[Federal Register Volume 76, Number 170 (Thursday, September 1, 2011)]
[Rules and Regulations]
[Pages 54538-54597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-20817]



[[Page 54537]]

Vol. 76

Thursday,

No. 170

September 1, 2011

Part II





Commodity Futures Trading Commission





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17 CFR Part 49





Swap Data Repositories: Registration Standards, Duties and Core 
Principles; Final Rule

Federal Register / Vol. 76 , No. 170 / Thursday, September 1, 2011 / 
Rules and Regulations

[[Page 54538]]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 49

RIN 3038-AD20


Swap Data Repositories: Registration Standards, Duties and Core 
Principles

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or 
``Commission'') is adopting its regulations to implement section 21 of 
the Commodity Exchange Act (``CEA'' or ``Act''), which establishes 
registration requirements, statutory duties, core principles and 
certain compliance obligations for registered swap data repositories 
(``SDRs''). Section 21 of the CEA was added by section 728 of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (``Dodd-Frank 
Act'').

DATES: Effective date is October 31, 2011. Applicants at that time may 
apply for registration as SDRs but are not required to do so. Mandatory 
registration and compliance with the registration rules will occur upon 
the effective date of the swap definition rulemaking, which the 
Commission will publish at a later date.

FOR FURTHER INFORMATION CONTACT: For questions relating to this 
rulemaking: Jeffrey P. Burns, Assistant General Counsel, Office of the 
General Counsel (``OGC''), at (202) 418.5101, <a href="/cdn-cgi/l/email-protection#cba1a9beb9a5b88ba8adbfa8e5aca4bd"><span class="__cf_email__" data-cfemail="9ff5fdeaedf1ecdffcf9ebfcb1f8f0e9">[email protected]</span></a>; Susan 
Nathan, Senior Special Counsel, Division of Market Oversight (``DMO''), 
at (202) 418.5133, <a href="/cdn-cgi/l/email-protection#15667b74617d747b55767361763b727a63"><span class="__cf_email__" data-cfemail="780b16190c101916381b1e0c1b561f170e">[email protected]</span></a>; or Adedayo Banwo, Counsel, OGC, at 
(202) 418.6249, <a href="/cdn-cgi/l/email-protection#e58487848b928aa586839186cb828a93"><span class="__cf_email__" data-cfemail="335251525d445c73505547501d545c45">[email protected]</span></a>, Commodity Futures Trading Commission, 
Washington, DC 20581. With respect to questions relating to 
registration processing and compliance matters: Riva Spear Adriance, 
Associate Director, DMO, at (202) 418.5494, <a href="/cdn-cgi/l/email-protection#7d0f1c190f141c131e183d1e1b091e531a120b"><span class="__cf_email__" data-cfemail="c7b5a6a3b5aea6a9a4a287a4a1b3a4e9a0a8b1">[email protected]</span></a> and 
Sebastian Pujol Schott, Associate Deputy Director, Market Compliance, 
DMO, at (202) 418.5641, <a href="/cdn-cgi/l/email-protection#0a79796962657e7e4a696c7e69246d657c"><span class="__cf_email__" data-cfemail="7e0d0d1d16110a0a3e1d180a1d50191108">[email protected]</span></a>, respectively.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
    A. Overview
    B. International Considerations
    C. Summary of the Proposed Part 49 Regulations
    1. Proposed Regulations Related to Registration
    2. Proposed Regulations Related to Statutory Duties of SDRs
    3. Proposed Regulations Related to Data Acceptance, Accuracy and 
Recordkeeping
    4. Proposed Regulations Relating to Data Privacy, 
Confidentiality and Access
    5. Proposed Regulations Related to Emergency Procedures
    6. Regulations Related to Designation of a Chief Compliance 
Officer
    7. Core Principles Applicable to SDRs
    8. Proposed Regulations Relating to Additional Duties
    9. Proposed Regulations Related to Real-Time Public Reporting
    10. Proposed Regulations Relating to Implementation of SDR rules
    D. Overview of Comments Received
II. Part 49 of the Commission's Regulations
    A. Requirements of Registration
    1. Procedures for Registration
    2. Withdrawal From Registration
    3. Equity Interest Transfer Notification
    4. Swap Data Repositories Located in Foreign Jurisdictions
    B. Duties of Registered SDRs
    1. Acceptance of Data
    2. Confirmation of Data Accuracy
    3. Recordkeeping Requirements
    4. Monitoring, Screening and Analyzing Swap Data
    5. Real-Time Public Reporting
    6. Maintenance of Data Privacy
    7. Access to SDR Data
    8. Emergency Authority Procedures and System Safeguards
    C. Designation of Chief Compliance Officer
    D. Core Principles Applicable to SDRs
    1. Antitrust Considerations (Core Principle 1)
    2. Introduction--Governance Arrangements (Core Principle 2) and 
Conflicts of Interest (Core Principle 3)
    3. Governance Arrangements (Core Principle 2)
    4. Conflicts of Interest (Core Principle 3)
    E. Additional Duties
    1. Financial Resources
    2. Disclosure Requirements of Swap Data Repositories
    3. Non-Discriminatory Access and Fees
    F. Procedures for Implementing Swap Data Repository Regulations
III. Effectiveness and Transition Period
IV. Related Matters
    A. Paperwork Reduction Act
    B. Cost-Benefit Analysis
    C. Regulatory Flexibility Act
V. List of Subjects

I. Background

A. Overview

    On July 21, 2010, President Obama signed into law the Dodd-Frank 
Act.\1\ Title VII \2\ amended the CEA \3\ to establish a comprehensive 
new regulatory framework for swaps and security-based swaps. The 
legislation was enacted to reduce risk, increase transparency and 
promote market integrity within the financial system by, among other 
things (1) providing for the registration and comprehensive regulation 
of swap dealers (``SDs'') and major swap participants (``MSPs''); (2) 
imposing clearing and trade execution requirements on standardized 
derivative products; (3) creating robust recordkeeping and real-time 
reporting regimes; and (4) enhancing the Commission's rulemaking and 
enforcement authorities with respect to, among others, all registered 
entities and intermediaries subject to the Commission's oversight.
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    \1\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010), available at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.
    \2\ Pursuant to section 701 of the Dodd-Frank Act, Title VII may 
be cited as the ``Wall Street Transparency and Accountability Act of 
2010.''
    \3\ 7 U.S.C. 1, et seq.
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    To enhance transparency, promote standardization and reduce 
systemic risk, section 727 of the Dodd-Frank Act added to the CEA new 
section 2(a)(13)(G), which requires all swaps--whether cleared or 
uncleared--to be reported to SDRs,\4\ which are new registered entities 
created by section 728 of the Dodd-Frank Act.\5\ SDRs are required to 
perform specified functions related to the collection and

[[Page 54539]]

maintenance \6\ of swap transaction data and information and to make 
such data and information directly and electronically available to 
regulators. Section 728 of the Dodd-Frank Act added to the CEA new 
section 21 governing registration and regulation of SDRs and directed 
the Commission to promulgate rules governing those duties and 
responsibilities. Section 21 requires that SDRs register with the 
Commission regardless of whether they are also licensed as a bank or 
registered as a security-based swap data repository with the Securities 
and Exchange Commission (``SEC''), and to submit to inspection and 
examination by the Commission.\7\
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    \4\ Section 721 of the Dodd-Frank Act amends section 1a of the 
CEA to add the definition of SDR. Pursuant to section 1a(48), the 
term ``swap data repository means any person that collects and 
maintains information or records with respect to transactions or 
positions in, or the terms and conditions of, swaps entered into by 
third parties for the purpose of providing a centralized 
recordkeeping facility for swaps.'' 7 U.S.C. 1a(48).
    \5\ The Commission notes that currently there are global trade 
repositories for credit, interest rate and equity swaps. Since 2009, 
all G-14 dealers have submitted credit swap data to the Depository 
Trust and Clearing Corporation's (``DTCC'') Trade Information 
Warehouse. In January 2010 TriOptima launched the Global OTC 
Derivatives Interest Rate Trade Reporting Repository after selection 
by the Rates Steering Committee of the International Swaps and 
Derivatives Association (``ISDA'') to provide a trade repository to 
collect information on trades in interest rate swaps. In August 
2010, DTCC also launched the Equity Derivatives Reporting Repository 
for equity swaps and other equity derivatives. Other entities may 
also perform trade repository functions on a more limited basis 
based on various business models and/or regional or localized 
considerations. In addition, a variety of firms also provide 
ancillary services and functions essential to the efficient 
operation of trade reporting of swaps. Recently, ISDA in 
anticipation of the implementation of swap data reporting and SDR 
requirements related to the Dodd-Frank Act selected DTCC and a joint 
venture between DTCC's Deriv/SERV and EFETnet as ``global'' 
repositories for interest rates available at http://www2.isda.org/attachment/MzExMQ==/InterestRatesRepositorySelection.pdf and 
commodities available at http://www2.isda.org/attachment/MzIwNw==/CommodityRepositorySelection.pdf. In addition, the Global FX 
Divisions of the Association of Financial Markets Europe (AFME), 
Securities industry and Financial Markets (SIFMA) and the Asian 
Securities industry and Financial Markets (ASIFMA) have recommended 
a partnership with DTCC and SWIFT for the purpose of developing a 
foreign exchange trade repository available at http://www.sifma.org/news/news.aspx?id=8589934651.
    \6\ See Commission, Notice of Proposed Rulemaking: Swap Data 
Recordkeeping and Reporting Requirements, 75 FR 76574 (Dec. 8, 2010) 
(``Data NPRM''). The Data NPRM, among other things, proposed 
regulations governing SDR data collection and reporting 
responsibilities under part 45 of the Commission's regulations.
    \7\ Section 21(a)(1)(B) permits derivatives clearing 
organizations (``DCOs'') to register as SDRs.
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    To register and maintain registration with the Commission, SDRs are 
required to comply with specific duties and core principles enumerated 
in section 21 as well as other requirements that the Commission may 
prescribe by rule. As described more fully in the Commission's Notice 
of Proposed Rulemaking (``SDR NPRM''),\8\ new section 21(c) mandates 
that SDRs (1) accept data; (2) confirm with both counterparties the 
accuracy of submitted data; (3) maintain data according to standards 
prescribed by the Commission; (4) provide direct electronic access to 
the Commission or any designee of the Commission (including another 
registered entity); (5) provide public reporting of swap data in the 
form and frequency required by the Commission; (6) establish automated 
systems for monitoring and analyzing data (including the use of end 
user clearing exemptions) at the direction of the Commission; (7) 
maintain user privacy; (8) on a confidential basis, pursuant to section 
8 of the CEA,\9\ upon request and after notifying the Commission, make 
data available to other specified regulators; and (9) establish and 
maintain emergency and business continuity-disaster recovery procedures 
(``BC-DR''). In connection with the sharing of confidential information 
with other regulators, the SDR must, pursuant to new section 21(d), 
receive a written agreement from such regulator, prior to sharing the 
information, stating that it will abide by the confidentiality 
provisions of section 8 and agree to indemnify both the SDR and the 
Commission against any litigation expenses relating to information 
provided under section 8.
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    \8\ Commission, Notice of Proposed Rulemaking: Swap Data 
Repositories, 75 FR 80898 (Dec. 23, 2010).
    \9\ Section 8(e) of the CEA, 7 U.S.C. 12(e), establishes among 
other things the conditions under which the Commission may furnish 
information obtained in connection with the administration of the 
CEA to any department or agency of the United States. Such 
information shall not be disclosed by such department or agency 
except in any action or proceeding under the laws of the United 
States to which it, the Commission or the United States is a party.
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    New section 21(e) also added a provision that each SDR designate a 
chief compliance officer (``CCO'') with specified duties. New section 
21(f) established three focused core principles. First, unless 
necessary or appropriate to achieve the purposes of the CEA, an SDR may 
not adopt any rule or take any action that results in any unreasonable 
restraint or trade, or impose any material anticompetitive burden on 
the trading, clearing or reporting of transactions. Second, each SDR 
must establish transparent governance arrangements to fulfill the 
public interest requirements of the CEA and support the objectives of 
the Federal government, owners and participants. Third, each SDR must 
establish and enforce rules to minimize conflicts of interest in the 
SDR's decision-making processes and establish a process for resolving 
conflicts of interest. Section 21(f) further directs the Commission to 
establish additional duties for SDRs to minimize conflicts of interest, 
protect data, ensure compliance and guarantee the safety and security 
of the SDR.\10\
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    \10\ Pursuant to this provision, the Commission also may develop 
additional duties taking into account evolving standards of the 
United States and the international community. Section 21(f)(4) of 
the CEA, 7 U.S.C. 24a(f)(4). This provision is sometimes referred to 
as ``Core Principle 4.''
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B. International Considerations

