[Federal Register Volume 75, Number 242 (Friday, December 17, 2010)]
[Rules and Regulations]
[Pages 78892-78896]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31579]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 44

RIN 3038-AD29


Reporting Certain Post-Enactment Swap Transactions

AGENCY: Commodity Futures Trading Commission.

ACTION: Interim final rule; request for comment.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is publishing for comment an interim final rule to implement 
new statutory provisions introduced by Title VII of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (``Dodd-Frank Act''). Section 
723 of the Dodd-Frank Act amends Section 2 of the Commodity Exchange 
Act (``CEA'' or the ``Act'') by adding new Section 2(h)(5)(B), which 
directs that rules adopted by the Commission under this section shall 
provide for the reporting of ``transition'' swaps--that is, swaps 
entered into on or after the date of enactment of the Dodd-Frank Act 
and prior to the effective date of swap data reporting rules to 
implement Section 2(h)(5)(B)--to a registered swap data repository 
(``SDR'') or to the Commission. Each category of data is subject to a 
reporting timetable specified in Section 2(h)(5). The Commission 
intends shortly to notice for comment substantive rules implementing 
the swap data reporting provisions of Section 2(h)(5)(B). In order to 
ensure the preservation of data pending implementation of such rules, 
the Commission is today adopting an interim final rule directing 
specified counterparties to post-enactment, or transition, swap 
transactions entered into prior to the effective date of the swap data 
reporting and recordkeeping rules implementing Section 2(h)(5)(B) of 
the CEA to retain information pertaining to the terms of such swaps.

DATES: This interim final rule is effective December 17, 2010. Comments 
on all aspects of the interim final rule must be received on or before 
January 18, 2011.

ADDRESSES: You may submit comments, identified by RIN number 3038-AD29, 
by any of the following methods:
    <bullet> Agency Web Site: via its Comments Online process: http://comments.cftc.gov. Follow the instructions for submitting comments 
through the Web site.
    <bullet> Mail: Address to David A. Stawick, Secretary of the 
Commission, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street, NW., Washington, DC 20581.
    <bullet> Hand Delivery/Courier: Same as mail above.
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.

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 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 Sec.  145.9 of the 
Commission's Regulations.\1\
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    \1\ 17 CFR 145.9.
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    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: Susan Nathan, Senior Special Counsel, 
Division of Market Oversight, Commodity Futures Trading Commission, 
1155 21st Street, NW., Washington, DC 20581, at (202) 418-5133.

SUPPLEMENTARY INFORMATION: The Commission is adopting an interim final 
rule under part 44 of its regulations under the Commodity Exchange Act 
and is soliciting comments on all aspects of the rule. The Commission 
will carefully consider all comments received and will address them, as 
applicable, in connection with the permanent reporting rules to be 
adopted under the Dodd-Frank Act.

I. Background

    On July 21, 2010, President Obama signed into law the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'').\2\ 
Title VII of the Dodd-Frank Act \3\ amended the Commodity Exchange Act 
(``CEA'' or the ``Act'') \4\ to establish a comprehensive new 
regulatory framework for swaps and security-based swaps. The 
legislation was enacted to reduce risk, increase transparency, and 
promote market integrity within the financial system by, among other 
things: (1) Providing for the registration and comprehensive regulation 
of swap dealers and major swap participants; (2) imposing clearing and 
trade execution requirements on standardized derivative products; (3) 
creating robust recordkeeping and real-time reporting regimes; and (4) 
enhancing the Commission's rulemaking and enforcement authorities with 
respect to, among others, all registered entities and intermediaries 
subject to the Commission's oversight.
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    \2\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010), hereinafter cited as 
``Dodd-Frank Act.'' The text of the Dodd-Frank Act may be accessed 
at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.
    \3\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may 
be cited as the ``Wall Street Transparency and Accountability Act of 
2010.''
    \4\ 7 U.S.C. 1 et seq.
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    Among other things, the Dodd-Frank Act requires that swaps be 
reported to a registered SDR \5\ or to the Commission if there is no 
registered SDR that would accept the swap. Section 723 of the Dodd-
Frank Act adds to the CEA new Section 2(h)(5)(B), to require that 
transition swaps be reported to a registered SDR or the Commission 
according to specified timetables. As described below, pursuant to its 
authority under Sections 4r and 2(h)(5)(A) of the CEA the Commission 
previously has adopted an interim final rule addressing the reporting 
timetable for swaps entered into prior to the enactment of the Dodd-
Frank Act the terms of which had not expired by that date.
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    \5\ The term ``swap data repository'' is defined in Section 
1a(48) of the CEA to mean ``any person that collects and maintains 
information or records with respect to transactions or positions in, 
or the terms and conductions of, swaps entered into by third parties 
for the purpose of providing a centralized recordkeeping facility 
for swaps.''
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    Separately, Section 729 of the Dodd-Frank Act established in new 
Section 4r(a)(2)(A) a transition rule applicable to pre-enactment 
swaps, providing for the reporting, by a date certain, of each swap 
entered into before the date of enactment of the Dodd-Frank Act, the

