCDERIVATIVES/index.htm.
    \3\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may 
be cited as the ``Wall Street Transparency and Accountability Act of 
2010.''
    \4\ 7 U.S.C. 1 et seq.
    \5\ Rules governing the reporting and dissemination of security-
based swaps are the subject of a separate and forthcoming rulemaking 
by the Securities and Exchange Commission (``SEC'').
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    Accordingly, in order to ensure the proper implementation of the 
new regulatory framework, Section 727 of the Dodd-Frank Act created 
Section 2(a)(13) of the CEA, which requires the Commission to 
promulgate rules that provide for the public availability of swap 
transaction and pricing data in real-time in such form and at such 
times as the Commission determines appropriate to enhance price 
discovery.\6\ Under new Section 2(a)(13)(A) of the CEA, the definition 
of ``real-time public reporting'' means reporting ``data relating to a 
swap transaction, including price and volume, as soon as 
technologically practicable after the time at which the swap 
transaction has been executed.''
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    \6\ Section 2(a)(13)(B) of the CEA states that ``[t]he purpose 
of this section is to authorize the Commission to make 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.''
    It is notable that the CEA is silent as to the appropriate 
method through which real-time public reporting must occur.
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    Sections 2(a)(13)(C)(i) through (iv) of the CEA set out the four 
types of swaps for which transaction and pricing data must be reported 
to the public in real-time: (i) Swaps that are subject to the mandatory 
clearing requirement \7\ (including those swaps that may qualify for a 
non-financial end-user exception from the mandatory clearing 
requirement); \8\ (ii) swaps that are not subject to the mandatory 
clearing requirement but are cleared at a registered derivatives 
clearing organization (``DCO''); (iii) swaps that are not cleared at a 
registered DCO and which are reported to a registered swap data 
repository (``SDR'') or to the Commission pursuant to Section 2(h)(6) 
of the CEA; and (iv) swaps that are ``determined to be required to be 
cleared'' under Section 2(h)(2) of the CEA but are not cleared. The 
four categories described in Section 2(a)(13)(C) of the CEA cover all 
swaps and, therefore, the real-time reporting requirements apply to all 
swaps, including those swaps executed on a registered swap execution 
facility (``SEF'') or a registered designated contract market (``DCM,'' 
together with a SEF, a ``swap market'') and those swaps executed 
bilaterally between counterparties and not pursuant to the rules of a 
SEF or DCM (``off-facility swaps'').\9\
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    \7\ The mandatory clearing requirement is found in Section 
2(h)(1) of the CEA, as added by Section 723(a)(3) of the Dodd-Frank 
Act.
    \8\ Section 2(h)(7) of the CEA provides the non-financial end-
user exception from the mandatory clearing requirement.
    \9\ The legislative history of the Dodd-Frank Act also suggests 
that the real-time reporting requirements of Section 2(a)(13) apply 
to all swaps. Senate Agriculture Committee Chairwoman Blanche 
Lincoln stated during Senate deliberations that ``[t]he major 
components of the derivatives title include: 100 percent reporting 
of swaps and security-based swaps, mandatory trading and clearing of 
standardized swaps and security-based swaps and real-time price 
reporting for all swap transactions--those subject to mandatory 
trading and clearing as well as those subject to the end-user 
clearing exemption and customized swaps.'' 156 Cong. Rec. S5,920 
(daily ed. July 15, 2010) (statement of Sen. Blanche Lincoln).
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    With regard to swaps described in Sections 2(a)(13)(C)(i) and (ii) 
of the CEA, Section 2(a)(13)(E) of the CEA provides that the Commission 
shall prescribe rules that: (i) Ensure such information does not 
identify the participants; (ii) specify the criteria for determining 
what constitutes a large notional swap transaction (block trade) for 
particular markets and contracts; (iii) specify the appropriate time 
delay for reporting large notional swap transactions (block trades) to 
the public; and (iv) take into account whether public disclosure will 
materially reduce market liquidity. CEA Section 2(a)(13)(E) does not 
state explicitly that the proposed rules must contain similar 
provisions for those swaps described in Sections 2(a)(13)(C)(iii) and 
(iv). However, in applying its authority under Section 2(a)(13)(B) to 
``make 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,'' the Commission is authorized to prescribe 
similar rules to those provisions in Section 2(a)(13)(E) for off-
facility swap transactions described in Sections 2(a)(13)(C)(iii) and 
(iv).\10\
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    \10\ In addition, the Commission is required by Section 
2(a)(13)(C)(iii) of the CEA to prescribe real-time public reporting 
requirements for off-facility swaps ``in a manner that does not 
disclose the business transactions and market positions of any 
person.''
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II. Explanation of the Proposed Rules

A. Overview

1. Introduction
    The Commission proposes to create a new part 43 of its regulations, 
implementing the provisions of Section 2(a)(13) of the CEA. The 
proposed rules in part 43 set out: (1) The entities or persons that 
shall be responsible for reporting swap transaction and pricing data; 
(2) the entities or persons that shall be responsible for publicly 
disseminating such data; (3) the data fields and guidance on the 
appropriate order and format for data to be reported to the public in 
real-time; (4) the appropriate minimum size and time delay for block 
trades and large notional swaps; and (5) the proposed effective date 
and implementation schedule for the proposed rules.
    The proposed rules reflect consultation with staff of the 
Securities and Exchange Commission (the ``SEC'') \11\ and staff of the 
Board of Governors of the Federal Reserve.\12\ Staff from each of these 
agencies has provided verbal and/or written comments and the proposed 
rules incorporate elements of the comments provided. The proposed rules 
have been further informed by (i) the joint roundtable conducted by 
CFTC staff and staff of the SEC on September 14, 2010 (the 
``Roundtable''); \13\ (ii) public comments posted on the Commission's 
Internet Web site; \14\ and (iii) CFTC staff meetings with market 
participants.\15\
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    \11\ Section 763 of the Dodd-Frank Act authorizes the SEC to 
promulgate rules ``to provide for the public availability of 
security-based swap transaction, volume, and pricing data * * *.''
    \12\ See Section 712(a)(1) of the Dodd-Frank Act requires staff 
to consult with the SEC and other prudential regulators.
    \13\ The transcript from the Roundtable (the ``Roundtable Tr.) 
is available at: http://www.cftc.gov/ucm/groups/public/@swaps/documents/file/derivative18sub091410.pdf.
    \14\ Such comments are available at: http://www.cftc.gov/LawRegulation/DoddFrankAct/OTC_18_RealTimeReporting.html.
    \15\ A list and description of such meetings is available at: 
http://www.cftc.gov/LawRegulation/DoddFrankAct/ExternalMeetings/index.htm.
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    The SEC is adopting rules related to the real-time reporting of 
security based swaps as required under Section 763 of the Dodd-Frank 
Act. Understanding that the Commission and the SEC regulate different 
products and markets and, as such may be proposing alternative 
regulatory requirements, the Commission requests comments on the impact 
of any differences between the Commission's and the SEC's approach to 
the regulation and reporting of swaps and security-based swaps and the 
public dissemination of swap transaction and

[[Page 76142]]

pricing data in real-time. In addition, the Commission requests 
specific comment on the following issues:
    <bullet> Would the regulatory approach of the Commission in this 
proposed rulemaking, pursuant to Section 727 of the Dodd-Frank Act, and 
the SEC's proposed rulemaking, pursuant to Section 763 and 766 of the 
Dodd-Frank Act, result in duplicative or inconsistent requirements on 
the part of market participants to both regulatory regimes or result in 
gaps between those regimes? If so, in what way should these 
duplications, inconsistencies or gaps be minimized?
    <bullet> Do commenters believe that the proposed approaches by the 
Commission and the SEC for the real-time reporting and public 
dissemination of swap transaction and pricing data are comparable? If 
not, why? Are there approaches that could make the real-time reporting 
and public dissemination of swap transaction and pricing data more 
comparable? If so, what?
    <bullet> Do commenters believe that it would be appropriate for the 
Commission to adopt an approach proposed by the SEC that differs from 
the Commission's proposal? If so, which one(s)? The Commission requests 
that commenters provide data, to the extent possible, to support any 
suggested approaches.
2. Parties Responsible for Reporting Swap Transaction and Pricing Data 
to a Registered Entity
    Section 2(a)(13)(F) of the CEA provides that the parties to a swap 
(including agents of the parties to a swap) shall be responsible for 
reporting swap transaction information to the appropriate registered 
entity \16\ in a timely manner as may be prescribed by the 
Commission.\17\ For off-facility swaps, the Commission's proposal 
places the requirement to report the swap transaction and pricing data 
in real-time to a registered entity (i.e., a registered SDR that 
accepts and publicly disseminates real-time swap transaction and 
pricing data in real-time) in a manner similar to that in which all 
swap transaction information for uncleared swaps would be reported to a 
registered SDR pursuant to Section 4r(a)(3) of the CEA.\18\ With 
respect to swaps that are executed on a swap market, the Commission's 
proposal provides that if the parties to a swap execute a transaction 
on a swap market, then the transacting parties' reporting requirements 
under Section 2(a)(13)(F) of the CEA are satisfied. The Commission 
views the real-time swap transaction and pricing data that is sent to a 
real-time disseminator and the swap information that is sent to a 
registered SDR as two separate and distinct data streams.\19\
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    \16\ Section 1a(40) of the CEA, as amended by Section 721(a) of 
the Dodd-Frank Act, defines ``registered entity'' to include SEFs, 
DCMs and SDRs, but does not include swap dealers and MSPs. Section 
1a(40) also defines registered entity to include DCOs. The 
Commission has determined not to apply this requirement to DCOs 
because it believes that the value of timely public dissemination 
outweighs the benefit of waiting until a swap is presented to a 
clearing organization.
    \17\ Sections 4s(f)(1)(A) and 4s(f)(2) of the CEA, provide the 
Commission with broad authority to adopt rules governing the 
reporting of all swap transaction information for swap dealers and 
MSPs. Specifically, Section 4s(f)(1)(A) of the CEA provides that 
``[e]ach registered swap dealer and major swap participant shall 
make such reports as are required by the Commission by rule or 
regulation regarding the transactions and positions and financial 
condition of the registered swap dealer or major swap participant * 
* *'' Section 4s(f)(2) of the CEA provides that ``[t]he Commission 
shall adopt rules governing reporting and recordkeeping for swap 
dealers and major swap participants.'' Additionally, Sections 
4s(h)(1)(D) and 4s(h)(3)(D) of the CEA provide the Commission with 
rulemaking authority to establish business conduct standards and 
requirements relating to the real-time reporting requirements on 
swap dealers and major swap participants.
    \18\ Section 4r(a)(3) of the CEA provides that for swaps in 
which only one counterparty is a swap dealer or MSP, the swap dealer 
or MSP is required to report the swap to a registered SDR. For swaps 
in which only one counterparty is a swap dealer and the other is an 
MSP, the swap dealer is required to report to a registered SDR. For 
all other swaps, Section 4r(a)(3) provides that the counterparties 
to the swap shall select a counterparty to report to a registered 
SDR.
    \19\ The real-time reporting requirements pursuant to Section 
2(a)(13) of the CEA are separate and apart from the requirements to 
report swap transaction information to a registered SDR. The 
reporting requirements for all swap transaction information to an 
SDR are found in Sections 2(a)(13)(G) and 4r(a)(1) of the CEA. 
Specifically, Section 2(a)(13)(G) of the CEA provides that [e]ach 
swap, (whether cleared or uncleared) shall be reported to a 
registered swap data repository.'' In addition, Section 4r(a)(1) 
provides that ``[e]ach swap that is not accepted for clearing by any 
[DCO] shall be reported to [an SDR] described in section 21 [of the 
CEA];'' or if no SDR exists, to the Commission.
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3. Parties Responsible for Publicly Disseminating Swap Transaction and 
Pricing Data in Real-Time
    Section 2(a)(13)(D) of the CEA authorizes the Commission to require 
registered entities ``to publicly disseminate the swap transaction and 
pricing data.'' With respect to all off-facility swaps, the 
Commission's proposal requires that reporting parties send swap 
transaction and pricing data to registered SDRs to publicly disseminate 
such data in real-time. With respect to swaps that are executed on a 
swap market, the Commission's proposal requires that swap markets 
publicly disseminate swap transaction and pricing data either through a 
registered SDR or a third-party service provider. Under the proposal, 
if a swap market sends the swap transaction and pricing data to a 
registered SDR, the swap market is responsible for ensuring that such 
data is sent in a timely manner for public dissemination. 
Alternatively, if a swap market sends the swap transaction and pricing 
data to a third-party service provider for the public dissemination of 
such data, the swap market does not absolve itself from or satisfy the 
requirement to publicly disseminate swap transaction and pricing data 
until such time as the third-party service provider actually 
disseminates such data. Indeed, under the alternative, a swap market 
must ensure that the third-party service provider publicly disseminates 
the data in the manner set forth in the proposal.\20\
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    \20\ In considering different schemes of real-time public 
reporting requirements, the Commission also considered a ``first 
touch'' method of reporting whereby the swap dealer, MSP or swap 
market where a swap transaction occurred would have been required to 
real-time report the transaction by posting the transaction on its 
Internet Web site or through other electronic means. The Commission 
chose not to pursue a ``first touch'' method because it would likely 
lead to greater fragmentation of market data, increased search costs 
for market participants and potential concerns with the quality of 
the data that would be publicly disseminated.
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    The Commission requests comment on all aspects of the proposed 
rules, as well as comment on the specific provisions, issues and 
questions highlighted in the discussion in Section B below.
4. Proposed Effective Date and Implementation Schedule
    The Dodd-Frank Act requires the Commission to promulgate rules to 
implement these provisions by July 15, 2011.\21\ Proposed part 43 is 
designed to provide clarity as to the real-time reporting and public 
dissemination requirements with respect to all swap transaction and 
pricing data. The Commission acknowledges that the systems for 
reporting and public dissemination described in proposed part 43 may 
take a significant amount of time and resources to implement 
effectively. While the Commission is fully committed to implementing 
Congress' directive to require real-time public reporting of all swaps 
and will adopt final rules by July 15, 2011, participants will need a 
reasonable amount of time in which to acquire or configure the 
necessary systems, engage

[[Page 76143]]

and train the necessary staff and develop and implement the necessary 
policies and procedures to implement the proposed rules. The 
Commission's proposed rules provide that appropriate minimum block 
sizes will be published by registered SDRs beginning in January 
2012.\22\ Accordingly, it is anticipated that registered entities and 
registrants will have begun their compliance by that time.
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    \21\ See Section 754 of the Dodd-Frank Act which states: 
``Unless otherwise provided in this title, the provisions of this 
subtitle shall take effect on the later of 360 days after the date 
of enactment of this subtitle or, to the extent a provision of this 
subtitle requires a rulemaking, not less than 60 days after 
publication of the final rule or regulation implementing such 
provision of this subtitle.''
    \22\ See discussion relating to proposed Sec.  43.5(g)(4) below.
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    The Commission requests comment on what would be an appropriate 
implementation schedule (i.e., effective date) for the final rules. In 
addition, the Commission requests specific comment on the following 
issues:
    <bullet> How do commenters believe that an appropriate 
implementation schedule should be structured? Should there be a phased-
in approach? Please provide specific examples.
    <bullet> Do commenters believe that different types of reporting 
parties (e.g., swap dealers, MSPs and end-users) should have different 
implementation timeframes? If so, why and what timeframes? If not, why 
and what timeframe?
    <bullet> Do commenters believe that different types of execution 
(e.g., SEF, DCM and off-facility) should have different implementation 
timeframes? If so, why and what timeframes? If not, why and what 
timeframe?
    <bullet> How long would swap dealers, MSPs and end-users need to 
establish the appropriate connections to report off-facility swaps to 
registered SDRs? Please explain.
    <bullet> How long after registration would registered SDRs need to 
accept and publicly disseminate swap transaction and pricing data in 
real-time? Please explain.
    <bullet> Should there be different implementation timeframes for 
particular asset classes, markets or contracts? If so, what criteria 
should be used to select those asset classes, markets or contracts?
    <bullet> Should the implementation timeframes for real-time 
reporting and public dissemination requirements for swaps and security-
based swaps be coordinated?
    <bullet> Should there be different implementation timeframes for 
the block trade and large notional swap rules explained in the 
discussion relating to proposed Sec.  43.5 below?

B. Section-by-Section Analysis

1. Proposed Section 43.1--Purpose, Scope and Rules of Construction
    The proposed rules apply to all swaps as defined in Section 1a(47) 
of the CEA and as may be further defined by Commission regulations. The 
categories of swaps described in Section 2(a)(13)(C) of the CEA account 
for all swaps, whether cleared or uncleared, and regardless of whether 
a swap is executed on a SEF, DCM or off-facility. The proposed rules 
apply real-time reporting requirements to SEFs, DCMs, SDRs and the 
parties of a swap, including registered or exempt swap dealers, 
registered or exempt MSPs and U.S.-based end-users.
    The Commission requests comment generally on the scope of 
transactions covered by this part. In addition, the Commission requests 
specific comment on which parties to a swap should be covered by the 
reporting requirements in this part in order to enhance price 
discovery?
2. Proposed Section 43.2--Definitions
    Proposed Sec.  43.2 contains definitions for, inter alia, the 
following terms: ``Affirmation''; ``As Soon As Technologically 
Practicable''; ``Asset Class''; ``Confirmation''; ``Execution''; 
``Public Dissemination'' or ``Publicly Disseminate''; ``Real-Time 
Disseminator''; ``Reportable Swap Transaction''; ``Swap Instrument''; 
and ``Third-Party Service Provider''.
Affirmation
    Proposed Sec.  43.2(b) defines ``affirmation'' as the process 
(electronically, orally, in writing or otherwise) in which the parties 
to a swap verify that they agree on the primary economic terms of a 
swap, but not necessarily all terms of the swap. The affirmation of the 
swap is only the agreement to the primary economic terms of the swap, 
as distinguished from the confirmation of a swap in which all of the 
terms of the swap are agreed to in writing to memorialize the agreement 
of all parties to the swap. Such confirmation legally supersedes any 
previous agreement of the parties.
    Affirmation and execution can, but do not necessarily, occur at the 
same time. In either case, affirmation and execution always occur prior 
to the confirmation of a swap. One further distinction is that 
``affirmation'', as defined in the proposed rules, differs from 
``confirmation by affirmation''. Some confirmation service vendors 
(e.g., Deriv/SERV, MarkitSERV) have used the term ``affirmation'' to 
describe the process by which one party to a swap (usually an end-user) 
electronically acknowledges its assent to complete swap terms submitted 
to the vendor by its counterparty (usually a dealer). This process 
allows for electronic confirmation even when one party to the swap does 
not have the systems necessary to submit swap terms to the vendor 
electronically. Upon such assent to complete swap terms, a swap is 
legally confirmed (i.e., ``confirmation by affirmation''). Parties that 
use a confirmation by affirmation process previously will have affirmed 
the primary economic terms of the trade and therefore executed the 
trade pursuant to the definitions in the proposed rules.
As Soon as Technologically Practicable
    Section 2(a)(13)(A) of the CEA defines ``real-time public 
reporting'' to mean ``to report data relating to a swap transaction, 
including price and volume, as soon as technologically practicable 
after the time at which the swap transaction has been executed.'' ``As 
soon as technologically practicable'' and ``executed'' are not defined 
in the Dodd-Frank Act.\23\
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    \23\ The terms ``execution'' and ``executed'' are discussed 
below.
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    The proposed rules provide definitions for ``as soon as 
technologically practicable'' and ``executed''. Proposed Sec.  43.2(d) 
defines the term ``as soon as technologically practicable'' to mean as 
soon as possible, taking into consideration the prevalence of 
technology, implementation and use of technology by comparable market 
participants. In defining ``as soon as technologically practicable'', 
the Commission has considered that this term may have different 
interpretations for different parties to a swap (i.e., swap dealers, 
MSPs and end-users), for different types of swaps (e.g., energy swaps, 
credit default swaps, interest rate swaps, etc.) and for different 
methods of execution (i.e., SEFs, DCMs and off-facility). Staff 
considered real-time reporting regimes that are currently in place, 
comments by market participants at external meetings, the discussions 
at the Roundtable and the potential costs to market participants, among 
other things. Cost, access to the latest technology and other factors 
may prevent some of the fastest, most efficient technology from being 
available to all market participants. Because of these factors, the 
Commission recognizes that what is ``technologically practicable'' for 
one party to a swap may not be the same as what is ``technologically 
practicable'' for another party to a swap.

[[Page 76144]]

    The Commission requests comment on whether the term should account 
for other considerations not presently identified in the definition.
Asset Class
    Proposed Sec.  43.2(e) defines the term ``asset class'' to mean the 
broad category of goods, services or commodities underlying a swap. The 
asset classes include, but are not limited to, the following five major 
categories: interest rate, currency, credit, equity and other 
commodity.\24\ In proposing these five major categories, the Commission 
considered market statistics that distinguish between those general 
types of underlying instruments, as well as market infrastructures that 
have been established for these five types of instruments. The interest 
rate asset class would encompass the underlying of any swap which is 
primarily based on one or more reference rates, such as swaps of 
payments determined by fixed and floating rates. The currency asset 
class would encompass the underlying of any swap that is primarily 
based on rates of exchange between different currencies, changes in 
such rates or other aspects of such rates including any swap that is a 
foreign exchange option. This category includes foreign exchange swaps 
defined in Section 1a(25) of the CEA. The credit asset class would 
encompass the underlying of any swap that is primarily based on one 
instruments of indebtedness, including without limitation any swap 
primarily based on one or more broad-based indices related to 
instruments of indebtedness and any swap that is an index credit 
default swap or a total return swap on one or more indices of debt 
instruments. The equity asset class would encompass the underlying of 
any swap that is primarily based on equity securities, including, 
without limitation, any swap primarily based on one or more broad-based 
indices of equity securities and any total return swap on one or more 
equity indices. The other commodity asset class would encompass the 
underlying of any swap not included in the credit, currency, equity or 
interest rate asset class categories, including, without limitation, 
any swap for which the primary underlying notional item is a physical 
commodity or the price or any other aspect of a physical commodity.\25\
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    \24\ Proposed Sec.  43.2(e) also provides that the Commission 
may determine other asset classes.
    \25\ Proposed Sec.  43.2(q) defines ``other commodity'' to mean 
any commodity that cannot be grouped in one of the other four asset 
classes (i.e., interest rate, currency, credit, equity). Other 
commodities may include physical commodities (e.g., natural gas, 
oil) but may also include non-physical commodities (e.g., weather 
and property).
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    The Commission requests comment on the following issues related to 
the definition of asset class:
    <bullet> Do commenters agree with the proposed asset class 
categories? If not, why? Should there be any additional categories of 
asset classes? Should any categories of asset classes in the proposed 
definition be changed or removed?
    <bullet> Do commenters agree on the proposed method of allocating 
swaps among asset class categories? If not, why?
    <bullet> Should the Commission classify cross-currency rate swaps 
as belonging to the interest rate asset class or to the currency asset 
class? Please explain.
    <bullet> Should the asset class for other commodity be divided 
further (e.g., agricultural commodity, energy commodity, etc.)? If so, 
how should it be divided?
Confirmation
    Proposed Sec.  43.2(g) defines the term ``confirmation'' to mean 
the consummation (electronically or otherwise) of legally binding 
documentation (electronic or otherwise) that memorializes the agreement 
of the parties to all terms of a swap. A confirmation must be in 
writing (whether electronic or otherwise) and must legally supersede 
any previous agreement (electronic or otherwise). A confirmation 
between parties to a swap may occur in various ways including via 
facsimile, via ``confirmation by affirmation'' and via electronic 
matching. A confirmation will contain all of the terms to a swap that 
have been agreed to between two parties, whereas an affirmation 
contains a subset of the terms of the confirmation.
Execution
    As noted above, swap counterparties and reporting entities must 
report ``as soon as technologically practicable after the time at which 
the swap transaction has been executed.'' \26\ Proposed Sec.  43.2(k) 
defines ``execution'' as the agreement between parties to the terms of 
a swap that legally binds the parties to such terms under applicable 
law. An agreement may be in electronic form (e.g., on a swap market or 
via instant message), oral (e.g., over the phone), in writing (e.g., a 
bespoke, structured transaction where documents are exchanged) or in 
some other format not contemplated at this time. Execution immediately 
follows or is simultaneous with the pre-execution affirmation of the 
swap. The Commission notes that the proposed definition of execution 
does not attempt to define what constitutes a legally enforceable 
contract, only that execution occurs if and when the parties have 
formed a legally enforceable contract (which is a matter to be decided 
by applicable law).\27\ If pre-execution affirmation of the primary 
economic terms creates a legally enforceable contract under applicable 
law, then it would also constitute execution. If pre-execution 
affirmation does not create a legally enforceable contract, then 
execution would not have occurred at that stage.
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    \26\ Section 2(a)(13)(A) of the CEA.
    \27\ Because contract law varies by jurisdiction, the time at 
which a legally enforceable contract is formed may differ based on 
the applicable state or local law.
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Public Dissemination and Publicly Disseminate
    Proposed Sec.  43.2(r) defines ``public dissemination'' and 
``publicly disseminate'' to mean publishing and making available swap 
transaction and pricing data in a non-discriminatory manner, through 
the Internet or other electronic data feed that is widely published and 
in a machine-readable format. The definition encompasses the non-
delayed provision of such data to the public, including market 
participants, end-users, data vendors and news media.
Real-Time Disseminator
    Proposed Sec.  43.2(s) defines ``real-time disseminator'' to mean 
any registered SDR or third-party service provider that is responsible 
for accepting and publicly disseminating swap transaction and pricing 
data in real-time from multiple sources, in accordance with proposed 
part 43.
Reportable Swap Transaction
    Proposed Sec.  43.2(v) defines ``reportable swap transaction'' to 
mean any executed swap, novation, swap unwind, partial novation, 
partial swap unwind or such post-execution event that affects the price 
of a swap. A reportable swap transaction includes not only the 
execution of a swap contract, but also certain price-affecting events 
that occur over the ``life'' of a swap. The Commission believes 
novations and swap unwinds are events that clearly affect the price of 
the swap and, therefore, should be publicly disseminated in real-time. 
In addition to novations and swap unwinds, other price-affecting events 
over the life of a swap may be considered reportable swap transactions. 
For example, certain amendments that change the price terms of a swap 
may be subject to the real-time public reporting requirements. Further, 
the Commission recognizes that certain

[[Page 76145]]

market participants may enter into a swap and then immediately enter 
into an amendment to the swap that alters the price terms, thus 
reducing transparency and price discovery. The Commission believes that 
including such post-execution price-affecting events to be reportable 
for the purposes of real-time public reporting will enhance the 
transparency and price discovery attributes of swaps trading.
    The Commission requests comments on other post-execution events 
that could affect price and that should be considered reportable swap 
transactions.
Swap Instrument
    Proposed Sec.  43.2(y) defines ``swap instrument'' to mean each 
swap in the same asset class with the same or similar characteristics. 
Under proposed Sec.  43.5, discussed below, registered SDRs would 
determine the appropriate minimum block size based on the type of swap 
instrument. After a registered SDR sets the appropriate minimum block 
size for a swap instrument and groups a specific swap contract that is 
listed on a swap market into a category of swap instrument, a swap 
market that lists such swap contract would then reference such 
appropriate minimum block size when adopting the minimum block trade 
size for such swap. The Commission believes that it is appropriate to 
group particular swap contracts into various broad categories of swap 
instruments in determining the appropriate minimum block size.
    The Commission is requesting general and specific comments on swap 
instruments, as described in the discussion of appendix A to proposed 
part 43 below.
Third-Party Service Provider
    Proposed Sec.  43.2(bb) defines ``third-party service provider'' to 
mean an entity, other than a registered SDR, that publicly disseminates 
swap transaction and pricing data in real-time on behalf of a swap 
market or, in the case of an off-facility swap where there is no 
registered SDR available to publicly disseminate the data in real-time, 
on behalf of a reporting party.
3. Proposed Section 43.3--Method and Timing for Real-Time Public 
Reporting
    Section 2(a)(13) of the CEA does not provide an explicit method or 
timeframe in which swap transaction and pricing data must be reported 
to the public in real-time. Instead, Section 2(a)(13) of the CEA 
provides the Commission with authority to prescribe rules requiring: 
(1) The parties to a swap transaction (including agents of the parties) 
to report swap transaction and pricing data to the appropriate 
registered entity in a timely manner; \28\ and (2) registered entities 
to publicly disseminate swap transaction and pricing data.\29\ In 
addition, Section 2(a)(13)(B) of the CEA provides that the Commission 
is authorized to make 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. Accordingly, the Commission's 
proposal in Sec.  43.3 sets out both the manner in which parties to a 
swap must report the swap transaction and pricing data to the 
appropriate registered entity, as well as the manner in which 
registered entities must publicly disseminate such data. In addition, 
proposed Sec.  43.3 sets out requirements for: (1) The acceptable forms 
of media through which swap transaction and pricing data must be made 
available to the public; (2) the appropriate methods to cancel or 
correct erroneous or omitted data that has been publicly disseminated; 
(3) the hours of operation that swap markets and registered SDRs must 
maintain for the public dissemination of swap transaction and pricing 
data; and (4) the recordkeeping of data by swap markets and registered 
SDRs.
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    \28\ See Section 2(a)(13)(F) of the CEA.
    \29\ See Section 2(a)(13)(D) of the CEA. As discussed below, the 
Commission's proposal requires registered entities to publicly 
disseminate swap transaction and pricing data ``as soon as 
technologically practicable''. See Section 2(a)(13)(A).
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i. Responsibilities of the Reporting Party To Report Data
    As discussed above, Section 2(a)(13)(F) of the CEA provides that 
the parties to a swap (including agents of the parties to a swap) shall 
be responsible for reporting swap transaction information to the 
appropriate registered entity. In general, proposed Sec.  43.3(a) 
provides that the ``reporting party'' to each swap transaction shall be 
responsible for reporting any reportable swap transaction to a 
registered entity as soon as technologically practicable.\30\ Proposed 
Sec.  43.2(w) defines ``reporting party'' to mean a party to a swap 
with the duty to report a reportable swap transaction to a registered 
entity. Under this proposal, the determination of who has this duty 
depends on whether the reportable swap transaction is executed on a 
swap market. For reportable swap transactions that are executed on a 
swap market, proposed Sec.  43.3(a)(2)(i) provides that the requirement 
for parties to report the swap transaction and pricing data is itself 
satisfied by the act of execution on the swap market. The Commission 
believes that this approach should result in the timeliest and most 
efficient method of reporting swap transaction and pricing data, since 
swap markets by definition would have immediate access to the most 
accurate execution information related to each swap transaction (e.g., 
information on the counterparties to the swap, date and time of 
execution, bid-offer information, final pricing information, whether 
the swap should be deemed a block trade, etc.). Proposed Sec.  
43.3(a)(2)(ii) recognizes that block trades may not be executed on a 
swap market, but would be effective pursuant to the rules of the swap 
market. For that reason, this section would require the reporting party 
to the block trade to report such trades to the swap market in 
accordance with the rules of the swap market and proposed Sec.  43.5.
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    \30\ The Commission proposes to define ``timely manner'' to mean 
``as soon as technologically practicable''.
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    For off-facility swaps, proposed Sec.  43.3(a)(3) provides that, 
except otherwise provided in proposed Sec.  43.5, the reporting party 
must report (i.e., transmit or otherwise electronically transfer) swap 
transaction and pricing data to a registered SDR as soon as 
technologically practicable. Once a reporting party has reported its 
swap transaction and pricing data to a registered SDR, the reporting 
party has satisfied its requirement to report pursuant to Section 
2(a)(13)(F) of the CEA and this proposed part 43.
    The Commission believes that advanced technologies presently exist 
through which a reporting party to an off-facility swap can send swap 
transaction and pricing data to a registered SDR as soon as 
technologically practicable. Through discussions with market 
participants, the Commission understands that many swaps are executed 
over the telephone and then inputted manually into electronic recording 
systems. The Commission believes that reporting parties should remain 
current with changes in technology and regularly update their 
technology infrastructure to decrease the time of transmission of swap 
transaction and pricing data to real-time disseminators.\31\
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    \31\ Two examples of how reporting technology can improve over 
time are seen in the evolution of (1) the Financial Industry 
Regulatory Authority's (``FINRA'') Trade Reporting and Compliance 
Engine (``TRACE''), and (2) the reporting of over-the-counter 
(``OTC'') equity securities. Under the reporting rules for TRACE, 
the current maximum reporting time requirement for publicly 
reporting transaction and pricing data for corporate bonds is 15 
minutes. FINRA staff has noted in meetings with Commission staff 
that over 90% of its trades are reported within five minutes. See 
FINRA Rule 6730 (``Transaction Reporting''). Available at: http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=4402.
    With respect to the OTC securities market, FINRA has recently 
reduced the reporting requirements for these securities to within 30 
seconds of execution. See Securities Exchange Act Release No. 61819 
(March 31, 2010), 75 FR 17806 (April 7, 2010 (Notice of Filing of 
Amendment No. 2 and Order Granting Accelerated Approval of File No. 
SR-FINRA-2009-061)); See also, FINRA Rules 6282(a); 6380A(a) and 
(g); 6380B(a) and (f); 6622(a) and (f); 7130(b); 7230A(b); 7230B(b); 
and 7330(b).

