Federal Register / Vol. 75, No. 240 / Wednesday, December 15, 2010 / Proposed Rules 78185 

45The comment must also be accompanied by an 

explicit request for confidential treatment, 

including the factual and legal basis for the request, 

and must identify the specific portions of the 

comment to be withheld from the public record. 

The request will be granted or denied by the 

Commission’s General Counsel, consistent with 

applicable law and the public interest. See 

Commission Rule 4.9(c), 16 CFR 4.9(c). 

1Commission regulations referred to herein are 

found at 17 CFR Ch. 1 (2010). They are accessible 

on the Commission’s Web site at http:// 

www.cftc.gov. 

from any person and which is privileged 

or confidential,’’ as provided in Section 

6(f) of the FTC Act, 15 U.S.C. 46(f), and 

Commission Rule 4.10(a)(2), 16 CFR 

4.10(a)(2). Comments containing 

material for which confidential 

treatment is requested must be filed in 

paper form and clearly labeled 

‘‘Confidential.’’ 45

Because mail delivered to the FTC by 

the United States Postal Service is 

subject to delay due to heightened 

security screening, please consider 

submitting your comments in electronic 

form. Comments filed in electronic form 

should be submitted by using the 

following weblink: https:// 

ftcpublic.commentworks.com/ftc/ 

tsrcalleridanprm (and following the 

instructions on the web-based form). To 

ensure that the Commission considers 

an electronic comment, you must file it 

on the web-based form at the weblink 

https://ftcpublic.commentworks.com/ 

ftc/tsrcalleridanprm. If this Notice 

appears at http://www.regulations.gov/ 

search/index.jsp, you may also file an 

electronic comment through that Web 

site. The Commission will consider all 

comments that regulations.gov forwards 

to it. You may also visit the FTC Web 

site at http://www.ftc.gov to read the 

Notice and the news release describing 

it. 

A comment filed in paper form 

should reference the ‘‘Advance Notice 

of Proposed Rulemaking Concerning 

Caller Identification, Matter P104405’’ 

both in the text and on the envelope, 

and should be mailed or delivered to the 

following address: Federal Trade 

Commission/Office of the Secretary, 

Room H–113 (Annex Q), 600 

Pennsylvania Avenue, NW., 

Washington, DC 20580. The FTC 

requests that any comment filed in 

paper form be sent by courier or 

overnight service, if possible, because 

U.S. postal mail in the Washington area 

and at the Commission is subject to 

delay due to heightened security 

precautions. 

The Federal Trade Commission Act 

(‘‘FTC Act’’) and other laws the 

Commission administers permit the 

collection of public comments to 

consider and use in this proceeding as 

appropriate. The Commission will 

consider all timely and responsive 

public comments that it receives, 

whether filed in paper or electronic 

form. Comments received will be 

available to the public on the FTC Web 

site, to the extent practicable, at 

http://www.ftc.gov/os/ 

publiccomments.shtm. As a matter of 

discretion, the Commission makes every 

effort to remove home contact 

information for individuals from the 

public comments it receives before 

placing those comments on the FTC 

Web site. More information, including 

routine uses permitted by the Privacy 

Act, may be found in the FTC’s privacy 

policy, at http://www.ftc.gov/ftc/ 

privacy.shtm. 

By direction of the Commission. 

Donald S. Clark, 

Secretary. 

[FR Doc. 2010–31390 Filed 12–14–10; 8:45 am] 

BILLING CODE 6750–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Parts 1, 21, and 39 

RIN 3038–AC98 

Information Management 

Requirements for Derivatives Clearing 

Organizations 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Commodity Futures 

Trading Commission (Commission or 

CFTC) is proposing regulations to 

implement certain core principles for 

derivatives clearing organizations 

(DCOs) as amended by Title VII of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank 

Act). The proposed regulations would 

establish standards for compliance with 

DCO Core Principles J (Reporting), K 

(Recordkeeping), L (Public Information), 

and M (Information Sharing). 

Additionally, the Commission is 

proposing technical amendments to 

parts 1 and 21 in connection with the 

proposed regulations. Finally, the 

Commission also is proposing to 

delegate to the Director of the Division 

of Clearing and Intermediary Oversight 

the Commission’s authority to perform 

certain functions in connection with the 

proposed regulations. 

DATES: Submit comments on or before 

February 14, 2011. 

ADDRESSES: You may submit comments, 

identified by RIN number 3038–AC98, 

by any of the following methods: 

• Agency Web site, via its Comments 

Online process: http:// 

comments.cftc.gov. Follow the 

instructions for submitting comments 

through the Web site. 

• Mail: David A. Stawick, Secretary of 

the Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street, NW., 

Washington, DC 20581. 

• Hand Delivery/Courier: Same as 

mail above. 

• Federal eRulemaking Portal: http:// 

www.Regulations.gov. Follow the 

instructions for submitting comments. 

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 you believe is exempt from 

disclosure under the Freedom of 

Information Act, a petition for 

confidential treatment of the exempt 

information may be submitted according 

to the procedures established in 

§ 145.9.1

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 the Freedom of Information Act. 

FOR FURTHER INFORMATION CONTACT: 

Phyllis P. Dietz, Associate Director, 

202–418–5449, pdietz@cftc.gov, or Jacob 

Preiserowicz, Attorney-Advisor, 202– 

418–5432, jpreiserowicz@cftc.gov, 

Division of Clearing and Intermediary 

Oversight, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

II. Proposed Regulations 

A. Reporting Requirements 

1. Information Required on a Daily Basis 

2. Information Required on a Quarterly 

Basis 

3. Information Required on an Annual 

Basis 

4. Event-Specific Reporting 

(a) Decrease in Financial Resources 

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78186 Federal Register / Vol. 75, No. 240 / Wednesday, December 15, 2010 / Proposed Rules 

2See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Public Law 111–203, 124 

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

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

LawRegulation/OTCDERIVATIVES/index.htm. 

3Pursuant to Section 701 of the Dodd-Frank Act, 

Title VII may be cited as the ‘‘Wall Street 

Transparency and Accountability Act of 2010.’’ 

4 7 U.S.C. 1 et seq. 

5See Commodity Futures Modernization Act of 

2000, Public Law 106–554, 114 Stat. 2763 (2000). 

6See 17 CFR part 39, app. A. 

7See 7 U.S.C. 7a–1(c)(2). Section 8a(5) of the CEA 

authorizes the Commission to promulgate such 

Regulations ‘‘as, in the judgment of the Commission, 

are reasonably necessary to effectuate any of the 

provisions or to accomplish any of the purposes of 

[the CEA].’’ 7 U.S.C. 12a(5). 

8See 75 FR 63732 (Oct. 18, 2010) (proposing 

regulations to implement Core Principle P 

(Conflicts of Interest); and 75 FR 63113 (Oct. 14, 

2010) (proposing regulations to implement Core 

Principle B (Financial Resources)). Concurrent with 

issuing this notice, the Commission also is 

proposing regulations to implement Core Principles 

A (Compliance), H (Rule Enforcement), N (Antitrust 

Considerations), and R (Legal Risk). The 

Commission expects to issue two additional notices 

of proposed rulemaking to implement DCO core 

principles. 

9See Section 5b(c)(2)(J) of the CEA; 7 U.S.C. 7a– 

1(c)(2)(J). Prior to amendment by the Dodd-Frank 

Act, Core Principle J provided that ‘‘The [DCO] 

applicant shall provide to the Commission all 

information necessary for the Commission to 

conduct the oversight function of the applicant with 

respect to the activities of the [DCO].’’ 

10See Section 5b(c)(2)(K) of the CEA; 7 U.S.C. 7a– 

1(c)(2)(K). Prior to amendment by the Dodd-Frank 

Act, Core Principle K provided that ‘‘The [DCO] 

applicant shall maintain records of all activities 

related to the business of the applicant as a [DCO] 

in a form and manner acceptable to the Commission 

for a period of 5 years.’’ 

11See Section 5b(c)(2)(L) of the CEA; 7 U.S.C. 7a– 

1(c)(2)(L). 

12The statutory language refers to fees charged to 

‘‘members and participants,’’ and the Commission 

interprets this phrase to mean fees charged to 

‘‘clearing members,’’ a term which it proposes to 

define as ‘‘any person that has clearing privileges 

such that it can process, clear and settle trades 

through a derivatives clearing organization on 

behalf of itself or others. The derivatives clearing 

organization need not be organized as a 

membership organization.’’ The Commission is 

proposing to amend the definition of ‘‘clearing 

member’’ in § 1.3(c) of its regulations, as part of a 

separate proposed rulemaking. 

13This core principle has been expanded greatly. 

Prior to amendment by the Dodd-Frank Act, Core 

Principle L provided that ‘‘The [DCO] applicant 

shall make information concerning the rules and 

operating procedures governing the clearing and 

settlement systems (including default procedures) 

available to market participants.’’ 

14See Section 5b(c)(2)(M) of the CEA, 7 U.S.C. 

7a–1(c)(2)(M). The Dodd-Frank Act made minor 

(b) Decrease in Ownership Equity 

(c) Six-Month Liquid Asset Requirement 

(d) Change in Working Capital 

(e) Intraday Initial Margin Call 

(f) Delay in Collection of Initial Margin 

(g) Management of Clearing Member 

Positions 

(h) Change in Ownership or Corporate or 

Organizational Structure 

(i) Change in Key Personnel 

(j) Credit Facility Funding Arrangement 

Change 

(k) Rule Enforcement 

(l) Financial Condition and Events 

5. Technical Amendments 

B. Recordkeeping Requirements 

C. Public Information 

1. Availability of Information 

2. Public Disclosure 

D. Information Sharing 

III. Effective Date 

IV. Related Matters 

A. Regulatory Flexibility Act 

B. Paperwork Reduction Act 

1. Information Provided by Reporting 

Entities/Persons 

2. Information Collection Comments 

C. Cost-Benefit Analysis 

I. Background 

On July 21, 2010, President Obama 

signed the Dodd-Frank Act.2 Title VII of 

the Dodd-Frank Act 3 amended the 

Commodity Exchange Act (CEA) 4 to 

establish a comprehensive new 

regulatory framework to reduce risk, 

increase transparency, and promote 

market integrity within the financial 

system by, among other things: (1) 

Providing for the registration and 

comprehensive regulation of swap 

dealers and major swap participants; (2) 

imposing clearing and trade execution 

requirements on standardized derivative 

products; (3) creating rigorous 

recordkeeping and real-time reporting 

regimes; and (4) enhancing the 

Commission’s rulemaking and 

enforcement authorities with respect to 

all registered entities and intermediaries 

subject to the Commission’s oversight. 