[[Page 78893]]

terms of which had not expired as of that date.\6\ Section 4r(a)(2)(B) 
directs the Commission to promulgate an interim final rule within 90 
days of the date of enactment of the Dodd-Frank Act providing for the 
reporting of each swap entered into before the date of enactment. On 
October 14, 2010, the Commission published in part 44 of its 
regulations an interim final rule instructing specified counterparties 
to pre-enactment swaps to report data to a registered SDR or to the 
Commission by the compliance date to be established in reporting rules 
to be promulgated under CEA Section 2(h)(5), and advising such 
counterparties of the necessity, inherent in the reporting requirement, 
to preserve information pertaining to the terms of such swaps until 
reporting can be effectuated under permanent rules. The reporting 
requirements established by Section 4r and Sec. Sec.  44.00-44.02 of 
the Commission's Regulations will remain in effect until the effective 
date of the permanent reporting rules to be adopted by the Commission 
pursuant to Section 2(h)(5) of the CEA.\7\
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    \6\ The statute provides that reporting must occur either (i) 30 
days after issuance of the interim final rule; or (ii) such other 
date as the Commission determines to be appropriate.
    \7\ See Interim Final Rule for Reporting Pre-Enactment Swap 
Transactions, 75 FR 63080, Oct. 14, 2010.
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    Section 4r did not mandate an interim final rulemaking addressing 
reporting provisions for transition swap transactions entered into on 
or after the date of enactment of the Dodd-Frank Act and prior to the 
effective date of the swap data reporting rule to implement the 
provisions of Section 2(h)(5)(B). The instant interim final rule is 
intended to provide clarity and guidance with respect to such swaps by 
(i) establishing that transition swaps \8\ be subject to Section 
2(h)(5)(B)'s reporting requirements and to Commission regulations to be 
promulgated thereunder; and (ii) advising potential counterparties to 
such swaps that implicit in this reporting requirement is the need to 
retain relevant data.
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    \8\ The term ``transition swap'' refers to a swap executed on or 
after the date of enactment of the Dodd-Frank Act and before the 
effective date of the swap data reporting and recordkeeping rules 
implementing Section 2(h)(5)(B) of the CEA. As discussed infra., 
Sections 2(h)(5)(A) and 4r describe as a separate category of swaps 
those executed prior to the enactment of the Dodd-Frank Act, the 
terms of which had not expired by that date (``pre-enactment 
swaps'').
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    The Commission intends to establish permanent data recordkeeping 
and reporting requirements for transition swaps in a separate 
rulemaking under Section 2(h)(5)(B) of the CEA.\9\ The Commission 
anticipates that its rulemaking for transition swaps will address 
specifically the records, information and data regarding transition 
swaps that must be retained and the timeframe for reporting such 
information to a registered SDR or to the Commission.
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    \9\ See Notice of Proposed Rulemaking Relating to Swap Data 
Recordkeeping and Reporting Requirements n. 10, approved for 
publication by the Commission at an open meeting on November 19, 
2010 and expected to be published shortly in the Federal Register 
(to be codified at 17 CFR part 45). Rules adopted by the Commission 
under this section shall provide for the reporting of swap data as 
follows:
    (A) Swaps entered into on or before the date of the enactment of 
this subsection shall be reported to a registered swap data 
repository or the Commission no later than 180 days after the 
effective date of this subsection.
    (B) Swaps entered into on or after such date of enactment shall 
be reported to a registered swap data repository or the Commission 
no later than the later of--
    (i) 90 days after such effective date; or
    (ii) Such other time after entering into the swap as the 
Commission may prescribe by rule or regulation.
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II. The Scope of the Interim Final Rule

    This interim final rule will apply to all swaps entered into on or 
after the date of enactment of the Dodd-Frank Act and before the 
effective date of the swap data reporting and recordkeeping rules 
implementing Section 2(h)(5)(B) of the CEA.