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[[Page 76146]]

    The determination of which party to a swap will be deemed the 
reporting party for the purposes of proposed Sec.  43.3(a) chiefly 
depends on the types of entities that are parties to the swap.
    Specifically, proposed Sec.  43.3(a)(3) provides that for off-
facility swaps:
    <bullet> If only one party is a swap dealer or MSP, the swap dealer 
or MSP shall be the reporting party.
    <bullet> If one party is a swap dealer and the other party is an 
MSP, the swap dealer shall be the reporting party.
    <bullet> If both parties are swap dealers, the swap dealers shall 
designate which party shall be the reporting party.
    <bullet> If both parties are MSPs, the MSPs shall designate which 
party shall be the reporting party.
    <bullet> If neither party is a swap dealer or an MSP, the parties 
shall designate which party (or its agent) shall be the reporting 
party.
    Through discussions with market participants at the Roundtable and 
external meetings, the Commission believes that swap dealers and MSPs 
are more likely to have the infrastructure and resources available to 
report their swap transaction information to a registered SDR in a 
quicker period of time than parties to an end-user-to-end-user, off-
facility swap. Indeed, the Commission recognizes that non-financial 
end-users do not frequently enter into swap transactions and may not 
have the technology readily available to report swap transaction and 
pricing data for the purposes of the real-time reporting requirements 
under Section 2(a)(13)(F) of the CEA, and therefore, may lead to longer 
reporting time periods from execution for such reporting parties.
    The Commission understands that the requirement to report swap 
transaction and pricing data as soon as technologically practicable may 
increase costs for reporting parties as a result of such parties having 
to upgrade their technology infrastructures. Based on discussions with 
market participants, however, the Commission believes that technology 
solutions may develop, such as web portals and other Internet-based 
interfaces, which will aide reporting parties in complying with the 
requirements proposed in Sec.  43.3(a) and reduce the cost burden 
associated with their compliance. In addition, the Commission believes 
that the total number of end-user to end-user swaps will be small and 
thus the costs imposed on end-users will likely be lower relative to 
the total number of swaps.\32\
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    \32\ In addition, the Commission believes that increased 
transparency may lead to more robust price competition, thus 
decreasing bid-offer spreads in certain swap contracts and 
benefiting end-users.
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    The Commission's proposal with respect to off-facility swaps is 
consistent with the reporting requirements for the reporting of 
uncleared swaps to a registered SDR under Section 4r(a) of the CEA.\33\ 
After consulting with market participants at the Roundtable and in 
meetings with market participants, the Commission believes that this 
consistency may reduce technology infrastructure costs for swap dealers 
and MSPs, particularly since swap dealers and MSPs will likely 
establish direct connectivity to registered SDRs to satisfy the 
reporting requirements for the reporting of uncleared swaps under 
Section 4r(a) of the CEA.
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    \33\ The requirements of Section 4r(a)(3) of the CEA are 
discussed in footnote 18 above.
---------------------------------------------------------------------------

    In the event that no registered SDR exists or is available to 
accept and publicly disseminate swap transaction and pricing data, 
proposed Sec.  43.3(a)(4) establishes a special rule for the real-time 
reporting of these swaps. Specifically, proposed Sec.  43.3(a)(4) 
provides that the reporting party may report such data to a third-party 
service provider, which provides public dissemination services. Similar 
to the requirements placed on swap markets when such markets choose to 
publicly disseminate through a third-party service provider, the 
reporting party will be required to ensure that the swap transaction 
and pricing data is publicly disseminated in real-time.
    The Commission requests comment related to the responsibilities of 
the parties to a swap to report swap transaction and pricing data. In 
addition, the Commission requests specific comment on the following 
issues:
    <bullet> Should the Commission establish maximum timeframes in 
which reporting parties must report to a registered SDR that accepts 
and publicly disseminates swap transaction and pricing data in real-
time (e.g., as soon as technologically practicable but no later than 
five minutes)? If so, what should the maximum timeframes be and how 
should they be determined?
    <bullet> Do commenters believe that the rules should require that 
any additional parties to a swap be the reporting party for a swap? If 
so, which parties and in which circumstances?
    <bullet> Should the Commission's final rules address the reporting 
and public dissemination of swap transaction and pricing data for 
swaps, which are transacted between two non-U.S. persons? If so, how 
should the Commission's final rules address these situations?
    <bullet> In off-facility swap transactions where a non-U.S. swap 
dealer or non-U.S. MSP transacts with a U.S.-based end-user, which 
party to the swap should have the obligation to report to a real-time 
disseminator? Are there other situations involving non-U.S. parties 
where this issue may arise? How should the Commission address these 
situations in its final rules?
    <bullet> Should there be an alternative method of reporting and 
subsequently disseminating swap transaction and pricing data in real-
time when no registered SDR is available to accept and publicly 
disseminate such data? If there is no registered SDR available and 
there is no third-party service provider available to accept and 
publicly disseminate data for a swap transaction, what should the real-
time reporting requirement be for such transaction?
    <bullet> Is there a better or more efficient alternative to have 
swap transaction and pricing data reported by a reporting party to a 
registered SDR for public dissemination in real-time? If so, what would 
that be?
ii. Responsibilities of Swap Markets To Publicly Disseminate Swap 
Transaction and Pricing Data in Real-Time
    Section 2(a)(13)(D) of the CEA gives the Commission the authority 
to require registered entities to publicly disseminate swap transaction 
and pricing data.\34\ Proposed Sec.  43.3(b) provides the method and 
timeliness of public dissemination of swap transaction and pricing 
data. Proposed Sec.  43.3(b) distinguishes the public dissemination 
requirement for swaps that are executed on a swap market versus those 
swaps that are executed off-facility.\35\ Irrespective of the mode of

[[Page 76147]]

execution, the Commission sought to provide market participants with 
reasonable guidelines to report and publicly disseminate swap 
transaction and pricing data in real-time.
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    \34\ As noted above, Section 1a(40) of the CEA, as amended by 
Section 721(a) of the Dodd-Frank Act, defines ``registered entity'' 
to include SEFs, DCOs, DCMs and SDRs. The Commission has determined, 
however, not to apply the Section 2(a)(13)(D) requirement to DCOs 
because it believes that the value of timely public dissemination 
outweighs the benefit of waiting until a swap is presented to a 
clearing organization.
    \35\ Block trades that are transmitted pursuant to a swap 
market's rules are addressed in proposed Sec.  43.5.
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    With respect to reportable swap transactions that are executed on a 
swap market, proposed Sec.  43.3(b)(1)(i) provides that a swap market 
shall satisfy its requirement to publicly disseminate swap transaction 
and pricing data by: (1) Sending, or otherwise electronically 
transmitting, swap transaction and pricing data to a registered SDR 
that accepts swaps for the particular asset class of reportable swap 
transactions; or (2) disseminating such data to the public through a 
third-party service provider operating on behalf of the swap 
market.\36\ The Commission notes that a swap market that relies on a 
third-party service provider to disseminate swap transaction and 
pricing data, for example through a contractual agreement, remains 
responsible for compliance with the rules of proposed part 43.
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    \36\ As discussed immediately below, proposedSec.  43.3(b)(2) 
prohibits a swap market or reporting parties from disclosing swap 
transaction and pricing data prior to sending such data to a real-
time disseminator.
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    If a swap market sends swap transaction and pricing data to a 
registered SDR, proposed Sec.  43.3(b)(1)(i) provides that such data 
must be sent as soon as technologically practicable after the swap has 
been executed. As a result of industry comments made during staff 
meetings and at the Roundtable, the Commission believes that 
technologies presently exist through which a swap market can send swap 
transaction and pricing data to a registered SDR almost instantaneously 
after execution of a reportable swap transaction.\37\ Under the 
proposal, once the swap market has sent the swap transaction and 
pricing data to a registered SDR, the swap market will have satisfied 
its dissemination requirement.
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    \37\ See, e.g., Comments by Steve Joachim, Executive Vice 
President, Transparency Services, FINRA (``[T]he technology for 
collecting, aggregating, and disseminating [swap] data, assuming 
[the] use [of] current infrastructures * * * can allow [real-time 
public reporting] to work pretty efficiently.'') Roundtable Tr. at 
277-78.
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    In contrast, proposed Sec.  43.3(b)(1)(ii) provides that if a swap 
market sends swap transaction and pricing data to a third-party service 
provider, the swap market does not satisfy its requirement to publicly 
disseminate swap transaction and pricing data until such data is 
actually disseminated to the public. The Commission's proposal 
distinguishes between a registered SDR and a third-party service 
provider because the Commission would have oversight authority over a 
registered SDR, but not over a third-party service provider. This 
distinction would be especially important if, for example, a third-
party service provider failed to publish swap transaction and pricing 
data in real-time. Under those circumstances, the Commission may have 
no authority over the third-party service provider to remedy the 
failure. Since the swap market is still obligated to publicly 
disseminate, the Commission may require the swap market to resolve the 
failure and publicly disseminate the swap transaction and pricing data 
through another third-party service provider or a registered SDR. 
Accordingly, the Commission would expect that a swap market that uses a 
third-party service provider to meet its public dissemination 
obligation should be vigilant in monitoring the timeliness and accuracy 
of the provider's publication of the swap market's swap transaction and 
pricing data.
    Proposed Sec.  43.3(b)(2)(i) prohibits swap markets or any 
reporting party to a swap from disclosing the swap transaction and 
pricing data before the real-time disseminator has publicly 
disseminated such data. The Commission believes that this prohibition 
will ensure that swap transaction and pricing data is disseminated 
uniformly and is not published in a manner that creates unfair 
advantages for any segment of market participants.
    The proposed rules do allow for swap markets and swap dealers to 
provide their market participants and customers, respectively, with 
swap transaction and pricing data for swaps that they execute. In 
particular, proposed Sec.  43.3(b)(2)(ii) provides that notwithstanding 
the non-disclosure provision in proposed Sec.  43.3(b)(2)(i), a swap 
market may make swap transaction and pricing data available to 
participants on its market prior to the public dissemination of such 
data; however, the swap market must send such swap transaction and 
pricing data to a real-time disseminator at the same time as or earlier 
than it makes such data available to its market participants. 
Similarly, proposed Sec.  43.3(b)(2)(iii) provides that notwithstanding 
the non-disclosure provision in proposed Sec.  43.3(b)(2)(i), a swap 
dealer may make swap transaction and pricing data for off-facility 
swaps available to its customer base prior to the public dissemination 
of such data; however, such swap dealer must send such swap transaction 
and pricing data to a registered SDR at the same time as or earlier 
than it makes such data available to its customer base. In both cases, 
the data may only be made available to the particular market (e.g., 
data for a swap executed on a particular SEF or DCM may only be shared 
with market participants on that SEF or DCM). The Commission believes 
that granting swap markets and swap dealers the flexibility to provide 
swap transaction and pricing data to its market participants or 
customer base, respectively, concurrent with reporting to the real-time 
disseminator may incentivize a rapid transmittal of data to the real-
time disseminator.
    The Commission requests comment generally on the responsibilities 
of swap markets to publicly disseminate real-time swap transaction and 
pricing data. In addition, the Commission requests comment on the 
following issues:
    <bullet> Should the Commission establish a maximum timeframe in 
which swap markets must report swap transaction and pricing data to a 
real-time disseminator? If so, what is an appropriate maximum timeframe 
and why?
    <bullet> Do commenters agree with the Commission's proposal that 
swap markets satisfy their public dissemination requirement by either 
sending to a registered SDR that accepts and disseminates swap 
transaction and pricing data or by publicly disseminating through a 
third-party service provider? If not, why? Should there be any other 
means by which a swap market can satisfy its public dissemination 
requirement? If yes, by what other means?
iii. Requirements for Registered SDRs
    Sections 2(a)(13)(D) and 21(c)(4)(B) of the CEA provide the 
Commission with the authority to require registered SDRs to publicly 
disseminate swap transaction and pricing data in real-time. In 
particular, Section 2(a)(13)(D) provides that the Commission may 
require registered entities to publicly disseminate swap transaction 
and pricing data. Registered SDRs are registered entities as defined in 
Section 1(a)(40)(E) of the CEA. Section 21(c)(4)(B) of the CEA provides 
that an SDR must provide swap transaction information in such form and 
at such frequency as the Commission may require to comply with the 
real-time reporting requirements under Section 2(a)(13).
    Pursuant to these authorities, the Commission is proposing Sec.  
43.3(c)(1) to require that registered SDRs that accept and publicly 
disseminate such data in real-time to comply with proposed part

[[Page 76148]]

49 of the Commission's regulations.\38\ Under proposed part 49, a 
registered SDR may choose, but would not be required, to publicly 
disseminate swap transaction and pricing data in real-time for an asset 
class of swaps. Further, a registered SDR that accepts swap transaction 
and pricing data for public dissemination must publicly disseminate 
such data as soon as technologically practicable upon receipt of such 
data. Proposed Sec.  43.3(c)(2) provides that if a registered SDR 
chooses to publicly disseminate swap transaction and pricing data in 
real-time for its specified asset class,\39\ the registered SDR must 
accept and publicly disseminate swap transaction and pricing data for 
all swaps within such asset class. This requirement is intended to 
minimize the number of swaps that are not accepted by a registered SDR 
for public dissemination by enabling market participants to easily 
identify the SDR that accepts particular asset classes. In addition, 
proposed Sec.  43.3(c)(3) provides that any registered SDR that accepts 
and publicly disseminates swap transaction and pricing data in real-
time shall perform, on an annual basis, an independent review of its 
security and other system controls, in accordance with established 
audit procedures and standards, for the purposes of ensuring that the 
requirements of proposed part 43 are met.
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    \38\ In a forthcoming release, the Commission will propose part 
49 of the Commission's regulations, which will set out the 
requirements that a registered SDR must satisfy in connection with 
its receipt and public dissemination of swap transaction and pricing 
data in real-time. Proposed part 49 of the Commission's regulations 
also will identify the necessary systems that registered SDRs must 
develop and maintain in order to receive and publicly disseminate 
such data.
    \39\ In the forthcoming proposed part 49 of the Commission's 
regulations, registered swap data repositories will select the asset 
class(es) for which they accept swaps.
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    The Commission requests comment generally on the requirements for 
registered SDRs under proposed part 43. In addition, the Commission 
requests comment on whether it should require registered SDRs to 
publicly disseminate all real-time swap transaction and pricing data.
iv. Requirements for Third-Party Service Providers
    If a swap market chooses to publicly disseminate swap transaction 
and pricing data through a third-party service provider, proposed Sec.  
43.3(d) provides that the swap market must ensure that the provider 
maintains standards that are, at a minimum, equal to those standards 
for registered SDRs described in proposed part 43 and the relevant 
provisions relating to real-time public reporting that will be proposed 
in part 49 of the Commission's regulations. In addition, this section 
provides that the swap market must ensure that the Commission has 
access to any swap transaction and pricing data, either through the 
swap market or directly through the third-party service provider.
v. Availability of Real-Time Swap Transaction and Pricing Data
    Under proposed Sec.  43.3(e), registered SDRs that report swap 
transaction and pricing data to the public in real-time, must make the 
data available and accessible in an electronic format that is capable 
of being downloaded, saved and/or analyzed. The Commission is proposing 
this provision to address the concern that a registered SDR may flash 
real-time swap transaction and pricing data to selected market 
participants with the technology to view such data without making such 
information available to the public and all market participants. 
Requiring registered SDRs to allow market participants and the public 
to download, save and/or analyze the real-time swap transaction and 
pricing data upon public dissemination, ensures equal access to real-
time swap transaction and pricing data.
vi. Errors or Omissions
    Proposed Sec.  43.3(f)(1) sets out the process through which any 
errors or omissions in swap transaction and pricing data that were 
publicly disseminated in real-time shall be corrected or cancelled. 
Section 43.3(f)(1) sets out different processes depending on whether 
the data error or omission was discovered by the reporting party to the 
swap or the non-reporting party. Proposed paragraph (f)(1)(i) provides 
that if the non-reporting party becomes aware of an error or omission 
in the data reported for its swap, it shall promptly notify the 
reporting party of the correction. Proposed paragraph (f)(1)(ii) 
provides that if the reporting party becomes aware of an error or 
omission in the reported data, it is required to promptly submit the 
corrected data to the swap market or real-time disseminator. Proposed 
paragraph (f)(1)(iii) provides that if the swap market becomes aware of 
an error or omission in the swap transaction and pricing data reported 
for a swap, whether or not it received notification from the reporting 
party, the swap market shall promptly submit corrected data to the 
real-time disseminator. Proposed paragraph (f)(1)(iv) provides that a 
registered SDR that accepts and publicly disseminates swap transaction 
and pricing data in real-time must publicly disseminate any 
cancellations or corrections to such data as soon as technologically 
practicable after receipt or discovery of such cancellation or 
correction.
    The proposal also seeks to prevent fraudulent dissemination for the 
purpose of distorting market pricing. Specifically, proposed paragraph 
(f)(2) of this section provides that reporting parties, swap markets 
and registered SDRs that accept and publicly disseminate swap 
transaction and pricing data in real-time are prohibited from 
submitting or agreeing to submit a cancellation or correction for the 
purpose of re-reporting swap transaction and pricing data in order to 
gain or extend a delay in publication or to otherwise evade the 
reporting requirements of proposed part 43.
    Proposed paragraph (f)(3) of this section sets forth the 
appropriate method of canceling incorrectly published swap transaction 
and pricing data. Specifically, this paragraph provides that a real-
time disseminator must cancel incorrect data that has been disseminated 
to the public by publishing a cancellation of the incorrect data in the 
format and manner described in appendix A to proposed part 43.
    Proposed paragraph (f)(4) of this section sets forth the 
appropriate method of correcting erroneous or omitted swap transaction 
and pricing data. Specifically, this paragraph provides that a real-
time disseminator must correct any erroneous or omitted data that has 
been disseminated to the public by first publicly disseminating a 
cancellation of the incorrect data and then publicly disseminating the 
correct data pursuant to the format described in appendix A to proposed 
part 43.
    Depending on the situation, a cancellation may or not be followed 
by a correction. For example, a cancellation may occur in a situation 
where a clearinghouse does not accept a particular swap for clearing 
and, therefore, the swap may be busted and not require a correction. In 
another situation, one or more terms to a swap may be incorrectly 
reported by the party responsible for reporting the swap, and upon 
confirmation of the swap the error in the terms would be realized. 
Under the proposed rules, such a situation would require a cancellation 
of the original incorrectly reported data, followed by a correction 
with the correct swap transaction and pricing data. Whenever reporting 
a cancellation or correction, the real-time disseminator must report 
the data in the same form

[[Page 76149]]

and manner in which it was originally reported and include a date stamp 
reflecting the time of the original transaction, so that market 
participants and the public are aware of exactly which swap has been 
canceled or corrected.
vii. Hours of Operation
    Since Section 2(a)(13) of the CEA requires that swap transaction 
and pricing data be reported and subsequently disseminated to the 
public in real-time, the Commission proposes that registered SDRs 
maintain certain hours of operation in order to comply with this 
legislative requirement. Proposed Sec.  43.3(g)(1) requires registered 
SDRs that accept and publicly disseminate swap transaction and pricing 
data in real-time to be able to receive and publicly disseminate such 
data at all times, twenty-four hours a day.
    Because the Commission recognizes that a registered SDR 
periodically may need to conduct maintenance on its electronic systems, 
proposed Sec.  43.3(g)(2) would permit a registered SDR to declare 
special closing hours to perform such maintenance on an ad hoc basis. 
In addition, this section would require a registered SDR to provide 
advance notice of its special closing hours to market participants and 
the public. Further, proposed Sec.  43.3(g)(3) provides that registered 
SDRs should avoid scheduling special closing hours during those periods 
when the U.S. markets and major foreign swap markets are most active. 
Proposed Sec.  43.3(h) provides that during special closing hours, a 
registered SDR that accepts and publicly disseminates swap transaction 
and pricing data in real-time shall have the capability to receive and 
hold in queue information regarding reportable swap transactions 
pursuant to proposed part 43.
    The Commission requests comment on the following questions 
regarding hours of operation:
    <bullet> Should swap markets have requirements regarding hours of 
operation for the purposes of the real-time reporting requirements?
    <bullet> Do the proposed requirements regarding hours of operation 
provide registered SDRs with sufficient flexibility to conduct the 
necessary maintenance on their electronic systems?
    <bullet> Do commenters agree that registered SDRs that accept and 
publicly disseminate swap transaction and pricing data should have the 
capability to receive and hold such data in queue during special 
closing hours? If not, why and are there any alternatives?
viii. Recordkeeping Requirements
    Proposed Sec.  43.3(i) requires reporting parties, swap markets and 
registered SDRs to retain all data related to a reportable swap 
transaction (including large notional swaps and block trades) for a 
period of not less than five years following the time at which such 
reportable swap transaction is publicly disseminated. The Commission 
believes that it is necessary to retain such records in order to 
recreate transaction profiles for the purposes of trade practice 
surveillance and compliance. This requirement is separate and distinct 
from any other recordkeeping requirements under the Commission's 
regulations, including Sec.  1.31.\40\
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    \40\ Section 1.31 of the Commission's regulations generally 
provides, inter alia, all books and records required to be kept by 
the CEA or the Commission's regulations shall be kept for a period 
of five years from the date such records come into existence. In 
addition, Sec.  1.31 provides that the records shall be readily 
accessible during the first two years of the five year period.
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    The Commission requests comment on the following questions 
regarding recordkeeping requirements:
    <bullet> Do commenters believe that the proposed retention period 
for data related to reportable swap transactions is an appropriate 
period of time?
    <bullet> Should the recordkeeping requirement be the same as Sec.  
1.31 of the Commission's regulations?
    <bullet> What are the anticipated costs associated with storing 
such real-time swap transaction and pricing data for a longer period of 
time?
ix. Fees Charged by Registered SDRs
    The Commission believes that the intent and purpose of Sections 
2(a)(13) and 21 of the CEA is for registered SDRs to provide open and 
equal access to their data collection services for the purposes of 
real-time public reporting.\41\ Consistent with open and equal access 
to registered SDR services, the Commission further believes that fees 
or charges adopted by a registered SDR for its data collection services 
for the purposes of real-time public reporting must be equitable and 
non-discriminatory. Proposed Sec.  43.3(j) ensures that any fees or 
charges assessed on a reporting party or a swap market are consistent 
with the intent and purpose of Sections 2(a)(13) and 21. Proposed Sec.  
43.3(j) also prohibits a registered SDR from offering a discount based 
on the volume of swap transaction and pricing data reported to the 
registered SDR for public dissemination, unless such discount is 
offered to all reporting parties and swap markets.
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    \41\ Section 21 of the CEA sets forth the rules with respect to 
the business conduct standards and regulation of SDRs.
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x. Consolidated Public Dissemination of Swap Data
    The Commission recognizes the benefits of consolidating the public 
dissemination of swap transaction and pricing data in real-time.\42\ 
During the Roundtable and in Commission external meetings, several 
market participants commented on their desire for the Commission to 
establish a consolidator in order to avoid fragmentation of the 
publication of swap transaction and pricing data. The Commission 
believes that a real-time reporting consolidator of swap transaction 
and pricing data could provide a comprehensive record of all swaps 
executed in chronological order. Additionally, a real-time reporting 
consolidator would create greater anonymity for the parties to 
transactions, particularly for swap dealers and MSPs.
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    \42\ The Commission considered the experience of the European 
Union under the Markets in Financial Instruments Directive 
(``MiFID'') and its Financial Services Action Plan, which went into 
effect on November 1, 2007 for OTC equity securities. Under this 
plan, the European Union broadened post-trade transparency 
requirements in European OTC equity securities markets. While MiFID 
required transparency, many market participants expressed concerns 
about the fragmentation of post-trade transparency under the MiFID 
regime, especially in OTC trading. The quality, disparate timing of 
publication and other barriers to consolidation of post-trade data 
were all highlighted as problems by the Committee of European 
Securities Regulators (``CESR'') in its Technical Advice report. See 
``CESR Technical Advice to the European Commission in the Context of 
the MiFID Review and Responses to the European Commission Request 
for Additional Information'' (CESR/10-802, CESR/10-799, CESR/10-808, 
CESR/10-859), July 29, 2010. Available at: http://www.cesr-eu.org/popup2.php?id=7003.
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    Unlike the federal securities laws,\43\ however, neither the CEA 
nor the Dodd-Frank Act grants the Commission explicit statutory 
authority to establish a real-time reporting consolidator.\44\ The 
Commission requests comment on methods to encourage the consolidation 
of publicly disseminated swap transaction and pricing data.
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    \43\ See, e.g., 15 U.S.C. 78k-1.
    \44\ As mentioned above, FINRA oversees TRACE, which is a 
mechanism through which post-trade data regarding OTC secondary 
market securities in fixed income is reported. FINRA requires its 
broker-dealer member firms to report transactions to TRACE under an 
SEC-approved set of rules. Beginning in 2002, TRACE published 
transaction data on a consolidated tape. TRACE first published data 
on very liquid transactions and later phased-in additional products. 
More information on TRACE can be accessed at: http://www.finra.org/Industry/Compliance/MarketTransparency/TRACE/index.htm.

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[[Page 76150]]

4. Proposed Section 43.4 and Appendix A to Proposed Part 43--Swap 
Transaction and Pricing Data To Be Publicly Disseminated in Real-Time
    As noted above, Section 2(a)(13)(B) authorizes the Commission to 
prescribe regulations to make swap transaction and pricing data 
available in real-time in such form as the Commission determines 
appropriate to enhance price discovery. Proposed Sec.  43.4 establishes 
the format in which such data will be publicly disseminated.
    Proposed Sec.  43.4(a) provides that swap transaction information 
shall be reported to a real-time disseminator so that the real-time 
disseminator can publicly disseminate swap transaction and pricing data 
in real-time in accordance with proposed part 43, including the manner 
and format described in appendix A to proposed part 43.\45\ Appendix A 
to proposed part 43 provides a list of data fields for which a 
registered SDR must publicly disseminate swap transaction and pricing 
data. The descriptions and examples in appendix A to proposed part 43 
are intended to provide guidance on an acceptable public reporting 
format and order for the data fields that are listed.
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    \45\ Proposed Sec.  43.4 would not require that a reporting 
party or swap market provide swap transaction and pricing data in a 
particular format or that such data be anonymized prior to being 
sent to a real-time disseminator. Reporting parties and swap markets 
must, however, provide real-time disseminators with the information 
required to publicly disseminate the required data fields.
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    Proposed Sec.  43.4(b) provides that any registered SDR that 
accepts and publicly disseminates swap transaction and pricing data in 
real-time shall publicly disseminate the information in the data fields 
described in appendix A to proposed part 43.
    Proposed Sec.  43.4(c) provides that a registered SDR that accepts 
and publicly disseminates swap transaction and pricing data in real-
time may, as necessary, require reporting parties and swap markets to 
report such information in addition to the data described in appendix A 
to proposed part 43, in order to match the swap transaction and pricing 
data that was publicly disseminated in real-time to the data reported 
to a registered SDR or confirm that parties to a swap have reported in 
a timely manner pursuant to Sec.  43.3. Such additional information 
shall not be publicly disseminated, on either a transactional or 
aggregate basis, by the registered SDR that accepts and publicly 
disseminates swap transaction and pricing data in real-time.
    Proposed Sec.  43.4(d) provides that the Commission may determine 
from time to time to amend the data fields described in appendix A. 
This section gives the Commission flexibility to add, modify or delete 
data fields as the Commission may deem appropriate and necessary to 
enhance price discovery and prevent the disclosure of the identities of 
the parties to any swap.
    The Commission requests comment generally on the real-time 
reporting and public dissemination of the data described in appendix A 
to proposed part 43. In addition, the Commission requests comment on 
the following issues:
    <bullet> Should the Commission specify the format and/or manner in 
which swap transaction and pricing data must be reported to a real-time 
disseminator?
    <bullet> Should the Commission require that registered SDRs follow 
a specified order and format for the public dissemination of swap 
transaction and pricing data instead of providing examples and 
guidance?
i. Ensuring the Anonymity of the Parties to a Swap
    Sections 2(a)(13)(C)(iii) and 2(a)(13)(E)(i) of the CEA emphasize 
the importance of maintaining the anonymity of the parties to a 
swap.\46\ Proposed Sec.  43.4(e)(1) prohibits the disclosure of swap 
transaction and pricing data that is publicly disseminated in real-
time, which identifies or otherwise facilitates the identification of a 
party to a swap. This section further provides that a registered SDR 
may not report such data in a manner that discloses or otherwise 
facilitates the identification of a party to a swap.
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    \46\ The legislative history of the Dodd-Frank Act states that 
``regulators are to ensure that the public reporting of swap 
transactions and pricing data does not disclose the names or 
identities of the parties to the transactions.'' 156 Cong. Rec. 
S5,921 (daily ed. July 15, 2010) (statement of Sen. Blanche 
Lincoln).
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    The Commission understands that this latter prohibition may lead to 
a loss of clarity with respect to the precise characteristics of swaps 
in certain circumstances.\47\ Proposed Sec.  43.4(e)(2) provides that a 
reporting party or a swap market must provide a real-time disseminator 
with a specific description of the underlying asset and tenor of a 
swap. The description must be general enough to provide anonymity, but 
specific enough to provide for a meaningful understanding of the swap. 
The Commission recognizes that it is conceivable that in situations 
where few parties trade a particular type of underlying asset, the 
description of that asset may inadvertently reveal the identity of one 
or more party(ies) to the swap.
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    \47\ See, e.g., comments from Steve Joachim, Executive Vice 
President, Transparency Services, FINRA (``I think we have to 
recognize that when we're talking about transparen[cy] in 
marketplaces that if we want to pursue the goal of transparency, 
that trading in transparent markets is different than trading in 
opaque markets and that you lose some anonymity no matter what 
happens. There will not be total confidentiality.''), Roundtable Tr. 
at 258.
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    For off-facility swaps, particularly other commodity swaps with 
very specific underlying assets, market participants may be able to 
infer the identity of a party or parties to a swap based on the 
description of the underlying asset.\48\ For example, if the underlying 
asset to an off-facility swap is an energy commodity contract that has 
a specific delivery point at Lake Charles, Louisiana and such contract 
is only traded by two companies, then disclosing the underlying asset 
to the public would effectively disclose that one of those companies 
was entering into the trade. Proposed Sec.  43.4(e)(2) allows reporting 
parties of off-facility swaps to publicly disseminate a description an 
underlying asset or tenor that by virtue of its real-time reporting 
would enable market participants to infer the identity of a party to 
the swap, in a way that does not disclose a party to a swap, but 
provides a meaningful understanding of the swap for the purpose of 
price discovery.\49\ In the example, instead of saying a specific 
delivery point of Lake Charles, Louisiana, the reporting party may use 
a broader geographic region (e.g., Louisiana, Gulf coast, etc.) under 
the Commission's proposal. The Commission believes that the issue of 
the description being too specific as to divulge the identity of a 
party to a swap