Section 725(c) of the Dodd-Frank Act 

amended Section 5b(c)(2) of the CEA, 

which sets forth core principles with 

which a DCO must comply to be 

registered and to maintain registration 

as a DCO. The core principles were 

added to the CEA by the Commodity 

Futures Modernization Act of 2000 

(CFMA).5 The Commission did not 

adopt implementing rules and 

regulations, but instead promulgated 

guidance for DCOs on compliance with 

the core principles.6 Under Section 

5b(c)(2), as amended by the Dodd-Frank 

Act, Congress expressly confirmed that 

the Commission may adopt 

implementing rules and regulations 

pursuant to its rulemaking authority 

under Section 8a(5) of the CEA.7 This 

rulemaking is one of a series that will, 

in its entirety, propose regulations to 

implement all 18 DCO core principles.8

The Commission continues to believe 

that, where possible, each DCO should 

be afforded an appropriate level of 

discretion in determining how to 

operate its business within the statutory 

framework. At the same time, the 

Commission recognizes that specific 

bright-line regulations may be necessary 

in order to facilitate DCO compliance 

with a given core principle, and 

ultimately, to protect the integrity of the 

U.S. clearing system. Accordingly, in 

developing the proposed regulations, 

the Commission has endeavored to 

strike an appropriate balance between 

establishing general prudential 

standards and prescriptive 

requirements. 

Core Principle J, Reporting, as 

amended by the Dodd-Frank Act, 

requires a DCO to provide the 

Commission with all information that 

the Commission determines to be 

necessary to conduct oversight of the 

DCO.9 The Commission is proposing to 

adopt § 39.19 to establish requirements 

that a DCO will have to meet in order 

to comply with Core Principle J. 

Core Principle K, Recordkeeping, as 

amended by the Dodd-Frank Act, 

requires a DCO to maintain records of 

all activities related to the business of 

the DCO as a DCO, in a form and 

manner that is acceptable to the 

Commission and for a period of not less 

than 5 years.10 The Commission is 

proposing to adopt § 39.20 to establish 

requirements that a DCO will have to 

meet in order to comply with Core 

Principle K. 

Core Principle L, Public Information, 

as amended by the Dodd-Frank Act, 

requires a DCO to provide market 

participants sufficient information to 

enable the market participants to 

identify and evaluate accurately the 

risks and costs associated with using the 

DCO’s services.11 A DCO is, more 

specifically, required to make available 

to market participants information 

concerning the rules and operating and 

default procedures governing its 

clearing and settlement systems and 

also disclose publicly and to the 

Commission the terms and conditions of 

each contract, agreement, and 

transaction cleared and settled by the 

DCO, each clearing and other fee 

charged to members,12 the DCO’s 

margin-setting methodology, daily 

settlement prices, and other matters 

relevant to participation in the DCO’s 

clearing and settlement activities.13 The 

Commission is proposing to adopt 

§ 39.21 to establish requirements that a 

DCO will have to meet in order to 

comply with Core Principle L. 

Core Principle M, Information 

Sharing, as amended by the Dodd-Frank 

Act, requires a DCO to enter into and 

abide by terms of each appropriate and 

applicable domestic and international 

information-sharing agreement and use 

relevant information obtained under 

such agreements in carrying out its risk 

management program.14 The 

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Federal Register / Vol. 75, No. 240 / Wednesday, December 15, 2010 / Proposed Rules 78187 

changes in the language of Core Principle M, but 

did not make any substantive changes. 

15Section 804 of the Dodd-Frank Act authorizes 

the Financial Stability Oversight Council to 

designate financial market utilities involved in 

clearing and settlement as ‘‘systemically important.’’ 

16Requirements that certain information be 

submitted upon request of the Commission are 

currently found in the Commission’s regulations as 

paragraphs (a) and (b) of § 39.5. 17 CFR 39.5. See 

infra discussion of technical amendments regarding 

§§ 39.5(a) and 39.5(b) at Section II.A.5. of this 

notice. 

17The Commission notes that DCOs may be 

subject to additional reporting requirements that are 

not covered by Core Principle J and therefore are 

not addressed in proposed § 39.19, e.g., 

requirements for reporting to a swap data repository 

under proposed part 45 of the Commission’s 

regulations. 

18See proposed § 39.19(b)(2). 

19See infra discussion of proposed Regulation 

39.19(c)(4)(v) which would require intraday 

reporting of initial margin calls at Section II.A.4.(e) 

of this notice. 

20 In a separate rulemaking, the Commission is 

proposing to define the terms ‘‘customer account or 

customer origin’’ and ‘‘house account or house 

origin’’ in proposed § 39.1(b). ‘‘Customer account or 

customer origin’’ would be defined as a clearing 

member’s account held on behalf of customers, as 

defined in § 1.3(k) of the Commission’s regulations, 

and would clarify that a customer account is also 

a futures account, as that term is defined by 

§ 1.3(vv). ‘‘House account or house origin’’ would be 

defined as a clearing member’s combined 

proprietary accounts, as defined in § 1.3(y). 

21This requirement would apply to options 

transactions only to the extent a DCO uses futuresstyle margining for options. 

22See 75 FR 63113 (Oct. 14, 2010) (proposing 

DCO financial resources requirements pursuant to 

Core Principle B). 

Commission is proposing to adopt 

§ 39.22 to codify the statutory 

requirement. 

Section 805(a) of the Dodd-Frank Act 

allows the Commission to prescribe 

regulations for those DCOs that the 

Financial Stability Oversight Council 

has determined are systemically 

important financial market utilities.15

The Commission is not proposing to 

adopt additional or enhanced 

requirements for systemically important 

DCOs (SIDCOs) in connection with the 

proposed rules to implement Core 

Principles J, K, L and M. This is based 

on the Commission’s view that rigorous 

information management requirements 

should apply equally to all DCOs, 

regardless of their size or systemic 

importance. 

The Commission requests comment 

on all aspects of the proposed rules, as 

well as comment on the specific 

provisions and issues highlighted in the 

discussion below. 

II. Proposed Regulations 

A. Reporting Requirements 

Proposed § 39.19 would require 

certain reports to be made by the DCO 

to the Commission: (1) On a periodic 

basis (daily, quarterly or annually), (2) 

where the reporting requirement is 

triggered by the occurrence of a 

significant event; and (3) upon request 

by the Commission.16 Unless otherwise 

specified by the Commission or its 

designee, each DCO would have to 

submit the information required by this 

section to the Commission 

electronically and in a form and manner 

prescribed by the Commission. 

The Commission has determined that 

the information required by proposed 

§ 39.19 would enable it to conduct more 

effective and more streamlined financial 

oversight of a DCO. In this regard, 

obtaining the required data would 

enhance the Commission’s ability to 

conduct a more in-depth and timely 

analysis of a DCO’s activities, thereby 

enabling the Commission to identify 

insipient problems and address them at 

an earlier stage. This is particularly 

important in connection with a DCO 

that clears swaps, in light of the 

increased risk that swaps may pose to 

DCOs.17

Unless otherwise specified by the 

Commission or its designee, any stated 

time in these proposed regulations 

would be Central time for information 

concerning DCOs located in that time 

zone, and Eastern time for information 

concerning all other DCOs (including 

clearing organizations registered as 

DCOs but located outside the United 

States).18

1. Information Required on a Daily Basis 

Currently, the Commission receives 

initial margin data from several, but not 

all DCOs and not necessarily on a daily 

basis. The Commission receives 

variation margin data through the 

Shared Market Information System 

(SHAMIS), which is maintained by The 

Clearing Corporation, a subsidiary of 

IntercontinentalExchange, Inc. 

However, the Commission has found it 

difficult to obtain a complete data set 

from SHAMIS on a regular basis and in 

the necessary format. Moreover, not all 

DCOs participate in SHAMIS. The 

Commission is therefore proposing 

regulations that would require reporting 

by all DCOs on a daily basis. By 

requiring both sets of data as well as 

intraday initial margin calls 19 to be 

reported directly to the Commission, the 

Commission would be better positioned 

to conduct risk surveillance activities 

efficiently, to monitor the financial 

health of the DCO, and to detect any 

unusual activity in a timely manner. 

Proposed § 39.19(c)(1)(i) would 

require a DCO to report both the initial 

margin requirement for each clearing 

member, by customer origin and house 

origin,20 and the initial margin on 

deposit for each clearing member, by 

origin. Proposed § 39.19(c)(1)(ii) would 

require a DCO to report the daily 

variation margin collected and paid by 

the DCO. The report would separately 

list the mark-to-market amount 

collected from or paid to each clearing 

member, by origin.21

Proposed § 39.19(c)(1)(iii) would 

require the DCO to report all other cash 

flows relating to clearing and settlement 

including, but not limited to, option 

premiums and payments related to 

swaps such as coupon amounts, 

collected from or paid to each clearing 

member, by origin. This data, 

supplementing the initial margin and 

variation margin data, would provide 

the Commission with a more complete 

picture of the financial risk profile of 

the DCO and its clearing members. 

Proposed § 39.19(c)(1)(iv) would 

require a DCO to report the end-of-day 

positions for each clearing member, by 

origin. Although the Commission 

currently receives large trader reports 

that are essential to an understanding of 

significant financial risk exposures, 

receipt of the proposed reports directly 

from the DCO would facilitate the 

ability of the Commission to evaluate 

the risk of each DCO as well as the 

aggregate financial risk across all DCOs. 

Proposed § 39.19(c)(1) would require 

the report to be compiled as of the end 

of each trading day and to be submitted 

to the Commission by 10 a.m. the 

following business day. Although the 

proposed daily reporting requirements 

would be new, the Commission notes 

that in the ordinary course of a DCO 

conducting its clearing and settlement 

business, the information required to be 

reported is already known or is readily 

ascertainable by a DCO. 

2. Information Required on a Quarterly 

Basis 

The Commission recently proposed a 

new § 39.11(f)(1) under which, at the 

end of each fiscal quarter, or at any time 

upon Commission request, a DCO 

would be required to report to the 

Commission: (i) The amount of financial 

resources necessary to meet the 

requirements set forth in the regulation; 

and (ii) the value of each financial 

resource available to meet those 

requirements.22 The DCO would have to 

include with the report its financial 

statements, including the balance sheet, 

income statement, and statement of cash 

flows of the DCO or its parent company. 

If one of the financial resources a DCO 

is using to meet the regulation’s 

requirements is a guaranty fund, the 

DCO would also have to report the value 

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78188 Federal Register / Vol. 75, No. 240 / Wednesday, December 15, 2010 / Proposed Rules 

23See infra discussion of proposed § 39.19(c)(4)(i) 

at Section II.A.4.(a) of this notice. 

24Section 5b(i) of the CEA, 7 U.S.C. 7a–1(i). 

25Section 39.10 is being proposed in a separate 

notice of proposed rulemaking. 

