[Federal Register Volume 75, Number 246 (Thursday, December 23, 2010)]
[Proposed Rules]
[Pages 80898-80945]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31133]



[[Page 80897]]

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Part II





Commodity Futures Trading Commission





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17 CFR Part 49



Swap Data Repositories; Proposed Rule

Federal Register / Vol. 75 , No. 246 / Thursday, December 23, 2010 / 
Proposed Rules

[[Page 80898]]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 49

RIN 3038-AD20


Swap Data Repositories

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or 
``Commission'') is proposing rules to implement new statutory 
provisions introduced by Title VII of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (``Dodd-Frank Act''). Section 728 of the 
Dodd-Frank Act amends the Commodity Exchange Act (``CEA'' or the 
``Act'') by adding new Section 21, which establishes registration 
requirements, statutory duties, core principles and certain compliance 
obligations for registered swap data repositories (``SDRs'') and 
directs the Commission to adopt rules governing persons that are 
registered, as such, under this Section.

DATES: Comments must be received by February 22, 2011.

ADDRESSES: You may submit comments, identified by RIN 3038-AC20, by any 
of the following methods:
    <bullet> Agency Web site, via its Comments Online process: http://comments.cftc.gov. Follow the instructions for submitting comments 
through the 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.
    <bullet> Federal eRulemaking Portal: http://www.Regulations.gov. 
Follow the instructions for submitting comments.

Please submit your comments using only one method.
    All comments must be submitted in English, or if not, accompanied 
by an English translation. Comments will be posted as received to 
http://www.cftc.gov. You should submit only information that you wish 
to make available publicly. If you wish the Commission to consider 
information that may be exempt from disclosure under the Freedom of 
Information Act (``FOIA''),\1\ a petition for confidential treatment of 
the exempt information may be submitted according to the established 
procedures in Sec.  145.9 of the Commission's regulations.\2\ The 
Commission reserves the right, but shall have no obligation, to review, 
pre-screen, filter, redact, refuse or remove any or all of your 
submission from http://www.cftc.gov that it may deem to be 
inappropriate for publication, such as obscene language. All 
submissions that have been redacted or removed that contain comments on 
the merits of the rulemaking will be retained in the public comment 
file and will be considered as required under the Administrative 
Procedure Act and other applicable laws, and may be accessible under 
FOIA.
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    \1\ 5 U.S.C. 552.
    \2\ 17 CFR 145.9.

FOR FURTHER INFORMATION CONTACT: Jeffrey P. Burns, Assistant General 
Counsel, Office of the General Counsel, at (202) 418-5101, 
<a href="/cdn-cgi/l/email-protection#e3898196918d90a380859780cd848c95"><span class="__cf_email__" data-cfemail="81ebe3f4f3eff2c1e2e7f5e2afe6eef7">[email protected]</span></a>; Susan Nathan, Senior Special Counsel, Division of 
Market Oversight, at (202) 418-5133, <a href="/cdn-cgi/l/email-protection#e0938e819488818ea083869483ce878f96"><span class="__cf_email__" data-cfemail="93e0fdf2e7fbf2fdd3f0f5e7f0bdf4fce5">[email protected]</span></a> and Adedayo 
Banwo, Counsel, Office of the General Counsel, at (202) 418-6249, 
<a href="/cdn-cgi/l/email-protection#dbbab9bab5acb49bb8bdafb8f5bcb4ad"><span class="__cf_email__" data-cfemail="95f4f7f4fbe2fad5f6f3e1f6bbf2fae3">[email protected]</span></a>, Commodity Futures Trading Commission, Washington, DC 
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20581.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
II. The Proposed Regulations: Part 49
    A. Requirements of Registration
    B. Duties of Registered SDRs
    1. Acceptance of Data
    2. Confirmation of Data Accuracy
    3. Recordkeeping Requirements
    4. Direct Electronic Access by the Commission
    5. Monitoring, Screening and Analyzing Swap Data
    6. Maintenance of Data Privacy
    7. Access to SDR Data
    8. Emergency Procedures
    C. Designation of Chief Compliance Officer
    D. Core Principles Applicable to SDRs
    1. Antitrust Considerations (Core Principle 1)
    2. Introduction--Governance Arrangements (Core Principle 2) and 
Conflicts of Interest (Core Principle 3)
    3. Governance Arrangements (Core Principle 2)
    4. Conflicts of Interest (Core Principle 3)
    E. Additional Duties
    1. System Safeguards
    2. Financial Resources
    3. Disclosure Requirements of Swap Data Repositories
    4. Non-Discriminatory Access and Fees
    F. Real Time Reporting
    G. Procedures for Implementing Swap Data Repository Rules
III. Effectiveness and Transition Period
IV. General Request for Comments
V. Related Matters
    A. Paperwork Reduction Act
    B. Cost-Benefit Analysis
    C. Antitrust Considerations
    D. Regulatory Flexibility Act
VI. List of Subjects

I. Background

    On July 21, 2010, President Obama signed into law the Dodd-Frank 
Act.\3\ Title VII of the Dodd-Frank Act \4\ amended the CEA \5\ to 
establish a comprehensive new regulatory framework for swaps and 
security-based swaps. The legislation was enacted to reduce risk, 
increase transparency, and promote market integrity within the 
financial system by, among other things: (1) Providing for the 
registration and comprehensive regulation of swap dealers (``SDs'') and 
major swap participants (``MSPs''); (2) imposing clearing and trade 
execution requirements on standardized derivative products; (3) 
creating robust recordkeeping and real-time reporting regimes; and (4) 
enhancing the Commission's rulemaking and enforcement authorities with 
respect to, among others, all registered entities and intermediaries 
subject to the Commission's oversight.
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    \3\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010), available at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.
    \4\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may 
be cited as the ``Wall Street Transparency and Accountability Act of 
2010.''
    \5\ 7 U.S.C. 1, et seq.
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    To enhance transparency, promote standardization and reduce 
systemic risk, Section 728 of the Dodd-Frank Act establishes a newly-
created registered entity--the SDR \6\--to collect and maintain data 
and information related to swap transactions as prescribed by the

[[Page 80899]]

Commission \7\ and to make such data and information directly and 
electronically available to regulators. Section 2(a)(13)(G) of the CEA, 
adopted by Section 727 of the Dodd-Frank Act, requires all swaps--
cleared or uncleared--to be reported to an SDR. Section 728 of the 
Dodd-Frank Act added to the CEA new Section 21 governing registration 
and regulation of SDRs, and directed the Commission to adopt 
regulations governing SDR duties and responsibilities specified in the 
legislation. Section 21 requires that SDRs be registered with the 
Commission,\8\ allows a derivatives clearing organization (``DCO'') to 
register as an SDR, and specifies that persons required to be 
registered as SDRs must register with the Commission whether or not 
they are also licensed as a bank or registered as a security-based swap 
data repository with the Securities and Exchange Commission 
(``SEC'').\9\ To register with the Commission and maintain 
registration, SDRs are required to comply with the duties and core 
principles set forth in Section 21 of the CEA as well as other 
requirements that the Commission may prescribed by rule.\10\
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    \6\ Section 721 of the Dodd-Frank Act amends Section 1a of the 
CEA to add the definition of SDR. Section 1a provides that the term 
``swap data repository means any person that collects and maintains 
information or records with respect to transactions or positions in, 
or the terms and conditions of, swaps entered into by third parties 
for the purpose of providing a centralized recordkeeping facility 
for swaps.'' 7 U.S.C. 1a(48). Currently there are global trade 
repositories for credit, interest rate, and equity swaps. Since 
2009, all G-14 dealers have submitted credit swap data to the 
Depository Trust & Clearing Corporation's (``DTCC'') Trade 
Information Warehouse. In January 2010, TriOptima launched the 
Global OTC Derivatives Interest Rate Trade Reporting Repository 
after selection by the Rates Steering Committee of the International 
Swaps and Derivatives Association to provide a trade repository to 
collect information on trades in interest rate swaps. In August 
2010, DTCC also launched the Equity Derivatives Reporting Repository 
for equity swaps and other equity derivatives. Other entities may 
also perform trade repository functions on a regional or more 
localized basis. In addition, a variety of firms also provide 
ancillary services and functions essential to the efficient 
operation of trade reporting of swaps. Trade repositories for other 
asset classes such as commodities and foreign currency have yet to 
be formally established but are expected to be developed in the near 
future in connection with the effective date of the Dodd-Frank Act.
    \7\ Regulations governing the SDRs' data collection and 
recordkeeping responsibilities are the subject of a separate 
proposed rulemaking under part 45 of the Commission's regulations. 
See 17 CFR part 45.
    \8\ The Dodd-Frank Act mandates that the Commission promulgate 
rules to implement these provisions by July 15, 2011. See Section 
712 of the Dodd-Frank Act.
    \9\ If a DCO so registers, then to the extent that final rules 
on governance and conflicts of interest, discussed infra Section 
II.D.2, differ between a DCO and an SDR, the DCO must meet the more 
stringent set of rules.
    \10\ Section 21(f)(4)(A) of the CEA, added by the Dodd-Frank 
Act, authorizes the Commission to develop one or more additional 
duties applicable to SDRs. 7 U.S.C. 24a(f)(4).
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    Pursuant to the specific duties outlined in Section 21(c) of the 
CEA, SDRs must (1) accept data; (2) confirm with both counterparties to 
the swap the accuracy of the data that was submitted; (3) maintain data 
according to standards prescribed by the Commission; (4) provide direct 
electronic access to the Commission or any designee of the Commission; 
(5) provide public reporting of swap data in the form and frequency as 
the Commission may require; (6) establish automated systems for 
monitoring and analyzing data (including the use of end-user clearing 
exemptions) at the direction of the Commission; (7) maintain user 
privacy; (8) on a confidential basis, pursuant to Section 8 of the 
CEA,\11\ upon request and after notifying the Commission, make data 
available to other specified regulators; and (9) establish and maintain 
emergency procedures. As a separate matter, prior to sharing 
information with specified entities, the SDR must, pursuant to Section 
21(d) of the CEA, receive a written agreement from each such entity 
stating that it will abide by the confidentiality provisions of Section 
8 of the CEA and agree to indemnify the SDR and the Commission for any 
litigation expenses relating to information provided under Section 8.
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    \11\ Section 8 of the CEA, 7 U.S.C. 12(e), establishes among 
other things the conditions under which the Commission may furnish 
information obtained in connection with the administration of the 
CEA to any department or agency of the United States; such 
information shall not be disclosed by such department or agency 
except in any action or proceeding under the laws of the United 
States to which it, the Commission or the United States is a party. 
Similarly, the Commission may furnish such information to a foreign 
futures authority if the Commission is satisfied that the 
information will not be disclosed by such foreign futures authority 
except in connection with an adjudicatory action or proceeding 
brought under the laws of such foreign government or political 
subdivision, or foreign futures authority, is a party.
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    Section 21(e) of the CEA requires that each SDR have a chief 
compliance officer (``CCO'') and specifies the duties of the CCO. 
Section 21(f) of the CEA establishes four core principles for SDRs. 
First, an SDR is prohibited from adopting any rule or taking any action 
that results in any unreasonable restraint of trade or imposing any 
material anticompetitive burden on the trading, clearing or reporting 
of transactions. Second, each SDR must establish governance 
arrangements that are transparent to fulfill the public interest 
requirements and to support the objectives of the federal government, 
owners and participants. Third, each SDR must establish and enforce 
rules to minimize conflicts of interest in the SDR's decision-making 
processes and establish a process for resolving conflicts of interest. 
Lastly, a fourth core principle provides that the Commission must 
establish additional duties for registered SDRs to minimize conflicts 
of interest, protect data, ensure compliance and guarantee the safety 
and security of the SDR and may develop additional duties taking into 
account evolving standards of the United States and the international 
community.\12\
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    \12\ See Section 21(f)(4) of the CEA, 7 U.S.C. 24a(f)(4).
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    The Commission notes that in May 2010, a working group jointly 
established by the Committee on Payment and Settlement Systems 
(``CPPS'') of the Bank of International Settlements (``BIS'') and the 
Technical Committee of the International Organization of Securities 
Commissions (``IOSCO'') published a consultative report entitled 
``Considerations for Trade Repositories in the OTC Derivatives 
Markets''(``Working Group Report'').\13\ The Working Group Report 
presents a set of factors to consider in connection with the design, 
operation and regulation of SDRs. A significant consideration of the 
Working Group Report is access to SDR data by appropriate regulators. 
As noted in this Working Group Report, a trade repository ``should 
support market transparency by making data available to relevant 
authorities and the public in line with their respective information 
needs.'' \14\ The Commission believes that the Dodd-Frank Act and 
proposed part 49 of the Commission's Regulations are consistent with 
the goals of the Working Group Report. Unless inconsistent with the 
statutory framework set forth in Section 21 of the CEA and related 
provisions, the Commission proposes that SDRs will largely follow the 
recommendations in the Working Group Report to enhance transparency, 
promote standardization and reduce systemic risk in the swaps market.
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    \13\ See CPSS-IOSCO Consultative Report, Considerations for 
Trade Repositories in the OTC Derivatives (May 2010), available at 
http://www.bis.org/publ/cpss90.pdf.
    \14\ Id.
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    Additionally, Section 752(a) of the Dodd-Frank Act directs the 
Commission to consult and coordinate with foreign regulatory 
authorities regarding the establishment of consistent international 
standards for the regulation of swaps and various ``swap entities.'' 
\15\ Consistent with this directive, the Commission believes that the 
data maintained by SDRs must be available to all appropriate foreign 
regulators consistent with their regulatory responsibilities and the 
Dodd-Frank Act. Accordingly, in support of its cooperative 
international approach to the regulation of SDRs, the Commission has 
consulted with various foreign regulatory authorities in promulgating 
the proposed rules.
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    \15\ The Dodd-Frank Act provides:
    In order to promote effective and consistent global regulation 
of swaps and security-based swaps, the Commodity Futures Trading 
Commission, the Securities and Exchange Commission, and the 
prudential regulators (as that term is defined in Section 1a(39) of 
the Commodity Exchange Act), as appropriate, shall consult and 
coordinate with foreign regulatory authorities on the establishment 
of consistent international standards with respect to the regulation 
(including fees) of swaps, security-based swaps, swap entities, and 
security-based swap entities and may agree to such information-
sharing arrangements as may be deemed to be necessary or appropriate 
in the public interest or for the protection of investors, swap 
counterparties, and security-based swap counterparties.
    Section 752(a) of the Dodd-Frank Act.
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    The Commission also notes the recent issuance by the European 
Commission

[[Page 80900]]

of its regulatory proposal related to OTC derivatives, central 
counterparties and trade depositories.\16\ It is the Commission's 
intention to harmonize its approach with that of the European 
Commission to the extent possible consistent with the statutory 
provisions of Dodd-Frank Act relating to SDRs.
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    \16\ See Proposal for a Regulation of the European Parliament 
and of the Council on OTC Derivatives, Central Counterparties, and 
Trade Depositories (the ``European Commission Proposal''), COM 
(2010) 484/5.
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    The Commission submits further that Section 21 of the CEA does not 
provide the Commission with the authority to exempt any entity 
performing the functions of an SDR from the registration requirements 
or any other regulatory duties established by the Dodd-Frank Act. 
However, swap activity that is strictly of a ``non-U.S.'' nature would 
be excluded from Commission registration and regulation. Specifically, 
Section 2(i) of the CEA, as amended by Section 722 of the Dodd-Frank 
Act, excludes from U.S. jurisdiction all swap activity that does not 
have a ``direct and significant connection with activities in, or 
effect on, commerce of the United States'', or which contravene 
regulations necessary to prevent evasion.\17\
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    \17\ Section 2(i) of the CEA, as amended by Section 722(d) of 
the Dodd-Frank Act, provides:
    (i) APPLICABILITY.--The provisions of this Act relating to swaps 
that were enacted by the Wall Street Transparency and Accountability 
Act of 2010 (including any rule prescribed or regulation promulgated 
under that Act), shall not apply to activities outside the United 
States unless those activities--
    (1) have a direct and significant connection with activities in, 
or effect on, commerce of the United States; or
    (2) contravene such rules or regulations as the Commission may 
prescribe or promulgate as are necessary or appropriate to prevent 
the evasion of any provision of this Act that was enacted by the 
Wall Street Transparency and Accountability Act of 2010.
    7 U.S.C. 2(i)(1)-(2).
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II. The Proposed Regulations: Part 49

    As discussed above, part 49 will contain the provisions that apply 
to registration and regulation of SDRs. Proposed Sec.  49.3 will 
establish the procedures and substantive requirements for registration 
as an SDR. Compliance with the statutory duties described in Section 
21(c) of the CEA is described in proposed Sec.  49.9 and detailed in 
proposed Sec. Sec.  49.10 through 49.18. Core principles applicable to 
SDRs as outlined in Section 21(f) are set forth in proposed Sec. Sec.  
49.19 through 49.22. The additional duties promulgated pursuant to 
Section 21(f)(4) of the CEA (Core Principle 4) are set forth in 
proposed Sec. Sec.  49.23 through 49.27.

A. Requirements of Registration

    Proposed Sec. Sec.  49.3-49.4 and 49.6-49.7 provide the substantive 
requirements and framework for SDR registration. The Proposed 
Regulations include provisions relating to: (1) Procedures for 
registration; (2) provisional registration; (3) an annual filing 
requirement; (4) withdrawal of application for registration; (5) 
reinstatement of dormant registration; (6) withdrawal of registration; 
(7) registration of successor entities; and (8) SDRs located in foreign 
jurisdictions. Each of the proposed Regulations is discussed below in 
turn.
1. Procedures for Registration--Proposed Sec.  49.3
    To implement the requirements of Section 21(a) of the CEA, as 
amended by Section 728 of the Dodd-Frank Act, and to ensure the 
Commission's ability to administer part 49 of the Commission's 
Regulations generally, the Commission proposes in Sec.  49.3 to 
establish application and approval procedures for any entity seeking 
registration as a SDR. The Commission, in connection with proposed 
Sec.  49.3, is proposing to require each SDR applicant to file for 
registration on proposed Form SDR.
    (a) Proposed Form SDR. Proposed Sec.  49.3(a) provides that 
applications for registration as an SDR must be filed electronically 
with the Commission on new Form SDR. Proposed Form SDR will be used for 
an initial or provisional registration as an SDR as well as any updates 
or amendments to registration. Each applicant will be required to 
provide the Commission with documents and descriptions pertaining to 
the (i) business organization, (ii) financial resources, (iii) 
technological capabilities and (iv) accessibility of services of the 
SDR.
    SDR applicants will be required to provide documents describing the 
applicant's legal status, including a copy of the constitution, 
articles of incorporation or association with all amendments, existing 
by-laws, rules or instruments corresponding with, and a description of 
the organizational and governance structure. SDRs must also submit 
copies of any applicable rules and regulations (as defined in revised 
Sec.  40.1),\18\ disclose any affiliates along with a brief description 
of the nature of the affiliation, and submit copies of any agreements 
between the SDR and third parties that will assist the SDR in complying 
with the duties set forth in Section 21(c) and the core principles 
specified in Section 21(f). If the applicant is a foreign entity, the 
entity is required to certify and provide an opinion of counsel that 
the SDR, as a matter of law, is able to provide the Commission with 
prompt access to the books and records of the SDR and that the SDR can 
submit to onsite inspection and examination by the Commission.
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    \18\ See Commission, Notice of Proposed Rulemaking: Revisions to 
part 40 (Provisions Common to Registered Entities), 75 FR 67282 
(Nov. 2, 2010).
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    Financial information filed as part of Form SDR would include (i) a 
balance sheet, (ii) statement of income and expenses, (iii) statement 
of sources and application of revenues and (iv) all notes or schedules, 
as of the most recent fiscal year. A balance sheet and an income and 
expense statement for each affiliate, as of the end of the most recent 
fiscal year, will also be required for those affiliates of the SDR that 
provide SDR regulatory services. If the applicant is a newly-created 
entity without sufficient time in operation, the applicant should 
provide pro forma financial statements for the most recent six months, 
or since inception of the entity, whichever occurs first. Except for 
pro forma financial statements prepared for newly-created entities, 
financial statements shall be prepared in conformity with generally 
accepted accounting principles (``GAAP'') applied on a basis consistent 
with that of the preceding financial statement.
    Applicants will be required to demonstrate operational capability 
through documentation such as technical manuals and/or third party 
service provider agreements that will be employed to provide services 
to the SDR. Applicants will also be required to set forth practices and 
procedures for accepting swap data and providing services to market 
participants. As required by proposed Sec.  49.27, access must be fair, 
open and non-discriminatory.
    (b) 180-Day Review Procedures. An entity that seeks to register as 
a SDR is required to electronically file Form SDR with the Commission 
in accordance with the instructions contained in Form SDR. The 
Commission will review Form SDR and, at or prior to the conclusion of a 
180-day period, by order either (i) grant registration; (ii) extend the 
180-day review period for good cause; or (ii) deny the application for 
registration. If deemed appropriate, the Commission may grant 
registration as a SDR subject to conditions. The 180-day review period 
will commence once a completed submission on Form SDR is submitted to 
the Commission, as determined solely in the discretion of the 
Commission. If the Commission denies an application for registration, 
it will specify the grounds for such denial. In the event the 
Commission denies an applicant

[[Page 80901]]

registration, such person may request an opportunity for a hearing 
before the Commission.
    (c) Standard for Approval. The Commission, in reviewing 
applications for SDR registration, will review whether SDR applicants 
are properly organized and have the capacity to assure the prompt, 
accurate and reliable performance of the SDR duties in Section 21(c), 
core principles in Section 21(f) and additional duties of Section 
21(f)(4). Subject to the ability of the Commission to extend the 180-
day period as noted above, the Commission would deny registration if it 
appears at the end of the 180-day period that the application (i) is 
materially incomplete; \19\ (ii) fails in form or substance to meet the 
requirements of Section 21 of the CEA and proposed part 49 of the 
Commission's Regulations; \20\ and/or (iii) is amended or supplemented 
in a manner that is inconsistent with proposed Sec.  49.3. The 
Commission, in each instance of the denial of an application for 
registration, will provide notification setting forth the deficiencies 
in the application, or the manner in which the application fails to 
meet the requirements of proposed part 49 of the Commission's 
Regulations.\21\
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    \19\ An SDR applicant that is denied registration based on an 
incomplete application would be permitted to re-file an application 
with the Commission.
    \20\ The Commission would deny the registration of a SDR 
applicant that is unable to demonstrate compliance with the 
statutory duties set forth in Section 21(c) of the CEA, 7 U.S.C. 
24a(c) and proposed Sec.  49.9 as well as the core principles set 
forth in Section 21(f) of the CEA, 7 U.S.C. 24a(f), and proposed 
Sec.  49.19.
    \21\ This provision is comparable to the designated contract 
market (``DCM'') and DCO applications set forth in Section 6 of the 
CEA, 7 U.S.C. 8.
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    (d) Amendments and Annual Filing. Proposed Sec.  49.3(a)(3) 
provides that if any information reported on Form SDR or any subsequent 
amendment becomes inaccurate, the SDR is required to promptly file an 
amendment on Form SDR updating such information. This requirement is 
applicable regardless of whether the information becomes inaccurate 
before or after an application for registration has been granted. 
Proposed Sec.  49.3(a)(3) also requires that each registered SDR 
annually file an amendment on Form SDR within 60 days after the end of 
each calendar year.
    (e) Service of Process. The Commission is proposing in proposed 
Sec.  49.3(a)(5) to require each SDR to designate and authorize on Form 
SDR an agent in the United States, other than a Commission official, to 
accept any notice or service of process, pleadings, or other documents 
in any action or proceedings against the SDR to enforce the CEA and 
related Regulations. If an SDR appoints another agent to accept such 
notice or service of process, then the SDR would be required to file 
promptly an amendment on Form SDR updating this information.\22\ 
Proposed Sec.  49.3(a)(5) is intended to conserve the Commission's 
resources and to minimize any logistical obstacles (e.g., locating 
defendants or respondents abroad) that the Commission may encounter 
when attempting to effect service.
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    \22\ See proposed Sec.  49.3(a)(5).
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    (f) Provisional Registration. Proposed Sec.  49.3(b) permits the 
Commission, upon the request of an applicant, to grant a provisional 
registration of an SDR, if such applicant is in substantial compliance 
with the standards set forth in proposed Sec.  49.3(a)(4). This 
application for provisional registration would be filed on proposed 
Form SDR. Such provisional registration will expire on the earlier of: 
(i) The date that the Commission grants or denies registration of the 
SDR; or (ii) the date that the Commission rescinds the provisional 
registration of the SDR. The Commission may rescind such provisional 
registration on the same grounds as those set forth in proposed Sec.  
49.3(a)(3).
    The proposed provisional registration would enable an SDR to comply 
with the Dodd-Frank Act upon its effective date (i.e., the later of 360 
days after the date of its enactment or 60 days after publication of 
the final rule implementing Section 21 of the CEA). The provisional 
registration would also allow the Commission to implement the 
registration requirements of the Dodd-Frank Act for SDRs while 
providing the Commission sufficient time to fully review the 
application of an SDR. An SDR that is provisionally registered with the 
Commission would be subject to Section 21 of the CEA and related 
regulations during the period in which the Commission is reviewing the 
SDR's application of registration.
    The Commission believes that the provisional registration should 
not be a permanent provision of part 49. Accordingly, proposed Sec.  
49.3(b) includes a ``sunset'' provision so that provisional 
registration would terminate 365 days from the effective date of 
proposed Sec.  49.3(b).
    Notwithstanding the availability of a provisional registration, the 
Commission encourages each SDR to apply for registration as soon as 
possible following the Commission's adoption of final part 49, to 
permit sufficient time for an SDR to answer any questions that the 
Commission staff may have and to provide additional information or 
documentation, if necessary. The Commission will review applications in 
the order in which they are received. Applications seeking provisional 
registration that are received close to the effective date of the SDR 
registration requirement may not be reviewed and approved by the 
effective date.
    (g) Withdrawal of Application for Registration. Proposed Sec.  
49.3(c) permits an applicant for registration as an SDR to withdraw its 
application by filing a request with the Commission. Such a voluntary 
withdrawal by the applicant SDR will not affect any action taken or to 
be taken by the Commission based upon conduct occurring during the time 
that the application for registration was pending with the Commission.
    (h) Reinstatement of Dormant Registration. Proposed Sec.  49.3(d) 
provides that the Commission must affirmatively re-instate the 
registration of a dormant SDR (as defined in revised Sec.  40.1 of the 
Commission's Regulations) \23\ prior to such dormant SDR accepting or 
re-accepting swap data.
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    \23\ See Provisions Common to Registered Entities, supra note 
18.
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    (i) Delegation of Authority. Proposed Sec.  49.3(e) delegates 
authority to the Director of the Division of Market Oversight (or 
designee) with the consultation of the General Counsel of the 
Commission (or designee) for certain matters relating to the 
sufficiency of the application on Form SDR filed with the Commission. 
In particular, the Commission in this proposed Regulation delegates to 
the Director of the Division of Market Oversight or designee, with the 
consultation of the General Counsel or designee, the authority to 
notify an applicant for registration as an SDR under Section 21 of the 
CEA that such application for registration is materially incomplete and 
that the running of the 180-day period is stayed. This delegation of 
authority does not prohibit the Commission from otherwise exercising 
its authority that would be delegated under this proposed Regulation. 
The Director of the Division of Market Oversight may also submit to the 
Commission for its consideration any matter which has been delegated 
under this proposed Regulation.
2. Withdrawal From Registration--Proposed Sec.  49.4
    Consistent with Section 7 of the CEA, proposed Sec.  49.4 permits a 
registered SDR to withdraw from registration by filing a notice of 
withdrawal with the Commission at least 90 days prior to the

[[Page 80902]]

named withdrawal date. As part of its notice of withdrawal, the SDR is 
required to: (1) Designate another SDR to serve as the custodian of the 
withdrawing SDR's books and records; (2) specify the location of the 
data and records; and (3) provide an opinion of counsel that the SDR is 
authorized to make such data and records available. Prior to the filing 
of a notice of withdrawal, a SDR must file an amended Form SDR to 
update any inaccurate information.
    The withdrawal of a SDR's registration will be effective on the 
60th day after receipt by the Commission of the notice of withdrawal, 
unless the Commission determines to extend or curtail the effectiveness 
of an SDR's registration by order, deemed necessary or appropriate and 
in the public interest.
    Proposed Sec.  49.4(c) provides that after an opportunity for 
hearing, the Commission may revoke the registration of a registered SDR 
if the Commission finds that any registered SDR has obtained its 
registration by making any false and misleading material statements or 
has violated or failed to comply with any provision of the CEA and 
Commission Regulations. Pending final determination of whether the 
registration of an SDR should be revoked, the Commission may suspend 
the registration of the SDR if it appears to the Commission, after 
notice and opportunity for hearing, to be necessary or appropriate in 
the public interest.
3. Equity Interest Transfer Notification--Proposed Sec.  49.5
    Proposed Sec.  49.5 would require SDRs to file with the Commission 
a notice of the equity interest transfer of ten percent or more, no 
later than the business day, as defined in revised Sec.  40.1,\24\ 
following the date on which the SDR enters into a firm obligation to 
transfer the equity interest.\25\ The notification must include and be 
accompanied by: (i) Any relevant agreement(s), including preliminary 
agreements; (ii) any associated changes to relevant corporate 
documents; (iii) a chart outlining any new ownership or corporate or 
organizational structure; (iv) a brief description of the purpose and 
any impact of the equity interest transfer; and (v) a representation 
from the registered SDR that it meets all of the requirements of 
Section 21 of the CEA and Commission regulations adopted thereunder. 
The SDR would also be required to amend any information that is no 
longer accurate on Form SDR consistent with the procedures set forth in 
proposed Sec.  49.3.
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    \24\ See Provisions Common to Registered Entities, supra note 
18.
    \25\ The Commission is proposing a 10 percent threshold because 
it believes that a change in ownership of such magnitude may have an 
impact on the operations of the SDR. The Commission believes that 
such impact may be present even if the change in ownership does not 
constitute a change in control. Given the potential impact that a 
change in ownership might have on the operations of a SDR, the 
Commission believes that it is appropriate to require such SDR to 
certify after such change that it continues to comply with all 
obligations under the CEA and Commission regulations.
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    The proposed Regulation requires that the registered SDR keep the 
Commission informed of the projected date that the transaction 
resulting in the equity interest transfer will be consummated, and 
provide to the Commission any new agreements or modifications to the 
original agreement(s) filed pursuant to this proposed Regulation. The 
registered SDR is required to notify the Commission of the consummation 
of the transaction on the business day in which it occurs. The proposed 
Regulation will enable Commission staff to consider whether any 
conditions contained in an equity transfer agreement(s) are 
inconsistent with the duties, responsibilities and core principles of a 
SDR.
    Proposed Sec.  49.5(c) would require the SDR upon a 10% or greater 
change in ownership to certify, within two business days following the 
date on which the change in ownership occurs, that such SDR meets all 
of the requirements of Section 21 of the CEA and proposed Regulations 
under Part 49 of the Commission's regulations. The proposed Regulation 
also requires that the SDR include as part of its certification whether 
any aspects of the SDR's operations will change as a result of the 
change in ownership, and if so, the SDR must provide a description of 
the changes. Proposed Sec.  49.5(c) also provides that the 
certification may rely on, and be supported by, prior materials and 
information submitted as part of an application for registration or new 
filings if necessary to update its previous filings.
    The Commission notes that there may be differences in notification 
procedures for transfers or changes in equity ownership of registered 
entities proposed by the Commission.
    Request for Comment. The Commission requests comment regarding the 
proposed notification procedures as follows:
    <bullet> Should there be uniformity or differentiation in 
procedures applied to different registered entities?
4. Registration of Successor Entities--Proposed Sec.  49.6
    Proposed Sec.  49.6(a) sets forth the process of registering 
successor entities of an SDR as the result of corporate change of 
control or other similar events. Specifically, the proposed Regulation 
provides that in the event of a corporate reorganization, merger, 
acquisition, bankruptcy or other similar corporate event that creates a 
new entity, the SDR is required to request a transfer of its 
registration, rules, and other matters, within 30 days of the 
succession. The registration of the predecessor SDR entity will be 
deemed to remain effective as the registration of the successor if the 
successor, within 30 days after such succession, files an application 
for registration on Form SDR, and the predecessor files a request for 
withdrawal of registration. The proposed Regulation would further 
provide that the registration of the predecessor SDR shall cease to be 
effective 90 days after the application for registration on Form SDR is 
filed by the successor SDR.\26\ In other words, the 90-day period would 
not begin to run until a complete Form SDR has been filed by the 
successor with the Commission.
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    \26\ See proposed Sec.  49.6(a).
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    The following are examples of the types of successions that would 
be required to be completed by filing an application: (1) An 
acquisition, through which an unregistered entity purchases or assumes 
substantially all of the assets and liabilities of the SDR and then 
operates the business of the SDR, (2) a consolidation of two or more 
registered entities, resulting in their conducting business through a 
new unregistered entity, which assumes substantially all of the assets 
and liabilities of the predecessor entities, and (3) dual successions, 
through which one registered entity subdivides its business into two or 
more new unregistered entities.
    Proposed Sec.  49.6(b) sets forth the process of registering 
successor entities of an SDR as the result of a change in the 
predecessor SDR's date or state of incorporation, form of organization, 
or composition of a partnership. In these cases, the successor SDR, 
within 30 days after the succession, must amend the registration of the 
predecessor SDR on Form SDR to reflect the changes. Such amendment 
would be deemed an application for registration filed by the 
predecessor and adopted by the successor. In all three types of 
successions, the predecessor must cease operating as an SDR. The 
Commission

[[Page 80903]]

preliminarily believes that it is appropriate to allow a successor to 
file an amendment to the predecessor's Form SDR in these types of 
successions because such successions do not typically result in a 
change of control of the SDR. The purpose of proposed Sec.  49.6 is to 
enable a successor SDR to operate without an interruption of business 
by relying for a limited period of time on the registration of the 
predecessor SDR until the successor's own registration becomes 
effective. The proposed Regulation is intended to facilitate the 
legitimate transfer of business between two or more SDRs and to be used 
only where there is a direct and substantial business nexus between the 
predecessor and the successor SDR. The proposed Regulation would not 
allow a registered SDR to sell its registration, eliminate substantial 
liabilities, spin off personnel, or facilitate the transfer of the 
registration of a ``shell'' organization that does not conduct any 
business. No entity would be permitted to rely on proposed Sec.  49.6 
unless it is acquiring or assuming substantially all of the assets and 
liabilities of the predecessor's SDR business.
    Proposed Sec.  49.6 would not apply to reorganizations that involve 
only registered SDRs. In those situations, the registered SDRs can 
continue to rely on their existing registrations. The proposed rule 
would also not apply to situations in which the predecessor intends to 
continue to engage in SDR activities. Otherwise, confusion may result 
as to the identities and registration statuses of the parties.
5. Swap Data Repositories Located in Foreign Jurisdictions--Proposed 
Sec.  49.7
    Proposed Sec.  49.7 relates to those SDR applicants that are 
located outside of the United States. This proposed Regulation is 
intended to enable the Commission to obtain necessary swap data and 
related books and records maintained by a SDR located outside of the 
United States. Proposed Sec.  49.7 would require each SDR located 
outside of the United States to provide an opinion of counsel that the 
SDR can, as a matter of law, provide the Commission with prompt access 
to its books and records and submit to onsite inspection and 
examination by the Commission. The Commission notes that each 
jurisdiction may have a different legal framework that may limit or 
restrict the Commission's ability to receive information from an SDR. 
An opinion of counsel regarding prompt access to books and records and 
onsite inspection and examination will allow the Commission to better 
evaluate an SDR's capability to meet the requirements of registration 
and ongoing supervision. Failure to provide an opinion of counsel may 
be a basis for the Commission to deny an application for registration.
    Request for Comment. The Commission requests comment on the 
questions set forth below regarding registration.
    (1) Are the instructions in proposed Form SDR clear? If not, 
identify any instructions that should be clarified and, if possible, 
offer alternatives.
    (2) Would any of the requested information on proposed Form SDR be 
burdensome for an SDR to supply? If so, explain.
    (3) Should the Commission require any additional information on 
proposed Form SDR? If so, what information and why?
    (4) Are there any items on proposed Form SDR that the Commission 
should not request? If so, which items and why?
    (5) Is the Commission's proposed registration process appropriate 
and sufficiently clear? If not, why not and what would be a better 
alternative?
    (6) If a SDR located outside of the United States is registered, 
should the registration process for the foreign SDR be any different 
than the Commission's proposed registration process?
    (7) Are there any factors that the Commission should take into 
consideration to ensure that a SDR located outside the United States 
seeking to register as an SDR can, in compliance with applicable 
foreign laws, provide the Commission with access to the SDR's books and 
records that are required pursuant to proposed Sec.  49.7 and can 
submit to onsite inspection and examination by the Commission?
    (8) Should the Commission consider any other factors relating to a 
SDR located outside of the United States with respect to the 
Commission's registration rules or in general?
    (9) Is the Commission's proposed rule regarding provisional 
registration appropriate? If not, why not?
    (10) What conditions should apply to the granting of a provisional 
registration? What criteria should the Commission consider for 
approving provisional registration applications?
    (11) Are the timeframes in the proposed registration process 
appropriate? If not, why not and what would be more appropriate 
timeframes?
    (12) Are the proposed factors in determining whether the Commission 
should grant or deny an application for registration appropriate and 
sufficiently clear? If not, why not? Should the Commission take into 
consideration any other factors in determining whether to grant or deny 
an SDR's application for registration?