[[Page 76151]]

is more likely to arise when the underlying asset is a commodity. The 
Commission, however, believes that other asset classes and markets may 
have similar issues. In contrast, for those swaps that are executed on 
a swap market, the Commission believes that, since such contracts will 
be listed on a particular trading platform or facility, it will be 
unlikely that a party to a swap could be inferred based on the 
reporting of the underlying asset and therefore parties to swaps 
executed on swap markets must report the specific underlying assets and 
tenor of the swap.
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    \48\ See, e.g., comments from Peter Axilrod, Managing Director, 
New Business Development, The Depository Trust & Clearing 
Corporation (``I guess I'd like to make a plea for people to be 
careful with commodities. It's a little bit of a different market 
than what most people have been talking about. There are delivery 
points all over the country, there are load-serving entities, many 
of them all over the country, there are producers all over the 
country, and if you force people to specify a particular delivery 
point all the time, people are pretty much going to know who's 
making those trades. So, whatever you do in terms of what 
commodities data is reported publicly, you have to leave room for 
some flexibility in terms of anonymization [sic]. So, if the 
delivery points are too specific, you may never get much anonymizing 
[sic] of trades, but if you allow the geographic area to be expanded 
or to have some anonymity criteria and perhaps pick the set of the 
delivery points that meets the anonymity criteria, something like 
that needs to be done.''), Roundtable Tr. at 252-253.
    \49\ It is important to note that the reporting requirement in 
this section is separate from the requirement to report swap 
transaction information to a registered SDR pursuant to Section 
2(a)(13)(G) of the CEA. The CEA does not require swap transaction 
information be reported in a manner that protects anonymity since 
such information will not be publicly disseminated.
---------------------------------------------------------------------------

    The Commission recognizes that swap markets may differ and that new 
types of swaps may emerge; therefore, the Commission is not proposing 
specific guidelines at this time for how an underlying asset should be 
described for the purposes of proposed Sec.  43.4(e)(2). The 
specificity of the description will vary based on particular markets 
and contracts, but the proposed rules provide reporting parties with 
discretion on how to report swap transaction and pricing data. Proposed 
Sec.  43.3(e)(2) and proposed part 23 of the Commission's regulations 
require that swap dealers and MSPs who do not disclose a specific 
description of an underlying asset and/or tenor because such disclosure 
would facilitate the identity of a party to a swap, must document why 
the specific information regarding the underlying asset and/or tenor 
was not publicly disseminated.\50\ Further, swap dealers and MSPs must 
retain and provide such written justifications to the Commission 
pursuant to proposed part 23 of the Commission's regulations.\51\
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    \50\ In a forthcoming release, the Commission will propose part 
23 of the Commission's regulations, which will set out the internal 
business conduct standards for swap dealers and MSPs, including 
recordkeeping requirements in connection with real-time public 
reporting.
    \51\ See id.
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    The Commission notes that the language found in Section 
2(a)(13)(C)(iii) of the CEA, requiring that real-time public reporting 
be done ``in a manner that does not disclose the business transactions 
and market positions of any person'' is similar to the language found 
in Section 8(a) of the CEA. Section 8(a)(1) of the CEA provides, in 
relevant part, that ``the Commission may not publish data and 
information that would separately disclose the business transactions or 
market positions of any person and trade secrets of or names of 
customers * * *.'' \52\ For the purposes of protecting the 
confidentiality of participants' business transactions or market 
positions as required under Section 8(a)(1) of the CEA, the Commission 
has historically created guidelines for various market information 
reports (e.g., Bank Participation Reports (``BPRs'') and Commitments of 
Traders (``COT'') reports) that prevent market participants and the 
public from reverse-engineering aggregate data to determine the 
participants that submitted the data.\53\ The Commission believes that 
the approach in the proposed rules regarding protecting the identities 
of parties to a swap under Sections 2(a)(13)(C)(iii) and 2(a)(13)(E)(i) 
of the CEA is consistent with the approach to confidentiality under 
Section 8(a)(1).
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    \52\ 7 U.S.C. 12(a)(1).
    \53\ The BPRs, which provide large-trader positions of banks 
participating in various financial and non-financial commodity 
futures, collect data for every market where five or more banks hold 
reportable positions. The BPRs break the banks' positions into two 
categories--U.S. Banks and Non-U.S. Banks--and show their aggregate 
gross long and short market positions for each type. However, in 
those markets where the number of banks in either category (U.S. 
Banks or Non-U.S. Banks) is less than five, the number of banks in 
each of the two categories is omitted and only the total number of 
banks is shown for that market. Available at:http://www.cftc.gov/MarketReports/BankParticipationReports/ExplanatoryNotes/index.htm. 
Similarly, the COT reports provide a breakdown of each Tuesday's 
open interest for markets in which 20 or more traders hold positions 
equal to or above the reporting levels established by the 
Commission. Available at:http://www.cftc.gov/MarketReports/CommitmentsofTraders/AbouttheCOTReports/index.htm.
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    The Commission requests comment generally on the protection of 
identities of the parties to the swap relating to real-time public 
reporting. In addition, the Commission requests comment on the 
following issues:
    <bullet> Do commenters agree with the proposed method for real-time 
reporting of less specific information with regard to the underlying 
asset and tenor data fields in order to protect the anonymity of 
parties to a swap? If not, why?
    <bullet> Should any additional data fields be allowed to have less 
specificity to ensure the anonymity of the parties to a swap? Should 
this proposed provision apply to all asset classes? If so, why?
    <bullet> In what situations, if any, would it be appropriate for a 
reporting party to report, for the purposes of public dissemination, 
less specificity in the underlying asset(s) of a swap and how should 
such underlying asset(s) be reported? Please provide specific examples.
    <bullet> Do commenters believe that it is appropriate to allow for 
less specificity than the month and year (as described in appendix A to 
proposed part 43) for the tenor of the swap? If not, why? If so, in 
what situations would it be appropriate for a reporting party to 
report, for the purposes of public dissemination, less specificity in 
the tenor of a swap and how should the tenor be reported? Please 
provide specific examples.
    <bullet> What specific parameters for reporting less specificity in 
the underlying asset(s) and tenor of a swap should be applied to swaps 
in order to protect the identities of the counterparties?
    <bullet> Should there be an indication to the public that a 
description of the underlying asset or tenor lacks specificity in order 
to protect the identities of the parties to the swap?
ii. Unique Product Identifiers
    The Commission anticipates that unique product identifiers may 
develop for various swap products in various markets. Proposed Sec.  
43.4(f) provides that if a unique product identifier is developed and 
it sufficiently describes the information in one or more of the data 
fields for public dissemination in real-time, as described in appendix 
A, then such unique product identifier may be used in lieu of such data 
fields. If a swap does not have a unique product identifier, the swap 
transaction and pricing data must contain all of the appropriate 
product identification fields in appendix A to proposed part 43.\54\
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    \54\ The Commission is considering the issue of unique product 
identifiers in two forthcoming rulemakings under proposed parts 45 
and 49.
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iii. Price-Forming Continuation Data
    Proposed Sec.  43.4(g) requires any swap-specific event (including, 
but not limited to, novations, swap unwinds, partial novations and 
partial swap unwinds) that occurs during the life of a swap and affects 
the price of such swap to be publicly disseminated (a ``price forming 
continuation event''). The Commission does not believe that a price-
forming continuation event includes the scheduled expiration of a swap, 
any anticipated interest rate adjustments, or any other event that does 
not result in a change to the price that would otherwise not have been 
known at the point of execution.
v. Reporting and Public Dissemination of Notional or Principal Amount
    Proposed Sec.  43.4(h) and (i) provide rules for the public 
reporting of the notional or principal amount for all swaps. Proposed 
Sec.  43.4(h)(1) would require the reporting party to report the actual 
notional size of any swap, including large notional swaps, to the 
registered SDR that accepts and publicly disseminates such data. 
Proposed Sec.  43.4(h)(2) would require a reporting party to transmit 
the actual notional size

[[Page 76152]]

of any block trade to a swap market. Further, a swap market must 
transmit the actual notional size for all swaps executed on or pursuant 
to its rules to a real-time disseminator. The Commission believes that 
the application of the rounding convention for notional or principal 
size, described in proposed Sec.  43.4(i) should be done at the point 
of public dissemination (as opposed to the point at which it is 
reported to real-time disseminator) since this timing would provide for 
a more efficient audit trail of the swap.
    Proposed Sec.  43.4(i) provides that for all swaps the notional or 
principal amount that must be reported pursuant to proposed Sec.  43.4 
and appendix A to proposed part 43 should be rounded pursuant a 
specific rounding convention. Specifically, proposed Sec.  43.4(i) 
provides that if the notional or principal amount of a swap is:
    <bullet> Less than one million, round to the nearest 100 thousand;
    <bullet> Less than 50 million, but greater than one million, round 
to the nearest million;
    <bullet> Less than 100 million, but greater than 50 million, round 
to the nearest 5 million;
    <bullet> Less than 250 million, but greater than 100 million, round 
to the nearest 10 million; and
    <bullet> Greater than 250 million, use ``250+''.
    For example, if the notional size of a swap is $575 million, the 
notional size that would be reported by a reporting party to a swap 
market (assuming such swap is a block trade) would be $575 million. The 
swap market would then report the notional amount of $575 million to a 
real-time disseminator and the real-time disseminator would publicly 
disseminate the notional amount for such block trade as ``$250+''. By 
reporting the notional or principal transaction amount pursuant to the 
rounding convention set forth in proposed Sec.  43.4(i), parties to 
swaps, particularly those swaps that are of a large notional size, 
would be given a greater amount of anonymity.
    The Commission requests comment generally on all aspects of the 
proposed rules relating to the reporting and public dissemination of 
notional or principal amount. In addition, the Commission requests 
specific comment on the following issues:
    <bullet> Do commenters agree with the proposed rounding convention 
for public dissemination of large notional or principal amount provided 
in proposed Sec.  43.4(i)? If not, why and provide alternatives?
    <bullet> Would this rounding convention be appropriate for all 
swaps? For example, would this apply to swaps with an underlying asset 
that is a physical commodity with a specific delivery point? If not, 
why and what additional rounding convention may be needed?
    <bullet> Does the rounding convention for reporting notional and 
principal transaction amounts in proposed Sec.  43.4(i) help to protect 
the anonymity of the parties to a swap?
    <bullet> Should the actual notional or principal amount be publicly 
disseminated at a later time?
    <bullet> Should registered SDRs publish the aggregate volume for 
each category of swap instrument on a daily basis? If so, why? If not, 
why not?
    <bullet> Would the daily publication of aggregate volume of swap 
instruments be useful to market participants and the public?
v. Appendix A to Proposed Part 43
    The Commission anticipates that real-time swap transaction and 
pricing data may be publicly disseminated by multiple real-time 
disseminators in the same asset class. In order to reduce the effects 
of fragmentation and increase consistency both within an asset class 
and between asset classes, the Commission is proposing that the 
information in the data fields in appendix A to proposed part 43 be 
publicly disseminated. In addition, the Commission is providing 
proposed guidance on the order and format of reporting swap transaction 
and pricing data.\55\ Additionally, the Commission believes that the 
public dissemination of standardized data should reduce the search 
costs to the public and market participants, increase consolidation of 
real-time swap transaction and pricing data and promote post-trade 
transparency and price discovery.\56\ While appendix A to proposed part 
43 attempts to provide consistency in describing which real-time data 
fields must be publicly disseminated, the Commission anticipates that 
certain fields will be easier to standardize than other fields. For 
example, it should be easy to standardize the format for an execution 
time-stamp across all swap transactions; whereas it may be more 
difficult to achieve standardization when describing an underlying 
asset. The Commission anticipates that, as markets develop over time, 
real-time disseminators and market participants may develop a form of 
standardization for certain data fields in certain asset classes.
---------------------------------------------------------------------------

    \55\ In developing the Commission's proposal, Commission staff 
considered technical advice reports from CESR in the context of 
MiFID. In those reports, CESR concluded that market participants in 
the equities markets are not delivering consolidated data to the 
market in a standard format as a result of the ``inadequate quality 
and consistency of the raw data itself, the inconsistencies in the 
way in which firms report it for publication, and the lack of any 
formal requirements to publish data through bodies with 
responsibilities for monitoring the publication process.'' Committee 
for European Securities Regulators, ``CESR Technical Advice to the 
European Commission in the Context of the MiFID Review--Equity 
Markets,'' CESR/10-802, July 29, 2010. Available at: http://www.cesr-eu.org/popup2.php?id=7004. See also, ``CESR Technical 
Advice to the European Commission in the Context of the MiFID Review 
and Responses to the European Commission Request for Additional 
Information'' (CESR/10-802, CESR/10-799, CESR/10-808, CESR/10-859), 
July 29, 2010. Available at: http://www.cesr-eu.org/popup2.php?id=7003.
    \56\ See id.
---------------------------------------------------------------------------

    While real-time disseminators must disseminate swap transaction and 
pricing data to the public, the reporting parties and swap markets must 
provide the real-time disseminators with, at a minimum, the relevant 
information needed to report the data fields described in appendix A to 
proposed part 43. As discussed above, a real-time disseminator that is 
a registered SDR may require a reporting party or a swap market to 
report additional information to the information necessary for public 
dissemination. Since all swap data must be sent to a registered SDR 
pursuant to Section 2(a)(13)(G) of the CEA and forthcoming Commission 
proposals, and an SDR may be a real-time disseminator, as previously 
discussed, the proposed rules provide that a registered SDR that is a 
real-time disseminator may require additional information to match the 
real-time swap transaction and pricing data to data reported to the 
registered SDR or confirm that parties to a swap have reported in a 
timely manner pursuant to Section 2(a)(13)(F) of the CEA. Such 
additional information requested by a registered SDR may include a 
transaction identification code, the names of the parties to the swap, 
or such other information as may be necessary.
    As mentioned above, proposed Sec.  43.4(b) would require that the 
information in any data field listed in appendix A to proposed part 43 
to be publicly disseminated by a registered SDR or swap market through 
a third-party service provider to the extent that such data field 
captures a term of the reportable swap transaction. In many cases, 
several data fields listed in appendix A to proposed part 43 will not 
be applicable to a particular reportable swap transaction. To the 
extent that a data field is not a term of the swap, such field need not 
be reported and should be left blank. Appendix A to proposed part 43 
also provides specific examples of how the reporting of a particular 
field should look (both in form and in order) when disseminated to the 
public.

[[Page 76153]]

    Table A1 of appendix A to proposed part 43 provides that the 
following data fields be reported to the public in real-time.
    1. Cancellation. This data field reports the swap transaction and 
pricing data that was incorrectly or erroneously reported and is 
therefore being canceled. Any cancellations must also contain a date 
stamp of the original swap, even if such date stamp was not originally 
reported, followed by the full swap transaction and pricing data that 
is being canceled (including the original time-stamp of execution). It 
must be made clear to the public exactly which transaction is being 
reported so that the public can easily disregard such swap transaction 
and pricing data. A cancellation does not have to be corrected; 
however, any corrections must first be canceled. Any such cancellation 
must be done in accordance with proposed Sec.  43.3(f).
    2. Correction. This data field reports the swap transaction and 
pricing data that is being reported is a correction to real-time swap 
transaction and pricing data that has been incorrectly publicly 
disseminated. Any corrections must also contain a date stamp to 
indicate the date of the initial swap that is being corrected, even if 
such date stamp was not originally reported, and the time-stamp must 
indicate the time of execution of the swap, not the time of the 
correction. Providing the date and original time-stamp of the swap will 
allow the public to easily replace the incorrect data. Any reportable 
swap transaction for which there are corrections to real-time swap 
transaction and pricing data must first be canceled prior to the 
correction, so that the public is aware of which data is being 
corrected. Any such correction must be done in accordance with proposed 
Sec.  43.3(f).
    3. Date stamp. This data field reports the date of execution of the 
swap (if not the same day or a correction). This data field need only 
be publicly disseminated if the swap that is being reported was 
executed on a day other than the current day or if the swap transaction 
or pricing data is a cancellation or correction to previously real-time 
reported swap transaction and pricing data.
    4. Execution time-stamp. This data field reports the time of 
execution of the swap. The reporting party provides the execution time-
stamp of the swap. The execution time-stamp is the only time-stamp that 
will be publicly disseminated.
    5. Cleared or uncleared. This data field reports whether a swap is 
cleared through a DCO, which may affect the price of the swap. For 
cleared swaps, the specific DCO that clears the swap will not be 
listed. In consideration of protecting the identities of the parties to 
the swap, the Commission does not believe that the specific DCO through 
which a swap is cleared must be reported to the public.
    6. Indication of other price-affecting term (non-standardized 
swaps). This data field reports whether there are other non-standard 
terms to the swap that materially affect the price of the swap. This 
indicator signals to market participants that there may be unreported 
terms of the contract that affect the price. Any reporting of bespoke 
swap transactions must include this indicator, since in these 
transactions there are other terms or factors that materially affect 
the price of the swap and are otherwise not included in the required 
fields for real-time public reporting found elsewhere in appendix A to 
proposed part 43.
    7. Block trades and large notional swaps. This data field reports 
whether the swap is a block trade or large notional swap. This data 
field does not, however, make a distinction between block trades and 
large notional swaps, since the execution venue data field will reveal 
that information.
    8. Execution venue. This data field reports where the swap was 
executed. The reporting party must indicate whether the swap was 
executed on a swap market or whether such swap is an off-facility swap. 
This data field assists the public in understanding the other data 
fields that are being reported. In consideration of protecting the 
identities of the parties, the Commission does not believe that the 
specific swap market on which the swap was executed need be publicly 
disseminated. Similarly, the Commission does not believe that a 
distinction need be made between those swaps executed on a SEF and 
those executed on a DCM.
    9. Swap instrument. This data field must be reported only if a 
trade is a block trade or a large notional swap. Large notional swaps 
must refer to an existing swap instrument that is posted by a 
registered SDR and has an appropriate minimum block size associated 
with such instrument. The parties to a swap must use the appropriate 
minimum block size of the swap instrument when determining if a swap 
constitutes a large notional swap. Swap markets, in setting the minimum 
block trade size for a particular listed swap, must reference the 
appropriate minimum block size for the category of swap instrument 
within which the particular listed swap is included. A swap market will 
set a minimum block trade size for a listed swap based on the 
appropriate minimum block size for the relevant category of swap 
instrument as calculated by the SDR. Proposed Sec.  43.5 provides rules 
on block trades and large notional swaps, including the determination 
of minimum block trade sizes. The reporting of the swap instrument data 
field provides market participants and the public with an understanding 
of the type of swap instrument for which a block trade is occurring.
    The Commission believes that within each asset class there should 
be certain criteria that are used to determine a category of swap 
instrument. For example, swaps in the interest rate asset class may be 
considered the same swap instrument if they are denominated in the same 
major currency (or denominated in any non-major currency considered in 
the aggregate) and if they have the same general tenor.\57\ With regard 
to tenor, the Commission believes that tenors may be grouped into 
ranges based on maturity date (e.g., short, intermediate and long). For 
example, a single category of swap instrument may be ``U.S. dollar 
interest rate swaps in a short maturity bucket, including swaps, 
swaptions, inflation-linked swaps, etc. and all underlying reference 
rates.'' Similarly, swaps in the ``other commodity'' asset class may be 
considered the same swap instrument if they have the same underlying 
asset, which generally would include all swaps whose economic terms 
relate to the same underlying product (e.g., oil, natural gas, heating 
oil, gold, etc.). In contrast, the Commission believes that for swaps 
under the Commission's jurisdiction in the credit or equity asset 
classes all swaps within each asset class can be considered to be the 
same swap instrument. The swaps in the credit and equity asset class 
will be broad-based or on indexes and such swaps can likely be grouped 
together for purposes of determining the appropriate minimum block 
size. In the currency asset class, swap instruments may be defined by 
major currency pair, not by whether a major currency is one of the 
currencies involved in the swap.
---------------------------------------------------------------------------

    \57\ Major currencies are those of the United States, Japan, the 
United Kingdom, Canada, Australia, Switzerland, Sweden and the 
European Monetary Union. See Sec.  15.03 of the Commissions 
regulations.
---------------------------------------------------------------------------

    The Commission requests comment generally about swap instruments. 
In addition the Commission requests comment on the following specific 
issues:
    <bullet> What criteria for each asset class should a registered SDR 
consider in determining if a swap falls within a

[[Page 76154]]

particular grouping of swap instrument? Specifically, what criteria 
should be used to classify a swap instrument and how do those criteria 
differ by asset class? What particular considerations should apply to 
swaps in interest rate, equity, credit, currency and other commodity 
classes? Who should determine the categories of swap instrument?
    <bullet> How broad or narrow should the categories of swap 
instruments be for each asset class? Do commenters believe that the 
appropriate minimum block size should be determined based on particular 
types of swap contracts and not on categories of swap instruments? If 
so, why?
    <bullet> Should certain asset classes have additional or fewer 
criteria in determining a swap instrument? If so, what asset classes 
and what criteria?
    <bullet> Should a registered SDR apply any other criteria to the 
other commodity asset class to decide whether a swap falls within a 
particular type of swap instrument? How should the underlying asset be 
grouped for the other commodity asset class?
    <bullet> Is it an appropriate approach to group tenors for swaps in 
the interest rate asset class into ranges (e.g., short-term, 
intermediate-term and long-term)? What should be the appropriate ranges 
of tenor or maturity date for each of these ranges? Should there be 
tenor ranges for other asset classes?
    <bullet> Are there any other currencies other than those described 
in Sec.  15.03 of the Commissions regulations that the Commission 
should consider as a major currency? If so, which currencies and why?
    10. Start date. This data field reports the day on which the 
contractual provisions of a swap commence or become effective. The 
Commission recognizes that the start date may be different than the 
execution date. The Commission also recognizes that the markets may 
develop such that swaps traded on swap markets become standardized to 
the point where the start date is embedded or understood by a unique 
product identifier. For example, the start date for a particular swap 
may always be the day following execution (i.e., T+1), and such 
information could be captured by simply identifying the product through 
a unique product identifier. If the markets evolve in such a manner, 
then this data field may not be necessary to report for these swaps. 
Nonetheless, the start date must always be provided in a manner that is 
apparent to the public.
    11. Asset class. This data field provides a general description of 
the asset class for a swap, as defined in proposed Sec.  43.2(e). This 
data field will allow the public to easily compare swaps within an 
asset class and to easily identify the type of swap that is being 
reported. Swaps within an asset class would have broadly similar 
characteristics.
    12. Sub-asset class for other commodity. This data field provides 
greater detail as to the type of other commodity that is being 
reported. The Commission realizes that there may be vast differences in 
the types of products that fall under a particular asset class. For 
this reason, a sub-asset class should be reported for other commodities 
so that the public can easily understand similar types of swaps. Such 
sub-asset classes may include, but are not limited to, specific energy, 
weather, precious metals, other metals, agricultural commodities, etc.
    13. Contract type. This data field reports the specific type of 
swap that has been executed. This data field provides greater 
transparency and price discovery to market participants and the public, 
as knowledge of the contract type will allow the public to understand 
the swap transaction and pricing data that is being reported. The 
Commission has identified four broad categories of contracts that may 
be entered into: swaps, swaptions, forwards and stand-alone options. 
These categories may be further defined by the contract sub-type data 
field discussed immediately below.
    14. Contract sub-type. This data field provides more detail on the 
type of contract specified in the contract type data field. The 
Commission envisions that there will be many contract sub-types. Such 
contract sub-types may include, for example, basis swaps, index swaps, 
broad-based security swaps and basket swaps. Specific option types and 
other information about options are covered by the options fields found 
in Table A2 to appendix A to proposed part 43.
    15. Price-forming continuation data. This data field describes 
whether the information that is being reported is a price-affecting 
event to an existing swap. Such events may include novations, partial 
novations, swap unwinds and partial swap unwinds as well as other 
price-forming events that may occur following the execution of the 
swap. Such other events may also include amendments to the swap that 
have a specific affect on the price of the swap.
    16. Underlying asset 1 and underlying asset 2. These data fields 
describe the specifics of the swap and help the public evaluate the 
price of the swap transaction. It is likely that each leg of a swap 
(i.e., the fixed and the variable) will have an underlying asset that 
should be reported as a separate field. If there are more than two 
underlying assets, all underlying assets should be real-time reported 
and publicly disseminated. The Commission is not providing a specific 
format for all underlying asset fields, but the description of each 
underlying asset should be in a format that is commonly used by market 
participants. The Commission encourages reporting parties and real-time 
reporting disseminators to consult with one another to determine 
consistent ways of reporting similar underlying assets. If a 
standardized industry abbreviation exists for a particular underlying 
asset, such abbreviation should be used to describe the underlying 
asset. Whenever possible, alphabetical abbreviations should be used, 
including roman numerals; provided, however the underlying asset must 
be reasonably apparent to the public (e.g., six-month LIBOR could be 
represented as VIL, 10-year Treasury could be represented as TX, etc.). 
Further, if a unique product identifier adequately captures the 
underlying asset, the underlying asset field may not need to be 
reported.
    17. Price notation and additional price notation. These data fields 
report the price of the swap. These fields should include the total or 
net of any premium that is associated with a party's requirements under 
the swap. For example, if Party A's contractual requirements are linked 
to a 10-year Treasury note and Party B's requirements are linked to 
three-month LIBOR, the price notation should be the rate of 10-year 
Treasury note compared to three-month LIBOR (e.g., 2.5).
    The Commission recognizes that a number of different pricing 
conventions currently exist across swap transactions and even among 
market participants for similar swap transactions. Nevertheless, the 
Commission believes that standardizing of pricing conventions will 
result in greater price transparency. In order to promote such 
standardization, it becomes important to define what ``pricing'' means 
for swaps. Notional or principal amount is the amount on which payment 
rates are calculated and is not the actual amount or units exchanged in 
most cases. Payments under the swap are based on what the market refers 
to as ``legs'' and what the Commission refers to as ``underlying 
assets'' in this proposed rulemaking. The additional price notation 
would be necessary in such instances where there are multiple premiums 
yields, spreads or rates are characteristics of the swap. It is for 
this reason that the proposed rules require

[[Page 76155]]

the additional price notation to include, inter alia, front-end 
payments, back-end payments, mid-cycle flat payments, collateral and 
margin. All of the elements to additional price notation must be 
represented in this field as a single number, relative to the 
difference in payments between the underlying assets of the swap.
    In the example above, if Party A's requirement is tied to the 10-
year Treasury note yield and Party B's requirement is linked to three-
month LIBOR and Party B is also required to post a back-end payment of 
$100,000, then the price notation would be the rate of 10-year Treasury 
note compared to three-month LIBOR (e.g., 2.5). The additional price 
notation might be calculated to be +0.05, because in this example, the 
net present value of the back-end payment of $100,000, as applied to 
the exchange of payments within the swap, would be equal to +0.05. 
These two data fields provide the public and market participants with 
an easily accessible and uniform means of understanding the price at 
which the parties to a swap have reached an agreement regarding the 
swap's payment streams.
    18. Unique product identifier. This data field, if available, 
describes a standardized swap. If a unique product identifier is 
available for a particular product, it may be reported in lieu of 
reporting other identifying fields including, but not limited to, the 
underlying asset, asset class, contract type, contract sub-type and 
start date, so long as such fields are adequately described and 
apparent to the public. The Commission believes that the markets will 
evolve to a point where the use of such unique product identifiers will 
increase transparency and promote price discovery across real-time 
disseminators. The Commission envisions unique product identifiers will 
be uniform across different swap markets.
    19. Notional currency 1 and notional currency 2. This data field is 
needed if the notional or principal amounts are referenced in terms of 
a currency. The currency field may be reported in a commonly-accepted 
code. For example, U.S. dollars may be reported with the ISO 4217 
currency code ``USD''.\58\ The notional currency 1 field should refer 
to the notional or principal amount 1 field, while the notional 
currency 2 field, if applicable, should refer to the notional or 
principal amount 2 field. If there are more than two notional or 
principal amounts that require a notional currency field, then these 
fields should be reported in a similar manner.
---------------------------------------------------------------------------

    \58\ The International Organization for Standardization 
(``ISO'') provides a list of currency and funds names that are 
represented by both a three-letter alphabetical and a three-number 
numerical code (the ``ISO 4217'' code list), which is available at: 
http://www.iso.org/iso/support/currency_codes_list-1.htm.
---------------------------------------------------------------------------

    20. Notional or principal amount 1 and notional or principal amount 
2. This data field is needed to identify the size or amount of the swap 
transaction. The notional amount may be reported in a currency and if 
so, the currency must be disclosed and made easily identifiable to the 
public. Such disclosure can be done by reporting the notional currency 
field with respect to the notional amount that requires such 
information. If a principal amount is in units, then a currency 
description does not need to be reported. Appendix A to proposed part 
43 contemplates the potential for two or more notional or principal 
amounts. When a swap has more than two notional or principal amounts, 
then all such amounts must be reported and made easily identifiable by 
reporting parties and real-time reporting disseminators. The notional 
or principal amount for swaps should be reported pursuant to proposed 
Sec.  43.4(h) and (i). Each notional or principal amount (if there is 
more than one) should be labeled with a number (e.g., 1, 2, 3, etc.), 
such that the number corresponds to the underlying asset for which the 
notional or principal amount is applicable.
    21. Payment frequency 1 and payment frequency 2. This data field is 
needed to assist in understanding the price of a swap. It represents 
the frequency at which payments will be made for a party's contractual 
requirements under a swap. It is possible that the payment frequency 
may be the same for both parties to a swap; however, the payment 
frequency also may be different. If there is a difference, the payment 
frequencies must be reported for each requirement under the swap. The 
format for payment frequency should be consistent and may be reported 
as a numerical character followed by a letter.\59\ For example, if 
payments are to be made every two weeks, then ``2W'' may be reported in 
this field; if payments are to be made every year, then ``1Y'' may be 
reported, etc. Each payment frequency (if there is more than one) 
should be labeled with a number (e.g., 1, 2, 3, etc.), such that the 
number corresponds to the underlying asset for which the payment 
frequency is applicable.
---------------------------------------------------------------------------

    \59\ Such period descriptions may be described as follows: daily 
(D), weekly (W), monthly (M) and yearly (Y).
---------------------------------------------------------------------------

    22. Reset frequency 1 and reset frequency 2. This data field is 
needed to assist in understanding the price of a swap. It represents 
the frequency that a price for an underlying asset may be adjusted. It 
is possible that there is no reset frequency, that the reset frequency 
is the same for both underlying assets or that the reset is different 
for both underlying assets. If different, the reset frequencies must be 
reported for each underlying asset. The format for reset frequency must 
be consistent and may be a numerical character followed by a 
letter.\60\ For example, if adjustments are to be made every two weeks, 
then ``2W'' may be reported in this field, if adjustments are to be 
made every year, then ``1Y'' may be reported, etc. Each reset frequency 
(if there is more than one) should be labeled with a number (e.g., 1, 
2, 3, etc.), such that the number corresponds to the underlying asset 
for which the reset frequency is applicable.
---------------------------------------------------------------------------

    \60\ See id.
---------------------------------------------------------------------------

    23. Tenor. This data field is needed to describe the duration of a 
swap and when a swap will terminate, mature or end. To protect the 
anonymity of the parties to a swap, the tenor field should only be 
reported as the month and year that the swap terminates, matures or 
ends. Such description may use the three character alpha-numerical 
format that is used in describing futures contracts.\61\ For example, 
if a swap ends on March 15, 2020, the tenor may be reported as ``H20''.
---------------------------------------------------------------------------

    \61\ Futures month symbols are as follows: January (F), February 
(G), March (H), April (J), May (K), June (M), July (N), August (Q), 
September (U), October (V), November (X) and December (Z).
---------------------------------------------------------------------------

    Table A2 of appendix A to proposed part 43 provides the following 
data fields to be publicly disseminated in real-time for options, 
swaptions and swaps with embedded options, if applicable to a swap. If 
a swap has more than one embedded option or swaption provision, then 
all such embedded options or swaptions should be real-time reported to 
the public in the same manner.
    1. Embedded option on swap. This data field is needed to describe 
whether the data listed in the option fields is an option that is 
embedded in the price of the swap. Proposed Sec.  43.2(i) defines 
``embedded option'' as any right, but not an obligation, provided to 
one party of a swap by the other party to the same swap that provides 
the party in possession of the option with the ability to change any 
one or more of the economic terms of the swap as they were previously 
established at confirmation (or were in effect on the start date). By 
requiring a separate field for embedded options on swaps, market 
participants and the public will be able to compare prices across the 
same or

[[Page 76156]]

similar swaps. The Commission believes that requiring this field will 
increase transparency and price discovery across the swap markets, as 
it will allow for the easy comparison of price by market participants 
and the public. Further, the Commission does not wish to see market 
participants wasting resources to try to avoid transparency by adding 
embedded options to otherwise standardized swap contracts. If the 
Commission did not require separate reporting of the embedded option 
field, it would be possible for market participants to attach worthless 
options to a swap in order to avoid real-time public reporting the swap 
in the same format as a standardized swap that does not have an 
embedded option.
    2. Option strike price. This data field reports the level or price 
at which a party to a swap may exercise an option. The Commission 
recognizes that for some option types, such as collars, strangles and 
condors, it will be necessary to report two or more prices in this 
field. This data field is the first field that would be reported for 
options and real-time disseminators may choose to place an ``O'' prior 
to the strike price. After the ``O'', the level or price should follow 
immediately thereafter. For example, an option or swaption with a 
strike price of $25 should be real-time publicly reported as ``O25''.
    3. Option type. This data field reports the type of option. The 
option type is important because it clarifies how the buying or selling 
of the asset is to be transacted between two parties. To promote 
standardization, this data field should be reported from the 
perspective of the party to the swap associated with underlying asset 
1. The Commission recognizes that there are several different types of 
options, and has tried to identify some of the more common option types 
and their suggested two-character alphabetical descriptors in Table A2 
of appendix A to proposed part 43. The Commission intends for the list 
of options in Table A2 to promote consistency and transparency across 
reporting parties and real-time disseminators. Some examples of option 
types include caps, collars, floors, puts, calls, pay fixed versus 
floating, receive fixed versus floating, straddles, strangles and 
knock-outs.
    4. Option family. This data field reports the family associated 
with the option. The option family is important because it identifies 
the period of time over which an option may be executed. The Commission 
recognizes that there are several different types of option families, 
and has tried to identify some of the more common option families and 
provided suggested two-character alphabetical descriptors in Table A2 
of appendix A to proposed part 43. The Commission intends for the list 
in Table A2 to promote consistency and transparency across reporting 
parties and real-time disseminators. Some examples of option families 
include American, Bermudan, European and Asian.
    5. Option currency. This data field is needed to explain the 
currency for the option that is being reported. If applicable, the 
option currency field shall refer to both the option premium field and 
the option strike price.
    6. Option premium. This data field reports the purchase price for 
the option at the time of execution of the swap. This number represents 
the total additional cost of the option as a numerical value and is 
broken out separately from the price notation and additional price 
notation fields to allow for an easier comparison of a swap with an 
option to similar swaps that do not include an option.
    7. Option lockout period. This data field reports the time at which 
an option first can be exercised and thus, assist them in evaluating 
the price of an option. The option lockout date should be reported in 
the year and month format used in futures markets.\62\ This field most 
often will be needed for European style options and other options where 
the start date for the requirements to a swap with an embedded option 
may be different than the date that an embedded option is available for 
execution. The option lockout period should be reported in the year and 
month format used in futures.
---------------------------------------------------------------------------

    \62\ See id.
---------------------------------------------------------------------------

    8. Option expiration. This data field reports when an option can no 
longer be exercised. This data field will assist the public and market 
participants in evaluating the price of an option. In most cases, this 
data field can be omitted, as a standard option would expire at the 
same time as the swap contract to which it is linked. The option 
expiration should be reported in the year and month format used in 
futures markets.
v. Examples To Illustrate the Public Reporting of Real-Time Swap 
Transaction and Pricing Data
    The Commission envisions that the reporting of the data fields in 
appendix A to proposed part 43 may eventually be reported in the form 
of a consolidated ticker, particularly for the more standardized swaps 
that are traded on swap markets. Additionally, the Commission believes 
that when unique product identifiers emerge they will be publicly 
disseminated, increase uniformity and transparency across real-time 
disseminators and ultimately lead to greater transparency and price 
discovery. Below, the Commission has set out two examples of how real-
time public reporting of swap transaction and pricing data may evolve 
as consolidation and standardization develops in particular asset 
classes and markets.