26Proposed § 39.11(a) would require a DCO to 

maintain sufficient financial resources to: (1) Meet 

its financial obligations to its clearing members 

notwithstanding a default by the clearing member 

creating the largest financial exposure for the DCO 

in extreme but plausible market conditions, and (2) 

cover its operating costs for at least one year, 

calculated on a rolling basis. Proposed § 39.29(a) 

would establish a different default resources 

standard for SIDCOs, requiring a SIDCO to maintain 

sufficient financial resources to meet its financial 

obligations to its clearing members notwithstanding 

a default by the two clearing members creating the 

largest combined financial exposure for the SIDCO 

in extreme but plausible market conditions. See 75 

FR at 63118–19. 

27Proposed § 39.11(d)(2) and § 39.29(b) address 

valuation of clearing member assessments for 

purposes of calculating default resources. See 75 FR 

at 63119–20. 

28See supra discussion of proposed § 39.19(c)(2) 

at Section II.A.2. of this notice. 

29See supra discussion of proposed 

§ 39.19(c)(3)(ii) at Section II.A.3. of this notice. 

of each individual clearing member’s 

guaranty fund deposit. Proposed 

§ 39.11(f)(3) would require a DCO to 

provide the Commission with sufficient 

documentation that explains both the 

methodology it used to calculate its 

financial requirements and the basis for 

its determinations regarding valuation 

and liquidity. The DCO also would have 

to provide copies of any agreements 

establishing or amending a credit 

facility, insurance coverage, or other 

arrangement that evidences or otherwise 

supports its conclusions. 

By this notice, the Commission is 

proposing a new § 39.19(c)(2) under 

which a DCO would be required to 

report its financial resources in 

accordance with proposed § 39.11(f). 

The Commission notes that certain 

significant changes in financial 

resources would trigger additional 

reporting requirements under proposed 

§ 39.19(c)(4)(i).23

3. Information Required on an Annual 

Basis 

Proposed § 39.19(c)(3)(i) would 

require a DCO’s chief compliance officer 

to submit the annual compliance report 

required by Section 725(b) of the DoddFrank Act 24 and proposed § 39.10.25

The form and content of the annual 

compliance report would be codified in 

proposed § 39.10. 

Proposed § 39.19(c)(3)(ii) would 

require a DCO to provide the 

Commission with audited year-end 

financial statements of the DCO, or if 

there are no financial statements 

available for the DCO itself, the 

consolidated audited year-end financial 

statements of the DCO’s parent 

company. 

Proposed § 39.19(c)(3)(iii) would 

require a DCO to submit to the 

Commission concurrently, the annual 

compliance report and audited financial 

statements required by (c)(3)(i) and (ii), 

respectively, not later than 90 days after 

the end of the DCO’s fiscal year. The 

DCO would be able to request from the 

Commission an extension of time to 

submit either report, provided the 

DCO’s failure to submit the report in a 

timely manner could not be avoided 

without unreasonable effort or expense. 

Extensions of the deadline would be 

granted at the discretion of the 

Commission. 

4. Event-Specific Reporting 

(a) Decrease in Financial Resources 

Proposed § 39.19(c)(4)(i) would alert 

the Commission in a timely manner of 

a significant decrease in the value of a 

DCO’s financial resources and the 

reason for the decrease, e.g., whether 

such a decrease is an indicator of 

inadequate financial resources or if it is 

merely the result of a corresponding 

decrease in the margin requirements of 

the DCO. A DCO would be required to 

report certain decreases of the financial 

resources required to be maintained by 

proposed § 39.11(a) or, as applicable if 

the DCO is a SIDCO, proposed 

§ 39.29(a): 26 (1) A 10 percent decrease 

from the total value of the financial 

resources reported on the last quarterly 

report submitted under proposed 

§ 39.11(f); or (2) a 10 percent decrease 

from the total value of the financial 

resources as of the close of the previous 

business day. Reporting a decrease from 

the last quarterly report is intended to 

capture a situation where a DCO has a 

gradual decrease of financial resources. 

Reporting a decrease from the previous 

business day is intended to capture a 

situation where the DCO would 

experience a sudden decrease in 

financial resources over a short period 

of time. Although in such a situation the 

DCO may still have financial resources 

on hand that are greater in value than 

what was reported on the most recent 

quarterly report, the Commission 

believes that such a rapid drop in the 

value of a DCO’s financial resources is 

a situation that warrants notice to the 

Commission. The Commission invites 

comment on possible alternatives 

regarding what would be considered a 

significant drop in the value of financial 

resources and whether there should be 

alternative reporting requirements. 

The DCO would be required to report 

each such decrease to the Commission 

no later than one business day following 

the day the 10 percent threshold was 

reached. The report would have to 

include the total value of the financial 

resources: (1) As of the close of business 

the day the 10 percent threshold was 

reached; and (2) if reporting a 10 

percent decrease from the previous 

business day, the total value of the 

financial resources immediately prior to 

the 10 percent drop. This would include 

a breakdown of the value of each 

financial resource available as reported 

in each (1) and (2) above, calculated in 

accordance with the requirements of 

proposed § 39.11(d) or, as applicable if 

the DCO is a SIDCO, § 39.29(b),27

including the value of each individual 

clearing member’s guaranty fund 

deposit, if the DCO reports guaranty 

fund deposits as a financial resource. 

The report would also include a 

detailed explanation for the decrease. 

(b) Decrease in Ownership Equity 

Proposed § 39.19(c)(4)(ii) would 

require a DCO to notify the Commission 

of an event which the DCO knows or 

should reasonably know will cause a 

decrease of 20 percent in ownership 

equity from the last reported ownership 

equity balance. This notice would be 

required to be provided no later than 

two business days prior to the event. 

The last reported ownership equity 

balance would generally be on the 

quarterly or audited financial statements 

that would be required to be submitted 

by proposed § 39.19(c)(2) 28 or proposed 

§ 39.19(c)(3)(ii),29 respectively. For 

events which the DCO did not know, 

and reasonably could not know, would 

cause a decrease of 20 percent prior to 

the event occurring, the DCO would be 

able to report the triggering event no 

later than two business days after the 

decrease in ownership equity. Reports 

submitted prior to an event would have 

to include pro forma financial 

statements, reflecting the DCO’s 

estimated future financial condition 

following the anticipated decrease and 

details describing the reason for the 

anticipated decrease. Reports submitted 

after the event would have to include 

current financial statements and details 

describing the reason for the decrease. 

Proposed § 39.19(c)(4)(ii) is intended 

to alert the Commission of major 

planned events that would significantly 

affect ownership equity, most of which 

are events the DCO would have advance 

knowledge of, such as a reinvestment of 

capital, dividend payment, or major 

acquisition. The report would notify the 

Commission of such an event and 

would allow the Commission to 

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30See 75 FR at 63116. 

31The DCO’s rules and procedures are required 

to be submitted to the Commission under Section 

5c(c) of the CEA, 7 U.S.C. 7a–2(c), and § 40.6. Such 

information is required to be made available to 

clearing members and the public under Core 

Principle L and proposed § 39.21. See infra Section 

II.C. of this notice. 

evaluate its effect on the financial health 

of the DCO. The Commission invites 

commenters to propose alternative 

reporting requirements which would 

also provide the Commission with this 

type of information. 

(c) Six-Month Liquid Asset Requirement 

The Commission recently proposed a 

new § 39.11(e)(2) which would establish 

a six-month liquid asset requirement. It 

would require DCOs to maintain 

unencumbered liquid financial assets in 

the form of cash or highly liquid 

securities equal to six months operating 

costs.30 In this notice, the Commission 

is proposing a new § 39.19(c)(4)(iii) that 

would require immediate notice to the 

Commission when a DCO knows or 

reasonably should know of a deficit in 

the six-month liquid asset requirement 

of proposed § 39.11(e)(2). The 

Commission believes that immediate 

notification of a DCO’s deficit in the sixmonth liquid asset requirement is 

critical because of its potential impact 

on the ability of the DCO to continue to 

operate as a going concern. 

(d) Change in Working Capital 

Proposed § 39.19(c)(4)(iv) would 

require notice to the Commission no 

later than two business days after a 

DCO’s working capital becomes 

negative. Working capital is defined as 

current assets minus current liabilities. 

The notice would include a balance 

sheet that reflects the DCO’s working 

capital and an explanation as to the 

reason for the negative balance. The 

Commission believes that it is essential 

that it be made aware, in a timely 

manner, when a DCO has negative 

working capital, as this development 

can be an indicator of the declining 

financial health of a DCO. 

The Commission invites comment as 

to whether this is a meaningful 

indicator of a DCO’s financial condition, 

if there are alternative or additional 

measures that might be applied, and if 

the timing for notification is appropriate 

given the information to be provided. 

(e) Intraday Initial Margin Calls to 

Clearing Members 

Proposed § 39.19(c)(4)(v) would 

require a DCO to report any intraday 

initial margin calls to clearing members. 

While proposed § 39.19(c)(1), discussed 

above, would provide the Commission 

with initial margin and daily variation 

margin data, the Commission would not 

receive that data until the following 

business day. Learning of an intraday 

initial margin call soon after the call 

would assist the Commission in 

determining whether certain clearing 

member positions could affect the 

ability of a DCO to meet its end-of-day 

financial obligations in a timely manner. 

This data would alert the Commission 

to positions that could pose greater risk. 

This is especially important given that 

intraday initial margin calls are unusual 

and are often due to increasing position 

size. The Commission invites 

commenters to recommend other 

possible reporting solutions that could 

serve to inform the Commission of a 

clearing member that is potentially 

building up position size during the 

current trading day. 

The report would have to be 

submitted no later than 1 hour following 

the margin call and would have to 

separately list each request and include 

the name of the clearing member, the 

amount requested and the account 

origin. 

The Commission notes that while this 

may impose an occasional reporting 

requirement on DCOs, many DCOs 

already have such reports generated for 

submission to a clearing member’s 

depository as a request for intraday 

funds. The primary burden would be 

arranging a mechanism that would 

allow submission of these reports to the 

Commission in a timely manner. Thus, 

the Commission believes that it would 

be a de minimis burden. 

(f) Delay in Collection of Initial Margin 

Proposed § 39.19(c)(4)(vi) would 

require the DCO to immediately notify 

the Commission when it has not 

received additional initial margin that it 

requested from a clearing member, in a 

timely manner. The proposed reporting 

requirement is intended to alert the 

Commission of a development that 

could be an indicator of a potential 

clearing member default. Payment of 

additional initial margin would be 

considered late if the DCO has not 

received payment within the time frame 

allowed by the DCO’s rules and 

procedures.31 The Commission invites 

comment on this reporting requirement 

and the time frame used in determining 

when a payment is not considered 

timely. 

(g) Management of Clearing Member 

Positions 

Proposed §§ 39.19(c)(4)(vii)–(ix) 

would require a DCO to apprise the 

Commission of different levels of 

financial distress of a clearing member, 

and the status of the DCO’s actions to 

manage the risks associated with the 

clearing member’s financial situation. 