    Section 752(a) of the Dodd-Frank Act directs the Commission to 
consult and coordinate with foreign regulatory authorities regarding 
the establishment of consistent international standards for the 
regulation of swaps and various ``swap entities.'' The Commission is 
committed to a cooperative international approach to the registration 
and regulation of SDRs and has consulted extensively with various 
foreign regulatory authorities in promulgating both its proposed and 
final regulations. In this regard, both the proposed and final part 49 
regulations reflect the Commission's intent to harmonize our approach 
to the extent possible with the European Commission's regulatory 
proposal related to OTC derivatives, central counterparties and trade 
repositories.\11\ The Commission's part 49 regulations also largely 
adopt the recommendations of the May 2010 ``CPSS-IOSCO Consultative 
Report, Considerations for Trade Repositories in the OTC Derivatives 
Market'' (``Working Group Report'').\12\ The Commission believes that 
the Dodd-Frank Act and the part 49 regulations are consistent with the 
goals of the Working Group Report. As noted in the SDR NPRM, section 21 
of the CEA does not authorize the Commission to exempt any entity 
performing the functions of an SDR from the registration requirements 
or any other duties established by the Dodd-Frank Act.\13\ Certain non-
U.S. swap activity is excluded, however, from the reach of the Dodd-
Frank Act and Commission regulations pursuant to section 2(i) of the 
CEA.\14\
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    \11\ See Proposal for a Regulation of the European Parliament 
and of the Council on OTC Derivatives, Central Counterparties, and 
Trade Repositories (the ``European Commission Proposal''), COM 
(2010). See also SDR NPRM supra note 8 at 80899-80900 and note 16. 
The proposal, if implemented, would become a part of the European 
Union's framework for financial supervision. The European Union is 
composed of 27 member states and the European Securities and Markets 
Authority will supervise the European securities markets along with 
the national regulators of the member states.
    \12\ This working group was jointly established by the Committee 
on Payment and Settlement Systems (``CPSS'') of the Bank of 
International Settlements (``BIS'') and the Technical Committee of 
the International Organization of Securities Commissions 
(``IOSCO''). The Working Group Report presented a set of factors to 
consider in connection with the design, operation and regulation of 
SDRs. A significant focus of the Working Group Report is access to 
SDR data by appropriate regulators: the report urges that a trade 
repository ``should support market transparency by making data 
available to relevant authorities and the public in line with their 
respective information needs.'' The Working Group Report is 
available at http://www.bis.org/publ/cpss90.pdf. See also CPSS-IOSCO 
Consultative Report, Principles of Financial Market Infrastructures 
(March 2011) available at http://www.bis.org/publ/cpss94.pdf. See 
also Financial Stability Board, Implementing OTC Derivatives Market 
Reforms, October 25, 2010 (``FSB Report''); FSB, Derivative Market 
Reforms, Progress Report on Implementation, April 15, 2010 (``FSB 
Progress Report'').
    \13\ Section 721(d) of the Dodd-Frank Act, which as relevant 
here amended the Commission's exemptive authority under section 
4c(1) of the CEA, does not permit the Commission to grant exemptions 
with respect to new section 21 of the CEA unless expressly 
authorized.
    \14\ Section 2(i) of the CEA, as amended by section 722 of the 
Dodd-Frank Act, excludes from U.S. jurisdiction all swap activity 
that does not have a ``direct and significant connection with 
activities in, or effect on, commerce of the United States'' unless 
such activity contravenes regulations necessary to prevent evasion. 
7 U.S.C. 2(i)(1)-(2).
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C. Summary of the Proposed Part 49 Regulations

    Against this background, the Commission developed and published for 
comment part 49 of the

[[Page 54540]]

Commission's regulations establishing provisions applicable to the 
registration and regulation of SDRs.\15\ Proposed part 49 of the 
Commission's regulations included procedures and substantive 
requirements to achieve and maintain registration as an SDR--including 
proposed standards for compliance with each of the statutory duties 
enumerated in section 21(c), the three core principles outlined in 
section 21(f), and proposed additional duties consistent with the 
authority conferred by section 21(f)(4).
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    \15\ A full description and discussion of each proposed rule can 
be found in the SDR NPRM, supra note 8.
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1. Proposed Regulations Related to Registration
    Section 21(a)(1)(A) makes it unlawful for any person, unless 
registered with the Commission, directly or indirectly to make use of 
the mails or any means or instrumentality of interstate commerce to 
perform the functions of an SDR. Consistent with this statutory 
directive, the Commission proposed regulations establishing procedural 
and substantive requirements governing registration as an SDR.\16\ The 
proposed regulations required that SDRs specify the asset class or 
classes for which they will accept swap data and undertake to accept 
all swaps in asset classes for which they have specified.\17\ If the 
applicant is a foreign entity, the proposed regulations specified that 
it be required to certify, and provide an opinion of counsel, that as a 
matter of law it is able to provide the Commission with prompt access 
to its books and records and to submit to onsite inspection and 
examination by the Commission.\18\ The proposal established the 
standard of review as well as the standards for denial, suspension and 
revocation of registration. In addition, the proposed rules provided a 
``provisional registration'' for SDR applicants that are in substantial 
compliance with the registration standards set forth in the 
regulations.\19\ With respect to Commission review of SDR rules and 
rule amendments, the proposed rules provided procedures by which an 
applicant for SDR registration may either request that the Commission 
approve any or all of its rules or self-certify that its rules comply 
with the CEA or Commission regulations thereunder (``self 
certification'').\20\
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    \16\ Proposed Sec. Sec.  49.3-49.4 and 49.6-49.7; Proposed Form 
SDR.
    \17\ Proposed Sec.  49.10. Proposed Sec.  49.2(a)(2) defines the 
term ``asset class'' as those swaps in a particular broad category 
of goods, services or commodities underlying a swap. The asset 
classes include credit, equity, interest rates, currency, other 
commodities, and such other asset classes as may be determined by 
the Commission.
    \18\ Proposed Sec.  49.7.
    \19\ Proposed Sec.  49.3(b).
    \20\ Proposed Sec.  49.8.
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    The proposed regulations separately required SDRs to file with the 
Commission a notice of an equity interest transfer of ten percent or 
more, as defined in the Commission's revised part 40 rules \21\ and 
specified the necessary information and related notifications. 
Similarly, the proposed rules described the procedures and requirements 
for registering successor entities of an SDR.\22\
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    \21\ See Commission, Notice of Proposed Rulemaking: Revisions to 
part 40 (Provisions Common to Registered Entities), 75 FR 67282 
(Nov. 2, 2010)(``Part 40 NPRM'') and Final rule: Revisions to part 
40 (Provisions Common to Registered Entities), 76 FR 44776 (July 27, 
2011)(``Part 40 Adopting Release'') (collectively, ``part 40'').
    \22\ Proposed Sec.  49.6.
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2. Proposed Regulations Related to Statutory Duties of SDRs
    Section 21(c) of the CEA prescribes the minimum duties required of 
SDRs. To register and maintain registration, an SDR must (i) accept 
swap data as prescribed by the Commission; (ii) confirm with both 
counterparties to a swap the accuracy of the data; (iii) maintain the 
data submitted; (iv) provide the Commission or its designee (including 
another registered entity) with direct electronic access to the swap 
data; (v) provide the information prescribed by the Commission to 
comply with the public reporting requirements set forth in section 
2(a)(13) of the CEA; (vi) establish automated systems for monitoring, 
screening, and analyzing swap data; (vii) maintain the privacy and 
confidentiality of any and all swap data received by the SDR; (viii) 
provide access to the swap data to specified appropriate domestic and 
foreign regulators; and (ix) adopt and implement emergency and BC-DR 
procedures.
    Pursuant to the authority granted by sections 21(f)(4) \23\ and 
8a(5) \24\ of the CEA, the Commission proposed to include in part 49 
four additional duties requiring SDRs to (i) adopt and implement system 
safeguards, including BC-DR plans; (ii) maintain sufficient financial 
resources; (iii) furnish market participants with a disclosure document 
setting forth the risks and costs associated with using the services of 
an SDR; and (iv) provide fair and open access and fees and charges that 
are equitable and non-discriminatory. Proposed Sec. Sec.  49.9-49.18 
and 49.23-49.27 described the standards for compliance with each of 
these duties.
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    \23\ Section 21(f)(4) of the CEA; see supra note 10.
    \24\ Section 8a(5) of the CEA, 7 U.S.C. 12a(5), authorizes the 
Commission to promulgate such rules and regulations as, in the 
judgment of the Commission, are reasonably necessary to effectuate 
any of the provisions or accomplish any of the purposes of the CEA. 
In connection with SDRs, section 21(a)(3)(A)(ii), 7 U.S.C. 
24a(3)(A)(ii), specifically requires that an SDR, to be registered 
and maintain registration, must comply with any requirement that the 
Commission may impose by rule or regulation pursuant to section 
8a(5) of the CEA.
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3. Proposed Regulations Related to Data Acceptance, Accuracy and 
Recordkeeping
    Sections 21(c)(1)-(5) of the CEA, as adopted by section 728 of the 
Dodd-Frank Act, address the duties of SDRs in connection with accepting 
and maintaining swap data, ensuring accuracy and reliability, and 
providing direct electronic data access to the Commission or its 
designee.\25\ To implement section 21(c)(1), the Commission proposed 
that SDRs adopt policies and procedures that will enable them to 
electronically accept data and other regulatory information, and to 
accept all swaps in an asset class, or classes, for which they have 
registered.\26\ The Commission also proposed that SDRs establish 
policies and procedures to prevent a valid swap from being invalidated, 
altered or modified through the SDR's confirmation or recording 
process, and provide facilities for effectively resolving disputes 
concerning the accuracy of swap data and positions recorded by the 
SDR.\27\
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    \25\ In a companion rulemaking under new part 45 of its 
regulations, the Commission has proposed data elements that must be 
reported to SDRs and has in addition provided specific requirements 
for SDRs relating to (i) determining which counterparty must report 
the swap data to the SDR; (ii) third-party facilitation of swap data 
reporting; (iii) reporting to a single SDR in connection with the 
reporting of swap data; and (iv) reporting errors and omissions. See 
Data NPRM supra note 6.
    \26\ Proposed Sec.  49.10.
    \27\ Id.
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    Proposed Sec.  49.11 implemented section 21(c)(2) of the CEA and 
specified that an SDR adopt policies and procedures to ensure the 
accuracy of swap data reported to it, and must confirm with both 
counterparties to the swap \28\ the accuracy of data and information 
submitted by them.\29\
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    \28\ These proposed confirmation requirements would not apply to 
real-time public reporting. See proposed Sec.  43.3(f) set forth in 
Commission, Notice of Proposed Rulemaking: Real-Time Public 
Reporting of Swap Transaction Data, 74 FR 76140 (Dec. 7, 2010) (the 
``Real-Time NPRM'').
    \29\ As noted, the form and content of the swap data ultimately 
will be established in the Commission's part 45 regulations related 
to data elements and standards. The Data NPRM detailed and defined 
the terms ``confirmation'' and ``confirmation data.'' See Data NPRM 
supra note 6.
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    Proposed Sec.  49.12 implemented section 21(c)(3) of the CEA and 
required