1. Reporting Obligations

    The Commission expects that the reporting obligations outlined in 
Sec.  44.03 will implicate swap transaction information and data that 
counterparties normally retain as sound business practice. Interim 
Sec.  44.03 establishes that reporting requirements are applicable to 
transition swaps and describes the information that would be reported 
to a registered SDR or to the Commission with respect to such 
transaction: (i) A copy of the transaction confirmation in electronic 
form, if available, or in written form if there is no electronic copy; 
(ii) if available, the time the transaction was executed; and (iii) 
additional information of the character described in Section 4 
(``Record Preservation'') below.
    In addition, Interim Sec.  44.03 provides that a designated 
counterparty \10\ to a transition swap \11\ must provide to the 
Commission on request any information relating to such transaction 
during the time that this interim final rule is in effect. The 
Commission expects that such information would vary depending upon the 
needs of the Commission and may include actual as well as summary trade 
data. Such summary data may include a description of a swap dealer's 
counterparties or the total number of post-enactment pre-effective swap 
transactions entered into by the dealer and some measure of the 
frequency and duration of those contracts. The Commission believes that 
this requirement will facilitate its ability to understand and evaluate 
the current market for swaps and may inform its analysis of other 
required rulemakings under the Dodd-Frank Act.
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    \10\ The reporting obligations of specified counterparties are 
delineated in Section 4r(a)(3) of the CEA, as amended. Unlike 
certain other provisions of Section 4r, these obligations are not 
limited to pre-enactment swaps.
    \11\ The term ``transition swap'' is defined in Sec.  44.00(c) 
of the Commission's Regulations to mean ``any swap entered into 
after the enactment of the Dodd-Frank Act of 2010 (July 21, 2010) 
and prior to the effective date of the swap data reporting and 
recordkeeping rules implemented pursuant to Section 2(h)(5)(B)'' of 
the CEA.
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2. Reporting Party

    Section 4r(a)(3) of the CEA specifies the party obligated to report 
a particular swap transaction. Specifically, this section provides, 
with respect to a swap in which only one counterparty is a swap dealer 
or major swap participant, that entity must report the swap. With 
respect to a swap in which one counterparty is a swap dealer and the 
other counterparty is a major swap participant, the swap dealer is 
responsible for reporting the swap. With respect to any other swap, the 
counterparties shall select one of them to report the swap. Interim 
Sec.  44.03 incorporates these provisions.

3. Effective Date for Reporting Transition Swaps

    Section 2(h)(5)(B) of the CEA requires that rules adopted by the 
Commission shall provide for the reporting of data for transition swaps 
no later than the later of 90 days after the effective date of the 
Dodd-Frank Act \12\ or such other time after entering into the swap as 
the Commission may prescribe. Section 4r(a)(2)(C) establishes that the 
reporting obligations described in Section 4r shall be effective on the 
enactment of that section--July 21, 2010. In a July 15, 2010 floor 
statement, Senator Lincoln addressed inconsistencies between Sections 
4r and 2(h)(5), emphasizing that the provisions of these two sections 
``should be interpreted as complementary to one another to assure 
consistency between them. This is particularly true with respect to 
issues such as the effective dates of these reporting requirements.'' 
\13\ Accordingly,

[[Page 78894]]

Section 4r(a)(2)(C) should be read to require that the reporting 
obligations of Section 2(h)(5)(B) became effective on enactment of the 
Dodd-Frank Act and that counterparties who are or may become subject to 
this obligation should, as of that date, be prepared to report swap 
data relating to post-enactment pre-effective swaps at such time as 
reporting is required: the later of 90 days after July 15, 2011 or such 
other time after entering into the swap as the Commission may 
prescribed by rule. The Commission believes that this result achieves 
Senator Lincoln's goal of assuring consistency between the legislative 
provisions embodied in Sections 4r and 2(h)(5).
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    \12\ As relevant here, the effective date is 360 days after the 
enactment of the Dodd-Frank Act--July 15, 2011.
    \13\ Lincoln, ``Wall Street Transparency and Accountability,'' 
Congressional Record (July 15, 2010) at S5923.
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4. Record Preservation