Example 1

    On Friday, February 4, 2011, Bank X enters into a new plain vanilla 
10-year fixed versus floating interest rate swap with Bank Y, for a 
notional amount of $10 million U.S. dollars. The swap is scheduled to 
start on Tuesday, February 8, 2011 (note: start dates are usually 2 
business days later for interest rate swaps). Bank X is the payer of 
the fixed leg of the swap and is obligated to pay a fixed rate of 2.53% 
on the notional amount for the ten-year tenor of the swap. Bank Y is 
the payer of the floating leg of the swap and is obligated to pay the 
prevailing three-month LIBOR on the $10 million notional amount. The 
first LIBOR payment will be based upon the three-month LIBOR rate for 
February 4, 2011 with the rate reset on a quarterly basis going 
forward. This interest rate swap is plain vanilla with both banks using 
the same day count convention, payment currency and notional value for 
both of the underlying assets to the swap.
    Bank X and Bank Y have no additional premiums or payments under the 
terms of the swap. In this example, the reset and payment frequency for 
the fixed-rate are semi-annual. The reset and payment frequency for the 
floating rate (i.e., three-month LIBOR) are quarterly. The parties' 
requirements under the swap for both the fixed leg and floating leg are 
scheduled to mature on Monday, February 8, 2021. Bank X and Bank Y are 
both members in good standing with a SEF named ``Xeqution Co.'' and use 
a DCO named ``ClearitAll''.

------------------------------------------------------------------------
                   Field                             Description
------------------------------------------------------------------------
Execution time-stamp......................  16:20:47
Cleared or uncleared......................  C (note: the name of DCO is
                                             not reported)
Execution Venue...........................  SWM (note: the name of SEF
                                             is not reported)
Start date................................  08-02-11
Asset class...............................  IR
Contract type.............................  S-

[[Page 76157]]

 
Underlying asset 1........................  TX (note: TX represents the
                                             reference rate of Treasury
                                             10 year, which is the fixed
                                             rate)
Underlying asset 2........................  IIIL (note: IIIL represents
                                             3 month LIBOR, which is the
                                             floating rate)
Notional currency 1.......................  USD
Notional or principal amount 1............  10M (note: this may be
                                             reported as ``10,000,000'')
Pricing Notation..........................  2.53
Payment frequency 1.......................  6M
Payment frequency 2.......................  3M
Reset frequency 1.........................  6M
Reset frequency 2.........................  3M
Tenor.....................................  G21 (note: actual day is not
                                             reported)
------------------------------------------------------------------------

    The Commission believes that as swaps become more standardized, 
market participants and real-time disseminators may develop a 
nomenclature that combines data fields in an easy-to-follow manner, 
ensuring that all the relevant information in appendix A to this 
proposed part 43 is publicly disseminated. For example, the swap in the 
above example may be displayed as follows:

16:20:47 IRS 10 TXIIIL 2.53 @0 G21.

    In the illustration above, the symbol ``C'' is not included, 
because as the markets develop, the majority of standardized swaps will 
be cleared through DCOs and an indication of ``U'' would only be 
necessary for the reporting of uncleared swaps. The term ``SWM'' is 
also omitted since it could be assumed by market participants and the 
public that the swap has taken place on a swap market. Such an 
indication would only be needed if the swap was done off-facility 
pursuant to the non-financial end-user exception from the mandatory 
clearing requirement under Section 2(h)(7) of the CEA. The start date 
is not reported because in this illustration it is assumed for a swap 
of ``TXIIIL'' the start date is always two business days after the date 
of execution (i.e., T+2). The term ``IRS'' would replace the separate 
data fields for asset class ``IR'' and contract type ``S-'' as the 
standard format once market participants have become accustomed to 
reading data on a consolidated tape for swaps. The terms ``USD'' and 
``M'' in 10,000,000 are also dropped because in this illustration the 
market would have developed in such a manner as to understand that the 
standard trade is done in U.S. dollars and in round lots of one million 
or in this case ``10''. Payment frequency and reset frequency would 
also be excluded for both of the underlying assets because the symbol 
``TXIIIL'' now represents a plain vanilla interest rate swap where 
payment frequency and reset frequency are standardized terms of the 
swap transaction. The number ``2.53'' for price notation remains but in 
some cases, such as a basis swap, this field may be omitted as the 
market develops. The symbol ``@0'' is used because in some cases front-
end, back-end, margin, collateral or other payments that are not 
included in the terms of the swap must be reported as an additional 
price notation characteristic. In this example, there is no additional 
price notation that must be reported. The symbol ``G21'' is still 
reported to indicate that the swap matures (i.e., terminates) in 
February 2016.

Example 2:

    On Friday, February 4, 2011, Bank X, once again enters into a plain 
vanilla 10-year fixed versus floating interest rate swap with Bank Y 
for a notional amount of $10 million U.S. dollars. The swap is 
scheduled to start on Tuesday, February 8, 2011 (Note: start dates are 
usually 2 business days later). Bank X is payer of the fixed leg of the 
swap and is obligated to pay a fixed rate of 2.53% on the notional 
amount for the ten-year tenor of the swap. Bank Y is the payer of the 
floating leg of the swap and is obligated to pay the prevailing three-
month LIBOR on the $10 million notional amount. To illustrate an 
exception from the plain vanilla swap, the first LIBOR payment in this 
example is based on the three-month LIBOR rate for February 4, 2011 
with a weekly rate reset, instead of the normal quarterly rate reset. 
Both parties have agreed to use the same day count convention, payment 
currency and notional amount for both of the underlying assets to the 
swap.
    Bank X and Bank Y have additional payments to be made between the 
two parties under the terms of the swap. Bank X is required to deliver 
a front-end payment of $500,000 U.S. dollars to Bank Y, which is 
represented by an increase to the fixed-rate payer's requirement of 
``+0.07'' and reported in the additional price notation data field. For 
the sake of clarity, this additional price notation data field should 
be in the same format as the price notation field and be displayed as 
an addition or subtraction to the fixed-rate payer's rate under the 
swap.
    In order for the parties to protect themselves from a possible 
increase in interest rates, Bank Y purchases a one-year pay fixed 
versus floating swaption with a strike rate of 2.53% to pay fixed for 
9-years to Bank X (i.e., through the maturity of the swap). This 
swaption effectively will terminate the original swap with Bank X, and 
in this example, we can assume that the cost of the swaption is 
$100,000. This swaption might also be listed as an adjustment to the 
fixed rate that Bank Y would receive from Bank X in the initial swap if 
the payments were not made outright, but were blended into the initial 
fixed rate. In this example, this might be represented by subtracting 
four basis points or ``-0.04''.
    The reset and payment frequency for the fixed rate is semi-annual 
(every six months), while the reset and payment frequency for the 
three-month LIBOR is weekly, upon the request of the variable rate 
payer. The parties' requirements under the swap are scheduled to mature 
on Monday, February 8, 2021. Bank X and Bank Y are both members in good 
standing with a SEF named ``Xeqution Co.'' and use a DCO named 
``ClearitAll''.

------------------------------------------------------------------------
                   Field                             Description
------------------------------------------------------------------------
Execution time-stamp......................  16:20:47
Cleared or uncleared......................  C (note: the name of DCO is
                                             not reported)
Execution Venue...........................  SWM (note: the name of SEF
                                             is not reported)
Start date................................  08-02-11
Asset class...............................  IR
Contract type.............................  S-
Underlying asset 1........................  TX (note: TX represents
                                             Treasury 10 year)
Underlying asset 2........................  IIIL (note: IIIL represents
                                             3 month LIBOR)
Price Notation............................  2.53
Additional price notation.................  +0.07
Notional currency 1.......................  USD
Notional or principal amount 1............  10M (note: this may be
                                             reported as ``10,000,000'')
Payment frequency 1.......................  6M
Payment frequency 2.......................  1W
Reset frequency 1.........................  6M
Reset frequency 2.........................  1W
Tenor.....................................  G21 (note: actual day is not
                                             reported)
Embedded option on swap...................  EMBED1
Option Strike Price.......................  O2.53
Option Type...............................  PF (note: this is always
                                             reported from the point of
                                             view of the variable leg)
Option Family.............................  EU (note: this is a European
                                             style option)
Option currency...........................  USD
Option premium............................  -.04 (note: this may be
                                             reported as ``$100,000''
                                             depending on market
                                             conventions)

[[Page 76158]]

 
Option lockout period.....................  G12 (note: actual day is not
                                             reported)
Option expiration.........................  G21 (note: actual day is not
                                             reported)
------------------------------------------------------------------------

    The Commission believes that as swaps become more standardized, 
market participants or real-time disseminators may develop a 
nomenclature that combines data fields in an easy-to-follow manner, 
while ensuring that all the relevant information in appendix A to this 
proposed part 43 is publicly disseminated. Even swaps with one or more 
non-standard terms may still be reported in a consolidated format. For 
example, the swap in the example above may be displayed as follows:

16:20:47 IRS 10 TXIIIL S/1W 2.53 @0.07 G21 EMBED1 EU <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="c4f6eaf1f7948284e9eaf4f0">[email protected]</a> LOG12

    In the illustration above, the symbol ``C'' is not included because 
as the markets develop the majority of standardized swaps will be 
cleared through DCOs, and an indication (e.g., the symbol ``U'') would 
only be necessary for the reporting of uncleared swaps. The term 
``SWM'' is also omitted since, it could be assumed by market 
participants and the public that the swap has taken place on a swap 
market. Such indication would only be necessary if the swap was done 
off-facility, pursuant to the non-financial end-user exception from the 
mandatory clearing requirement under Section 2(h)(7) of the CEA. The 
start date not reported for this swap because in this illustration, it 
is assumed that for a swap of ``TXIIIL'' the start date is always two 
business days after the date of execution (i.e., T+2). The term ``IRS'' 
would replace the separate data fields for asset class ``IR'' and 
contract type ``S-'' as the standard format once market participants 
have come accustomed reading data on a consolidated tape for swaps. The 
terms ``USD'' and ``M'' in 10,000,000 are also dropped because in this 
illustration the market has developed in such manner as to understand 
that the standard trade is done in U.S. dollars and in round lots of 
one million or in this case ``10''.
    The Commission anticipates that in order for the price notation and 
additional price notation data fields to be of the greatest value to 
market participants and the public, some form of standardization likely 
will develop for the purposes of real-time public reporting and market 
participants consistently use these data fields.\63\ An example of the 
evolution of standardization is shown in the illustration above where 
price notation is displayed as the number ``2.53'', which is equal to 
the rates associated with payments on each leg at execution. Each leg 
of the swap's present value of future payments would be equal to zero 
(i.e., a par swap's value). The symbol ``@0.07'' is listed in the 
illustration above because the present value of the front-end payment 
is the equivalent of a higher interest payment of 0.07 over the life of 
the swap for the party that is paying the fixed rate at execution. 
Payment frequency and reset frequency have been represented with an 
``S/1W'' for the underlying assets because the symbol ``TXIIIL'' 
represents a plain vanilla interest rate swap where payment frequency 
and reset frequency are standardized terms of the swap transaction. In 
the illustration above, however, only the Treasury leg is standard, 
while the floating LIBOR leg is set to weekly versus its standard 
quarterly format. The symbol ``G21'' is reported to indicate that the 
requirements under the swap terminate in February 2021. In this 
illustration, ``TXIIIL'' is still used as a symbol that lets 
participants know several of the previously required data fields are 
standardized and combined and therefore do not need to be displayed 
separately for real-time public reporting, while those fields that are 
non-standard are simply broken out and reported separately in a more 
traditional long format.
---------------------------------------------------------------------------

    \63\ It is important to note that such standards are not 
intended to change the form in which market participants use to 
quote or construct swaps.
---------------------------------------------------------------------------

    The interest rate swap in this illustration contains an embedded 
option that is broken out so that data fields can be easily comparable 
across a wider variety of similar, but not identical swaps, thus 
promoting post-trade price transparency. The term ``EMBED1'' indicates 
that this interest rate swap has an embedded option and the pricing 
information for such embedded option follows on the real-time public 
reporting consolidated tape. The symbol ``2.53PF'' replaces the 
separate data fields for option strike price ``O2.53'' and option type 
``PF''. Option family ``EU'' is included in the consolidated tape to 
indicate the family of the embedded option. The option currency ``USD'' 
is left off of this transaction because it is assumed for a ``TXIIIL'' 
swap, the option currency for any embedded options would be ``USD'', 
unless broken out and reported individually. The symbol ``LOG12'' is 
used instead of ``G12'' to indicate the lock out period to provide 
clarity. The option expiration of ``G21'' is omitted because the 
embedded option is assumed to be in a standard form and as such would 
be set to expire at the same time as the swap itself. If such embedded 
option was not in standard form, then the option expiration field would 
have been reported as an additional data field.
    The Commission requests comment on all aspects of the data fields 
in appendix A to proposed part 43 that would be required to be reported 
in real-time under this proposal. In addition, the Commission requests 
specific comment on the following issues:
    <bullet> Do commenters agree with the proposed data fields that 
would be required to be reported in real-time? If not, what additional 
data fields should be reported and why? How would public dissemination 
of these data fields enhance transparency and price discovery?
    <bullet> Which data fields, if any, should not be required to be 
publicly disseminated in real-time and why?
    <bullet> Would public dissemination of certain data fields reduce 
market liquidity? \64\ If so, why?
---------------------------------------------------------------------------

    \64\ Section 2(a)(13)(E)(iv) requires that the Commission ``take 
into account whether the public disclosure will materially reduce 
market liquidity.''
---------------------------------------------------------------------------

    <bullet> Should the portion of the amount reported in the 
additional price notation data field that relates to the 
creditworthiness of a counterparty be extracted and reported as a 
separate data field? If so, why? Should the creditworthiness of a 
counterparty be reported in some other way?
    <bullet> Do commenters agree that tenure should only be reported 
with month and year? Is this a useful method for protecting the 
anonymity of the counterparties? Does this provide an adequate level of 
transparency?
    <bullet> Do commenters agree with the proposed method for real-time 
reporting and public dissemination of non-standardized swaps? Should 
the ``indication of other price affecting term'' data field contain 
more specificity as to what type of term is affecting the price? If so, 
what additional information should be included and how should it be 
reported?
    <bullet> Would public dissemination of information concerning non-
standardized swaps materially reduce market liquidity? If so, why? \65\
---------------------------------------------------------------------------

    \65\ See Section 2(a)(13)(E)(iv).
---------------------------------------------------------------------------

    <bullet> Under the proposal, the swap instrument data field would 
only be required for block trades and large notional swaps, should this 
data field be reported for all swaps? If so, why?

[[Page 76159]]

    <bullet> Would information concerning the type of counterparties 
that enter into a swap enhance transparency and price discovery (e.g., 
whether the counterparty is a swap dealer, MSP, or not)? If so, why?
    <bullet> Would separately reporting embedded option information 
enhance price discovery and transparency? If not, why?
    <bullet> Do proposed Sec.  43.4 and appendix A to proposed part 43 
provide adequate guidance with respect to the information that must be 
reported? If not, what additional guidance do commenters believe is 
necessary?
    <bullet> Do commenters agree with the reporting of price-affecting 
continuation events? Should data relating to these events be publicly 
disseminated in real-time in the same way as new swap transactions? 
What additional types of transactions, if any, would be price-affecting 
continuation events that should be reported and publicly disseminated 
in real-time?
    <bullet> What would be the costs of reporting and publicly 
disseminating the proposed data fields? What would be the benefits? 
Please provide examples, if possible.
5. Proposed Section 43.5--Block Trades and Large Notional Swaps
    Sections 2(a)(13)(E)(ii) and (iii) of the CEA authorize the 
Commission to prescribe rules ``to specify the criteria for determining 
what constitutes a large notional swap transaction (block trade) for 
particular markets and contracts'' and ``to specify the appropriate 
time delay for reporting large notional swap transactions (block 
trades) to the public.'' As discussed in the Background Section above, 
while Section 2(a)(13)(E) of the CEA specifically refers to the swaps 
described only in Sections 2(a)(13)(C)(i) and 2(a)(13)(C)(ii) of the 
CEA (i.e., clearable swaps, including swaps that are exempt from 
clearing), the Commission believes that it is appropriate to consider 
the four criteria in Section 2(a)(13)(E) of the CEA for all four 
categories of swaps described in Section 2(a)(13)(C) of the CEA.\66\ 
Therefore, proposed Sec.  43.5 establishes: (1) the procedures for 
determining the appropriate minimum sizes for block trades and large 
notional swaps; and (2) the appropriate time delays for the reporting 
of block trades and large notional swaps.
---------------------------------------------------------------------------

    \66\ Pursuant to the Commission's authority under Sections 
2(a)(13)(B) and 2(a)(13)(E)(iii) of the CEA.
---------------------------------------------------------------------------

    In developing the proposed rules with respect to block trades and 
large notional swaps, the Commission considered its guidance with 
respect to block trades in the futures markets. Additionally, the 
Commission considered the treatment of block trades in other markets 
(both foreign and domestic), such as those for equities, options and 
corporate bonds. Further, the Commission considered the treatment and 
effects of swaps with large notional or principal amounts in the 
current OTC swap markets. The Commission is not aware of any academic 
literature that offers empirical evidence to support the claim of 
impaired liquidity given greater transparency or how block trades on 
swaps or large notional swaps are affected by a post-trade transparency 
regime.\67\
---------------------------------------------------------------------------

    \67\ The Commission will continue to analyze and study the 
effects of increased transparency on post-trade liquidity, 
particularly in the context of block trades on swaps and large 
notional swaps. The Commission expects that, as post-trade 
transparency is implemented in the context of the Dodd-Frank Act, 
new data will come to light that will inform the discussion and 
could cause subsequent revision of the proposed rules.
---------------------------------------------------------------------------

    The Commission recognizes that the term ``block trade'' has 
different meanings in different markets. For example, in the futures 
markets, a block trade is a permissible, privately negotiated 
transaction that equals or exceeds a DCM's specified minimum quantity 
of futures or options contracts and is executed away from the DCM's 
centralized market but pursuant to its rules.\68\ Block trades are 
large-sized transactions that would cause a significant price impact if 
required to be executed on the DCM's centralized market. In contrast, 
the Commission understands, through discussions with market 
participants, that in the swaps markets, asset managers that execute 
OTC swaps and then later distribute or allocate the swap to various 
clients or funds may refer to such bunched transactions as block 
trades. To clarify the Commission's view of block trades on swaps, the 
proposed rules include definitions for both ``block trade'' and ``large 
notional swap''.\69\
---------------------------------------------------------------------------

    \68\ See, e.g., CME Rulebook, Rule 526 (``Block Trades''). 
Available at: http://www.cmegroup.com/rulebook/CME/index.html; ICE 
Futures U.S. Rulebook, Rule 4.31 (``Block Trading''). Available at: 
https://www.theice.com/Rulebook.shtml?futuresUSRulebook=.
    \69\ The legislative history to the Dodd-Frank Act provides the 
following statement by Senate Agriculture Committee Chairwoman 
Blanche Lincoln regarding block trades and large notional swaps: ``I 
would like to specifically note the treatment of `block trades' or 
`large notional' swap transactions. Block trades, which are 
transactions involving a very large number of shares or dollar 
amount of a particular security or commodity and which transactions 
could move the market price for the security or contract, are very 
common in the securities and futures markets. Block trades, which 
are normally arranged privately, off exchange, are subject to 
certain minimum size requirements and time delayed reporting * * 
*.'' 156 Cong. Rec. S5921 (daily ed. July 15, 2010) (statement of 
Sen. Blanche Lincoln).
---------------------------------------------------------------------------

i. Parties to a Block Trade or Large Notional Swap
    Proposed Sec.  43.5(b)(1) provides that any party to a block trade 
or large notional swap is required to be an eligible contract 
participant (``ECP'') as that term is defined in Section 1(a)(18) of 
the CEA. The ECP requirement relies on Section 2(e) of the CEA, which 
provides that ``[i]t shall be unlawful for any person, other than an 
eligible contract participant, to enter into a swap unless the swap is 
entered into on, or subject to the rules of, a board of trade 
designated as a contract market under section 5.'' The parties to any 
block trade, pursuant to a swap market's rules, and any large notional 
swap executed off-facility, must be ECPs. However, the proposed rule 
makes clear that a registered DCM may allow commodity trading advisors 
acting in an asset managerial capacity and investment advisors that 
have over $25 million in assets under management, including foreign 
persons performing equivalent roles, to carry out block trades on a 
registered DCM for non-ECP customers. Any such person may not conduct a 
trade on behalf of a customer unless the person receives instruction or 
prior consent to do so.
    Proposed Sec.  43.5(b)(2) requires that parties to a swap that is 
equal to or greater than the minimum block trade size must elect to be 
treated as a block trade and that the swap market must provide the 
real-time disseminator with such election. The block trade election 
allows parties to a swap to calculate the impact of executing the 
transaction bilaterally and delaying public dissemination versus 
executing the transaction on a swap market's trading system or platform 
where there would be no delay in the dissemination of the swap's 
transaction and pricing data. Proposed Sec.  45.5(b)(2) also requires 
that the parties to a swap that qualifies as a large notional swap must 
elect to be treated as a large notional swap and the reporting party 
must provide the real-time disseminator with such election.\70\
---------------------------------------------------------------------------

    \70\ By way of comparison, a party to a futures contract may 
elect not to treat the transaction as a block trade. By not electing 
to treat the transaction as a block trade, the party is choosing to 
place its order on the DCM's centralized market. The party who makes 
such an election may believe that it will receive a better price in 
settling its trade immediately, on the DCM's centralized market, 
rather than bilaterally negotiating the transaction and delaying the 
reporting of the trade.
---------------------------------------------------------------------------

ii. Block Trades on Swaps
    Proposed Sec.  43.2(f) and (l) define ``block trade'' and ``large 
notional swap''

[[Page 76160]]

as separate concepts to distinguish the difference between large 
notional or principal sized trades executed pursuant to a swap market's 
rules (block trades) and off-facility swaps that are not subject to a 
swap market's rules but have very large notional or principal sizes 
(large notional swaps). Proposed Sec.  43.2(f) defines a block trade as 
a swap transaction that: (1) Involves a swap that is made available for 
trading or execution on a swap market; (2) occurs off the swap market's 
trading system or platform pursuant to the swap market's rules and 
procedures; (3) is consistent with the minimum block trade size 
requirements set forth in proposed Sec.  43.5; and (4) is reported in 
accordance with the swap market's rules and procedures and subject to 
the appropriate time delay set forth in proposed Sec.  43.5.\71\
---------------------------------------------------------------------------

    \71\ Both block trades and large notional swaps would only apply 
to new events (i.e., not price affecting continuation events).
---------------------------------------------------------------------------

    Proposed Sec.  43.5(c)(2) provides that a reporting party for any 
block trade must report the block trade transaction and pricing data 
pursuant to the rules of the swap market that makes that swap available 
for trading. Such reporting must occur as soon as technologically 
practicable after execution of the block trade and pursuant to the 
rules of the swap market.
    Proposed Sec.  43.5(c)(3) would require the swap market that 
accepts the block trade to immediately send the block trade transaction 
and pricing data to a real-time disseminator, which shall not publicly 
disseminate the swap transaction and pricing data before the expiration 
of the appropriate time delay described in proposed Sec.  43.5(k) 
discussed below.
    The Commission requests comment generally on all aspects of the 
proposed rules regarding block trades. In addition, the Commission 
requests specific comment on the following issues:
    <bullet> Do commenters agree with the proposed definition of 
``block trade''? If not, why?
    <bullet> Do commenters believe that the Commission should set a 
maximum time frame in which a reporting party must report a block trade 
to a swap market, or should such time period be defined pursuant to the 
rules of the respective swap markets?
iii. Large Notional Swaps
    Proposed Sec.  43.2(l) defines a large notional swap as a swap that 
(1) is not available for trading or execution on a swap market; (2) is 
consistent with the appropriate size requirements for large notional 
swaps set forth in proposed Sec.  43.5; and (3) is reported in 
accordance with the appropriate time delay requirements set forth in 
proposed Sec.  43.5. Similar to the proposed reporting requirements for 
block trades, the reporting party to a large notional swap must report 
to a real-time disseminator as soon as technologically practicable. 
Such large notional swaps may include: (1) Swaps that would have been 
subject to mandatory clearing, and for which an end-user relies on the 
exception from the mandatory clearing requirement in Section 2(h)(7) of 
the CEA; \72\ or (2) other off-facility swaps that are not subject to 
mandatory clearing but have large notional amounts (which would include 
non-standardized swaps). The proposed rules provide that if a swap is 
sufficiently large in notional or principal amount, such swap could be 
considered a large notional swap and therefore may be eligible for the 
same time delay in real-time public reporting as block trades.
---------------------------------------------------------------------------

    \72\ As described below, swaps that rely on the exception in 
Section 2(h)(7) of the CEA, although large notional swaps, are 
subject to the same time delay as block trades.
---------------------------------------------------------------------------

    Proposed Sec.  43.5(d) requires the registered SDR that has 
received the swap transaction and pricing data for a large notional 
swap not to publicly disseminate such data before the expiration of the 
appropriate time delay described in proposed Sec.  43.5(k).
    Proposed Sec.  43.5(e) provides that an off-facility swap where 
neither counterparty is a swap dealer or an MSP (e.g., a swap between 
two end-users) may be eligible to be a large notional swap. Although 
the parties to these swaps will not be registrants with the Commission, 
this provision specifies that such swaps (i.e., end-user to end-user 
transactions) will be treated the same as swaps in which a swap dealer 
or MSP is a party.
    The Commission requests comment generally on all aspects of the 
proposed rules regarding large notional swaps. In addition, the 
Commission requests specific comment on the following issues:
    <bullet> Do commenters agree with the proposed definition of 
``large notional swap''? If not, why?
    <bullet> Do commenters agree that off-facility swaps in which 
neither party is a swap dealer or an MSP be eligible to be treated as 
large notional swaps? If not, why?
iv. Time-Stamp and Reporting Requirements for Block Trades and Large 
Notional Swaps
    In addition to the execution time-stamp requirement under proposed 
Sec.  43.4 and appendix A to proposed part 43, proposed Sec.  43.5(f) 
would require a swap market and registered SDR that accepts and 
publicly disseminates swap transaction and pricing data in real-time to 
have additional time-stamp requirements with respect to block trades 
and large notional swaps. Proposed Sec.  43.5(f)(1) would require swap 
markets to time-stamp swap transaction and pricing data with the date 
and time to the nearest second (1) when such swap market receives the 
data from a reporting party and (2) when a swap market transmits such 
data to a real-time disseminator. Proposed Sec.  45.5(f)(2) would 
require registered SDRs that accept and publicly disseminate swap 
transaction and pricing data in real-time to time-stamp such data with 
the date and time to the nearest second when (1) such registered SDR 
receives such swap transaction and pricing data from a swap market or 
reporting party and (2) when such data is publicly disseminated.\73\ 
Proposed Sec.  43.5(f)(3) would require that records of these 
additional time-stamps be maintained for a period of at least five 
years from the execution of the block trade or large notional swap. The 
Commission believes that requiring a swap market and a registered SDR 
to time-stamp these actions for block trades and/or large notional 
swaps is essential in providing an audit trail for block trade and 
large notional swap transactions from execution through public 
dissemination. Additionally, such time-stamps would provide the 
Commission ability to monitor whether reporting parties, swap markets 
and registered SDRs are reporting the block trades and large notional 
swaps in the manner described in proposed part 43.
---------------------------------------------------------------------------

    \73\ Proposed Sec.  43.5(f) would require five distinct time-
stamps for block trades and three distinct time-stamps for large 
notional swaps. Block trades would receive a time-stamp by: (1) The 
parties at execution; (2) the swap market upon receipt of the data; 
(3) the swap market when it sends the data to a real-time 
disseminator; (4) the real-time disseminator upon receipt of the 
data; and (5) the real-time disseminator upon public dissemination 
of the data. A large notional swap would receive a time-stamp: (1) 
The parties at execution; (2) the real-time disseminator (a 
registered SDR, if available) upon receipt of the data; and (3) the 
real-time disseminator (a registered SDR, if available) upon public 
dissemination of the data.
---------------------------------------------------------------------------

v. Responsibilities of Registered SDRs in Determining the Appropriate 
Minimum Block Size
    Proposed Sec.  43.5(g) would require registered SDRs to calculate 
the appropriate minimum block size \74\ for

[[Page 76161]]

swaps for which such registered SDR receives data in accordance with 
Section 2(a)(13)(G) of the CEA. Such appropriate minimum block size for 
a swap instrument \75\ shall be the greater of the resulting number 
derived from the ``distribution test'' and the ``multiple test'' (each 
described below).\76\ If there is only one registered SDR for a 
particular asset class, the registered SDR would have to calculate the 
appropriate minimum block size. Since registered SDRs will be receiving 
data from all swaps within an asset class, they should have a more 
complete set of swap data and therefore the calculations will be based 
off of a more complete set of swap data. In the event that there are 
multiple registered SDRs for an asset class, and therefore, multiple 
registered SDRs would accept swaps for a particular category of swap 
instrument, the Commission will prescribe how the appropriate minimum 
block size should be calculated, in a way that accounts for all the 
relevant data.\77\
---------------------------------------------------------------------------