[[Page 54541]]

SDRs to maintain the books and records of all activity and data 
relating to swaps reported to the SDR, consistent with recordkeeping 
and reporting rules to be established in new parts 43 and 45 of the 
Commission's regulations.\30\ As proposed, Sec.  49.12 required that 
SDR books and records be open to inspection on request by any 
representative of the Commission, the United States Department of 
Justice, the SEC or any representative of a prudential regulator 
authorized by the Commission. The proposal would further require each 
SDR that publicly disseminates swap data in real time to comply with 
the real-time reporting requirements prescribed in part 43.\31\
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    \30\ See Sec.  45.2 set forth in the Data NPRM supra note 6 and 
Sec.  43.3 set forth in Real-Time NPRM supra note 28.
    \31\ Id.
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    The Commission proposed two requirements in connection with the 
provision of direct electronic access mandated by section 21(c)(4) of 
the CEA. First, SDRs would be required to provide the Commission or its 
designee with connectivity and access to the SDR's database; second, 
SDRs would be required to electronically deliver to the Commission or 
its designee certain data in the form and manner prescribed by the 
Commission.\32\ The Commission also proposed that SDRs be required to 
provide it with monitoring tools identical to those provided to the 
SDR's compliance staff and CCO.\33\ In connection with section 
21(c)(5)'s mandate that SDRs establish automated systems for 
monitoring, screening and analyzing swap data, the Commission proposed 
that at this time SDRs establish the infrastructure necessary to 
fulfill the statutory requirement.\34\
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    \32\ Proposed Sec.  49.17.
    \33\ Id.
    \34\ Proposed Sec. Sec.  49.13 and 49.14. The latter proposal 
was designed to implement the Commission's program to monitor and 
prevent abuse of end-user clearing exemption claims. See section 
2(h)(7) of the CEA, as amended, which creates a framework by which 
certain swaps may be exempt from clearing if one of its 
counterparties is (i) not a financial entity; (ii) is using swaps to 
hedge or mitigate commercial risk; and (iii) notifies the Commission 
as to how it generally meets the financial obligations associated 
with entering into non-cleared swaps (the ``end-user clearing 
exemption''). See Commission, Notice of Proposed Rulemaking: End-
User Exemption to Mandatory Clearing of Swaps, 75 FR 80747 (Dec. 23, 
2010) (``End-User NPRM'').
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4. Proposed Regulations Relating to Data Privacy, Confidentiality and 
Access
    Section 21(c)(6) of the CEA requires that an SDR maintain the 
privacy of all swap transaction information that it receives from an 
SD, counterparty or any other registered entity. The Commission 
recognized that data related to real-time public reporting is, by its 
nature, publicly available, while detailed core data intended for use 
by the Commission and other regulators is subject to statutory 
confidential treatment. Accordingly, the Commission proposed to 
implement section 21(c)(6)'s mandate--and also in part the conflicts of 
interest core principle applicable to SDRs (``Core Principle 3'')--by 
requiring that ``SDR Information'' that is not subject to real-time 
reporting be treated as non-public and confidential and may not be 
accessed, disclosed, or used for purposes unrelated to SDR 
responsibilities under the CEA unless the submitters of the data 
explicitly agree to such use.\35\ The proposed regulation also directed 
SDRs to establish and maintain safeguards, policies and procedures 
addressing the misappropriation or misuse of swap data that the 
Commission is prohibited from disclosing pursuant to section 8 of the 
CEA (``Section 8 Material'') \36\ or similar material, such as 
intellectual property.
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    \35\ Proposed Sec.  49.16. However, aggregated data that cannot 
be attributed to individual transactions or market participants may 
be made publicly available by SDRs.
    \36\ Id. Section 8(a) of the CEA prohibits the Commission from 
disclosing information or material if it ``would separately disclose 
the business transactions or market positions of any person and 
trade secrets or names of customers.'' See also the definition of 
``Section 8 Material'' in Sec.  49.2(a)(14).
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    The Commission proposed to prohibit the use of SDR data for 
commercial or business purposes by the SDR or any of its affiliated 
entities with a limited exception where the SDR has received the 
express written consent of the market participants who submitted the 
swap data.\37\ The proposal required that SDRs develop and maintain 
firewalls to protect data they are required to maintain, and permitted 
access to third-party service providers so long as they have 
implemented stringent confidentiality procedures to protect data and 
information from improper disclosure.\38\
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    \37\ Proposed Sec.  49.17(g)(2).
    \38\  Id. This proposal was intended to partially implement 
section 21(c)(6)'s privacy provisions as well as the provisions of 
section 21(f)(3), which requires an SDR to establish and enforce 
rules to mitigate conflicts of interest. See SDR NPRM supra note 8 
at 80911.
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    Section 21(c)(7) requires that an SDR make data available to 
certain domestic and foreign regulators (``Appropriate Domestic 
Regulator'' or ``Appropriate Foreign Regulator'') under specified 
circumstances. To implement this provision, the Commission proposed 
definitions and standards for determining appropriateness--such as an 
existing memorandum of understanding (``MOU'') or similar agreement 
executed with the Commission--as well as procedures for gaining access 
to data maintained by SDRs.\39\ Separately, section 21(d) mandates that 
prior to receipt of any requested data or information from an SDR, the 
Appropriate Foreign or Appropriate Domestic Regulator must execute a 
``Confidentiality and Indemnification Agreement'' with the SDR. The 
Commission proposed to implement this provision by requiring that such 
an agreement be executed between SDRs and each appropriate 
regulator.\40\ The Commission acknowledged in the SDR NPRM that this 
requirement could have the unintended effect of inhibiting access to 
data maintained by SDRs. Consistent with the international 
harmonization envisioned by section 752 of the Dodd-Frank Act, the 
Commission stated that it will endeavor to provide sufficient access to 
SDR data to Appropriate Foreign and Domestic Regulators. In that 
regard, the Commission noted that pursuant to section 8(e) of the CEA 
it may share confidential information in its possession with any 
foreign futures authority, department or agency of any foreign 
government or political subdivision thereof.\41\
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    \39\ Id.
    \40\ Proposed Sec.  49.18.
    \41\ SDR NPRM supra note 8 at 80910.
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5. Proposed Regulations Related to Emergency Procedures
    To implement section 21(c)(8), the Commission proposed Sec.  49.23 
to require SDRs to adopt specific policies and procedures for the 
exercise of emergency authority. The Commission based its proposals on 
existing emergency authority concepts--in particular, the application 
guidance for former designated contract market (``DCM'') Core Principle 
6.\42\ As proposed, Sec.  49.23 required SDRs to enumerate the 
circumstances in which it is authorized to invoke its emergency 
authority, applicable procedures, and the range of measures it is 
authorized to take in response to an emergency. Further, the emergency 
policies and procedures adopted by an SDR must specifically address 
conflicts of interest and include a requirement that the SDR's CCO be 
consulted in any emergency that may raise conflicts of interest. The 
proposal further required an SDR to identify to the Commission the 
persons authorized to exercise emergency authority and the chain of 
command, and to promptly notify the

[[Page 54542]]