The DCO would be required to report 

situations where a clearing member’s 

position(s) must be reduced, transferred 

or liquidated, or where the clearing 

member defaults. 

Proposed § 39.19(c)(4)(vii) would 

require a DCO to immediately notify the 

Commission of the DCO’s request to a 

clearing member to reduce its positions 

because the DCO has determined that 

the clearing member has exceeded its 

exposure limit, that the clearing member 

has failed to meet an initial or variation 

margin call, or that it has failed to fulfill 

any other financial obligation to the 

DCO. The notice would have to include: 

(A) The name of the clearing member; 

(B) the time the clearing member was 

contacted; (C) the number of positions 

by which the DCO requested the 

clearing member to reduce its position 

size; (D) the contracts that are the 

subject of the request; and (E) the reason 

for the request. 

Proposed § 39.19(c)(4)(viii) would 

require a DCO to immediately notify the 

Commission of the DCO’s determination 

that any position the DCO carries for 

one of its clearing members must be 

liquidated immediately or transferred 

immediately, or that the trading of any 

account of a clearing member can be 

only for the purposes of liquidation 

because that clearing member has failed 

to meet an initial or variation margin 

call or failed to fulfill any other 

financial obligation to the DCO. The 

notice would have to include: (A) The 

name of the clearing member; (B) the 

time the clearing member was 

contacted; (C) the contracts that are 

subject to the determination; (D) the 

number of positions that are subject to 

the determination; and (E) the reason for 

the determination. 

The provisions of proposed 

§ 39.19(c)(4)(viii) are substantially 

similar to the requirements of 

§ 1.12(f)(1) of the Commission’s 

regulations. Accordingly, the 

Commission is proposing to remove 

§ 1.12(f)(1) and redesignate it as 

proposed § 39.19(c)(4)(viii) in 

substantially the same form. The 

difference would be that while 

§ 1.12(f)(1) applies only to a DCO’s 

determination concerning a clearing 

member that is a registered futures 

commission merchant (FCM) or 

registered leverage transaction 

merchant, proposed § 39.19(c)(4)(viii) 

would apply to all DCO clearing 

members, even those that are not 

registrants. 

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32 In a separate proposed rulemaking, the 

Commission is proposing procedures for the 

transfer of a DCO’s registration and open interest 

under proposed § 39.3(h). 

33Such requirements would be proposed in 

separate rulemakings, each for a specific registrant. 

34 In a separate rulemaking, the Commission is 

proposing to adopt this definition for ‘‘key 

personnel’’ in a new § 39.1(b). 

35See 75 FR 67282, 67292 (Nov. 2, 2010) 

(provisions common to registered entities; 

proposing to revise and redesignate § 40.1(g) as 

§ 40.1(h)). The term ‘‘emergency’’ is currently 

defined as: 

Any occurrence or circumstance that, in the 

opinion of the governing board of a registered 

entity, or a person or persons duly authorized to 

issue such an opinion on behalf of the governing 

board of a registered entity under circumstances 

and pursuant to procedures that are specified by 

rule, requires immediate action and threatens or 

may threaten such things as the fair and orderly 

trading in, or the liquidation of or delivery pursuant 

to, any agreements, contracts or transactions, 

including: (1) Any manipulative or attempted 

manipulative activity; (2) Any actual, attempted, or 

threatened corner, squeeze, congestion, or undue 

concentration of positions; (3) Any circumstances 

which may materially affect the performance of 

agreements, contracts or transactions, including 

failure of the payment system or the bankruptcy or 

insolvency of any participant; (4) Any action taken 

by any governmental body, or any other registered 

entity, board of trade, market or facility which may 

have a direct impact on trading; and (5) Any other 

circumstance which may have a severe, adverse 

effect upon the functioning of a registered entity. 

17 CFR 40.1(g). 

36See Section 5b(c)(2)(B)(i) of the CEA; 17 USC 

7a–1(c)(2)(B)(i) (requiring each DCO to have 

‘‘adequate financial, operational, and managerial 

resources, as determined by the Commission, to 

discharge each responsibility of the derivatives 

clearing organization’’). The Commission expects to 

include in a future rulemaking revised instructions 

for DCO applications which will include a 

requirement that applicants list key personnel and 

emergency contacts. 

37See 75 FR at 63116 (proposing that a DCO may 

use a committed line of credit or similar facility to 

Proposed § 39.19(c)(4)(ix) would 

require a DCO to immediately notify the 

Commission of the default of a clearing 

member. An event of default would be 

determined in accordance with the rules 

of the DCO. The notice of default would 

have to include: (A) The name of the 

clearing member; (B) the contracts the 

clearing member defaulted upon; (C) the 

number of positions the clearing 

member defaulted upon; and (D) the 

amount of the unmet financial 

obligation. 

(h) Change in Ownership or Corporate 

or Organizational Structure 

Proposed § 39.19(c)(4)(x) is intended 

to provide advance notice to the 

Commission of major ownership, 

corporate, or organizational changes of a 

DCO. The DCO would be required to 

report any anticipated ownership, 

corporate, or organizational changes of 

the DCO or its parent company that 

would: (i) Result in at least a 10 percent 

change of ownership of the DCO; (ii) 

create a new subsidiary of the DCO or 

the parent company; (iii) eliminate a 

current subsidiary of the DCO or its 

parent company; or (iv) result in a 

transfer of all or substantially all of its 

assets, including its registration as a 

DCO, to another legal entity (e.g., as a 

result of a reincorporation, or corporate 

merger). Such changes could include, 

but would not be limited to, the DCO’s 

change of corporate structure from a 

partnership to a corporation, or from a 

member owned company to a publicly 

held company, or a change in corporate 

domicile. The report would include: (1) 

A chart outlining the new ownership or 

corporate or organizational structure, (2) 

a brief description of the purpose and 

impact of the change; and (3) any 

relevant agreements effecting the change 

and corporate documents such as new 

articles of incorporation and bylaws. 

With respect to a corporate change that 

results in a transfer of all or 

substantially all of a DCO’s assets, the 

informational requirements of proposed 

§ 39.19(c)(4)(x)(B) would be satisfied by 

the DCO’s compliance with proposed 

§ 39.3(h)(3).32

Because a DCO is likely to be aware 

of such changes well in advance of their 

effective date, the proposed regulation 

would require the report to be submitted 

to the Commission no later than three 

months prior to the anticipated change. 

The Commission is allowing an 

exception to the three-month prior 

notice requirement if the DCO does not 

know and reasonably could not have 

known of the anticipated change three 

months prior to that change. In such 

event, the DCO would be required to 

immediately report such change to the 

Commission as soon as it knows of the 

change. The Commission requests 

comment on whether the three-month 

notice period is appropriate or whether 

a different notice period should be 

required. 

Proposed § 39.19(c)(4)(x)(D) would 

require a second report to the 

Commission of the consummation of the 

corporate or organizational change no 

later than 2 business days following the 

effective date of the change. 

The Commission notes that there may 

be differences in the proposed 

notification requirements for changes in 

the ownership or corporate or 

organizational structure of DCOs, 

designated contract markets, swap 

execution facilities, and swap data 

repositories.33 The Commission requests 

comment on the proposed reporting 

requirements under § 39.19(c)(4)(x), 

generally, and, more specifically, the 

extent to which there should be 

uniformity or differentiation in 

notification procedures applied to 

different types of registrants. 

(i) Change in Key Personnel 

Proposed § 39.19(c)(4)(xi) would 

require a DCO to report to the 

Commission the departure or addition 

of persons who are key personnel, as 

defined in proposed § 39.1(b), no later 

than two business days following any 

such change. As applicable when a 

position is vacated, the report would 

include the name of the person who will 

assume the duties of the position on a 

temporary basis until a permanent 

replacement fills the position. 

Key personnel would be defined by 

proposed § 39.1(b) as personnel who 

play a significant role in the operation 

of the DCO, provision of clearing and 

settlement services, risk management, or 

oversight of compliance with the CEA 

and Commission regulations. Key 

personnel would include, but would not 

be limited to, those persons who are or 

perform the functions of any of the 

following: The chief executive officer; 

president; chief compliance officer; 

chief operating officer; chief risk officer; 

chief financial officer; chief technology 

officer; and emergency contacts or 

persons who are responsible for 

business continuity and disaster 

recovery.34 The term ‘‘emergency’’ 

would have the same meaning as 

defined in § 40.1(g), which the 

Commission has proposed to revise and 

redesignate as § 40.1(h).35 The 

Commission intends to require listing 

key personnel on a DCO’s initial 

application in furtherance of the 

applicant’s representation that it can 

satisfy the requirements of Core 

Principle B, i.e., that it will have 

adequate managerial resources.36 From 

a practical standpoint, notification of 

any changes of key personnel, 

particularly those responsible for 

handling emergency situations, is 

important for purposes of the 

Commission’s general oversight of each 

DCO, as well as its ability to establish 

contact with key personnel in a timely 

manner, as circumstances may warrant. 

(j) Credit Facility Funding Arrangement 

Change 

Under proposed § 39.19(c)(4)(xii), a 

DCO would be required to notify the 

Commission of material changes in a 

credit facility funding arrangement, if 

the DCO has one in place. A credit 

facility funding arrangement is generally 

used as a stop-gap measure in an 

emergency situation such as to provide 

liquidity during a clearing member 

default or to temporarily provide the 

DCO with adequate operating funds.37

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meet the liquidity requirements set forth in 

proposed § 39.11(e)(1) and 39.11(e)(2)). 

38See 17 CFR 9.11(a). 

39Section 39.5(c) states: 

Information regarding transactions by large 

traders cleared by a derivatives clearing 

organization shall be filed with the Commission, in 

a form and manner acceptable to the Commission, 

by futures commission merchants, clearing 

members, foreign brokers or registered entities other 

than a derivatives clearing organization, as 

applicable. Provided, however, that if no such 

person or entity is required to file large trader 

information with the Commission, such information 

must be filed with the Commission by a derivatives 

clearing organization. 

17 CFR 39.5(c). 

40See supra discussion of proposed daily 

reporting requirements at Section II.A.1. of this 

notice. 

41Section 39.5(d) states: 

Upon special call by the Commission, each 

futures commission merchant, clearing member or 

foreign broker shall provide information to the 

Commission concerning customer accounts or 

related positions cleared on a derivatives clearing 

organization or other multilateral clearing 

organization in the form and manner and within the 

time specified by the Commission in the special 

call. 

17 CFR 39.5(d). 

42 In a recent proposed rulemaking, the 

Commission proposed to renumber § 39.5 as § 39.6. 

See 75 FR 67277, 67281 (Nov. 2, 2010) (process for 

review of swaps for mandatory clearing). 