    While neither Section 4r nor Section 2(h)(5) expressly requires 
that counterparties retain data related to transition swaps, implicit 
in the reporting requirements established by these provisions is the 
necessity for counterparties to these transactions to retain 
information and data related to the terms of each transaction so that 
it may subsequently be reported. In this regard, Sec.  44.03 includes a 
Note to paragraphs (a)(1) and (a)(2) advising potential counterparties 
to a post-enactment pre-effective swap transaction to retain all 
information and documents relating to the terms of the transaction, to 
the extent and in such form as they presently exist. The Commission 
expects that counterparties to existing swaps routinely retain, 
consistent with reasonable business practice, information including but 
not limited to: (i) Any information necessary to identify and value the 
transaction (e.g., underlying asset and tenor); (ii) the date and time 
of execution of the transaction; (iii) volume (e.g., notional or 
principal amount); (iv) information relevant to the price and payment 
of the transaction until the swap is terminated, reaches maturity, or 
is novated; (v) whether the transaction was accepted for clearing by 
any clearing agency or derivatives clearing organization, and if so, 
the identity of such agency or organization; (vi) any modification(s) 
to the terms of the transaction; and (vii) the final confirmation of 
the transaction.
    The Commission believes that counterparties that may be required to 
report transition swap transactions should preserve such information in 
order to ensure that they will be able to comply with the reporting 
requirements of Interim Sec.  44.03 as well as with permanent reporting 
rules to be promulgated under CEA Section 2(h)(5). The Commission is 
mindful that the data retention requirement may be perceived as 
burdensome, and in that regard the Note attempts to limit the data to 
material information that may be expected to assist the Commission in 
performing its oversight functions under the CEA. In addition, to 
ensure that important information relating to the terms of such swaps 
may be retained with minimal burden on the counterparties, the Note 
does not require any counterparty to a transition swap transaction to 
create new records, and permits records to be retained in their 
existing format. Similarly, the Commission recognizes that information 
that the counterparty does not have prior to the effective date of the 
interim final rule cannot be reported.

III. Request for Comments

    The Commission requests comments on the questions outlined below:
    1. Should the date on which data concerning transition swaps is 
required to be reported to a registered swap data repository or to the 
Commission be more than 90 days following the July 15, 2011 effective 
date of the Dodd-Frank Act? If so, what date(s) should the Commission 
consider and why?
    2. Should the date for such reporting be different for reporting 
counterparties who are swap dealers or major swap participants than it 
is for reporting counterparties who are not swap dealers or major swap 
participants?
    3. What information should be reported with respect to transition 
swaps? Who would use this information, and for what purpose(s)?
    4. Should data reporting for transition swaps be asset-class 
specific?
    5. What methods of data accuracy verification should be used for 
transition swap data?
    6. Should the Commission's permanent rules concerning data 
reporting for transition swaps between counterparties who are not swap 
dealers or swap participants specify how such counterparties should 
determine which counterparty will report the swap data? If so, what 
factors should govern this choice?
    7. The Note to the interim final rule advises that counterparties 
retain, in their existing format, all information and documents 
relating to the terms of the transition swap, including but not limited 
to certain data elements. What documents and data typically are kept by 
swap market participants to memorialize their transactions? In what 
format? How long are such records currently maintained by market 
participants?
    8. What additional records should be kept, if any, and what burdens 
or costs would the retention of such information entail?
    In addition to the specific requests for comment above, the 
Commission welcomes comment on all aspects of the interim final rule 
and invites interested persons to submit written presentations of 
views, data and arguments on all aspects of the interim final rule.