Commission of any emergency action taken.
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    \42\ Id. at 80911.
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6. Regulations Related to Designation of a Chief Compliance Officer
    Section 21(e) establishes the CCO as a focal point for compliance. 
The Commission implemented section 21(e) in proposed Sec.  49.22, which 
further developed and detailed CCO statutory requirements and 
responsibilities. Specifically, proposed Sec.  49.22 established the 
supervisory regime applicable to CCOs; specified removal provisions; 
specified the duties and authorities of CCOs; and detailed the 
information that must be included in the required annual compliance 
report and the procedure for submission of the report to the 
Commission.
7. Core Principles Applicable to SDRs
    Unlike prescriptive rules, core principles generally provide the 
registered entity with reasonable discretion in establishing the manner 
of compliance with each specified principle. Section 21(f) enumerates 
three focused core principles applicable to SDRs: (1) Antitrust 
considerations (``Core Principle 1''); (2) governance arrangements 
(``Core Principle 2''); and (3) conflicts of interest, Core Principle 
3.\43\ With respect to Core Principle 1, antitrust considerations, the 
Commission proposed in Sec.  49.19 that, unless necessary or 
appropriate to achieve the purposes of the CEA, SDRs should avoid 
adopting any rule, regulation or policy or taking any action that 
results in an unreasonable restraint of trade or imposes any material 
anticompetitive burden on the trading, clearing, reporting, and/or 
processing of swaps.
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    \43\ Section 21(f)(4), the ``fourth core principle,'' grants 
broad rulemaking authority to the Commission to establish additional 
duties for SDRs. The Commission proposed to add several additional 
duties pursuant to this authority; they are discussed in section II. 
E, below.
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    Core Principle 2 requires that each SDR establish governance 
arrangements that are transparent to fulfill public interest 
requirements and to support the objectives of the Federal government, 
owners and participants. Core Principle 3 provides that each SDR 
establish and enforce rules to minimize conflicts of interest in its 
decision-making processes and establish a process for resolving such 
conflicts. In order to ensure proper implementation of Core Principles 
2 and 3, the Commission proposed Sec.  49.20 (focusing on the 
transparency of SDR governance arrangements) and Sec.  49.21 
(addressing SDR identification and mitigation of existing and potential 
conflicts of interest).
    Proposed Sec.  49.20 prescribed minimum standards for the 
transparency of SDR governance arrangements and required that the SDR 
make available certain information to the Commission and the public 
that is current, accurate, clear and readily accessible; and that it 
disclose summaries of significant decisions. In addition, proposed 
Sec.  49.20 required each SDR to ensure that an independent perspective 
be reflected in the nominations process for its board of directors as 
well as the process for assigning members of the board or others to SDR 
committees. Finally, the proposal included a number of substantive 
requirements for SDR boards of directors and committees. In 
implementing Core Principle 3, the Commission proposed in Sec.  49.21 
that each SDR maintain and enforce rules that would identify and 
mitigate existing and potential conflicts of interest in its decision-
making processes.
8. Proposed Regulations Relating to Additional Duties
    As noted above, section 21(f)(4) provides authority under which the 
Commission may prescribe additional duties for SDRs. Pursuant to 
section 21(f)(4) and section 8a(5) of the CEA, the Commission proposed 
to include in part 49 four additional duties that would require SDRs to 
(i) adopt and implement system safeguards, including BC-DR plans; \44\ 
(ii) maintain sufficient financial resources; \45\ (iii) furnish to 
market participants a disclosure document setting forth the risks and 
costs associated with using the services of an SDR; \46\ and (iv) 
provide fair and open access to the SDR and fees that are equitable and 
non-discriminatory.\47\
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    \44\ Proposed Sec.  49.24.
    \45\ Proposed Sec.  49.25.
    \46\ Proposed Sec.  49.26.
    \47\ Proposed Sec.  49.27.
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9. Proposed Regulations Related to Real-Time Public Reporting
    As discussed above, section 727 of the Dodd-Frank Act established 
certain public reporting requirements for all swap transactions and 
participants, creating new section 2(a)(13)(B) which establishes the 
reporting requirements pursuant to which the Commission is authorized 
to promulgate rules mandating the public availability of swap 
transaction and pricing data in ``real time.'' \48\ To implement these 
provisions, the Commission proposed a real-time public reporting 
framework for swap transaction and pricing data in new part 43 of its 
Regulations.\49\ Proposed Sec.  49.15 details SDRs' ability to accept 
and publicly disseminate swap transaction and pricing data on a swap 
market as well as those executed off-exchange; its provisions apply to 
off-facility swap transactions and to all swap transactions executed on 
a SEF or DCM that fulfill the public dissemination requirement of 
proposed part 43 by reporting to a registered SDR. As proposed, Sec.  
49.15 required SDRs to establish electronic reporting systems necessary 
to receive and publicly disseminate all required data fields and 
further requires SDRs who disseminate swap transaction and pricing data 
in real time to promptly notify the Commission when such data is not 
timely reported.
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    \48\ Section 2(a)(13)(A) of the CEA defines real-time public 
reporting to mean ``as soon as technologically practicable after the 
time at which the swap transaction has been executed.''
    \49\ See Real-Time NPRM supra note 28.
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10. Proposed Regulations Relating to Implementation of SDR Rules
    Proposed Sec.  40.8 was intended to conform SDR implementation 
procedures to the proposed amendments to the Commission's part 40 
regulations addressing provisions common to all registered 
entities.\50\ The proposal provided that an applicant for registration 
as an SDR may request Commission approval of some or all of its rules 
or, alternatively, may self-certify its rules. Proposed Sec.  40.8 
specified procedures applicable to both alternatives.
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    \50\ See Part 40 supra note 21.
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D. Overview of Comments Received <SUP>51</SUP>

    The Commission received a total of 29 comments from a broad range 
of

[[Page 54543]]

interested persons, including existing trade repositories and potential 
SDRs, foreign regulatory authorities, trade organizations, banks, 
commercial end-users, and DCMs. While commenters generally expressed 
support for the proposed part 49 rules, they also offered 
recommendations for clarification or modification of specific 
provisions. Comments generally focused on one or more of a dozen broad 
themes, including (i) SDRs as a public utility; (ii) commercialization 
of data; (iii) indemnification requirements; (iv) monitoring, screening 
and analyzing swap data; (v) ability of SDRs to invalidate or modify 
the terms of an executed swap; (vi) real-time public reporting; (vii) 
pricing; (viii) bundling of services; (ix) registration; (x) governance 
and conflicts of interest; (xi) access to data; and (xii) 
implementation and phase-in.\52\ Individual comments will be described 
and discussed as appropriate throughout this section.
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    \51\ The initial comment period with respect to proposed part 49 
closed on February 22, 2011. The comment periods for most proposed 
rulemakings implementing the Dodd-Frank Act were reopened for 30 
days from April 27 through June 2, 2011. Throughout this release, 
comment letters (``CL'') are identified by ``CL'' and the submitter. 
Each letter will be addressed as appropriate in connection with the 
discussion, infra, of the final regulatory provision or provisions 
to which they relate. All comment letters are available through the 
Commission Web site at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=939. Comments addressing the proposed part 49 
regulations were received from: (1) American Benefits Council 
(``ABC'') and the Committee on the Investment of Employee Benefits 
Assets (``CIEBA'') on February 22, 2011 (``CL-ABC/CIEBA''); (2) 
Americans for Financial Reform (``AFR'') on February 22, 2011 (``CL-
AFR''); (3) Argus Media Inc. (``Argus'') on February 22, 2011 (``CL-
Argus''); (4) Association of Institutional Investors (``AII'') on 
June 2, 2011 (``CL-AII''); (5) Chris Barnard (``Barnard'') on May 
25, 2011 (``CL-Barnard''); (6) Better Markets on February 22, 2011 
(``CL-Better Markets''); (7) CIEBA on June 3, 2011 (``CL-CIEBA''); 
(8) CME Group (``CME'') on February 22, 2011 (``CL-CME''); (9) 
Council of Institutional Investors (``Council'') on February 18, 
2011 (``CL-Council''); (10) Depository Trust & Clearing Corporation 
(``DTCC'') on February 22, 2011 (``CL-DTCC I''); (11) DTCC on June 
3, 2011 (``CL-DTCC II''); (12) DTCC on June 10, 2011 (``CL-DTCC 
III''); (13) European Securities and Markets Authority (``ESMA'') on 
January 17, 2011 (``CL-ESMA''); (14) Foreign Banking Organizations--
Barclays, BNP Paribas, Deutsche Bank, Royal Bank of Canada, The 
Royal Bank of Scotland Group, Societe Generale and UBS (``Foreign 
Banks'') on January 11, 2011 (``CL-Foreign Banks''); (15) Global 
Foreign Exchange Division (``Global FX Division') formed in 
cooperation with the Association for Financial Markets in Europe 
(``AFME''), the Securities Industry and Financial Markets 
Association (``SIFMA'') and the Asia Securities Industry and 
Financial Markets Association (``ASIFMA'') on February 22, 2011 
(``CL-Global FX Division''); (16) Managed Funds Association 
(``MFA'') on February 21, 2011 (``CL-MFA''); (17) Markit on February 
7, 2011 (``CL-Markit''); (18) MarkitSERV on February 7, 2011 (``CL-
MarkitSERV I''); (19) MarkitSERV on June 3, 2011 (``CL-MarkitSERV 
II''); (20) MarkitSERV on June 3, 2011 (``CL-MarkitSERV III''); (21) 
Not-For-Profit Electric End-User Coalition consisting of the 
National Rural Electric Cooperative Association, the American Public 
Power Association and the Large Public Power Council (``NFPE 
Coalition'') on February 22, 2011 (CL-NFPE Coalition''); (22) The 
Office of the Comptroller of the Currency (``OCC'') on June 30, 2011 
(``CL-OCC''); (23) Regis--TR on February 22, 2011 (``CL-Regis-TR''); 
(24) Reval.com, Inc. (``Reval'') on January 24, 2011 (``CL-Reval 
I''); (25) Reval on February 18, 2011 (``CL-Reval II''); (26) Reval 
on February 20, 2011 (``CL-Reval III''); (27) Securities Industry 
and Financial Markets Association (``SIFMA'') Asset Management Group 
(``AMG'') on February 7, 2011 (``CL-AMG''); (28) SunGard Energy & 
Commodities (``Sungard'') on February 22, 2011 (``CL-Sungard''); and 
(29) TriOptima on February 22, 2011 (``CL-TriOptima'').
    In addition, five comment letters submitted in response to the 
Data NPRM also referenced the proposed part 49 regulations. Those 
commenters are: (1) DTCC on February 7, 2011 (``CL-Data-DTCC''); (2) 
Encana Marketing (USA) Inc. (``Encana'') on February 7, 2011 (``CL-
Data-Encana''); (3) Foreign Banks on February 17, 2011 (``CL-Data-
Foreign Banks''); (4) Global FX Division on February 7, 2011 (``CL-
Data-Global FX Division''); and (5) InterContinentalExchange, Inc. 
(``ICE'') on February 7, 2011 (``CL-Data-ICE''). The comments have 
been considered in connection with the promulgation of these final 
rules, and will be addressed in connection with the discussion of 
the provisions to which they relate.
    The Commission notes that both DTCC and CME submitted additional 
late comment letters related to the SDR Rulemaking on July 21, 2011 
and July 29, 2011, respectively. These late-filed comment letters 
were received very close to the Commission's decision on the final 
part 49 rules; the letters raised no new issues, and therefore, the 
Commission is not providing a specific response to any issues raised 
by the letters.
    \52\ The Commission in its SDR NPRM requested comment on the 
nature and length of any implementation or phase-in period for 
proposed part 49. Six commenters responded, recommending variously 
that there be separate phase-in periods for different asset classes 
and/or that the Commission sequence the implementation of reporting 
rules by first implementing parts 45 and 49. Subsequently, when 
sufficient information is collected to fully study the markets, 
rules related to real-time and block trading should be implemented. 
The Commission has determined to separately address implementation 
and sequencing issues and will consider and address comments related 
to those concerns in connection with that action. In addition, 14 
additional comments were received by the Commission in connection 
with its request for comment on the order in which it should 
consider final rulemakings made under the Dodd-Frank Act. See infra 
note 315 for cites to the additional letters.
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II. Part 49 of the Commission's Regulations: The Final Rules

    As proposed in the SDR NPRM, part 49 contains provisions governing 
the registration and regulation of SDRs. The scope of part 49 is 
established in Sec.  49.1; definitions are contained in Sec.  49.2. 
Proposed Sec. Sec.  49.3-49.4 and 49.6-49.7, along with Form SDR, 
establish the procedures and substantive requirements for registration 
as an SDR. Proposed Sec.  49.5 governs equity interest transfers and 
Sec.  49.8 establishes procedures under which an SDR must implement its 
rules. Compliance with the statutory duties described in section 21(c) 
of the CEA is established in Sec.  49.9 and detailed in Sec. Sec.  
49.10 through 49.18 and Sec. Sec.  49.23 and 49.24. Core principles 
applicable to SDRs as outlined in section 21(f) are set forth in 
Sec. Sec.  49.19 through 49.22. Additional duties promulgated pursuant 
to section 21(f)(4) of the CEA (``Core Principle 4'') are set forth in 
Sec. Sec.  49.25 through 49.27. Unless otherwise discussed in this 
section, the regulations are adopted as proposed.