Renumbering would no longer be necessary if the 

requirements of § 39.5 are redesignated as proposed 

in this notice. (As discussed in this section, the 

Commission is proposing to: (1) Redesignate 

§ 39.5(a) as § 39.19(c)(5)(i); (2) redesignate § 39.5(b) 

as § 39.19(c)(5)(ii); (3) remove § 39.5(c); (4) 

redesignate § 21.04 as § 21.05; (5) redesignate 

§ 39.5(d) as § 21.04; and (6) add § 21.06). 

Additionally, the earlier proposal to redesignate 

§§ 39.6 and 39.7 as §§ 39.7 and 39.8, respectively, 

would no longer be necessary. See 75 FR at 67281. 

The Commission notes that it intends to propose a 

revised and renumbered part 39 in conjunction 

with an upcoming notice of proposed rulemaking. 

43This delegation provision is the same as the 

delegation provision for the Director of the Division 

of Market Oversight in current § 21.04. 

Thus, it is essential for the Commission 

to be promptly notified of changes that 

would affect the DCO’s immediate 

access to cash. Under the proposed 

regulation, a DCO would have to notify 

the Commission no later than one 

business day after a DCO changes a 

credit facility funding arrangement, is 

notified that such an arrangement has 

changed, or knows or reasonably should 

know that the arrangement will change, 

including but not limited to a change in 

lender, change in the size of the facility, 

change in expiration date, or any other 

material changes or conditions. 

(k) Rule Enforcement 

As mandated by Core Principle H, 

proposed § 39.19(c)(4)(xiii) would 

require a DCO to report to the 

Commission regarding rule enforcement 

activities and sanctions imposed against 

clearing members. More specifically, it 

would require a DCO to notify the 

Commission no later than two business 

days after the DCO (A) initiates a rule 

enforcement action against a clearing 

member, or (B) imposes sanctions 

against a clearing member. The 

Commission notes that while an 

exchange has 30 days within which to 

notify the Commission of a decision 

pursuant to which a disciplinary action 

has become final,38 a DCO taking 

disciplinary action against a clearing 

member is a less common occurrence, 

and the clearing member’s offense could 

potentially impact the financial integrity 

of the DCO. Thus, the Commission 

believes that it should be notified of 

such actions, sooner. Nonetheless, the 

Commission requests comment on 

whether a 30-day reporting period 

would be more appropriate under 

proposed § 39.19(c)(4)(xiii). 

(l) Financial Condition and Events 

Proposed § 39.19(c)(4)(xiv) is 

intended to alert the Commission of 

certain events and situations that may 

affect the financial integrity of a DCO. 

Under the proposed regulation, a DCO 

would be required to immediately notify 

the Commission after the DCO knows or 

reasonably should know of: (A) The 

institution of any legal proceedings 

which may have a material adverse 

financial impact on the DCO; (B) any 

event, circumstance or situation that 

would not otherwise be required to be 

reported under § 39.19 and that would 

materially impede the DCO’s ability to 

comply with part 39 of the 

Commission’s regulations; and (C) any 

material adverse change in the financial 

condition of any clearing member that 

would not otherwise be required to be 

reported under § 39.19. These 

requirements would place an affirmative 

duty on the DCO to be aware of and 

monitor such events, and would permit 

the DCO to exercise its discretion in 

determining which events rise to the 

level of requiring notification to the 

Commission. 

Proposed § 39.19(c)(4)(xv) would 

require a DCO, when it discovers or is 

notified by an independent public 

accountant of the existence of any 

material inadequacy, to give notice of 

such material inadequacy within 24 

hours, and within 48 hours after giving 

such notice to file a written report 

stating what steps have been and are 

being taken to correct the material 

inadequacy. Proposed § 39.19(c)(4)(xv) 

is consistent with § 1.12(d), a similar 

requirement for FCMs and introducing 

brokers. 

5. Technical Amendments 

Sections 39.5(a) and (b) require 

certain reports from a DCO upon request 

by the Commission. The Commission is 

proposing redesignating § 39.5(a) and (b) 

as proposed § 39.19(c)(5)(i) and (ii), 

respectively, in substantially the same 

form. The Commission believes that the 

addition of proposed § 39.19 as the DCO 

reporting regulation would make that 

section the appropriate placement for 

the provisions of § 39.5(a) and (b). 

Section 39.5(a), which is proposed as 

new § 39.19(c)(5)(i), requires that, upon 

request by the Commission, a DCO file 

with the Commission such information 

related to its business as a clearing 

organization, including information 

relating to trade and clearing details, in 

the form and manner and within the 

time as specified by the Commission in 

the request. Section 39.5(b), which is 

proposed as new § 39.19(c)(5)(ii), 

requires that, upon request by the 

Commission, a DCO file with the 

Commission a written demonstration, 

containing such supporting data, 

information and documents, in the form 

and manner and within such time as the 

Commission may specify, that the DCO 

is in compliance with one or more core 

principles and the relevant provisions of 

part 39, as specified in the request. 

Section 39.5(c) currently requires a 

DCO to submit large trader reports in 

circumstances where they are not 

required to be filed by FCMs, clearing 

members or others.39 The Commission 

is proposing to remove § 39.5(c) because 

the data from such large trader reports 

would be available pursuant to a 

combination of other large trader 

reporting requirements and the 

requirements of proposed 

§ 39.19(c)(1).40

Section 39.5(d) currently requires, 

upon special call, reports by certain 

persons for positions cleared on a 

DCO.41 The Commission is proposing to 

redesignate § 39.5(d) as § 21.04 because 

part 21 (Special Calls) is the appropriate 

placement for this provision.42 As such, 

the Commission also proposes to 

redesignate current § 21.04 as § 21.05 

and add § 21.06 which would delegate 

its authority under proposed § 21.04 to 

the Director of the Division of Clearing 

and Intermediary Oversight.43

B. Recordkeeping Requirements 

To implement Core Principle K, the 

Commission proposes to codify the 

requirements of the core principle such 

that each DCO will have to maintain 

records of all activities related to its 

business as a DCO in the form and 

manner acceptable to the Commission 

for a period of not less than five years. 

To clarify this general standard by way 

of example, and to supplement preexisting recordkeeping requirements 

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78192 Federal Register / Vol. 75, No. 240 / Wednesday, December 15, 2010 / Proposed Rules 

44For example, §§ 1.26 and 1.27 impose 

recordkeeping requirements for DCOs and FCMs 

related to the investment of customer funds. 

45See 75 FR 67282 (Nov. 2, 2010) (proposing 

amendments to part 40 of the Commission’s 

regulations). 

46See Section 5b(c)(2)(L)(i) of the CEA; 7 U.S.C. 

7a–1(c)(2)(L)(i). 

47See Section 5b(c)(2)(L)(ii) of the CEA; 7 U.S.C. 

7a–1(c)(2)(L)(ii). 

48 In a future proposed rulemaking, the 

Commission intends to propose a new § 39.16 to 

implement DCO Core Principle G, regarding default 

rules and procedures. See Section 5b(c)(2)(G) of the 

CEA; 7 U.S.C. 7a–1(c)(2)(G). 

49See Section 5b(c)(2)(L)(iii) of the CEA, 7 U.S.C. 

7a–1(c)(2)(L)(iii). 50 5 U.S.C. 601 et seq. 

imposed by various Commission 

regulations,44 the Commission is 

proposing to list examples of 

information subject to the recordkeeping 

requirement. 

Proposed § 39.20(a)(1) would require 

a DCO to maintain records of all cleared 

transactions, including swaps. This is 

information that a DCO already 

maintains in the ordinary course of its 

business as a clearing house. 

More specifically, proposed 

§ 39.20(a)(2) would require a DCO to 

retain all information necessary to 

record allocation of bunched orders for 

cleared swaps. This provision would 

highlight an important recordkeeping 

component of swaps clearing. 

Proposed § 39.20(a)(3) would require 

a DCO to maintain records of all 

information required to be generated, 

created, or reported under part 39. This 

would include, but would not be 

limited to, the results of and the 

methodology used for all tests, reviews, 

and calculations in connection with 

setting and evaluating margin levels, 

determining the value and adequacy of 

financial resources, and establishing 

settlement prices. 

Proposed § 39.20(a)(4) would require 

a DCO to maintain records of all rules 

and procedures of the DCO. 

Specifically, the DCO would be required 

to maintain records of all rules and 

procedures required to be submitted 

pursuant to part 39 and part 40 of the 

Commission’s regulations, including all 

proposed changes in rules, procedures 

or operations of SIDCOs, subject to 

proposed § 40.10.45

Proposed § 39.20(a)(5) would require 

a DCO to maintain any data or 

documentation required by the 

Commission or the DCO to be submitted 

to the DCO by its clearing members, or 

by any other person in connection with 

the DCO’s clearing and settlement 

activities. 

Proposed § 39.20(b)(1) would require 

a DCO to maintain records required by 

the Commission’s regulations in 

accordance with the provisions of § 1.31 

(books and records; keeping and 

inspection), for a period of not less than 

five years. However, there is an 

exception in proposed § 39.20(b)(2) that 

would require each DCO that clears 

swaps to maintain swap data in 

accordance with the requirements of 

part 45 (swap data repositories) of the 

Commission’s regulations. 

C. Public Information 

To implement Core Principle L, the 

Commission proposes to codify the 

requirements of the core principle, 

requiring DCOs to provide or make 

available certain information to the 

public and to market participants. 

1. Availability of Information 

Proposed § 39.21(a) would require 

each DCO to provide to market 

participants sufficient information to 

enable the market participants to 

identify and evaluate accurately the 

risks and costs associated with using the 

services of the DCO.46 In furtherance of 

this objective, each DCO would be 

required to have clear and 

comprehensive rules and procedures. 

Proposed § 39.21(b) would require each 

DCO to make information concerning 

the rules and the operating and default 

procedures governing the clearing and 

settlement systems of the DCO available 

to market participants.47

2. Public Disclosure 

Proposed § 39.21(c) would require 

each DCO to disclose publicly and to 

the Commission information 

concerning: (1) The terms and 

conditions of each contract, agreement, 

and transaction cleared and settled by 

the DCO; (2) each clearing and other fee 

that the DCO charges its clearing 

members; (3) the DCO’s margin 

methodology; (4) the size and 

composition of the financial resource 

package available in the event of a 

clearing member default; (5) daily 

settlement prices, volume, and open 

interest for each contract, agreement or 

transaction cleared or settled by the 

DCO; (6) the DCO’s rules and 

procedures for defaults pursuant to 

proposed § 39.16; 48 and (7) any other 

matter that is relevant to participation in 

the clearing and settlement activities of 

the DCO.49

Under proposed § 39.21(d) the DCO 

would be required to make its rulebook, 

a list of all current clearing members, 

and the information listed in proposed 

§ 39.21(c) readily available to the 

general public, in a timely manner, by 

posting such information on the DCO’s 

website, unless otherwise permitted by 

the Commission. The information that 

would be required by proposed 

§ 39.21(c)(5) would have to be made 

available to the public no later than the 

business day following the day to which 

the information pertains. 