    \74\ Proposed Sec.  43.2(c) defines ``appropriate minimum block 
size'' to mean the minimum notional or principal size of a swap 
instrument that qualifies swaps within such category of swap 
instrument as a block trade.
    \75\ As discussed below, proposed Sec.  43.2(y) defines ``swap 
instrument'' to mean a grouping of swaps in the same asset class 
with the same or similar characteristics. Swaps in a category of 
swap instruments may be traded on SEFs, DCMs or off-facility. The 
Commission is requesting general and specific comment about the 
determination of swap instrument, as explained in the discussion of 
appendix A to part 43 above.
    \76\ The Commission has the authority to require registered SDRs 
to provide the appropriate block trade minimum size to the public 
under Sections 21(c)(4)(B) and 21(c)(5) of the CEA. Section 
21(c)(4)(B) of the CEA states that an SDR shall provide data ``in 
such form and at such frequency as the Commission may require to 
comply with the public reporting requirements contained in section 
2(a)(13).'' Section 21(c)(5) of the CEA states that an SDR shall 
``at the direction of the Commission, establish automated systems 
for monitoring, screening, and analyzing swap data, including 
compliance and frequency of end-user clearing exemption claims by 
individual and affiliate entities.''
    \77\ The Commission is considering alternative methods on how to 
determine the appropriate minimum block size when there is more than 
one registered SDR that accepts data for a particular asset class, 
including requiring a registered SDR to follow the requirements in 
Sec.  40.6(a) of the CEA to self-certify the appropriate minimum 
block size and having the Commission make a determination of the 
appropriate minimum block size for a swap instrument.
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    The Commission requests comment on the appropriate methods to 
calculate the appropriate minimum block size when more than one 
registered SDR accepts swap data for a particular asset class or swap 
instrument. In addition, the Commission requests specific comment on 
the following issues:
    <bullet> Who should determine the appropriate minimum block size 
when there is more than one registered SDR that accepts swap data for a 
particular asset class or instrument?
    <bullet> Should the Commission require registered SDRs to self-
certify determinations of the appropriate minimum block size for swap 
instruments?
vi. Formula To Calculate the Appropriate Minimum Block Size
    Section 2(a)(13)(E)(ii) of the CEA directs the Commission to 
determine the appropriate minimum size for large notional swaps and 
block trades.\78\ Proposed Sec.  43.5(g)(1) describes the procedure and 
calculations that a registered SDR must follow in determining the 
appropriate minimum block size. In determining the appropriate 
calculations, the Commission considered: (1) Currently existing size 
standards for block trades in other markets; (2) the potential impact 
of block trades on liquidity; and (3) the frequency of block trades in 
other markets, including equities, bonds and futures markets. The 
Commission also considered the standards used by TRACE in setting its 
minimum threshold for block trades.\79\ In that regard, for trades with 
a par value exceeding $5 million for investment-grade bonds or $1 
million for non-investment grade bonds (e.g., high-yield and unrated 
debt), TRACE publicly disseminates the quantity as ``5MM+'' and 
``1MM+'', respectively.\80\ In developing the appropriate minimum block 
size formula, the Commission considered the many differences within the 
swaps markets, including differences in liquidity between particular 
markets and contracts and differences in product types between asset 
classes and within the same asset class.
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    \78\ The legislative history to the Dodd-Frank Act provides the 
following statement by Senate Agriculture Committee Chairwoman 
Blanche Lincoln regarding the calculation of the minimum size for 
block trades and large notional swaps: ``The committee expects that 
regulators to distinguish between different types of swaps based on 
the commodity involved, size of the market, term of the contract and 
liquidity in that contract and related contracts, i.e.; for instance 
the size/dollar amount of what constitutes a block trade in 10-year 
interest rate swap, 2-year dollar/euro swap, 5-year CDS, 3-year gold 
swap, or a 1-year unleaded gasoline swap. While we expect the 
regulators to distinguish between particular contracts and markets, 
the guiding principal in setting appropriate block trade levels 
should be that the vast majority of swap transactions should be 
exposed to the public through exchange trading.'' 156 Cong. Rec. 
S5,921-22 (daily ed. July 15, 2010) (statement of Sen. Blanche 
Lincoln).
    \79\ TRACE does not use the term ``block trades.'' Rather, the 
TRACE system uses the term ``disseminated volume caps.'' In 
discussions between TRACE representatives and staff, TRACE informed 
staff that disseminated volume caps are, for all intents and 
purposes, substantially similar to the minimum size requirements for 
block trades.
    \80\ See TRACE, Trade Reporting and Compliance Engine, User 
Guide, Version 2.4--March 31, 2010, p. 50, http://www.finra.org/web/groups/industry/@ip/@comp/@mt/documents/appsupportdocs/p116039.pdf.
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    Proposed Sec.  43.5(g)(1) would also require a registered SDR to 
set the appropriate minimum block size at the greater resulting number 
of each of the ``distribution test'' and ``multiple test.''
vii. Distribution Test
    Proposed Sec.  43.5(g)(1)(i) describes the distribution test as 
applying the ``minimum threshold'' to the ``distribution of the 
notional or principal transaction amounts.'' The proposed distribution 
test would require a registered SDR to create a distribution curve to 
see where the most and least liquidity exists based on the notional or 
principal transaction amounts for all swaps within a category of swap 
instrument.\81\ The application of the distribution test requires a 
registered SDR to determine first the distribution of the rounded 
notional or principal transaction amounts of swaps (rounded pursuant to 
the proposed rules in Sec.  43.4(i)) within a category of swap 
instrument and then calculate a notional or principal size for such 
swap instrument that is greater than the minimum threshold.
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    \81\ For the purposes of determining the appropriate minimum 
block size, swaps may be grouped by asset class into a category of 
swap instruments. As discussed above, proposed Sec.  43.2(y) defines 
swap instrument as a grouping of swaps in the same asset class with 
the same or similar characteristics. A registered SDR would 
determine a swap instrument based on different criteria per asset 
class. The Commission is requesting comment on the appropriate 
criteria to determine the categories of swap instruments for a 
particular asset class.
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    Proposed Sec.  43.5(g)(1)(i)(A) would require a registered SDR to 
pool and perform an empirical distributional analysis on the 
transactional data for the swaps included in each category of swap 
instrument by pooling the data from such swaps for which it has data 
that are executed on a swap market and that are executed off-facility. 
Proposed Sec.  43.5(g)(1)(i)(A) also provides that a registered SDR may 
consider other economic information in determining the appropriate 
minimum block size, in consultation with the Commission.\82\ The 
registered SDR should: (1) identify all of the rounded notional or 
principal amounts traded; (2) group the transactions of a particular 
swap instrument based on the rounded notional or principal amounts; 
\83\ and (3)

[[Page 76162]]

calculate the empirical distribution of all trades for the swap 
instrument.
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    \82\ The Commission anticipates that as swap markets develop, 
certain adjustments for seasonality, etc., may become relevant 
depending on the particular type of swap contract.
    \83\ Rounding would occur pursuant to the rounding rules for the 
real-time public reporting of notional or principal amounts which 
are illustrated in proposed Sec.  43.4(i).
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    Once the distribution of notional or principal transaction amounts 
is completed for a swap instrument, a registered SDR must then apply 
the minimum threshold to such distribution. Proposed Sec.  
43.5(g)(1)(i)(B) describes the ``minimum threshold'' as a notional or 
principal amount that is greater than 95% of transaction sizes in a 
category of swap instrument during the period of time represented by 
the distribution of the notional or principal transaction amounts. 
Setting the threshold level at 95% ensures that the resulting number 
from the distribution test will be large relative to the notional value 
of other swaps of the same type.
    In determining the appropriate percentage at which to set the 
``minimum threshold,'' the Commission considered the impact of block 
trades in selected futures markets.\84\ In the studies conducted by the 
Commission, the Commission found that block trades made up a small 
percentage of the overall markets, accounting for less than 0.075% of 
total trades in the three observed markets (i.e., ED, CL and RB futures 
contracts). Recognizing that the market for swaps is not as liquid as 
that of futures, and recognizing market participants' needs to lay-off 
risk associated with block trades, the Commission is proposing a 
minimum threshold of greater than 95%.
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    \84\ The Commission examined trading data for the Eurodollar 
(``ED''), crude oil (``CL'') and reformulated gasoline blendstock 
for oxygenate blending (``RB'') futures contracts, among other 
contracts. In the ED, CL and RB studies, the relevant time period 
was February 2009 to September 2010 (``relevant time period''). The 
Commission evaluated the frequency of use and impact of block trades 
in these three futures markets, which represent both liquid (e.g., 
ED) and less liquid (e.g., RB) markets. In the ED futures market, 
the Commission looked at a total of 56,643,563 trades of which 502 
trades were block trades under CME's rules, representing 0.00089% of 
all trades in the ED futures market during the relevant time period. 
The average size of an ED futures block trade during the relevant 
time period consisted of 2,835 contracts, and the largest ED futures 
block trade consisted of 21,800 contracts. In the RB futures market, 
the Commission looked at 10,230,939 trades of which 7,551 trades met 
the minimum qualifications of a block trade, representing 0.0739% of 
all trades in the RB futures market during the relevant time period. 
The average size of a RB futures block trade was 106.47 contracts 
and the largest RB futures block trade was 1,050 contracts. Lastly, 
in the CL futures market, the Commission looked at 53,796,956 trades 
of which 9,346 trades were block trades, representing 0.0173% of all 
trades during the relevant time period. The average size of a block 
trade in CL futures was 294.2 contracts and the largest individual 
trade was 5,200 contracts.
    At the time of the study, the block trade minimum was 4,000 ED 
futures contracts (or 1,000 ED futures contracts, provided that a 
minimum of 1,000 contracts are transacted in years 6-10), the block 
trade minimum size for RB futures was 100 contracts and the block 
trade minimum size for RB futures was 100 contracts. See CME & CBOT 
Market Regulation Advisory Notice RA1006-3, October 19, 2010. 
Available at: http://www.cmegroup.com/rulebook/files/CME_CBOT_RA1006-3.pdf. See also, CME Rule 526 (``Block Trades''). Available 
at: http://www.cmegroup.com/rulebook/CME/I/5/26.html.
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    viii. Multiple Test
    Proposed Sec.  43.5(g)(1)(ii) provides that to apply the multiple 
test to a swap instrument, a registered SDR shall multiply the ``block 
multiple'' by the ``social size''.\85\ The multiple test is necessary 
since the market for a swap instrument may be illiquid and there may be 
very few transactions over a particular period to provide a meaningful 
distribution of transaction amounts.
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    \85\ Proposed Sec.  43.2(x) defines the ``social size'' as the 
greatest of the mode, median and mean transaction sizes of a 
particular type of swap.
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    Proposed Sec.  43.5(g)(1)(ii)(A) provides that the social size 
shall be determined by: (1) Calculating the mode, median and mean 
transaction sizes for all swaps within a category swap instrument; and 
(2) choosing the greatest of the mode, median and mean transaction 
sizes.\86\ Commission staff's research and external meetings with 
market participants indicated that a swap's ``social size'' is an 
important criterion in quantifying an appropriate minimum block 
size.\87\ The social size, or customary transaction size, for a swap 
varies by asset class, tenor and delivery points.
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    \86\ The Commission also considered using one of the mode, 
median, or mean of a swap instrument category as the sole 
measurement of social size without first comparing the three to 
determine which is largest. However, the Commission determined such 
a methodology would render an incomplete understanding of a 
particular swap category. By itself, the mean would not represent 
the social size of a particular type of swap because, as the sum of 
the values divided by the total number of transactions, it would 
fail to accurately account for the influence of outliers at the 
extreme large end of the data set. The median, although it would 
take into account swap transaction outliers, would fail to 
accurately reflect which trade size is transacted most often. 
Finally, the mode, which would represent the trade size that occurs 
most frequently in a particular type of swap, would fail to take 
into account a market where trade sizes were thinly spread and where 
there were large gaps in data points or in swap markets without a 
normal distribution.
    \87\ See, e.g., Comments from Robert Cook, Director of the 
Division of Trading and Markets, SEC, Yunho Song, Managing Director/
Senior Trader, Bank of America Merrill Lynch and Conrad Volstad, 
Chief Executive Officer, ELX Futures, L.P.:
    Mr. Cook: Let me ask in terms of methodology, it's been argued 
by some to us that there are certain markets where there's a social 
size of trade or fairly standardized level of trading that could be 
used as a part of a building block or measuring--measurement of a 
block trade and others where there aren't. I would just ask if, in 
your experience, there are generalizations that can be drawn and, if 
so, what product categories do you think would lend themselves most 
to that type of approach to the issue?
    Mr. Song: Well, I'll have a go at this. It's relatively the 
easiest for the most liquid products say like interest rate swaps 
because you can get data from banks and brokers as to--like data 
mining. How many trades have you done? What is the maturity profile? 
What is the median ticket size? What ticket size will put you in the 
top tenth percentile? Those, I think, you would have the relatively 
the least amount of hurdles to derive those number scientifically. 
Where it gets difficult is with the products that might trade, like, 
once a month, because then you've got the issue with these lumpy 
trades, right. It could be very illiquid. Well, you may not trade 
for a few months. You do this gigantic trade and then you do very 
little trades again and then another gigantic trade. But for--again 
for the bulk of the OTC derivative market, for interest rate swaps 
and plain vanilla options, I believe that that data is relatively 
readily available.
    Mr. Voldstad: I would think the same is true for (inaudible) 
credit default swaps as it is for various indices. Roundtable Tr. at 
376-377.
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    Once the social size is determined, the registered SDR must then 
apply the block multiplier. Proposed Sec.  43.5(g)(1)(ii)(B) provides 
that the block multiple shall be set at five, so therefore the 
registered SDR should multiply the social size by five. The resulting 
product will be the number that the registered SDR compares to the 
resulting number from the distribution test, the greater of which will 
be the appropriate minimum block size for such swap instrument. In 
determining the block multiplier, the Commission selected a number that 
it believed would help to ensure that the block trade size was 
sufficiently large relative to the trading in a particular market and 
would take into account those markets that have very little trading.
    The Commission believes this proposed two-part test is necessary to 
ensure that qualifying block trades are, in fact, large trades relative 
to the notional or principal amounts for a swap instrument.\88\ For 
example, suppose there is a swap instrument that has 500 trades over a 
one month period and all of the specific swap instruments had notional 
values between $50 and $60 million. Using the distribution test, the 
appropriate minimum block size would be somewhere close to $60 million. 
Using the multiple test, the appropriate minimum block size would be 
$275 million.\89\ The $60 million

[[Page 76163]]

notional size determined by the distribution test would not move the 
market (since the market can clearly handle that size) and would 
therefore not be a large notional amount relative to the other notional 
amounts that traded over the one month period. Therefore, in this 
example, the distribution test alone would not provide a good measure 
for the appropriate minimum block size. The proposed rules would 
require the registered SDR to compare the resulting number from the 
distribution test to resulting number from the multiple test. The 
greater of the two numbers would be the appropriate minimum block size 
for a swap instrument, which the registered SDR would post on its 
Internet Web site. In the example above, the result of the multiple 
test ($275 million) is greater than the distribution test and therefore 
would be the appropriate minimum block size that is posted by the 
registered SDR for the swap instrument.
---------------------------------------------------------------------------

    \88\ The legislative history to the Dodd-Frank Act provides the 
following statement by Senate Agriculture Committee Chairwoman 
Blanche Lincoln regarding the calculation of the minimum size for 
block trades and large notional swaps: ``Block trades, which are 
transactions involving a very large number of shares or dollar 
amount of a particular security or commodity and which transactions 
could move the market price for the security or contract, are very 
common in the securities and futures markets. '' 156 Cong. Rec. 
S5,921 (daily ed. July 15, 2010) (statement of Sen. Blanche 
Lincoln).
    \89\ Assuming that the median ($55 million) is the largest of 
the mode, median and mean, the median would be multiplied by the 
block multiplier (five (5)) to equal $275 million.
---------------------------------------------------------------------------

    With respect to newly-listed swaps, a registered SDR would be 
required to evaluate the distribution of notional or principal 
transaction amounts and calculate the mode, median and mean, over the 
one month period following the registered SDR's acceptance of the swap 
data pursuant to Section 2(a)(13)(G) of the CEA. Proposed Sec.  
43.5(g)(2) provides that after such one month period, the registered 
SDR would assign the newly-listed swap to the appropriate category of 
swap instrument or determine that a new category of swap instrument was 
necessary and would set an appropriate minimum block size. Proposed 
Sec.  43.5(g)(2) also provides that registered SDRs should make an 
initial determination of the appropriate minimum block size \90\ for a 
newly-listed swap one month after such newly-listed swap is first 
executed and reported to the registered SDR pursuant to Section 
2(a)(13)(G) of the CEA. The Commission believes that one month of 
trading data provides a registered SDR with sufficient data to 
determine an appropriate minimum block size for a swap instrument.
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    \90\ As discussed, such initial determination may be done by 
either grouping such newly-listed swap into an existing swap 
instrument category or by creating a new category of swap instrument 
and determining the appropriate minimum block size based on the 
criteria set forth in proposed Sec.  43.5.
---------------------------------------------------------------------------

    Proposed Sec.  43.5(g)(3) provides that registered SDRs must 
publish the list of the appropriate minimum block sizes in swap 
instruments on its Internet Web site, for which the registered SDR has 
received data pursuant to Section 2(a)(13)(G) of the CEA. Such 
appropriate minimum block size information must be available to the 
public in an open and non-discriminatory manner.
    Proposed Sec.  43.5(g)(4) would require that a registered SDR 
evaluate the distribution of notional or principal transaction amounts 
and calculate the mode, median and mean, on a yearly basis, initially 
beginning in accordance with the implementation timeframe for which the 
Commission is requesting public comment. The Commission recognizes that 
the appropriate minimum block size for a swap instrument may change due 
to market conditions. Such annual adjustments are in addition to the 
requirement to provide an appropriate minimum block size for newly-
listed swaps one month after the registered SDR first receives data for 
such swap. Publishing the information on the same date each year (10th 
business day) will allow swap markets, market participants and the 
public certainty as to when they should check the appropriate minimum 
block sizes and, in the case of swap markets, adjust the minimum block 
trade sizes. In making its calculations, the registered SDR should look 
back to the data over the previous year for a category of swap 
instrument. If a particular swap instrument does not have a an entire 
year's worth of data, the proposed rules provide that the registered 
SDR should use the data that it has to make its determination of the 
appropriate minimum block size for a particular swap instrument. 
Proposed Sec.  43.5(g)(4) also provides that registered SDRs shall 
begin to publish appropriate minimum block sizes for swap instruments 
in January 2012. The Commission believes that such timeframe allows the 
registered SDRs enough time to receive data to determine appropriate 
minimum block sizes for swap instruments.
    The Commission considered the burden on registered SDRs and the 
benefit to market participants, swap markets and the public in 
proposing an annual update of the appropriate minimum block size. 
Allowing for a longer period between reviews would, presumably, bring 
more certainty to traders who engage in long-term investment 
strategies. However, such longer periods would fail to take into 
account the dynamic nature of swaps markets, as significant changes in 
swaps markets may occur in a relatively short amount of time. 
Therefore, previously established appropriate minimum block sizes may 
fail to accurately reflect the market. Conversely, shorter timeframes 
(e.g., weekly, monthly, quarterly, etc.) were considered by the 
Commission, but such updates may be burdensome on registered SDRs and 
may create instability for market participants who engage in long-term 
investment strategies. The Commission believes that an annual review of 
the appropriate minimum block sizes is appropriate to balance these 
competing interests.\91\
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    \91\ Registered SDRs will have the relevant swap data readily 
available since it will be sent to them pursuant to Section 
2(a)(13)(G) of the CEA, and the Commission does not anticipate that 
the annual review calculations required by this proposed rule will 
be burdensome on a registered SDR. Additionally, market participants 
and the public will receive the benefit of having up-to-date, 
appropriate minimum block sizes that accurately reflect the current 
market for a swap instrument.
---------------------------------------------------------------------------

ix. Responsibilities of Swap Markets in Determining Minimum Block Trade 
Sizes
    Proposed Sec.  43.5(h) provides that after an ``appropriate minimum 
block size'' is established by either a registered SDR or by a 
Commission prescribed method, a swap market shall set the ``minimum 
block trade size'' \92\ for those swaps that it lists and wishes to 
allow block trading, by referring to the appropriate minimum block size 
that is posted on a registered SDR's Internet Web site for the swap 
instrument category for such swap. A swap market must set the minimum 
block trade size for a swap at an amount that is equal to or greater 
than the appropriate minimum block size listed by the appropriate 
registered SDR. A swap market would be responsible for ensuring that 
the minimum block trade sizes for swaps that it lists are consistent 
with the annual updates to the appropriate minimum block size for swap 
instruments. Additionally, a swap market would have to immediately 
apply any change to the minimum block size of a particular swap, 
following the posting of an appropriate minimum block size by a 
registered SDR. The swap market should follow the requirements set 
forth in Sec.  40.6(a) of the Commission's regulations.\93\
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    \92\ Proposed Sec.  43.2(m) defines ``minimum block trade size'' 
as the minimum notional or principal amount, as determined by each 
swap market, for a block trade in a particular type of swap that is 
listed or executed on such swap market.
    \93\ The Commission recently proposed amendments to Sec.  
40.6(a) of the CEA. See 75 FR 67282 (November 2, 2010).
---------------------------------------------------------------------------

    Proposed Sec.  43.5(h) provides that if a swap market wishes to set 
a minimum block trade size for a swap that does not have an appropriate 
minimum block size listed by a registered SDR, the swap market must 
follow the rules in proposed Sec.  43.5(i) which discusses the 
procedure for setting the minimum block trade size for newly-listed 
swaps.
    Proposed Sec.  43.5(i) would require a swap market to set a minimum 
block trade size for newly-listed swap. Proposed Sec.  43.2(n) defines 
a ``newly-

[[Page 76164]]

listed swap'' as a swap that is listed on any swap market where an 
appropriate minimum block size has not been published by a registered 
SDR.\94\ The minimum block trade size for a newly-listed swap that is 
set by a swap market would govern the trading of the newly-listed swaps 
on such swap market until such time as a registered SDR establishes an 
appropriate minimum block size for the newly-listed swap.
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    \94\ A swap market may, however choose not to allow block 
trading for such swaps and would therefore not be required to make 
such determination.
---------------------------------------------------------------------------

    ProposedSec.  43.5(i)(1) provides that if a newly-listed swap is 
within the parameters of an existing category of swap instrument for 
which a registered SDR has posted an appropriate minimum block size, 
the swap market shall set the minimum block trade size for such newly-
listed swap at a level equal to or greater than such appropriate 
minimum block size. The requirement would enable a swap market to 
reference a currently existing appropriate minimum block size as a 
point of reference during the one-month interim period until the 
registered SDR actually puts the swap in a particular category of swap 
instrument and establishes an appropriate minimum block size. Proposed 
Sec.  43.5(i)(2) provides that in setting the minimum block trade size 
for a newly-listed swap that is not within an existing category of swap 
instrument, the swap market should consider: (i) The anticipated 
distribution of notional or principal transaction amounts; (ii) the 
social size for swaps in other markets that are in substance the same 
as the newly-listed swap; and (iii) the minimum block trade sizes of 
similar swaps in the same asset class.. After taking into account these 
considerations, proposed Sec.  43.5(i)(3) provides that the swap market 
must ensure that the notional or principal amount selected represents a 
reasonable estimate of the greater of (i) a notional or principal 
amount that is greater than all but 95% of the total anticipated 
distribution of notional or principal transaction amounts over the one-
month period immediately following the first execution of the swap; or 
(ii) five times the anticipated social size over the one-month period 
immediately following the first execution of the swap.
    In the event that a registered SDR does not set an appropriate 
minimum block size for a newly-listed swap after one month, as 
described in proposed Sec.  43.5(g)(2), the Commission believes that in 
order to comply with the proposed requirements of Sec.  43.5(i), a swap 
market should continue to revise the minimum block trade size for such 
newly-listed swap as trading increases in order to ensure that the 
estimated minimum block trade size is reasonable relative to increased 
trading activity for such newly-listed swap. Such process should 
continue until an appropriate minimum block size is published for the 
type of swap by a registered SDR.\95\
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    \95\ If the initial minimum block trade size established by a 
swap market is greater than or equal to the appropriate minimum 
block size posted on a registered SDR's Internet Web site, a swap 
market may not have to adjust its minimum block trade size. In such 
a situation, a swap market may reduce its minimum block trade size 
to the appropriate minimum block size.
---------------------------------------------------------------------------

    If the same type of swap begins trading on more than one swap 
market during the one-month period before a registered SDR sets the 
appropriate minimum block size, proposed Sec.  43.5(i) would apply to 
each swap market where such swap is traded. Each such swap market 
should set the minimum block trade size the swap listed on its facility 
until an appropriate minimum block size is published by a registered 
SDR.\96\
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    \96\ For example, if on March 1, a newly-listed swap is executed 
on swap market 1 and a registered SDR is available to accept the 
swap transaction and pricing data for the swap. If on March 15, a 
swap is traded on swap market 2 with the same terms as the swap 
traded on swap market 1. The minimum block trade size established by 
swap market 1 will prevail until the appropriate minimum block size 
is calculated and posted on the registered SDR's Internet Web site 
on April 1, at which time swap market 1 must ensure its minimum 
block trade size is greater than or equal to the appropriate minimum 
block size. The minimum block trade size established by swap market 
2 will only be its prevailing block trade size until April 1st, when 
it must conform to the appropriate minimum block size as calculated 
by the registered SDR.
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x. Responsibilities of the Parties to a Swap in Determining the 
Appropriate Minimum Large Notional Swap Size
    Section 43.5(j)(1) provides the procedure for parties to a swap to 
determine the appropriate minimum large notional swap size.\97\ Because 
the appropriate minimum block size for swap instruments will be 
available on a registered SDR's Internet Web site with respect to swaps 
that have been trading for one month or longer, the proposed rules 
provide that parties who engage in an off-facility swap, and seek to 
qualify their swap as a large notional swap, must refer to the 
appropriate minimum block sizes for swap instruments. Parties to such 
off-facility swap must then identify the category of swap instrument in 
which the swap that they wish to be considered a large notional swap 
would likely fall. The parties to the off-facility swap should refer to 
the appropriate minimum block size that is associated with the selected 
swap instrument, and the notional or principal amount of such swap must 
be equal to or greater than the appropriate minimum block size. If 
there is not an existing category of swap instrument with an 
appropriate minimum block size available to reference, then such swap 
between the parties shall not qualify as a large notional swap and 
would not be afforded any time delay in public reporting. In 
determining the appropriate category of existing swap instrument, the 
parties to a swap should consider and must document: (1) The 
similarities of the terms of the swap between the parties compared to 
the terms of swaps that are grouped within the existing category of 
swap instrument (e.g., similarities of the fields listed in appendix A 
to proposed part 43); and (2) other swaps listed on swap markets that 
were considered in evaluating the swaps that are grouped within the 
existing swap instrument.
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    \97\ As noted, proposed Sec.  45.3(b)(2) requires the reporting 
party of a large notional swap to elect to treat such swap as a 
large notional swap.
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    The Commission considered several factors in determining this 
proposed method for calculating the appropriate minimum size for large 
notional swaps. First, the appropriate minimum block sizes that are 
posted by a registered SDR should be accurate, up to date and 
accessible to market participants. Additionally, to the extent that the 
reporting party to a large notional swap is a swap dealer or MSP, such 
reporting parties would be subject to the Commission's proposed rules 
for internal business conduct standards in proposed part 23 of the 
Commission's regulations. Further, the swap instrument categories 
should be broadly defined to allow parties to a large notional swap to 
easily place their swap into one of the categories of swap instrument. 
The parties to an off-facility swap should therefore be able to 
accurately choose a swap instrument based on the criteria set forth in 
this proposed rule.
    Proposed Sec.  43.5(j)(2) provides that, to the extent that the 
parties to a large notional swap transaction are swap dealers and/or 
MSPs, such parties must maintain records that illustrate the basis for 
the selection of the swap instrument for the large notional swap in 
accordance with proposed part 23 of the Commission's regulations. This 
section also requires that such records be made available to the 
Commission upon request. This proposed recordkeeping requirement should 
ensure that parties to an off-facility swap do not attempt to 
manipulate these proposed rules.
    Proposed Sec.  43.5(j)(3) provides that if the parties to a swap 
are unable to determine, identify or agree on the appropriate swap 
instrument to

[[Page 76165]]

reference for the purposes of treating such swap as a large notional 
swap, such swap cannot qualify as a large notional swap and therefore 
will not be eligible for a time delay thereby requiring that such swap 
transaction and pricing data be publicly disseminated in real-time.
    The Commission requests comment generally on all aspects of 
determining the appropriate minimum size for block trades and large 
notional swaps. In addition, the Commission requests comment on the 
following issues:
    <bullet> Do commenters agree with the approach of having a 
registered SDR calculate and publicize appropriate minimum block size, 
but allowing swap markets to individually set their own minimum block 
sizes for particular contracts at a higher level based on the 
appropriate minimum block size? Why or why not? If not, please provide 
an alternative approach.
    <bullet> Is the distribution test an acceptable method of 
determining an appropriate minimum block size? If so, is 95% the 
appropriate minimum threshold?
    <bullet> Is the multiple test an acceptable method of determining 
an appropriate minimum block size? If so, is five the appropriate block 
multiple?
    <bullet> Do the distribution test and the multiple test, taken 
together, account for a situation where there is a swap instrument with 
an extremely small sample (e.g., less than 40 transactions for a 
category of swap instrument)? If not, what alternative method of 
calculation can be added for swap instruments with a small number of 
transactions?
    <bullet> Do commenters agree with the proposal to use the greater 
of the distribution test or the multiple test)? If not, what 
alternative approach should be used and why?
    <bullet> The Commission recognizes that the two-pronged formula for 
determining the appropriate minimum block size may lead to a relatively 
small appropriate minimum block size and the possibility that a 
significant percentage of the overall notional or principal amount of 
swaps transacted in a particular category of swap instrument could be 
executed pursuant to block trade rules or as large notional swaps, 
which are subject to a delay in real-time public dissemination. 
Therefore, should the Commission adopt an additional standard which 
would limit the aggregate notional or principal amount of block trades 
and large notional swap transactions to a percentage of the overall 
notional or principal volume over the prior year? If not, why not? If 
so, why and what should that percentage be? Should some other test be 
used to address this situation?
    <bullet> Do commenters agree that the appropriate minimum block 
sizes for swap instruments, as determined by a registered SDR, should 
apply to all swap markets and off-facility swaps, regardless of 
differences in liquidity in swap markets or off-facility? \98\
---------------------------------------------------------------------------