B. Duties of Registered SDRs

    Section 21(c) of the CEA sets forth the minimum duties that a SDR 
is required to perform to become registered and to maintain 
registration. These statutory duties require that SDRs (i) accept swap 
data as prescribed by the Commission; (ii) confirm with both 
counterparties to a swap the accuracy of the data; (iii) maintain the 
data submitted; (iv) provide the Commission or its designee with direct 
electronic access to the swap data; (v) provide the necessary 
information as prescribed by the Commission to comply with the public 
reporting requirements set forth in Section 2(a)(13) of the CEA; (vi) 
establish automated systems for monitoring, screening, and analyzing 
swap data; (vii) maintain the privacy or confidentiality of any and all 
swap data that the SDR receives; (viii) provide access to the swap data 
to certain ``appropriate'' domestic and foreign regulators; and (ix) 
adopt and implement emergency procedures. In addition, the Commission 
pursuant to its authority under Sections 21(f)(4) and 8a(5) \27\ of the 
CEA also proposes to add by regulation four additional duties which 
would require that registered SDRs (i) adopt and implement system 
safeguards, including business continuity and disaster recovery (``BC-
DR'') plans; (ii) maintain sufficient financial resources; (iii) 
furnish market participant with a disclosure document setting forth the 
risks and costs associated with using the services of the SDR; and (iv) 
provide fair and open access and fees and charges that are equitable 
and non-discriminatory.
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    \27\ Section 8a(5) of the CEA, 7 U.S.C. 12a(5), authorizes the 
Commission to promulgate such rules and regulations as, in the 
judgment of the Commission, are reasonably necessary to effectuate 
any of the provisions or accomplish any of the purposes of the CEA. 
In connection with SDRs, Section 21(a)(3)(A)(ii), 7 U.S.C. 
24a(a)(3)(A)(ii) specifically requires that a SDR to be registered 
and maintain its registration must comply with any requirement that 
the Commission may impose by rule or regulation pursuant to Section 
8a(5) of the CEA.
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    The following subsections describe in detail the Regulations 
proposed by the Commission to implement SDR statutory duties set forth 
in Section 21(c) of the CEA.
1. Acceptance of Data--Section 21(c)(1) of the CEA
    The Commission in a companion release \28\ is proposing in new part 
45 to

[[Page 80904]]

the Commission's Regulations the data elements that must be reported 
and applicable to DCMs, DCOs, swap execution facilities (``SEFs''), 
foreign boards of trade (``FBOTs''),\29\ SDs, MSPs and/or end-users in 
connection with the reporting of such swap data to SDRs.\30\ These data 
elements and standards would include the reporting of continuation data 
throughout the life of the swap.\31\ In addition, the Data NPRM 
provides specific requirements for SDRs relating to (i) determining 
which counterparty must report to the SDR; \32\ (ii) third party 
facilitation of swap data reporting; \33\ (iii) reporting to a single 
SDR in connection with the reporting of swap data; \34\ (iv) required 
data standards; and (v) the reporting of errors and omissions.
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    \28\ See Commission, Notice of Proposed Rulemaking: Swap Data 
Recordkeeping and Reporting Requirements, 75 FR 76574 (Dec. 8, 2010) 
(the ``Data NPRM'').
    \29\ Proposed Sec.  48.1 defines a FBOT as ``any board of trade, 
exchange or market located outside of the United States, its 
territories or possessions, whether incorporated or unincorporated, 
where foreign agreements, contracts or transactions are entered 
into.'' See Commission, Notice of Proposed Rulemaking: Registration 
of Foreign Boards of Trade, 75 FR 70974 (Nov. 19, 2010) (expected to 
be codified at 17 CFR part 48). Since 1996, FBOT requests to provide 
direct access to their electronic trading and order matching systems 
(trading systems) from within the U.S. have been addressed by 
Commission staff via the no-action process set forth in Commission 
Regulation 140.99. See, e.g., Deutsche Terminborse, CFTC No-Action 
Letter, 1994-1996 Transfer Binder], Comm. Fut. L. Rep. (CCH) ] 
26,669 (Feb. 29, 1996), available at http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/96-28.pdf.
    \30\ As detailed in the Data NPRM, SDRs will also be required by 
proposed Sec.  45.4(a) to issue unique swap identifiers (``USIs''), 
used to identify each particular swap transaction, when both 
counterparties to a swap are not SDs or MSPs. The SDR would be 
required to transmit the USI to each counterparty and DCO (if 
applicable) involved in the swap as soon as technologically 
practicable.
    \31\ See proposed Sec.  45.3(b) detailed in the Data NPRM, supra 
note 28.
    \32\ Proposed Sec.  45.5 establishes a mechanism for 
counterparties to follow in choosing the counterparty to report in 
situations where both counterparties have the same hierarchical 
status, in order to prevent confusion or delay concerning this 
choice. Where both counterparties are SDs, or both are MSPs, or both 
are non-SD/MSP counterparties, the proposed regulations require the 
counterparties to agree as one term of their swap transaction which 
counterparty will fulfill reporting obligations with respect to that 
swap. In addition, and notwithstanding the other provisions in 
proposed Sec.  45.5, where only one counterparty to a swap is a U.S. 
person, the proposed Regulation would require the U.S. person to be 
the reporting counterparty.
    \33\ The Commission in proposed Sec.  45.6 permits registered 
entities and counterparties to contract with third-party service 
providers to facilitate their reporting obligations. However, 
registered entities and counterparties remain fully responsible for 
their reporting obligations.
    \34\ Proposed Sec.  45.7 would require that all swap data for a 
given swap must be reported to the SDR to which required primary 
economic terms data for that swap is first reported. The SDR 
receiving the initial report must transmit its own identity, 
together with the USI for the swap to each counterparty to the swap, 
to the SEF or DCM, if any, on which the swap was executed, and to 
the DCO, if any, to which the swap is submitted for clearing. 
Thereafter, the proposed Regulation requires that all data reported 
for the swap by any registered entity or any counterparty to the 
swap, and all corrections of errors and omissions in previously 
reported data, must be reported to that same SDR (or to its 
successor in the event that it ceases to operate).
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    As part of proposed Sec.  49.10, market participants will be 
required to fulfill their reporting obligations to SDRs in a reliable, 
secure, and efficient manner. Proposed Sec.  49.10 specifically 
requires that SDRs adopt policies and procedures that will enable the 
SDR to electronically accept data and other regulatory information.\35\ 
These policies and procedures must provide specific technological 
protocols for market participants in submitting swaps data to the SDR.
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    \35\ See Section 21(c)(1) of the CEA, 7 U.S.C. 24a(c)(1).
---------------------------------------------------------------------------

    Proposed Sec.  49.10 will also require SDRs to accept all swaps in 
an asset classes for which they have registered. The requirement is 
intended to minimize the number of swaps that are not accepted by any 
SDR by enabling market participants to easily identify a SDR that 
accepts particular asset classes. As described in proposed Sec.  49.3 
relating to registration, each SDR applying for registration on Form 
SDR will be required to specify the specific asset classes for which it 
will accept swap data. Proposed Sec.  49.2(a)(2) defines the term 
``asset class'' as those swaps in a particular broad category of goods, 
services or commodities underlying a swap. The asset classes include 
credit, equity, interest rates, currency,\36\ other commodities and 
such other asset classes as may be determined by the Commission.\37\ In 
proposing these five major asset 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 first 
category would encompass the underlying of any swap which is based, in 
whole or in part, on one or more reference rates, such as swaps of 
payments determined by fixed and floating rates. The second category 
would encompass the underlying of any swap that is based, in whole or 
in part, on rates of exchange between different currencies, changes in 
such rates or other aspects of such rates, including a foreign exchange 
option. The currency asset class includes foreign exchange swaps, as 
defined in Section 1a(25) of the CEA. The third category would 
encompass the underlying of any swap that is based, in whole or in 
part, on one or more broad-based indices related to instruments of 
indebtedness, including but not limited to any swap that is an index 
credit default swap or a total return swap on one or more indices of 
debt instruments.\38\ The fourth category would encompass the 
underlying of any swap that is based, in whole or in part, on one or 
more broad-based indices of equity securities, such as a total return 
swap on one or more equity indices. The fifth category would encompass 
the underlying of any swap not included in the interest rate, currency, 
credit or equity 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.
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    \36\ Section 1a(47)(iii) of the CEA states:
    Notwithstanding a written determination by the Secretary under 
clause (i), all foreign exchange swaps and foreign exchange forwards 
shall be reported to either a swap data repository, or, if there is 
no swap data repository that would accept such swaps or forwards, to 
the Commission pursuant to section 4r within such time period as the 
Commission may by rule or regulation prescribe.
    7 U.S.C. 1a(47)(E)(iii). Clause (i) of Section 1a(47)(E) 
provides:
    Foreign exchange swaps and foreign exchange forwards shall be 
considered swaps under this paragraph unless the Secretary makes a 
written determination under section 1b that either foreign exchange 
swaps or foreign exchange forwards or both--
    (I) should be not be regulated as swaps under this Act; and
    (II) are not structured to evade the Dodd-Frank Wall Street 
Reform and Consumer Protection Act in violation of any rule 
promulgated by the Commission pursuant to section 721(c) of that 
Act.
    7 U.S.C. 1a(47)(E)(iii).
    See also, Department of the Treasury, Notice and Request for 
Comments: Determination of Foreign Exchange Swaps and Forwards, 75 
FR 66829 (Oct. 29, 2010) and 75 FR 66426 (Oct. 28, 2010).
    \37\ As detailed in proposed Sec.  49.27, SDRs would be required 
to provide fair and open access to their services. The Commission 
submits that SDRs would not be permitted to discriminate in 
connection with the access to their services. As a result, market 
participants with sufficient technology resources for connectivity 
and the payment of fees would be granted access to the services of 
the SDR.
    \38\ This category does not encompass the underlying of a 
derivatives contract that is based on an instrument of indebtedness 
solely in connection with the swap's financing leg.
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    In addition, part 43 of the Commission's proposed regulations 
states that SDRs acting as ``real-time disseminators'' for the purposes 
of real-time reporting may require additional information to (1) match 
the real-time swap transaction and pricing data to data reported to the 
SDR; and/or (2) 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 an SDR acting as a real-time 
disseminator may include a transaction identification

[[Page 80905]]

code, the names of the parties to the swap, or such other additional 
information as may be necessary.\39\ Additionally, part 43 of the 
Commission's proposed regulations will also require registered SDRs to 
calculate the appropriate minimum block size for swaps for purposes of 
real-time reporting.
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    \39\ See proposed Sec.  43.4(c) set forth in Notice of Proposed 
Rulemaking: Real Time Public Reporting of Swap Transaction Data, 75 
FR 76140 (Dec. 7, 2010) (the ``Real Time NPRM'').
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    Proposed Sec.  49.10(c) would also require an SDR to establish 
sufficient policies and procedures to prevent a valid swap from being 
invalidated, altered or modified through the confirmation or recording 
process of the SDR. The Commission is concerned that a validly executed 
swap may, through contractual provisions or other practices of an SDR, 
be improperly invalidated. To this end, the Commission submits that 
SDRs should not be in a position to alter, amend or invalidate 
otherwise valid swaps of counterparties through the reporting process. 
In addition, proposed Sec.  49.10(d) would also require SDRs to 
establish procedures and provide facilities for effectively resolving 
disputes over the accuracy of the swap data and positions that are 
recorded in the SDR. In this manner, disputes can be resolved quickly 
and efficiently so that the integrity and reliability of SDR data 
reporting and recordkeeping is facilitated.
    Request for Comment. The Commission requests comment on the 
question set forth below on acceptance of data:
    (1) Should the Commission require an SDR to accept all swaps of a 
given asset class? If not, what other mechanism should the Commission 
use to prevent ``orphaned'' swaps (i.e., those swaps not accepted by an 
SDR)?
    (2) How should the Commission address swaps that do not clearly 
belong to a particular asset class or that could arguably belong to 
more than one asset class? Should the Commission allow an SDR that 
accepts swaps in one asset class to accept any swap that arguably 
belongs to that asset class, but which could also belong to a second 
asset class, without requiring the SDR to then accept all swaps in the 
second asset class?
    (3) Are there any circumstances under which a validly, executed 
swap should be modified or altered other than by the express agreement 
of the counterparties? What should be the role of the SDR in these 
circumstances? Should the SDR be able to alter or modify an existing 
swap based on a contractual arrangement with a reporting party?
2. Confirmation of Data Accuracy--Section 21(c)(2) of the CEA
    Section 21(c)(2) of the CEA, as adopted by Section 728 of the Dodd-
Frank Act, requires SDRs to ``confirm with both counterparties to the 
swap the accuracy of the data that was submitted.'' \40\ Proposed Sec.  
49.11 provides that an SDR must establish and adopt policies and 
procedures to ensure the accuracy of swap data that is reported to an 
SDR by DCMs, DCOs, SEFs, FBOTs, SDs, MSPs and/or end-users or certain 
third party service providers such as confirmation or matching service 
providers acting on their behalf. The specific form and content of the 
swaps data will be established by the Commission in proposed part 45 of 
the Commission's regulations relating to data elements and standards. 
In particular, proposed Sec.  49.11 requires that the SDR confirm with 
both counterparties to the swap the accuracy of the data and 
information submitted.\41\
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    \40\ Section 21(c)(2) of the CEA, 7 U.S.C. 24a(c)(2).
    \41\ The Data NPRM details and defines ``confirmation'' and 
``confirmation data.'' The term confirmation is proposed in Sec.  
45.1(b) to mean ``the full, signed legal confirmation by the 
counterparties of all of the terms of a swap.'' The term 
``confirmation data'' is proposed in Sec.  45.1(c) to mean ``all of 
the terms of a swap matched and agreed upon by the counterparties in 
confirming the swap.'' See Data NPRM, supra note 28.
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    Proposed Sec.  49.11 provides that in connection with the required 
confirmation, the SDR must confirm with each counterparty to the swap 
and receive acknowledgement of all data submitted as well as 
corrections of any errors.\42\ The acknowledgement and correction of 
errors must pertain to all information submitted by either counterparty 
or entity that has been delegated the reporting obligation. The SDR 
must keep a record of corrected errors and make that record available 
upon request to the Commission. Confirmation is unnecessary when the 
reporting obligation is borne by a SEF, DCM, DCO or a confirmation or 
matching service provider to whom the swap counterparty has delegated 
its reporting obligation. In these situations, the SDR must still 
ensure that the data and information it receives from such entity is 
accurate.
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    \42\ This requirement does not apply to real-time public 
reporting. See proposed Sec.  43.3(f), supra note 39.
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    In addition, proposed part 43 of the Commission's regulations 
relating to real-time reporting requires that registered SDRs which 
accept and publicly disseminate swap transaction and pricing data to 
also disseminate any cancellations and corrections to such data.\43\
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    \43\ See proposed Regulations 43.3(f)(3)-(4), supra note 39.
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3. Recordkeeping Requirements--Section 21(c)(3) of the CEA
    Proposed Sec.  49.12, which implements Section 21(c)(3) of the CEA, 
requires SDRs to, in accordance with the requirements of proposed Sec.  
45.2(f), maintain the books and records of all activity and data 
relating to swaps reported to the SDR.\44\ Proposed Sec.  45.2(f), 
relating to swap data recordkeeping requirements, requires that SDRs 
maintain reported swap data, consistent with the data elements 
described in proposed Sec.  45.9, throughout the life of such swap 
transaction plus an additional five year period, during which time the 
swap data must be readily accessible by the SDR and available to the 
Commission via real-time electronic access. In addition, proposed Sec.  
45.2(f) would also require the SDR to provide subsequent archival 
storage.\45\ This archival storage would require the SDR to be able to 
retrieve such swap data within three business days.
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    \44\ See Data NPRM, supra note 28.
    \45\ The Commission in the Data NPRM is requesting comment 
relating to the time period in which an SDR should be required to 
maintain archival storage of swap data records.
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    Consistent with proposed Sec.  45.2(g), proposed Sec.  49.12(c) 
would also require the books and records maintained by a SDR to be open 
to inspection upon request by any representative of the Commission, the 
United States Department of Justice, the SEC or by any representative 
of a prudential regulator as authorized by the Commission. The SDR 
would be required to provide copies to the Commission, either by 
electronic means, in hard copy, or both, as requested by the 
Commission.
    Proposed Sec.  49.12(d) would require each SDR that publicly 
disseminates swap data in real time to comply with the real time public 
reporting and recordkeeping requirements prescribed in part 43. In 
connection with real-time reporting, proposed Sec.  49.2(a)(9) defines 
``position'' to mean the gross and net notional amounts of open swap 
transactions aggregated by one or more attributes, including, but not 
limited to, the (i) underlying instrument, index, or reference entity; 
(ii) counterparty; (iii) asset class; (iv) long risk of the underlying 
instrument, index, or reference entity; and (v) short risk of the 
underlying instrument, index, or reference entity. Position data is 
required to be provided by SDRs to certain entities pursuant to Section

[[Page 80906]]

2(a)(13) of the CEA.\46\ The proposed term is designed to be 
sufficiently specific so that SDRs are aware of the types of positions 
that regulators may require an SDR to provide, while at the same time, 
provide enough flexibility to encompass the types of positions that 
regulators and the industry will find important as new types of swaps 
are developed.
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    \46\ See Section 727 of the Dodd-Frank Act.
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    The Dodd-Frank Act specifically directs the Commission to issue 
regulations to limit the amount of positions, other than bona fide 
hedge positions, that may be held by any person with respect to 
commodity futures and option contracts in exempt and agricultural 
commodities.\47\ The Data NPRM accordingly has proposed data reporting 
requirements that would require all persons reporting to SDRs to 
include futures contract equivalents for each swap transaction.\48\ As 
set forth below, the Commission requests comment on position data and 
how it should be maintained and monitored.
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    \47\ See Commission, Notice of Proposed Rulemaking: Position 
Reports for Physical Commodity Swaps, 75 FR 67258 (November 2, 
2010). The Commission in this proposal would require position data 
for not only futures and option contracts but also for economically 
equivalent swaps.
    \48\ See Data NPRM, supra note 28.
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    Request for Comment. The Commission requests comment on the 
questions set forth below on data maintenance:
    (1) Is the appropriate time period for readily accessible access to 
the transaction data the life of the particular swap plus at least five 
years after expiration of the swap? Should the Commission provide 
different recordkeeping requirements for transaction data and position 
data? For transaction data, would ten years after expiration of the 
applicable swap be more appropriate and why? What would be the benefits 
and burdens associated with each of these time periods? Are there other 
retention periods that would be more appropriate?
    (2) What is the appropriate time period for archival storage of SDR 
data and records?
    (3) What are the costs/benefits of requiring longer data retention 
requirements?
    (4) Should position data be maintained and monitored by SDRs? If 
not, in what manner should the Commission monitor speculative position 
limits that may include swaps? What would be the proper role of an SDR? 
What entity or entities should have the responsibility to aggregate and 
maintain the position data for regulatory purposes?
    (5) Should the Commission specify particular standards or 
procedures for calculating positions?
4. Direct Electronic Access to SDR by the Commission--Section 21(c)(4) 
of the CEA
    A critical function and responsibility of an SDR as set forth in 
Section 21(c)(4)(A) of the CEA is to provide ``direct electronic 
access'' to the Commission or its designee, which could include another 
registered entity.\49\ For purposes of proposed Sec.  49.17, ``direct 
electronic access'' is defined as ``an electronic system, platform or 
framework that provides internet or web-based access to real-time swap 
transaction data.'' \50\
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    \49\ The term ``registered entity'' is defined in Section 1a(40) 
of the CEA to include (i) a board of trade designated as a contract 
market under Section 5 of the CEA; (ii) a DCO registered under 
Section 5b of the CEA; (iii) a SEF registered under Section 5h of 
the CEA; (iv) a SDR registered under Section 21 of the CEA; and (v) 
with respect to a contract that the Commission determines is a 
significant price discovery contract, any electronic trading 
facility on which the contract is executed or traded. 7 U.S.C. 
1a(40).
    \50\ See proposed Sec.  49.17(b)(3).
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    Proposed Sec.  49.17 provides for two requirements in connection 
with ``direct electronic access'' that each SDR must develop. First, 
proposed Sec.  49.17 would require a SDR to provide the Commission or 
its designee with connectivity and access to the SDR's database of swap 
data and web-based services. Connectivity access and web-based services 
will allow the Commission or its designee to receive any and all 
information regarding a swap transaction that may be required for 
regulatory, examination and/or enforcement purposes on a real-time 
basis. Second, proposed Sec.  49.17 would also require the SDR to 
electronically deliver to the Commission or its designee, certain data 
in the form and manner prescribed by the Commission.
    Section 21(c)(5) of the CEA requires a registered SDR, at the 
direction of the Commission, to establish automated systems for 
monitoring, screening, and analyzing swap data. Pursuant to proposed 
Sec.  49.17,\51\ registered SDRs in connection with providing ``direct 
electronic access'' will also be required to provide the Commission 
with monitoring tools, capable of screening and analyzing swap data, 
identical to those provided to compliance staff and the CCO of the 
registered SDR, including, but not limited to, access to the staff of 
the registered SDR and/or third party service providers or agents 
familiar with the operations of the registered SDR, who can provide 
assistance to the Commission regarding data structure and content, web-
based services and various software.
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    \51\ Section 21(c)(5) of the CEA reads: ``A swap data repository 
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 affiliated entities.''
    7 U.S.C. 24a(c)(5).
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    Proposed Sec.  49.17 further provides that the swap data provided 
to the Commission by a registered SDR will be accessible only by 
authorized persons. The Commission will provide registered SDRs with a 
list of authorized users on a quarterly basis so that proper security 
protocols may be efficiently implemented.
    Request for Comment. The Commission requests comment on the 
following issues related to swap data access.
    (1) What are the advantages and disadvantages of requiring SDRs to 
provide a direct streaming of the data to the Commission or its 
designee? Should the Commission require periodic electronic transfer of 
data as an alternative? If so, how often should such transfer occur 
(e.g., hourly, a few times a day, every few days, once a week)?
    (2) What are the advantages and disadvantages of requiring SDRs to 
provide a user interface that permits the Commission or its designee 
access to the data maintained by the SDR and that provides the 
Commission or its designee with the ability to query or analyze the 
data in the same manner that is available to the SDR?
    (3) What would be the most feasible and cost-effective method for 
an SDR to provide direct electronic access to the Commission or its 
designee?
    (4) Are there other methods of providing direct electronic access 
to the Commission or its designee that the Commission should consider?
    (5) Are there specific reports or sets of data that the Commission 
should consider obtaining from SDRs to monitor risk exposures of 
individual counterparties to swap transactions, to monitor 
concentrations of risk exposures, or for other purposes?
    (6) In addition to the data already subject to the Commission's 
request, are there additional reports or sets of data that the 
Commission should consider obtaining from SDRs to evaluate systemic 
risk or that could be used for prudential supervision?
    (7) Are there any other reports or sets of data that the Commission 
should consider obtaining from SDRs?

[[Page 80907]]

5. Monitoring, Screening and Analyzing Swap Data--Section 21(c)(5) of 
the CEA
    Section 21(c)(5) of the CEA, as amended by Section 728 of the Dodd 
Frank Act, requires SDRs to implement such automated systems for 
``monitoring, screening, and analyzing swap data'' as the Commission 
may direct. In addition, Section 21(c)(5) also requires SDRs to 
establish automated systems to monitor, screen, and analyze data for 
end-user clearing exemption claims by individuals and affiliated 
entities.'' The Commission proposes to implement the requirements of 
Section 21(c)(5) through proposed Sec. Sec.  49.13 and 49.14, which 
closely resembles the statutory text, by requiring SDRs to monitor, 
screen, and analyze swap data in their possession, as directed by the 
Commission, including data related to end-user clearing exemptions 
claims.\52\ Proposed Sec.  49.13 also requires SDRs to establish and 
maintain sufficient information technology, staff, and other resources 
to fulfill these tasks. Section 21 of the CEA reflects SDRs' 
significant responsibilities in the new swaps market regulatory 
structure established by the Dodd-Frank Act. SDRs will function not 
only as warehouses for all swap transaction data, but also as potential 
sources of regulatory information for the Commission and other 
appropriate regulators.
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    \52\ Section 2(h)(7) of the CEA, 7 U.S.C. 2(h)(7) provides that 
the clearing requirement of Section 2(h)(1)(A) shall not apply to a 
swap if one of the counterparties (i) is not a financial entity; 
(ii) is using swaps to hedge or mitigate commercial risk; and (iii) 
notifies the Commission, in a manner set forth by the Commission, 
how it generally meets the financial obligations associated with 
entering into non-cleared swaps.
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    By its terms, Section 21(c)(5), requires that such automated 
systems be established ``at the direction of the Commission,'' but does 
not provide for specific functions which SDRs should undertake with 
respect to the swap transaction data in their possession.\53\ 
Similarly, while suggesting a role for SDRs in monitoring end-user 
clearing exemption claims, the only specific requirement of Section 
21(c)(5) is that SDRs have systems in place capable of fulfilling such 
requirements as the Commission may assign. The Commission proposes to 
implement the requirements of Section 21(c)(5) via proposed Sec.  49.13 
which, as summarized below, requires that SDRs: (1) Monitor, screen, 
and analyze all swap data in their possession as the Commission may 
require; (2) develop systems and resources as necessary to execute any 
monitoring, screening, or analyzing functions assigned by the 
Commission; and (3) monitor, screen, and analyze swap transactions 
which are reported to the SDR as exempt from clearing pursuant to 
Section 2(h)(7) of the CEA (i.e., end-user clearing exemption).
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    \53\ Id.
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(a) Proposed Sec.  49.13(a)
    Proposed Sec.  49.13(a) requires SDRs to monitor, screen, and 
analyze all swap data in their possession in such a manner as the 
Commission may require. An SDR's duties in this respect include routine 
monitoring, screening, and analysis to accomplish any swap surveillance 
objectives established by the Commission, and specific monitoring, 
screening, and analysis tasks based on ad hoc requests by the 
Commission. The Commission expects that SDRs will be required to 
compile, extract, filter, and report information necessary to assist 
the Commission in the fulfillment of its regulatory obligations with 
respect to swap markets. However proposed Sec.  49.13(b) only requires 
that SDRs undertake these functions at the Commission's request. The 
Commission will consider specific tasks to be performed by SDRs at a 
later date, as its knowledge of the regulatory oversight needs with 
respect to the swap markets increases.
(b) Proposed Sec.  49.13(b)
    Proposed Sec.  49.13(b) obligates SDRs to maintain sufficient 
information technology, staff, and other resources as necessary to 
fulfill any requirements that may arise through proposed Sec.  
49.13(a). It also requires SDRs to monitor their resources at least 
annually, and to make adjustments as needed to remain in regulatory 
compliance. Proposed Sec.  49.13(b) is modeled on existing and proposed 
Commission requirements applicable to other registered entities. For 
example, part 38 of the Commission's Regulations requires DCMs to have 
``arrangements and resources for effective trade practice 
surveillance'' and ``arrangements, resources and authority for 
effective rule enforcement.'' \54\ With respect to SDRs, the Commission 
also recognizes the necessity for adequate resource requirements given 
its expectation that SDRs may play a significant role in assisting the 
Commission to fulfill its regulatory mandate.
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    \54\ See 17 CFR 38, Appendix B, Core Principle 2(a)(1)-(2). See 
also Notice of Proposed Rulemaking Relating to Core Principle and 
Other Requirements for Designated Contract Markets approved for 
publication by the Commission at an open meeting on Dec. 1, 2010 and 
expected to be published shortly in the Federal Register (to be 
codified at 17 CFR part 38).
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(c) Proposed Sec.  49.14
    Pursuant to Section 2(h)(7) of the CEA, the Dodd-Frank Act creates 
a framework by which certain swap transactions may be exempt from the 
mandatory clearing requirement.\55\ Swap transactions may be exempt 
from clearing if one of the counterparties to a swap is (i) not a 
financial entity; \56\ (ii) is using swaps to hedge or mitigate 
commercial risk; \57\ and (iii) notifies the Commission as to how it 
generally meets its financial obligations associated with entering into 
non-cleared swaps (the so-called ``end-user'' clearing exemption).\58\ 
The Commission is expected in a subsequent proposed rulemaking to 
require that swap counterparties claiming the clearing exemption submit 
supplemental information along with transaction data and notification 
for any swap transaction claimed under the clearing exception. 
Counterparties may be required to answer entity-related identification 
questions, identify how they generally expect to meet their financial 
obligations associated with the non-cleared swaps, identify whether the 
swap claimed under the exemption is being used to hedge or mitigate 
commercial risk, and identify whether the transaction was approved by a 
governing body of the entity.
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    \55\ See Section 2(h)(1)(A) of the CEA, 7 U.S.C. 2(h)(1)(A).
    \56\ See Section 2(h)(7)(A)(i) of the CEA, 7 U.S.C. 
2(h)(7)(A)(i).
    \57\ See Section 2(h)(7)(A)(ii) of the CEA, 7 U.S.C. 
2(h)(7)(A)(ii).
    \58\ See Section 2(h)(7)(A)(iii) of the CEA., 7 U.S.C. 
2(h)(7)(A)(iii).
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    Section 2(h)(7) of the CEA--and more specifically Section 
2(h)(7)(F) of the CEA--also enables the Commission to monitor the use 
of clearing exemption claims and to prevent abuses by prescribing 
rules, issuing interpretations, or requesting information from persons 
claiming the clearing exemption.\59\ Although exempt from clearing, 
counterparties claiming the clearing exemption must nonetheless report 
the swap transaction to an SDR, and must provide the notification 
required pursuant to Section 2(h)(7)(A)(iii) of the CEA, including 
information regarding how the counterparty generally meets its 
financial obligations associated with non-cleared swaps, and any 
additional information which the Commission deems necessary to prevent 
abuse pursuant to Section 2(h)(7)(F) of the CEA.
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    \59\ See Section 2(h)(7)(F) of the CEA, 7 U.S.C. 2(h)(7)(F).
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    Proposed Sec.  49.14 is designed to implement the Commission's 
program