D. Information Sharing 

Proposed § 39.22 would require each 

DCO to enter into, and abide by the 

terms of, each appropriate and 

applicable domestic and international 

information-sharing agreement and to 

use relevant information obtained from 

each such agreement in carrying out the 

risk management program of the DCO. 

Proposed § 39.22 would codify the 

statutory provisions of Core Principle 

M. The Commission believes that the 

language affords each DCO the 

appropriate level of discretion regarding 

the appropriate information-sharing 

agreements to enter into and the rules to 

abide by, and it does not perceive a 

need to articulate more specific 

requirements. The Commission requests 

comment on this approach. 

III. Effective Date 

The Commission is proposing that the 

requirements proposed in this notice 

become effective 180 days from the date 

the final rules are published in the 

Federal Register. The Commission 

believes that this would give DCOs 

adequate time to implement the 

technology and the procedures 

necessary to fulfill the proposed 

reporting requirements. This period of 

time also would be sufficient to allow 

for compliance with the recordkeeping, 

public information and information 

sharing requirements. The Commission 

requests comment on whether 180 days 

is an appropriate time frame for 

compliance with the proposed rules. 

The Commission further requests 

comment on possible alternative 

effective dates and the basis for any 

such alternative date. 

IV. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

requires that agencies consider whether 

the rules 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.50 The rules proposed by the 

Commission will affect only DCOs 

(some of which will be designated as 

SIDCOs). The Commission has 

previously established certain 

definitions of ‘‘small entities’’ to be used 

by the Commission in evaluating the 

impact of its regulations on small 

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51 47 FR 18618 (Apr. 30, 1982). 

52See 66 FR 45604, 45609 (Aug. 29, 2001). 

53 44 U.S.C. 3501 et seq. 

54Quarterly financial resources reports and 

annual compliance reports are the subjects of 

separate Paperwork Reduction Act submissions in 

connection with other proposed rulemakings. 

55Reports submitted upon Commission request 

are current requirements. 

56This amount reflects the estimated cost of 

preparing audited annual financial statements, an 

activity which many, if not all, respondents already 

perform on an annual basis. 

57This amount reflects the estimated cost of 

putting systems in place which would alert a 

respondent of certain event-specific-reporting 

requirements. It is expected, however, that most 

respondents already have most, if not all, of these 

systems in place. Additionally, this amount takes 

into account the preparation of reports such as the 

pro forma financial statement for a decrease in 

ownership equity, a document which a respondent 

would most likely already have produced in 

connection with whatever specific event the 

respondent anticipated would cause a decrease in 

ownership equity. 

entities in accordance with the RFA.51

The Commission has previously 

determined that DCOs are not small 

entities for the purpose of the RFA.52

Accordingly, the Chairman, on behalf of 

the Commission, hereby certifies 

pursuant to 5 U.S.C. 605(b) that the 

proposed rules will not have a 

significant economic impact on a 

substantial number of small entities. 

B. Paperwork Reduction Act 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a currently valid 

control number. OMB has not yet 

assigned a control number to the new 

collection. The Paperwork Reduction 

Act of 1995 (PRA) 53 imposes certain 

requirements on Federal agencies 

(including the Commission) in 

connection with their conducting or 

sponsoring any collection of 

information as defined by the PRA. This 

proposed rulemaking would result in 

new collection of information 

requirements within the meaning of the 

PRA. The Commission therefore is 

submitting this proposal to the Office of 

Management and Budget (OMB) for 

review. If adopted, responses to this 

collection of information would be 

mandatory. The Commission will 

protect proprietary information 

according to the Freedom of Information 

Act and 17 CFR Part 145, ‘‘Commission 

Records and Information.’’ In addition, 

section 8(a)(1) of the CEA strictly 

prohibits the Commission, unless 

specifically authorized by the CEA, from 

making public ‘‘data and information 

that would separately disclose the 

business transactions or market 

positions of any person and trade 

secrets or names of customers.’’ The 

Commission is also required to protect 

certain information contained in a 

government system of records according 

to the Privacy Act of 1974, 5 U.S.C. 

552a. 

1. Information Provided by Reporting 

Entities/Persons 

The proposed regulations require each 

respondent to file information with the 

Commission (1) periodically, on a daily, 

quarterly, and annual basis,54 (2) as 

specified events occur, and (3) upon 

Commission request.55

For daily reports, these would result 

in an estimated total of 12 initial 

responses and 250 responses per 

respondent on an annual basis. 

Commission staff estimates that 

respondents could expend up to $690 

initially and $1,400 annually, based on 

an hourly rate ranging from $46 to $56, 

to comply with the proposed 

regulations. This would result in an 

aggregated cost of $8,280 initially (12 

respondents × $690) and $16,800 per 

annum (12 respondents × $1,400). 

For annual reports, these would result 

in an estimated total of 1 response per 

respondent on an annual basis. 

Commission staff estimates that 

respondents could expend up to 

$482,110 annually, based on an hourly 

rate of $185, to comply with the 

proposed regulations. This would result 

in an aggregated cost of $5,785,320 per 

annum (12 respondents × $482,110).56

For event-specific reports, these 

would result in an estimated total of 4 

responses per respondent on an annual 

basis. Commission staff estimates that 

respondents could expend up to $1,680 

annually, based on an hourly rate of 

$75, to comply with the proposed 

regulations. This would result in an 

aggregated cost of $20,160 per annum 

(12 respondents × $1,680).57

For recordkeeping requirements, these 

would result in an estimated total of 1 

response per respondent on an annual 

basis. Commission staff estimates that 

respondents could expend up to $1,000 

annually, based on an hourly rate of 

$10, to comply with the proposed 

regulations. This would result in an 

aggregated cost of $12,000 per annum 

(12 respondents × $1,000). 

2. 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 comment in order 

to: (i) Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the Commission, including 

whether the information will have 

practical utility; (ii) evaluate the 

accuracy of the Commission’s estimate 

of the burden of the proposed collection 

of information; (iii) determine whether 

there are ways to enhance the quality, 

utility, and clarity of the information to 

be collected; and (iv) minimize the 

burden of the collection of information 

on those who are to respond, including 

through the use of automated collection 

techniques or other forms of information 

technology. 

Comments may be submitted directly 

to the Office of Information and 

Regulatory Affairs, by fax at (202) 395– 

6566 or by e-mail at 

OIRAsubmissions@omb.eop.gov. 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 document in the 

Federal Register. Therefore, a comment 

is best assured of having its full effect 

if OMB receives it within 30 days of 

publication. 

C. Cost-Benefit Analysis 

Section 15(a) of the CEA requires the 

Commission to consider the costs and 

benefits of its actions before issuing a 

rulemaking under the CEA. By its terms, 

Section 15(a) does not require the 

Commission to quantify the costs and 

benefits of a rule or to determine 

whether the benefits of the rulemaking 

outweigh its costs; rather, it requires 

that the Commission to ‘‘consider’’ the 

costs and benefits of its actions. Section 

15(a) further specifies that the costs and 

benefits shall be evaluated in light of 

five broad areas of market and public 

concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. The 

Commission may in its discretion give 

greater weight to any one of the five 

enumerated areas and could in its 

discretion determine that, 

notwithstanding its costs, a particular 

rule is necessary or appropriate to 

protect the public interest or to 

effectuate any of the provisions or to 

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78194 Federal Register / Vol. 75, No. 240 / Wednesday, December 15, 2010 / Proposed Rules 

accomplish any of the purposes of the 

CEA. 

Summary of proposed requirements. 

The proposed regulations would 

implement the reporting, recordkeeping, 

public information, and informationsharing requirements for DCOs under 

the CEA, as amended by the Dodd-Frank 

Act. 

Costs. With respect to costs, the 

Commission has determined that the 

costs of the new reporting requirements 

are not expected to be significant given 

that the information required to be 

reported is readily available to the DCO 

and, in certain instances, is already 

being reported to the Commission. The 

incremental increases in operating costs 

will have a negligible effect on the 

markets’ efficiency, effectiveness and 

financial competitiveness. 

Benefits. With respect to benefits, the 

Commission has determined that 

receiving such data required by the 

daily, annual and event-specific 

reporting requirements in a timely 

manner and in one format would further 

the Commission’s goal of monitoring the 

financial health and financial integrity 

of DCOs and whether a DCO’s financial 

and risk management practices are 

effective. It would also assist the 

Commission in taking prompt action as 

necessary to identify insipient problems 

and address them at an earlier stage. 

This would further the goal of avoiding 

systemic risk due to the default of a 

clearing member and thereby protect 

market participants and the public and 

serve the public interest by promoting 

sound risk management practices. 

Similarly, the recordkeeping 

requirements allow for making certain 

records available for Commission 

inspection, which helps further the 

goals of the reporting requirements and 

is necessary for the Commission to 

effectively monitor a DCO’s financial 

integrity and compliance with the CEA 

and Commission regulations. The public 

information requirements serve the 

public interest by facilitating the 

dissemination of important information 

about the DCO, including its clearing 

and settlement activities and default 

procedures. Information-sharing 

requirements promote cooperation 

among industry participants, facilitating 

more effective risk management. 

Public Comment. The Commission 

invites public comment on its costbenefit considerations. Commentators 

are also invited to submit any data or 

other information that they may have 

quantifying or qualifying costs and 

benefits of the Proposal with their 

comment letters. 

List of Subjects 

17 CFR Part 1 

Brokers, Commodity futures, 

Consumer protection. 

17 CFR Part 21 

Brokers, Commodity futures, 

Reporting and recordkeeping 

requirements 

17 CFR Part 39 

Definitions, commodity futures, 

reporting and recordkeeping 

requirements, swaps. 

For the reasons stated in the 

preamble, the Commission proposes to 

amend 17 CFR parts 1, 21 and 39 as 

follows: 

PART 1—GENERAL REGULATIONS 

UNDER THE COMMODITY EXCHANGE 

ACT 

Authority and Issuance 

1. The authority citation for part 1 is 

revised to read as follows: 

Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 

6d, 6e, 6f, 6g, 6h, 6i, 6k, 6m, 6n, 6o, 6p, 7, 

7a, 7b, 8, 9, 12, 12a, 12c, 13a, 13a–1, 16, 16a, 

19, 21, 23, and 24, as amended by the DoddFrank Wall Street Reform and Consumer 

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

1376 (2010). 

2. In § 1.12, remove and reserve 

paragraph (f)(1). 

PART 21—SPECIAL CALLS 

Authority and Issuance 

3. The authority for part 21 continues 

to read as follows: 

Authority: 7 U.S.C. 1a, 2, 2a, 4, 6a, 6c, 6f, 

6g, 6i, 6k, 6m, 6n, 7, 7a, 12a, 19 and 21, as 

amended by the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, Pub. L. 