    \98\ See Section 2(a)(13)(E)(iv).
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    <bullet> Should there be one block trade formula for all swaps? 
Should there be one block trade formula for all swaps in an asset 
class? Should different swap instruments have different block trade 
formulas? If commenters believe there should be various block trade 
formulas for different markets, for which markets and how should those 
standards be defined?
    <bullet> Do commenters agree with the proposed method for 
determining the minimum block size for large notional swaps? If not, 
why (please provide alternative methods)? Do commenters believe that 
there should be other criteria that should be considered in determining 
if a swap is a large notional swap? If so, what other criteria?
    <bullet> If there is more than one registered SDR per asset class, 
how could the Commission ensure that all registered SDRs implement the 
same appropriate minimum block size formula for the entire market for a 
category of swap instrument? How should the Commission approach this 
issue?
    <bullet> Do commenters believe that the concept of block trades 
should exist for newly-listed swaps? If not, why? Do commenters agree 
with the proposed method for determining the minimum block trade size 
for newly-listed swaps? If not, why?
    <bullet> Do commenters believe that the registered SDRs should 
initially calculate the appropriate minimum block size for a swap one 
month after a swap has been executed on a swap market? If so, why? If 
not, why?
    <bullet> If there is no registered SDR to accept swaps for an asset 
class, do commenters agree with the Commission's proposal that swap 
markets will determine the minimum block sizes in the manner described 
in proposed Sec.  43.5(h) and (i)?
    <bullet> Do commenters believe that having registered SDRs perform 
an annual review of all appropriate minimum block sizes is the 
appropriate frequency? If so, why? If not, why?
    <bullet> How much data would be necessary for the initial 
determination by registered SDRs of appropriate minimum block trade 
sizes? When should such initial determination of appropriate minimum 
block trade sizes begin? Should there be different initial 
determinations times based on asset class? If so, why?
    <bullet> Should registered SDRs consider data for pre-existing 
swaps (i.e., swaps entered into prior to the effective date of the 
Dodd-Frank Act) in making their determinations of the appropriate 
minimum block sizes for swap instruments? If so, why? If not, why?
    <bullet> Should registered SDRs have a requirement to consult with 
swap markets in calculating the appropriate minimum block size of a 
swap instrument? If not, should swap markets have an ability to dispute 
and/or appeal the calculation of the appropriate minimum block size for 
a swap instrument that is determined by a registered SDR?
    <bullet> Should registered SDRs submit to the Commission their 
formulas/calculations for the appropriate minimum block sizes of swap 
instruments in order to ensure market transparency?
xi. Time Delay in the Real-Time Public Reporting of Block Trades and 
Large Notional Swaps
    Section 2(a)(13)(A) of the CEA requires that all parties to swap 
transactions, including parties to block trades and large notional swap 
transactions, to report data relating to swap transactions ``as soon as 
technologically practicable after the time at which the swap 
transaction has been executed.'' \99\ However, the Dodd-Frank Act also 
requires the Commission to promulgate rules ``to specify the 
appropriate time delay for reporting large notional swap transactions 
(block trades) to the public.'' \100\ Additionally, the Dodd-Frank Act 
requires that the Commission, in writing these proposed rules, ``take 
into account whether public disclosure will materially reduce market 
liquidity.'' \101\
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    \99\ Section 2(a)(13)(A) of the CEA; see also, Statement of 
Senate Agriculture Committee Chairwoman Blanche Lincoln's statement: 
``With respect to delays in public reporting of block trades, we 
expect the regulators to keep the reporting delays as short as 
possible.'' 156 Cong. Rec. S5,922 (daily ed. July 15, 2010) 
(statement of Sen. Blanche Lincoln).
    \100\ Section 2(a)(13)(E)(iii) of the CEA.
    \101\ Section 2(a)(13)(E)(iv) of the CEA.
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    The Commission recognizes the potential market impact that the 
reporting of a block trade or large notional swap may have on the 
market. Such potential market impact is critical to the determination 
of an appropriate time delay before public dissemination of block trade 
or large notional swap transaction and pricing data. The ability for 
market participants to trade in large

[[Page 76166]]

notional or principal amounts without market prices moving 
significantly against them is a vital component of any vibrant and 
liquid marketplace.
    In external meetings with market participants, CFTC staff was often 
told that increased pre-trade and post-trade transparency would enable 
front-running and may have an adverse impact on market liquidity. 
Specifically, market participants expressed concern that if they were 
required to publicly disseminate swap transaction and pricing data 
immediately after the execution of a block trade or large notional 
swap, other market participants would be able to profit on this 
information by anticipating the trading activity of the block trade or 
large notional swap participants who are attempting to hedge their swap 
portfolios. As other market participants anticipate the block trade or 
large notional swap parties' hedges, prices may rise adverse to the 
market participant who is attempting to hedge and, as a result, certain 
market participants may be forced to take on increased costs and market 
exposure in offsetting their risk. Although CFTC staff was often told 
of the adverse impact of post-trade transparency on market liquidity, 
staff is not aware of any empirical evidence to support this 
position.\102\
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    \102\ See, e.g., the exchange at the Roundtable between Chester 
Spatt, Pamela R. and Kenneth B. Dunn Professor of Finance, Tepper 
School of Business, Director, Center for Financial Markets Carnegie 
Mellon University and Yunho Song, Managing Director/Senior Trader, 
Bank of America Merrill Lynch:
    MR. SPATT: So just to follow up on that as well, in the three 
years that I was at the SEC, was basically coincided with the three 
years after much of the implementation of TRACE. And while folks 
from industry repeatedly came in and pressed the point that spreads 
were wider, they never presented to us in any format a convincing 
empirical study and nor am I aware of any empirical study in the 
academic community to show those effects. So I do think it's 
incumbent upon critics of post-trade disclosure to point to and 
identify convincing empirical evidence of these effects. And I think 
that's extremely important to the regulators as they go forward, but 
I must say, I'm not aware of that evidence right now.
    MR. SONG: If I may comment on that--I think one of the 
distinctions we have is a market that may be [smaller] in retail 
based versus a market that is with [a] far small number of 
participant[s] and that's institutional based. So, you may not be 
able to, for example, find who was doing a specific trade looking at 
a TRACE report so it has a marginal impact on the marketplace * * *.
    Roundtable Tr. at 332-333.
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    Proposed Sec.  43.5(k)(1) provides the appropriate time delays for 
public dissemination of block trades and large notional swaps. The time 
delay for public dissemination begins at execution of the swap (i.e., 
upon or immediately following or simultaneous with affirmation of the 
parties to the swap). Therefore, in the case of a block trade, the time 
delay would begin prior to the time that that a swap market receives 
the swap transaction and pricing data from a reporting party. The 
registered SDR that publicly disseminates such data would be 
responsible for ensuring that such data is disseminated in accordance 
with proposed Sec.  43.5(k).
    Proposed Sec.  43.5(k)(2) requires that the time delay for block 
trades be no later than 15 minutes after the time of execution. After 
the 15 minute time delay has expired, the registered SDR or the swap 
market (through a third-party service provider) must immediately 
disseminate the swap transaction and pricing data to the public.\103\ 
As discussed above, such delay does not apply to the reporting party's 
requirement to report to a swap market or to a swap party's requirement 
to report to a real-time disseminator. It is the responsibility of the 
registered SDR or the swap market (through a third-party service 
provider) to hold the swap data for a period of 15 minutes after the 
execution of the trade prior to dissemination. The 15 minute time delay 
would apply to all swaps in Sections 2(a)(13)(C)(i) and (iv) of the 
CEA, meaning that even though some swaps may be large notional swaps 
(e.g., those subject to the non-financial end-user exception from 
mandatory clearing) they would be subject to the same time delay as 
block trades executed pursuant to the rules of a swap market. The 
Commission believes that since swaps in Sections 2(a)(13)(i) and (iv) 
of the CEA will be standardized, they should be subject to the same 
time delay as other standardized swaps.
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    \103\ In calculating the 15 minute time delay, the clock begins 
immediately upon execution of the swap transaction. Under proposed 
Sec.  43.5(k), no pause in the running of the clock is permitted 
during the time it takes the reporting party or swap market to 
report the swap data to a real-time disseminator.
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    In determining this proposed time delay for standardized block 
trades and large notional swaps, the Commission considered time delays 
for reporting block trades or large notional transactions in other 
markets. FINRA's TRACE system for corporate and agency debt securities 
requires that ``transactions in TRACE-eligible securities executed on a 
business day at or after 8:00 a.m. Eastern Time through 6:29:59 p.m. 
Eastern Time must be reported within 15 minutes of the time of 
execution.'' \104\ Given the 15 minute reporting delay, TRACE does not 
provide any additional time delay for those trades that are subject to 
disseminated volume caps.\105\ On the other hand, in the equity 
securities markets the New York Stock Exchange (``NYSE'') requires all 
trades to be reported within 30 seconds; no additional time delay is 
provided for block trades.\106\ The London Stock Exchange (``LSE'') 
allows the publication of the trade to be delayed, if requested, for a 
specified period of time which is dependent on the volume of the trade 
compared to the average daily turnover, as published by LSE, for that 
particular security.\107\ In the futures markets, CME Group's rules 
require the seller in a block trade transaction to report to the 
exchange within five minutes of execution if the trade is executed 
during regular trading hours (as compared to the immediate reporting 
exchange executed transactions). After the reporting of the block trade 
data, the exchange ``promptly publishes such information separately 
from the reports of transactions in the regular markets.'' \108\ NYSE 
Liffe U.S., on the other hand, allows a 15 minute delay after the trade 
is executed to publicly report the block trade information.\109\
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    \104\ FINRA Rule 6730 (``Transaction Reporting''). Available at: 
http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=4402.
    \105\ See TRACE, Trade Reporting and Compliance Engine, User 
Guide, Version 2.4--March 31, 2010, p. 50. Available at: http://www.finra.org/web/groups/industry/@ip/@comp/@mt/documents/appsupportdocs/p116039.pdf.
    \106\ The NYSE has a definition of ``block trade'' but such 
designation does not affect how such transactions are reported. See 
NYSE Rule 127.
    \107\ LSE rules require member firms to submit trade reports to 
LSE as ``close to instantaneously as technically possible and that 
the authorized limit of three minutes should only be used in 
exceptional circumstances,''; however, publication of such data may 
be deferred. See, LSE Rules 3020 and 3030, effective August 2, 2010. 
Available at: http://www.londonstockexchange.com/traders-and-brokers/rules-regulations/rules-lse-2010.pdf.
    \108\ See, CME Rule 526(F), (``The seller must ensure that each 
block trade is reported to the Exchange within five minutes of the 
time of execution; except that block trades in interest rate futures 
and options executed outside of Regular Trading Hours (7 a.m.-4 p.m. 
Central Time, Monday-Friday on regular business days) and Housing 
and Weather futures and options must be reported within fifteen 
minutes of the time of execution.''). Available at: http://www.cmegroup.com/rulebook/CME/I/5/26.html.
    \109\ See NYSE Liffe U.S. Rule 423(d), (``Block Trades must be 
reported to the Exchange in a manner prescribed from time to time by 
the Exchange. Block Trades must be reported to the Exchange within 
15 minutes after the completion of negotiations, but may not be 
submitted any later than 15 minutes prior to the Contract's Trading 
Session close time.''). Available at: http://www.nyse.com/pdfs/rulebook.pdf.
---------------------------------------------------------------------------

    Proposed Sec.  43.5(k)(3) provides that large notional swap 
transaction and pricing data must be reported to the public by the 
registered SDR that accepts and publicly disseminates such data subject 
to a time delay as may be

[[Page 76167]]

prescribed by the Commission. The Commission believes that such time 
delay for large notional swaps may vary based on whether a swap's 
underlying asset is a financial or a physical commodity, asset class, 
and/or other factors. This provision covers all swaps under Sections 
2(a)(13)(C)(ii) and (iii) of the CEA, which covers those swaps that are 
not subject to the mandatory clearing requirement. The swaps that fall 
under Sections 2(a)(13)(C)(ii) and (iii) of the CEA generally will be 
more customized and may, in some instances require, in the case of 
large notional swaps, different time delays than the time delays for 
block trades.
    Proposed Sec.  43.5(l) provides that all information in the data 
fields described in appendix A to this part and proposed Sec.  43.4 
shall be disseminated to the public for block trades and large notional 
swaps.
    The Commission requests comment generally on all aspects of the 
proposed time delay in reporting block trade and large notional swap 
transaction and pricing data to the public. In addition, the Commission 
requests specific comment on the following issues:
    <bullet> Do commenters believe that any time delay is appropriate 
for block trades and/or large notional swaps? If not, why? If so, why?
    <bullet> Is a 15 minute time delay for publicly reporting the block 
trade transaction and pricing data described in the proposed rules an 
appropriate amount of time? If not, why? If so, why?
    <bullet> Should the Commission consider different time delays for 
block trades that are significantly larger than the appropriate minimum 
block trade size? If so, why? How much larger than the appropriate 
minimum block trade size should the notional or principal amount be to 
warrant an additional time delay?
    <bullet> Should the Commission consider different time delays for 
block trades and large notional swaps based on asset classes, swap 
instruments or particular contracts? If so, what factors or specific 
examples would warrant such longer time delays?
    <bullet> How should the Commission determine an appropriate time 
delay for large notional swaps? The Commission believes that swaps will 
fall under the Commission's jurisdiction in the equity, credit, 
currency and interest rate asset classes (i.e., financial swaps) can be 
distinguished from those swaps that fall in the other commodity asset 
class (e.g., physical commodities). The Commission's presumption is 
that swaps in the equity, credit, currency and interest rate asset 
classes be subject to the same time delay as block trades (i.e., 15 
minutes). Do commenters agree that 15 minutes is an appropriate delay 
for these trades? If not, why and what would be an appropriate time 
delay? With regard to the time delay for large notional swaps in the 
other commodity asset class, the Commission recognizes a longer time 
delay may be necessary due to the hedging strategies that are 
associated with such swaps. What time delay would be appropriate for 
swaps in the other commodity asset class and why?
    <bullet> What are the factors that should be considered in 
determining how long a time delay for a large notional swap should be? 
Which characteristics of a swap should be taken into consideration in 
determining the time delay for publicly disseminating swap transaction 
and pricing data relating to a large notional swap?
    <bullet> If commenters believe that there would be an adverse price 
impact for traders if all information on block trades were 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 swap transaction and 
pricing details of all swaps in real-time? Would this impact liquidity? 
If so, how?
    <bullet> Would the differences between the Commission's and the 
SEC's proposals for treatment of block trades, particularly regarding 
the time delay for public dissemination of block trade information 
provide for unfair treatment for any market participants? If so, how? 
Could the differences in the proposals regarding the time delay lead to 
any disruption in trading in any swaps markets? If so, how?
xii. Prohibition of Aggregation of Trades
    Proposed Sec.  43.5(m) prohibits the aggregation of orders for 
different trading accounts in order to satisfy the minimum block size 
requirement, except if done on a DCM by a commodity trading advisor 
acting in an asset manager capacity or an investment advisor who has 
$25 million in total assets under management.

III. Related Matters

A. Cost-Benefit Analysis

1. Introduction
    Section 15(a) of the CEA requires the Commission to consider the 
costs and benefits of its actions before issuing a rulemaking under the 
CEA.\110\ By its terms, Section 15(a) of the CEA does not require the 
Commission to quantify the costs and benefits of the rulemaking or to 
determine whether the benefits of the rulemaking outweigh its costs; 
rather, it requires that the Commission ``consider'' the costs and 
benefits of its actions. Section 15(a) of the CEA further specifies 
that the costs and benefits shall be evaluated in light of five broad 
areas of market and public concern: (1) Protection of market 
participants and the public; (2) efficiency, competitiveness and 
financial integrity of markets; (3) price discovery; (4) sound risk 
management practices; and (5) other public interest considerations. The 
Commission may in its discretion give greater weight to any one of the 
five enumerated areas and could in its discretion determine that, 
notwithstanding its costs, a particular rule is necessary or 
appropriate to protect the public interest or to effectuate any of the 
provisions or accomplish any of the purposes of the CEA.
---------------------------------------------------------------------------

    \110\ See 7 U.S.C. 19(a).
---------------------------------------------------------------------------

2. Summary of Proposed Requirements
    The proposal provides rules for the real-time public reporting of 
all swap transaction data, including volume and pricing data. The 
proposed rules mandate that reporting parties (which include swap 
dealers, MSPs and end-users) and swap markets (which include SEFs and 
DCMs), be responsible for the reporting of the swap transaction and 
pricing data in real-time by sending the data to an appropriate real-
time disseminator. For swaps traded on a swap market, the swap market 
must send the data to a registered SDR or third-party service provider 
and such entity will publicly disseminate the swap transaction and 
pricing data in real-time. For off-facility swaps, the reporting party 
(either an MSP, swap dealer, or end-user) must send the data to a 
registered SDR, or if no registered SDR is available, to a third-party 
service provider, who will publicly disseminate the swap transaction 
and pricing data. The proposed rules also specify rules for how swap 
transaction and pricing data for trades deemed as either a block trade 
or large notional swap should be publicly disseminated.
3. Costs
    With respect to costs, the Commission believes that the proposed 
reporting and recordkeeping requirements would impose significant 
compliance costs on registered SDRs, SEFs, DCMs, swap dealers, MSPs, 
end-users and third-party service providers. The proposed rules may 
reduce liquidity in the market by discouraging dealers from holding 
inventory as part of a market participant's risk management practice. 
Disclosing the terms of a trade

[[Page 76168]]

immediately after execution exposes the price paid for a large position 
by a particular dealer to the rest of the market. Market participants 
may attempt to anticipate trading activity that the dealer will engage 
in to rebalance its portfolio, which may induce adverse price movements 
against such dealer. Additionally, real-time public reporting may 
obstruct some trading in illiquid instruments. Swap dealers may be less 
likely to commit capital in less liquid products because the terms of 
the trade are disclosed as soon as the trade is executed and the dealer 
fears his ability to lay off the risk in the market. If a trade is 
considered a block trade or large notional swap, the proposed rules may 
lead to increased costs associated with added liquidity risks, which 
may be passed on to end-users.
4. Benefits
    With respect to benefits, the Commission believes that the proposed 
rules promote transparency in swaps trading which, in turn, creates 
greater efficiency in the swap markets.\111\ Additionally, real-time 
reporting may expand trading opportunities as market participants have 
more data to analyze and research when producing investment strategies. 
The Commission believes that transparency in the form of real-time 
public dissemination of swap transaction and pricing data leads to the 
fairness and efficiency of markets and improves price discovery. The 
facilitation of price discovery decreases risk to market participants 
by promoting responsible and informed risk taking and, to the extent 
that swaps play a central role in the national economy, decreases the 
risk of another financial disaster by enabling market participants to 
measure systematic risk. The Commission believes that the federal 
government will be better positioned to protect the public as a result 
of increased surveillance and monitoring of the swap markets and its 
market participants. The Commission requests public comment on its 
cost-benefit considerations. Specifically, the Commission requests 
comment on whether there are alternative ways we can meet these 
statutory requirements under Section 727 of the Dodd-Frank Act in a 
less costly manner. Commenters are also invited to submit any data or 
other information that they may have quantifying or qualifying the 
costs and benefits of the proposal with their comment letters.
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    \111\ Under Section 727 of the Dodd-Frank Act, Congress has 
mandated that swap transaction and pricing data be real-time 
reported and publicly disseminated. The Commission has requested 
comments on ways we can meet these statutory requirements in a less 
costly manner.
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B. Paperwork Reduction Act

1. Introduction
    The purposes of the Paperwork Reduction Act (``PRA'') are, among 
other things, to minimize the paperwork burden to the private sector, 
ensure that any collection of information by a government agency is put 
to the greatest possible uses, and minimize duplicative information 
collections across government.\112\ The PRA applies with extraordinary 
breadth to all information, ``regardless of form or format,'' a 
government agency is ``obtaining, causing to be obtained [or] 
soliciting'' and includes requiring ``disclosure to third parties or 
the public, of facts or opinion,'' when the information collection 
calls for ``answers to identical questions posed to, or identical 
reporting or recordkeeping requirements imposed on, ten or more 
people.'' \113\ This provision has been determined to include not only 
mandatory but also voluntary information collections, and include both 
written and oral communications.\114\
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    \112\ See 44 U.S.C. 3501.
    \113\ 44 U.S.C. 3502.
    \114\ See 5 CFR 1320.3(c)(1).
---------------------------------------------------------------------------

    To effect the purposes of the PRA, Congress requires all agencies 
to quantify and justify the burden of any information collection it 
imposes.\115\ This includes submitting each collection, whether or not 
it is contained in a rulemaking, to the Office of Management and Budget 
(``OMB'') for review.\116\ The OMB submission process includes 
completing a form 83-I and a supporting statement with the agency's 
burden estimate and justification for the collection. When the 
information collection is established within a rulemaking, the agency's 
burden estimate and justification should be provided in the proposed 
rulemaking, subjecting it to the rulemaking's public comment process.
---------------------------------------------------------------------------

    \115\ See 44 U.S.C. 3506.
    \116\ See 44 U.S.C. 3507.
---------------------------------------------------------------------------

    Provisions of proposed part 43 of the Commission's regulations 
would result in new collection of information requirements within the 
meaning of the PRA. The Commission therefore is submitting this 
proposal to the Office of Management and Budget (``OMB'') for review in 
accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The title for this 
collection of information is ``Regulation 43--Real-Time Public 
Reporting,'' OMB control number 3038-NEW. If adopted, responses to this 
new collection of information would be mandatory.
    The Commission will protect proprietary information according to 
the Freedom of Information Act and 17 CFR part 145, ``Commission 
Records and Information.'' In addition, section 8(a)(1) of the CEA 
strictly prohibits the Commission, unless specifically authorized by 
the CEA, from making public ``data and information that would 
separately disclose the business transactions or market positions of 
any person and trade secrets or names of customers.'' The Commission 
also is required to protect certain information contained in a 
government system of records according to the Privacy Act of 1974, 5 
U.S.C. 552a.
2. Information Provided by Reporting Entities/Persons
    As mentioned above, proposed part 43 of the Commission's 
regulations would result in three new collections of information 
requirements within the meaning of the PRA. First, proposed part 43 
would create a new reporting requirement either on a ``swap market'' 
when a swap is executed on a facility, or on the parties to each swap 
transaction when a swap is not executed on such a facility. Second, 
proposed part 43 would create a public dissemination requirement on a 
``real-time disseminator''. Third, proposed part 43 creates a 
recordkeeping requirement for swap markets, real-time disseminators, 
any reporting party.
i. Reporting Requirement
    Under proposed Sec.  43.3(a), reporting parties \117\ would be 
required to electronically report any reportable swap transactions 
\118\ to a real-time disseminator, except as otherwise provided in such 
section. Proposed Sec.  43.3 places the duty to report on several 
entities or persons depending on: (1) The manner in which the 
transaction is executed; and (2) the parties to the swap transaction.
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    \117\ Proposed Sec.  43.2(w) defines ``reporting party'' to 
include the party to a swap with the duty to report a reportable 
swap transaction.
    \118\ Proposed Sec.  43.2(v) defines ``reportable swap 
transaction'' to mean any executed swap, notation, swap unwind, 
partial novation, partial swap unwind or any other post-execution 
event that affects the pricing of a swap.
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    For those swap transactions that are executed on a swap market 
(i.e., a DCM or SEF), proposed Sec.  43.3 requires the swap market to 
publicly disseminate such swap transaction and pricing data by either 
sending swap transaction information to a registered SDR that accepts 
and publicly disseminates swap transaction and pricing data or by

[[Page 76169]]

sending swap transaction information through a third-party service 
provider for public dissemination. The Commission estimates that DCMs 
and SEFs (an estimated 57 entities or persons) will have approximately 
2,080 burdens hours per swap market.\119\
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    \119\ Because the Commission has not regulated the swap market, 
it has not collected data relevant to this estimate. Therefore, the 
Commission requests comment on this estimate.
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    For those swap transactions that are executed ``off-facility'', 
proposed Sec.  43.3 requires reporting parties (i.e., swap dealers, 
MSPs and swap end-users) to report their swap transaction and pricing 
data to a registered SDR or, if no registered SDR will accept such 
data, to a third-party service provider. With respect to swap dealers 
and MSPs (an estimated 300 entities or persons), proposed Sec.  43.3 
requires only one party to such transaction report to a real-time 
disseminator. The Commission estimates that swap dealers and MSPs will 
have 2,080 annual burden hours associated with the reporting 
requirement under proposed Sec.  43.3. With respect to swap end-users, 
proposed Sec.  43.3 requires swap end-users to report their swap 
transaction and pricing data only for end-user-to-end-user 
transactions. In addition, proposed Sec.  43.3 provides that only one 
swap end-user in an end-user-to-end-user swap transaction will have the 
obligation to report to a real-time disseminator. For that reason, the 
Commission estimates that the total number of swap end-users that would 
be required to report their swap transaction and pricing data is 1,500 
entities or persons.\120\ The Commission estimates that swap end-users 
will have four (4) annual burden hours per reporting party or person, 
for a total of 6,000 aggregate annual burden hours.\121\
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    \120\ The Commission requests comment on the number of swap end-
users that would be required to report their swap transaction and 
pricing data pursuant to proposed Sec.  43.3. The Commission 
estimates that there will be a total of 30,000 swap market 
participants and that 1,500 of those participants will engage in 
end-user-to-end-user swap transactions (5% of 30,000) requiring at 
least one of those participants to report such swap transaction and 
pricing data.
    \121\ Estimated burden hours were obtained in consultation with 
the Commission's experts on information technology. This estimate 
includes the expectation that end users who participate in end-user-
to-end-user swaps will contract with other entities to report the 
swap transaction and pricing data to a registered SDR or third party 
service provider. The Commission requests comment on these 
estimates.
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    Based on the foregoing, the Commission has determined the estimated 
aggregate annual burden hours on swap markets and with respect to off-
facility swap transactions to be 748,560.
ii. Public Dissemination Requirement
    Proposed Sec.  43.3 requires a registered SDR to publish through an 
electronic medium swap transaction and pricing data received from 
reporting parties as soon as technologically practicable, except when 
the registered SDR is required to delay the publication of information 
relating to large notional swaps or block trades. The Commission 
estimates that there will be approximately 15 registered SDRs \122\ 
Proposed Sec.  43.3(h) requires registered SDRs to receive and publicly 
disseminate real-time swap transaction and pricing data at all times, 
24-hours a day. The Commission anticipates that there will be 6,900 
annual burden hours per registered SDR. Based on the foregoing, the 
Commission has determined the estimated aggregate annual burden hours 
to be 103,500 for all registered SDRs.\123\ Therefore, the total 
aggregate annual burden hours associated with this public dissemination 
requirement, including the burden hours associated with third party 
service providers, is estimated to be 207,000.
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    \122\ Because the Commission has not regulated the swap market, 
the Commission was unable to collect data relevant to these 
estimates. For that reason, the Commission requests comment on these 
estimates.
    \123\ The Commission estimates that there will be 15 third-party 
service providers. These third-party service providers are 
anticipated to have the same public dissemination and recordkeeping 
burden hours as those estimated for registered SDRs. Proposed Sec.  
43.3(d) would require a swap market that chooses to publicly 
disseminate swap transaction and pricing data in real-time through a 
third-party service provider to (1) ensure that any such third-party 
service provider that publicly disseminates the swap market's swap 
transaction and pricing data in real-time does so in a manner that 
complies with those standards for registered swap data repositories 
described in this part; and (2) ensure that the Commission has 
access to any such swap transaction and pricing data, through either 
the swap market or via direct access to the third-party service 
provider. Additionally, certain off-facility swaps may be publicly 
disseminated through a third-party service provider in those 
instances where no registered SDR is available to accept and publish 
the swap transaction and pricing data. Therefore, although the 
ultimate responsibility is on the swap market who uses a third-party 
service provider to ensure it complies with standards set forth in 
part 43 for registered SDRs, the third-party service provider will 
be the entity actually performing the public dissemination and, in 
some cases, recordkeeping function for certain swaps. Therefore, as 
was estimated for registered SDRs, the Commission estimates a public 
dissemination burden of 6,900 hours per third-party service 
provider, for an aggregate of 103,500 annual burden hours for all 
third-party service providers. Also, the Commission estimates a 
recordkeeping burden of 250 hours per third-party service provider, 
for an aggregate of 3,750 annual burden hours for all third-party 
service providers.
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iii. Recordkeeping Requirement
    Under proposed Sec.  43.3(i), swap markets (an estimated 57 
entities or persons), registered SDRs (an estimated 15 entities or 
persons) and reporting parties must retain all data relating to a 
reportable swap transaction for a period of not less than five years 
following the time at which such reportable swap transaction is 
publicly disseminated in real-time. With respect to swap markets and 
real-time disseminators, the Commission estimates that proposed 
recordkeeping requirement will be 250 annual burden hours per swap 
market and registered SDR.\124\ As referenced above, the Commission 
anticipates that 1,500 swap end-users will be reporting parties for the 
purposes of this part of the Commission's regulations. Since the 
Commission anticipates that there will be lower levels of activity 
relating to the requirement for swap end-users, the Commission 
estimates that there will be two (2) annual burden hours per swap end-
user. It is important to note that the Commission addresses the 
recordkeeping requirements of swap dealers and MSPs in a separate, but 
related rulemaking relating to the internal business conduct standards 
of these entities as part of the Commission's overall rulemaking 
initiative implementing the Dodd-Frank Act.\125\
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    \124\ See footnote 123 above.
    \125\ 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. The Commission invites 
public comment on the accuracy of its estimate that no additional 
recordkeeping or information collection requirements related to swap 
dealers and MSPs would result from the rules proposed herein.
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    Based on the foregoing, the Commission estimates that the aggregate 
annual burden hours associated with the recordkeeping requirement under 
the proposed Sec.  43.3 will be 39,250.
iv. Determination of Appropriate Minimum Block Size
    Under proposed Sec.  43.5(g), registered SDRs (an estimated 15 
entities or persons) will be required to determine the appropriate 
minimum block size for swaps for which these registered SDRs receive 
data in accordance with Section 2(a)(13)(G) of the CEA. A registered 
SDR shall set and publish annually the appropriate minimum block size 
for each swap instrument as the greater of the numbers derived from two 
formulas: A distribution test and a multiple test as described in the 
proposal. Additionally, under proposed Sec.  43.5(i), the SDR shall set 
the appropriate minimum block size for newly-listed swaps one month 
after the registered SDR receives data in accordance with Section 
2(a)(13)(G). The registered SDR may set the appropriate minimum block 
size for newly-listed swaps by placing them in

[[Page 76170]]

a category of existing swap instrument with an appropriate minimum 
block size or by creating a new category of swap instrument and 
performing the calculations described in Sec.  43.5(g). The Commission 
estimates that proposed requirement will impose 20 annual burden hours 
per registered SDR.
    Based on the foregoing, the Commission estimates that the aggregate 
annual burden hours associated with this requirement under the proposed 
Sec.  43.5(g) and (i) will be 300.
3. Information Collection Comments
    The Commission invites the public and other Federal agencies to 
comment on any aspect of the reporting and recordkeeping burdens 
discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission 
requests comments in order to: (i) Evaluate whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information will 
have practical utility; (ii) evaluate the accuracy of the Commission's 
estimate of the burden of the proposed collection of information; (iii) 
determine whether there are ways to enhance the quality, utility and 
clarity of the information to be collected; and (iv) minimize the 
burden of the collection of information on those who are to respond, 
including through the use of automated collection techniques or other 
forms of information technology.
    Comments may be submitted directly to the Office of Information and 
Regulatory Affairs, by fax at (202) 395-6566 or by e-mail at 
<a href="/cdn-cgi/l/email-protection#327d7b60734147505f5b41415b5d5c41725d5f501c575d421c555d44"><span class="__cf_email__" data-cfemail="b8f7f1eaf9cbcddad5d1cbcbd1d7d6cbf8d7d5da96ddd7c896dfd7ce">[email protected]</span></a>. Please provide the Commission with a copy 
of submitted comments so that all comments can be summarized and 
addressed in the final rule preamble. Refer to the Addresses section of 
this notice of proposed rulemaking for comment submission instructions 
to the Commission. A copy of the supporting statements for the 
collections of information discussed above may be obtained by visiting 
RegInfo.gov. OMB is required to make a decision concerning the 
collection of information between 30 and 60 days after publication of 
this release in the Federal Register. Consequently, a comment to OMB is 
most assured of being fully effective if received by OMB (and the 
Commission) within 30 days after publication of this notice of proposed 
rulemaking. Nothing in the foregoing affects the deadline enumerated 
above for public comment to the Commission on the proposed rules.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') was adopted to address the 
concerns that government regulations may have a significant and/or 
disproportionate effect on small businesses. To mitigate this risk, the 
RFA requires agencies to conduct an initial and final regulatory 
flexibility analysis for each rule of general applicability for which 
the agency issues a general notice of proposed rulemaking.\126\ These 
analyses must describe the impact of the proposed rule on small 
entities, including a statement of the objectives and the legal bases 
for the rulemaking; an estimate of the number of small entities to be 
affected; identification of federal rules that may duplicate, overlap, 
or conflict with the proposed rules; and a description of any 
significant alternatives to the proposed rule that would minimize any 
significant impacts on small entities.\127\
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    \126\ See 5 U.S.C. 601 et seq.
    \127\ See 5 U.S.C. 603, 604.
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    Proposed part 43 shall affect real-time disseminators (i.e., 
registered SDRs and third-party service providers), SEFs, DCMs, swap 
dealers, MSPs and swap end-users that transact with other swap end-
users. The Commission has previously established certain definitions of 
``small entities'' to be used by the Commission in evaluating the 
impact of its regulations on small entities in accordance with the 
RFA.\128\ In its previous determinations, the Commission has concluded 
that DCMs are not small entities for the purpose of the RFA.\129\
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    \128\ See 5 U.S.C. 601 et seq.
    \129\ See 47 FR 18618 (Apr. 30, 1982).
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    As registered SDRs and SEFs are new entities to be regulated by the 
Commission pursuant to the Dodd-Frank Act, the Commission previously 
has not determined whether these entities are ``small entities'' for 
the purpose of the RFA. The Commission is proposing to determine that 
registered SDRs and SEF covered by these proposed regulations, for 
reasons similar to those applicable to DCMs, are not small entities for 
purposes of the RFA. Specifically, the Commission proposes that 
registered SDRs and SEFs should not be considered small entities based 
on, among other things, the central role they will play in the national 
regulatory scheme overseeing the trading of swaps. Because they will be 
required to accept swaps across asset classes, registered SDRs will 
require significant resources to operate. With respect to SEFs, not 
only will SEFs play a vital role in the national economy, but they will 
be required to operate a self-regulatory organization, subject to 
Commission oversight, with statutory duties to enforce the rules 
adopted by their own governing bodies. Most of these entities will not 
be small entities for the purposes of the RFA.
    With respect to swap dealers, the Commission previously has 
determined that futures commission merchants (``FCMs'') should not be 
considered to be small entities for the purposes of the RFA.\130\ Like 
FCMs, swap dealers will be subject to minimum capital and margin 
requirements, and are excepted to comprise the largest global financial 
firm. Additionally, the Commission is required to exempt from 
designation entities that engage in a de minimis level of swaps.\131\
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    \130\ See 47 FR 18618 (Apr. 30, 1982).
    \131\ See id. at 18619.
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    Similarly, with respect to swap dealers and MSPs, the Commission 
has previously determined that large traders are not ``small entities'' 
for RFA purposes. Like large traders, swap dealers and MSPs will 
maintain substantial positions, creating substantial counterparty 
exposure that could have serious adverse effects on the financial 
stability of the United States banking system or financial markets.
    Although the regulations will require reporting from a single end-
user transacting in a swap with another end-user, in all other 
situations (such as when an end-user engages in a swap with a swap or 
MSP), the reporting requirement will be borne by the swap dealer or 
MSP. Additionally, most end-users regulated by the Employee Retirement 
Income Security Act of 1974 (``ERISA'') \132\ such as pension funds, 
which are among the most active end-users in the swap market, are 
prohibited from transacting directly with other ERISA-regulated end-
users. The Commission does not believe that the reporting requirements 
under this rulemaking will create a significant economic impact on a 
substantial number of small entities.
---------------------------------------------------------------------------

    \132\ See 29 U.S.C. 1106.
---------------------------------------------------------------------------

    Accordingly, the Chairman, on behalf of the Commission, hereby 
certifies pursuant to 5 U.S.C. 605(b) that the proposed rules, will not 
have a significant impact on a substantial number of small entities. 
Nonetheless, the Commission specifically requests comment on the impact 
these proposed rules may have on small entities.