[[Page 80908]]

to monitor and prevent abuse of end-user clearing exemption claims. It 
requires SDRs to have automated systems capable of identifying, 
aggregating, sorting and filtering all swap transactions reported to an 
SDR that are exempt from clearing pursuant to Section 2(h)(7) of the 
CEA. Such systems are also required for information provided by end-
users to the SDR regarding how an end-user meets the requirements of 
Sections 2(h)(7)(A)(i)-(iii) of the CEA and any regulations promulgated 
by the Commission thereunder. The Commission believes it is important 
to monitor the use and claims of end user exemptions to prevent abuse 
and assure compliance with the required disclosures. At this time the 
Commission is only requiring that SDRs establish the infrastructure to 
fulfill the requirements of this rule, and any requirements for 
specific data processing will be set forth at a later time.
    Request for Comment. The Commission requests comment on the 
following issue relating to the monitoring of margin.
    <bullet> Should the Commission require SDRs to establish automated 
systems for monitoring, screening, and analyzing the reporting of 
margin required, and of margin on deposit, as proposed in new part 23 
of the Commissions Regulations? \60\
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    \60\ See Commission, Notice of Proposed Rulemaking: Regulations 
Establishing and Governing Duties of Swap Dealers and Major Swap 
Participants, 75 FR 71397 (Nov. 23, 2010).
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6. Maintenance of Data Privacy--Section 21(c)(6) of the CEA
    Proposed Sec.  49.16 would implement the statutory requirements of 
Section 21(c)(6) of the CEA as adopted by Section 728 of the Dodd-Frank 
Act to maintain the privacy and confidentiality of swap data provided 
to the SDR. In particular, Section 21(c)(6) of the CEA provides that an 
SDR shall ``maintain the privacy of any and all swap transaction 
information that the swap data repository receives from a SD, 
counterparty, or any other registered entity''.\61\ Proposed Sec.  
49.16 would also partially implement Section 21(f)(3) of the CEA, as 
adopted by Section 728 of the Dodd-Frank Act.\62\ Such section sets 
forth a conflicts of interest ``core principle'' applicable to an 
SDR.\63\ As detailed further below, the Commission has identified 
certain conflicts that may implicate access, disclosure, or use of SDR 
Information.\64\ SDR Information includes any information that an SDR 
receives from a reporting entity (i.e., the submitter(s) of the data, 
including, without limitation, market participants \65\ such as DCMs, 
DCOs, SEFs, SDs, MSPs, end-users and/or any other counterparties). The 
Commission emphasizes that SDRs will receive two separate ``streams'' 
of data: (i) data related to real-time public reporting which by its 
nature is publicly available and (ii) core data that is intended for 
use by the Commission and other regulators which is subject to 
statutory confidential treatment. Accordingly, pursuant to Sections 
21(c)(6) and 21(f)(3) (Core Principle 3--Conflicts of Interest) of the 
CEA, SDR information that is not subject to real-time public reporting 
should be treated as non-public and strictly confidential, so that it 
may not be accessed, disclosed, or used for purposes not related to SDR 
responsibilities under the CEA or the regulations thereunder, unless 
such use is explicitly agreed to by the reporting entities (i.e., the 
submitter(s) of the data). However, aggregated data that cannot be 
attributed to individual transactions or market participants may be 
made publicly available by SDRs.
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    \61\ See Section 21(c)(6) of the CEA, 7 U.S.C. 24a(c)(6).
    \62\ See Section 21(f)(3) of the CEA, 7 U.S.C. 24a(f)(3).
    \63\ According to such ``core principle,'' each SDR shall 
``establish and enforce rules to minimize conflicts of interest in 
[its] decision-making process * * *'' and ``establish a process for 
resolving conflicts of interest * * *'' Id.
    \64\ The term ``SDR Information'' is defined in proposed Sec.  
49.2(a)(15) to mean ``any information that the swap data repository 
maintains.'' Proposed Sec.  49.17(f) and (g) contain more specific 
prohibitions on access or use of SDR Information.
    \65\ The term ``market participant'' is defined in proposed 
Sec.  49.2(a)(6) to mean any person participating in the swap 
market, including, but not limited to, DCMs, DCOs, SEFs, SDs, MSPs, 
and any other counterparties to a swap transaction.
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    Request for Comment. The Commission requests comment on the 
questions set forth below regarding the limitations on the use of SDR 
Information.
    (1) Has the Proposal correctly defined ``SDR Information''?
    (2) Are there any other concerns regarding the use of SDR 
Information that the Commission should consider?
    (3) Would public availability of aggregated swap data be consistent 
with an SDR's obligation to keep swap data confidential?
    Proposed Sec.  49.16 would require the SDR to establish, maintain, 
and enforce specific policies and procedures to protect the privacy or 
confidentiality of any and all SDR Information. This would also include 
privacy or confidentiality policies and procedures for the sharing of 
SDR Information with SDR affiliates \66\ as well as certain non-
affiliated third parties.\67\ As noted above, swap data that is 
publicly disseminated in real-time by SDRs pursuant to proposed part 43 
of the Commission's Regulation would not be subject to the privacy and 
confidentiality requirements set forth in proposed Sec.  49.16.
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    \66\ The term ``affiliate'' is defined in proposed Sec.  
49.2(a)(1) to mean a person that ``directly, or indirectly, 
controls, is controlled by, or is under common control with, the 
swap data repository.''
    \67\ The term ``non-affiliated third party'' is defined in 
proposed Sec.  49.2(a)(7) to mean ``any person except (i) swap data 
repository, (ii) the swap data repository's affiliate, or (iii) a 
person employed by a swap data repository and any entity that is not 
the swap data repository's affiliate (and ``non-affiliated third 
party'' includes such entity that jointly employs the person).''
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    Proposed Sec.  49.16 would also require the SDR to establish and 
maintain safeguards, policies, and procedures that would, at a minimum, 
address the misappropriation or misuse of swap data that the Commission 
is prohibited (save for limited exceptions) from disclosing pursuant to 
Section 8 of the CEA (``Section 8 Material'').\68\ Section 8 Material 
is that information or material described in Section 8(a) of the CEA 
that the Commission is prohibited from publishing if it ``would 
separately disclose the business transactions or market positions of 
any person and trade secrets or names of customers.'' \69\

[[Page 80909]]

Such information would typically include trade data, position data, 
business transactions, trade secrets and any other non-public personal 
information about a market participant or any of its customers. 
Moreover, proposed Sec.  49.16 would require an SDR to also protect SDR 
information that is not Section 8 Material as well as intellectual 
property that may include trading strategies.
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    \68\ The term ``Section 8 Material'' is defined in proposed 
Sec.  49.2(a)(13) as ``the business transactions, trade data, or 
market positions of any person and trade secrets or names of 
customers.'' The legislative history of Section 8 of the CEA 
reflects substantial Congressional concern with protecting the 
legitimate interests of certain market participants. In particular, 
Congressional members were concerned that ``bona fide hedging 
transactions'' and ``legitimate'' or ``necessary'' speculative 
transactions would be impracticable if disclosure of positions or 
transactions was permitted. Congress was also concerned that 
publication of the names and market positions of large traders would 
facilitate manipulation and place traders at a competitive 
disadvantage. Section 8(e) generally provides that ``upon request,'' 
the CFTC may furnish ``any information'' in its possession. 7 U.S.C. 
12(e). See generally 61 Cong. Rec. 1321 (1921); Regulation of Grain 
Exchanges, Hearing on H.R. 8829 Before the H. Comm. on Agriculture, 
73rd Cong. (1934).
    \69\ Section 8(a) of the CEA outlines the scope and authority of 
the Commission to publish or otherwise publicly disclose information 
that is gathered in the course of its investigative and market 
surveillance activities. While the Section authorizes the Commission 
to publish or disclose the information obtained through the use of 
its powers, it expressly provides that, except in specifically 
prescribed circumstances, the Commission may not lawfully:
    publish data and information that would separately disclose the 
business transactions or market positions of any person and trade 
secrets or names of customers * * *. 7 U.S.C. 12(a).
    The statutory bar to disclosure of ``business transactions, 
market positions and trade secrets'' is qualified by several 
narrowly-defined exceptions set forth in Section 8(e) of the CEA. 7 
U.S.C. 12(e). Section 8(e) generally provides that ``upon request,'' 
the CFTC may furnish ``any information'' in its possession 
``obtained in connection with its administration of the [CEA]'' to 
another U.S. government department or agency, individual states, 
foreign futures authorities and foreign governments and any 
committee of the U.S. Congress that is ``acting within the scope of 
its jurisdiction.'' Id. In addition, Section 8(e) also provides an 
exception for information that was previously disclosed publicly and 
Section 8(b) permits disclosure of Section 8 Material in connection 
with congressional, administrative or judicial proceedings. Id.
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    The Commission submits that the abovementioned SDR safeguards, 
policies, and procedures addressing privacy and confidentiality--as 
well as misuse and misappropriation--of data should provide (i) 
limitations on access related to Section 8 Material and other SDR 
Information; (ii) standards related to controlling persons associated 
with the SDR trading for their personal benefit or the benefit of 
others; and (iii) adequate oversight to ensure SDR compliance with 
proposed Sec.  49.17. As set forth in proposed Sec.  49.17 discussed 
below in the section entitled ``Access to SDR Data,'' the SDR may share 
swap data and information with certain appropriate domestic and foreign 
regulators. Commercial use of the data maintained by an SDR--exclusive 
of real-time reporting data--would be strictly circumscribed as 
provided in proposed Sec.  49.17.
7. Access to SDR Data--Section 21(c)(7) of the CEA
    Section 21(c)(7) \70\ of the CEA requires a registered SDR, on a 
confidential basis pursuant to Section 8 of the CEA, upon request and 
after notifying the Commission, to make available all data \71\ 
obtained by the registered SDR, to ``Appropriate Domestic Regulators'' 
and ``Appropriate Foreign Regulators.''
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    \70\ Section 21(c)(7) of the CEA reads:
    A swap data repository shall-- * * * on a confidential basis 
pursuant to Section 8, upon request, and after notifying the 
Commission of the request, make available all data obtained by the 
swap data repository, including individual counterparty trade and 
position data, to--(A) each appropriate prudential regulator; (B) 
the Financial Stability Oversight Council; (C) the Securities and 
Exchange Commission; (D) the Department of Justice; and (E) any 
other person that the Commission determines to be appropriate * * *.
    7 U.S.C. 24a(c)(7). Included in the definition of Appropriate 
Domestic Regulators are all domestic entities listed in Section 
21(c)(7) and other persons that the Commission has determined to be 
appropriate.
    \71\ The sharing of data with an Appropriate Domestic Regulator 
by a registered SDR is subject to the confidentiality and 
indemnification restrictions in Section 21(d) of the CEA, 7 U.S.C. 
24a(d).
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    (a) Appropriate Domestic Regulator. An ``Appropriate Domestic 
Regulator'' is defined in proposed Sec.  49.17 as (i) the SEC; (ii) 
each prudential regulator identified in Section 1a(39) of the CEA with 
respect to requests related to any of such regulator's statutory 
authorities, without limitation to the activities listed for each 
regulator in Section 1a(39); (iii) the Financial Stability Oversight 
Council (``FSOC''); \72\ (iv) the Department of Justice; (v) the 
Federal Reserve Bank of New York (``FRBNY''); (vi) the Office of 
Financial Research (``OFR'') \73\ and (vii) any other person the 
Commission deems appropriate.\74\
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    \72\ FSOC consists of the Department of the Treasury 
(``Treasury''), the Board of Governors of the Federal Reserve System 
(the ''Fed''), the Office of the Comptroller of the Currency 
(``OCC''), the Bureau of Consumer Financial Protection, the SEC, the 
Commission, the Federal Deposit Insurance Corporation (``FDIC''), 
the Federal Housing Financial Agency, National Credit Union 
Administration Board and an independent member appointed by the 
President, by and with the advice and consent of the Senate, having 
insurance expertise.
    \73\ Under Section 152 of the Dodd-Frank Act, OFR will be 
established within the Department of the Treasury. OFR is intended 
to help facilitate improved financial market data gathering and 
analyses for financial regulators, including the new FSOC, which is 
responsible for monitoring the financial system as a whole in order 
to promote financial stability. OFR will support the FSOC and its 
member agencies by providing them with better financial data, 
information, and analysis so that policymakers and market 
participants have a more complete understanding of risk in the 
financial system. The data and analysis provided by the OFR will 
enhance the ability to identify emerging threats in financial 
markets, and will help ensure that the government has the 
information and analytical tools it needs to respond appropriately 
to future crises.
    \74\ The definition of ``Appropriate Domestic Regulator'' set 
forth above specifically includes those federal agencies or 
departments that are identified as prudential regulators in Section 
1a(39) of the CEA. Each prudential regulator will have access to all 
data related to any of its statutory authorities, without limitation 
to the activities listed for each regulator in Section 1a(39).
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    Although Section 21(c)(7) of the CEA does not specifically provide 
for the sharing of information between an SDR and the FRBNY or OFR, the 
Commission in proposed Sec.  49.17 is proposing to deem the FRBNY and 
OFR as ``appropriate'' persons under Section 21(c)(7) of the CEA. The 
FRBNY is one of 12 regional Federal Reserve Banks, which together with 
the Board of Governors of the Federal Reserve System comprise the 
Federal Reserve System. Each of the Federal Reserve Banks has features 
and/or characteristics of private corporations and quasi-public federal 
agencies.\75\ OFR will be an office within the Department of the 
Treasury with the primary function to support the FSOC in the 
monitoring and containment of systemic risk. OFR will also be a 
resource for the FSOC and all of its member agencies. In particular, 
OFR will support the agencies in their efforts to supervise financial 
institutions and the financial system as well as in their work to 
implement the Act. In addition, regulatory agencies will have access to 
new data collected by the OFR, which will improve regulators' ability 
to monitor risks within their respective focus areas.
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    \75\ The FRBNY oversees the Second Federal Reserve District, 
which includes the state of New York, the 12 northern counties of 
the state of New Jersey, Fairfield County in the state of 
Connecticut, Puerto Rico and the U.S. Virgin Islands. Though it 
serves a geographically small area compared with those of other 
Federal Reserve Banks, the FRBNY is the largest Reserve Bank as 
measured by assets and volume of activity.
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    (b) Appropriate Foreign Regulator. An ``Appropriate Foreign 
Regulator'' is defined in proposed Sec.  49.17 and contains a two-part 
analysis. First, proposed Sec.  49.17 defines as an Appropriate Foreign 
Regulator as those ``foreign regulators'' \76\ with an existing 
memorandum of understanding (``MOU'') or other similar type of 
information sharing arrangement executed with the Commission. Second, 
proposed Sec.  49.17 provides that foreign regulators without an MOU 
with the Commission may be deemed ``Appropriate Foreign Regulators'' as 
determined on a case-by-case basis by the Commission.
---------------------------------------------------------------------------

    \76\ The term ``foreign regulator'' is defined in proposed Sec.  
49.2(a)(4) to mean ``a foreign futures authority as defined in 
Section 1a(26) of the Commodity Exchange Act, foreign financial 
supervisors, foreign central banks and foreign ministries.''
---------------------------------------------------------------------------

    Proposed Sec.  49.17 details the filing procedures for foreign 
regulators who do not currently have an MOU with the Commission to 
obtain the status of an ``Appropriate Foreign Regulator.'' The foreign 
regulator in its application \77\ filed with the Commission is required 
to provide sufficient facts and details to permit the Commission to 
analyze whether the foreign regulator has appropriate confidentiality 
procedures and whether the foreign regulator is otherwise subject to 
local laws, regulations and/or customs that would require disclosure of 
information in contravention of the CEA.
---------------------------------------------------------------------------

    \77\ The form and manner of this filing will be prescribed by 
the Commission.
---------------------------------------------------------------------------

    In its review of applications filed by foreign regulators seeking 
the status of an ``Appropriate Regulator'' under proposed Sec.  49.17, 
the Commission must

[[Page 80910]]

be satisfied that any information potentially provided by a registered 
SDR will not be disclosed except in limited circumstances such as an 
adjudicatory action or proceeding involving the foreign regulator.\78\ 
In addition, the Commission on an ongoing basis, reserves the right in 
connection with any determination of an ``Appropriate Foreign 
Regulator'' to revisit or reassess a prior determination consistent 
with the CEA.
---------------------------------------------------------------------------

    \78\ See supra text accompanying note 69.
---------------------------------------------------------------------------

    (c) Procedure for Gaining Access to an SDR. Pursuant to proposed 
Sec.  49.17, an Appropriate Domestic Regulator or Appropriate Foreign 
Regulator will be required to request access with the registered SDR. 
The request will set forth in sufficient detail the basis for such 
request. The Appropriate Domestic Regulator or Appropriate Foreign 
Regulator must also certify (i) its statutory authority and (ii) that 
it is acting within the scope of its jurisdiction.
    A registered SDR must notify the Commission promptly by electronic 
means of any request received from an Appropriate Domestic Regulator or 
Appropriate Foreign Regulator. The registered SDR will then provide 
access to the requested swap data if satisfied that the Appropriate 
Domestic or Appropriate Foreign Regulator is acting within the scope of 
its authority.
    Request for Comment. The Commission requests the following comments 
relating to regulator access of data maintained by SDRs.
    (1) What mechanisms or other processes should the Commission 
consider in connection with Appropriate Domestic Regulators and/or 
Appropriate Foreign Regulators access to the data maintained by SDRs?
    (2) Should the Commission provide that Appropriate Domestic 
Regulators and Appropriate Foreign Regulators specifically request 
access from an SDR for each individual data request? Or, should the 
Commission provide for a single prospective data access request to SDRs 
by Appropriate Domestic and Foreign Regulators followed up by a 
certification at intervals determined by the Commission? For each 
specific instance of access or regulatory use of an SDR's data by 
Appropriate Domestic Regulators and Appropriate Foreign Regulators, 
should the Commission be notified in each case by the SDR?
    (3) Given the regulatory outlines set forth by the Dodd-Frank Act, 
what would be an appropriate way for regulators to access the swap data 
held by SDRs for the purpose of fulfilling their regulatory 
responsibilities?
    (d) Confidentiality and Indemnification Agreement. Consistent with 
proposed Sec.  49.18, the Appropriate Domestic Regulator or Appropriate 
Foreign Regulator prior to receipt of any requested data or information 
from a registered SDR must execute a ``Confidentiality and 
Indemnification Agreement'' with the registered SDR. This requirement 
is mandated by Section 21(d) of the CEA and applies to those entities 
set forth in Section 21(c)(7) of the CEA. Upon execution of a 
Confidentiality and Indemnification Agreement with a registered SDR, 
the Appropriate Domestic Regulator or Appropriate Foreign Regulator is 
required to notify and provide a copy of the Confidentiality and 
Indemnification Agreement to the Commission.
    The specific entities identified in Section 21(c)(7) include: (i) 
Each appropriate prudential regulator specified in Section 1a(39) of 
the; (ii) FSOC; (iii) SEC; (iv) Department of Justice; and (v) any 
other person the Commission deems appropriate, including foreign 
financial supervisors, foreign central banks and foreign ministries. 
Pursuant to the general authority of the Commission as set forth in 
Section 21(c)(7)(E) of the CEA to deem any other person 
``appropriate,'' the Commission proposes, for purposes of this 
Regulation, to deem ``appropriate'' the FRBNY, OFR and those foreign 
regulators with an existing MOU or other similar type of information 
sharing arrangement executed with the Commission.\79\
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    \79\ Any other Foreign Regulator that would require access to 
SDR data would need to be specifically approved and deemed 
``appropriate'' by the Commission as set forth in proposed Sec.  
49.17.
---------------------------------------------------------------------------

    Proposed Sec.  49.18 implementing Section 21(d) of the CEA requires 
that the Confidentiality and Indemnification Agreement executed with 
each Appropriate Domestic Regulator and/or Appropriate Foreign 
Regulator provide that such entity abide by the confidentiality 
requirements set forth in Section 8 of the CEA relating to the swap 
data that is to be provided by the registered SDR. Moreover, the 
Confidentiality and Indemnification Agreement must also provide that 
each Section 21(c)(7) entity agree to indemnify the registered SDR and 
the Commission for any expenses arising from litigation relating to the 
information provided under Section 8 of the CEA.
    The Commission is mindful of the potential difficulty that certain 
domestic and foreign regulators may have in executing a Confidentiality 
and Indemnification Agreement with an SDR pursuant to Section 21(d) of 
the CEA\80\ due to various statutory laws, regulations and/or customs. 
This provision could have the unintended effect of inhibiting access to 
the data maintained by SDRs, and, possibly hindering the ability of 
certain foreign regulators to fulfill their corresponding statutory 
mandates. To promote and ensure international harmonization as 
envisioned in Section 752 of the Dodd-Frank Act, the Commission 
continues to coordinate with its foreign regulatory counterparts on 
pending and proposed regulatory initiatives. To the extent consistent 
with the regulatory framework set forth in the Dodd-Frank Act, and the 
CEA generally, the Commission will endeavor to provide sufficient 
access to SDR data to appropriate domestic and foreign regulatory 
authorities.
---------------------------------------------------------------------------

    \80\ Section 21(d) of the CEA provides:
    Before the swap data repository may share information with any 
entity described in subsection (c)(7)-(1) the swap data repository 
shall receive a written agreement from each entity stating that the 
entity shall abide by the confidentiality requirements described in 
Section 8 relating to the information on swap transactions that is 
provided; and (2) each entity shall agree to indemnify the swap data 
repository and the Commission for any expenses arising from 
litigation related to the information provided under section 8.
    See 7 U.S.C. 24a(d).
---------------------------------------------------------------------------

    The Commission believes that access to the swap data maintained by 
SDR will assist regulators to, among other things, monitor risk 
exposures of individual counterparties to swap and swap transactions, 
monitor concentrations of risk exposures, and evaluate systemic risks. 
The Commission notes that, pursuant to Section 8(e) of the CEA, the 
Commission may share confidential information in its possession 
obtained in connection with its administration of the CEA to ``any 
foreign futures authority, department or agency of any foreign 
government or any political subdivision thereof'' acting within the 
scope of their jurisdiction.\81\
---------------------------------------------------------------------------

    \81\ See 7 U.S.C. 12(e).
---------------------------------------------------------------------------

    Request for Comment: The Commission requests comment from those 
regulators that may be affected by Section 21(d) of the CEA and the 
proposed related Regulations. In particular, the Commission requests 
comment on the following questions:
    <bullet> Are the proposed time frames for Commission response 
relating to access to swap data maintained by a SDR by Appropriate 
Domestic and Appropriate Foreign Regulators reasonable? Should the 
Commission provide for an expedited or emergency procedure?

[[Page 80911]]

    (e) Access to SDRs by Third Party Service Providers. Section 
21(c)(3) \82\ of the CEA directs registered SDRs to maintain data in 
such form and manner as may be required by the Commission. Section 
21(c)(6) \83\ of the CEA requires registered SDRs to maintain the 
privacy of any and all swap data that the registered SDR receives from 
a SD, counterparty, or any other registered entity. The operations of 
registered SDRs may require them to provide occasional access to data 
and information to third party service providers for the purpose of 
obtaining certain technology and SDR infrastructure services. Proposed 
Sec.  49.17 permits such access provided these third party service 
providers have implemented strict confidentiality procedures that 
protect data and information from improper disclosure. Prior to swap 
data access, third party service providers will be required to execute 
a ``Confidentiality Agreement'' setting forth minimum confidentiality 
procedures and permissible uses of data received.
---------------------------------------------------------------------------

    \82\ Section 21(c)(3) reads: ``A swap data repository shall-- * 
* * maintain the data described in paragraph (1) in such form, in 
such manner, and for such period as may be required by the 
Commission.'' 7 U.S.C. 24a(c)(3).
    \83\ Section 21(c)(6) reads: ``A swap data repository shall-- * 
* * maintain the privacy of any and all swap transaction information 
that the swap data repository receives from a swap dealer, 
counterparty, or any other registered entity.'' 7 U.S.C. 24a(c)(6).
---------------------------------------------------------------------------

    (f) Access to SDRs by Market Participants. Section 21(c)(6) of the 
CEA requires registered SDRs to maintain the privacy and 
confidentiality of any and all swap transaction information that the 
registered SDR receives from a SD, counterparty, or any other 
registered entity. As mentioned above, Section 21(f)(3) \84\ of the CEA 
requires an SDR to establish and enforce rules to mitigate conflicts of 
interest, among other things. As detailed further below, the Commission 
has identified certain conflicts that may implicate access to SDR 
Information. Consequently, in partial implementation of Sections 
21(c)(6) and 21(f)(3) of the CEA, proposed Sec.  49.17 generally 
prohibits access to swaps data maintained by a registered SDR by market 
participants, such as commercial end-users, SDs and MSPs unless the 
specific data was originally submitted by such party.
---------------------------------------------------------------------------

    \84\ See supra text accompanying notes 62-63.
---------------------------------------------------------------------------

    (g) Commercial Use of Data Maintained by the SDR. As outlined by 
Sections 21(c)(6) and (c)(7) of the CEA, Congress in the Dodd-Frank Act 
was concerned with maintaining the confidentiality of information 
provided to registered SDRs by SDs, counterparties or any other 
Commission-registered entity.\85\ Furthermore, as outlined in Section 
21(f)(3) of the CEA, Congress in the Dodd-Frank Act was concerned that 
conflicts of interest may affect SDR operations. As detailed below, the 
Commission has identified certain conflicts of interest that may 
implicate commercial use of SDR Information (other than swap data 
subject to real-time public dissemination). In response to concerns 
reflected in Sections 21(c)(6), 21(c)(7), and 21(f)(3), the Commission 
believes that ``commercial use'' of any data submitted and maintained 
by an SDR must be severely restricted. The privacy and confidentiality 
concerns set forth in Section 21(c)(6) of the CEA do not apply to the 
swap data subject to proposed part 43 of the Commission's Regulations, 
which set forth the requirements for real-time public reporting of swap 
data by SDRs.
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    \85\ 7 U.S.C. 24a(c)(6)-(7).
---------------------------------------------------------------------------

    Therefore, in partial implementation of Sections 21(c)(6), 
21(c)(7), and 21(f)(3), proposed Sec.  49.17 generally provides that 
SDR Information (as defined in proposed Sec.  49.2(a)(13)) may not be 
used for commercial or business purposes by the registered SDR or any 
of its affiliated entities. In connection with its obligation to 
maintain the privacy and confidentiality of SDR Information as outlined 
in Sections 21(c)(6), 21(c)(7), and 21(f)(3) of the CEA, registered 
SDRs are required to adopt and implement adequate ``firewalls'' to 
protect the swaps data required to be maintained under proposed Sec.  
45.2 \86\ and Section 21(c)(3) of the CEA from any improper, commercial 
use.
---------------------------------------------------------------------------

    \86\ See Data NPRM, supra note 28.
---------------------------------------------------------------------------

    Proposed Sec.  49.17 permits a limited exception to the commercial 
use restrictions for market participants, such as end-users, SDs and 
MSPs, who submit SDR Information maintained by the registered SDR. The 
exception requires that the registered SDR must receive the express 
written consent of the counterparties to the swap. The Commission is 
concerned that a registered SDR may attempt to use this limited 
``commercial use'' exception as a condition for the reporting of end-
users, SDs and/or MSPs swap transactions. Accordingly, in proposed 
Sec.  49.27 the Commission submits that a registered SDR must be 
equitable and must not discriminate against submitters of data 
regardless of whether such a submitter has agreed to any ``commercial 
use'' of its data.
8. Emergency Procedures--Section 21(c)(8) of the CEA
    Section 21(c)(8) of the CEA, as amended by Section 728 of the Dodd-
Frank Act, provides that a ``swap data repository shall establish and 
maintain emergency procedures, backup facilities, and a plan for 
disaster recovery that allows for the timely recovery and resumption of 
operations and the fulfillment of the responsibilities and obligations 
of the organization.'' \87\ Section 21(c)(8) of the CEA reflects SDRs' 
critical role as central storehouses of information in the new swap 
market structure established by the Dodd-Frank Act. In particular, it 
recognizes that SDRs must be available to meet their statutory 
obligations in all circumstances, and that swap data must be readily 
accessible to the Commission and other regulators even in emergency 
situations. To effectuate the purposes of Section 21(c)(8) of the CEA, 
the Commission proposes Sec.  49.23, which requires SDRs to adopt 
specific policies and procedures for the responsible exercise of 
emergency authority in the event of natural, man-made, information 
technology, and other, emergencies.
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    \87\ Section 21(c)(8) of the CEA. 7 U.S.C. 24a(c)(8).
---------------------------------------------------------------------------

    While SDRs are a new type of registered entity created by Dodd-
Frank, proposed Sec.  49.23 applies existing emergency procedure 
concepts borrowed from analogues in the Commission's regulatory 
experience. For example, prior to the enactment of the Dodd-Frank Act, 
DCMs were subject to former DCM Core Principle 6, which contemplated 
exigent circumstances that might justify the exercise of emergency 
authority by a DCM.\88\ The application guidance for former DCM Core 
Principle 6 set forth the Commission's requirements for emergency 
procedures. It stated, in part, that a DCM ``should have clear 
procedures and guidelines for contract market decision-making regarding 
emergency intervention in the market, including procedures and 
guidelines to avoid conflicts of interest while carrying out such 
decision making.'' \89\ The application guidance also stated that a 
DCM's procedures and guidelines for the exercise of emergency authority 
should include ``notifying the Commission of the exercise of [emergency 
authority], explaining how conflicts of interest are minimized, and 
documenting the contract market's decision-making process and the

[[Page 80912]]

reasons for using its emergency authority.'' \90\
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    \88\ Former Section 5(d)(6) of the CEA, 7 U.S.C. 7(d)(6).
    \89\ 17 CFR part 38, App. B, Application Guidance for former 
Core Principle 6.
    \90\ Id.
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    The Commission has generally found that procedures implemented by 
DCMs in response to former DCM Core Principle 6 allowed for adequate 
responses in the event of emergencies.\91\ Accordingly, the Commission 
is proposing new application guidance and acceptable practices to 
implement emergency procedures core principles for both DCMs and SEFs 
that are modeled on former DCM Core Principle 6 and its application 
guidance.\92\ Similarly, the Commission's proposed Sec.  49.23 for SDR 
emergency procedures is modeled on relevant provisions of the statutory 
text, application guidance, and acceptable practices, as applicable, 
for the former and current DCM and SEF emergency procedures core 
principles.
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    \91\ The Commission notes that former DCM Core Principle 6, and 
its successor Core Principle 6 pursuant to Section 735 of the Dodd-
Frank Act, both incorporate market-specific emergencies and 
responses into their statutory requirements. For example, under both 
core principles, a DCM's emergency authority must include the 
authority to liquidate or transfer open positions in any contract; 
the authority to suspend or curtail trading in any contract; and the 
authority to require market participants in any contract to meet 
special margin requirements. The emergency policies and procedures 
required of SDRs pursuant to proposed Sec.  49.23 do not incorporate 
these market-specific concepts as they are not relevant to SDRs.
    \92\ The new DCM emergency procedures core principle is also 
enumerated as DCM Core Principle 6 and codified in Section 5(d)(6) 
of the CEA, 7 U.S.C. 7(d)(6); it is substantively similar to its 
predecessor. The new SEF emergency procedures core principle is 
enumerated as SEF Core Principle 8 and codified in Section 5h(f)(8) 
of the CEA, 7 U.S.C. 7b-3(f)(8).
---------------------------------------------------------------------------

(a) Emergency Policies and Procedures Required--Proposed Sec.  49.23(a)
    Proposed Sec.  49.23(a) requires that an SDR establish policies and 
procedures for the exercise of emergency authority in the event of any 
emergency, including but not limited to, natural, man-made, and 
information technology emergencies. Proposed Sec.  49.23(a) will mirror 
language in the application guidance for former DCM Core Principle 6, 
which states that DCMs must ``have clear procedures and guidelines for 
contract market decision-making regarding emergency intervention. * * * 
'' Similar language is also proposed in the guidance and acceptable 
practices for new DCM Core Principle 6 and new SEF Core Principle 8. 
Proposed Sec.  49.23(a) and the new DCM Core Principle 6 and new SEF 
Core Principle 8 reflect the Commission's view that these policies must 
be transparent to the Commission and to market participants whose 
transaction data resides at the SDR.
(b) Invocation of Emergency Authority--Proposed Sec.  49.23(b)
    Proposed Sec.  49.23(b) requires an SDR to enumerate the 
circumstances under which it is authorized to invoke its emergency 
authority, and the procedures that it must follow to declare an 
emergency. Such policies and procedures must also address the range of 
measures that an SDR is authorized to take when exercising emergency 
authority.
    Proposed Sec.  49.23(b) helps ensure that an SDR can respond 
quickly to an emergency but reduces the possibility that SDRs will 
exercise such authority arbitrarily. Similar to the Commission's view 
on the development of emergency policies and procedures, proposed Sec.  
49.23(b) reflects the Commission's view that the use of emergency 
authority should be governed by transparent standards and be 
predictable to the Commission and to swap market participants.
(c) Designation of Persons Authorized to Act in an Emergency--Proposed 
Sec.  49.23(c)
    Proposed Sec.  49.23(c) requires an SDR to designate, and notify 
the Commission of, one or more persons authorized to exercise emergency 
authority on its behalf. In the event that such designated persons are 
unavailable, an SDR must also establish a chain of command. The 
Commission believes that the proposed regulation reduces the 
possibility that emergency situations will be exacerbated by a lack of 
leadership and inadequate line of decisional authority.
(d) Conflicts of Interest--Proposed Sec.  49.23(d)
    Proposed Sec.  49.23(d) requires that SDR policies and procedures 
include provisions to avoid conflicts of interest in any decision made 
pursuant to emergency authority. SDR policies and procedures must also 
require that the SDR's CCO be consulted in any emergency decision that 
may raise potential conflicts of interest.\93\ The Commission believes 
that specific policies and procedures designed to avoid conflicts in 
the exercise of emergency authority will focus SDR decision-makers' 
attention and guide their decisions in ways that minimize the risk for 
actual or perceived conflicts of interest.
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    \93\ Section 21(e) of the CEA, 7 U.S.C. 24a(e) creates the 
position of CCO and prescribes detailed responsibilities to CCOs. 
Section 21(e)(2)(C) tasks CCOs with ``resolv[ing] any conflicts of 
interest that may arise'' in consultation with the SDR's board of 
directors, a body performing a similar function as the board, or the 
senior officer of the SDR. Proposed Sec.  49.26 specifically 
implements new Section 21(e). 7 U.S.C. 24a(2)(C).
---------------------------------------------------------------------------

(e) Notification to the Commission--Proposed Sec.  49.23(e)
    Proposed Sec.  49.23(e) requires that an SDR's policies and 
procedures include provisions for the exercise of emergency authority 
to notify the Commission as soon as reasonably practicable regarding 
any invocation of emergency authority by the SDR. When notifying the 
Commission of an exercise of emergency authority, an SDR must explain 
the reasons for taking such emergency action, explain how conflicts of 
interest were minimized, and document the decision-making process. In 
addition, any underlying documentation must be made available to the 
Commission upon request. These proposed provisions will help keep the 
Commission informed of emergency situations, allow the Commission to 
participate as necessary, and facilitate any review that the Commission 
may wish to conduct at a later date.
    Request for Comment. The Commission requests comment on the 
questions set forth below on SDR duties:
    (1) Should the Commission impose any additional duties on SDRs? For 
example, should SDRs be required to provide downstream processing 
services or ancillary services (e.g., managing life-cycle events and 
asset servicing)?
    (2) Should the Commission establish more specific requirements to 
avoid contract invalidation by an SDR?