IV. Related Matters

A. Administrative Procedure Act

    The Administrative Procedure Act \14\ (``APA'') generally requires 
an agency to publish notice of a proposed rulemaking in the Federal 
Register.\15\ This requirement does not apply, however, when the agency 
``for good cause finds * * * that notice and public procedure are 
impracticable, unnecessary, or contrary to the public interest.'' \16\ 
Moreover, while the APA requires generally that an agency publish an 
adopted rule in the Federal Register 30 days before it becomes 
effective, this requirement does not apply if the agency finds good 
cause to make the rule effective sooner.\17\
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    \14\ 5 U.S.C. 553.
    \15\ 5 U.S.C. 553(b).
    \16\ Id.
    \17\ 5 U.S.C. 553(d).
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    By way of background, Section 729 of the Dodd-Frank Act amended the 
CEA to add new Section 4r, which in turn requires the Commission to 
adopt, within 90 days of enactment of the Dodd-Frank Act, an interim 
final rule providing for the reporting of swaps entered into before the 
date of enactment of the Dodd-Frank Act the terms of which had not 
expired as of that date. In response to that mandate, the Commission 
adopted in new part 44 of the CEA an interim final rule whose purpose 
was to establish reporting requirements for pre-enactment unexpired 
swaps and to serve as notice to potential reporting entities of a 
subsequent requirement to report certain data \18\ associated with such 
swaps. This interim rule provides notice to counterparties to preserve 
data associated with transition swaps until the Commission issues 
permanent reporting and recordkeeping rules for all swaps pursuant to 
CEA Section 2(h)(5).\19\
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    \18\ 75 FR 63080 (Oct. 14, 2010).
    \19\ Id. at 63084.
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    The Commission is mindful that the Dodd-Frank Act did not mandate 
an interim final rule relating to transition swaps (those entered into 
after the date of enactment of the Act and prior to its effective 
date), although such swaps will in the future be subject to a permanent 
reporting requirement

[[Page 78895]]

pursuant to new Section 2(h)(5)(B) of the CEA. The Commission believes 
that these circumstances similarly warrant notice to potential 
counterparties of a present obligation to retain data relating to such 
swaps until the Commission issues permanent rules pursuant to Section 
2(h)(5)(B). Moreover, the Commission believes that issuance of such a 
rule as an interim final rule serves the public interest. The 
availability of this data will facilitate the Commission's ability to 
understand and evaluate the current market for swaps and may inform its 
analysis of other required rulemaking under the Dodd-Frank Act; any 
delay in adopting such rules likely will result in a substantial loss 
of significant swap data. Accordingly, the Commission believes that 
good cause exists under 5 U.S.C. 553(b) and (d) because delay in 
clarifying the potential scope of Section 2(h)(5)'s reporting and 
record preservation obligations likely will result in a substantial 
loss of material data relating transition swaps that would assist the 
Commission in performing its oversight and analytic functions under the 
CEA.

B. Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA'') provides that 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 from the Office of Management and Budget (``OMB'').\20\ OMB has 
not yet assigned a control number to the new collection. As described 
below, the Interim Final Rule will result in new collection of 
information requirements within the meaning of the PRA.
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    \20\ 44 U.S.C. 3501 et.seq.
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1. Reporting Requirements
    The Commission has determined that this interim final rulemaking 
will not impose on swap counterparties any new reporting requirements 
that would be collections of information requiring the approval of the 
Office of Management and Budget (``OMB'') under the Paperwork Reduction 
Act (``PRA'').\21\ The Commission intends to propose permanent 
reporting requirements associated with Section 723 of the Dodd-Frank 
Act, at which time the Commission will issue a notice of proposed 
rulemaking, seek comments on the proposed reporting requirements, and 
seek OMB approval for the collections of information as provided by 5 
CFR 1320.8 and 1320.11.
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    \21\ 44 U.S.C. 3501 et seq.
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2. Recordkeeping Requirements
    In order to comply with the reporting requirements contained in 
Sec.  44.03, and in anticipation of permanent recordkeeping and 
reporting requirements to be adopted by the Commission pursuant to 
Section 2(h)(5)(B) of the CEA, each potential counterparty to a 
transition swap that may be required to report such transaction should 
retain information relating to the terms of the swap transaction. The 
Commission believes that this recordkeeping element, while not 
explicit, is considered to be a collection of information within the 
meaning of the PRA. The Commission therefore is submitting this 
proposal to the Office of Management and Budget (OMB) for review in 
accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The title for this 
collection of information is ``Regulation 44.03--Interim Final Rule for 
Reporting Certain Post-Enactment Swap Transactions. OMB control number 
3038-NEW.''
    The Commission will, by separate action, publish in the Federal 
Register a notice and request for comment on the paperwork burden 
associated with the recordkeeping element of this interim final rule in 
accordance with 5 CFR 1320.8. If approved, this new collection of 
information will be mandatory.