A. Requirements of Registration

1. Procedures for Registration--Sec.  49.3
    To implement the requirements of section 21(a), the Commission 
proposed Sec.  49.3 to establish application and approval procedures. 
Proposed Sec.  49.3 required each SDR applicant to file for 
registration electronically on proposed Form SDR.\53\ Form SDR would 
require each applicant to provide the Commission with documentation 
relating to its business organization, financial resources, 
technological capabilities, and accessibility of services.\54\ The 
Commission is adopting Sec. Sec.  49.3-49.7 substantially as proposed 
subject to the minor modifications discussed below.
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    \53\ This form would be used for initial or provisional 
registration as an SDR as well as for any amendments to the 
applicant's registration status.
    \54\ SDR NPRM supra 8 at 80900-80901.
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    The Commission received one comment relating to registration 
generally. CIEBA requested that the Commission clarify that it will 
register any qualified applicant as an SDR.\55\ The Commission confirms 
that it expects to register any applicant that satisfies the 
requirements for registration established in section 21 of the CEA and 
this part 49.\56\
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    \55\ See CL-CIEBA supra note 51.
    \56\ In particular, the Commission notes that section 21(B) of 
the CEA, as amended by section 728 of the Dodd-Frank Act, expressly 
provides that a DCO may register as an SDR.
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    As discussed below, although it received no comments regarding 
proposed Form SDR, the Commission has determined to make minor 
technical and conforming changes to Form SDR and also to amend certain 
provisions of Sec. Sec.  49.3-49.7.\57\
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    \57\ The Commission in approving applicants for registration as 
SDRs expects to provide an identifying code that is unique for each 
``approved'' SDR in order to provide proper identification for each 
SDR and the transactions that are reported to it.
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(a) Form SDR
    The Commission is making certain technical amendments to Form SDR 
to harmonize, to the extent possible, the SDR registration procedures 
with the application procedures for DCMs, DCOs, and SEFs. For example, 
the word ``material'' has been added to the registration instructions 
to make clear that ``intentional misstatements or omissions of material 
fact may constitute federal criminal violations.'' Because the 
registration application must be filed electronically, Form SDR as 
adopted no longer requires the applicant to provide two copies of Form 
SDR and attached exhibits. Additionally, the Commission revised Item 8 
to account for various organizational structures. Moreover, instead of 
requesting ``State/Country'' of the entity's incorporation or filing, 
the final Form SDR requests that the applicant note the 
``Jurisdiction'' of the organization and list the jurisdictions in 
which the applicant is qualified to do business. This information will 
assist the Commission in determining whether other domestic and foreign 
regulators should be contacted during the application process.

[[Page 54544]]

    Both Sec.  49.3(a)(5) and Form SDR, as adopted, require that an 
annual amendment on Form SDR be filed within 60 days of the end of each 
fiscal year rather than on a calendar year basis. The Commission 
believes that this is consistent with the CCO filing provisions set 
forth in Sec.  49.22 and will provide the Commission with more timely 
financial statements.
    The Commission is also making technical amendments to the form to 
eliminate redundant and ambiguous undefined language. For example, the 
term ``Applicant'' is capitalized and is referred to as a proper person 
to create consistency and references to ``facing page'' were removed as 
this concept was not defined in Form SDR or the regulations.
    Form SDR as adopted clarifies that in order to assist the 
Commission in its review of an application, applicants for registration 
are encouraged to supplement Form SDR with any additional information 
that may be significant to their operation as an SDR. In addition, the 
Commission in adopting final Form SDR clarifies that SDR applicants 
must be mindful that certain information submitted for application 
purposes may be made available to the public and therefore advises 
applicant to request confidential treatment, where appropriate, when 
submitting application materials.
(b) Provisional Registration
    As proposed, Sec.  49.3(b) permitted the Commission, upon the 
request of an applicant, to grant provisional registration as an SDR if 
the applicant is in substantial compliance with the standards set forth 
in proposed Sec.  49.3(a)(4).\58\ Because the Commission believed that 
provisional registration should not be a permanent part of part 49, 
proposed regulation 49.3(b) provided for a ``sunset'' provision so that 
the provisional registration provision would terminate 365 days from 
the effective date of the proposed regulations. The Commission has 
determined to amend proposed Sec.  49.3(b) to remove this sunset 
provision and provide that the Commission may terminate granting new 
provisional registrations at a later date.\59\ The Commission believes 
that removal of the sunset provision will allow the Commission to fully 
evaluate applications for registration and provide greater flexibility 
in establishing compliance deadlines with registration requirements 
under Sec.  49.3. The Commission expects to work with applicants to 
ensure that the transition from provisional registration to full 
registration is as prompt and seamless as possible.
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    \58\ Proposed Sec.  49.3(a)(4) delineated the standards for 
approval of an SDR application: The SDR (i) is appropriately 
organized, and has the capacity, to ensure the prompt, accurate and 
reliable performance of its functions as an SDR; (ii) can comply 
with any applicable provisions of the CEA and regulations 
thereunder; (iii) can carry out its functions in a manner consistent 
with the purposes of section 21 of the CEA; and (iv) can operate in 
a fair, equitable and consistent manner.
    \59\ No comments were received in response to the proposed 
provisional registration provisions.
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    In its comment letter, DTCC urged that applicants for provisional 
registration be required to demonstrate operational capability, real-
time processing, multiple redundancy and robust information security 
controls.\60\ The Commission agrees that SDRs should have sufficient 
operational capabilities to operate on a 24-hour basis based on a 6-day 
working week and accordingly has clarified in Sec.  49.3(b) that in 
considering a grant of provisional registration it will require both 
(i) a demonstrated ability to substantially comply with the standards 
established in Sec.  49.3(a)(4) and statutory duties and core 
principles; and (ii) demonstrated operational capability, real-time 
processing, multiple redundancy and robust information security 
controls.
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    \60\ CL-DTCC I supra note 51 at 4.
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(c) Registration of Existing Registered Entities
    Although comments addressing the proposed application and 
registration procedures generally indicated satisfaction with the 
Commission's proposal, CME recommended that DCOs wishing to register as 
SDRs be given relief from ``duplicative'' registration and requested 
that the Commission adopt an abbreviated notice registration procedure 
for registered DCOs in good standing with the Commission.\61\
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    \61\ See CL-CME supra note 51.
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    The Commission acknowledges the merits of CME's suggestion that 
there be a process to streamline the application procedures for 
existing DCO registrants, and therefore, is adopting a modification to 
Sec.  49.3. The Commission is making a minor revision to Sec.  
49.3(a)(3) so that applicants are not subject to unnecessary 
duplicative review by the staff of the Commission. Specifically, staff 
in considering an application for registration as an SDR shall include 
in its review an applicant's past relevant submissions to the 
Commission and its compliance history. In addition, the Commission 
believes that once it gains experience with the SDR registration 
process it may re-evaluate whether a shortened or ``notice'' 
registration process should be available to existing non-SDR 
registrants (such as a DCO) seeking registration as an SDR.\62\
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    \62\ The Commission notes that the additional cost of providing 
documents that may already be available to the Commission is 
expected to be limited to the expense of providing electronic copies 
of the exhibits set forth in Form SDR.
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2. Withdrawal From Registration--Sec.  49.4
    As proposed, Sec.  49.4(a) outlined the process for withdrawal from 
registration and specified that written notice of a request to withdraw 
be served at least 90 days prior to the desired effective date of the 
withdrawal. The Commission has corrected Sec.  49.4(a) to clarify that 
notice must be served at least 60 days prior to the desired effective 
date of the withdrawal; this correction achieves consistency with Sec.  
49.4(b), which provides that a notice of withdrawal from registration 
shall be effective on the 60th day after its filing with the 
Commission.
3. Notification of Equity Interest Transfers--Sec.  49.5
    As proposed, Sec.  49.5 required SDRs to file with the Commission a 
notice of the equity interest transfer of ten percent or more, no later 
than the business day following the date on which the SDR enters into a 
firm obligation to transfer the equity interest. The Commission 
proposed a ten percent threshold because it believes that a change in 
ownership of such magnitude, even without a corresponding change in 
control, may have an impact on the operations of the SDR.\63\
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    \63\ SDR NPRM supra note 8 at 80902, n.25.
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    The Commission received a single comment relating to this provision 
which recommended that the Commission lower the notification threshold 
from ten percent to five percent. The same commenter also urged that 
the Commission obtain notification at or prior to the firm commitment 
to transfer the equity interest.\64\ The Commission has considered 
these comments and believes that the notification threshold as proposed 
is adequate, based on its belief that a ten percent threshold 
appropriately covers those transfers that may result in significant 
control or lead to control of the SDR's management.
---------------------------------------------------------------------------

    \64\ See CL-Better Markets supra note 51.
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    As proposed, Sec.  49.5(a) and (c) required filings with the 
Commission relating to equity transfer notifications and certifications 
electronically through dedicated e-mail addresses. The Commission 
believes that future procedures may change, and therefore,

[[Page 54545]]

is revising these provisions so that SDRs file certain equity transfer 
notifications and certifications in a format and manner to be specified 
by the Secretary of the Commission. Accordingly, the Commission is 
adopting this provision largely as proposed subject to the modification 
described above.
4. Swap Data Repositories Located in Foreign Jurisdictions--Sec.  49.7
    The Commission proposed Sec.  49.7 to enable it to obtain necessary 
swap data and related books and records maintained by an SDR located 
outside the United States. As proposed, Sec.  49.7 required each SDR 
located outside the United States to provide an opinion of counsel that 
the SDR can, as a matter of law, provide the Commission with prompt 
access to its books and records and submit to onsite inspection and 
examination by the Commission. The Commission believes this provision 
is necessary because different jurisdictions may have different legal 
frameworks, which in turn may limit or restrict the Commission's 
ability to receive information from an SDR. An opinion of counsel in 
this regard will allow the Commission to better evaluate an SDR's 
capability to meet the requirements of registration and ongoing 
supervision.
    The Commission requested comment on a series of questions relating 
to registration of a foreign-based SDR.\65\ In response, the Commission 
received several comments regarding the potential for ``duplicative'' 
registration requirements.\66\ With one exception, commenters supported 
a system of cross-registration or ``recognition'' in order to reduce 
potential burdens.
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    \65\ Specifically, the Commission requested comment with respect 
to whether (i) the registration process for the foreign SDR be any 
different than the Commission's proposed registration process; (ii) 
there are any factors that the Commission should consider to ensure 
that an SDR located outside the United States seeking to register as 
an SDR can, in compliance with applicable foreign laws, provide the 
Commission with access to the SDR's books and records that are 
required pursuant to proposed Sec.  49.7 and can submit to onsite 
inspection and examination by the Commission; and (iii) there are 
any other factors the Commission should consider relating to an SDR 
located outside of the United States See SDR NPRM supra 8 at 80903.
    \66\ See CL-DTCC II; CL-Foreign Banks; CL-ESMA; CL-TriOptima; 
CL-Regis-TR; CL-Reval supra note 51.
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    ESMA in particular requested that the Commission consider a 
recognition regime in which an SDR located in a foreign jurisdiction 
could register with the Commission if (i) the laws and regulations of 
the foreign jurisdiction are equivalent to those in the U.S.; and (ii) 
a MOU has been signed by the Commission and the foreign regulator.\67\ 
ESMA suggested that the MOU would ensure access to all information the 
Commission will need in order to fulfill its statutory duties.
---------------------------------------------------------------------------