C. Designation of Chief Compliance Officer

    Section 21(e) of the CEA, as amended by Section 728 of the Dodd-
Frank Act, creates an internal regulatory framework for all SDRs, with 
the position of CCO serving as a focal point for compliance with the 
CEA and applicable Commission Regulations. The three-part structure of 
Section 21(e) requires, first, that every SDR designate an individual 
to serve as CCO.\94\ Second, it enumerates specific duties for CCOs and 
establishes their responsibilities within an SDR.\95\ Third, it 
outlines the

[[Page 80913]]

requirements of a mandatory annual report from SDRs to the Commission, 
which must be prepared and signed by an SDR's CCO.\96\ The Commission 
proposes to implement Section 21(e) of the CEA through proposed Sec.  
49.22, which further develops the already robust CCO requirements 
enacted by the Dodd-Frank Act. Section 21(e) of the CEA and proposed 
Sec.  49.22 are summarized below.
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    \94\ See Section 21(e)(1) of the CEA, 7 U.S.C. 24a(e)(1).
    \95\ See Section 21(e)(2) of the CEA, adopted as part of the 
Dodd-Frank Act, providing that a CCO shall:
    (A) report directly to the board or to the senior officer of the 
swap data repository; (B) review the compliance of the swap data 
repository with respect to the requirements and core principles 
described in this section; (C) in consultation with the board of the 
swap data repository, a body performing a function similar to the 
board of the swap data repository, or the senior officer of the swap 
data repository, resolve any conflicts of interest that may arise; 
(D) be responsible for administering each policy and procedure that 
is required to be established pursuant to this section; (E) ensure 
compliance with this Act (including regulations) relating to 
agreements, contracts, or transactions, including each rule 
prescribed by the Commission under this section; (F) establish 
procedures for the remediation of noncompliance issues identified by 
the chief compliance officer through any--(i) compliance office 
review; (ii) look-back; (iii) internal or external audit finding; 
(iv) self-reported error; or (v) validated complaint; and (G) 
establish and follow appropriate procedures for the handling, 
management response, remediation, retesting, and closing of 
noncompliance issues.
    7 U.S.C. 24a(e)(2).
    \96\ See Section 21(e)(3)(A) of the CEA, adopted as part of the 
Dodd-Frank Act, providing that a CCO shall:[A]nnually prepare and 
sign a report that contains a description of--(i) the compliance of 
the swap data repository of the chief compliance officer with 
respect to this Act (including regulations); and (ii) each policy 
and procedure of the swap data repository of the chief compliance 
officer (including the code of ethics and conflict of interest 
policies of the swap data repository). (B) REQUIREMENTS.--A 
compliance report under subparagraph (A) shall--(i) accompany each 
appropriate financial report of the swap data repository that is 
required to be furnished to the Commission pursuant to this section; 
and (ii) include a certification that, under penalty of law, the 
compliance report is accurate and complete.
    7 U.S.C. 24a(e)(3)(A)-(B).
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    The first provision of Section 21(e)-21(e)(1)--provides only for 
the self-explanatory requirement that each SDR designate an individual 
to serve as its CCO. The second provision of Section 21(e) offers a 
detailed description of a CCO's role within an SDR. Specifically, 
Section 21(e)(2) includes seven enumerated duties incumbent upon all 
CCOs, and thereby outlines the internal regulatory structure of an SDR 
as contemplated by the Dodd-Frank Act. The enumerated duties of CCOs 
include: (1) Reporting directly to the SDR's board of directors or to 
its senior officer; (2) reviewing an SDR's compliance with the 
requirements and core principles described in Section 21; (3) resolving 
any conflicts of interest that may arise, in consultation with the 
board of directors or the senior officer of the SDR; (4) administering 
any policy or procedure that is required to be established by an SDR 
pursuant to Section 21; (5) ensuring compliance with the CEA and 
Commission Regulations as they pertain to agreements, contracts, or 
transactions entered into by an SDR; (6) establishing procedures for 
the remediation of noncompliance issues identified by the CCO; and (7) 
establishing and following appropriate procedures for the handling, 
management response, remediation, retesting, and closing of 
noncompliance issues.\97\
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    \97\ 7 U.S.C. 24a(e)(2).
---------------------------------------------------------------------------

    Finally, the third provision of Section 21(e)-21(e)(3)--requires 
CCOs to prepare and sign annual compliance reports on behalf of their 
SDRs. The annual compliance reports must describe an SDR's compliance 
with the CEA and Commission Regulations. They must also describe the 
policies and procedures of the SDR, including the code of ethics and 
conflict of interest policies. In addition, the annual compliance 
reports must include ``a certification that, under penalty of law, the 
report is accurate and complete.'' \98\ The annual compliance report 
must be furnished to the Commission as it may prescribe.
---------------------------------------------------------------------------

    \98\ 7 U.S.C. 24a(e)(3)(B)(ii).
---------------------------------------------------------------------------

    Proposed Sec.  49.22 develops each of these statutory provisions in 
greater detail and grants CCOs the regulatory authority necessary to 
fulfill responsibilities in each regard.
1. Definition of Board of Directors--Proposed Sec.  49.22(a)
    Proposed Sec.  49.22(a) defines ``board of directors'' as ``the 
board of directors of a swap data repository or for those swap data 
repositories whose organizational structure does not include a board of 
directors, a body performing a function similar to a board of 
directors.'' The proposed definition reflects the various forms of 
business associations which an SDR could conceivably take, including 
forms which do not include a corporate board of directors. It also 
reflects the flexibility in Section 728 of the Dodd-Frank Act, which 
refers, for example, to ``a body performing a function similar to a 
board'' in discussing the duties of a CCO pursuant to Section 
21(e)(2)(C) of the CEA.
    Request for Comment. The Commission requests comment on the 
following.
    (1) Should the Commission develop additional rules around the types 
of bodies which may perform board-like functions at an SDR, depending 
on their business form?
    (2) Should the proposed definition of board of directors 
appropriately address issues related to parent companies, subsidiaries, 
affiliates, and SDRs located in foreign jurisdictions? Does the 
proposed rule allow for sufficient flexibility with regard to an SDR's 
business structure?
2. Designation and qualifications of Chief Compliance Officer--Proposed 
Sec.  49.22(b)
    Proposed Sec.  49.22(b)(1) requires an SDR to establish the 
position of CCO, designate an individual to serve in that capacity and 
provide that individual with the authority and resources to develop and 
enforce policies and procedures necessary to fulfill the duties set 
forth for CCOs in the Dodd-Frank Act and Commission regulations. In 
addition, proposed Sec.  49.22(b)(1) provides that CCOs must have 
supervisory authority over all staff acting in furtherance of the CCO's 
statutory and regulatory obligations. In short, proposed Sec.  
49.22(b)(1) establishes CCOs as the focal-point of an SDR's regulatory 
compliance functions.
    Proposed Sec.  49.22(b)(2) details minimum competency standards for 
CCOs. It requires that CCOs have the background and skills necessary to 
fulfill the responsibilities of the position, and prohibits anyone who 
would be disqualified from registration under Sections 8a(2) or 8a(3) 
of the CEA from serving as a CCO. Although the CCO would not be 
required to register with the Commission, as the primary individual 
with responsibility for ensuring an SDR's legal compliance, the 
Commission believes that CCOs should meet the same standard as those 
individuals who are required to register, as set forth in the list of 
statutory disqualifications under Sections 8a(2) and (3) of the CEA. 
These standards largely consist of a high degree of responsibility and 
requirements relating to integrity and honesty in financial and 
business dealings.
    The Commission is seeking comment on whether additional limitations 
should be placed on persons who may be designated as a CCO. For 
example, the function of the CCO and in-house or general counsel may 
have inherent tension between, for example, the duty to defend the swap 
data repository and duties as a CCO.
    Request for Comment.
    (1) The Commission requests comment on whether the provisions of 
proposed Sec.  49.22(b)(1) are sufficient to ensure that a CCO has the 
authority and resources necessary to fulfill his or her statutory and 
regulatory obligations.
    (2) The Commission also requests comment regarding the 
qualifications that should be required of a CCO, and whether the 
requirements expressed in proposed Sec.  49.22(b)(2) are sufficient.
    (3) Should there be additional restrictions placed on who is 
qualified to be designated as a CCO? The Commission requests comment on

[[Page 80914]]

whether restricting a CCO from serving as the General Counsel or other 
attorney within the legal department of a SDR would address conflict of 
interest concerns.
3. Appointment, Supervision, and Removal of Chief Compliance Officer--
Proposed Sec.  49.22(c)
    Taken together, proposed Sec. Sec.  49.22(c)(1), 49.22(c)(2), and 
49.22(c)(3) provide the supervisory regime applicable to CCOs. Proposed 
Sec.  49.22(c)(1) requires that a CCO be appointed by a majority of the 
SDR's board of directors or senior officer, and that a majority of the 
board or senior officer be responsible for approving the CCO's 
compensation. An SDR must notify the Commission within two business 
days of appointing a new CCO. The proposed regulation also requires the 
CCO to meet at least annually with the board of directors to discuss 
the effectiveness of the CCO's administration of the compliance 
policies adopted by the registrant. The meeting or meetings would 
create an opportunity for a CCO and the directors to speak freely about 
any sensitive issues of concern to any of them, including any 
reservations about the cooperativeness or compliance practices of the 
registrant's management. Finally, proposed Sec.  49.22(c)(1) also 
provides that the senior officer of a SDR may assume responsibility for 
appointing the CCO and approving his or her compensation.
    Proposed Sec.  49.22(c)(2) addresses routine oversight of an SDR's 
CCO. It allows an SDR with a board of directors to grant oversight 
authority to either its board or to its senior officer. The proposed 
regulation is modeled on the terms of Section 21(e)(2)(A) of the CEA, 
which requires a CCO to ``report directly to the board or to the senior 
officer of the swap data repository.''
    Request for Comment. The Commission requests comment regarding the 
appropriate reporting relationship for the CCO of an SDR that has both 
a senior officer and a board of directors.
    (1) In such cases, should a CCO report to the SDR's board rather 
than to its senior officer?
    (2) What potential conflicts of interest might arise if a CCO 
reports to the senior officer rather than to the board, and how might 
those conflicts be mitigated?
    (3) In addition, the Commission requests comment regarding whether 
``senior officer'' of an SDR should be a defined term, and if so, how 
the term should be defined.
4. Removal of CCO--Proposed Sec.  49.22(c)(3)
    Proposed Sec.  49.22(c)(3) requires approval of a majority of an 
SDR's board of directors to remove a CCO. The Commission believes that 
these removal provisions will help insulate CCOs and their decision-
making from day-to-day commercial pressures that they may otherwise 
experience. If an SDR does not have a board, the proposed regulation 
provides that the CCO may be removed by its senior officer. Proposed 
Sec.  49.22(c)(3) also requires an SDR to notify the Commission in 
writing within two business days of the removal or voluntary departure 
of its CCO by providing a statement describing the circumstances 
surrounding his or her departure.\99\ The Commission believes that this 
provision will help protect CCOs from undue influence or retaliatory 
termination by the board or the senior officer of the SDR.
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    \99\ Upon the removal or voluntary departure of a CCO, proposed 
Sec.  49.22(c)(3) requires and SDR to appoint an interim CCO 
immediately and a permanent replacement as soon as practicable. See 
proposed Sec.  49.22(c)(3).
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    Proposed Sec. Sec.  49.22(c)(1) and 49.22(c)(3) seek to provide an 
SDR's CCO with a measure of independence from management in the 
performance of his or her duties, and to ensure that such duties are 
executed in the most effective and impartial manner possible.
    Request for Comment. The Commission requests comment on any 
additional measures that should be required to adequately protect CCOs 
from undue influence in the performance of their duties. The Commission 
is particularly interested in how it might offer such protection to a 
CCO who reports to his or her senior officer, either at the SDR's 
choosing or because the SDR does not have a board of directors. In 
addition, the Commission also requests comment on whether the provision 
that would require a majority of a board of directors to remove the CCO 
is sufficiently specific.
5. Duties of the Chief Compliance Officer--Proposed Sec.  49.22(d)
    Proposed Sec.  49.22(d) details the duties of a CCO, as well as his 
or her authority within an SDR. The proposed regulation codifies and 
expands upon the CCO duties already set forth in Section 21(e)(2) of 
the CEA. These duties include overseeing and reviewing compliance with 
the CEA and Commission regulations, as well as resolving, in 
consultation with the board of directors or the senior officer, any 
conflicts of interest that may arise. The proposed Regulation also 
lists a number of potential conflicts that may confront a CCO. The list 
of conflicts of interest indicates the types of conflicts that the 
Commission believes an SDR's CCOs should be aware of, but it is not 
exhaustive.
    Proposed Sec.  49.22(d) also requires that the CCO establish and 
administer a written code of ethics and policies and procedures 
designed to prevent violations of the CEA and Commission regulations. 
The Commission believes that such written documentation will serve as a 
useful guide for the SDR's management and staff, as well as for swap 
participants who will be submitting data to the SDR. It will also help 
the Commission to evaluate the SDR's compliance and adherence to its 
own internal standards. Finally, proposed Sec.  49.22(d) requires that 
a CCO establish and follow procedures for the remediation and closing 
of any noncompliance issues that are identified. To assist the CCO in 
meeting this responsibility, proposed Sec.  49.22(b)(1), summarized 
above, grants a CCO oversight authority over all compliance functions 
and staff acting in furtherance of those compliance functions. The 
CCO's authority would also extend to any activities performed by the 
SDR to verify that other entities are in compliance with applicable 
laws and regulations, such as the verification of the timeliness of 
certain swap data, pursuant to proposed Sec.  49.15. The Commission 
recognizes that the staff that assists a CCO may not be dedicated to 
the CCO full-time; however, the proposed regulation would ensure that a 
CCO has authority over any staff and resources while they are acting in 
furtherance of compliance functions.
    Request for Comment. The Commission requests comment regarding 
proposed Sec.  49.22(d). Comments should address any additional CCO 
duties which the Commission should include in the proposed regulation. 
In addition, they should specifically address a CCO's role in managing 
conflicts of interest within an SDR, the types of conflicts which 
commenters believe might arise within an SDR, and how and by whom those 
conflicts should be resolved.
6. Preparation and Submission of Annual Compliance Report--Proposed 
Sec. Sec.  49.22(e) and 49.22(f)
    Section 21(e)(3) of the CEA requires a CCO to prepare an annual 
compliance report. As discussed above, the Commission believes that 
this annual compliance report should give the Commission a complete and 
accurate picture of an SDR's compliance

[[Page 80915]]

program. Proposed Sec.  49.22(e) details the information that must be 
included in the annual compliance report. The report must include: (i) 
A description of the SDR's written policies and procedures, code of 
ethics and conflicts of interest policies; (ii) a detailed review of 
the SDR compliance with Section 21 of the CEA, including an assessment 
by the CCO of the effectiveness of the SDR's policies and procedures in 
ensuring compliance with Section 21 of the CEA and a discussion of 
areas for improvement; (iii) a description of any material changes to 
the policies and procedures that were made to these since the last 
annual compliance report; (iv) a description of the financial, 
managerial, operational, and staffing resources set aside for the SDR's 
compliance program; (v) a description of any material compliance 
matters, including instances of noncompliance, that were identified in 
the year prior to the filing of the report; and (vi) any objections to 
the annual compliance report by the board or senior officer of the SDR. 
In addition to the above information, proposed Sec.  49.22(e) also 
requires the annual report to include a certification by the CCO that, 
under penalty of law, the compliance report is accurate and complete.
    Proposed Sec.  49.22(f)(1) sets forth the procedures for the review 
of the annual compliance report by the board of directors of the SDR or 
senior officer, prior to submission to the Commission. While the board 
or senior officer has a chance to review the annual compliance report 
before submission, the report is not subject to their approval. 
Proposed Sec.  49.22(f)(1) explicitly prohibits the board or senior 
officer from forcing the CCO to make any material changes to the 
report. The purpose of this review is to permit the members of the 
board or the senior officer to provide the Commission with any 
objections they might have to the report. The Commission believes that 
the prohibition against the board and senior officer making changes to 
the annual compliance report will allow the CCO to make a complete and 
accurate assessment of the SDR's compliance program.
    Proposed Sec.  49.22(f)(2) describes the process for submission of 
the report to the Commission. The proposed Regulation requires that the 
annual compliance report be electronically provided to the Commission 
not more than 60 days after the end of the calendar year. If a CCO 
determines that an annual compliance report filed with the Commission 
has a material error or if material non-compliance is identified after 
filing, proposed Sec.  49.22(f)(3) would require a SDR to promptly file 
an amended report. This amended report must also include the 
certification by the CCO as to the accuracy and completeness made in 
the initial submission of the report. If a CCO is unable to file an 
annual compliance report within 60 days of the end of the calendar 
year, proposed Sec.  49.22(f)(4) would permit a CCO to request the 
Commission to grant an extension of time to file its compliance report 
based on substantial undue hardship. Extensions for the filing deadline 
would be granted at the discretion of the Commission. Additionally, to 
protect the trade secrets of the SDR and the security of the data held 
by the SDR, the proposed Regulation requires that annual compliance 
reports filed pursuant to Sec.  49.22 be treated as exempt from 
mandatory public disclosure for purposes of FOIA \100\ and the Sunshine 
Act \101\ and parts 145 and 147 of Commission Regulations.
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    \100\ See 5 U.S.C. 552.
    \101\ See 5 U.S.C. 552b(b).
---------------------------------------------------------------------------

    Request for Comment. The Commission request comment on its proposed 
regulations regarding the preparation and submission of an SDR's annual 
compliance report.
    (1) Should the annual compliance report contain additional content 
beyond what is proposed in Sec.  49.22(e)? Are additional provisions 
necessary to ensure that an SDR's board of directors cannot adversely 
influence the content of an annual compliance report as drafted by the 
CCO?
    (2) In the alternative, are additional provisions necessary to 
insure that individual directors or other SDR employees have an 
adequate opportunity to register any concerns or objections they might 
have to the contents of an annual compliance report?
    The Commission also requests comment relating to insulating an 
SDR's CCO from undue influence or coercion.
    (1) Should the Commission adopt a regulation that prohibits an 
officer, director or employee of the SDR or related person to coerce, 
manipulate, mislead, or fraudulently influence the CCO in performing 
his or her duties?
    (2) Is it necessary to adopt regulations to address potential 
conflicts between and among an SDR's compliance, commercial, and 
ownership interests?
    (3) If so, what should such regulations entail, and what specific 
conflicts of interest should they address?
7. Recordkeeping--Proposed Sec.  49.22(g)
    Proposed Sec.  49.22(g) details SDRs' recordkeeping requirements 
for records relating to a CCO's areas of responsibility. This proposed 
regulation requires an SDR to maintain: (i) A copy of its written 
policies and procedures, including its code of ethics and conflicts of 
interest policies; (ii) copies of all materials, including written 
reports provided to the board of directors in connection with review of 
the annual report, as well as the board minutes or other similar 
written records, that record the submission of the annual compliance 
report to an SDR's board of directors or its senior officer; and (iii) 
any other records relevant to an SDR's annual report. The records 
required to be maintained pursuant to this section are designed to 
provide Commission staff with a basis to determine whether an SDR has 
complied with the CEA and applicable Commission Regulations. The 
Commission also wants to preserve its ability to reconstruct why 
certain information was included or excluded in an annual report, in 
the event that such reconstruction becomes necessary under a future 
audit or investigation.
    The SDR would be required to maintain these records in accordance 
with Sec.  1.31 of the Commission's Regulations. Following Sec.  1.31, 
all records must be kept for a period of five years.
    Request for Comment. The Commission requests comment regarding 
whether the requirements of proposed Sec.  49.22(g) are sufficient to 
create a complete and easily auditable record of a board of directors' 
or senior officer's review of an annual compliance report to ensure 
that the report, as drafted by the CCO, was not altered.

D. Core Principles Applicable to SDRs

    Section 21(f) of the CEA details the ``core principles'' that are 
applicable to SDRs. These core principles include (i) antitrust 
considerations; (ii) governance arrangements; and (iii) conflicts of 
interest.\102\
---------------------------------------------------------------------------

    \102\ Section 21(f)(4), 7 U.S.C. 24a(f)(4), establishes a fourth 
core principle which authorizes the Commission to establish 
additional duties for registered SDRs. The Commission is proposing 
to add several additional duties pursuant to this authority; these 
proposed duties are discussed in Section E, below.
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    Registered SDRs will be required to comply with the core principles 
as described in proposed Sec.  49.19. Unless otherwise determined by 
the Commission by order, rule or regulation, an SDR would have 
reasonable discretion in establishing the manner in which it complies 
with the core principles described in proposed Sec.  49.19. The 
following subsections describe in detail the Regulations

[[Page 80916]]

proposed by the Commission to implement the ``core principles.''
1. Antitrust Considerations (Core Principle 1)
    Consistent with Section 15(a) of the CEA,\103\ the Commission in 
proposing Sec.  49.19 believes that an SDR should (unless necessary or 
appropriate to achieve the purposes of the CEA) avoid adopting any 
rule, regulation or policy, or taking any action that results in an 
unreasonable restraint of trade or imposing any material 
anticompetitive burden on the trading, clearing, reporting and/or 
processing of swaps (``Core Principle 1'').
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    \103\ Section 15(b) of the CEA provides:
    The Commission shall take into consideration the public interest 
to be protected by the antitrust laws and endeavor to take the least 
anticompetitive means of achieving the objectives of this chapter, 
as well as the policies and purposes of this chapter, in issuing any 
order or adopting any Commission rule or regulation (including any 
exemption under Section 6(c) or 6c(b) of this title), or in 
requiring or approving any bylaw, rule, or regulation of a contract 
market or registered futures association established pursuant to 
Section 21 of this title.
    7 U.S.C. 19.
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2. Introduction--Governance Arrangements (Core Principle 2) and 
Conflicts of Interest (Core Principle 3)
    Section 21(f)(2) of the CEA requires that each SDR establish 
governance arrangements that are transparent to fulfill public interest 
requirements and to support the objectives of the Federal Government, 
owners, and participants (``Core Principle 2'').\104\ Section 21(f)(3) 
of the CEA provides that each SDR must establish and enforce rules to 
minimize conflicts of interest in the decision-making process of the 
SDR and to establish a process for resolving such conflicts (``Core 
Principle 3'').\105\ In many respects, Core Principles 2 and 3 are 
interrelated, although each provides a separate source of authority for 
the Commission.\106\
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    \104\ See Section 21(f)(2) of the CEA, 7 U.S.C. 24a(f)(2) as 
added by Section 728 of the Dodd-Frank Act.
    \105\ See Section 21(f)(3) of the CEA, 7 U.S.C. 24a(f)(3) as 
added by Section 728 of the Dodd-Frank Act.
    \106\ In Section 4(a), the Commission identifies potential 
conflicts of interest in the operation of a registered SDR. Such 
conflicts may implicate (i) SDR access, pricing, and provision of 
services and (ii) disclosure or use of SDR Information. As further 
discussed, such conflicts of interest may originate in the control 
of an SDR by one reporting entity or a small subset of reporting 
entities (a ``control group''). Such control may result from 
representation on SDR governing bodies, whether through (i) 
ownership of voting equity or the exercise of voting rights or (ii) 
other direct or indirect means. The existence of such conflicts may 
frustrate the public interest, as well as the objectives of the 
Federal Government, certain owners, and participants, in 
facilitating the reporting of swap transactions. Therefore, in 
establishing governance arrangements that are transparent as to (i) 
the sources of such control and (ii) the decisions resulting from 
such control, the SDR may be satisfying Core Principles 2 and 3 
simultaneously.
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    In order to ensure proper implementation of Core Principles 2 and 
3, respectively, the Commission proposes regulations regarding (i) the 
transparency of SDR governance arrangements and (ii) SDR identification 
and mitigation of existing and potential conflicts of interest.\107\ 
The proposed rules reflect consultation with staff of the following 
agencies: (i) The SEC; (ii) the Fed; (iii) OCC; (iv) FDIC; and (v) the 
Treasury Department. Additionally, the proposed rules were informed by: 
(1) The joint public roundtable that Commission and SEC staff conducted 
on September 14, 2010 (the ``SDR Roundtable''); \108\ and (2) answers 
to a survey that the Commission informally circulated to existing trade 
repositories \109\ and other companies that may be interested in 
registering as SDRs in the future (the ``SDR Survey'').\110\ Finally, 
mindful of the importance of international harmonization, the proposed 
rules incorporate certain elements of the European Commission Proposal 
\111\ and the Working Group Report.\112\ The Commission intends for the 
proposed rules, as well as the final rules, to meet or exceed the 
standards set forth by the Working Group Report relating to trade 
repositories.\113\
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    \107\ The Commission notes that entities dually registered with 
the Commission and the SEC would be required to comply with both 
sets of rules.
    \108\ See Press Release, Commission, CFTC, SEC Announce 
Panelists, Room Update and Webcast Address for September 15 Public 
Roundtable to Discuss Swap Execution Facilities and Security-Based 
Swap Execution Facilities (Sept. 14, 2010), http://www.cftc.gov/PressRoom/PressReleases/pr5895-10.html; Press Release, Commission, 
CFTC, SEC Announce Panelists for September 14 Public Roundtable to 
Discuss Swap and Security-Based Swap Data, Swap and Security-Based 
Swap Data Repositories and Real Time Reporting (Sept. 13, 2010), 
http://www.cftc.gov/PressRoom/PressReleases/pr5892-10.html; Press 
Release, Commission, CFTC, SEC to host public roundtable to discuss 
swap data, swap data repositories and real time reporting (Sept. 7, 
2010), available at http://www.cftc.gov/PressRoom/PressReleases/pr5886-10.html. See also Transcript, Public Roundtable to Discuss 
Swap Data, Swap Data Repositories and Real Time Reporting (Sept. 14, 
2010), available at http://www.cftc.gov/ucm/groups/public/@swaps/documents/file/derivative18sub091410.pdf (the ``SDR Roundtable 
Tr.'').
    \109\ Although SDRs are new entities created pursuant to the 
Dodd-Frank Act, similarly-functioning entities called trade 
repositories have been in existence for quite some time.
    \110\ Commission staff circulated the informal survey to five 
entities and received answers to certain questions. See http://www.cftc.gov/LawRegulation/DoddFrankAct/OTC_9_DCOGovernance.html 
(last visited Nov. 1, 2010).
    \111\ See European Commission Proposal, supra note 16.
    \112\ See Working Group Report, supra note 13.
    \113\ Id.
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3. Governance Arrangements (Core Principle 2)
    In addition to proposed Regulations discussed in sections II.B.6, 
II.B.7 and II.E.4,\114\ the Commission proposes to impose, pursuant to 
proposed Sec.  49.20 (implementing Core Principle 2), certain minimum 
standards for the transparency of SDR governance arrangements.
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    \114\ See proposed Sec. Sec.  49.16 regarding maintenance of 
data privacy, discussed in section II.B.6 of this proposed 
rulemaking; 49.17 regarding access to SDR data, discussed in section 
II.B.7. of this proposed rulemaking; and 49.27 regarding equitable 
and non-discriminatory access and fees, discussed in section II.E.4 
of this proposed rulemaking.
---------------------------------------------------------------------------

(a) Transparency of Governance Arrangements
    The Commission proposes to mandate minimum standards for the 
transparency of SDR governance arrangements.\115\ Pursuant to such 
standards, an SDR must:
---------------------------------------------------------------------------

    \115\ In addition, the Commission proposes to require each 
registered SDR to establish governance arrangements that are well 
defined and include a clear organizational structure with consistent 
lines of responsibility and effective internal controls. As the SDR 
must have such arrangements to (i) properly identify the sources of 
potential conflicts of interest and (ii) establish an appropriate 
process for resolving such conflicts, such arrangements also satisfy 
Core Principle 3.
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    <bullet> Include a statement in its charter documents regarding the 
transparency of its governance arrangements, and the manner in which 
such transparency supports the objectives of the Federal Government;
    <bullet> Make available certain information to the public and 
relevant authorities; \116\
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    \116\ Such information includes: (i) The registered SDR mission 
statement; (ii) the mission statement and/or charter of the 
registered SDR Board of Directors and certain committees; (iii) the 
board of directors nominations process of the registered SDR, as 
well as the process for assigning members of the board of directors 
or other persons to certain committees; (iv) names of all members of 
(a) the board of directors and (b) certain committees; (v) a 
description of how the board of directors and certain committees 
consider an independent perspective in their decision-making 
processes; (vi) the lines of responsibility and accountability for 
each operational unit of the registered SDR; and (vii) summaries of 
significant decisions implicating the public interest, the rationale 
for such decisions, and the process for reaching such decisions. 
These significant decisions include decisions relating to pricing of 
repository services, the offering of ancillary services, access to 
data, and the use of SDR Information.
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    <bullet> Ensure that the information made available is current, 
accurate, clear and readily accessible; and
    <bullet> Disclose summaries of significant decisions in a 
sufficiently comprehensive and detailed fashion so

[[Page 80917]]

that the public and relevant authorities would have the ability to 
discern the SDR policies or procedures implicated and the manner in 
which SDR decisions implement or amend such policies or procedures.
    In addition, although a registered SDR is not required to disclose 
minutes of board of directors or committee meetings to the public, it 
must furnish this information to the Commission upon request.
    Request for Comment. The Commission requests comment on the 
questions set forth below.
    (1) Are the requirements described above sufficiently clear? If 
not, why not? What would be a better alternative?
    (2) Should the Commission require the SDR to make any other 
information available to the public? To the relevant authorities? 
Conversely, should the Commission permit the SDR to maintain the 
confidentiality of any information that the Commission currently 
contemplates making public?
    (3) Should the Commission prescribe more detailed standards on the 
manner in which an SDR must ensure that its information is ``current, 
accurate, clear, and readily accessible''? If so, which standards?
    (4) Should the Commission require the SDR to disclose summaries of 
significant decisions? Why or why not? Has the Commission correctly 
identified which decisions should be considered significant? It not, 
what would be a better alternative? In what manner should these 
decisions be disclosed?
    (5) Are the requirements described above necessary or appropriate 
to implement Core Principle 2? If not, why not?
    (6) What other measures should the Commission consider to implement 
Core Principle 2? Should such measures supplement or replace the 
requirements described above? Why?
    (b) Consideration of an Independent Perspective
    Proposed Sec.  49.20(c) would require each registered SDR to 
establish, maintain, and enforce policies and procedures to ensure that 
(i) its board of directors, as well as (ii) any SDR committee that has 
the authority to (A) act on behalf of the board of directors or (B) 
amend or constrain the action thereof, adequately considers a 
perspective independent of competitive, commercial, or industry 
interests in its deliberations.\117\ The Commission believes that the 
board of directors, as well as each abovementioned committee, would be 
more likely to contemplate the manner in which a decision might affect 
all constituencies, and less likely to concentrate on the manner in 
which a decision affects the interests of the control group, if it 
integrates an independent perspective in its deliberations. Hence, in 
counterbalancing the perspective of certain reporting entities 
controlling an SDR, the integration of an independent perspective would 
aid in addressing the conflicts of interest identified herein. The 
Commission believes that it is particularly important for an 
independent perspective to be reflected in the nominations process for 
the board of directors, as well as the process for assigning members of 
the board of directors or other persons to the abovementioned 
committees. Therefore, proposed Sec.  49.20(c) would also require each 
registered SDR to establish, maintain, and enforce policies and 
procedures to ensure that such nominations and assignment processes 
adequately incorporates an independent perspective.
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    \117\ See 75 FR 63732, 63737-38 (Oct. 18, 2010) (regarding the 
importance of the independent perspective in mitigating conflicts of 
interest).
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    Along with the requirements noted above, the Commission is 
proposing that a registered SDR meet certain reporting requirements 
relating to its board of directors, as well as each SDR committee that 
has the authority to (i) act on behalf of its board of directors or 
(ii) amend or constrain the action thereof. Specifically, the 
Commission proposes to require an SDR to submit the following within 
thirty (30) days after an election of the board of directors: (i) For 
the board of directors, as well as each such committee, a list of all 
members; (ii) a description of the relationship, if any, between such 
members and the SDR or its affiliates; and (iii) any amendments to the 
policies and procedures that the SDR maintains with respect to 
consideration of the independent perspective. The Commission believes 
that such disclosure promotes the transparency of governance 
arrangements and improves the detection and prevention of conflicts of 
interest, and which may actually deter such conflicts in the first 
instance.
    Request for Comment. The Commission requests comment on the 
questions set forth below.
Consideration of an Independent Perspective
    (1) To ensure the consideration of an independent perspective, 
should the Commission require a registered SDR to have public directors 
on (i) its board of directors and (ii) any committee that has the 
authority to (A) act on behalf of the board of directors or (B) amend 
or constrain the action of the board of directors?
    a. If not, why not and what would be a better alternative to 
improve governance and mitigate conflicts of interest?
    b. If so, what should be the required composition of the board of 
directors and each such committee? Should there be a minimum 
requirement on the number or percentage of public directors? If so, 
what should the minimum requirement be and why?
    c. How should the Commission define ``public director'' for 
registered SDRs?
    d. Would providing for fair representation on an SDR board of 
directors and each such committee be preferable to, or complementary 
to, mandating a specific number or percentage of public directors?
    (2) Should the Commission require a registered SDR to establish a 
nominating committee? Is the nominating committee necessary or 
appropriate for the mitigation of the conflicts of interest identified 
herein, or of any other conflict of interest? If not, why not and what 
would be a better alternative? If so, should the nominating committee 
have a certain percentage, minimum number, or be comprised solely of 
public directors? Why?
    (3) Should the Commission require a registered SDR to establish any 
other committees to mitigate conflicts of interest? If so, what would 
be the responsibilities of such a committee? Should the Commission 
require such a committee to have a certain percentage, a minimum 
number, or be comprised solely of public directors? Why?
Limitations on Ownership of Voting Equity and the Exercise of Voting 
Rights
    (4) Should the Commission impose limitations on the ownership of 
voting or non-voting equity and the exercise of voting rights on 
reporting entities or other market participants? If so, what should the 
required ownership and voting limitations be? Are such limits necessary 
or appropriate for mitigating the conflicts of interest identified 
herein, or any other conflicts of interest?
    (5) Would SDR compositional requirements be more or less effective 
than ownership or voting limitations at addressing conflicts of 
interest? Would SDR compositional requirements, on their own, be 
sufficient to address conflicts of interest concerns (assuming that 
such restrictions are necessary for this purpose) or are both 
restrictions on governance and ownership needed?
    (6) If the Commission were to require ownership and voting 
limitations, should the Commission permit the SDR board of directors to 
waive the

[[Page 80918]]

limitations for a person who is not an SDR participant (and its related 
persons) provided that certain conditions are met? If so, under what 
conditions? Should the waiver be subject to the review of the 
Commission?
    (7) Would an aggregate limit on the ownership of voting equity and 
the exercise of voting rights be appropriate for SDRs? If so, should 
such aggregate limit be applied only to reporting entities? Which 
reporting entities? What should such aggregate limit be? Why?
    (8) Should any ownership and voting limitations be extended to the 
parent company of an SDR?
    (9) If the Commission were to impose ownership or voting 
limitations, should the Commission require remediation by an SDR of any 
interest that a reporting entity or a related person holds or exercises 
in excess of the limitations?
    (10) If the Commission were to impose ownership or voting limits, 
should the limitations be phased-in for SDRs to provide a grace period 
for those entities that would not meet the limits at the outset, but 
that could potentially meet them at a later date, e.g., one or two 
years after SDR registration with the Commission?
    (11) If the Commission were to impose ownership and voting 
limitations, how might such limitations influence the competitive 
dynamics of the SDR market?
    (12) If the Commission were to impose ownership or voting 
limitations, how might such limitations address changes in conflicts of 
interest resulting from the evolution of the regulated swaps market?
    (13) Are there potential ways to more narrowly target voting and 
ownership limitations?
    (14) Should the Commission require parent companies of SDRs to 
comply with the substantive requirements applicable to SDR boards of 
directors?
    (15) Should the Commission require parent companies' officers, 
directors, employees and agents to be subject to Commission authority?
    (16) Should the Commission require that the books and records of 
SDR parent companies be open to inspection by the Commission?
(c) Substantive Requirements for SDR Boards of Directors (and Certain 
SDR Committees)
(i) Expertise
    The Commission is proposing a number of substantive requirements 
for SDR boards of directors and certain SDR committees to mitigate 
existing and potential conflicts of interest. Proposed Sec.  
49.20(c)(5) would require that the SDR board of directors, SDR senior 
management, and members of any SDR committee that has the authority to 
(i) act on behalf of the board of directors or (ii) amend or constrain 
the actions thereof, in each case, have (A) sufficiently good 
reputations, (B) the requisite skills and expertise to fulfill their 
responsibilities in the management and governance of the registered 
SDR, (C) a clear understanding of such responsibilities, and (D) the 
ability to exercise sound judgment about SDR affairs.
(ii) Other Substantive Requirements
    In addition to the expertise requirement, the Commission in 
proposed Sec.  49.20(c) proposes the following requirements, which aim 
to enhance the accountability of SDR boards of directors to the 
Commission, with respect to the manner in which such boards of 
directors cause the registered SDRs to discharge all statutory and 
regulatory responsibilities\118\ under the Dodd-Frank Act, as it amends 
the CEA:
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    \118\ See proposed Sec. Sec.  49.16, 49.17 and 49.27.
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    <bullet> The roles and responsibilities of SDR boards of directors 
must be clearly articulated, especially in respect of the manner in 
which each such board of directors ensures that the registered SDR 
complies with all statutory and regulatory responsibilities under the 
Dodd-Frank Act, as it amends the CEA.
    <bullet> Each SDR board of directors shall review its performance 
and that of its individual members annually. It should consider 
periodically using external facilitators for such reviews.
    <bullet> A registered SDR must have procedures to remove a member 
from its board of directors, where the conduct of such member is likely 
to be prejudicial to the sound and prudent management of the SDR.
    Request for Comment. The Commission requests comment on the 
questions set forth below.
    (1) Are the proposed substantive requirements for board of 
directors (and certain SDR committees) necessary or appropriate to 
mitigate SDR conflicts of interest, in light of the proposed minimum 
standards on (A) transparency, (B) identification and resolution of 
conflicts of interest, and (C) access, use, or disclosure of SDR 
Information? If not, why not?
    (2) How might the proposed substantive requirements influence the 
competitive dynamics of the SDR market?
    (3) How might the proposed substantive requirements address changes 
in conflicts of interest resulting from the evolution of the regulated 
swaps market?
    (4) What other substantive requirements should the Commission 
consider imposing on an SDR board of directors? How might such 
requirements affect the competitive dynamics of the SDR market?
    (5) Should the Commission focus on ensuring fair representation? If 
so, should the Commission view fair representation as complementing or 
replacing an independent perspective? What entities should be included 
in fair representation? Would the value of fair representation differ 
depending on the organizational structure of the SDR (e.g., an at-cost 
utility or a for-profit entity)? The Commission particularly welcomes 
factual examples.
    (6) If the Commission decides to focus on ensuring fair 
representation as either an alternative to, or a complement of, an 
independent perspective, what changes should the Commission make to the 
proposed substantive requirements?
    (7) In what ways can a SDR board of directors incorporate an 
independent perspective into its decision-making process?
    (8) Should the nominations process require the right to petition 
for alternative candidates? If so, to whom should such right be granted 
(e.g., certain groups of market participants)?
4. Conflicts of Interest (Core Principle 3)
(a) Conflicts of Interest
    Based on discussions at the SDR Roundtable, as well as answers to 
the SDR Survey, the Commission has identified several potential 
conflicts of interest, including but not limited to, discrimination 
against certain reporting entities and unfair or anticompetitive 
disclosure. A control group may compete with other reporting entities 
in the execution or clearing of swap transactions and may have an 
incentive to leverage its influence over the registered SDR to gain a 
competitive advantage in relation to other reporting entities. 
Additionally, because the Dodd-Frank Act requires all swaps (whether 
cleared or uncleared) to be reported to a registered SDR,\119\ swap 
data\120\ and SDR analyses of SDR