C. Cost-Benefit Analysis

    Section 15(a) of the CEA requires the Commission to consider the 
costs and benefits of its action before issuing a new regulation or 
order under the Act. By its terms, Section 15(a) does not require the 
Commission to quantify the costs and benefits of its action or to 
determine whether the benefits of the action outweigh its costs. 
Rather, Section 15(a) requires the Commission simply to ``consider the 
costs and benefits'' of the subject rule or order. Section 15(a) 
further specifies that the costs and benefits of Commission regulations 
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 the market for 
listed derivatives; (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 of concern and may, in its discretion, determine that 
notwithstanding its costs, a particular regulation is necessary or 
appropriate to protect the public interest or to effectuate any of the 
provisions or accomplish any of the purposes of the CEA.
    Title VII of the Dodd-Frank Act requires the Commission to 
undertake a number of rulemakings to implement the regulatory framework 
for swaps dictated by that Act, including the reporting of swap 
transactions. This interim final rule implements the Dodd-Frank Act by 
providing clarity and guidance with respect to the reporting of 
transition swaps by (i) establishing that transition swaps will be 
subject to Section 2(h)(5)(B)'s reporting requirements and to 
Commission regulations to be promulgated thereunder; and (ii) advising 
potential counterparties to such transition swaps that implicit in this 
reporting requirement is the present obligation to retain data for 
reporting at a time to be determined by rules promulgated under Section 
2(h)(5)(B). This interim final rule will enable the Commission to 
obtain data on transition swaps and will also ensure the preservation 
of such data until permanent recordkeeping and reporting rules are 
issued by the Commission. The availability of data relating to 
transition swaps will enable the Commission to gain a better 
understanding of the swap market--including the size and scope of that 
market. This understanding ultimately will lead to a more robust and 
transparent environment for the swaps market. Further, the Commission 
expects this rule to make available information that could inform the 
Commission's decision-making with respect to the rules it is required 
to implement under the Dodd-Frank Act.
    The Note to Interim Sec.  44.03(a)(1) and (2) addresses the 
retention of records relating to transition swaps. Although there are 
recordkeeping costs associated with retention of existing swap 
transaction information, the Commission has crafted the Interim Final 
Rule to be efficient in terms of these costs. The Interim Rule does not 
require market participants to modify data for retention purposes, and 
the information that is to be reported should be information that is 
already kept by swap counterparties in their normal course of 
business--and it may be reported in the format in which it is kept. 
Moreover, counterparties must report the time of execution only to the 
extent such information is available.
    The recordkeeping and reporting rules that the Commission is 
required to adopt under new CEA Section 2(h)(5)(B) will apply to 
transition swaps. Accordingly, in adopting this Interim Rule the 
Commission has sought to limit the burden on market participants by

[[Page 78896]]

not imposing substantial or potentially conflicting reporting 
requirements.

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., 
requires federal agencies, in promulgating rules, to consider the 
impact of those rules on small entities. The term ``rule'' under the 
RFA is defined as ``any rule for which the agency publishes a general 
notice of proposed rulemaking pursuant to Section 553(b) of this title, 
or any other law * * *.'' \22\ However, a general notice of proposed 
rulemaking under Section 553(b) does not apply ``when the agency for 
good cause finds (and incorporates the finding and a brief statement of 
reasons therefor) in the rules [issued] that notice and public 
procedure thereon are impracticable, unnecessary or contrary to the 
public interest.'' \23\ As noted above, the Commission believes that 
good cause exists under 5 U.S.C. 553(b) because delay in clarifying the 
scope of 2(h)(5)'s reporting and record preservation obligations will 
likely result in a substantial loss of material data relating to post-
enactment pre-effective swaps that would assist the Commission in 
performing its oversight functions under the CEA.
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    \22\ 5 U.S.C. 601(2).
    \23\ 5 U.S.C. 553(b).
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List of Subjects in 17 CFR Part 44

    Swap markets, Counterparties, Reporting and Recordkeeping 
requirements.