    \67\ CL-ESMA supra note 51.
---------------------------------------------------------------------------

    Reval, however, urged that that all foreign-based SDRs be required 
to comply with U.S. regulations and procedures, and to physically host 
the data in the U.S. or create a daily backup of the data with an 
entity in the U.S.\68\ DTCC also maintained that foreign-based SDRs 
should not be approved by the Commission under reduced registration 
requirements \69\ and asserted that an abbreviated or notice 
registration procedure for foreign SDRs should be based on a comparable 
regulatory structure for repositories in the home country of the 
foreign SDR.
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    \68\ CL-Reval II supra note 51.
    \69\ CL-DTCC I supra note 51.
---------------------------------------------------------------------------

    The Commission notes that the Dodd-Frank Act and the CEA do not 
authorize the Commission to exempt SDRs located in foreign 
jurisdictions from the registration requirements set forth in section 
21. At the same time, the Commission is cognizant of the global nature 
of the swaps market and of concerns regarding regulatory 
responsibilities and costs associated with requiring foreign-based SDRs 
to comply with multiple, separate regulatory regimes. To that end, the 
Commission expects to consult, cooperate, and exchange information with 
foreign regulators in connection with the oversight of foreign-based 
SDRs that are separately registered in jurisdictions outside of the 
U.S.
    The Commission is mindful of the commenters' concerns and 
emphasizes that the extent of the Commission's ability to coordinate 
with foreign regulators will depend largely on the comparability and 
comprehensiveness of supervision and regulation by the foreign 
jurisdiction in which the SDR is located. In considering the 
feasibility of a particular recognition regime, the Commission intends 
to review regulatory requirements and the supervision or oversight 
programs of a ``home'' or foreign regulator of an SDR to determine the 
extent to which the Commission potentially could rely on such foreign 
regulators. The level of cooperation and the extent of any coordination 
would be evaluated on an individual basis and would be governed by an 
MOU. For example, the Commission and the foreign regulator should be 
capable of exchanging regulatory reports (including examination 
reports) and filings, as well as other information applicable to the 
operation of such entity as an SDR. This exchange of information would 
assist the Commission in determining whether the SDR located in a 
foreign jurisdiction is in compliance with duties mandated under part 
49. Such cooperation or coordination with foreign regulators would not 
limit or in any way condition the discretion of the Commission in the 
discharge of its regulatory responsibilities.

B. Duties of Registered SDRs

    Section 21(c) sets forth the minimum duties that an SDR is required 
to perform to become registered and to maintain registration. These 
statutory duties require that SDRs (i) accept swap data as prescribed 
by the Commission; (ii) confirm with both counterparties to a swap the 
accuracy of the data; (iii) maintain the data submitted; (iv) provide 
the Commission or its designee (including another registered entity) 
with direct electronic access to the swap data; (v) provide the 
necessary information as prescribed by the Commission to comply with 
the public reporting requirements set forth in section 2(a)(13) of the 
CEA; (vi) establish automated systems for monitoring, screening, and 
analyzing swap data; (vii) maintain the privacy or confidentiality of 
any and all swap data that the SDR receives; (viii) provide access to 
the swap data to certain ``appropriate'' domestic and foreign 
regulators; and (ix) adopt and implement emergency procedures. In 
addition, the Commission pursuant to its authority under sections 
21(f)(4) and 8a(5) \70\ of the CEA proposed that registered SDRs (i) 
adopt and implement system safeguards, including BC-DR plans; (ii) 
maintain sufficient financial resources; (iii) furnish market 
participant with a disclosure document setting forth the risks and 
costs associated with using the services of the SDR; and (iv) provide 
fair and open access and fees and charges that are equitable and non-
discriminatory.
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    \70\ Section 8a(5) of the CEA, 7 U.S.C. 12a(5), authorizes the 
Commission to promulgate such rules and regulations as, in the 
judgment of the Commission, are reasonably necessary to effectuate 
any of the provisions or accomplish any of the purposes of the CEA. 
In connection with SDRs, section 21(a)(3)(A)(ii), 7 U.S.C. 
24a(a)(3)(A)(ii) specifically requires that an SDR to be registered 
and maintain its registration must comply with any requirement that 
the Commission may impose by rule or regulation pursuant to section 
8a(5) of the CEA.
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1. Acceptance of Data--Sec.  49.10
    As proposed, Sec.  49.10 required that SDRs adopt policies and 
procedures that would enable the SDR to electronically accept data and 
other regulatory

[[Page 54546]]

information; \71\ accept all swaps in the asset class(es) \72\ for 
which they have registered; \73\ establish sufficient policies and 
procedures to prevent a valid swap from being invalidated, altered or 
modified through the confirmation or recording process of the SDR; and 
establish procedures and provide facilities for effectively resolving 
disputes over the accuracy of the swap data and positions that are 
recorded in the SDR.
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    \71\ See section 21(c)(1) of the CEA, 7 U.S.C. 24a(c)(1). The 
Commission proposed in new part 45 to the Commission's Regulations 
the specific data elements that must be reported and applicable to 
DCMs, DCOs, swap execution facilities (``SEFs''), foreign boards of 
trade (``FBOTs''),1 SDs, MSPs, non-end-user SDs/MSPs and end-users 
in connection with the reporting of such swap data to SDRs. These 
data elements and standards would include the reporting of 
continuation data throughout the life of the swap. In addition, the 
Data NPRM also provides specific requirements for SDRs relating to 
(i) determining which counterparty must report to the SDR; (ii) 
third-party facilitation of swap data reporting; (iii) reporting to 
a single SDR in connection with the reporting of swap data; (iv) 
required data standards; and (v) the reporting of errors and 
omissions. See Data NPRM supra note 6.
    \72\ Proposed Sec.  49.2(a)(2) defined ``asset class'' as those 
swaps in a particular broad category of goods, services or 
commodities underlying a swap. The asset classes include credit, 
equity, interest rates, currency, other commodities and such other 
assets as may be determined by the Commission. See also Department 
of the Treasury, Notice of Proposed Determination of Foreign 
Exchange Swaps and Foreign Exchange Forwards Under the Commodity 
Exchange Act, 76 FR 25774 (May 5, 2011) and Request for Comments: 
Determination of Foreign Exchange Swaps and Forwards, 75 FR 66829 
(Oct. 29, 2010) and 75 FR 66426 (Oct. 28, 2010).
    \73\ As detailed in proposed Sec.  49.27, SDRs would be required 
to provide fair and open access to their services. The Commission 
submits that SDRs would not be permitted to discriminate in 
connection with the access to their services. As a result, market 
participants with sufficient technology resources for connectivity 
and the payment of fees would be granted access to the services of 
the SDR.
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    The Commission received one comment relating to the definition of 
asset class that indicated cross-currency (also known as currency) 
swaps are not properly characterized under the ``currency'' asset class 
but instead are interest rate products.\74\ Therefore, the Commission 
believes a modification is necessary to better reflect the fact that 
the industry typically characterizes ''currency'' swaps as ``interest 
rate swaps.'' This characterization is based on the attributes of 
currency swaps that resemble the structure and operation exhibited by 
interest rate swaps while in ``foreign exchange'' swaps, the underlying 
foreign currency is exchanged by the parties. Accordingly, the 
Commission is replacing the term ``currency'' in the definition of 
asset class with ``foreign exchange'' as set forth in Sec.  49.2(a)(2) 
to accurately reflect the asset classes employed in the swaps market.
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    \74\ See CL-Global FX Division supra note 51 at 2.
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    The Commission received a single comment relating to data formats 
and protocols for data submission to SDRs.\75\ DTCC commented that a 
registered SDR should have the flexibility to specify the acceptable 
data formats, connectivity requirements, and other protocols for 
submitting information.\76\ While the Commission generally agrees with 
DTCC that SDRs should have flexibility to specify acceptable data 
formats and other technical requirements, the Commission does not 
believe that DTCC's recommendations are necessary to operational 
flexibility. Several commenters supported \77\ the proposed requirement 
in Sec.  49.10(b) that an SDR accept all swaps from any asset class or 
classes for which it registers. CME, however, recommended that DCO-SDRs 
should only be required to accept data for swaps that they clear and 
not for uncleared/bilateral transactions.\78\ The Commission believes 
that CME's approach would lead to greater data fragmentation. 
Additionally, the Commission believes that pursuant to section 
2(a)(13)(G), SDRs are required to accept cleared and uncleared swaps. 
Accordingly, the Commission is adopting Sec.  49.10(b) substantially as 
proposed, with the addition of the phrase ``unless otherwise prescribed 
by the Commission'' so that the Commission may, in its discretion, 
provide flexibility to the general rule that an SDR must accept all 
swaps in an asset class for which it has registered. This flexibility 
will be especially relevant in connection with the implementation or 
phasing of reporting obligations of market participants.
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    \75\ See CL-DTCC I supra note 51.
    \76\ Id.
    \77\ See CL-Better Markets, CL-DTCC I and CL-Global FX Division 
supra note 51.
    \78\ See CL-CME supra note 51.
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    The Commission received four comments relating to proposed Sec.  
49.10(c).\79\ The comments were supportive of the Commission's efforts 
to prevent improper invalidation of swap transactions; as discussed 
below, however, some commenters felt that further refinement of the 
text is necessary.
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    \79\ See CL-ABC/CIEBA, CL-AMG and CL-CIEBA supra note 51.
---------------------------------------------------------------------------

    ABC/CIEBA and AMG requested that the Commission clarify that Sec.  
49.10(c) would prevent an SDR from adopting user agreements that 
indirectly serve to modify or invalidate terms that have been agreed 
upon by the counterparties.\80\ The Commission has adopted the 
recommended clarification. ABC/CIEBA and AMG also requested that the 
Commission seek to prevent confirmation and reporting platforms from 
adopting provisions in their user agreements that would permit the 
modification or invalidation without the consent of the 
counterparties.\81\ CIEBA also separately suggested that the Commission 
prohibit SDRs from using third-party service providers which invalidate 
a swap without the consent of a counterparty.\82\ The Commission 
believes that Sec.  49.10(c), as proposed, would clearly prohibit SDRs 
as well as any agent or third-party service provider of the SDR to 
modify or invalidate a swap transaction without the consent of the 
counterparties.
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    \80\ CL-ABC/CIEBA and CL-AMG supra note 51 at 3-4 and 9, 
respectively.
    \81\ Id.
    \82\ CL-CIEBA supra note 51 at 5.
---------------------------------------------------------------------------

2. Confirmation of Data Accuracy--Sec.  49.11
    As proposed, Sec.  49.11 required SDRs to establish and adopt 
policies and procedures to ensure the accuracy of swap data that is 
reported to an SDR.\83\ In particular, proposed Sec.  49.11 required 
that the SDR confirm with both counterparties to the swap the accuracy 
of the data and information submitted \84\ and receive acknowledgement 
of all data submitted as well as corrections of any errors.\85\ The SDR 
NPRM specified that confirmation is unnecessary when the reporting 
party is a SEF, DCM, DCO or a confirmation or matching service provider 
to whom the swap counterparty has delegated its reporting obligation. 
However, the SDR would still be required to ensure that the data and 
information it receives from such entity is accurate.
---------------------------------------------------------------------------