[[Page 80919]]

Information could have great commercial value.\121\ A control group may 
have an incentive to (i) limit or burden access to such analyses on a 
discriminatory basis or (ii) disclose or use the data of other 
reporting entities for its own competitive purposes (e.g., front-
running). The control group may also have an incentive to cause the SDR 
to provide such data to an affiliate for derivative applications or 
ancillary services (especially if such applications or services are 
bundled).
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    \119\ See Section 2(a)(13)(G) of the CEA, as amended by Section 
727 of the Dodd-Frank Act.
    \120\ For example, such data would enable regulatory 
authorities, such as the Commission, to ascertain the exposure of 
reporting entities and their counterparties to swap transactions. 
See generally 7 U.S.C. 24a(c)(7). See also SDR Roundtable Tr., supra 
note108, at 55-56 (Comments from Jiro Okochi, CEO and Co-Founder, 
Reval, stating ``In terms of the actual data itself, I think one of 
the goals of the reform is to allow more transparency and efficiency 
in the marketplace * * *'').
    \121\ Warehouse Trust Response to the SDR Survey, at p. 4, 
available at http://www.cftc.gov/ucm/groups/public/@swaps/documents/file/derivative9sub100510-wt.pdf (stating that ``SDR data is 
extremely valuable and could be sold either stand alone or enhanced 
with other market data and analysis'').
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    Request for Comment. The Commission requests comment on the 
questions set forth below on potential conflicts of interest.
    (1) Has the Proposal correctly identified the conflicts of interest 
that a registered SDR may confront? Has the Proposal accurately 
specified the possible effects of such conflicts of interest on SDR 
operations? What are other possible effects?
    (2) What other conflicts of interest may exist? What are the 
effects of such conflicts?
    (3) How might conflicts of interest change as registered SDRs 
become more established?
    (4) How might conflicts of interest change as the swaps market 
evolves under regulation?
(b) Mitigation of Conflicts of Interest
    To mitigate conflicts of interest, the Commission proposes to 
mandate, pursuant to proposed Sec.  49.21, that each registered SDR 
maintain and enforce rules (i) that would identify, on an ongoing 
basis, existing and potential conflicts of interest, and (ii) that 
would enable the SDR to make decisions if a conflict exists. Such rules 
would complement the abovementioned provisions.
(c) Policies and Procedures to Identify and Mitigate Conflicts of 
Interest
    To ensure that the mitigation in Core Principle 3 is effected, the 
Commission proposes to require each registered SDR to establish, 
maintain and enforce rules to identify existing and potential conflicts 
of interest in its decision-making process. As discussed above, a 
control group can dominate an SDR to further its economic interests to 
the detriment of other reporting entities. Therefore, the Commission 
believes that it is critical for a registered SDR to establish, 
maintain and enforce policies and procedures to mitigate such a 
conflict. Moreover, the Commission believes that an SDR should engage 
in the identification and mitigation of conflicts of interest on an 
ongoing basis since conflicts can arise or change at any time. Further, 
the Commission proposes to require such SDR to have rules for making 
decisions in the event of a conflict of interest. The Commission 
believes such rules should require, at a minimum, the recusal of any 
person involved in the conflict from such decision-making. Such recusal 
rules will alleviate certain concerns regarding the impartiality of the 
SDR decision-making process.
    Request for Comment. The Commission requests comment on the 
questions set forth below.
    (1) Are the requirements described above sufficiently clear? If 
not, why not? What would be a better alternative?
    (2) Should the Commission prescribe more detailed standards for SDR 
rules on identifying conflicts of interest? If so, which standards?
    (3) Should the Commission prescribe more detailed standards for SDR 
rules on decision-making in the event of a conflict of interest? If so, 
which standards?

E. Additional Duties

    In addition to the ``core principles'' set forth above in section 
D, Section 21(f)(4) of the CEA established a fourth core principle 
under which the Commission may prescribe additional duties for SDRs for 
the purpose of minimizing conflicts of interest, protecting data, 
ensuring compliance and guaranteeing the safety and security of the 
SDR. In this regard, pursuant to its authority under Sections 21(f)(4) 
and 8a(5) of the CEA the Commission proposes to require four additional 
duties that would require an SDR to (i) adopt and implement system 
safeguards, including business continuity and disaster recovery plans; 
(ii) maintain sufficient financial resources; (iii) furnish to market 
participants a disclosure document setting forth the risks and costs 
associated with using the services of the SDR; and (iv) provide fair 
and open access to the SDR and fees that are equitable and non-
discriminatory. These additional duties are discussed in turn below.
1. System Safeguards
    Proposed Sec.  49.24 would require SDRs to (1) establish and 
maintain a program of risk oversight to identify and minimize sources 
of operational risk through the development of appropriate controls and 
procedures and the development of automated systems that are reliable, 
secure, and have adequate scalable capacity; (2) establish and maintain 
emergency procedures, backup facilities, and a plan for disaster 
recovery that allow for the timely recovery and resumption of 
operations and the fulfillment of the responsibilities and obligations 
of the SDR, i.e., BC-DR Plans; and (3) periodically conduct tests to 
verify that backup resources are sufficient to ensure continued 
fulfillment of all duties of the SDR established by the CEA or the 
Commission's regulations.
    The proposed regulation would require an SDR's program of risk 
analysis and oversight to address six categories of risk analysis and 
oversight, including information security; BC-DR planning and 
resources; capacity and performance planning; systems operations; 
systems development and quality assurance; and physical security and 
environmental controls. It would require each SDR to maintain a BC-DR 
plan and have BC-DR resources sufficient to enable recovery and 
resumption of its operations and resumption of its ongoing fulfillment 
of its duties and obligations as an SDR during the next business day 
following any disruption of its operations, either through sufficient 
infrastructure and personnel resources of its own or through sufficient 
contractual arrangements with other SDRs or disaster recovery service 
providers.\122\ The proposed regulation would require each SDR to 
notify Commission staff of various security-related events and provide 
relevant documents to the Commission; and to conduct regular, periodic, 
objective testing and review of its automated systems. It would also 
require each SDR, to the extent practicable, to coordinate its BC-DR 
plan with SEFs, DCMs, DCOs, SDs, and MSPs who report swap data to the 
SDR, as well as initiate coordinated testing of such plans, and to take 
into account in its own BC-DR plan, the BC-DR plans of relevant 
telecommunications, power, water, and other essential service 
providers.
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    \122\ See Commission, Notice of Proposed Rulemaking: Business 
Continuity and Disaster Recovery, 75 FR 42,633 (July 22, 2010); 
Interagency Paper on Sound Practices to Strengthen the Resilience of 
the U.S. Financial System issued by the Board of Governors of the 
Federal Reserve System, the Department of the Treasury and the SEC, 
68 FR 17,809 (Apr. 11, 2003); SEC, Policy Statement Relating to 
Business Continuity Planning for Trading Markets, Exchange Act 
Release No. 48,545 (Sept. 25, 2003), 68 FR 56,656 (Oct. 1, 2003).
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    Because automated systems play a central and critical role in 
today's financial markets, oversight of these systems will be an 
essential part of the effective regulatory oversight of swaps.

[[Page 80920]]

Prompt and adequate notice to the Commission concerning systems 
malfunctions, systems security incidents, or any events leading to the 
activation of an SDR's BC-DR plan will assist the Commission's 
oversight and its ability to assess systemic risk levels. Additionally 
and because SDRs will hold data needed by financial regulators from 
multiple jurisdictions, safeguarding such systems will be essential to 
mitigation of systemic risk world-wide. The ability of SDRs to recover 
and resume operations promptly in the event of a disruption of their 
operations will be highly important to the U.S. and world economy. It 
would present unacceptable risks to the U.S. and world financial system 
if SDRs that hold data concerning swaps and thus comprise critical 
components of the world financial system were to become unavailable for 
an extended period of time for any reason. Adequate system safeguards 
are crucial to mitigation of such risks.
    Request for Comment. The Commission requests comment on whether the 
time periods specified in proposed Sec.  49.24 with respect to 
submission of annual reviews and written notices of material system 
outages and material systems changes the correct time periods to use? 
Should any of the proposed time periods be shortened or lengthened? If 
so, please explain your reasoning.
2. Financial Resources
    Proposed Sec.  49.25 would require an SDR to maintain financial 
resources sufficient to enable it to perform its functions in 
compliance with the duties set forth in proposed Sec.  49.9 and the 
core principles set forth in proposed Sec.  49.19.\123\ The Commission 
believes that requiring SDRs to maintain sufficient financial resources 
will help to ensure the protection of the swap data maintained by the 
SDR as well as the safety and security of the SDR.
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    \123\ An entity that operates as both a SDR and DCO would also 
be required to comply with the financial resource requirements of 
Core Principle B set forth in Section 5b(c)(2)(B) of the CEA, 7 
U.S.C. 7a-1(c)(2)(B).
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    Proposed Sec.  49.25 (a)(3) provides that financial resources \124\ 
will be considered sufficient for an SDR if their value is at least 
equal to the total amount that would enable the SDR, or applicant for 
SDR registration, to cover its operating costs for a period of at least 
one year, calculated on a rolling basis. The types of financial 
resources to meet this obligation would include the SDR's own capital 
and any other financial resource acceptable to the Commission. The 
financial resources required in proposed Sec.  49.25 must be the 
independent or dedicated resources of the SDR and may not be resources 
used for other purposes or by affiliated entities, i.e., the same 
assets or capital may not be used for multiple purposes.
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    \124\ The financial resources allocated by the swap data 
repository to meet these requirements must include unencumbered, 
liquid financial assets (i.e., cash and/or highly liquid securities) 
equal to at least six months' operating costs. If any portion of 
such financial resources is not sufficiently liquid, the SDR may 
take into account a committed line of credit or similar facility for 
the purpose of meeting this requirement.
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    Proposed Sec.  49.25(c) provides that SDRs, in computing its 
financial resource requirement, may make a reasonable calculation of 
its projected operating costs over a 12-month period.\125\ This would 
be performed on a quarterly basis. Financial resources of a SDR would 
also be valued under proposed Sec.  49.25(d) on at least a quarterly 
basis.
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    \125\ The SDR shall have reasonable discretion in determining 
the methodology used to compute such projected operating costs. The 
Commission may review the methodology and require changes as 
appropriate.
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    Proposed Sec.  49.25(f) sets forth the reporting requirements to 
the Commission. Specifically, no later than 17 business days after the 
close of each fiscal quarter or at any time upon Commission request, a 
SDR is required to report the amount of financial resources required by 
proposed Sec.  49.25(a) together with financial statements, including 
the balance sheet, income statement, and statement of cash flows of the 
SDR or of its parent company.
    Request for Comment. The Commission requests comment on whether the 
methodology set forth above for determining sufficient financial 
resources would provide the necessary resources to ensure the financial 
integrity of the SDR. If not, please provide a different methodology or 
manner for calculating sufficient SDR financial resources.
3. Disclosure Requirements of Swap Data Repositories
    Proposed Sec.  49.26 would require an SDR furnish to market 
participants a disclosure document (``SDR Disclosure Document'') 
setting forth the risks and costs associated with using the services of 
the SDR. The Commission believes that this requirement will benefit 
market participants and the swap market generally by helping to (i) 
minimize conflicts of interest and (ii) ensure SDR compliance with its 
statutory responsibilities and duties.
    The Commission in proposed Sec.  49.26 would require that each SDR 
Disclosure Document contain the following information:
    <bullet> The SDR's criteria for providing others with access to 
services offered and data maintained by the SDR;
    <bullet> The SDR's criteria for those seeking to connect to or link 
with the SDR;
    <bullet> A description of the SDR's policies and procedures 
regarding its safeguarding of data and operational reliability, as 
described in proposed Sec.  49.24;
    <bullet> The SDR's policies and procedures designed to protect the 
privacy and confidentiality of any and all swap transaction information 
that the SDR receives from market participants, as described in 
proposed Sec.  49.16;
    <bullet> The SDR's policies and procedures regarding its non-
commercial and/or commercial use of the swap data;
    <bullet> The SDR's dispute resolution procedures involving market 
participant;
    <bullet> A description of all the SDR's services, including any 
ancillary services;
    <bullet> The SDR's updated schedule of any fees, rates, dues, 
unbundled prices, or other charges for all of its services, including 
any ancillary services; any discounts or rebates offered; and the 
criteria to benefit from such discounts or rebates; and
    <bullet> A description of the SDR's governance arrangements.
    Request for Comment. The Commission requests comment on the 
following questions:
    (1) How should the SDR Disclosure Document be furnished to market 
participants? Would public availability on a SDR's Web site be 
sufficient? Any other available alternatives?
    (2) How useful would the SDR Disclosure Document be for market 
participants?
4. Non-Discriminatory Access and Fees
    Proposed Sec.  49.27 is intended to establish non-discriminatory 
access to the services provided by SDRs because all swap transactions 
must be reported to a SDR pursuant to Section 2(a)(13)(G) of the CEA. 
The Commission believes that the intent and purpose of Section 21 of 
the CEA is for SDRs to provide open and equal access to its services. 
Consistent with open and equal access to SDR services, the Commission 
further believes that fees or charges adopted by an SDR must be 
equitable and otherwise non-discriminatory.
    (a) Access. Proposed Sec.  49.27(a) would require that the services 
provided by SDRs be available to all market participants, such as DCMs, 
SEFs, DCOs, SDs, MSPs and any other counterparty, on a fair, open and 
equal

[[Page 80921]]

basis. SDRs that register and agree to accept swap data in a particular 
asset class (such as interest rates or commodities) could not offer 
their services on a discriminatory basis to select market participants 
or select categories of market participants. The Commission believes, 
pursuant to Section 21 of the CEA, that access should be fair, open and 
equitable. As a component of fair, open and equal access, the 
Commission submits that SDRs must ensure that they have the necessary 
operational capability to provide services to market participants that 
would seek access for the reporting of swap transactions consistent 
with Section 21 of the CEA.
    (b) Fees. Proposed Sec.  49.27(b) would ensure that fees or other 
charges established by a SDR are not used as a means to deny access to 
some market participants by employing disparate and/or discriminatory 
pricing. The Commission is especially concerned that SDRs could attempt 
to adopt disparate pricing for performing their statutory duties and 
obligations set forth in Section 21 of the CEA. The Commission believes 
that such action would be inconsistent with Core Principle 3 discussed 
above, the CEA generally and the guiding principles set forth in the 
Dodd-Frank Act.
    The Commission recognizes that the ability to receive swap data in 
the form and manner proposed by part 45 of the Commission's regulations 
and the ongoing maintenance of such data may involve significant costs, 
including, but not limited to, technology, personnel, technical support 
and appropriate BC-DR plans. The Commission in this proposed Sec.  
49.27(b) seeks to ensure that the fees charged to DCMs, DCOs, SEFs, 
SDs, MSPs, and any other counterparties are equitable and do not become 
an artificial barrier to access, thereby potentially reducing 
competition for SDR services.
    The Commission submits that an equitable fee would be a uniform and 
non-discriminatory set of fees for both ``core'' regulatory services 
provided by the SDR as well as any ``ancillary'' or ``supplemental'' 
services such as life-cycle analysis, confirmation, compression, 
dispute resolution, and mark-to-market valuation.
    Any preferential pricing such as volume discounts or reductions 
would not be generally viewed as equitable by the Commission. Proposed 
Sec.  49.27(b) provides that SDRs shall not offer preferential pricing 
arrangements to any market participant, including volume discounts or 
reductions unless such discounts or reductions apply to all market 
participants uniformly and are not otherwise established in a manner 
that would effectively limit the application of such discount or 
reduction to a select number of market participants. Proposed Sec.  
49.27 also would require SDRs to provide fee transparency to market 
participants. At a minimum, the proposed Sec.  49.27 would require SDRs 
to set forth on its Web site a schedule of fees and charges as well as 
in the Disclosure Document discussed above in proposed Sec.  49.26.
    In addition, part 43 of the Commission's proposed regulations 
relating to real-time reporting would prohibit 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.\126\
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    \126\ See proposed Sec.  43.3(i), supra note 39.
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    Request for Comment. The Commission requests comment on the 
questions set forth below on fees:
    (1) Are there circumstances in which it would be fair or reasonable 
for an SDR to charge a counterparty to a swap a fee to satisfy itself 
that the swap data submitted to the SDR by the other counterparty to 
the swap is accurate?
    (2) In what instances would an SDR differentiate among its users 
with respect to fees, dues, other charges, discounts, and rebates? 
Should any of those instances be explicitly prohibited or restricted?
    (3) Are there any other requirements that the Commission should 
impose on an SDR that would promote competition?

F. Real Time Reporting

    Proposed Sec.  49.15 details SDRs' ability to accept and publicly 
disseminate swap transaction and pricing data for public reporting of 
swap transactions executed on a DCM as well as those executed off-
exchange.\127\ The Dodd-Frank Act's real-time public reporting 
requirements and the text of proposed Sec.  49.15 are summarized below.
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    \127\ As explained below, proposed Sec.  49.15 applies to off-
facility swap transactions. See proposed Sec.  49.15.
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    Section 727 of the Dodd-Frank Act establishes certain public 
reporting requirements for all swap transactions and participants, and 
identifies the purpose of such public reporting as ``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.'' \128\ Section 2(a)(13)(B) establishes the reporting 
requirements pursuant to which the Commission is authorized to 
promulgate regulations mandating the public availability of swap 
transaction and pricing data in ``real-time.'' \129\ By its terms, 
Section 2(a)(13)(A) of the CEA defines real-time public reporting to 
mean ``as soon as technologically practicable after the time at which 
the swap transaction has been executed.'' Section 2(a)(13)(D) of the 
CEA permits the Commission to require registered entities to publicly 
disseminate swap transaction and pricing data.
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    \128\ Section 2(a)(13)(A) of the CEA, 7 U.S.C. 2(a)(13)(A).
    \129\ See Section 2(a)(13)(C) of the CEA, 7 U.S.C. 2(a)(13)(C) 
(authorizing and requiring the Commission to provide, by rule, for 
the real-time public availability of swap transaction and pricing 
data for four types of swap transactions: (1) Swaps that are subject 
to the mandatory clearing requirement, including those swaps that 
may qualify for an exemption; (2) swaps that are not subject to the 
mandatory clearing requirement but are cleared at a registered 
derivatives clearing organization; (3) bilateral swap transactions 
between two counterparties that are reported to a registered swap 
data repository or the Commission in accordance with Section 2(h)(6) 
of the Act; and (4) swaps that are determined to be required to be 
cleared but are not cleared.). Pursuant to section 2(a)(13)(F) 
parties to a swap are required to report to a registered entity in a 
timely manner as prescribed by the Commission. Timeliness standards 
are prescribed in part 43. See supra note 39.
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    To implement Section 2(a)(13) of the CEA, the Commission is 
proposing a real-time public reporting framework for swap transaction 
and pricing data in a new part 43 of the Commission's regulations that 
is subject to a separate rulemaking.\130\ Proposed Section 43.2(v) 
defines ``reportable swap transaction'' to mean any executed swap, 
novation, swap unwind, partial novation, partial swap unwind or such 
other post-execution events that affect the price of the 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 proposed regulations in part 43 require 
registered SDRs to publicly disseminate ``off-facility'' swap data and 
allows SDRs to choose to disseminate publicly for swaps executed on a 
swap market. The proposed regulations in part 43 organize swap 
transactions into a number of distinct categories for purposes of real-
time public reporting, including (1) swap transactions executed on a 
``swap market'' as defined in proposed Sec.  43.2(z) \131\, and (2) 
``off-facility'' swaps as defined in proposed Sec.  43.2(p).\132\

[[Page 80922]]

Proposed Sec.  49.15 applies to off-facility swap transactions and to 
all swap transactions executed on a SEF or DCM that fulfill their 
public dissemination requirement \133\ by reporting to a registered 
SDR.
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    \130\ See supra note 39.
    \131\ Proposed Sec.  43.2(z) defines ``swap market'' as ``any 
registered swap execution facility or registered designated contract 
market that makes swaps available for trading.'' See supra note 39.
    \132\ Proposed Sec.  43.2(p) defines ``off-facility'' swaps as 
``any reportable swap transaction that is not executed on or subject 
to the rules of a swap market.'' See supra note 39.
    \133\ The proposed part 43 Regulations will provide that a swap 
market may fulfill its public dissemination requirement by either 
(i) sending the required data to a registered SDR that accepts and 
publicly disseminates such data; or (ii) by utilizing a third-party 
service provider to perform this function. See supra note 39.
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    Under proposed part 43, registered SDRs that disseminate 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.\134\ Proposed Sec.  43.3(i) 
requires registered SDRs who disseminate publicly 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.
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    \134\ 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 before 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. See 
proposed Sec.  43.3(e), supra note 39.
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    Proposed part 43 of the Commission's Regulations also reflects the 
Commission's belief in the economic utility of real-time swap data that 
is promptly reported to the public. Accordingly, proposed Sec.  43.3(a) 
proposes specific timeliness standards that must to be met for each 
subcategory of swap transaction.
    As noted above, proposed Sec.  49.15 applies to off-facility swap 
transactions and all transactions executed on a SEF or DCM that fulfill 
their public dissemination requirement by reporting to a registered SDR 
that has undertaken to accept and publicly disseminate swap transaction 
and pricing data in real time. For these transactions, the proposed 
regulations in part 43 will require that one party to the swap 
transaction report specified real-time data to such a registered SDR, 
which, in turn, will be required to disseminate such data to the 
public.\135\ In coordination with proposed part 43, proposed Sec.  
49.15(b) requires SDRs to ``establish such electronic systems as are 
necessary to receive real-time swap transaction data,'' and specifies 
that such systems must be capable of publicly disseminating all data 
fields specified by the Commission in proposed part 43.
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    \135\ The Commission notes that proposed Sec.  43.3(b) also 
provides for an alternative method of reporting by using a third-
party service provide for public dissemination. Reporting entities 
electing to satisfy their real-time reporting requirements through a 
third-party service provider would not need to report through an 
SDR. See supra note 39.
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    Proposed Sec.  49.15(c) requires SDRs who disseminate swap 
transaction and pricing data in real time to promptly notify the 
Commission when real-time swap data is not timely reported. This 
proposed regulation also specifies the information that must be 
included in any notification to the Commission of untimely reporting. 
The notification must include all of the real-time swap data submitted; 
identify the party to the swap that submitted the real-time swap data; 
and contain the date and time the real-time swap transaction data was 
received by the SDR. The Commission will take appropriate regulatory 
action against the delinquent reporting party based on these 
notifications.
    Request for Comment. The Commission request comment on the 
following questions relating to real-time reporting of swap 
transactions.
    (1) Should any party that receives swaps data pursuant to proposed 
part 43 of the Commission's Regulations for the purpose of performing a 
real-time reporting function be required to register as a swap data 
repository?
    (2) Should additional regulatory conditions and requirements apply 
to a party receiving swaps data pursuant to proposed part 43 of the 
Commission's Regulations for the purpose of performing a real-time 
reporting function if such a party is not required to register as a 
swap data repository?

G. Procedures for Implementing Swap Data Repository Rules

    Proposed Sec.  49.8 is largely intended to conform to the proposed 
changes to existing Sec.  40.5(b) (Voluntary submission of rules for 
Commission review and approval).\136\ The proposed amendments to Sec.  
40.5(b) are set forth in a separate rulemaking pertaining to 
``Provisions Common to Registered Entities.'' \137\
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    \136\ Proposed Sec.  40.3 is amended to require additional 
information to be provided by registered entities submitting new 
products for the Commission's review and approval. Proposed Sec.  
40.5(b) codifies a new standard for the review of new rules or rule 
amendments as established under the Dodd-Frank Act. See supra note 
18.
    \137\ Id.
---------------------------------------------------------------------------

1. Request for Approval
    Proposed Sec.  49.8 provides that an applicant for registration as 
a SDR may request that the Commission approve under Section 5c(c) of 
the CEA, any or all of its rules and subsequent amendments, prior to 
implementation or, notwithstanding the provisions of Section 5c(c)(2) 
of the CEA, at anytime thereafter, under the procedures set forth in 
Sec.  40.5 of the Commission's Regulations. SDRs that submit operating 
rules to the Commission for approval at the same time as an application 
for registration pursuant to proposed Sec.  49.3 on Form SDR to 
reinstate the registration of a dormant registered SDR, as defined in 
Sec.  40.1, or while one of the foregoing is pending, will be deemed 
approved by the Commission no earlier than when the swap data 
repository is deemed to be registered or reinstated.
2. Self-certification of Rules
    Rules of a registered swap data repository not voluntarily 
submitted for prior Commission approval as described above must be 
submitted to the Commission with a certification that the rule or rule 
amendment complies with the CEA and Commission Regulations pursuant to 
the procedures set forth in Sec.  40.6.

III. Effectiveness and Transition Period

    The statutory deadline for final rules is July 15, 2011. Final 
rules will become effective sixty (60) days after the Federal Register 
publication of the final rules. The Commission expects all SDR 
applicants to fully comply with the final rules. The Commission 
requests comment on the nature and length of implementation and phase-
in periods that would be appropriate to allow potential SDRs and market 
participants time to adapt to the new swaps regulatory structure and 
implement the Proposal in an efficient and orderly manner.
    Request for Comment. The Commission requests comment on the 
questions set forth below.
    (1) Is a phase-in period appropriate (especially for existing trade 
repositories that may seek SDR registration)? If so, how long should 
such phase-in period be?
    (2) Conversely, should all applicants for SDR registration have to 
demonstrate compliance with the final rules to receive registration? 
Why or why not?

IV. General Request For Comments

    In addition to any specific request for comment included above, the 
Commission generally requests comment on all aspects of the Proposal. 
Interested persons are invited to submit written presentations of 
views, data, and arguments concerning the Proposal.

[[Page 80923]]

V. Related Matters

A. Paperwork Reduction Act

    Provisions of proposed part 49 would result in new ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act of 1995 (``PRA'').\138\ 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 Office of Management 
and Budget (OMB) control number. The Commission therefore is submitting 
this proposal to 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 
``Part 49--Swap data repositories; registration and regulatory 
requirements,'' OMB control number 3038-NEW. If adopted, responses to 
this new collection of information would be mandatory.
---------------------------------------------------------------------------

    \138\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    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 Act 
strictly prohibits the Commission, unless specifically authorized by 
the Act, 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 pursuant to the Privacy Act of 1974, 5 
U.S.C. 552a.
1. Summary of the Proposed Requirements
    The proposed regulations would establish a new registered entity 
called a swap data repository (``SDR''), which would gather swap data 
and make such data available to the Commission and other regulators. 
The Commission believes there will be approximately 15 entities seeking 
registration as SDRs.
2. Information Provided by Reporting Entities
    As noted above, proposed part 49 will impose multiple new 
collections of information requirements within the meaning of the PRA. 
First, proposed part 49 would impose a registration requirement on all 
SDRs. This registration requirement is composed of a one-time initial 
registration as well as amendments to registration documents previously 
submitted to the Commission by an SDR. Second, proposed part 49 imposes 
a reporting requirement on registered SDRs. As part of this reporting 
requirement, SDRs are required to provide access to the swap data it 
holds to either the Commission or one of the Commission's designees. 
Additionally, an annual compliance report must be submitted by an SDR's 
CCO. Third, proposed part 49 imposes a recordkeeping requirement for 
registered SDRs whereby a registered SDR is required to maintain 
records of all swap transaction data for a period of at least five 
years after a swap expires and must maintain a written copy of written 
policies and procedures, including the code of ethics and conflicts of 
interest policies in furtherance of compliance with the Act and 
Commission regulations and any records relevant to the annual 
compliance report. Lastly, proposed part 49 imposes a disclosure 
requirement whereby registered SDRs must provide written disclosures 
before accepting any swap data from a reporting entity or upon a 
reporting entity's request.
    Registration Requirement. Under proposed Sec.  49.3, SDRs would be 
required to demonstrate compliance with specified registration 
requirements on Form SDR. The proposed collection for this one-time 
initial registration is estimated to involve 400 burden hours per SDR. 
The Commission bases this estimate on consultation with other 
regulators involving similar collections.\139\ As noted above, the 
Commission believes 15 entities will be subject to this burden. 
Accordingly, the Commission estimates that the one-time initial 
registration burden for all SDRs will be approximately 6,000 annual 
burden hours.
---------------------------------------------------------------------------

    \139\ The Securities and Exchange Commission (``SEC'') 
calculated in 2008 that Form SIP takes 400 hours to complete. 
Submission for OMB Review; Comment Request, 73 FR 34060 (June 16, 
2008) (outlining the most recent SEC calculations regarding the PRA 
burdens for Form SIP). While the requirements of Form SIP and Form 
SDR are not identical, the Commission believes that there is 
sufficient similarity for PRA purposes that the burden would be 
roughly equivalent.
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    Additionally, under proposed Sec.  49.3, registered SDRs must amend 
Form SDR annually (i.e., within 60 days after the end of each calendar 
year of such SDR) as well as when certain information specified on the 
Form SDR becomes inaccurate.\140\ The Commission estimates that the 
hourly burden for complying with each amendment requirement will be 15 
burden hours per amendment for each SDR. The Commission estimates that 
respondents will be required to file, on average, including the 
mandatory annual amendment, three amendments per year, for an ongoing 
annualized burden of approximately 45 hours per SDR and approximately 
675 burden hours for all SDRs.
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    \140\ An amendment to Form SDR may occur pending SDR 
registration.
---------------------------------------------------------------------------

    In addition to amending Form SDR, the following filing requirements 
may be imposed on an SDR in the following circumstances.\141\ Under 
proposed Sec.  49.3, a SDR may withdraw its registration application by 
filing an electronic request with the Secretary of the Commission at 
the Commission's Washington, DC office. In the event an SDR is 
registered and seeks to withdraw from registration, proposed Sec.  49.4 
would require such SDR to give notice to the Commission, in writing, 
requesting that its registration as an SDR be withdrawn. Such notice 
must be made at least 90 days prior to the date named therein as the 
date when the withdrawal of registration shall take effect. The 
Commission estimates the burden hours associated with these filings, 
which are in addition to and separate from the requirement to amend 
Form SDR, to be 10 hours per filing. Additionally, the Commission 
estimates that such filings will occur once over a period of two years 
for all registered SDRs. Therefore, the average burden hours annualized 
for all SDRs are expected to be 5 burden hours.
---------------------------------------------------------------------------

    \141\ Prior to filing a notice to withdraw or vacate an 
application to register or filing for withdrawal of registration 
status, an SDR shall file an amended Form SDR to update any 
inaccurate information on the registration form (such burden hours 
associated with amendments to Form SDR are calculated above).
---------------------------------------------------------------------------

    If an SDR is located outside of the United States and is seeking to 
register, proposed Sec.  49.7 requires such SDR to, in addition to 
filing a Form SDR, provide the Commission with an opinion of counsel 
that the SDR, as a matter of law, is able to provide the Commission 
with prompt access to the book and records of such SDR and that the SDR 
can submit to onsite inspection and examination by the Commission. The 
Commission estimates that the hourly burden for complying with each 
opinion of counsel will be 20 burden hours per opinion for each SDR. 
The Commission estimates that five SDRs will be located outside the 
United States and therefore the aggregate burden hours associated with 
this requirement is estimated to be 100 annual burden hours for those 
SDRs.
    Therefore, the total number of annual burden hours estimated to be 
required by the proposed regulations for purposes of registration is 
6,000 hours initially (Form SDR) \142\ and 680 hours

[[Page 80924]]

on an ongoing basis for any additional filings.
---------------------------------------------------------------------------

    \142\ The initial burden hours imposed will increase for SDRs 
located outside the United States.
---------------------------------------------------------------------------