List of Subjects in 17 CFR Part 43

    Real-time public reporting; block trades; large notional swaps; 
reporting and recordkeeping requirements.


[[Page 76171]]


    In consideration of the foregoing, and pursuant to the authority in 
the Commodity Exchange Act, as amended, and in particular Section 
2(a)(13) of the Act, the Commission hereby proposes to amend Chapter I 
of Title 17 of the Code of Federal Regulation by adding part 43 as 
follows:

PART 43--REAL-TIME PUBLIC REPORTING

Sec.
43.1 Purpose, scope, and rules of construction.
43.2 Definitions.
43.3 Method and timing for real-time public reporting.
43.4 Swap transaction and pricing data to be publicly disseminated 
in real-time.
43.5 Block trades and large notional swaps for particular markets 
and contracts.

Appendix A to Part 43--Data Fields for Real-Time Public Reporting

    Authority:  7 U.S.C. 2(a), 12a(5) and 24a, amended by Pub. L. 
111-203, 124 Stat. 1376 (2010).


Sec.  43.1  Purpose, scope and rules of construction.

    (a) Purpose. This part sets forth rules relating to the collection 
and public dissemination of certain swap transaction and pricing data 
to enhance transparency and price discovery.
    (b) Scope. (1) The provisions of this part shall apply to all swaps 
as defined in Section 1a(47) of the Act and any implementing 
regulations therefrom, including:
    (i) Swaps subject to the mandatory clearing requirement described 
in Section 2(h)(1) of the Act (including those swaps that are excepted 
from the requirement pursuant to Section 2(h)(7) of the Act);
    (ii) Swaps that are not subject to the mandatory clearing 
requirement described in Section 2(h)(1) of the Act, but are cleared at 
a registered derivatives clearing organization;
    (iii) Swaps that are not cleared at a registered derivatives 
clearing organization and are reported to a registered swap data 
repository that accepts and publicly disseminates swap transaction and 
pricing data in real-time; and
    (iv) Swaps that are required to be cleared under Section 2(h)(2) of 
the Act, but are not cleared.
    (2) This part applies to all swap execution facilities, designated 
contract markets, swap data repositories, as well as parties to a swap 
including registered or exempt swap dealers, registered or exempt major 
swap participants and U.S.-based end-users.
    (c) Rules of Construction. The examples in this part and in 
appendix A to this part 43 are not exclusive. Compliance with a 
particular example or application of a sample clause, to the extent 
applicable, constitutes compliance with such portion of the rule to 
which the example relates.


Sec.  43.2.  Definitions.

    As used in this part:
    (a) Act means the Commodity Exchange Act, as amended.
    (b) Affirmation means the process by which parties to a swap verify 
(orally, in writing, electronically or otherwise) that they agree on 
the primary economic terms of a swap (but not necessarily all terms of 
the swap). Affirmation may constitute ``execution'' of the swap or may 
provide evidence of execution of the swap, but does not constitute 
confirmation (or confirmation by affirmation) of the swap.
    (c) Appropriate minimum block size means the minimum notional or 
principal size of a swap instrument that qualifies swaps within such 
category of swap instrument as a block trade. The appropriate minimum 
block size is calculated by a registered swap data repository or is 
prescribed by the Commission.
    (d) As soon as technologically practicable means as soon as 
possible, taking into consideration the prevalence, implementation and 
use of technology by comparable market participants.
    (e) Asset class means the broad category of goods, services or 
commodities underlying a swap. The asset classes include interest rate, 
currency, credit, equity, other commodity and such other asset classes 
as may be determined by the Commission.
    (f) Block trade means a swap transaction that:
    (1) Involves a swap that is made available for trading or execution 
on a swap market;
    (2) Occurs off the swap market's trading system or platform 
pursuant to the swap market's rules and procedures;
    (3) Is consistent with the minimum block trade size requirements 
set forth in Sec.  43.5; and
    (4) Is reported in accordance with the swap market's rules and 
procedures and the appropriate time delay set forth in Sec.  43.5(k).
    (g) Confirmation means the consummation (electronically or 
otherwise) of legally binding documentation (electronic or otherwise) 
that memorializes the agreement of the parties to all terms of a swap. 
A confirmation must be in writing (whether electronic or otherwise) and 
must legally supersede any previous agreement (electronically or 
otherwise).
    (h) Confirmation by affirmation. The process by which one party to 
a swap acknowledges its assent to the complete swap terms submitted by 
the other party to the swap. If the parties to a swap are using a 
confirmation service vendor, complete swap terms may be submitted 
electronically by a party to such vendor's platform and the other party 
may affirm such terms on such platform. With the affirmation by one 
party to the complete swap terms submitted by the other party, the swap 
is legally confirmed and a legally binding confirmation is consummated 
(i.e., ``confirmation by affirmation'').
    (i) Embedded option means any right, but not an obligation, 
provided to one party of a swap by the other party to the same swap 
that provides the party in possession of the option with the ability to 
change any one or more of the economic terms of the swap as they were 
previously established at confirmation (or were in effect on the start 
date).
    (j) Executed means the completion of the execution process.
    (k) Execution means an agreement by the parties (whether orally, in 
writing, electronically, or otherwise) to the terms of a swap that 
legally binds the parties to such swap terms under applicable law. 
Execution occurs immediately following or simultaneous with the 
affirmation of the swap.
    (l) Large notional swap means a swap transaction that:
    (1) Involves a swap that is not available for trading or execution 
on a swap market;
    (2) Is consistent with the appropriate size requirements for large 
notional swaps set forth in Sec.  43.5; and
    (3) Is reported in accordance with the appropriate time delay 
requirements set forth in Sec.  43.5(k).
    (m) Minimum block trade size means the minimum notional or 
principal amount, as determined by each swap market, for a block trade 
in a particular type of swap that is listed or executed on such swap 
market. The minimum block trade size shall be equal to or greater than 
the appropriate minimum block size.
    (n) Newly-listed swap means a swap that is listed on any swap 
market where an appropriate minimum block size has not been published 
by a registered swap data repository pursuant to Sec.  43.5.
    (o) Novation means the process by which a party to a swap transfers 
all of its rights, liabilities, duties and obligations under the swap 
to a new legal party other than the counterparty to the swap. The 
transferee accepts all

[[Page 76172]]

of the transferor's rights, liabilities, duties and obligations under 
the swap. A novation is valid so long as the transferor and remaining 
party to the swap are given notice, and the transferor, transferee and 
remaining party to the swap consent to the transfer.
    (p) Off-facility swap means any reportable swap transaction that is 
not executed on or subject to the rules of a swap market.
    (q) Other commodity means any commodity that cannot be grouped in 
the credit, currency, equity or interest rate asset class categories.
    (r) Public dissemination and publicly disseminate means to publish 
and make available swap transaction and pricing data in a non-
discriminatory manner, through the Internet or other electronic data 
feed that is widely published and in machine-readable electronic 
format.
    (s) Real-time disseminator means a registered swap data repository 
or third-party service provider that accepts swap transaction and 
pricing data from multiple data sources and publicly disseminates such 
data in real-time pursuant to this part.
    (t) Real-time public reporting means the reporting of data relating 
to a swap transaction, including price and volume, as soon as 
technologically practicable after the time at which the swap 
transaction has been executed.
    (u) Remaining party means a party to a swap that consents to a 
transferor's transfer by novation of all of the transferor's rights, 
liabilities, duties and obligations under such swap to a transferee.
    (v) Reportable swap transaction means any executed swap, novation, 
swap unwind, partial novation or partial swap unwind, or such post-
execution events that affect the pricing of a swap.
    (w) Reporting party means the party to a swap with the duty to 
report a reportable swap transaction in accordance with this part and 
Section 2(a)(13)(F) of the Act.
    (x) Social size means the greatest of the mode, median and mean 
transaction sizes of a particular swap contract or swap instrument, as 
commonly observed in the marketplace.
    (y) Swap instrument means a grouping of swaps in the same asset 
class with the same or similar characteristics.
    (z) Swap market means any registered swap execution facility or 
registered designated contract market that makes swaps available for 
trading.
    (aa) Swap unwind means the termination and liquidation of a swap, 
typically followed by a cash settlement between the parties to such 
swap.
    (bb) Third-party service provider means an entity, other than a 
registered swap data repository, that publicly disseminates swap 
transaction and pricing data in real-time on behalf of a swap market 
or, in the case of an off-facility swap where there is no registered 
swap data repository available to publicly disseminate the swap 
transaction and pricing data in real-time, on behalf of a reporting 
party.
    (cc) Transferee means a party to a swap that accepts, by way of 
novation, all of a transferor's rights, liabilities, duties and 
obligations under such swap with respect to a remaining party.
    (dd) Transferor means a party to a swap that transfers, by way of 
novation, all of its rights, liabilities, duties and obligations under 
such swap, with respect to a remaining party, to a transferee.
    (ee) Unique product identifier means a unique identification of a 
particular level of the taxonomy of the asset class or sub-asset class 
in question, as further described in Sec.  43.4(f) and Sec.  45.4(c) of 
this chapter. Such unique product identifier may combine the 
information from one or more of the data fields described in appendix A 
to this part 43.
    (ff) U.S. person means any U.S.-based swap dealer, major swap 
participant, eligible contract participant, end-user or other U.S.-
based entity or person that transacts in a swap.


Sec.  43.3  Method and timing for real-time public reporting.

    (a) Responsibilities of parties to a swap to report swap 
transaction and pricing data in real-time. (1) In general. A reporting 
party shall report any reportable swap transaction to a real-time 
disseminator as soon as technologically practicable.
    (2) Swaps listed or executed on a swap market. (i) For swaps 
executed on a swap market's trading system or platform, a reporting 
party shall satisfy its reporting requirement under this section by 
executing such reportable swap transaction on the swap market.
    (ii) For block trades executed pursuant to the rules of a swap 
market, the reporting party shall satisfy its reporting requirement by 
reporting such trades to the swap market in accordance with the rules 
of the swap market and Sec.  43.5.
    (3) Off-facility swaps. Except as otherwise provided in Sec.  43.5, 
all off-facility swaps shall be reported as soon as technologically 
practicable following execution, by the reporting party, to a 
registered swap data repository that accepts and publicly disseminates 
swap transaction and pricing data in accordance with the rules set 
forth in this part. The following persons shall be reporting parties 
for off-facility swaps:
    (i) If only one party is a swap dealer or major swap participant, 
the swap dealer or major swap participant shall be the reporting party.
    (ii) If one party is a swap dealer and the other party is a major 
swap participant, the swap dealer shall be the reporting party.
    (iii) If both parties are swap dealers, the swap dealers shall 
designate which party shall be the reporting party.
    (iv) If both parties are major swap participants, the major swap 
participants shall designate which party shall be the reporting party.
    (v) If neither party is a swap dealer nor a major swap participant, 
the parties shall designate which party (or its agent) shall be the 
reporting party.
    (4) Special rules when no registered swap data repository will 
accept and publicly disseminate data. If no registered swap data 
repository is available to accept and publicly disseminate swap 
transaction and pricing data, the reporting party of an off-facility 
swap may satisfy the real-time public reporting requirement under this 
part by publicly disseminating such data through a third-party service 
provider in the same manner that a swap market may report through a 
third-party service provider.
    (b) Public dissemination of swap transaction and pricing data. (1) 
Reportable swap transactions executed on a swap market. (i) A swap 
market shall publicly disseminate all swap transaction and pricing data 
for swaps executed thereon, as soon as technologically practicable 
after the swap has been executed. A swap market shall satisfy this 
public dissemination requirement by either sending or otherwise 
electronically transmitting swap transaction information to a 
registered swap data repository that accepts and publicly disseminates 
swap transaction and pricing data or by publicly disseminating swap 
transaction information through a third-party service provider for 
public dissemination.
    (ii) A swap market that sends swap transaction information to a 
third-party service provider to publicly disseminate such data in real-
time does not satisfy its requirements under this section until such 
data is publicly disseminated pursuant to this part.
    (2) Prohibition of disclosure of data prior to sending data to a 
real-time disseminator.
    (i) No swap market or reporting party shall disclose swap 
transaction and pricing data prior to the public

[[Page 76173]]

dissemination of such data by a real-time disseminator.
    (ii) Notwithstanding the disclosure prohibition of Sec.  
43.5(b)(2)(i), a swap market may disclose swap transaction and pricing 
data available to participants on its market prior to the public 
dissemination of such data, provided that such disclosure is made no 
earlier than the disclosure of such data to a real-time disseminator 
for public dissemination.
    (iii) Notwithstanding the disclosure prohibition of Sec.  
43.5(b)(2)(i), a swap dealer may disclose swap transaction and pricing 
data for off-facility swaps available to its customer base prior to the 
public dissemination of such data, provided that such disclosure is 
made no earlier than the disclosure of such data to a registered swap 
data repository that accepts swap transaction and pricing data for 
public dissemination.
    (c) Requirements for registered swap data repositories in providing 
the real-time public dissemination of swap transaction and pricing 
data. (1) Compliance with part 49 of this chapter. Any registered swap 
data repository that accepts and publicly disseminates swap transaction 
and pricing data in real-time shall comply with part 49 of this chapter 
and shall publicly disseminate swap transaction and pricing data as 
soon as technologically practicable upon receipt of such data, unless 
the data is subject to a time delay in accordance with Sec.  43.5.
    (2) Acceptance of all swaps in an asset class. Any registered swap 
data repository that accepts and publicly disseminates swap transaction 
and pricing data in real-time for swaps in its selected asset class 
shall accept and publicly disseminate swap transaction and pricing data 
in real-time for all swaps within such asset class.
    (3) Annual independent review. Any registered swap data repository 
that accepts and publicly disseminates swap transaction and pricing 
data in real-time shall perform, on an annual basis, an independent 
review in accordance with established audit procedures and standards of 
the registered swap data repository's security and other system 
controls for the purposes of ensuring compliance with the requirements 
in this part.
    (d) Requirements if a swap market publicly disseminates through a 
third-party service provider. If a swap market chooses to publicly 
disseminate swap transaction and pricing data in real-time through a 
third-party service provider, such swap market shall --
    (1) Ensure that any such third-party service provider that publicly 
disseminates the swap market's swap transaction and pricing data in 
real-time does so in a manner that complies with those standards for 
registered swap data repositories described in this part.
    (2) Ensure that the Commission has access to any such swap 
transaction and pricing data, through either the swap market or via 
direct access to the third-party service provider.
    (e) Availability of swap transaction and pricing data to the 
public. Registered swap data repositories shall publicly disseminate 
swap transaction and pricing data in such a format that may be 
downloaded, saved and/or analyzed.
    (f) Errors or omissions. (1) In general. Any errors or omissions in 
swap transaction and pricing data that were publicly disseminated in 
real-time shall be corrected or cancelled in the following manner:
    (i) If a party to the swap that is not the reporting party becomes 
aware of an error or omission in the swap transaction and pricing data 
reported with respect to such swap, such party shall promptly notify 
the reporting party of the correction.
    (ii) If the reporting party to a swap becomes aware of an error or 
omission in the swap transaction and pricing data which it reported to 
a swap market or real-time disseminator with respect to such swap, 
either through its own initiative or through notice by the other party 
to the swap, the reporting party shall promptly submit corrected data 
to the same swap market or real-time disseminator.
    (iii) If the swap market becomes aware of an error or omission in 
the swap transaction and pricing data reported with respect to such 
swap, or receives notification from the reporting party, the swap 
market shall promptly submit corrected data to the same real-time 
disseminator.
    (iv) Any registered swap data repository that accepts and publicly 
disseminates swap transaction and pricing data in real-time shall 
publicly disseminate any cancellations or corrections to such data, as 
soon as technologically practicable after receipt or discovery of any 
such cancellation or correction.
    (2) Improper cancellation or correction. Reporting parties, swap 
markets and registered swap data repositories that accept and publicly 
disseminate swap transaction and pricing data in real-time shall not 
submit or agree to submit a cancellation or correction for the purpose 
of re-reporting swap transaction and pricing data in order to gain or 
extend a delay in publication or to otherwise evade the reporting 
requirements in this part.
    (3) Cancellation. A registered swap data repository that accepts 
and publicly disseminates swap transaction and pricing data in real-
time shall cancel any incorrect data that had been publicly 
disseminated, by publicly disseminating a cancellation of such data, in 
the manner and format described in Appendix A to this part.
    (4) Correction. A registered swap data repository that accepts and 
publicly disseminates swap transaction and pricing data in real-time 
shall correct any incorrect data that had been publicly disseminated to 
the public, by publicly disseminating a cancellation of the incorrect 
swap transaction and pricing data and then publicly disseminating the 
correct data, as soon as technologically practicable, in the manner and 
format described in Appendix A to this part.
    (g) Hours of operation. A registered swap data repository that 
accepts and publicly disseminates swap transaction and pricing data in 
real-time:
    (1) Shall maintain hours of operation to receive and publicly 
disseminate swap transaction and pricing data at all times, twenty-four 
hours a day;
    (2) May declare, on an ad hoc basis, special closing hours to 
perform system maintenance and shall provide reasonable advance notice 
of its special closing hours to market participants and to the public; 
and
    (3) Shall, to the extent reasonably possible under the 
circumstances, avoid scheduling special closing hours when, in its 
estimation, the U.S. market and major foreign markets are most active.
    (h) Acceptance of data during special closing hours. During special 
closing hours, a registered swap data repository that accepts and 
publicly disseminates swap transaction and pricing data in real-time 
shall have the capability to receive and hold in queue information 
regarding reportable swap transactions pursuant to this part.
    (i) Recordkeeping. All data related to a reportable swap 
transaction shall be maintained for a period of not less than five 
years following the time at which such reportable swap transaction is 
publicly disseminated pursuant to this part.
    (1) Retention of data by a swap market. Any swap market and any 
registered swap data repository that accepts and publicly disseminates 
swap transaction and pricing data in real-time shall retain all swap 
transaction information that is received from reporting parties for 
public dissemination, including data related to block trades and large 
notional swaps and information that is received by a swap market or by 
a registered swap

[[Page 76174]]

data repository that accepts and publicly disseminates swap transaction 
and pricing data in real-time but is not publicly reported pursuant to 
Sec.  43.4(c).
    (2) Retention of data by a swap dealer or major swap participant. 
In accordance with this part and part 23 of this chapter, a swap dealer 
or major swap participant shall retain all data relating to a 
reportable swap transaction that such swap dealer or major swap 
participant sends to a swap market or a registered swap data repository 
that accepts and publicly disseminates such data in real-time or that 
such swap dealer or major swap participant retains in accordance with 
Sec.  43.5.
    (j) Fees. Any fees or charges assessed on a reporting party or swap 
market by a registered swap data repository that accepts and publicly 
disseminates swap transaction and pricing data in real-time for the 
collection of such data must be equitable and non-discriminatory. If 
such registered swap data repository allows a discount based on the 
volume of data reported to it for public dissemination, such discount 
shall be provided to all reporting parties and swap markets 
impartially.


Sec.  43.4  Swap transaction and pricing data to be publicly 
disseminated in real-time.

    (a) In general. Swap transaction information shall be reported to a 
real-time disseminator so that the real-time disseminator can publicly 
disseminate swap transaction and pricing data in real-time in 
accordance with this part, including the manner and format requirements 
described in appendix A to this part 43 and this section.
    (b) Public dissemination of data fields. Any registered swap data 
repository that accepts and publicly disseminates swap transaction and 
pricing data in real-time shall publicly disseminate the information in 
the data fields described in appendix A to this part.
    (c) Additional swap information. A registered swap data repository 
that accepts and publicly disseminates swap transaction and pricing 
data in real-time may require reporting parties and swap markets to 
report to such registered swap data repository, such information that 
is necessary to match the swap transaction and pricing data that was 
publicly disseminated in real-time to the data reported to a registered 
swap data repository pursuant to Section 2(a)(13)(G) of the Act or to 
confirm that parties to a swap have reported in a timely manner 
pursuant to Sec.  43.3. Such additional information shall not be 
publicly disseminated by the registered swap data repository that 
accepts and publicly disseminates swap transaction and pricing data in 
real-time on a transactional or aggregate basis.
    (d) Amendments to data fields. The Commission may determine from 
time to time to amend the data fields described in appendix A to this 
part.
    (e) Anonymity of the parties to a swap transaction. (1) In general. 
Swap transaction and pricing data that is publicly disseminated in 
real-time may not disclose the identities of the parties to the swap. A 
registered swap data repository that accepts and publicly disseminates 
such data in real-time may not do so in a manner that discloses or 
otherwise facilitates the identification of a party to a swap.
    (2) Use of general description. Reporting parties and swap markets 
shall provide a registered swap data repository that accepts and 
publicly disseminates swap transaction and pricing data in real-time 
with a specific description of the underlying asset(s) and tenor of the 
swap; this description must be general enough to provide anonymity but 
specific enough to provide for a meaningful understanding of the 
economic characteristics of the swap. This requirement is separate from 
the requirement that a reporting party must report swap data to a 
registered swap data repository pursuant to Section 2(a)(13)(G) of the 
Act. If a swap dealer or major swap participant does not report the 
exact description of the underlying asset(s) or tenor for the purposes 
of real-time reporting pursuant to this part, because such exact 
description would facilitate the identity of a party to a swap, such 
swap dealer or major swap participant must comply with the related 
documentation and recordkeeping requirements described in Part 23 of 
this chapter.
    (f) Unique product identifier. If a unique product identifier is 
developed that sufficiently describes one or more swap transaction and 
pricing data fields for real-time reporting described in appendix A to 
this part, then such unique product identifier may be used in lieu of 
the data fields that it describes.
    (g) Price forming continuation data. Any swap-specific event 
including, but not limited to novations, swap unwinds, partial 
novations, and partial swap unwinds, that occurs during the life of a 
swap and affects the price of such swap shall be publicly disseminated 
pursuant to this part.
    (h) Reporting of notional or principal amount. (1) Off-facility 
swaps. The actual notional or principal amount for any off-facility 
swap shall be reported by the reporting party to the registered swap 
data repository that accepts and publicly disseminates such data in 
real-time.
    (2) Swaps executed on or pursuant to the rules of a swap market. 
The actual notional or principal amount for any block trade executed 
pursuant to the rules of a swap market shall be reported by the 
reporting party to the swap market. A swap market shall transmit the 
actual notional amount for all swaps executed on or pursuant to its 
rules to the real-time disseminator.
    (i) Public dissemination of notional or principal amount. The 
notional or principal amount data fields described in Appendix A to 
this Part 43 shall be publicly disseminated as follows:
    (1) If the notional or principal amount is less than 1 million, 
round to nearest 100 thousand;
    (2) If the notional or principal amount is less than 50 million but 
greater than 1 million, round to the nearest million;
    (3) If the notional or principal amount is less than 100 million 
but greater than 50 million, round to the nearest 5 million;
    (4) If the notional or principal amount is less than 250 million 
but greater than 100 million, round to the nearest 10 million;
    (5) If the notional or principal amount is greater than 250 
million, round to ``250+''.


Sec.  43.5  Block trades and large notional swaps for particular 
markets and contracts.

    (a) In general. The provisions in this Sec.  43.5 shall apply to 
both block trades on swaps and large notional swaps.
    (b) Eligible block trade or large notional swap parties. (1) In 
general. Parties to a block trade or large notional swap must be 
``eligible contract participants'' as defined in Section 1a(18) of the 
Act. However, a designated contract market may allow a commodity 
trading advisor acting in an asset managerial capacity and registered 
pursuant to Section 4n of the Act, or a principal thereof, including 
any investment advisor who satisfies the criteria of Sec.  4.7(a)(2)(v) 
of this chapter, or a foreign person performing a similar role or 
function and subject as such to foreign regulation, to transact block 
trades for customers who are not eligible contract participants, if 
such commodity trading advisor, investment advisor or foreign person 
has more than $25,000,000 in total assets under management. A person 
transacting a block trade on behalf of a customer must receive written 
instruction or prior consent from the customer to do so.
    (2) Election to be treated as a block trade or large notional swap. 
Parties to a swap of a large notional value shall elect to have the 
swap treated as a block

[[Page 76175]]

trade or large notional swap. Any reporting party or swap market shall 
indicate such election to a real-time disseminator.
    (c) Block trades on swaps. (1) A swap market that permits block 
trades must have rules that specify the minimum size of such block 
trades pursuant to this section.
    (2) The reporting party of a block trade shall report the block 
trade transaction and pricing data to the swap market, as soon as 
technologically practicable after execution of the block trade and 
pursuant to the rules of such swap market.
    (3) The swap market shall transmit block trade transaction and 
pricing data to a real-time disseminator as soon as technologically 
practicable after receipt of such data. Such information shall not be 
publicly disseminated until the expiration of the appropriate time 
delay described in Sec.  43.5(k).
    (d) Large notional swaps. A registered swap data repository that 
accepts and publicly disseminates swap transaction and pricing data in 
real-time shall not publicly report the large notional swap transaction 
and pricing data until the expiration of the appropriate time delay 
described in Sec.  43.5(k). Immediately upon expiration of the 
appropriate time delay, the registered swap data repository that 
accepts and publicly disseminates swap transaction and pricing data in 
real-time must publicly disseminate the large notional swap transaction 
and pricing data.
    (e) Off-facility swaps in which neither counterparty is a swap 
dealer or a major swap participant. Off-facility swaps in which neither 
counterparty is a swap dealer or a major swap participant may qualify 
as large notional swaps. Parties to such transactions shall follow the 
requirements for large notional swaps in Sec.  43.5.
    (f) Time-stamp and reporting requirements for block trades and 
large notional swaps. In addition to the requirements under Sec.  43.4 
and appendix A to this part, a swap market and a registered swap data 
repository that accepts and publicly disseminates swap transaction and 
pricing data in real-time shall have the following additional time-
stamp requirements with respect to block trades and large notional 
swaps:
    (1) A swap market shall time-stamp swap transaction and pricing 
data with the date and time, to the nearest second of when such swap 
market:
    (i) Receives data from a reporting party; and
    (ii) Transmits such data to a real-time disseminator.
    (2) A registered swap data repository that accepts and publicly 
disseminates swap transaction and pricing data in real-time shall time-
stamp such data with the date and time, to the nearest second when such 
swap data:
    (i) Is received from a swap market or reporting party; and
    (ii) Is publicly disseminated.
    (3) All records relating to the time-stamps required by this 
section shall be maintained for a period of at least five years from 
the execution of the block trade or large notional swap.
    (g) Responsibilities of registered swap data repositories in 
determining appropriate minimum block size.
    (1) In general. A registered swap data repository shall determine 
the appropriate minimum block size for swaps for which such registered 
swap data repository receives data in accordance with Section 
2(a)(13)(G) of the Act. A registered swap data repository shall set the 
appropriate minimum block size for each swap instrument as the greater 
of the numbers derived from the distribution test and the multiple test 
described in this paragraph. To qualify as a block trade, the notional 
or principal amount of the swap must be equal to or greater than the 
appropriate minimum block size.
    (i) Distribution test. To apply the distribution test to a swap 
instrument, a registered swap data repository shall apply the minimum 
threshold to the distribution of the notional or principal transaction 
amounts, each as set forth in this paragraph.
    (A) In determining the distribution of the notional or principal 
transaction amounts of a swap instrument, a registered swap data 
repository shall evaluate the transaction sizes, rounded in the manner 
discussed in Sec.  43.4(i), for all swaps within a category of swap 
instrument, by looking at swaps within the category of swap instrument 
that are executed: on all swap execution facilities; on all designated 
contract markets; and as off-facility swaps. Registered swap data 
repositories may also consider other economic information to establish 
the total market size of a category of swap instrument, in consultation 
with the Commission.
    (B) The minimum threshold shall be a notional or principal amount 
that is greater than 95% of the notional or principal transaction sizes 
in a swap instrument during the applicable period of time, as 
represented by the distribution of the notional or principal 
transaction amounts for such swap.
    (ii) Multiple test. To apply the multiple test to a swap 
instrument, a registered swap data repository shall multiply the block 
multiple by the social size, as described in this paragraph.
    (A) In determining the social size for a swap instrument, the 
registered swap data repository shall calculate the mode, mean and 
median transaction sizes for all swaps in the category of swap 
instrument and choose the greatest of the mode, mean and median 
transaction sizes.
    (B) For all swaps, the block multiple shall be five.
    (2) Initial determination of appropriate minimum block size for 
newly-listed swaps. A registered swap data repository shall make its 
initial determination of the appropriate minimum block size for a 
newly-listed swap one month after such newly-listed swap is first 
executed and reported to the registered swap data repository. Such 
registered swap data repository may make such a determination by:
    (i) Grouping a newly-listed swap into an existing category of swap 
instrument for which the registered swap data repository has already 
determined an appropriate minimum block size; or
    (ii) Creating a new category of swap instrument for the newly-
listed swap and calculating the appropriate minimum block size based on 
the previous month's data.
    (3) Publication of appropriate minimum block sizes. A registered 
swap data repository shall publish the appropriate minimum block sizes 
on its Internet Web site for all swap instruments. Additionally, a 
registered swap data repository shall publish the types of swaps that 
fall within a particular category of swap instrument, for which the 
registered swap data repository has received data on its Internet Web 
site. The appropriate minimum block size information and swap 
instrument information on the registered swap data repository's 
Internet Web site must be available to the public in an open and non-
discriminatory manner.
    (4) Annual update. A registered swap data repository shall each 
year beginning in January 2012, publish and update the appropriate 
minimum block sizes for the swap instruments for which the registered 
swap data repository accepts data. Any such updates must be posted on 
the registered swap data repository's Internet Web site by the tenth 
business day of each year. The registered swap data repository shall 
calculate the appropriate minimum block size based on the data that it 
has received over the previous year. If a registered swap data 
repository has received data for a category of swap instrument for less 
than one year, the appropriate minimum block size shall be calculated 
based on such data.