0
In consideration of the foregoing, and pursuant to the authority in the 
Commodity Exchange Act, as amended, and in particular Sections 2(h)(5), 
4r(a) and 12a(5), the Commission hereby proposes to amend Chapter 1 of 
Title 17 of the Code of Federal Regulations by amending part 44 as 
follows:

PART 44--INTERIM FINAL RULE FOR PRE-ENACTMENT SWAP TRANSACTIONS

Authority and Issuance

0
1. The authority citation for part 44 shall continue to read as 
follows:

    Authority:  7 U.S.C. 2(h)(5), 4r and 12a(5), as amended by Title 
VII of the Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act of 2010), Pub. L. 111-203, 124 Stat. 1376 (2010).


0
2. Section 44.00 is amended by redesignating paragraphs (c) through (e) 
as paragraphs (d) through (f) and by revising paragraph (c) to read as 
follows:


Sec.  44.00  Definition of terms used in Part 44 of this chapter.

* * * * *
    (c) Transition swap means any swap entered into after the enactment 
of the Dodd-Frank Act of 2010 (July 21, 2010) and prior to the 
effective date of the swap data reporting and recordkeeping rule 
implemented under Section 2(h)(5)(B) of the CEA.
* * * * *
0
3. Section 44.03 is added to read as follows:


Sec.  44.03  Reporting transition swaps to a swap data repository or to 
the Commission.

    (a) A counterparty to a post-enactment pre-effective swap 
transaction shall:
    (1) As required by the reporting rules required to be adopted 
pursuant to Section 2(h)(5)(B) of the Commodity Exchange Act, report 
data related to a transition swap to a registered swap data repository 
or the Commission by the compliance date established in such reporting 
rules or within 60 days after an appropriate swap data repository 
becomes registered with the Commission and commences operations to 
receive and maintain data related to such swap, whichever occurs first, 
the following information with respect to the swap transaction:
    (i) A copy of the transaction confirmation, in electronic form if 
available, or in written form if there is no electronic copy;
    (ii) The time, if available, that the transaction was executed; and
    (2) Report to the Commission on request, in the form and manner 
prescribed by the Commission, any information relating to the swap 
transaction.

    Note to Paragraphs (a).  In order to comply with the reporting 
requirements contained in paragraphs (a)(1) and (a)(2) of this 
section, each counterparty to a post-enactment pre-effective swap 
transaction that may be required to report such transaction should 
retain, in its existing format, all information and documents, to 
the extent and in such form as they exist on the effective date of 
this section, relating to: the terms of a swap transaction, 
including but not limited to any information necessary to identify 
and value the transaction (e.g., underlying asset and tenor); the 
date and time of execution of the transaction; volume (e.g., 
notional or principal amount); information relevant to the price and 
payment for the transaction until the swap is terminated, reaches 
maturity or is novated; whether the transaction was accepted for 
clearing and, if so, the identity of such clearing organization; any 
modification(s) to the terms of the transaction; and the final 
confirmation of the transaction.

    (b) Reporting party. The counterparties to a swap transaction shall 
report the information required under paragraph (a) of this section as 
follows:
    (1) Where only one counterparty to a swap transaction is a swap 
dealer or a major swap participant, the swap dealer or major swap 
participant shall report the transaction;
    (2) Where one counterparty to a swap transaction is a swap dealer 
and the other counterparty is a major swap participant, the swap dealer 
shall report the transaction; and
    (3) Where neither counterparty to a swap transaction is a swap 
dealer or a major swap participant, the counterparties to the 
transaction shall select the counterparty who will report the 
transaction.

    Issued in Washington, DC, on December 9, 2010, by the 
Commission.
David A. Stawick,
Secretary of the Commission.

Appendices to Interim Final Rule for Reporting Certain Post-Enactment 
Swap Transactions--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 interim final rulemaking regarding the reporting 
timetable for swaps entered into after the date of enactment of the 
Dodd-Frank Act but prior to the effective date of swap data reporting 
rules, or ``transition'' swaps. The interim final rule is intended to 
ensure that data and information related those transition swaps will be 
preserved until reporting to swap data repositories or regulators can 
occur. The rule is indeed to prevent a substantial loss of data on 
transition swaps and to assist the Commission in performing its 
oversight functions under the Commodity Exchange Act.

[FR Doc. 2010-31579 Filed 12-16-10; 8:45 am]
BILLING CODE 6351-01-P