    \83\ See Data NPRM supra note 6.
    \84\ The Data NPRM details and defines ``confirmation'' and 
``confirmation data.'' The term confirmation is proposed in Sec.  
45.1(b) to mean ``the full, signed legal confirmation by the 
counterparties of all of the terms of a swap.'' The term 
``confirmation data'' is proposed in Sec.  45.1(c) to mean ``all of 
the terms of a swap matched and agreed upon by the counterparties in 
confirming the swap.'' See Data NPRM, supra note 6.
    \85\ This requirement does not apply to real-time public 
reporting. See proposed Sec.  43.3(f) supra note 28.
---------------------------------------------------------------------------

    As detailed in proposed part 45, the reporting of swap creation 
data (primary economic terms data and confirmation data) and swap 
continuation data will take place through different channels, depending 
on the nature of the transaction and counterparties. Primary economic 
terms data is required to be reported by a SEF or DCM if the swap is 
executed on a platform, and by the reporting counterparty (SD, MSP, or 
other counterparty) if the swap is not platform executed. Confirmation 
data

[[Page 54547]]

will be reported by a DCO if the swap is cleared, and by the reporting 
counterparty if the swap is uncleared. Swap continuation data will be 
reported throughout the life of a swap by the DCO and/or the reporting 
counterparty. Consistent with proposed part 45 and Sec.  49.12, SDRs 
are required to accept swap data from these entities, as well as from 
third-party service providers who may be acting on their behalf.
    The Commission received five comments relating to an SDR's 
obligation to confirm the accuracy of the reported swap data.\86\ 
Several commenters recommended that an SDR should not be required to 
affirmatively communicate with both counterparties in order to confirm 
the accuracy of data submitted. Reval commented that the SDR should 
only be required to confirm the accuracy of the trade with the 
reporting entity.\87\ DTCC \88\ and MarkitSERV \89\ both supported the 
use of confirmation records in fulfilling the obligation of the SDR to 
confirm data submissions.
---------------------------------------------------------------------------

    \86\ See CL-Reval II, CL-DTCC I, CL-MarkitSERV I, CL-ABC/CIEBA 
and CL-Data-Encana supra note 51.
    \87\ CL-Reval II supra note 51 at 6.
    \88\ CL-DTCC I supra note 51 at 20.
    \89\ CL-MarkitSERV I supra note 51 at 6.
---------------------------------------------------------------------------

    The Commission notes that section 21(c)(2) of the CEA states that 
an SDR must confirm the accuracy of the data that was submitted with 
both counterparties to the swap and does not draw any distinction 
between submitted swap data that has or has not been legally confirmed. 
However, the Commission agrees with the commenters that it may not be 
necessary to affirmatively communicate with both counterparties in all 
circumstances. Therefore, the Commission has modified the manner in 
which an SDR may fulfill the requirement to confirm the accuracy of the 
data. As adopted, Sec.  49.11 will not require an SDR to affirmatively 
communicate with both counterparties when data is received from a SEF, 
DCM, DCO, or third-party service provider under certain conditions. 
Communication need not be direct and affirmative where the SDR has 
formed a reasonable belief that the data is accurate, the data or 
accompanying information reflects that both counterparties agreed to 
the data, and the counterparties were provided with a 48-hour 
correction period. The SDR must affirmatively communicate with both 
counterparties to the swap when data is submitted directly by a swap 
counterparty such as an SD, MSP or non-SD/MSP counterparty such as an 
end-user.
    Encana requested that the Commission provide additional guidance on 
how proposed Sec.  45.10 and Sec.  49.11 work together. Both 
regulations impose obligations on reporting parties and SDRs relating 
to errors and omissions in the reporting of swap transaction data.\90\ 
The Commission submits that the regulations are complementary and are 
both expected to protect the integrity and the accuracy of reported 
data. While Sec.  45.10 provides an ongoing obligation for 
counterparties to provide error corrections, Sec.  49.11 imposes a duty 
on the SDR to provide a correction period to receive from 
counterparties, within a short time period after the data has been 
submitted, acknowledgment of the accuracy of the data.
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    \90\ See CL-Encana supra note 51.
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3. Recordkeeping Requirements--Sec.  49.12
    Proposed Sec.  49.12 implements section 21(c)(3) consistent with 
existing Commission regulations and the Commission's proposed part 45 
regulations \91\ and required that SDRs maintain swap data throughout 
the existence of the swap and for five years following termination 
during which time the records must be readily accessible by the SDR and 
available to the Commission via real-time electronic access and in 
archival storage capable of being retrieved within three business days.
---------------------------------------------------------------------------

    \91\ See Data NPRM supra note 6.
---------------------------------------------------------------------------

    The Commission received one comment \92\ recommending that swap 
data be kept indefinitely.\93\ As proposed, Sec.  49.12(a) required 
SDRs to maintain books and records as prescribed by proposed Sec.  
45.2. Rather than specifically referencing and incorporating the 
provisions of proposed Sec.  45.2, the Commission believes Sec.  
49.12(a) should require SDRs to comply with any and all recordkeeping 
provisions adopted under part 45.\94\ Accordingly, Sec.  49.12(a) as 
adopted requires registered SDRs to ``maintain books and records in 
accordance with the requirements of part 45 of this chapter regarding 
the data required to be reported to the swap data repository.'' Under 
Sec.  49.12(a), registered SDRs will be required to maintain swap data 
for the time periods and under the standards to be set forth in part 
45.\95\
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    \92\ See CL-Barnard supra note 51 at 2.
    \93\ The Commission has also received several comments in 
connection with the proposed part 45 recordkeeping provisions. 
Comments received in connection with proposed part 45 will be 
reviewed in connection with that rulemaking; the Commission is 
adopting Sec.  49.12(a) largely as proposed subject to the 
modifications discussed below.
    \94\ Like other rules that are tied to related rulemakings, 
Sec.  49.12(c) will become effective 60 days after publication in 
the Federal Register but compliance will not be required until such 
time as the part 45 rules become effective.
    \95\ The time period and standards in part 45 are currently 
proposed as throughout the existence of the swap and for five years 
following termination during which time the records must be readily 
accessible by the SDR and available to the Commission via real-time 
electronic access and in archival storage capable of being 
retrievable within three business days.
---------------------------------------------------------------------------

    The Commission is revising proposed Sec.  49.12 to require SDRs to 
comply with the time periods set forth in part 45 for maintaining books 
and records. The Commission does not believe that SDRs should be 
required to keep records indefinitely following the expiration of the 
underlying transactions.
    Proposed Sec.  49.12(c) required all books and records to be open 
to inspection upon request by any representative of the Commission, the 
United States Department of Justice, the SEC or prudential regulators 
as authorized by the Commission. The Commission is revising Sec.  
49.12(c) to remove the SEC and prudential regulators so that only the 
Commission and the Department of Justice will have books and records 
inspection rights.\96\ This change will maintain consistency with 
existing Commission regulations on recordkeeping.\97\
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    \96\ See proposed rule 13n-7 under the Securities Exchange Act 
of 1934, 17 CFR 240.13n-7 set forth in the SEC's proposal relating 
to security-based swap data repositories. The SEC in that proposal 
did not provide inspection rights of the books and records of a 
security-based swap data repository to the Commission or prudential 
regulators. See SEC, Notice of Proposed Rulemaking: Security-Based 
Swap Data Repository Registration, Duties and Core Principles, 75 FR 
77306 (Dec. 10, 2010).
    \97\ Commission regulation Sec.  1.31 requires that all ``books 
and records required to be kept by the act or by these regulations 
shall be kept for a period of five years from the date thereof and 
shall be readily accessible during the first 2 years of the 5-year 
period. All such books and records shall be open to inspection by 
any representative of the Commission or the United States Department 
of Justice.'' The Commission notes that section 4r(c) of the CEA 
adopted by Section 729 of the Dodd-Frank Act provides inspection 
rights to, among others, the SEC, prudential regulators and the 
FSOC. However, these rights are limited to counterparties that do 
not clear or have their swap transactions reported to, or accepted 
by, an SDR. Accordingly, the Commission lacks the statutory 
authority to provide books and records inspection rights to those 
named other regulators.
---------------------------------------------------------------------------

    The Commission believes that the proper procedure for Appropriate 
Domestic Regulators to obtain SDR Information is through the mechanism 
set forth in Sec.  49.17 (Access to SDR Data) discussed below in 
section II.B.7.
    The Commission is adopting Sec.  49.12(d) largely as proposed, 
subject to a slight modification discussed below in connection with 
Sec.  49.15 relating to real-time public reporting requirements.

[[Page 54548]]

4. Monitoring, Screening and Analyzing Swap Data--Sec.  49.13 and Sec.  
49.14
    Proposed Sec. Sec.  49.13 and 49.14 implement section 21 of the CEA 
and together reflect SDRs' significant responsibilities in the new 
swaps market regulatory structure established by the Dodd-Frank Act. 
Under this new regulatory structure, SDRs will function not only as 
repositories for swap transaction data, but also as potential sources 
of support for the Commission's oversight of swaps markets and swap 
market participants. Section 21(c)(5) of the CEA, as amended by section 
728 of the Dodd-Frank Act, requires SDRs to establish ``automated 
systems for monitoring, screening, and analyzing swap data, including 
compliance and frequency of end-user clearing exemption claims by 
individuals and affiliated entities.'' \98\ By its terms, section 
21(c)(5) requires that such automated systems be established ``at the 
direction of the Commission,'' but does not provide for specific 
functions which SDRs should undertake with respect to the swap 
transaction data in their possession. The only specific requirement set 
forth in section 21(c)(5) is that SDRs have systems in place capable of 
fulfilling such requirements as the Commission may assign.
---------------------------------------------------------------------------

    \98\ Section 21(c)(5) of the CEA.
---------------------------------------------------------------------------