111–203, 124 Stat. 1376 (2010); 5 U.S.C. 552 

and 552(b), unless otherwise noted. 

4. Redesignate § 21.04 as § 21.05. 

5. Add § 21.06 to read as follows: 

§ 21.06 Delegation of authority to the 

Director of the Division of Clearing and 

Intermediary Oversight. 

The Commission hereby delegates, 

until the Commission orders otherwise, 

the special call authority set forth in 

§ 21.04 to the Director of the Division of 

Clearing and Intermediary Oversight to 

be exercised by such Director or by such 

other employee or employees of such 

Director as designated from time to time 

by the Director. The Director of the 

Division of Clearing and Intermediary 

Oversight may submit to the 

Commission for its consideration any 

matter which has been delegated in this 

paragraph. Nothing in this section shall 

be deemed to prohibit the Commission, 

at its election, from exercising the 

authority delegated in this section to the 

Director. 

PART 39—DERIVATIVES CLEARING 

ORGANIZATIONS 

Authority and Issuance 

6. The authority for part 39 is 

proposed to read as follows: 

Authority: 7 U.S.C. 2, 5, 6, 6d, 7a–1,7a– 

2, and 7b as amended by the Dodd-Frank 

Wall Street Reform and Consumer Protection 

Act, Pub. L. 111–203, 124 Stat. 1376 (2010). 

7. Add § 39.19 to read as follows: 

§ 39.19 Reporting. 

(a) In general. Each derivatives 

clearing organization shall provide to 

the Commission the information 

specified in this section and any other 

information that the Commission deems 

necessary to conduct its oversight of a 

derivatives clearing organization. 

(b) Submission of reports. (1) Unless 

otherwise specified by the Commission 

or its designee, each derivatives clearing 

organization shall submit the 

information required by this section to 

the Commission electronically and in a 

form and manner prescribed by the 

Commission. 

(2) Time zones. Unless otherwise 

specified by the Commission or its 

designee, any stated time in this section 

is Central time for information 

concerning derivatives clearing 

organizations located in that time zone, 

and Eastern time for information 

concerning all other derivatives clearing 

organizations. 

(c) Reporting requirements. Each 

registered derivatives clearing 

organization shall provide to the 

Commission or other person as may be 

required or permitted by this paragraph 

the information specified below: 

(1) Daily reporting. A report 

containing the information specified by 

this paragraph (c)(1), which shall be 

compiled as of the end of each trading 

day and shall be submitted to the 

Commission by 10 a.m. on the following 

business day: 

(i) Initial margin requirements and 

initial margin on deposit for each 

clearing member, by customer origin 

and house origin; 

(ii) Daily variation margin, separately 

listing the mark-to-market amount 

collected from or paid to each clearing 

member, by customer origin and house 

origin; 

(iii) All other daily cash flows relating 

to clearing and settlement including, but 

not limited to, option premiums and 

payments related to swaps such as 

coupon amounts, collected from or paid 

to each clearing member, by customer 

origin and house origin; and 

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(iv) End-of-day positions for each 

clearing member, by customer origin 

and house origin. 

(2) Quarterly reporting. A report of the 

derivatives clearing organization’s 

financial resources as required by 

§ 39.11(f); provided that, additional 

reports may be required by paragraph 

(c)(4)(i) of this section or § 39.11(f). 

(3) Annual reporting. (i) Annual 

report of chief compliance officer. The 

annual report of the chief compliance 

officer required by § 39.10. 

(ii) Audited financial statements. 

Audited year-end financial statements 

of the derivatives clearing organization 

or, if there are no financial statements 

available for the derivatives clearing 

organization itself, the consolidated 

audited year-end financial statements of 

the derivatives clearing organization’s 

parent company. 

(iii) Time of report. The reports 

required by this paragraph (c)(3) shall be 

submitted concurrently to the 

Commission not more than 90 days after 

the end of the derivatives clearing 

organization’s fiscal year; provided that, 

a derivatives clearing organization may 

request from the Commission an 

extension of time to submit either 

report, provided the derivatives clearing 

organization’s failure to submit the 

report in a timely manner could not be 

avoided without unreasonable effort or 

expense. Extensions of the deadline will 

be granted at the discretion of the 

Commission. 

(4) Event-specific reporting. (i) 

Decrease in financial resources. If there 

is a decrease of 10 percent in the total 

value of the financial resources required 

to be maintained by the derivatives 

clearing organization under § 39.11(a) 

or, as applicable, § 39.29(a), either from 

the last quarterly report submitted 

under § 39.11(f) or from the value as of 

the close of the previous business day, 

the derivatives clearing organization 

shall report such decrease to the 

Commission no later than one business 

day following the day the 10 percent 

threshold was reached. The report shall 

include: 

(A) The total value of the financial 

resources: 

(1) as of the close of business the day 

the 10 percent threshold was reached, 

and 

(2) if reporting a decrease in value 

from the previous business day, the total 

value of the financial resources 

immediately prior to the 10 percent 

decline; 

(B) A breakdown of the value of each 

financial resource reported in each of 

paragraph (4)(i)(A)(1) and (2), calculated 

in accordance with the requirements of 

§ 39.11(d) or, as applicable, § 39.29(b), 

including the value of each individual 

clearing member’s guaranty fund 

deposit if the derivatives clearing 

organization reports guaranty fund 

deposits as a financial resource; and 

(C) A detailed explanation for the 

decrease. 

(ii) Decrease in ownership equity. No 

later than two business days prior to an 

event which the derivatives clearing 

organization knows or should 

reasonably know will cause a decrease 

of 20 percent or more in ownership 

equity from the last reported ownership 

equity balance as reported on a 

quarterly or audited financial statements 

required to be submitted by paragraph 

(c)(2) or (c)(3)(ii), respectively, of this 

section, but in any event no later than 

two business days after such decrease in 

ownership equity for events that caused 

the decrease for which the derivatives 

clearing organization does not know and 

reasonably should not have known 

about prior to the event. The report shall 

include: 

(A) Pro forma financial statements 

reflecting the DCO’s estimated future 

financial condition following the 

anticipated decrease for reports 

submitted prior to the anticipated 

decrease and current financial 

statements for reports submitted after 

such a decrease; and 

(B) Details describing the reason for 

the decrease or anticipated decrease in 

the balance. 

(iii) Six-month liquid asset 

requirement. Immediate notice when a 

derivatives clearing organization knows 

or reasonably should know of a deficit 

in the six-month liquid asset 

requirement of § 39.11(e)(2). 

(iv) Change in working capital. No 

later than two business days after 

working capital becomes negative; the 

notice shall include a balance sheet that 

reflects the derivatives clearing 

organization’s working capital and an 

explanation as to the reason for the 

negative balance. 

(v) Intraday initial margin calls. (A) 

Reporting requirement. Any intraday 

initial margin call to a clearing member. 

(B) Required information. The report 

shall separately list each request and 

include the name of the clearing 

member, the amount requested and the 

account origin. 

(C) Time of report. The report shall be 

submitted to the Commission no later 

than 1 hour following the margin call. 

(vi) Delay in collection of initial 

margin. Immediate notice when a 

derivatives clearing organization has not 

received additional initial margin that it 

requested from a clearing member 

within the time frame allowed by the 

derivatives clearing organization’s rules 

and procedures. 

(vii) Request to clearing member to 

reduce its positions. Immediate notice, 

of a derivatives clearing organization’s 

request to a clearing member to reduce 

its positions because the derivatives 

clearing organization has determined 

that the clearing member has exceeded 

its exposure limit, has failed to meet an 

initial or variation margin call, or has 

failed to fulfill any other financial 

obligation to the derivatives clearing 

organization. The notice shall include: 

(A) The name of the clearing member; 

(B) The time the clearing member was 

contacted; 

(C) The number of positions by which 

the derivatives clearing organization 

requested the clearing member to reduce 

its position size; 

(D) All contracts that are the subject 

of the request; and 

(E) The reason for the request. 

(viii) Determination to transfer or 

liquidate positions. Immediate notice, of 

a determination that any position a 

derivatives clearing organization carries 

for one of its clearing members must be 

liquidated immediately or transferred 

immediately, or that the trading of any 

account of a clearing member shall be 

only for the purposes of liquidation 

because that clearing member has failed 

to meet an initial or variation margin 

call or has failed to fulfill any other 

financial obligation to the derivatives 

clearing organization. The notice shall 

include: 

(A) The name of the clearing member; 

(B) The time the clearing member was 

contacted; 

(C) The contracts that are subject to 

the determination; 

(D) The number of positions that are 

subject to the determination; and 

(E) The reason for the determination. 

(ix) Default of a clearing member. 

Immediate notice, upon the default of a 

clearing member. An event of default 

shall be determined in accordance with 

the rules of the derivatives clearing 

organization. The notice of default shall 

include: 

(A) The name of the clearing member; 

(B) The contracts the clearing member 

defaulted upon; 

(C) The number of positions the 

clearing member defaulted upon; and 

(D) The amount of the financial 

obligation. 

(x) Change in ownership or corporate 

or organizational structure. (A) 

Reporting requirement. Any anticipated 

change in the ownership or corporate or 

organizational structure of the 

derivatives clearing organization or its 

parent company that would: 

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78196 Federal Register / Vol. 75, No. 240 / Wednesday, December 15, 2010 / Proposed Rules 

(1) Result in at least a 10 percent 

change of ownership of the derivatives 

clearing organization, 

(2) create a new subsidiary or 

eliminate a current subsidiary of the 

derivatives clearing organization or its 

parent company, or 

(3) result in the transfer of all or 

substantially all of its assets, including 

its registration as a derivatives clearing 

organization to another legal entity. 

(B) Required information. The report 

shall include: A chart outlining the new 

ownership or corporate or 

organizational structure; a brief 

description of the purpose and impact 

of the change; and any relevant 

agreements effecting the change and 

corporate documents such as articles of 

incorporation and bylaws. With respect 

to a corporate change for which a 

derivatives clearing organization 

submits a request for approval to 

transfer its derivatives clearing 

organization registration and open 

interest under § 39.3(h) of this part, the 

informational requirements of this 

paragraph (c)(4)(x)(B) shall be satisfied 

by the derivatives clearing 

organization’s compliance with 

§ 39.3(h)(3). 

(C) Time of report. The report shall be 

submitted to the Commission no later 

than three months prior to the 

anticipated change; provided that the 

derivatives clearing organization may 

report the anticipated change to the 

Commission later than three months 

prior to the anticipated change if the 

derivatives clearing organization does 

not know and reasonably could not have 

known of the anticipated change three 

months prior to the anticipated change. 

In such event, the derivatives clearing 

organization shall immediately report 

such change to the Commission as soon 

as it knows of such change. 

(D) Confirmation of change report. 

The derivatives clearing organization 

shall report to the Commission the 

consummation of the change no later 

than 2 business days following the 

effective date of the change. 