    Reporting Requirements. Under proposed Sec.  49.22, chief 
compliance officers (``CCOs'') of registered SDRs would be required to 
submit an annual compliance report that contains a description of the 
SDR's written policies and procedures, including those related to the 
code of ethics, conflicts of interest, and compliance with Section 
21(c) core principles. If any material error is discovered in the 
annual compliance report, the CCO must promptly file an amendment with 
the Commission to correct such material error or omission. An amendment 
shall contain the oath or certification required by proposed Sec.  
49.22(e)(7) that, to the best of the CCO's knowledge and reasonable 
belief, and under penalty of law, the annual compliance report is 
accurate and complete. Based on the Commission's discussions with 
industry and other regulators, the Commission estimates that these 
reports (and any amendments which may be necessary) are estimated to 
involve an average of 5 annual burden hours per respondent per year, 
for an aggregate of 75 aggregate annual burden hours.
    A CCO would also be responsible under proposed Sec.  49.22 for, 
among other things, establishing procedures for the remediation of 
noncompliance issues, and establishing and following appropriate 
procedures for the handling, management response, remediation, 
retesting, and closing of noncompliance issues. The Commission 
estimates that these two requirements will require 520 hours to create 
and 120 hours to administer per year per respondent, for a total burden 
of 7800 hours initially and 1800 hours on average, annually.
    Under proposed Sec.  49.10, SDRs would be required to establish, 
maintain, and enforce policies and procedures for the reporting of swap 
data of the SDR and shall accept and promptly record all swap data in 
its selected asset class and other regulatory information that is 
required to be reported pursuant to part 45. Once such swap data is 
accepted, proposed Sec.  49.17 would require an SDR to provide direct 
electronic access to the Commission or its designees and, pursuant to 
proposed Sec.  49.17(d), make such data available to other parties, 
including other regulators (i.e., Appropriate Domestic Regulators and 
Appropriate Foreign Regulators). In the event an Appropriate Domestic 
Regulator or Appropriate Foreign Regulator files a request to gain 
access to the swaps data maintained by an SDR, proposed Sec.  49.17 
provides that the registered SDR must notify the Commission 
electronically and in a format specified by the Secretary of the 
Commission. Under proposed Sec.  49.16, SDRs would be required to 
develop written policies and procedures to protect the confidentiality 
of data, and, under proposed Sec.  49.11, ensure that submitted data is 
accurate. Prior to an Appropriate Domestic Regulator or Appropriate 
Foreign Regulator receiving the data, proposed Sec.  49.17 requires 
that a ``Confidentiality and Indemnification Agreement'' between the 
Appropriate Domestic Regulator or Appropriate Foreign Regulator and the 
registered SDR be executed. Proposed Sec. Sec.  49.23 and 49.24 specify 
the reporting requirements for a registered SDR's emergency policies 
and procedures and system safeguards. Proposed Sec.  49.23 would 
require registered SDRs to establish procedures for the exercise of 
emergency authority in the event of an emergency. A registered SDR 
policies and procedures shall include provisions to notify the 
Commission as soon as reasonably practicable of any exercise of 
emergency authority. When notifying the Commission of any exercise of 
emergency authority, a SDR shall explain the reasons for taking such 
emergency action, explain how conflicts of interest were minimized, and 
document the decision-making process. Underlying documentation shall be 
made available to the Commission upon request. Proposed Sec.  49.24 
provides that a registered SDR must maintain a BC-DR plan which can be 
invoked in the case of an emergency. A registered SDR shall provide to 
the Commission, upon request, current copies of its BC-DR plan and 
other emergency procedures, its assessments of its operational risk and 
other documents requested by Commission staff for purpose of 
maintaining a current profile of the SDR's automated systems. Proposed 
Sec.  49.24 also requires a registered SDR to notify the Commission 
staff of: (1) All system malfunction; (2) cyber security incidents or 
targeted threats that actually or potentially jeopardize automated 
system operation, reliability, security, or capacity; and (3) any 
activation of the SDR's BD-DR plan. Additionally, an SDR shall give the 
Commission staff timely notice of all (1) planned changes to automated 
systems that may impact the reliability, security, or adequate scalable 
capacity of such systems; and (2) planned changes to the SDR's program 
of risk analysis and oversight. The Commission estimates that the 
start-up burden associated with the reporting requirements in this 
paragraph will be 40,000 hours per respondent for a total of 600,000 
aggregate burden hours for all respondents. The Commission further 
estimates that the total ongoing annual burden of these systems to be 
15,000 hours per respondent for a total of 225,000 aggregate burden 
hours for all respondents.
    Proposed Sec.  49.25 would require a registered SDR to report to 
the Commission (and provide sufficient documentation to substantiate 
the calculations made therein) the amount of financial resources 
available to the SDR to meet the requirements set forth in proposed 
Sec.  49.25, the value of each financial resource available, and 
provide a financial statement, including the balance sheet, income 
statement, and statement of cash flows of the registered SDR. In 
addition to providing documentation of the methodology used to compute 
its financial requirement, a registered SDR must also provide copies of 
any agreement establishing or amending a credit facility, insurance 
coverage, or other arrangement evidencing or otherwise supporting the 
SDR's conclusions. The Commission estimates the financial statement 
will result in 200 annual burden hours per SDR for 3000 aggregate 
annual burden hours.
    Recordkeeping Requirement. Under proposed Sec.  49.12, registered 
SDRs, which are estimated to be approximately 15 entities, would be 
required to maintain the swap transaction data it receives for a period 
of not less than five (5) years after the applicable swap expires, 
during which time the records must be readily available by the SDR and 
available to the Commission via real-time electronic access. 
Thereafter, the swap data must be archived and retrievable by the SDR 
within 3 business days. In addition to requiring SDRs to maintain 
records of swap transaction and pricing data, the proposed Regulations 
impose an additional recordkeeping requirement on SDRs whereby they 
must maintain: (a) A copy of written policies and procedures, including 
the code of ethics and conflicts of interest policies in furtherance of 
compliance with the Act and Commission regulations, and (b) any records 
relevant to the annual compliance report. These proposed recordkeeping 
obligations are estimated to involve, initially, 300 burden hours, for 
an aggregate of 4500 annual burden hours. The Commission further 
estimates that the ongoing annual burden would be 254 hours per 
respondent for a total ongoing annual burden of 3810 hours.
    Disclosure Requirements. Proposed Sec.  49.26 provides that before 
accepting any swap data from a reporting entity or upon a reporting 
entity's request, a

[[Page 80925]]

registered SDR shall furnish to the reporting entity a disclosure 
document. This disclosure document must contain written information 
which reasonably enables the reporting entity to identify and 
accurately evaluate the risks and costs associated with using the 
services of the SDR. The proposed disclosure obligation is estimated to 
involve a one-time initial burden of 100 hours per respondent (i.e., 
preparation of template disclosure document), for a total initial 
burden of 1,500 hours. The Commission expects this requirement will 
result in an ongoing annual burden of one hour per respondent, for a 
total annual burden of 15 hours for all registered SDRs.
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 
solicits 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 OMB's Office of 
Information and Regulatory Affairs, by fax at (202) 395-6566 or by e-
mail at <a href="/cdn-cgi/l/email-protection#347b7d6675474156595d47475d5b5a47745b59561a515b441a535b42"><span class="__cf_email__" data-cfemail="a5eaecf7e4d6d0c7c8ccd6d6cccacbd6e5cac8c78bc0cad58bc2cad3">[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.

B. Cost-Benefit Analysis

    Section 15(a) of the CEA \143\ requires that the Commission, before 
promulgating a regulation or issuing an order, to consider the costs 
and benefits of its action. By its terms, Section 15(a) of the CEA does 
not require the Commission to quantify the costs and benefits of a new 
regulation or to determine whether the benefits of the regulation 
outweigh its costs. Rather, Section 15(a) of the CEA simply requires 
the Commission to ``consider the costs and benefits'' of its action.
---------------------------------------------------------------------------

    \143\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------

    Section 15(a) of the CEA further specifies that costs and benefits 
shall be evaluated in light of the following considerations: (1) 
Protection of market participants and the public; (2) efficiency and 
competition; (3) financial integrity of the futures markets and price 
discovery; (4) sound risk management practices; and (5) other public 
interest considerations. Accordingly, the Commission could, in its 
discretion, give greater weight to any one of the five considerations 
and could determine that, notwithstanding its costs, a particular 
regulation was necessary or appropriate to protect the public interest 
or to effectuate any of the provisions or to accomplish any of the 
purposes of the Act.
1. Costs
    The Commission has determined that if the proposed regulations are 
not enacted, there will be a continued lack of transparency in the 
swaps market for both market participants and regulators. Increased 
costs to market participants will result from inefficiencies in the 
market related to price discovery and risk management and the inability 
of regulators to monitor systemic risk. This will ultimately result in 
greater market risk for all market participants and greater systemic 
risk for the larger economy.
2. Benefits
    The Commission has determined that the proposed regulations would 
benefit market participants and the public by improving governance 
arrangements to prevent conflicts of interests that if not addressed, 
would serve the interests of one group of constituents over other 
groups, including market participants and the public. Additionally, the 
proposed regulations will improve efficiency and competition by 
identifying and mitigating conflicts of interests, which will lead to 
improved efficiency in decision-making on the one hand, and benefit 
competition by increasing open access to markets, on the other hand. 
The proposed regulations will also spur competition in the data and 
trade repository industry by setting forth clear registration 
guidelines and requirements for becoming SDRs and requiring more 
transparency and access for existing repositories. Enhanced 
transparency in the markets will also facilitate price discovery, which 
will decrease risk and, in turn, increase financial integrity. The 
increased transparency resulting from the proposed rules will lead to 
improved risk management practices, and the new governance arrangements 
more effectively balance different interests so that the risks 
presented by a ``control group'' or other interests will not dominate 
decision-making in the organization. Lastly, the proposed rules will 
give the Commission and other federal regulators access to data 
accepted by registered SDRs. Such access will promote greater risk 
management and give regulators a better measure of systematic risk 
throughout the financial markets. The proposed rules, for the reasons 
cited above, operate in the best interests of the public.
3. Public Comment
    The Commission invites public comment on its cost-benefit 
considerations. Commenters are also invited to submit any data or other 
information that they may have quantifying or qualifying the costs and 
benefits of this proposal with their comment letters.

C. Antitrust Considerations

    Section 15(b) of the Act requires ``[t]he Commission [to] take into 
consideration the public interest to be protected by the antitrust laws 
and endeavor to take the least anticompetitive means of achieving the 
objectives of this Act, as well as the policies and purposes of this 
Act, in issuing any order or adopting any Commission rule or regulation 
* * *'' \144\
---------------------------------------------------------------------------

    \144\ 7 U.S.C. 19.
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    The Commission does not anticipate that these proposed regulations 
will result in anticompetitive behavior. However, because these 
proposed regulations are creating a new registered entity for a new 
market (i.e., swaps market), the Commission encourages comments from 
the public on this regulation's potential anticompetitive nature.

[[Page 80926]]

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') \145\ requires that 
agencies consider whether the regulations they propose will have a 
significant economic impact on a substantial number of small entities 
and, if so, provide a regulatory flexibility analysis respecting the 
impact.\146\ The proposed Regulations by the Commission will affect 
only SDRs, which will comprise a new category of registered entity. 
Accordingly, the Commission has not previously addressed the question 
of whether SDRs are, in fact, small entities for purposes of the RFA.
---------------------------------------------------------------------------

    \145\ 5 U.S.C. 601 et seq.
    \146\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    The Commission has previously established certain definitions of 
``small entities'' to be used in evaluating the impact of its rules 
under the RFA.\147\ The Commission previously determined that 
derivatives clearing organizations (``DCOs'') are not small entities 
because they clear contracts executed on contract markets such as 
designated contract markets (``DCMs''). The Commission's decision was 
based in part on its previous determination that DCMs are not small 
entities because of ``the central role'' they play in ``the regulatory 
scheme concerning futures trading.'' \148\ Because of the ``importance 
of futures trading in the national economy,'' to register as a DCM, a 
board of trade has to meet stringent requirements set forth in Section 
5 of the Act, 7 U.S.C. 7.\149\ DCOs are subject to similar stringent 
requirements, including substantial financial resource requirements, 
set forth in Section 5b of the Act, 7 U.S.C. 7a-1.
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    \147\ Policy Statement and Establishment of Definitions of 
``Small Entities'' for Purposes of the Regulatory Flexibility Act, 
47 FR 18,618 (Apr. 30, 1982).
    \148\ Id.
    \149\ Id. at note 3.
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    The Dodd-Frank Act defines a SDR as any person that collects and 
maintains information or records with respect to transactions or 
positions in, or the terms and conditions of, swaps entered into by 
third parties for the purpose of providing a centralized recordkeeping 
facility for swaps. Similar to DCOs and DCMs, SDRs will play a central 
role both in the regulatory scheme for swaps trading and in the overall 
market for swap transactions. Additionally, the amount and complexity 
of swap transaction data expected to be reported, maintained and 
disseminated by SDRs is expected to require significant financial 
resources to build the systems necessary to comply with the statutory 
mandates set forth in the Dodd-Frank Act. SDRs will receive data from 
DCOs and DCMs, amongst others. Additionally, SDRs will be required to 
maintain certain minimum financial resources to perform its statutory 
duties set forth in proposed Sec.  49.9 and the core principles set 
forth in proposed Sec.  49.19. Although the financial requirements will 
vary for SDRs (i.e., an SDR's financial resources shall be considered 
sufficient if their value is at least equal to a total amount that 
would enable the SDR, or applicant for registration, to cover its 
operating costs for a period of at least one year, calculated on a 
rolling basis), for the basic purpose of the financial integrity of the 
swaps market, the Commission can make no size distinction among 
registered SDRs. The Commission believes that the financial resources 
required to be registered as an SDR and to meet the statutory 
obligations of an SDR would essentially prohibit ``small entities.'' 
Therefore, for purposes of the RFA, the Commission is hereby 
determining that SDRs, like DCOs and DCMs, are not ``small entities.''
    Thus, 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.

VI. List of Subjects

List of Subjects in 17 CFR Part 49

    Swap data repositories; registration and regulatory requirements.
    In consideration of the foregoing, and pursuant to the authority in 
the Commodity Exchange Act, as amended, and in particular Sections 
8a(5) and 21 of the Act, the Commission hereby proposes to amend 
Chapter I of Title 17 of the Code of Federal Regulation by adding a new 
part 49 as follows:

PART 49--SWAP DATA REPOSITORIES

Sec
49.1 Scope.
49.2 Definitions.
49.3 Procedures for registration.
49.4 Withdrawal from registration.
49.5 Equity interest transfers.
49.6 Registration of successor entities.
49.7 Swap data repositories located in foreign jurisdictions.
49.8 Procedures for implementing registered swap data repository 
rules.
49.9 Duties of registered swap data repositories.
49.10 Acceptance of data.
49.11 Confirmation of data accuracy.
49.12 Swap data repository recordkeeping requirements.
49.13 Monitoring, screening and analyzing swap data.
49.14 Monitoring, screening and analyzing end-user clearing 
exemption claims by individual and affiliated entities.
49.15 Real-time public reporting of swap data.
49.16 Privacy and confidentiality requirements of swap data 
repositories.
49.17 Access to SDR data.
49.18 Confidentiality and indemnification agreement.
49.19 Core principles applicable to registered swap data 
repositories.
49.20 Governance arrangements (Core Principle 2).
49.21 Conflicts of interest (Core Principle 3).
49.22 Chief compliance officer.
49.23 Emergency policies and procedures.
49.24 System safeguards.
49.25 Financial resources.
49.26 Disclosure requirements of swap data repositories.
49.27 Access and fees.
Appendix A to part 49--Form SDR


    Authority:  7 U.S.C. 12a and 24a, as amended by Title VII of the 
Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 
Stat. 1376 (2010), unless otherwise noted.


Sec.  49.1  Scope.

    The provisions of this part apply to any swap data repository as 
defined under Section 1a(48) of the Act which is registered or is 
required to register as such with the Commission pursuant to Section 
21(a) of the Act.


Sec.  49.2  Definitions.

    (a) As used in this part:
    (1) Affiliate. The term ``affiliate'' means a person that directly, 
or indirectly, controls, is controlled by, or is under common control 
with, the swap data repository.
    (2) Asset Class. The term ``asset class'' means the particular 
broad category of goods, services or commodities underlying a swap. The 
asset classes include credit, equity, interest rates, currency, other 
commodities, and such other asset classes as may be determined by the 
Commission.
    (3) Control. The term ``control'' (including the terms ``controlled 
by'' and ``under common control with'') means the possession, direct or 
indirect, of the power to direct or cause the direction of the 
management and policies of a person, whether through the ownership of 
voting securities, by contract, or otherwise.
    (4) Foreign Regulator. The term ``Foreign Regulator'' means a 
foreign futures authority as defined in Section 1a(26) of the Act, 
foreign financial supervisors, foreign central banks and foreign 
ministries.
    (5) Commercial Use. The term ``commercial use'' means the use of 
swap data held and maintained by a

[[Page 80927]]

registered swap data repository for a profit or business purposes. The 
use of swap data for regulatory purposes and/or responsibilities by a 
registered swap data repository would not be considered a commercial 
use regardless of whether the registered swap data repository charges a 
fee for reporting such swap data.
    (6) Market Participant. The term ``market participant'' means any 
person participating in the swap market, including, but not limited to, 
designated contract markets, derivatives clearing organizations, swaps 
execution facilities, swap dealers, major swap participants, and any 
other counterparties to a swap transaction.
    (7) Non-affiliated third party. The term ``non-affiliated third 
party'' means any person except:
    (i) The swap data repository,
    (ii) The swap data repository's affiliate, or
    (iii) A person employed by a swap data repository and any entity 
that is not the swap data repository's affiliate (and ``non-affiliated 
third party'' includes such entity that jointly employs the person).
    (8) Person Associated with a Swap Data Repository. The term 
``person associated with a swap data repository'' means:
    (i) Any partner, officer, or director of such swap data repository 
(or any person occupying a similar status or performing similar 
functions);
    (ii) Any person directly or indirectly controlling, controlled by, 
or under common control with such swap data repository;
    (iii) Or any employee of such swap data repository.
    (9) Position. The term ``position'' means the gross and net 
notional amounts of open swap transactions aggregated by one or more 
attributes, including, but not limited to, the:
    (i) Underlying instrument;
    (ii) Index, or reference entity;
    (iii) Counterparty;
    (iv) Asset class;
    (v) Long risk of the underlying instrument, index, or reference 
entity; and
    (vi) Short risk of the underlying instrument, index, or reference 
entity.
    (10) Reporting Entity. The term ``reporting entity'' means those 
entities that are required to report swap data to a registered swap 
data repository. These reporting entities include designated contract 
markets, swaps execution facilities, derivatives clearing 
organizations, swap dealers, major swap participants and certain end-
users.
    (11) Section 8 Material. The term ``Section 8 Material'' means the 
business transactions, trade data, or market positions of any person 
and trade secrets or names of customers.
    (12) Swap Data. The term ``swap data'' means the specific data 
elements and information set forth in part 45 of this chapter that is 
required to be reported by a reporting entity to a registered swap data 
repository.
    (13) SDR Information. The term ``SDR Information'' means any 
information that the swap data repository maintains.
    (14) Registered Swap Data Repository. The term ``registered swaps 
data repository'' means a swaps data repository that is registered 
under Section 21 of the Act.
    (15) Independent Perspective. The term ``independent perspective'' 
means a viewpoint that is impartial regarding competitive, commercial, 
or industry concerns and contemplates the effect of a decision on all 
constituencies involved.
    (b) Defined Terms. Capitalized terms not defined in this part shall 
have the meanings assigned to them in Sec.  1.3 of this chapter.


Sec.  49.3  Procedures for registration.

    (a) Application Procedures. (1) An applicant, person or entity 
desiring to be registered as a swap data repository shall file 
electronically an application for registration on Form SDR provided in 
appendix A to this part, with the Secretary of the Commission at its 
headquarters in Washington, DC at <a href="/cdn-cgi/l/email-protection#f98a8c9b94908a8a9096978ab99a9f8d9ad79e968f"><span class="__cf_email__" data-cfemail="d9aaacbbb4b0aaaab0b6b7aa99babfadbaf7beb6af">[email protected]</span></a> in accordance 
with the instructions contained therein.
    (2) The application shall include information sufficient to 
demonstrate compliance with core principles specified in Section 21 of 
the Act and the regulations thereunder. Form SDR consists of 
instructions, general questions and a list of Exhibits (documents, 
information and evidence) required by the Commission in order to 
determine whether an applicant is able to comply with the core 
principles. An application will not be considered to be materially 
complete unless the applicant has submitted, at a minimum, the exhibits 
as required in Form SDR. If the application is not materially complete, 
the Commission shall notify the applicant that the application will not 
be deemed to have been submitted for purposes of the 180-day review 
procedures.
    (3) 180-Day Review Procedures. The Commission will review the 
application for registration as a swap data repository within 180 days 
of the date of the filing of such application. At or prior to the 
conclusion of the 180-day period, the Commission will either by order 
grant registration; extend, by order, the 180-day review period for 
good cause; or deny the application for registration as a swap data 
repository. The 180-day review period shall commence once a completed 
submission on Form SDR is submitted to the Commission. The 
determination of when such submission on Form SDR is complete shall be 
at the sole discretion of the Commission. If deemed appropriate, the 
Commission may grant registration as a swap data repository subject to 
conditions. If the Commission denies an application for registration as 
a swap data repository, it shall specify the grounds for such denial. 
In the event of a denial of registration for a swap data repository, 
any person so denied shall be afforded an opportunity for a hearing 
before the Commission.
    (4) Standard for Approval. The Commission shall grant the 
registration of a swap data repository if the Commission finds that 
such swap data repository is appropriately organized, and has the 
capacity, to ensure the prompt, accurate and reliable performance of 
its functions as a swap data repository, comply with any applicable 
provisions of the Act and regulations thereunder, carry out its 
functions in a manner consistent with the purposes of Section 21 of the 
Act and the regulations thereunder, and operate in a fair, equitable 
and consistent manner. The Commission shall deny registration of a swap 
data repository if it appears that the application is materially 
incomplete; fails in form or substance to meet the requirements of 
Section 21 of the Act and part 49; or is amended or supplemented in a 
manner that is inconsistent with this Sec.  49.3. The Commission shall 
notify the applicant seeking registration that the Commission is 
denying the application setting forth the deficiencies in the 
application, and/or the manner in which the application fails to meet 
the requirements of this part.
    (5) Amendments and Annual Filing. If any information reported on 
Form SDR or in any amendment thereto is or becomes inaccurate for any 
reason, whether before or after the application for registration has 
been granted, the swap data repository shall promptly file an amendment 
on Form SDR updating such information. In addition, the swap data 
repository shall annually file an amendment on Form SDR within 60 days 
after the end of each calendar year of such swap data repository.
    (6) Service of Process. Each swap data repository shall designate 
and authorize on Form SDR an agent in the United States, other than a 
Commission official, who shall accept any notice or service

[[Page 80928]]

of process, pleadings, or other documents in any action or proceedings 
brought against the swap data repository to enforce the Act and the 
regulations thereunder.
    (b) Provisional Registration. The Commission, upon the request of 
an applicant, may grant provisional registration of a swap data 
repository if such applicant is in substantial compliance with the 
standards set forth in paragraph (a)(4) of this section. Such 
provisional registration of a swap data repository shall expire on the 
earlier of: the date that the Commission grants or denies registration 
of the swap data repository; or the date that the Commission rescinds 
the temporary registration of the swap data repository. This paragraph 
(b) of this section shall terminate within 365 days of the 
effectiveness of this Regulation. A provisional registration granted by 
the Commission does not affect the right of the Commission to grant or 
deny permanent registration as provided under paragraph (a)(3) of this 
section.
    (c) Withdrawal of Application for Registration. An applicant for 
registration may withdraw its application submitted pursuant to 
paragraph (a) of this section by filing with the Commission such a 
request. Withdrawal of an application for registration shall not affect 
any action taken or to be taken by the Commission based upon actions, 
activities, or events occurring during the time that the application 
for registration was pending with the Commission, and shall not 
prejudice the filing of a new application by such applicant.
    (d) Reinstatement of Dormant Registration. Before accepting or re-
accepting swap transaction data, a dormant registered swap data 
repository as defined in Sec.  40.1(e) of this chapter shall reinstate 
its registration under the procedures set forth in paragraph (a) of 
this section; provided, however, that an application for reinstatement 
may rely upon previously submitted materials that still pertain to, and 
accurately describe, current conditions.
    (e) Delegation of Authority. (1) The Commission hereby delegates, 
until it orders otherwise, to the Director of the Division of Market 
Oversight or the Director's delegates, with the consultation of the 
General Counsel or the General Counsel's delegates, the authority to 
notify an applicant seeking registration as a swap data repository 
pursuant to Section 21 of the Act that the application is materially 
incomplete and the 180-day period review period is extended.
    (2) The Director of the Division of Market Oversight may submit to 
the Commission for its consideration any matter which has been 
delegated in this paragraph.
    (3) Nothing in this paragraph prohibits the Commission, at its 
election, from exercising the authority delegated in paragraph (e)(1) 
of this section.
    (f) Request for Confidential Treatment. An applicant for 
registration may request confidential treatment for materials submitted 
in its application as set forth in Sec.  145.9 of this chapter. The 
applicant shall identify with particularity information in the 
application that will be subject to a request for confidential 
treatment.


Sec.  49.4  Withdrawal from registration.

    (a)(1) A registered swap data repository may withdraw its 
registration by giving notice in writing to the Commission requesting 
that its registration as a swap data repository be withdrawn, which 
notice shall be served at least ninety days prior to the date named 
therein as the date when the withdrawal of registration shall take 
effect. The request to withdraw shall be made by a person duly 
authorized by the registrant and shall specify:
    (i) The name of the registrant for which withdrawal of registration 
is being requested;
    (ii) The name, address and telephone number of the swap data 
repository that will have custody of data and records of the 
registrant;
    (iii) The address where such data and records will be located; and
    (iv) A statement that the custodial swap data repository is 
authorized to make such data and records available in accordance with 
Sec.  1.44.
    (2) Prior to filing a request to withdraw, a registered swap data 
repository shall file an amended Form SDR to update any inaccurate 
information. A withdrawal of registration shall not affect any action 
taken or to be taken by the Commission based upon actions, activities 
or events occurring during the time that the facility was designated by 
the Commission.
    (b) A notice of withdrawal from registration filed by a swap data 
repository shall become effective for all matters (except as provided 
in this paragraph (b)) on the 60th day after the filing thereof with 
the Commission, within such longer period of time as to which such swap 
data repository consents or which the Commission, by order, may 
determine as necessary or appropriate in the public interest.
    (c) Revocation of Registration for False Application. If, after 
notice and opportunity for hearing, the Commission finds that any 
registered swap data repository has obtained its registration by making 
any false and misleading statements with respect to any material fact 
or has violated or failed to comply with any provision of the Act and 
regulations thereunder, the Commission, by order, may revoke the 
registration. Pending final determination whether any registration 
shall be revoked, the Commission, by order, may suspend such 
registration, if such suspension appears to the Commission, after 
notice and opportunity for hearing, to be necessary or appropriate and 
in the public interest.


Sec.  49.5  Equity interest transfers.

    (a) Equity transfer notification. Upon entering into any 
agreement(s) that could result in an equity interest transfer of ten 
percent or more in the swap data repository, the swap data repository 
shall file a notification of the equity interest transfer with the 
Secretary of the Commission at its Washington, DC headquarters at 
<a href="/cdn-cgi/l/email-protection#2a595f4847435959434544596a494c5e49044d455c"><span class="__cf_email__" data-cfemail="097a7c6b64607a7a6066677a496a6f7d6a276e667f">[email protected]</span></a> and the Division of Market Oversight at 
<a href="/cdn-cgi/l/email-protection#2460696b775146494d57574d4b4a5764474250470a434b52"><span class="__cf_email__" data-cfemail="bffbf2f0eccaddd2d6ccccd6d0d1ccffdcd9cbdc91d8d0c9">[email protected]</span></a>, no later than the business day, as defined in 
Sec.  40.1 of this chapter, following the date on which the swap data 
repository enters into a firm obligation to transfer the equity 
interest. The swap data repository shall also amend any information 
that is no longer accurate on Form SDR consistent with the procedures 
set forth in Sec.  49.3 of this part.
    (b) Required information. The notification must include and be 
accompanied by: any relevant agreement(s), including any preliminary 
agreements; any associated changes to relevant corporate documents; a 
chart outlining any new ownership or corporate or organizational 
structure; a brief description of the purpose and any impact of the 
equity interest transfer; and a representation from the swap data 
repository that it meets all of the requirements of Section 21 of the 
Act and Commission regulations adopted thereunder. The swap data 
repository shall keep the Commission apprised of the projected date 
that the transaction resulting in the equity interest transfer will be 
consummated, and must provide to the Commission any new agreements or 
modifications to the original agreement(s) filed pursuant to this 
section. The swap data repository shall notify the Commission of the 
consummation of the transaction on the day in which it occurs.
    (c) Certification. (1) Upon a transfer of an equity interest of ten 
percent or more

[[Page 80929]]

in a registered swap data repository, the registered swap data 
repository shall file with the Secretary of the Commission at its 
Washington DC headquarters, at <a href="/cdn-cgi/l/email-protection#f68583949b9f85859f999885b695908295d8919980"><span class="__cf_email__" data-cfemail="c7b4b2a5aaaeb4b4aea8a9b487a4a1b3a4e9a0a8b1">[email protected]</span></a>, and the Division 
of Market Oversight, at <a href="/cdn-cgi/l/email-protection#8dc9c0c2def8efe0e4fefee4e2e3fecdeeebf9eea3eae2fb"><span class="__cf_email__" data-cfemail="ebafa6a4b89e898682989882848598ab888d9f88c58c849d">[email protected]</span></a>, a certification that 
the registered swap data repository meets all of the requirements of 
Section 21 of the Act and Commission regulations adopted thereunder, no 
later than two business days, as defined in Sec.  40.1 of this chapter, 
following the date on which the equity interest of ten percent or more 
was acquired. Such certification shall state whether changes to any 
aspects of the swap data repository's operations were made as a result 
of such change in ownership, and include a description of any such 
change(s).
    (2) The certification required under this paragraph may rely on and 
be supported by reference to an application for registration as a swap 
data repository or prior filings made pursuant to a rule submission 
requirement, along with any necessary new filings, including new 
filings that provide any and all material updates of prior submissions.


Sec.  49.6  Registration of successor entities.

    (a) In the event of a corporate transaction, such as a re-
organization, merger, acquisition, bankruptcy or other similar 
corporate event, that creates a new entity, in which the swap data 
repository continues to operate, the swap data repository shall request 
a transfer of the registration, rules, and other matters, no later than 
30 days after the succession. The registration of the predecessor shall 
be deemed to remain effective as the registration of the successor if 
the successor, within 30 days after such succession, files an 
application for registration on Form SDR, and the predecessor files a 
request for vacation of registration on Form SDR provided, however, 
that the registration of the predecessor swap data repository shall 
cease to be effective 90 days after the application for registration on 
Form SDR is filed by the successor swap data repository.
    (b) If the succession is based solely on a change in the 
predecessor's date or state of incorporation, form of organization, or 
composition of a partnership, the successor may, within 30 days after 
the succession, amend the registration of the predecessor swap data 
repository on Form SDR to reflect these changes. This amendment shall 
be an application for registration filed by the predecessor and adopted 
by the successor.


Sec.  49.7  Swap data repositories located in foreign jurisdictions.

    Any swap data repository located outside of the United States 
applying for registration pursuant to Sec.  49.3 of this part shall 
certify on Form SDR and provide an opinion of counsel that the swap 
data repository, as a matter of law, is able to provide the Commission 
with prompt access to the books and records of such swap data 
repository and that the swap data repository can submit to onsite 
inspection and examination by the Commission.


Sec.  49.8  Procedures for implementing registered swap data repository 
rules.

    (a) Request for Commission approval of rules. An applicant for 
registration as a swap data repository may request that the Commission 
approve under Section 5c(c) of the Act, any or all of its rules and 
subsequent amendments thereto, prior to their implementation or, 
notwithstanding the provisions of Section 5c(c)(2) of the Act, at 
anytime thereafter, under the procedures of Sec.  40.5 of this chapter.
    (b) Notwithstanding the timeline under Sec.  40.5(c) of this 
chapter, the rules of a swap data repository that have been submitted 
for Commission approval at the same time as an application for 
registration under Sec.  49.3 of this part to reinstate the 
registration of a dormant registered swap data repository, as defined 
in Sec.  40.1 of this chapter, will be deemed approved by the 
Commission no earlier than when the swap data repository is deemed to 
be registered or reinstated.
    (c) Self-certification of rules. Rules of a registered swap data 
repository not voluntarily submitted for prior Commission approval 
pursuant to paragraph (a) of this section must be submitted to the 
Commission with a certification that the rule or rule amendment 
complies with the Act or rules thereunder pursuant to the procedures of 
Sec.  40.6 of this chapter, as applicable.


Sec.  49.9  Duties of registered swap data repositories.

    (a) Duties. To be registered, and maintain registration, as a swap 
data repository, a registered swap data repository shall:
    (1) Accept data as prescribed in Sec.  49.10 for each swap;
    (2) Confirm, as prescribed in Sec.  49.11, with both counterparties 
to the swap the accuracy of the data that was submitted;
    (3) Maintain, as prescribed in Sec.  49.12, the data described in 
part 45 of the Commission's Regulations in such form and manner as 
provided therein and in the Act and the rules and regulations 
thereunder;
    (4) Provide direct electronic access to the Commission (or any 
designee of the Commission, including another registered entity) as 
prescribed in Sec.  49.17;
    (5) Provide the information set forth in Sec.  49.15 to comply with 
the public reporting requirements set forth in Section 2(a)(13) of the 
Act;
    (6) Establish automated systems for monitoring, screening, and 
analyzing swap data as prescribed in Sec.  49.13;
    (7) Establish automated systems for the monitoring, screening and 
analyzing end-user clearing exemption claims as prescribed in Sec.  
49.14;
    (8) Maintain the privacy of any and all swap data and any other 
related information that the swap data repository receives from a 
reporting entity as prescribed in Sec.  49.16;
    (9) Upon request of certain appropriate domestic and foreign 
regulators, provide access to swap data and information held and 
maintained by the swap data repository as prescribed in Sec.  49.17;
    (10) Adopt and establish appropriate emergency policies and 
procedures as prescribed in Sec.  49.23.
    (11) Designate an individual to serve as a chief compliance officer 
who shall comply with Sec.  49.22; and
    (12) Subject itself to inspection and examination by the 
Commission.
    (b) This Regulation is not intended to limit, or restrict, the 
applicability of other provisions of the Act, including, but not 
limited to, Section 2(a)(13) of the Act and rules and regulations 
promulgated thereunder.


Sec.  49.10  Acceptance of data.

    (a) A registered swap data repository shall establish, maintain, 
and enforce policies and procedures for the reporting of swap data to 
the registered swap data repository and shall accept and promptly 
record all swap data in its selected asset class and other regulatory 
information that is required to be reported pursuant to part 45 of this 
chapter by designated contract markets, derivatives clearing 
organizations, swap execution facilities, swap dealers, major swap 
participants and/or end-users.
    (1) Electronic Connectivity. For the purpose of accepting all swap 
data as required by part 45, the registered swap data repository shall 
adopt policies and procedures, including technological protocols, which 
provide for electronic connectivity between the swap data repository 
and designated contract markets, derivatives clearing organizations, 
swaps execution facilities, swap dealers, major swap participants and/
or end-users who report such data. The technological

[[Page 80930]]

protocols established by a swap data repository shall provide for the 
receipt of swap creation data, swap continuation data, real-time public 
reporting data, and all other data and information required to be 
reported to such swap data repository. The swap data repository shall 
ensure that its mechanisms for data acceptance are reliable and secure.
    (b) A registered swap data repository shall set forth in its 
application for registration as described in Sec.  49.3 the specific 
asset class or classes for which it will accept swaps data. If a swap 
data repository accepts swap data of a particular asset class, then it 
shall accept data from all swaps of that asset class.
    (c) A registered swap data repository shall establish policies and 
procedures reasonably designed to prevent any provision in a valid swap 
from being invalidated or modified through the confirmation or 
recording process of the swap data repository.
    (d) A registered swap data repository shall establish procedures 
and provide facilities for effectively resolving disputes over the 
accuracy of the swap data and positions that are recorded in the 
registered swap data repository.