[[Page 76176]]

    (5) Appropriate minimum block size determination when more than one 
registered swap data repository. If more than one registered swap data 
repository maintains data for a swap instrument, then the Commission 
shall prescribe the manner in which the appropriate minimum block trade 
size shall be determined.
    (h) Responsibilities of swap markets in determining minimum block 
trade sizes. For any swap listed on a swap market, the swap market 
shall set the minimum block trade size. Swap markets must set the 
minimum block trade sizes for all listed contracts at levels greater 
than or equal to the appropriate minimum block sizes posted on the swap 
data repositories' Internet Web sites. Swap markets shall immediately 
apply any change to the minimum block trade size of a listed swap 
following the posting of a new or adjusted appropriate minimum block 
size on a registered swap data repository's Internet Web site, pursuant 
to the requirements set forth in part 40 of this chapter. If a swap 
listed on a swap market does not have an appropriate minimum block 
size, such swap market shall apply the rules set forth in Sec.  
43.5(i).
    (i) Minimum block trade size determination for newly-listed swaps. 
For any newly-listed swap, the swap market that lists the swap for 
trading shall set the minimum block trade size.
    (1) If a newly-listed swap is within the parameters of a category 
of swap instrument for which a registered swap data repository has 
posted an appropriate minimum block size, the swap market shall set the 
minimum block size for such newly listed swap at a level equal to or 
greater than such appropriate minimum block size.
    (2) In determining the minimum block trade size for a newly-listed 
swap that is not within an existing category of swap instrument, swap 
markets shall take into account:
    (i) The anticipated distribution of notional or principal 
transaction amounts;
    (ii) The social size for swaps in other markets that are in 
substance the same as such newly-listed swap; and
    (iii) The minimum block trade sizes of similar swaps in the same 
asset class.
    (3) In determining the minimum block trade size for a newly-listed 
swap that is not within an existing category of swap instrument, the 
swap market that lists the swap must ensure that the notional or 
principal amount selected represents a reasonable estimate of the 
greater of:
    (i) A notional or principal amount that is greater than all but 95% 
of the anticipated distribution of notional or principal transaction 
amounts over the one month period immediately following the first 
execution of the swap; or
    (ii) Five times the anticipated social size over the one month 
period immediately following the first execution of the swap.
    (j) Responsibilities of the parties to a swap in determining the 
appropriate minimum large notional swap size. (1) The parties to a 
large notional swap shall be responsible for determining the category 
of existing swap instrument in which such swap should be included. Once 
the category of existing swap instrument is identified by the parties 
to the swap, the parties shall refer to the appropriate minimum block 
size that is associated with such existing swap instrument and made 
available to the public on the appropriate registered swap data 
repository's Internet Web site, or as otherwise prescribed by the 
Commission. The notional or principal amount of the swap must be equal 
to or greater than the appropriate minimum block size of the swap 
instrument in order to qualify as a large notional swap. If there is 
not a swap instrument with an appropriate minimum block size available 
to reference, then such swap between the parties shall not qualify as a 
large notional swap or for any time delay in reporting. In determining 
the appropriate swap instrument, the following factors shall be 
documented--
    (i) The similarities of the terms of the swap between the parties 
compared to the terms of swaps that are grouped within the existing 
swap instrument; and
    (ii) Other swaps listed on swap markets that are grouped within an 
existing category of swap instrument.
    (2) To the extent that the parties to a large notional swap are 
swap dealers and/or major swap participants, such parties shall 
maintain records illustrating the basis for the selection of the swap 
instrument for the large notional swap pursuant to part 23 of this 
chapter. Such records shall be made available to the Commission upon 
request.
    (3) In the event that the parties to a swap seek to qualify such 
swap as a large notional swap, but are unable to determine, identify or 
agree on the appropriate swap instrument to refer to, such swap shall 
not qualify as a large notional swap and shall not qualify for any time 
delay in reporting.
    (k) Time delay in the real-time public reporting of block trades 
and large notional swaps. (1) In general. The time delay for the real-
time public reporting of a block trade or large notional swap begins 
upon execution. It is the responsibility of the registered swap data 
repository that accepts and publicly disseminates swap transaction and 
pricing data in real-time to ensure the block trade or large notional 
swap transaction and pricing data is publicly disseminated following 
the appropriate time delay described in this section.
    (2) Time delay for standardized block trades and large notional 
swaps. The block trade or large notional swap transaction and pricing 
data shall be reported to the public by the swap market (through a 
third-party service provider) or registered swap data repository that 
accepts and publicly disseminates such data within 15 minutes of the 
time of execution reflected in the data. This provision covers all 
swaps under Sections 2(a)(13)(C)(i) and (iv) of the Act.
    (3) Time delay for customized large notional swaps. The large 
notional swap transaction and pricing data shall be reported to the 
public by the registered swap data repository that accepts and publicly 
disseminates such data subject to a time delay as may be prescribed by 
the Commission. This provision covers all swaps under Sections 
2(a)(13)(C)(ii) and (iii) of the Act.
    (l) Data to be reported to the public. With respect to block trades 
and large notional swaps, all information in the data fields described 
in appendix A to this part and Sec.  43.4 shall be disseminated to the 
public.
    (m) Aggregation. Except as otherwise stated in this paragraph, the 
aggregation of orders for different accounts in order to satisfy the 
minimum block trade size requirement is prohibited. Aggregation is 
permissible if done by a commodity trading advisor acting in an asset 
managerial capacity and registered pursuant to Section 4n of the Act, 
or a principal thereof, including any investment advisor who satisfies 
the criteria of Sec.  4.7(a)(2)(v) of this chapter, or a foreign person 
performing a similar role or function and subject as such to foreign 
regulation, if such commodity trading advisor, investment advisor or 
foreign person has more than $25,000,000 in total assets under 
management.

Appendix A to Part 43--Data Fields for Real-Time Public Reporting

    The data fields described in Table A1 and Table A2, to the 
extent applicable for a particular reportable swap transaction, 
shall be real-time reported to the public. Table A1 and Table A2 
provide guidance and examples for compliance with the reporting of 
each data field.

[[Page 76177]]



    Table A1--Data Fields and Suggested Form and Order for Real-Time Public Reporting of Swap Transaction and
                                                  Pricing Data
----------------------------------------------------------------------------------------------------------------
               Field                        Description                Example              Data application
----------------------------------------------------------------------------------------------------------------
Cancellation......................  An indication that a        CANCEL...............  Information is needed to
                                     reportable swap                                    inform market
                                     transaction has been                               participants and the
                                     incorrectly or                                     public that swap
                                     erroneously reported and                           transaction and pricing
                                     is canceled. There shall                           data was erroneously
                                     be a clear indication to                           disseminated to the
                                     the public that the                                public.
                                     reportable swap
                                     transaction is being
                                     canceled (e.g.,
                                     ``CANCEL'') followed by
                                     the swap transaction and
                                     pricing data that is
                                     being canceled same form
                                     and manner that it was
                                     erroneously reported. Any
                                     cancellations should be
                                     made in accordance with
                                     Sec.   43.3(f).
                                    If a reportable swap
                                     transaction is canceled,
                                     it may be corrected by
                                     reporting the
                                     ``Correction'' data field
                                     and the correct
                                     information.
Correction........................  An indication that the      CORRECT..............  Information needed to
                                     swap transaction and                               inform market
                                     pricing data that is                               participants and the
                                     being reported is a                                public that a particular
                                     correction to previously                           reportable swap
                                     publicly disseminated                              transaction that is
                                     swap transaction and                               being reported is a
                                     pricing data that                                  correction to swap
                                     contained an error or                              transaction and pricing
                                     omission. In order for a                           data that has been
                                     correction to occur, the                           publicly disseminated by
                                     registered swap data                               a real-time
                                     repository that accepts                            disseminator.
                                     and publicly disseminates
                                     swap transaction and
                                     pricing data shall first
                                     cancel the incorrectly
                                     reported swap transaction
                                     and pricing data and the
                                     follow such cancellation
                                     with the correction.
                                     There shall be a clear
                                     indication to the public
                                     that the swap transaction
                                     and pricing data that is
                                     being reported is a
                                     correction (e.g.,
                                     ``CORRECT''). Any
                                     corrections should be
                                     made in accordance with
                                     Sec.   43.3(f).
Date stamp........................  The date of execution of    13-10-07.............  Information needed to
                                     the reportable swap                                indicate the date of
                                     transaction. The date                              execution of the
                                     shall be displayed with                            reportable swap
                                     two digits for day,                                transaction (if not the
                                     month, and year. The date                          same day).
                                     stamp shall be reported
                                     only when the reportable
                                     swap transaction is
                                     executed on a day other
                                     than the current day or
                                     if the reportable swap
                                     transaction is a
                                     correction or
                                     cancellation.
Execution time-stamp..............  The time of execution of    15:25:47.............  Information needed to
                                     the reportable swap                                indicate the time of
                                     transaction in                                     execution of the
                                     Coordinated Universal                              reportable swap
                                     Time (UTC). The time-                              transaction.
                                     stamp shall be displayed
                                     with two digits for each
                                     of the hour, minute and
                                     second.
Cleared or uncleared..............  An indication of whether    C....................  Information needed to
                                     or not a reportable swap                           indicate whether or not
                                     transaction is cleared by                          a reportable swap
                                     a derivatives clearing                             transaction is cleared
                                     organization. If the                               through a derivatives
                                     reportable swap                                    clearing organization.
                                     transaction is cleared by
                                     a derivatives clearing
                                     organization, a ``C'' may
                                     be used and if uncleared
                                     a ``U'' may be used.
                                    Alternatively, the
                                     entirety of the data
                                     fields reported to the
                                     public for the reportable
                                     swap transaction may be
                                     color coded white if the
                                     swap is cleared by a
                                     derivatives clearing
                                     organization and red if
                                     the reportable swap
                                     transaction is uncleared.
Indication of other price           An indication that the      B*...................  Information needed to
 affecting term (non-standardized    reportable swap                                    indicate whether a
 swaps).                             transaction has one or                             reportable swap
                                     more additional term(s)                            transaction is non-
                                     or provision(s), other                             standardized (bespoke)
                                     than those listed in the                           and to inform the public
                                     required real-time data                            that there are one or
                                     fields, that materially                            more additional term(s)
                                     affect(s) the price of                             or provision(s) that
                                     the reportable swap                                materially affect the
                                     transaction. Reportable                            price of the reportable
                                     swap transactions that                             swap transaction.
                                     are reported with this
                                     designation would be non-
                                     standardized (bespoke)
                                     swaps.

[[Page 76178]]

 
                                    Some common material price
                                     affecting terms may
                                     include counterparty
                                     credit, collateral, day
                                     count fraction, changing
                                     notional amount, etc. A
                                     ``B*'' may be used to
                                     indicate that a
                                     reportable swap
                                     transaction has a
                                     material price affecting
                                     term that is not
                                     otherwise shown..
Block trades and large notional     An indication of whether a  BLK..................  Information needed to
 swaps.                              reportable swap                                    indicate whether a
                                     transaction is a block                             reportable swap
                                     trade or large notional                            transaction is a block
                                     swap. If a reportable                              trade or a large
                                     swap transaction is a                              notional swap. This
                                     block trade or a large                             information is important
                                     notional swap and subject                          since it will alert
                                     to a time delay in real-                           market participants and
                                     time public reporting                              the public to the
                                     pursuant to Sec.   43.5,                           differences in notional
                                     such block trade or large                          or principal amount and
                                     notional swap may be                               the time delay in real-
                                     indicated as follows:                              time reporting the swap
                                     block trade or large                               transaction and pricing
                                     notional swap (``BLK'').                           data.
                                     If a trade is not a block
                                     trade or large notional
                                     swap, then this field may
                                     be left blank.
Execution venue...................  An indication of the venue  OFF..................  Information needed to
                                     of execution of a                                  indicate whether a
                                     reportable swap                                    reportable swap
                                     transaction. Such                                  transaction is executed
                                     indication may be                                  on a swap market, as an
                                     indicated with a three                             off-facility swap, or as
                                     character reference code                           a block trade or large
                                     as follows: reportable                             notional swap.
                                     swap transaction executed
                                     on or pursuant to the
                                     rules of a swap market
                                     (SWM) or an off-facility
                                     swap (OFF).
Swap instrument...................  A description of the        SWI-ST-USD-IRS (e.g.,  Information needed to
                                     instrument used to          short term USD         understand what swap
                                     determine the appropriate   interest rate swaps).  instrument was used by
                                     minimum block size for                             the parties to a block
                                     block trades and large                             trade or large notional
                                     notional swaps. The swap                           swap to determine the
                                     instrument may be                                  appropriate minimum
                                     reported with the letters                          block trade size that
                                     ``SWI'' followed by the                            was relied on to delay
                                     description of the swap                            reporting pursuant to
                                     instrument. The swap                               Sec.   43.5.
                                     instrument should be
                                     described in such a
                                     manner that it is clear
                                     to market participants
                                     and the public what is
                                     being reported. If there
                                     is no swap instrument,
                                     then ``NA'' may be
                                     reported.
Start date........................  The date that the           20-02-09.............  Information needed to
                                     reportable swap                                    indicate when the terms
                                     transaction becomes                                of the reportable swap
                                     effective or starts. The                           transaction become
                                     effective date shall be                            effective or start.
                                     displayed with two digits
                                     for day, month, and year.
                                     If a standardized start
                                     date is established for a
                                     particular swap, for
                                     example, the start date
                                     is always T+1 for a
                                     particular swap contract
                                     or the start date is
                                     standardized to start on
                                     a given date in the
                                     future (e.g., the first
                                     of the following month),
                                     this field may not be
                                     necessary.
Asset class.......................  An indication of one of     IR...................  Information needed to
                                     the five broad categories                          broadly describe the
                                     as described in Sec.                               underlying asset to
                                     43.2(e). Reportable swap                           facilitate comparison
                                     transactions may be                                with other similar
                                     reported in the following                          reportable swap
                                     asset classes with an                              transactions.
                                     appropriate two character
                                     symbol: interest rate
                                     (IR), currency (CU),
                                     credit (CD), equity (EQ),
                                     other commodity (CO)..
Sub-asset class for other           An indication of a more     AG (agriculture swap)  Information needed to
 commodity.                          specific description of                            define with greater
                                     the asset class for other                          specificity, the type of
                                     commodity. Such sub-asset                          other commodity that is
                                     classes for other                                  being real-time reported
                                     commodity reportable swap                          and to facilitate
                                     transactions may include,                          comparison with other
                                     but are not limited to,                            similar reportable swap
                                     energy, precious metals,                           transactions.
                                     metals--other,
                                     agriculture, weather,
                                     emissions and volatility.
                                     The sub-asset class may
                                     be reported with an
                                     appropriate two character
                                     symbol (e.g., energy
                                     (EN)).
Contract type.....................  An indication of one of     S-...................  Information needed to
                                     four specific contract                             describe the reportable
                                     types of reportable swap                           swap transaction and to
                                     transactions. The                                  be able to compare such
                                     following product types                            reportable swap
                                     shall be reported with an                          transaction to other
                                     appropriate two character                          similar reportable swap
                                     symbol: swap (S-),                                 transactions.
                                     swaption (SO), forward
                                     (FO) and stand-alone
                                     options (O-).

[[Page 76179]]

 
Contract sub-type.................  An indication of more       SS (basis swap)......  Information needed to
                                     specificity into the type                          define with greater
                                     of contract described in                           specificity, the type of
                                     the contract type field.                           contract that is being
                                     Such contract sub-types                            real-time reported and
                                     may include, but are not                           to facilitate comparison
                                     limited to, basis swaps,                           with other similar
                                     index swaps, broad based                           reportable swap
                                     security swaps, and                                transactions.
                                     basket swaps. The
                                     contract sub-type may be
                                     reported with an
                                     appropriate two character
                                     symbol (e.g., basket swap
                                     (SK)).
Price-forming continuation data...  An indication of whether    PN...................  Information needed to
                                     such reportable swap                               describe whether the
                                     transaction is a post-                             reportable swap
                                     execution event that                               transaction is a post-
                                     affects the price of the                           execution event for a
                                     reportable swap                                    pre-existing swap (i.e.,
                                     transaction. The                                   not a newly executed
                                     following price-forming                            swap) that materially
                                     continuation data may be                           affects the price of the
                                     reported with a                                    reportable swap
                                     designation as follows:                            transaction.
                                     novation (N-), partial
                                     novation (PN), swap
                                     unwind (U-), partial swap
                                     unwind (PU), other price-
                                     forming continuation data
                                     (PF).
Underlying asset 1................  The asset, reference asset  TX (e.g., TX           Information needed to
                                     or reference obligation     represents             describe the reportable
                                     for payments of a party's   ``Treasury 10          swap transaction and to
                                     obligations under the       year'').               help market participants
                                     reportable swap                                    and the public evaluate
                                     transaction reference.                             the price of the
                                     The underlying asset may                           reportable swap
                                     be a reference price,                              transaction.
                                     index, obligation,
                                     physical commodity with
                                     delivery point, futures
                                     contract or any other
                                     instrument agreed to by
                                     the parties to a
                                     reportable swap
                                     transaction.
                                    Reporting entities may
                                     refer to Sec.   43.4(e)
                                     when reporting underlying
                                     asset.
Underlying asset 2................  The asset, reference asset  IIIL (e.g., IIIL       Information needed to
                                     or reference obligation     represents 3-month     describe the reportable
                                     for payments of a party's   LIBOR).                swap transaction and to
                                     obligations under the                              help market participants
                                     reportable swap                                    and the public evaluate
                                     transaction reference.                             the price of the
                                     The underlying asset may                           reportable swap
                                     be a reference price,                              transaction.
                                     index, obligation,
                                     physical commodity with
                                     delivery point, futures
                                     contract or any other
                                     instrument agreed to by
                                     the parties to a
                                     reportable swap
                                     transaction..
                                    Reporting entities may
                                     refer to Sec.   43.4(e)
                                     when reporting underlying
                                     asset..
                                    If there are more than two
                                     underlying assets, such
                                     underlying assets shall
                                     be reported in the same
                                     manner as above.
Price notation....................  The premium, yield, spread  2.53.................  Information needed to
                                     or rate, depending on the                          describe the reportable
                                     type of swap, that is                              swap transaction and to
                                     calculated at affirmation                          help market participants
                                     and nets to a present                              and the public evaluate
                                     value of zero at                                   the price of the
                                     execution. The pricing                             reportable swap
                                     characteristic shall not                           transaction.
                                     include any premiums
                                     associated with margin,
                                     collateral, independent
                                     amounts, reconcilable
                                     post-execution events,
                                     options on a swap, or
                                     other non-economic
                                     characteristics. The
                                     format in which the
                                     pricing characteristic is
                                     real-time reported to the
                                     public shall be the
                                     format commonly sought by
                                     market participants for
                                     each particular market or
                                     contract.
Additional price notation.........  The additional pricing      +0.25................  Additional information
                                     characteristic shall                               needed to describe the
                                     include any premiums                               reportable swap and to
                                     associated with margin,                            help market participants
                                     collateral, independent                            and the public evaluate
                                     amounts, reconcilable                              the price of the
                                     post-execution events,                             reportable swap
                                     front end payments, back                           transaction.
                                     end payments, or other
                                     non-economic
                                     characteristics not
                                     illustrated in the
                                     reporting field for
                                     pricing characteristic.
                                     The additional pricing
                                     characteristic shall not
                                     include options as they
                                     are reported elsewhere.
                                     The format in which the
                                     additional pricing
                                     characteristic is real-
                                     time reported to the
                                     public shall be as an
                                     addition or subtraction
                                     of the pricing
                                     characteristic and in a
                                     way commonly sought by
                                     market participants for
                                     each particular market or
                                     contract.

[[Page 76180]]

 
Unique product identifier.........  Certain fields may be       To be determined.....  Information needed to
                                     replaced with a unique                             describe the reportable
                                     product identifier, if                             swap transaction and for
                                     such unique identifier                             market participants and
                                     exists, to the extent                              the public to be able to
                                     that such unique product                           compare such reportable
                                     identifier adequately                              swap transaction to
                                     describes such fields..                            other similar reportable
                                                                                        swap transactions. Such
                                                                                        information would
                                                                                        substitute the
                                                                                        information described in
                                                                                        one or more reportable
                                                                                        fields in accordance
                                                                                        with Sec.   43.4.
Notional currency 1...............  An indication of the type   EUR..................  Information needed to
                                     of currency that the                               describe the type of
                                     notional amount is in.                             currency of the notional
                                     The notional currency may                          amount.
                                     be reported in a commonly
                                     accepted code (e.g., the
                                     three character
                                     alphabetic ISO 4217
                                     currency code).
Notional or principal amount 1....  The total currency amount   200..................  Information needed to
                                     or quantity of units of                            identify the size of the
                                     the underlying asset. The                          reportable swap
                                     notional or principal                              transaction and to help
                                     amounts for reportable                             evaluate the price of
                                     swap transactions,                                 the reportable swap
                                     including block trades                             transaction.
                                     and large notional swaps
                                     shall be reported
                                     pursuant Sec.   43.4.
Notional currency 2...............  An indication of the type   USD..................  Information needed to
                                     of currency that the                               describe the type of
                                     notional amount is in.                             currency of the notional
                                     The notional currency may                          amount.
                                     be reported in a commonly
                                     accepted code (e.g., the
                                     three character
                                     alphabetic ISO 4217
                                     currency code).
Notional or principal amount 2....  The total currency amount   45...................  Information needed to
                                     or quantity of units of                            identify the size of the
                                     the underlying asset. The                          reportable swap
                                     notional or principal                              transaction and to help
                                     amounts for reportable                             market participants and
                                     swap transactions,                                 the public evaluate the
                                     including block trades                             price of the reportable
                                     and large notional swaps,                          swap transaction.
                                     shall be reported
                                     pursuant to Sec.   43.4.
                                    Each notional or principal
                                     amount (if there is more
                                     than one) should be
                                     labeled with a number
                                     (e.g., 1, 2, 3, etc.)
                                     such that the number
                                     corresponds to the
                                     underlying asset for
                                     which the notional or
                                     principal amount is
                                     applicable.
                                    If there are more than two
                                     notional or principal
                                     amounts, each such
                                     additional notional or
                                     principal amount shall be
                                     reported in the same
                                     manner.
Payment frequency 1...............  An integer multiplier of a  2M...................  Information needed to
                                     time period describing                             identify the pricing
                                     how often the parties to                           characteristic of the
                                     the reportable swap                                reportable swap
                                     transaction exchange                               transaction and to help
                                     payments associated with                           market participants and
                                     each party's obligation                            the public evaluate the
                                     under the reportable swap                          price of the reportable
                                     transaction. Such payment                          swap transaction.
                                     frequency may be
                                     described as one letter
                                     preceded by an integer.
                                     Such letter convention
                                     may be reported as
                                     follows: D (daily), W
                                     (weekly), M (monthly), Y
                                     (yearly).
Payment frequency 2...............  An integer multiplier of a  6W...................  Information needed to
                                     time period describing                             identify the pricing
                                     how often the parties to                           characteristic of the
                                     the reportable swap                                reportable swap
                                     transaction exchange                               transaction and to help
                                     payments associated with                           market participants and
                                     each party's obligation                            the public evaluate the
                                     under the reportable swap                          price of the reportable
                                     transaction. Such payment                          swap transaction.
                                     frequency may be
                                     described as one letter
                                     preceded by an integer.
                                     Such letter convention
                                     may be reported as
                                     follows: D (daily), W
                                     (weekly), M (monthly), or
                                     Y (yearly).
                                    Each payment frequency (if
                                     there is more than one)
                                     should be labeled with a
                                     number (e.g., 1, 2, 3,
                                     etc.) such that the
                                     number corresponds to the
                                     underlying asset for
                                     which the payment
                                     frequency is applicable.
                                    If there are more than two
                                     payment frequency, each
                                     such additional payment
                                     frequency shall be
                                     reported in the same
                                     manner.

[[Page 76181]]

 
Reset frequency 1.................  An integer multiplier of a  1Y...................  Information needed to
                                     period describing how                              identify the pricing
                                     often the parties to the                           characteristic of the
                                     reportable swap                                    reportable swap
                                     transaction shall                                  transaction and to help
                                     evaluate and, when                                 market participants and
                                     applicable, change the                             the public evaluate the
                                     price used for the                                 price of the reportable
                                     underlying assets of the                           swap transaction.
                                     reportable swap
                                     transaction. Such reset
                                     frequency may be
                                     described as one letter
                                     preceded by an integer.
                                     Such letter convention
                                     may be reported as
                                     follows: D (daily), W
                                     (weekly), M (monthly), or
                                     Y (yearly).
Reset frequency 2.................  An integer multiplier of a  6M...................  Information needed to
                                     period describing how                              identify the pricing
                                     often the parties to the                           characteristic of the
                                     reportable swap                                    reportable swap
                                     transaction shall                                  transaction and to help
                                     evaluate and, when                                 market participants and
                                     applicable, change the                             the public evaluate the
                                     price used for the                                 price of the reportable
                                     underlying assets of the                           swap transaction.
                                     reportable swap
                                     transaction. Such reset
                                     frequency may be
                                     described as one letter
                                     preceded by an integer.
                                     Such letter convention
                                     may be reported as
                                     follows: D (daily), W
                                     (weekly), M (monthly), or
                                     Y (yearly).
                                    Each reset frequency (if
                                     there is more than one)
                                     should be labeled with a
                                     number (e.g., 1, 2, 3,
                                     etc.) such that the
                                     number corresponds to the
                                     underlying asset for
                                     which the reset frequency
                                     is applicable.
                                    If there are more than two
                                     reset frequencies, each
                                     such additional reset
                                     frequency shall be
                                     reported in the same
                                     manner.
Tenor.............................  The maturity, termination,  Z15..................  Information needed to
                                     or end date of the                                 determine the end month
                                     reportable swap                                    and year of the
                                     transaction. The tenor                             reportable swap
                                     may be displayed with the                          transaction and to help
                                     3 character month and                              market participants and
                                     year format used for                               the public evaluate the
                                     futures contracts..                                price of the reportable
                                                                                        swap transaction.
                                    Reporting entities may
                                     refer to Sec.   43.4(e)
                                     in reporting tenor.
----------------------------------------------------------------------------------------------------------------

    If a swap has more than one embedded option, or multiple 
swaptions provisions, all such option provisions shall be reported 
in the same manner pursuant to the fields in Table A2 of Appendix A 
to this Part 43. When disseminated to the public, multiple embedded 
options associated with the same swap shall be clearly described and 
clearly linked to the swap with which the embedded option is 
associated.

    Table A2--Additional Real-Time Public Reporting Data Fields for Options, Saptions and Swaps With Embedded
                                                     Options
----------------------------------------------------------------------------------------------------------------
               Field                        Description                Example              Data application
----------------------------------------------------------------------------------------------------------------
Embedded option on swap...........  An indication of whether    EMBED1...............  Information needed to
                                     or not the option fields                           describe whether an
                                     are for an embedded                                option is embedded in a
                                     option. This indication                            swap to prevent
                                     may be displayed as                                confusion and allow the
                                     ``EMBED1,'' ``EMBED2,''                            market participants and
                                     etc. and should precede                            the public to understand
                                     the option fields that                             the information that is
                                     describe the embedded                              being reported.
                                     option.
Option Strike Price...............  The level or price at       O25..................  Information needed to
                                     which an option may be                             indicate the level or
                                     exercised. The option                              price at which the
                                     strike price may be                                option may be exercised
                                     displayed with the letter                          to market participants
                                     ``O'' followed                                     and the public.
                                     immediately by the level
                                     or price.

[[Page 76182]]

 
Option Type.......................  An indication of the type   P-...................  Information needed to
                                     of option. The option                              adequately describe the
                                     type may be displayed                              option to market
                                     with a two character code                          participants and the
                                     as follows: put (P-),                              public.
                                     call (C-), purchase to
                                     pay fixed vs. floating
                                     (PF), purchase to receive
                                     fixed vs. floating (RF)
                                     cap (PC), floors (F-),
                                     collar (RC), straddle (D-
                                     ), strangle (G-),
                                     amortizing (A-),
                                     cancelable (NC),
                                     compounding (DC), knock-
                                     in (KI), knock-out (KO),
                                     reverse knock-in (RI),
                                     reverse knock-out (RO),
                                     one touch (OT), no touch
                                     (NT), double one-touch
                                     (DO), double no touch
                                     (DN), butterfly (BU),
                                     collar (L-), condor (R-),
                                     callable inverse snowball
                                     (JC), other exotic option
                                     types (XX).
Option Family.....................  An indication of the style  EU...................  Information needed to
                                     of the option                                      adequately describe the
                                     transaction. The option                            option to market
                                     style/family may be                                participants and the
                                     displayed as a two letter                          public.
                                     code as follows: European
                                     (EU), American (AM),
                                     Bermudan (BM), Asian
                                     (AS), other option style/
                                     family (YY).
Option currency...................  An indication of the type   USD..................  Information needed to
                                     of currency of the option                          identify the type of
                                     premium. The option                                currency of the option
                                     currency may be reported                           premium to market
                                     in a commonly accepted                             participants and the
                                     code (e.g., the three                              public.
                                     character alphabetic ISO
                                     4217 currency code).
Option premium....................  An indication of the        50000................  Information needed to
                                     additional cost of the                             explain the market value
                                     option to the reportable                           of the option to market
                                     swap transaction as a                              participants and the
                                     numerical value, not as                            public at the time of
                                     the difference of the                              execution. This field
                                     premiums of the party's                            will allow the public to
                                     obligations to the                                 understand the price of
                                     reportable swap                                    the reportable swap
                                     transaction. This field                            transaction.
                                     shall be combined with
                                     the option currency field.
Option lockout period.............  An indication of the first  J19..................  Information is needed to
                                     allowable exercise date                            identify when the option
                                     of the option. Such                                can first be exercised
                                     option lockout date shall                          and to help market
                                     be rounded to the month                            participants and the
                                     and reported using the                             public evaluate the
                                     three character month and                          price of the option.
                                     year format used for
                                     futures contracts.
Option expiration.................  An indication of the date   Z20..................  Information is needed to
                                     that the option is no                              identify when the option
                                     longer available for                               can no longer be
                                     exercise. Such option                              exercised and to help
                                     expiration shall be                                market participants and
                                     rounded off to the month                           the public evaluate the
                                     and reported using the                             price of the option.
                                     three character month and
                                     year format used for
                                     futures contracts.
----------------------------------------------------------------------------------------------------------------


    Issued in Washington, DC, on November 19, 2010, by the 
Commission.
David A. Stawick,
Secretary of the Commission.

Statement of Chairman Gary Gensler

Real-Time Public Reporting of Swap Transaction Data

    I support the proposed rulemaking to implement a real-time public 
reporting regime for swaps. The proposed rules are designed to fulfill 
Congress's direction to bring public transparency to the entire swaps 
market, both standardized and customized swaps. This post-trade 
transparency will enhance price discovery and liquidity while ensuring 
anonymity and protection for large trades in appropriate cases. Per 
Congress's direction, the proposal requires real time reporting for 
swap transaction and pricing data to occur as soon as technologically 
practicable for trades other than trades of large notional size or 
block trades. Congress mandated that these trades be reported without 
delay regardless of whether they are standardized or customized.
    With regard to block trades or trades of large notional size, the 
proposed rule includes two important features: a time delay and a 
method to report the large sizes. With regard to the delay, the 
proposed rule includes a 15-minute delay on standardized blocks. This 
compares to the futures marketplace, which currently has a five-minute 
delay for blocks, and the equities marketplace, which has an even 
shorter delay. With regard to customized trades of large notional size, 
the proposal asks a series of questions as to whether a similar delay 
of 15 minutes would be appropriate for interest rate, currency and 
other financial swaps and what delays may be appropriate for customized 
large trades referencing physical commodities. The second important 
feature with regard to block trades or trades of large notional size is 
a reporting method that transactions greater than $250 million notional 
amount--even the very largest of trades--will just be reported as being 
greater than $250 million. This will protect anonymity and promote the 
liquidity of these large trades.
    The proposal on real time reporting includes the methods by which 
to calculate what a block trade is across the market for various swap 
instruments. This will be based on data collected by the swap data 
repositories in each of the asset classes. Lastly, the proposal 
includes an initial

[[Page 76183]]

implementation date of January 2012 to provide time for the initial 
setting of block sizes based on market data and time for market 
participants to prepare for such real time reporting requirements.
    Real time post-trade reporting is critical to promoting market 
integrity and to benefit the investing and hedging public. When 
corporations, municipal governments, farmers and merchants seek to 
hedge their risk, they will benefit from seeing an accurate picture of 
where similar transactions are being priced concurrent with their 
decision-making. It is an essential ingredient of well-functioning 
markets. Such transparency increases liquidity and enhances the price 
discover function of the market.

[FR Doc. 2010-29994 Filed 12-6-10; 8:45 am]
BILLING CODE P


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