(xi) Change in key personnel. No later 

than two business days following the 

departure, or addition of persons who 

are key personnel as defined in 

§ 39.1(b), a report that includes, as 

applicable, the name of the person who 

will assume the duties of the position 

on a temporary basis until a permanent 

replacement fills the position. 

(xii) Credit facility funding 

arrangement change. No later than one 

business day after a derivatives clearing 

organization changes a credit facility 

funding arrangement it may have in 

place, is notified that such arrangement 

has changed, or knows or reasonably 

should have known that the 

arrangement will change, including but 

not limited to a change in lender, 

change in the size of the facility, change 

in expiration date, or any other material 

changes or conditions. 

(xiii) Rule enforcement. Notice of 

action taken, no later than two business 

days after the derivatives clearing 

organization: 

(A) Initiates a rule enforcement action 

against a clearing member; or 

(B) Imposes sanctions against a 

clearing member. 

(xiv) Financial condition and events. 

Immediate notice after the derivatives 

clearing organization knows or 

reasonably should have known of: 

(A) The institution of any legal 

proceedings which may have a material 

adverse financial impact on the 

derivatives clearing organization; 

(B) Any event, circumstance or 

situation that materially impedes the 

derivatives clearing organization’s 

ability to comply with this part and is 

not otherwise required to be reported 

under this section; or 

(C) A material adverse change in the 

financial condition of any clearing 

member that is not otherwise required 

to be reported under this section. 

(xv) Financial statements material 

inadequacies. If a derivatives clearing 

organization discovers or is notified by 

an independent public accountant of the 

existence of any material inadequacy, 

such derivatives clearing organization 

must give notice of such material 

inadequacy within 24 hours, and within 

48 hours after giving such notice file a 

written report stating what steps have 

been and are being taken to correct the 

material inadequacy. 

§ 39.5(a) [Redesignated as § 39.19(c)(5)(i)] 

8. Redesignate § 39.5(a) as 

§ 39.19(c)(5)(i). 

9. Redesignate § 39.5(b) as 

§ 39.19(c)(5)(ii) and revise to read as 

follows: 

§ 39.19 Reporting. 

* * * * * 

(c) * * * 

(5) * * * 

(ii) Upon request by the Commission, 

a derivatives clearing organization shall 

file with the Commission a written 

demonstration, containing such 

supporting data, information and 

documents, in the form and manner and 

within such time as the Commission 

may specify, that the derivatives 

clearing organization is in compliance 

with one or more core principles and 

relevant provisions of this part, as 

specified in the request. 

§ 39.5(d) [Redesignated as § 21.04] 

10. Redesignate § 39.5(d) as § 21.04. 

§ 39.5 [Amended] 

11. Remove § 39.5(c) and reserve the 

section. 

12. Add § 39.20 to read as follows: 

§ 39.20 Recordkeeping. 

(a) Requirement to maintain 

information. Each derivatives clearing 

organization shall maintain records of 

all activities related to its business as a 

derivatives clearing organization. Such 

records shall include, but are not 

limited to, records of: 

(1) All cleared transactions, including 

swaps. 

(2) All information necessary to 

record allocation of bunched orders for 

cleared swaps; 

(3) All information required to be 

created, generated, or reported under 

this part 39, including but not limited 

to the results of and methodology used 

for all tests, reviews, and calculations in 

connection with setting and evaluating 

margin levels, determining the value 

and adequacy of financial resources, 

and establishing settlement prices; 

(4) All rules and procedures required 

to be submitted pursuant to this part 39 

and part 40 of this chapter, including all 

proposed changes in rules, procedures 

or operations subject to § 40.10 of this 

chapter; and 

(5) Any data or documentation 

required by the Commission or by the 

derivatives clearing organization to be 

submitted to the derivatives clearing 

organization by its clearing members, or 

by any other person in connection with 

the derivatives clearing organization’s 

clearing and settlement activities. 

(b) Form and manner of maintaining 

information. (1) In general. The records 

required to be maintained by this 

chapter shall be maintained in 

accordance with the provisions of § 1.31 

of this chapter, for a period of not less 

than 5 years, except as provided in 

paragraph (b)(2) of this section. 

(2) Exception for swap data. Each 

derivatives clearing organization that 

clears swaps must maintain swap data 

in accordance with the requirements of 

part 45 of this chapter. 

15. Add § 39.21 to read as follows: 

§ 39.21 Public information. 

(a) In general. Each derivatives 

clearing organization shall provide to 

market participants sufficient 

information to enable the market 

participants to identify and evaluate 

accurately the risks and costs associated 

with using the services of the 

derivatives clearing organization. In 

furtherance of this objective, each 

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Federal Register / Vol. 75, No. 240 / Wednesday, December 15, 2010 / Proposed Rules 78197 

derivatives clearing organization shall 

have clear and comprehensive rules and 

procedures. 

(b) Availability of information. Each 

derivatives clearing organization shall 

make information concerning the rules 

and the operating and default 

procedures governing the clearing and 

settlement systems of the derivatives 

clearing organization available to market 

participants. 

(c) Public disclosure. Each derivatives 

clearing organization shall disclose 

publicly and to the Commission 

information concerning: 

(1) The terms and conditions of each 

contract, agreement, and transaction 

cleared and settled by the derivatives 

clearing organization; 

(2) Each clearing and other fee that 

the derivatives clearing organization 

charges its clearing members; 

(3) The margin-setting methodology; 

(4) The size and composition of the 

financial resource package available in 

the event of a clearing member default; 

(5) Daily settlement prices, volume, 

and open interest for each contract, 

agreement, or transaction cleared or 

settled by the derivatives clearing 

organization; 

(6) The derivatives clearing 

organization’s rules and procedures for 

defaults in accordance with § 39.16 of 

this part; and 

(7) Any other matter that is relevant 

to participation in the clearing and 

settlement activities of the derivatives 

clearing organization. 

(d) Publication of information. The 

derivatives clearing organization shall 

make its rulebook, a list of all current 

clearing members and the information 

listed in paragraph (c) of this section 

readily available to the general public, 

in a timely manner, by posting such 

information on the derivatives clearing 

organization’s website, unless otherwise 

permitted by the Commission. The 

information required in paragraph (c)(5) 

of this section shall be made available 

to the public no later than the business 

day following the day to which the 

information pertains. 

16. Add § 39.22 to read as follows: 

§ 39.22 Information sharing. 

Each derivatives clearing organization 

shall enter into, and abide by the terms 

of, each appropriate and applicable 

domestic and international informationsharing agreement, and shall use 

relevant information obtained from each 

such agreement in carrying out the risk 

management program of the derivatives 

clearing organization. 

Issued in Washington, DC, on December 1, 

2010, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Appendices to Information 

Management Requirements for 

Derivatives Clearing Organizations— 

Commission Voting Summary and 

Statements of Commissioners 

Note: The following appendices will not 

appear in the Code of Federal Regulations 

Appendix 1—Commission Voting Summary 

On this matter, Chairman Gensler and 

Commissioners Dunn, Sommers, Chilton and 

O’Malia voted in the affirmative. No 

Commissioner voted in the negative. 

Appendix 2—Statement of Chairman Gary 

Gensler 

I support the proposed rulemaking 

concerning information management, 

recordkeeping and reporting requirements for 

derivatives clearing organizations. The 

requirements would enable the Commission 

to conduct financial risk surveillance more 

efficiently and effectively. Further, they 

would promote transparency to the 

regulators, enhancing the Commission’s 

ability to detect and resolve potential 

concerns before they escalate into major 

problems. The rule also fulfills Congress’s 

direction that clearinghouses be required to 

make settlement prices and open interest 

public in all their contracts on a daily basis. 

The proposed reporting rules apply 

uniform standards to all DCOs, thereby 

helping to avoid inconsistency in DCO 

reporting. The recordkeeping requirements 

are rooted in sound business practices, and 

the public information requirements serve 

the public interest by promoting 

transparency and disclosure. By codifying 

the information-sharing core principle into 

the Commission’s regulations, the 

Commission would reaffirm its commitment 

to promoting cooperation among industry 

participants in carrying out risk management 

functions. 

[FR Doc. 2010–31131 Filed 12–14–10; 8:45 am] 

BILLING CODE 6351–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R05–OAR–2010–0850; FRL–9239–1] 

Approval and Promulgation of Air 

Quality Implementation Plans; 

Wisconsin; The Milwaukee-Racine and 

Sheboygan Areas; Determination of 

Attainment of the 1997 8-hour Ozone 

Standard 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: EPA is proposing to 

determine under the Clean Air Act 

(CAA) that the Milwaukee-Racine and 

Sheboygan, Wisconsin areas have 

attained the 1997 8-hour ozone National 

Ambient Air Quality Standard 

(NAAQS). The Milwaukee-Racine area 

includes Milwaukee, Ozaukee, Racine, 

Washington, Waukesha, and Kenosha 

Counties. The Sheboygan area includes 

Sheboygan County. The proposed 

determinations are based on complete, 

quality-assured and certified ambient air 

monitoring data that show that the areas 

have monitored attainment of the 1997 

8-hour ozone standard for the 2006– 

2008 and 2007–2009 monitoring 

periods. Preliminary data available for 

2010 indicate that the areas continue to 

monitor attainment. If EPA finalizes this 

action, as a result of these 

determinations, the requirements for 

these areas to submit attainment 

demonstrations and associated 

reasonably available control measures 

(RACM), reasonable further progress 

plans (RFP), contingency measures, and 

other State Implementation Plan (SIP) 

revisions related to attainment of the 

standard would be suspended for as 

long as the areas continue to attain the 

1997 8-hour ozone standard. These 

determinations would also suspend the 

requirement for EPA to promulgate 

attainment demonstration, RFP, and any 

other attainment-related Federal 

Implementation Plans (FIPs) for these 

areas. 

DATES: Comments must be received on 

or before January 14, 2011. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–R05– 

OAR–2010–0850, by one of the 

following methods: 

1. http://www.regulations.gov: Follow 

the on-line instructions for submitting 

comments. 

2. E-mail: mooney.john@epa.gov. 

3. Fax: (312) 692–2551. 

4. Mail: John M. Mooney, Chief, 

Attainment Planning and Maintenance 

Section, Air Programs Branch (AR–18J), 

U.S. Environmental Protection Agency, 

77 West Jackson Boulevard, Chicago, 

Illinois 60604. 

5. Hand Delivery: John M. Mooney, 

Chief, Attainment Planning and 

Maintenance Section, Air Programs 

Branch (AR–18J), U.S. Environmental 

Protection Agency, 77 West Jackson 

Boulevard, Chicago, Illinois 60604. 

Such deliveries are only accepted 

during the Regional Office normal hours 

of operation, and special arrangements 

should be made for deliveries of boxed 

information. The Regional Office official 

hours of business are Monday through 

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