Sec.  49.11  Confirmation of data accuracy.

    (a) A registered swap data repository shall establish policies and 
procedures to ensure the accuracy of swap data and other regulatory 
information required to be reported by this part 49 that it receives 
from reporting entities or certain third party service providers such 
as confirmation or matching service providers acting on their behalf.
    (b) With respect to data and other regulatory information submitted 
by a reporting entity or certain third party service providers acting 
on a reporting entity's behalf, the swap data repository shall confirm 
with both counterparties to the swap the accuracy of the data and 
information submitted. This requirement applies to all reported swap 
data except for data reported for purposes of real-time public 
reporting.
    (c) A registered swap data repository in connection with the 
process of confirming the accuracy of the data and information 
submitted shall communicate with both counterparties to the swap and 
receive acknowledgement of the data and information submitted as well 
as any correction of any errors. The acknowledgement and correction of 
errors shall pertain to all information submitted by either 
counterparty and any entity that has been delegated the reporting 
obligation. The swap data repository shall keep a record of corrected 
errors that is available upon request to the Commission.


Sec.  49.12  Swap data repository recordkeeping requirements.

    (a) A registered swap data repository shall maintain its books and 
records in accordance with the requirements of Sec.  45.2 of this 
chapter regarding the swap data required to be reported to the swap 
data repository.
    (b) A registered swap data repository shall maintain swap data 
(including all historical positions) throughout the existence of the 
swap and for five years following final termination of the swap, during 
which time the records must be readily accessible by the swap data 
repository and available to the Commission via real-time electronic 
access; and in archival storage for which such swap data is retrievable 
by the swap data repository within three business days.
    (c) All records required to be kept pursuant to this Regulation 
shall be open to inspection upon request by any representative of the 
Commission, the United States Department of Justice, the Securities and 
Exchange Commission, or by any representative of a prudential regulator 
as authorized by the Commission. Copies of all such records shall be 
provided, at the expense of the swap data repository or person required 
to keep the record, to any representative of the Commission upon 
request, either by electronic means, in hard copy, or both, as 
requested by the Commission.
    (d) A registered swap data repository that accepts and disseminates 
swap transaction and pricing data shall comply with the real time 
public reporting and recordkeeping requirements prescribed in part 43 
of this chapter.
    (e) A registered swap data repository shall establish policies and 
procedures to calculate positions for position limits and any other 
purpose as required by the Commission, for all persons with swaps that 
have not expired maintained by the registered swap data repository.


Sec.  49.13  Monitoring, screening and analyzing swap data.

    (a) Duty to Monitor, Screen and Analyze Data. A registered swap 
data repository shall monitor, screen, and analyze all swap data in its 
possession in such a manner as the Commission may require. A swap data 
repository shall routinely monitor, screen, and analyze swap data for 
the purpose of any standing swap surveillance objectives which the 
Commission may establish as well as specific monitoring, screening, and 
analysis tasks based on ad hoc requests by the Commission.
    (b) Capacity to Monitor, Screen and Analyze Data. A registered swap 
data repository shall establish and maintain sufficient information 
technology, staff, and other resources to fulfill the requirements in 
this Sec.  49.13 in a manner prescribed by the Commission. A swap data 
repository shall monitor the sufficiency of such resources at least 
annually, and adjust its resources as its responsibilities, or the 
volume of swap transactions subject to monitoring, screening, and 
analysis, increase.


Sec.  49.14  Monitoring, screening and analyzing end-user clearing 
exemption claims by individual and affiliated entities.

    A registered swap data repository shall have automated systems 
capable of identifying, aggregating, sorting, and filtering all swap 
transactions that are reported to it which are exempt from clearing 
pursuant to Section 2(h)(7) of the Act. Such capabilities shall be 
applicable to any information provided to a swap data repository by or 
on behalf of an end user regarding how such end user meets the 
requirements Sections 2(h)(7)(A)(i), 2(h)(7)(A)(ii), and 
2(h)(7)(A)(iii) of the Act and any Commission regulations thereunder.


Sec.  49.15  Real-time public reporting of swap data.

    (a) Scope. The provisions of this Sec.  49.15 apply to real-time 
public reporting of swap data for off-facility swaps, as defined in 
part 43 of this chapter.
    (b) Systems to Accept and Disseminate Swap Data In Connection With 
Real-Time Public Reporting. A registered swap data repository shall 
establish such electronic systems as are necessary to accept and 
publicly disseminate real-time swap data submitted to meet the real-
time public reporting obligations of part 43 of this chapter. Any 
electronic systems established for this purpose must be capable of 
accepting and publicly disseminating all data fields required by part 
43 of this chapter.
    (c) Duty to Notify the Commission of Untimely Data. A registered 
swap data repository must notify the Commission of any swap transaction 
for which the real-time swap data was not received by the swap data 
repository within the time period required by Sec.  43.3(a)(3). This 
notification must be submitted electronically to the Commission within 
forty-eight hours of when the swap data repository first receives an 
untimely real-time swap data report from one of the parties to the swap 
transaction. The notification submitted to the Commission must include 
all real-time swap data submitted for the relevant

[[Page 80931]]

swap transaction; identify the party to the swap that submitted the 
real-time swap data; and contain the date and time, to the nearest 
second, the real-time swap data was received by the swap data 
repository.


Sec.  49.16  Privacy and confidentiality requirements of swap data 
repositories.

    (a) Each swap data repository shall:
    (1) Establish, maintain, and enforce written policies and 
procedures reasonably designed to protect the privacy and 
confidentiality of any and all SDR Information that is not subject to 
real-time public reporting set forth in part 43 of this chapter. Such 
policies and procedures shall include, but are not limited to, policies 
and procedures to protect the privacy and confidentiality of any and 
all SDR Information (except for data disseminated under part 43) that 
the swap data repository shares with affiliates and non-affiliated 
third parties; and
    (2) Establish and maintain safeguards, policies, and procedures 
reasonably designed to prevent the misappropriation or misuse, directly 
or indirectly, of:
    (i) Section 8 Material;
    (ii) Other SDR Information; and/or
    (iii) Intellectual property, such as trading strategies or 
portfolio positions, by the swap data repository or any person 
associated with the swap data repository. Such safeguards, policies, 
and procedures shall include, but are not limited to,
    (A) limiting access to such Section 8 Material, other SDR 
Information, and intellectual property,
    (B) standards controlling persons associated with the swap data 
repository trading for their personal benefit or the benefit of others, 
and
    (C) adequate oversight to ensure compliance with this subparagraph.


Sec.  49.17  Access to SDR data.

    (a) Purpose. This Section provides a procedure by which the 
Commission, other domestic regulators and foreign regulators may obtain 
access to the swaps data held and maintained by registered swap data 
repositories. Except as specifically set forth in this Regulation, the 
Commission's duties and obligations regarding the confidentiality of 
business transactions or market positions of any person and trade 
secrets or names of customers identified in Section 8 of the Act are 
not affected.
    (b) Definitions. For purposes of this Sec.  49.17, the following 
terms shall be defined as follows:
    (1) Appropriate Domestic Regulator. The term ``Appropriate Domestic 
Regulator'' shall mean:
    (i) The Securities and Exchange Commission;
    (ii) Each prudential regulator identified in Section 1a(39) of the 
Act with respect to requests related to any of such regulator's 
statutory authorities, without limitation to the activities listed for 
each regulator in Section 1a(39);
    (iii) The Financial Stability Oversight Council;
    (iv) The Department of Justice;
    (v) The Federal Reserve Bank of New York;
    (vi) The Office of Financial Research; and
    (vii) Any other person the Commission deems appropriate.
    (2) Appropriate Foreign Regulator. The term ``Appropriate Foreign 
Regulator'' shall mean those Foreign Regulators with an existing 
memorandum of understanding or other similar type of information 
sharing arrangement executed with the Commission and/or Foreign 
Regulators without an MOU as determined on a case-by-case basis by the 
Commission.
    (i) Filing Requirements. For those Foreign Regulators who do not 
currently have a memorandum of understanding with the Commission, the 
Commission has determined to provide the following filing process for 
those Foreign Regulators that may require data or information 
maintained by a registered swap data repository. The filing requirement 
set forth in this Sec.  49.17 will assist the Commission in its 
analysis of whether a specific Foreign Regulator should be considered 
``appropriate'' for purposes of Section 21(c)(7) of the Commodity 
Exchange Act.
    (A) The Foreign Regulator is required to file an application in the 
form and manner prescribed by the Commission.
    (B) The Foreign Regulator in its application is required to provide 
sufficient facts and procedures to permit the Commission to analyze 
whether the Foreign Regulator has appropriate confidentiality 
procedures and whether the Foreign Regulator is otherwise subject to 
local laws, regulations and/or customs that would require disclosure of 
information in contravention of the Act.
    (ii) The Commission in its analysis of Foreign Regulator 
applications shall be satisfied that any information potentially 
provided by a registered swap data repository will not be disclosed 
except in limited circumstances such as an adjudicatory action or 
proceeding involving the Foreign Regulator that are identified in 
Section 8 of the Act.
    (iii) The Commission reserves the right in connection with any 
determination of an ``Appropriate Foreign Regulator'' to revisit or 
reassess a prior determination consistent with the Act.
    (3) Direct Electronic Access. For the purposes of this regulation, 
the term ``direct electronic access'' shall mean an electronic system, 
platform or framework that provides internet or web-based access to 
real-time swap transaction data.
    (c) Commission Access.
    (1) Direct Electronic Access. A registered swap data repository 
shall provide direct electronic access to the Commission or the 
Commission's designee, including another registered entity, in order 
for the Commission to carry out its legal and statutory 
responsibilities under the Act and related regulations.
    (2) Monitoring Tools. A registered swap data repository is required 
to provide the Commission with proper tools for the monitoring, 
screening and analyzing of swap transaction data, including, but not 
limited to, web-based services, various software and access to the 
staff of the swap data repository and/or third party service providers 
or agents familiar with the operations of the registered swap data 
repository, which can provide assistance to the Commission regarding 
data structure and content. These monitoring tools shall be identical 
in analytical capability as those provided to the compliance staff and 
the Chief Compliance Officer of the swap data repository.
    (3) Authorized Users. The swap transaction data provided to the 
Commission by a registered swap data repository shall be accessible 
only by authorized users. The swap data repository shall maintain and 
provide a list of authorized users in the manner and frequency 
determined by the Commission.
    (d) Other Regulators--(1) Procedure for Gaining Access to 
Registered Swap Data Repository Data. Appropriate Domestic Regulators 
and Appropriate Foreign Regulators seeking to gain access to the swaps 
data maintained by a swap data repository are required to apply for 
access as follows:
    (i) File a request for access with the registered swap data 
repository setting forth in sufficient detail the basis of its request; 
and
    (ii) Certify the statutory authority for its request and that it is 
acting within the scope of its jurisdiction;
    (2) Obligations of the Registered Swap Data Repository in 
Connection with Appropriate Domestic Regulator or

[[Page 80932]]

Appropriate Foreign Regulator Requests for Data Access.
    (i) A registered swap data repository shall promptly notify the 
Commission regarding any request received by an Appropriate Domestic 
Regulator or Appropriate Foreign Regulator to gain access to the swaps 
transaction data maintained by such swap data repository.
    (ii) The registered swap data repository shall notify the 
Commission electronically in a format specified by the Secretary of the 
Commission.
    (3) Timing. Once the swaps data repository provides the Commission 
with notification of a request for data access by an Appropriate 
Domestic Regulator or Appropriate Foreign Regulator as required by 
paragraph (d)(2) of this section, such swap data repository shall 
provide access to the requested swaps data if satisfied that the 
Appropriate Domestic Regulator or Appropriate Foreign Regulator is 
acting within the scope of its authority.
    (4) Confidentiality and Indemnification Agreement. Consistent with 
Sec.  49.18 of this part, the Appropriate Domestic Regulator or 
Appropriate Foreign Regulator prior to receipt of any requested data or 
information shall execute a ``Confidentiality and Indemnification 
Agreement'' with the registered swap data repository as set forth in 
Section 21(d) of the Act.
    (e) Third Party Service Providers to a Registered Swap Data 
Repository. Access to the data and information maintained by a 
registered swap data repository may be necessary for certain third 
parties that provide various technology and data-related services to a 
registered swap data repository. Third party access to the swap data 
maintained by a swap data repository is permissible subject to the 
following conditions:
    (1) Both the registered swap data repository and the third party 
service provider shall have strict confidentiality procedures that 
protect data and information from improper disclosure.
    (2) Prior to swaps data access, the third party service provider 
and the registered swaps data repository shall execute a 
``Confidentiality Agreement'' setting forth minimum confidentiality 
procedures and permissible uses of the information maintained by the 
swaps data repository.
    (f) Access by Market Participants-- (1) General. Access of swap 
data maintained by the registered swaps data repository to market 
participants is generally prohibited.
    (2) Exception. Data and information maintained by the registered 
swap data repository may be accessed by market participants if the 
specific data was originally submitted by such party.
    (g) Commercial Uses of Data Maintained by the Registered Swap Data 
Repository Prohibited. Data maintained by the swap data repository 
generally may not be used for commercial or business purposes by the 
swap data repository or any of its affiliated entities.
    (1) The registered swap data repository is required to adopt and 
implement adequate ``firewalls'' to protect the data required to be 
maintained under Sec.  49.12 of this part and Section 21(b) of the Act 
from any improper, commercial use.
    (2) Exception. Market participants who submit the data maintained 
by the registered swap data repository may permit the commercial or 
business use of that data by express written consent.


Sec.  49.18  Confidentiality and indemnification agreement.

    (a) Purpose. This section sets forth the obligations of registered 
swap data repositories to execute a ``Confidentiality and 
Indemnification Agreement'' in connection with providing access to 
swaps data to certain domestic regulators and ``appropriate foreign 
regulators.''
    (b) Confidentiality and Indemnification Agreement. Prior to the 
registered swap data repository providing access to the swaps data with 
any Appropriate Domestic Regulator or Appropriate Foreign Regulator as 
defined in Sec.  49.17(b), the swap data repository shall receive a 
written agreement from each such entity stating that the entity shall 
abide by the confidentiality requirements described in Section 8 of the 
Act relating to the swap data that is provided; and each such entity 
shall agree to indemnify the swap data repository and the Commission 
for any expenses arising from litigation relating to the information 
provided under Section 8 of the Act.


Sec.  49.19  Core principles applicable to registered swap data 
repositories.

    (a) Compliance with Core Principles. To be registered, and maintain 
registration, a swap data repository shall comply with the core 
principles as described in this paragraph. Unless otherwise determined 
by the Commission by rule or regulation, a swap data repository shall 
have reasonable discretion in establishing the manner in which the swap 
data repository complies with the core principles described in this 
paragraph.
    (b) Antitrust Considerations (Core Principle 1). Unless appropriate 
to achieve the purposes of the Act, a registered swap data repository 
shall avoid adopting any rule or taking any action that results in any 
unreasonable restraint of trade; or imposing any material 
anticompetitive burden on trading, clearing or reporting swaps.
    (c) Governance Arrangements (Core Principle 2). Registered swap 
data repositories shall establish governance arrangements as set forth 
in Sec.  49.20.
    (d) Conflicts of Interest (Core Principle 3). Registered swap data 
repositories shall manage and minimize conflicts of interest and 
establish processes for resolving such conflicts of interest as set 
forth in Sec.  49.21.
    (e) Additional Duties (Core Principle 4). Registered swap data 
repositories shall also comply with the following additional duties:
    (1) System Safeguards. Registered swap data repositories shall 
establish and maintain a program of system safeguards, including 
business continuity and disaster recovery plans as set forth in Sec.  
49.24;
    (2) Financial Resources. Registered swap data repositories shall 
maintain sufficient financial resources as set forth in Sec.  49.25;
    (3) Disclosure Requirements of Registered Swap Data Repositories. 
Registered swap data repositories shall furnish an appropriate 
disclosure document setting forth the risks and costs of swap data 
repository services as detailed in Sec.  49.26; and
    (4) Access and Fees. Registered swap data repositories shall adhere 
to Commission requirements regarding fair and open access and the 
charging of any fees, dues or other similar type charges as detailed in 
Sec.  49.27.


Sec.  49.20  Governance arrangements (Core Principle 2).

    (a) General. (1) Each registered swap data repository shall 
establish governance arrangements that are transparent to fulfill 
public interest requirements, and to support the objectives of the 
Federal Government, owners, and participants.
    (2) Each registered swap data repository shall establish governance 
arrangements that are well-defined and include a clear organizational 
structure with consistent lines of responsibility and effective 
internal controls, including with respect to administration, 
accounting, and the disclosure of confidential information. Sec.  49.22 
of this part contains rules on internal controls applicable to 
administration and accounting. Sec.  49.16 of this part contains rules 
on internal

[[Page 80933]]

controls applicable to the disclosure of confidential information.
    (b) Transparency of Governance Arrangements. (1) Each registered 
swap data repository shall state in its charter documents that its 
governance arrangements are transparent to support, among other things, 
the objectives of the Federal Government pursuant to Section 21(f)(2) 
of the Act.
    (2) Each registered swap data repository shall, at a minimum, make 
the following information available to the public and relevant 
authorities, including the Commission:
    (i) The mission statement of the registered swap data repository;
    (ii) The mission statement and/or charter of the board of 
directors, as well as of each committee of the registered swap data 
repository that has:
    (A) The authority to act on behalf of the board of directors or
    (B) The authority to amend or constrain actions of the board of 
directors;
    (iii) The board of directors nomination process for the registered 
swap data repository, as well as the process for assigning members of 
the board of directors or other persons to any committee referenced in 
paragraph (b)(2)(ii) of this section;
    (iv) For the board of directors and each committee referenced in 
paragraph (b)(2)(ii) of this section, the names of all members;
    (v) A description of the manner in which the board of directors, as 
well as any committee referenced in paragraph (b)(2)(ii) of this 
section, considers an Independent Perspective in its decision-making 
process, as Sec.  49.2(a)(14) of this part defines such term;
    (vi) The lines of responsibility and accountability for each 
operational unit of the registered swap data repository to any 
committee thereof and/or the board of directors; and
    (vii) Summaries of significant decisions implicating the public 
interest, the rationale for such decisions, and the process for 
reaching such decisions. Such significant decisions shall include 
decisions relating to pricing of repository services, offering of 
ancillary services, access to data, and use of Section 8 Material, 
other SDR Information, and intellectual property (as referenced in 
Sec.  49.16 of this part).
    (3) The registered swap data repository shall ensure that the 
information specified in paragraph (b)(2)(i) to (vii) of this section 
is current, accurate, clear, and readily accessible, for example, on 
its Web site. The swap data repository shall set forth such information 
in a language commonly used in the commodity futures and swap markets 
and at least one of the domestic language(s) of the jurisdiction in 
which the swap data repository is located.
    (4) Furthermore, the registered swap data repository shall disclose 
the information specified in paragraph (b)(2)(vii) of this section in a 
sufficiently comprehensive and detailed fashion so as to permit the 
public and relevant authorities, including the Commission, to 
understand the policies or procedures of the swap data repository 
implicated and the manner in which the decision implements or amends 
such policies or procedures. A swap data repository shall not disclose 
minutes from meetings of its board of directors or committees to the 
public, although it shall disclose such minutes to the Commission upon 
request.
    (c) The Board of Directors-- (1) General. (i) Each registered swap 
data repository shall establish, maintain, and enforce (including, 
without limitation, pursuant to paragraph (c)(4) of this Regulation) 
written policies or procedures:
    (A) To ensure that its board of directors, as well as any committee 
that has:
    (1) Authority to act on behalf of its board of directors or
    (2) Authority to amend or constrain actions of its board of 
directors, adequately considers an Independent Perspective in its 
decision-making process;
    (B) To ensure that the nominations process for such board of 
directors, as well as the process for assigning members of the board of 
directors or other persons to such committees, adequately incorporates 
an Independent Perspective; and
    (C) To clearly articulate the roles and responsibilities of such 
board of directors, as well as such committees, especially with respect 
to the manner in which they ensure that a registered swap data 
repository complies with all statutory and regulatory responsibilities 
under the Act and the regulations promulgated thereunder.
    (ii) Each registered swap data repository shall submit to the 
Commission, within thirty days after each election of its board of 
directors:
    (A) For the board of directors, as well as each committee 
referenced in paragraph (c)(1)(i)(A) of this section, a list of all 
members;
    (B) A description of the relationship, if any, between such members 
and the registered swap data repository or any reporting entity thereof 
(or, in each case, affiliates thereof, as Sec.  49.2(a)(1) of this part 
defines such term); and
    (C) Any amendments to the written policies and procedures 
referenced in paragraph (c)(1)(i) of this section.
    (2) Compensation. The compensation of non-executive members of the 
board of directors of a registered swap data repository shall not be 
linked to the business performance of such swap data repository.
    (3) Annual Self-Review. The board of directors of a registered swap 
data repository shall review its performance and that of its individual 
members annually. It should consider periodically using external 
facilitators for such reviews.
    (4) Board Member Removal. A registered swap data repository shall 
have procedures to remove a member from the board of directors, where 
the conduct of such member is likely to be prejudicial to the sound and 
prudent management of the swap data repository.
    (5) Expertise. Each registered swap data repository shall ensure 
that members of its board of directors, members of any committee 
referenced in paragraph (c)(1)(i)(A) of this Regulation, and its senior 
management, in each case, are of sufficiently good repute and possess 
the requisite skills and expertise to fulfill their responsibilities in 
the management and governance of the swap data repository, to have a 
clear understanding of such responsibilities, and to exercise sound 
judgment about the affairs of the swap data repository.
    (d) Compliance with Core Principle. The chief compliance officer of 
the registered swap data repository shall review the compliance of the 
swap data repository with this core principle.


Sec.  49.21  Conflicts of interest (Core Principle 3).

    (a) General. (1) Each registered swap data repository shall 
establish and enforce rules to minimize conflicts of interest in the 
decision-making process of the swap data repository, and establish a 
process for resolving such conflicts of interest.
    (2) Nothing in this section shall supersede any requirement 
applicable to the SDR pursuant to Sec.  49.20 of this part.
    (b) Policies and Procedures. (1) Each registered swap data 
repository shall establish, maintain, and enforce written procedures 
to:
    (i) Identify, on an ongoing basis, existing and potential conflicts 
of interest; and
    (ii) Make decisions in the event of a conflict of interest. Such 
procedures shall include rules regarding the recusal, in applicable 
circumstances, of

[[Page 80934]]

parties involved in the making of decisions.
    (2) As further described in Sec.  49.20 of this part, the chief 
compliance officer of the registered swap data repository shall, in 
consultation with the board of directors or a senior officer of the 
swap data repository, resolve any such conflicts of interest.
    (c) Compliance with Core Principle. The chief compliance officer of 
the registered swap data repository shall review the compliance of the 
swap data repository with this core principle.


Sec.  49.22  Chief compliance officer.

    (a) Definition of Board of Directors. For purposes of this part 49, 
the term ``board of directors'' means the board of directors of a 
registered swap data repository, or for those swap data repositories 
whose organizational structure does not include a board of directors, a 
body performing a function similar to a board of directors.
    (b) Designation and qualifications of chief compliance officer--(1) 
Chief Compliance Officer Required. Each registered swap data repository 
shall establish the position of chief compliance officer, and designate 
an individual to serve in that capacity.
    (i) The position of chief compliance officer shall carry with it 
the authority and resources to develop and enforce policies and 
procedures necessary to fulfill the duties set forth for chief 
compliance officers in the Act and Commission regulations.
    (ii) The chief compliance officer shall have supervisory authority 
over all staff acting in furtherance of the chief compliance officer's 
statutory and regulatory obligations.
    (2) Qualifications of Chief Compliance Officer. The individual 
designated to serve as chief compliance officer shall have the 
background and skills appropriate for fulfilling the responsibilities 
of the position. No individual disqualified from registration pursuant 
to Sections 8a(2) or 8a(3) of the Act may serve as a chief compliance 
officer.
    (c) Appointment, Supervision, and Removal of Chief Compliance 
Officer--(1) Appointment and Compensation of Chief Compliance Officer 
Determined by Board of Directors. A registered swap data repository's 
chief compliance officer shall be appointed by its board of directors. 
The board of directors shall also approve the compensation of the chief 
compliance officer and shall meet with the chief compliance officer at 
least annually. The appointment of the chief compliance officer and 
approval of the chief compliance officer's compensation shall require 
the approval of a majority of the board of directors. The senior 
officer of the swap data repository may fulfill these responsibilities. 
A swap data repository shall notify the Commission of the appointment 
of a new chief compliance officer within two business days of such 
appointment.
    (2) Supervision of Chief Compliance Officer. A registered swap data 
repository's chief compliance officer shall report directly to the 
board of directors or to the senior officer of the swap data 
repository, at the swap data repository's discretion.
    (3) Removal of Chief Compliance Officer by Board of Directors. 
Removal of a registered swap data repository's chief compliance officer 
shall require the approval of a majority of the swap data repository's 
board of directors. If the swap data repository does not have a board 
of directors, then the chief compliance officer may be removed by the 
senior officer of the swap data repository. The swap data repository 
shall notify the Commission within two business days of appointing any 
new chief compliance officer, whether interim or permanent.
    (d) Duties of Chief Compliance Officer. The chief compliance 
officer's duties shall include, but are not limited to, the following:
    (1) Overseeing and reviewing the swap data repository's compliance 
with Section 21 of the Act and any related rules adopted by the 
Commission;
    (2) In consultation with the board of directors, a body performing 
a function similar to the board, or the senior officer of the swap data 
repository, resolving any conflicts of interest that may arise:
    (i) Conflicts between business considerations and compliance 
requirements;
    (ii) Conflicts between business considerations and the requirement 
that the registered swap data repository provide fair and open access 
as set forth in Sec.  49.27 of this part; and
    (iii) Conflicts between a registered swap data repository's 
management and members of the board of directors;
    (3) Establishing and administering written policies and procedures 
reasonably designed to prevent violation of the Act and any rules 
adopted by the Commission;
    (4) Ensuring compliance with the Act and Commission regulations 
relating to agreements, contracts, or transactions, and with Commission 
regulations under Section 21 of the Act, including confidentiality and 
indemnification agreements entered into with foreign or domestic 
regulators pursuant to Section 21(d) of the Act;
    (5) Establishing procedures for the remediation of noncompliance 
issues identified by the chief compliance officer through a compliance 
office review, look-back, internal or external audit finding, self-
reported error, or validated complaint;
    (6) Establishing and following appropriate procedures for the 
handling, management response, remediation, retesting, and closing of 
noncompliance issues; and
    (7) Establishing and administering a written code of ethics 
designed to prevent ethical violations and to promote honesty and 
ethical conduct.
    (e) Annual Compliance Report Prepared by Chief Compliance Officer. 
The chief compliance officer shall, not less than annually, prepare an 
annual compliance report, that at a minimum, contains the following 
information covering the time period since the date on which the swap 
data repository became registered with the Commission or since the end 
of the period covered by a previously filed annual compliance report, 
as applicable:
    (1) A description of the registered swap data repository's written 
policies and procedures, including the code of ethics and conflict of 
interest policies;
    (2) A review of applicable Commission regulations and each 
subsection and core principle of Section 21 of the Act, that, with 
respect to each:
    (i) Identifies the policies and procedures that ensure compliance 
with each subsection and the core principle, including each duty 
specified in Section 21(c);
    (ii) Provides a self-assessment as to the effectiveness of these 
policies and procedures; and
    (iii) Discusses areas for improvement, and recommends potential or 
prospective changes or improvements to its compliance program and 
resources;
    (3) A list of any material changes to compliance policies and 
procedures since the last annual compliance report;
    (4) A description of the financial, managerial, and operational 
resources set aside for compliance with respect to the Act and 
Commission regulations;
    (5) A description of any material compliance matters, including 
noncompliance issues identified through a compliance office review, 
look-back, internal or external audit finding, self-reported error, or 
validated complaint, and explains how they were resolved;
    (6) Any objections to the annual compliance report by those persons 
who have oversight responsibility for the chief compliance officer; and
    (7) A certification by the chief compliance officer that, to the 
best of

[[Page 80935]]

his or her knowledge and reasonable belief, and under penalty of law, 
the annual compliance report is accurate and complete.
    (f) Submission of Annual Compliance Report by Chief Compliance 
Officer to the Commission. (1) Prior to submission of the annual 
compliance report to the Commission, the chief compliance officer shall 
provide the annual compliance report to the board of the registered 
swap data repository for its review. If the swap data repository does 
not have board, then the annual compliance report shall be provided to 
the senior officer for their review. Members of the board and the 
senior officer may not require the chief compliance officer to make any 
changes to the report. Submission of the report to the board or senior 
officer, and any subsequent discussion of the report, shall be recorded 
in board minutes or similar written record, as evidence of compliance 
with this requirement.
    (2) The annual compliance report shall be provided electronically 
to the Commission not more than 60 days after the end of the registered 
swap data repository's fiscal year.
    (3) Promptly upon discovery of any material error or omission made 
in a previously filed compliance report, the chief compliance officer 
shall file an amendment with the Commission to correct any material 
error or omission. An amendment shall contain the oath or certification 
required under paragraph (e)(7) of this section.
    (4) A registered swap data repository may request the Commission 
for an extension of time to file its compliance report based on 
substantial, undue hardship. Extensions for the filing deadline may be 
granted at the discretion of the Commission.
    (5) Annual compliance reports filed pursuant to this section will 
be treated as exempt from mandatory public disclosure for purposes of 
the Freedom of Information Act and the Government in the Sunshine Act 
and parts 145 and 147 of this chapter, but will be available for 
official use by any official or employee of the United States and any 
State, by any self-regulatory organization of which the person filing 
the report is a member, and by any other person to whom the Commission 
believes disclosure is in the public interest.
    (g) Recordkeeping. (1) The registered swap data repository shall 
maintain:
    (i) A copy of the written policies and procedures, including the 
code of ethics and conflicts of interest policies adopted in 
furtherance of compliance with the Act and Commission regulations;
    (ii) Copies of all materials, including written reports provided to 
the board of directors or senior officer in connection with the review 
of the annual compliance report under paragraph (f)(1) of this section 
and the board minutes or similar written record of such review, that 
record the submission of the annual compliance report to the board of 
directors or senior officer; and
    (iii) Any records relevant to the registered swap data repository's 
annual compliance report, including, but not limited to, work papers 
and other documents that form the basis of the report, and memoranda, 
correspondence, other documents, and records that are:
    (A) Created, sent or received in connection with the annual 
compliance report and
    (B) Contain conclusions, opinions, analyses, or financial data 
related to the annual compliance report.
    (2) The registered swap data repository shall maintain records in 
accordance with Sec.  1.31 of this chapter.


Sec.  49.23  Emergency policies and procedures.

    (a) Emergency Policies and Procedures Required. A registered swap 
data repository shall establish policies and procedures for the 
exercise of emergency authority in the event of any emergency, 
including but not limited to natural, man-made, and information 
technology emergencies. Such policies and procedures shall also require 
a swap data repository to exercise its emergency authority upon request 
by the Commission. A swap data repository's policies and procedures for 
the exercise of emergency authority shall be transparent to the 
Commission and to market participants whose swap transaction data 
resides at the swap data repository.
    (b) Invocation of Emergency Authority. A registered swap data 
repository's policies and procedures for the exercise of emergency 
authority shall enumerate the circumstances under which the swap data 
repository is authorized to invoke its emergency authority and the 
procedures that it shall follow to declare an emergency. Such policies 
and procedures shall also address the range of measures that it is 
authorized to take when exercising such emergency authority.
    (c) Designation of Persons Authorized to act in an Emergency. A 
registered swap data repository shall designate one or more officials 
of the swap data repository as persons authorized to exercise emergency 
authority on its behalf. A swap data repository shall also establish a 
chain of command to be used in the event that the designated person(s) 
is unavailable. A swap data repository shall notify the Commission of 
the person(s) designated to exercise emergency authority.
    (d) Conflicts of Interest. A registered swap data repository's 
policies and procedures for the exercise of emergency authority shall 
include provisions to avoid conflicts of interest in any decisions made 
pursuant to emergency authority. Such policies and procedures shall 
also include provisions to consult the swap data repository's chief 
compliance officer in any emergency decision that may raise potential 
conflicts of interest.
    (e) Notification to the Commission. A registered swap data 
repository's policies and procedures for the exercise of emergency 
authority shall include provisions to notify the Commission as soon as 
reasonably practicable regarding any invocation of emergency authority. 
When notifying the Commission of any exercise of emergency authority, a 
swap data repository shall explain the reasons for taking such 
emergency action, explain how conflicts of interest were minimized, and 
document the decision-making process. Underlying documentation shall be 
made available to the Commission upon request.


Sec.  49.24  System safeguards.

    (a) Each registered swap data repository shall, with respect to all 
swap data in its custody:
    (1) Establish and maintain a program of risk analysis and oversight 
to identify and minimize sources of operational risk through the 
development of appropriate controls and procedures and the development 
of automated systems that are reliable, secure, and have adequate 
scalable capacity;
    (2) Establish and maintain emergency procedures, backup facilities, 
and a business continuity-disaster recovery plan that allow for the 
timely recovery and resumption of operations and the fulfillment of the 
duties and obligations of the swap data repository; and
    (3) Periodically conduct tests to verify that backup resources are 
sufficient to ensure continued fulfillment of all duties of the swap 
data repository established by the Act or the Commission's regulations.
    (b) A registered swap data repository's program of risk analysis 
and oversight with respect to its operations and automated systems 
shall address each of the following categories of risk analysis and 
oversight:
    (1) Information security;
    (2) Business continuity-disaster recovery planning and resources;

[[Page 80936]]

    (3) Capacity and performance planning;
    (4) Systems operations;
    (5) Systems development and quality assurance; and
    (6) Physical security and environmental controls.
    (c) In addressing the categories of risk analysis and oversight 
required under paragraph (b) above, a registered swap data repository 
should follow generally accepted standards and best practices with 
respect to the development, operation, reliability, security, and 
capacity of automated systems.
    (d) A registered swap data repository shall maintain a business 
continuity-disaster recovery plan and business continuity-disaster 
recovery resources, emergency procedures, and backup facilities 
sufficient to enable timely recovery and resumption of its operations 
and resumption of its ongoing fulfillment of its duties and obligations 
as a swap data repository following any disruption of its operations. 
Such duties and obligations include, without limitation, the duties set 
forth in Sec.  49.9 and the core principles set forth in Sec.  49.19; 
and maintenance of a comprehensive audit trail. The swap data 
repository's business continuity-disaster recovery plan and resources 
generally should enable resumption of the swap data repository's 
operations and resumption of ongoing fulfillment of the swap data 
repository's duties and obligations during the next business day 
following the disruption.
    (e) Swap data repositories determined by the Commission to be 
critical swap data repositories are subject to more stringent 
requirements as set forth below.
    (1) Each swap data repository that the Commission determines is 
critical must maintain a disaster recovery plan and business continuity 
and disaster recovery resources, including infrastructure and 
personnel, sufficient to enable it to achieve a same-day recovery time 
objective in the event that its normal capabilities become temporarily 
inoperable for any reason up to and including a wide-scale disruption.
    (2) A same-day recovery time objective is a recovery time objective 
within the same business day on which normal capabilities become 
temporarily inoperable for any reason up to and including a wide-scale 
disruption.
    (3) To ensure its ability to achieve a same-day recovery time 
objective in the event of a wide-scale disruption, each swap data 
repository that the Commission determines is critical must maintain a 
degree of geographic dispersal of both infrastructure and personnel 
such that:
    (i) Infrastructure sufficient to enable the swap data repository to 
meet a same-day recovery time objective after interruption is located 
outside the relevant area of the infrastructure the entity normally 
relies upon to conduct activities necessary to the reporting, 
recordkeeping and/or dissemination of swap data, and does not rely on 
the same critical transportation, telecommunications, power, water, or 
other critical infrastructure components the entity normally relies 
upon for such activities; and
    (ii) Personnel sufficient to enable the swap data repository to 
meet a same-day recovery time objective, after interruption of normal 
swap data reporting, recordkeeping and/or dissemination by a wide-scale 
disruption affecting the relevant area in which the personnel the 
entity normally relies upon to engage in such activities are located, 
live and work outside that relevant area.
    (4) Each swap data repository that the Commission determines is 
critical must conduct regular, periodic tests of its business 
continuity and disaster recovery plans and resources and its capacity 
to achieve a same-day recovery time objective in the event of a wide-
scale disruption. The swap data repository shall keep records of the 
results of such tests, and make the results available to the Commission 
upon request.
    (f) A registered swap data repository that is not determined by the 
Commission to be a critical swap data repository satisfies the 
requirement to be able to resume operations and resume ongoing 
fulfillment of the swap data repository's duties and obligations during 
the next business day following a disruption by maintaining either:
    (1) Infrastructure and personnel resources of its own that are 
sufficient to ensure timely recovery and resumption of its operations, 
duties and obligations as a registered swap data repository following 
any disruption of its operations; or
    (2) Contractual arrangements with other registered swap data 
repositories or disaster recovery service providers, as appropriate, 
that are sufficient to ensure continued fulfillment of all of the swap 
data repository's duties and obligations following any disruption of 
its operations, both with respect to all swaps reported to the swap 
data repository and with respect to all swap data contained in the swap 
data repository.
    (g) A registered swap data repository shall notify Commission staff 
promptly of all:
    (1) Systems malfunctions;
    (2) Cyber security incidents or targeted threats that actually or 
potentially jeopardize automated system operation, reliability, 
security, or capacity; and
    (3) Any activation of the swap data repository's business 
continuity-disaster recovery plan.
    (h) A registered swap data repository shall give Commission staff 
timely advance notice of all:
    (1) Planned changes to automated systems that may impact the 
reliability, security, or adequate scalable capacity of such systems; 
and
    (2) Planned changes to the swap data repository's program of risk 
analysis and oversight.
    (i) A registered swap data repository shall provide to the 
Commission upon request current copies of its business continuity and 
disaster recovery plan and other emergency procedures, its assessments 
of its operational risks, and other documents requested by Commission 
staff for the purpose of maintaining a current profile of the swap data 
repository's automated systems.
    (j) A registered swap data repository shall conduct regular, 
periodic, objective testing and review of its automated systems to 
ensure that they are reliable, secure, and have adequate scalable 
capacity. It shall also conduct regular, periodic testing and review of 
its business continuity-disaster recovery capabilities. Both types of 
testing should be conducted by qualified, independent professionals. 
Such qualified independent professionals may be independent contractors 
or employees of the swap data repository, but should not be persons 
responsible for development or operation of the systems or capabilities 
being tested. Pursuant to Sec. Sec.  1.31, 49.12 and 45.2 of the 
Commission's Regulations, the swap data repository shall keep records 
of all such tests, and make all test results available to the 
Commission upon request.
    (k) To the extent practicable, a registered swap data repository 
should:
    (1) Coordinate its business continuity-disaster recovery plan with 
those of the swap execution facilities, designated contract markets, 
derivatives clearing organizations, swap dealers, and major swap 
participants who report swap data to the swap data repository, and with 
those of regulators identified in Section 21(c)(7) of the Act, in a 
manner adequate to enable effective resumption of the registered swap 
data repository's

[[Page 80937]]

fulfillment of its duties and obligations following a disruption 
causing activation of the swap data repository's business continuity 
and disaster recovery plan;
    (2) Participate in periodic, synchronized testing of its business 
continuity-disaster recovery plan and the business continuity-disaster 
recovery plans of the swap execution facilities, designated contract 
markets, derivatives clearing organizations, swap dealers, and major 
swap participants who report swap data to the registered swap data 
repository, and the business continuity-disaster recovery plans 
required by the regulators identified in Section 21(c)(7) of the Act; 
and
    (3) Ensure that its business continuity-disaster recovery plan 
takes into account the business continuity-disaster recovery plans of 
its telecommunications, power, water, and other essential service 
providers.


Sec.  49.25  Financial resources.

    (a) General rule. (1) A swap data repository shall maintain 
sufficient financial resources to perform its statutory duties set 
forth in Sec.  49.9 and the core principles set forth in Sec.  49.19.
    (2) An entity that operates as both a swap data repository and a 
derivatives clearing organization shall also comply with the financial 
resource requirements of Core Principle B set forth in Section 
5b(c)(2)(B) of the Act.
    (3) Financial resources shall be considered sufficient if their 
value is at least equal to a total amount that would enable the swap 
data repository, or applicant for registration, to cover its operating 
costs for a period of at least one year, calculated on a rolling basis.
    (4) The financial resources described in this paragraph (a) must be 
independent and separately dedicated to ensure that assets and capital 
are not used for multiple purposes.
    (b) Types of financial resources. Financial resources available to 
satisfy the requirements of paragraph (a) of this section may include:
    (1) The swap data repository's own capital; and
    (2) Any other financial resource deemed acceptable by the 
Commission.
    (c) Computation of financial resource requirement. A swap data 
repository shall, on a quarterly basis, based upon its fiscal year, 
make a reasonable calculation of its projected operating costs over a 
12-month period in order to determine the amount needed to meet the 
requirements of paragraph (a) of this section. The swap data repository 
shall have reasonable discretion in determining the methodology used to 
compute such projected operating costs. The Commission may review the 
methodology and require changes as appropriate.
    (d) Valuation of financial resources. At appropriate intervals, but 
not less than quarterly, a swap data repository shall compute the 
current market value of each financial resource used to meet its 
obligations under paragraph (a) of this section. Reductions in value to 
reflect market and credit risk (haircuts) shall be applied as 
appropriate.
    (e) Liquidity of financial resources. The financial resources 
allocated by the swap data repository to meet the requirements of 
paragraph (a) shall include unencumbered, liquid financial assets 
(i.e., cash and/or highly liquid securities) equal to at least six 
months' operating costs. If any portion of such financial resources is 
not sufficiently liquid, the swap data repository may take into account 
a committed line of credit or similar facility for the purpose of 
meeting this requirement.
    (f) Reporting requirements. (1) Each fiscal quarter, or at any time 
upon Commission request, a swap data repository shall report to the 
Commission the amount of financial resources necessary to meet the 
requirements of paragraph (a), the value of each financial resource 
available, computed in accordance with the requirements of paragraph 
(d); and provide the Commission with a financial statement, including 
the balance sheet, income statement, and statement of cash flows of the 
swap data repository or of its parent company. Financial statements 
shall be prepared in conformity with generally accepted accounting 
principles (GAAP) applied on a basis consistent with that of the 
preceding financial statement.
    (2) The calculations required by this paragraph shall be made as of 
the last business day of the swap data repository's fiscal quarter.
    (3) The report shall be filed not later than 17 business days after 
the end of the swap data repository's fiscal quarter, or at such later 
time as the Commission may permit, in its discretion, upon request by 
the swap data repository.


Sec.  49.26  Disclosure requirements of swap data repositories.

    Before accepting any swap data from a reporting entity or upon a 
reporting entity's request, a registered swap data repository shall 
furnish to the reporting entity a disclosure document that contains the 
following written information, which shall reasonably enable the 
reporting entity to identify and evaluate accurately the risks and 
costs associated with using the services of the swap data repository:
    (a) The registered swap data repository's criteria for providing 
others with access to services offered and data maintained by the swap 
data repository;
    (b) The registered swap data repository's criteria for those 
seeking to connect to or link with the swap data repository;
    (c) A description of the registered swap data repository's policies 
and procedures regarding its safeguarding of data and operational 
reliability to protect the confidentiality and security of such data, 
as described in Sec.  49.24;
    (d) The registered swap data repository's policies and procedures 
reasonably designed to protect the privacy of any and all swap data 
that the swap data repository receives from a reporting entity, as 
described in Sec.  49.16;
    (e) The registered swap data repository's policies and procedures 
regarding its non-commercial and/or commercial use of the swap data 
that it receives from a market participant, any registered entity, or 
any other person;
    (f) The registered swap data repository's dispute resolution 
procedures;
    (g) A description of all the registered swap data repository's 
services, including any ancillary services;
    (h) The registered swap data repository's updated schedule of any 
fees, rates, dues, unbundled prices, or other charges for all of its 
services, including any ancillary services; any discounts or rebates 
offered; and the criteria to benefit from such discounts or rebates; 
and
    (i) A description of the registered swap data repository's 
governance arrangements.


Sec.  49.27  Access and fees.

    (a) Fair, Open and Equal Access. A swap data repository, consistent 
with Section 21 of the Act, shall provide its services to market 
participants, including but not limited to designated contract markets, 
swap execution facilities, derivatives clearing organizations, swap 
dealers, major swap participants and any other counterparties, on fair, 
open and equal basis. For this purpose, a swap data repository shall 
not provide access to its services on a discriminatory basis but is 
required to provide its services to all market participants for swaps 
it accepts in an asset class.
    (b) Fees. (1) Any fees or charges imposed by a registered swap data 
repository in connection with the reporting of swap data and any other 
supplemental or ancillary services provided by such swap data 
repository shall be equitable and established in a uniform and non-
discriminatory

[[Page 80938]]

manner. Fees or charges shall not be used as an artificial barrier to 
access to the swap data repository. Swap data repositories shall not 
offer preferential pricing arrangements to any market participant on 
any basis, including volume discounts or reductions unless such 
discounts or reductions apply to all market participants uniformly and 
are not otherwise established in a manner that would effectively limit 
the application of such discount or reduction to a select number of 
market participants.
    (2) All fees or charges are to be fully disclosed and transparent 
to market participants. At a minimum, the registered swap data 
repository shall provide a schedule of fees and charges that is 
accessible by all market participants on its Web site.
    (3) The Commission notes that it will not specifically approve the 
fees charged by swap data repositories. However, any and all fees 
charged by swap data repositories must be consistent with the 
principles set forth in paragraph (b)(1) of this section.

Appendix A to Part 49--Form SDR

UNITED STATES COMMODITY FUTURES TRADING COMMISSION

FORM SDR

SWAP DATA REPOSITORY APPLICATION OR AMENDMENT TO APPLICATION FOR 
REGISTRATION UNDER THE COMMODITY EXCHANGE ACT

REGISTRATION INSTRUCTIONS

Intentional misstatements or omissions of fact may constitute federal 
criminal violations (7 U.S.C.   13 and 18 U.S.C.   1001) and/or 
grounds for disqualification from registration.

DEFINITIONS

    Unless the context requires otherwise, all terms used in the form 
have the same meaning as in the Commodity Exchange Act, as amended, and 
in the Regulations of the Commission thereunder.
    For the purposes of this form, the term ``applicant'' shall include 
any applicant for registration as a swap data repository or any 
registered swap data repository that is amending Form SDR.

GENERAL INSTRUCTIONS

    1. Two (2) copies of Form SDR and Exhibits thereto are to be filed 
with the Commodity Futures Trading Commission by applicants for 
registration as a swap data repository, or by a registered swap data 
repository amending such registration, pursuant to Section 21 of the 
Commodity Exchange Act and the regulations thereunder. Upon the filing 
of an application for registration, the Commission will publish notice 
of the filing and afford interested persons an opportunity to submit 
written data, views and arguments concerning such application. No 
application for registration shall be effective unless the Commission, 
by order, grants such registration.
    2. Individuals' names shall be given in full (last name, first 
name, middle name).
    3. Signatures must accompany each copy of the Form SDR filed with 
the Commission. If this Form SDR is filed by a corporation, it must be 
signed in the name of the corporation by a principal officer duly 
authorized; if filed by a limited liability company, this Form SDR must 
be signed in the name of the limited liability company by a member duly 
authorized to sign on the limited liability company's behalf; if filed 
by a partnership, this Form SDR must be signed in the name of the 
partnership by a general partner authorized; if filed by an 
unincorporated organization or association which is not a partnership, 
it must be signed in the name of the organization or association by the 
managing agent, i.e., a duly authorized person who directs, manages or 
who participates in the directing or managing of its affairs.
    4. If Form SDR is being filed as an initial application for 
registration, all applicable items must be answered in full. If any 
item is not applicable, indicate by ``none,'' ``not applicable,'' or 
``N/A'' as appropriate.
    5. Under Section 21 of the Commodity Exchange Act and the 
regulations thereunder, the Commission is authorized to solicit the 
information required to be supplied by this form from applicants for 
registration as a swap data repository and from registered swap data 
repositories amending their registration. Disclosure of the information 
specified on this form is mandatory prior to processing of an 
application for registration as a swap data repository. The information 
will be used for the principal purpose of determining whether the 
Commission should grant or deny registration to an applicant. Except in 
cases where confidential treatment is requested by the applicant and 
granted by the Commission pursuant to the Freedom of Information Act 
and the regulations of the Commission thereunder, information supplied 
on this form will be included routinely in the public files of the 
Commission and will be available for inspection by any interested 
person. A Form which is not prepared and executed in compliance with 
applicable requirements and instructions may be returned as not 
acceptable for filing. Acceptance of this Form SDR, however, shall not 
constitute any finding that the Form SDR has been filed as required or 
that the information submitted is true, current or complete.

UPDATING INFORMATION ON THE FORM SDR

    1. Section 21 requires that if any information contained in Items 1 
through 15, 21, 27, and Item 51 of this application, or any supplement 
or amendment thereto, is or becomes inaccurate for any reason, an 
amendment must be filed promptly, unless otherwise specified, on Form 
SDR correcting such information.
    2. Registrants filing Form SDR as an amendment (other than an 
annual amendment) need file only the facing page, the signature page 
(Item 11), and any pages on which an answer is being amended, together 
with such exhibits as are being amended. The submission of an amendment 
represents that all unamended items and exhibits remain true, current 
and complete as previously filed.

ANNUAL AMENDMENT ON THE FORM SDR

    Annual amendments on the Form SDR shall be submitted within 60 days 
of the end of each calendar year. Applicants must complete the facing 
page and provide updated information.
    An applicant may request an extension of time for submitting the 
annual amendment with the Secretary of the Commission based on 
substantial, undue hardship. Extensions for filing annual amendments 
may be granted at the discretion of the Commission.

WHERE TO FILE

    File registration application and appropriate exhibits 
electronically with the Commission at the Washington, D.C. headquarters 
in a format specified by the Secretary of the Commission. Applications 
should be sent to the attention of the Secretary of the Commission at 
<a href="/cdn-cgi/l/email-protection#b0c3c5d2ddd9c3c3d9dfdec3f0d3d6c4d39ed7dfc6"><span class="__cf_email__" data-cfemail="ccbfb9aea1a5bfbfa5a3a2bf8cafaab8afe2aba3ba">[email protected]</span></a>.
BILLING CODE 6351-01-P

[[Page 80939]]

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[[Page 80940]]


[GRAPHIC] [TIFF OMITTED] TP23DE10.001


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[GRAPHIC] [TIFF OMITTED] TP23DE10.002

BILLING CODE 6351-01-C

EXHIBITS INSTRUCTIONS

    The following exhibits must be included as part of Form SDR and 
filed with the Commodity Futures Trading Commission by applicants for 
registration as a swap data repository, or by registered swap data 
repository amending such registration, pursuant to Section 21 of the 
Commodity Exchange Act and regulations thereto. Such exhibits should be 
labeled according to the items specified in this Form. If any exhibit 
is not applicable, please specify the exhibit letter and indicate by 
``none,'' ``not applicable,'' or ``N/A'' as appropriate. The applicant 
must identify with particularity the information in these exhibits that 
will be subject to a request for confidential treatment and supporting 
documentation for such request pursuant to Commission Regulation Sec.  
145.9.
    If the applicant is a newly formed enterprise and does not have the 
financial statements required pursuant to Items 25 and 26 of this form, 
the applicant should provide pro forma financial statements for the 
most recent

[[Page 80942]]

six months or since inception, whichever is less. Except for pro forma 
financial statements prepared for newly-created entities, financial 
statements shall be prepared in conformity with generally accepted 
accounting principles (``GAAP'') applied on a basis consistent with 
that of the preceding financial statement.

EXHIBITS I--BUSINESS ORGANIZATION

    12. List as Exhibit A any person who owns ten (10) percent or more 
of applicant's equity or possesses voting power of any class, either 
directly or indirectly, through agreement or otherwise, or in any other 
manner, may control or direct the management or policies of applicant. 
``Control'' for this purpose is defined in Commission Regulation Sec.  
49.2(a)(3).
    State in Exhibit A the full name and address of each such person 
and attach a copy of the agreement or, if there is none written, 
describe the agreement or basis upon which such person exercises or may 
exercise such control or direction.
    13. Attach as Exhibit B to this application a narrative that sets 
forth the fitness standards for the board of directors. Attach a list 
of the present officers, directors, governors (and, in the case of an 
applicant not a corporation, the members of all standing committees 
grouped by committee), or persons performing functions similar to any 
of the foregoing, of the swap data repository or of the entity 
identified in Item 16 that performs the swap data repository activities 
of the applicant, indicating for each:
    a. Name
    b. Title
    c. Date of commencement and, if appropriate, termination of present 
term of position
    d. Length of time each present officer, director, or governor has 
held the same position
    e. Brief account of the business experience of each officer and 
director over the last five (5) years
    f. Any other business affiliations in the securities industry or 
OTC derivatives industry
    g. A description of:
    (1) any order of the Commission with respect to such person 
pursuant to Section 5e of the Act;
    (2) any conviction or injunction within the past 10 years;
    (3) any disciplinary action with respect to such person within the 
last five (5) years;
    (4) any disqualification under Sections 8b, and 8d of the Act;
    (5) any disciplinary action under Section 8c of the Act;
    (6) any violation pursuant to Section 9 of the Act.
    h. For directors, list any committees on which they serve and any 
compensation received by virtue of their directorship.
    14. Attach as Exhibit C to this application the following 
information about the chief compliance officer who has been appointed 
by the board of directors of the swap data repository or a person or 
group performing a function similar to such board of directors:
    a. Name
    b. Title
    c. Dates of commencement and termination of present term of office 
or position
    d. Length of time the chief compliance officer has held the same 
office or position
    e. Brief account of the business experience of the chief compliance 
officer over the last five (5) years
    f. Any other business affiliations in the derivatives/securities 
industry or swap data repository industry
    g. A description of:
    (1) any order of the Commission with respect to such person 
pursuant to Section 5e of the Act;
    (2) any conviction or injunction within the past 10 years;
    (3) any disciplinary action with respect to such person within the 
last five (5) years;
    (4) any disqualification under Sections 8b, and 8d of the Act;
    (5) any disciplinary action under Section 8c of the Act;
    (6) any violation pursuant to Section 9 of the Act.
    15. Attach as Exhibit D a copy of documents relating to the 
governance arrangements of the applicant, including, but not limited 
to:
    a. the nomination and selection process of the members on the 
applicant's board of directors, a person or group performing a function 
similar to a board of directors (collectively, ``board''), or any 
committee that has the authority to act on behalf of the board or amend 
or constrain the action of the board, the responsibilities of each of 
the board and such committee, and the composition of each board and 
such committee;
    b. the process for assigning members of the board or other persons 
to any committees referenced in (a);
    c. a description of the manner in which the board and the 
committees referenced in (a) allows the applicant to comply with 
applicable core principles, regulations, as well as the policies and 
procedures of the applicant (including those involving consideration of 
an Independent Perspective (as Commission Regulation Sec.  49.2(a)(14) 
defines such term));
    d. a description of the manner in which the board reviews its 
performance and the performance of its members;
    e. a description of the procedures to remove a member of the board, 
where the conduct of such member is likely to be prejudicial to the 
sound and prudent management of the applicant.
    16. Attach as Exhibit E a narrative or graphic description of the 
organizational structure of the applicant. Note: If the swap data 
repository activities are conducted primarily by a division, 
subdivision, or other segregable entity within the applicant's 
corporation or organization, describe the relationship of such entity 
within the overall organizational structure and attach as Exhibit E 
only such description as applies to the segregable entity. 
Additionally, prove any relevant jurisdictional information, including 
any and all jurisdictions in which the applicant or any affiliated 
entity is doing business and registration status, including pending 
application (e.g., country, regulator, registration category, date of 
registration). In addition, include a description of the lines of 
responsibility and accountability for each operational unit of the 
applicant to (i) any committee thereof and/or (ii) the board.
    17. Attach as Exhibit F a copy of the conflicts of interest 
policies and procedures implemented by the applicant to minimize 
conflicts of interest in the decision-making process of the swap data 
repository and to establish a process for the resolution of any such 
conflicts of interest.
    18. Attach as Exhibit G, a list of all affiliates of the swap data 
repository and indicate the general nature of the affiliation. Provide 
a copy of any agreements entered into or to be entered by the swap data 
repository, including partnerships or joint ventures, or its 
participants, that will enable the applicant to comply with the 
registration requirements and core principles specified in Section 21 
of the Commodity Exchange Act.
    19. Attach as Exhibit H to this application a copy of the 
constitution, articles of incorporation or association with all 
amendments thereto, and existing by-laws, rules or instruments 
corresponding thereto, of the applicant. A certificate of good standing 
dated within one week of the date of the application shall be provided.
    20. Where the applicant is a foreign entity seeking registration or 
filing an amendment to an existing registration, attach as Exhibit I, 
an opinion of

[[Page 80943]]

counsel that the swap data repository, as a matter of law, is able to 
provide the Commission with prompt access to the books and records of 
such swap data repository and that the swap data repository can submit 
to onsite inspection and examination by the Commission.
    21. Where the applicant is a foreign entity seeking registration, 
attach as Exhibit I-1, to designate and authorize an agent in the 
United States, other than a Commission official, to accept any notice 
or service of process, pleadings, or other documents in any action or 
proceedings brought against the swap data repository to enforce the Act 
and the regulations thereunder.
    22. Attach as Exhibit J, a current copy of the applicant's rules as 
defined in Commission Regulation Sec.  40.1, consisting of all the 
rules necessary to carry out the duties as a swap data repository.
    23. Attach as Exhibit K, a description of the applicant's internal 
disciplinary and enforcement protocols, tools, and procedures. Include 
the procedures for dispute resolution.
    24. Attach as Exhibit L, a brief description of any material 
pending legal proceeding(s), other than ordinary and routine litigation 
incidental to the business, to which the applicant or any of its 
affiliates is a party or to which any of its or their property is the 
subject. Include the name of the court or agency in which the 
proceeding(s) are pending, the date(s) instituted, and the principal 
parties thereto, a description of the factual basis alleged to underlie 
the proceeding(s) and the relief sought. Include similar information as 
to any such proceeding(s) known to be contemplated by the governmental 
agencies.

EXHIBITS II--FINANCIAL INFORMATION

    25. Attach as Exhibit M a balance sheet, statement of income and 
expenses, statement of sources and application of revenues and all 
notes or schedules thereto, as of the most recent fiscal year of the 
applicant. If a balance sheet and statements certified by an 
independent public accountant are available, such balance sheet and 
statement shall be submitted as Exhibit M. Except for pro forma 
financial statements prepared for newly-created entities, financial 
statements shall be prepared in conformity with generally accepted 
accounting principles (GAAP) applied on a basis consistent with that of 
the preceding financial statement.
    26. Attach as Exhibit N a balance sheet and an income and expense 
statement for each affiliate of the swap data repository that also 
engages in swap data repository activities as of the end of the most 
recent fiscal year of each such affiliate. Except for pro forma 
financial statements prepared for newly-created entities, financial 
statements shall be prepared in conformity with GAAP applied on a basis 
consistent with that of the preceding financial statement.
    27. Attach as Exhibit O the following:
    a. A complete list of all dues, fees and other charges imposed, or 
to be imposed, by or on behalf of applicant for its swap data 
repository services and identify the service or services provided for 
each such due, fee, or other charge.
    b. Furnish a description of the basis and methods used in 
determining the level and structure of the dues, fees and other charges 
listed above in paragraph a of this item.
    c. If the applicant differentiates, or proposes to differentiate, 
among its customers, or classes of customers in the amount of any dues, 
fees, or other charges imposed for the same or similar services, so 
state and indicate the amount of each differential. In addition, 
identify and describe any differences in the cost of providing such 
services, and any other factors, that account for such 
differentiations.

EXHIBITS III--OPERATIONAL CAPABILITY

    28. Attach as Exhibit P copies of all material contracts with any 
swap execution facility, clearing agency, central counterparty, or 
third party service provider. To the extent that form contracts are 
used by the applicant, submit a sample of each type of form contract 
used. In addition, include a list of swap execution facilities, 
clearing agencies, central counterparties, and third party service 
providers with whom the applicant has entered into material contracts. 
Where swap data repository functions are performed by a third-party, 
attach any agreements between or among the applicant and such third 
party, and identify the services that will be provided.
    29. Attach as Exhibit Q any technical manuals, other guides or 
instructions for users of, or participants in, the market.
    30. Attach as Exhibit R a description of system test procedures, 
test conducted or test results that will enable the applicant to 
comply, or demonstrate the applicant's ability to comply with the core 
principles for swap data repositories.
    31. Attach as Exhibit S a description in narrative form or by the 
inclusion of functional specifications, of each service or function 
performed as a swap data repository. Include in Exhibit S a description 
of all procedures utilized for the collection, processing, 
distribution, publication and retention (e.g., magnetic tape) of 
information with respect to transactions or positions in, or the terms 
and conditions of, swaps entered into by market participants.
    32. Attach as Exhibit T a list of all computer hardware utilized by 
the applicant to perform swap data repository functions, indicating 
where such equipment (terminals and other access devices) is physically 
located.
    33. Attach as Exhibit U a description of the personnel 
qualifications for each category of professional employees employed by 
the swap data repository or the division, subdivision, or other 
segregable entity within the swap data repository as described in Item 
16.
    34. Attach as Exhibit V a description of the measures or procedures 
implemented by applicant to provide for the security of any system 
employed to perform the functions of a swap data repository. Include a 
general description of any physical and operational safeguards designed 
to prevent unauthorized access (whether by input or retrieval) to the 
system. Describe any circumstances within the past year in which the 
described security measures or safeguards failed to prevent any such 
unauthorized access to the system and any measures taken to prevent a 
reoccurrence. Describe any measures used to verify the accuracy of 
information received or disseminated by the system.
    35. Attach as Exhibit W copies of emergency policies and procedures 
and applicant's business continuity-disaster recovery plan. Include a 
general description of any business continuity-disaster recovery 
resources, emergency procedures, and backup facilities sufficient to 
enable timely recovery and resumption of its operations and resumption 
of its ongoing fulfillment of its duties and obligations as a swap data 
repository following any disruption of its operations.
    36. Where swap data repository functions are performed by automated 
facilities or systems, attach as Exhibit X a description of all backup 
systems or subsystems that are designed to prevent interruptions in the 
performance of any swap data repository function as a result of 
technical malfunctions or otherwise in the system itself, in any 
permitted input or output system connection, or as a result of any 
independent source. Include a narrative description of each type of 
interruption that has lasted for more than two minutes and has occurred 
within the six (6) months preceding the date of the filing, including 
the date of each interruption,

[[Page 80944]]

the cause and duration. Also state the total number of interruptions 
that have lasted two minutes or less.
    37. Attach as Exhibit Y the following:
    a. For each of the swap data repository functions:
    (1) quantify in appropriate units of measure the limits on the swap 
data repository's capacity to receive (or collect), process, store or 
display (or disseminate for display or other use) the data elements 
included within each function (e.g., number of inquiries from remote 
terminals); and
    (2) identify the factors (mechanical, electronic or other) that 
account for the current limitations reported in answer to (1) on the 
swap data repository's capacity to receive (or collect), process, store 
or display (or disseminate for display or other use) the data elements 
included within each function.
    b. If the applicant is able to employ, or presently employs, the 
central processing units of its system(s) for any use other than for 
performing the functions of a swap data repository, state the 
priorities of assignment of capacity between such functions and such 
other uses, and state the methods used or able to be used to divert 
capacity between such functions and such other uses.

EXHIBITS IV--ACCESS TO SERVICES

    38. Attach as Exhibit Z the following:
    a. As to each swap data repository service that the applicant 
provides, state the number of persons who presently utilize, or who 
have notified the applicant of their intention to utilize, the services 
of the swap data repository.
    b. For each instance during the past year in which any person has 
been prohibited or limited in respect of access to services offered by 
the applicant as a swap data repository, indicate the name of each such 
person and the reason for the prohibition or limitation.
    c. Define the data elements for purposes of the swap data 
repository's real-time public reporting obligation. Appendix A to part 
43 of the Commission's Regulations (Data Elements and Form for Real-
Time Reporting for Particular Markets and Contracts) sets forth the 
specific data elements for real-time public reporting.
    39. Attach as Exhibit AA copies of any agreements governing the 
terms by which information may be shared by the swap data repository, 
including with market participants. To the extent that form contracts 
are used by the applicant, submit a sample of each type of form 
contract used.
    40. Attach as Exhibit BB a description of any specifications, 
qualifications or other criteria that limit, are interpreted to limit, 
or have the effect of limiting access to or use of any swap data 
repository services furnished by the applicant and state the reasons 
for imposing such specifications, qualifications, or other criteria, 
including whether such specifications, qualifications or other criteria 
are imposed.
    41. Attach as Exhibit CC any specifications, qualifications, or 
other criteria required of participants who utilize the services of the 
applicant for collection, processing, preparing for distribution, or 
public dissemination by the applicant.
    42. Attach as Exhibit DD any specifications, qualifications, or 
other criteria required of any person, including, but not limited to, 
regulators, market participants, market infrastructures, venues from 
which data could be submitted to the applicant, and third party service 
providers who request access to data maintained by the applicant.
    43. Attach as Exhibit EE policies and procedures implemented by the 
applicant to review any prohibition or limitation of any person with 
respect to access to services offered or data maintained by the 
applicant and to grant such person access to such services or data if 
such person has been discriminated against unfairly.

EXHIBITS--OTHER POLICIES AND PROCEDURES

    44. Attach as Exhibit FF, a narrative and supporting documents that 
may be provided under other Exhibits herein, that describe the manner 
in which the applicant is able to comply with each core principle and 
other requirements pursuant to Commission Regulation Sec.  49.17.
    45. Attach as Exhibit GG policies and procedures implemented by the 
applicant protect the privacy of any and all swap information that the 
swap data repository receives from reporting entities.
    46. Attach as Exhibit HH a description of safeguards, policies, and 
procedures implemented by the applicant to prevent the misappropriation 
or misuse of (a) any confidential information received by the 
applicant, including, but not limited to ``Section 8 Material'' and 
``SDR Information,'' as those terms are defined in Commission 
Regulation Sec.  49.2, about a market participant or any of its 
customers; and/or (c) intellectual property by applicant or any person 
associated with the applicant for their personal benefit or the benefit 
of others.
    47. Attach Exhibit II policies and procedures implemented by the 
applicant regarding its use of the SDR Information that it receives 
from a market participant, any registered entity, or any person for 
non-commercial and/or commercial purposes.
    48. Attach as Exhibit JJ procedures and a description of facilities 
of the applicant for effectively resolving disputes over the accuracy 
of the transaction data and positions that are recorded in the swap 
data repository.
    49. Attach as Exhibit KK policies and procedures relating to the 
applicant's calculation of positions.
    50. Attach as Exhibit LL policies and procedures that are 
reasonably designed to prevent any provision in a valid swap from being 
invalidated or modified through the procedures or operations of the 
applicant.
    51. Attach as Exhibit MM a plan to ensure that the transaction data 
and position data that are recorded in the applicant continue to be 
maintained after the applicant withdraws from registration as a swap 
data repository, which shall include procedures for transferring the 
transaction data and position data to the Commission or its designee 
(including another registered swap data repository).

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

    Note: The following Statement will not appear in the Code of 
Federal Regulations.

Statement of Chairman Gary Gensler Swap Data Repositories
    I support the proposed rulemaking to establish registration 
requirements and regulations of swap data repositories. This proposal 
would implement Congress's mandate that all swaps--whether cleared or 
uncleared--be reported to a swap data repository registered with the 
Commission. Registration will enable the Commission to monitor swap 
data repositories for compliance with the Dodd-Frank Act and Commission 
regulations. The proposal implements Congress's direction that 
regulators would have direct access to information maintained by swap 
data repositories. The proposal requires swap data repositories to 
verify the accuracy and completeness of all of the swaps data it 
accepts. The proposed rule also includes a requirement that swap data 
repositories would receive notifications with regard to non-financial 
end-users hedging or mitigating commercial risk. The proposal also 
includes important features where swap data repositories will 
facilitate real time reporting of

[[Page 80945]]

swaps transactions. Lastly, the proposal includes provisions for swap 
data repositories to aggregate certain information for regulators and 
the public.
Dissenting Statement of Commissioner Jill E. Sommers
    I disagree with several aspects of the proposal the Commission is 
issuing today, but seek public comment on two particular areas that I 
believe are important as they relate to the critical function of real-
time public reporting of swap data.
    First, I request public comment on whether the Commission should 
require registered swap data repositories (SDRs) to perform the real-
time reporting duties described in section 2(a)(13) of the Commodity 
Exchange Act (CEA), as amended by the Dodd-Frank Act. Section 21(c) of 
the CEA sets forth specific duties that SDRs must perform. It directs, 
in relevant part, that SDRs ``shall . . . provide the information 
described in paragraph (1) [i.e., swap 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) [i.e., real-time 
reporting].'' Section 21(c)(4)(B). The proposal contemplates that SDRs 
will be required to perform real-time reporting for off-facility swaps, 
but can choose not to perform this function for swaps executed on a 
swap market, in which case the data can be submitted to a third-party 
vendor for real-time reporting.
    In my view, real-time reporting is one of the core functions that 
Congress intended SDRs to perform. The structure the Commission is 
proposing may needlessly fragment the public reporting of real-time 
data and could undermine the purpose of real-time reporting, which is 
to make data available to the public in a form that enhances price 
transparency.
    Second, I recognize that under Section 2(a)(13) of the CEA the 
Commission may also require other registered entities to perform real-
time reporting, but I question the utility of allowing third-party 
vendors to perform this important function. As such, I also seek public 
comment on whether third-party vendors should be subject to some form 
of regulatory oversight in the event the Commission permits them to 
accept data for real-time reporting purposes.

[FR Doc. 2010-31133 Filed 12-22-10; 8:45 am]
BILLING CODE 6351-01-P


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