    Proposed Sec. Sec.  49.13 and 49.14 required that SDRs: (1) 
Monitor, screen, and analyze all swap data in their possession as the 
Commission may require; (2) develop systems and resources as necessary 
to execute any monitoring, screening, or analyzing functions assigned 
by the Commission; and (3) monitor, screen, and analyze swap 
transactions which are reported to the SDR as exempt from clearing 
pursuant to section 2(h)(7) of the CEA (i.e., end-user clearing 
exemption).
    The Commission received eight comment letters relating to proposed 
Sec. Sec.  49.13 and 49.14.\99\ While the commenters were generally 
supportive of the proposed rules and their objectives, they articulated 
a number of concerns, including: (1) The level of detail concerning 
routine and ad hoc monitoring, screening and analysis requirements; (2) 
future compliance costs; and (3) the level of responsibilities imposed 
on SDRs and/or retained by the Commission. Four of the commenters \100\ 
requested additional detail and clarity on the anticipated requirements 
in proposed Sec.  49.13(a) and (b).
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    \99\ These letters represent comments from five potential SDRs, 
two non-profit organizations, and one individual . See CL-AFR, CL-
Barnard, CL-Better Markets, CL-CME, CL-DTCC I, CL-Reval II, CL-
Sungard, and CL-TriOptima supra note 51.
    \100\ CL-Barnard, CL-CME, CL-Sungard and CL-TriOptima supra note 
51.
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    Sungard, in particular, expressed concern that proposed Sec.  
49.13(a) provided only ``limited guidance'' on the requirements to be 
imposed on SDRs' automated systems for monitoring, screening, and 
analyzing swap data.\101\ Sungard referenced the SDR NPRM which stated 
that the Commission ``will consider specific tasks to be performed by 
SDRs at a later date'' and requested that in the final rule 49.13(a), 
the Commission ``provide an implementation period and effective date 
which are based on such later date.'' \102\ Sungard also commented that 
the potentially rising cost of compliance with proposed Sec.  49.13(b), 
which requires that SDRs maintain sufficient resources to fulfill the 
requirements in Sec.  49.13(a), monitor their resources annually, and 
make adjustment as needed to remain in regulatory compliance, might 
harm the commercial viability of SDRs.\103\
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    \101\ See CL-Sungard supra note 51 at 2.
    \102\ Id. at 2. See also SDR NPRM supra note 8 at 80907.
    \103\ Sungard made a number of recommendations to ensure the 
commercial viability of SDRs, including (1) a constraint on the 
growth in resources required under Sec.  49.13(b), (2) a mechanism 
to recover at least a portion of resource costs in a manner other 
than user fees, or (3) ``some other mechanism to allow for the 
business planning necessary for the SDR to function while being 
certain of compliance with applicable rules.'' Id.
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    Three commenters \104\ suggested that the Commission should play a 
larger role in the monitoring, screening, and analyzing of swap market 
data; while two commenters \105\ took the opposing view and suggested 
that data monitoring, screening, and analyzing should be performed 
centrally by an SDR. Both AFR and Better Markets believed that 
aggregated data monitoring and analysis should be performed by the 
Commission rather than relying on SDRs.\106\ CME's comments raised 
concerns with providing SDRs with surveillance responsibilities.\107\ 
DTCC, however, recommended that certain monitoring, screening, and 
analyzing functions be performed centrally by an SDR.\108\ Reval 
recommended that SDRs be more than a data warehouse and provide data 
analysis to the Commission.\109\
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    \104\ See CL-AFR, CL-Better Markets and CL-CME supra note 51.
    \105\ See CL-DTCC I and CL-Reval II supra note 51.
    \106\ AFR further suggested that the Commission develop ``the 
capacity to perform key data analysis in-house, using raw data from 
SDRs, instead of becoming dependent on privately owned SDRs to 
measure aggregate exposures.'' Id. at 4. Better Markets suggested 
that the Commission build its own ``single, in-house system'' for 
monitoring and analyzing swap data rather than rely on individual 
SDRs. CL-Better Markets supra note 51 at 8.
    \107\ CME stated that it is ``not convinced that SDRs should be 
given wide ranging surveillance responsibilities.'' CL-CME supra 
note 51 at 5. And instead, opined that ``[m]arket-wide surveillance 
duties are best placed with a regulator or self-regulatory 
organization empowered with disciplinary powers * * *.'' Id.
    \108\ CL-DTCC I supra note 51 at 24.
    \109\ CL-Reval II supra note 51 at 7. Reval suggested that SDRs 
should be required to provide an independent valuation of the swaps 
submitted to the SDR, provide the relevant market data that goes 
into the calculation of the swap value, verify the credit value 
adjustment for uncleared trades, and provide the Commission with 
historic, current, and future risk analysis to anticipate systemic 
risk. Id. at 8.
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    Commenters expressed concern that Sec. Sec.  49.13(a) and 49.14 do 
not sufficiently describe the specific tasks SDRs are expected to 
perform. The Commission recognizes that Sec. Sec.  49.13(a) and 49.14 
do not contain specific requirements. Its intention in Sec. Sec.  
49.13(a) and 49.14 is to codify the statutory requirements in section 
21(c)(5) and establish that specific monitoring, screening, and 
analyzing duties will be imposed when its knowledge of the markets is 
more fully developed.\110\ At that time, the Commission will provide 
SDRs with adequate notice to permit them to meet specific requirements 
of Sec. Sec.  49.13(a) and 49.14.
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    \110\ See proposed Sec.  49.13(a). SDR NPRM supra note 8 at 
80907.
---------------------------------------------------------------------------

    Regarding proposed Sec.  49.13(b), the Commission believes that 
SDRs and other regulated entities should always maintain sufficient 
resources to comply with regulatory requirements under the CEA. The 
Commission also recognizes the necessity for adequate resource 
requirements for SDRs given the expectation that SDRs may play a 
significant role in assisting the Commission to fulfill its regulatory 
mandate. Therefore, the Commission has not implemented Sungard's 
suggestion to impose a cap on the growth of required information 
technology, staff, and other resources required under Sec.  49.13(b). 
The Commission also notes that the requirement of Sec.  43.13(b) to 
``establish and maintain sufficient information technology, staff, and 
other resources'' is similar to provisions proposed and already 
existing for DCMs and proposed for SEFs.\111\ Furthermore, any 
increased

[[Page 54549]]

regulatory functions covered by proposed Sec.  49.13(b), which may 
result in increase costs, will apply to all SDRs equally. As discussed 
above, the Commission has also committed to giving sufficient notice 
before imposing specific obligations under Sec. Sec.  49.13 and 49.14, 
giving SDRs time to also address any resulting financial needs.
---------------------------------------------------------------------------

    \111\ See Core Principle 2, Acceptable Practices, in appendix B 
to part 38 of the Commission's regulations. The Application Guidance 
for this Core Principle requires designated contract markets to 
``have arrangements and resources for effective trade practice 
surveillance programs'' and ``have arrangements, resources and 
authority for effective rule enforcement.'' 17 CFR 38, appendix B. 
See also proposed Sec.  38.155(a) which requires a designated 
contract market to ``establish and maintain sufficient compliance 
department resources and staff to ensure that it can conduct 
effective audit trail reviews, trade practice surveillance, market 
surveillance, and real-time market monitoring.'' 75 FR 80572, 80613 
(Dec. 22, 2010)(``DCM NPRM''). See also proposed Sec.  37.203(c)(1) 
which requires a swap execution facility to ``establish and maintain 
sufficient compliance department resources and staff to ensure that 
it can conduct effective audit trail reviews, trade practice 
surveillance, market surveillance and real-time market monitoring.'' 
Commission, Notice of Proposed Rulemaking: Core Principles and Other 
Requirements for Swap Execution Facilities, 76 FR 1214, 1241 (Jan. 
7, 2011)(``SEF NPRM'').
---------------------------------------------------------------------------

    AFR, Better Markets and CME recommended that the Commission play a 
larger role than proposed in the monitoring, screening, and analyzing 
of swap market data. Both AFR and Better Markets, in particular, 
recommended that the Commission build its own systems for monitoring, 
screening and analyzing swap data. The Commission believes that the 
proper role of an SDR is to provide the Commission with a centralized 
recordkeeping facility to facilitate its surveillance and oversight 
responsibilities in the swaps markets. The Commission does not propose 
that SDRs displace the Commission's regulatory responsibilities, but 
neither does it propose to displace SDRs statutory obligations to 
monitor, screen and analyze swap market data. The Commission largely 
agrees with AFR and Better Markets in that the Commission should retain 
the responsibility for surveillance and oversight of the swaps market; 
however, the Commission believes it is unnecessary to duplicate systems 
that will already be available through the SDR infrastructure. 
Additionally, the Commission believes that SDRs, at the direction of 
the Commission, will provide sufficient capacity for monitoring, 
screening, and analyzing swap data. The Commission believes that the 
approach of proposed Sec. Sec.  49.13 and 49.14 adequately balances the 
Commission's regulatory responsibilities with SDRs statutory duties 
and, as articulated by DTCC, ``promotes efficiency in the system.'' 
\112\
---------------------------------------------------------------------------

    \112\ CL-DTCC supra note 51 at 24.
---------------------------------------------------------------------------

    Commenters also made recommendations relating to uniform 
recordkeeping and reporting requirements across different SDRs. The 
Commission notes that it addressed this issue in a separate, related, 
rulemaking.\113\ Nonetheless, the Commission does not agree with Better 
Markets that it must also require SDR systems to be uniform and 
compatible. The Commission believes that its designation of uniform 
recordkeeping and reporting requirements will sustain a level of system 
compatibility. In addition, when established, the monitoring, 
screening, and analyzing tasks required of SDRs will likely impose a 
level of uniformity of system outputs within similarly situated SDRs.
---------------------------------------------------------------------------

    \113\ See Data NPRM supra note 6.
---------------------------------------------------------------------------

    Lastly, the Commission agrees with Reval's assertion that in order 
to minimize systemic risk, SDRs need to engage in certain data analysis 
and reporting rather than function merely as warehouses of transaction 
data. However, as articulated above, at this time the Commission has 
not proposed, nor is it implementing, specific data analysis functions 
for SDRs. The Commission intends to consider additional specific tasks 
to be performed by SDRs when its knowledge and experience of the 
regulatory oversight needs with respect to the swap markets has 
developed more fully.
    With the clarifications and modifications described above, the 
Commission is adopting Sec. Sec.  49.13 and 49.14 substantially as 
proposed.\114\
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    \114\ The Commission is making two non-substantive modifications 
to Sec. Sec.  49.13(a) and 49.14. The word ``perform'' will be added 
to the last sentence in Sec.  49.13(a) and the word ``of'' will be 
added to the last sentence in Sec.  49.14. These modifications are 
being made to improve the sentence structure of both of these 
sections.
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5. Real-Time Public Reporting--Sec.  49.15
    Section 2(a)(13)(D) of the CEA permits the Commission to require 
registered entities to publicly disseminate swap transaction and 
pricing data. To implement section 2(a)(13), the Commission is 
establishing a real-time public reporting framework in a new part 43 of 
the Commission's regulations that is subject to a separate 
rulemaking.\115\
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    \115\ See Real-Time NPRM supra note 28. As noted above, 
Sec. Sec.  49.12(d) and 49.15 will become effective 60 days from the 
date of publication in the Federal Register, but compliance will not 
be required until such time as the part 43 rules become effective. 
See note 93 supra.
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    As proposed, Sec.  49.12(d) and Sec.  49.15 together set forth the 
requirements for SDRs regarding the public dissemination of swap 
transaction and pricing data. Proposed Sec.  49.12(d) required each SDR 
to comply generally with the requirements prescribed in part 43, while 
proposed Sec.  49.15 described additional duties of an SDR relating to 
the acceptance and public dissemination of swap transaction and pricing 
data in real-time.
    The Commission received a total of seven comments relating to 
proposed Sec. Sec.  49.12(d) and 49.15.\116\ Markit and Argus urged the 
Commission to adopt tighter restrictions on the commercial non-public 
dissemination of real-time data,\117\ while Markit also recommended 
that the part 43 rules explicitly state that ownership of swap 
transaction data does not transfer from counterparties to other 
regulated entities such as DCMs, SEFs and DCOs.\118\ AMG and AII both 
requested that the Commission phase-in block size determinations and 
time-limits for real-time dissemination.\119\ NFPE Coalition also 
requested a clarification regarding aspects of the real-time reporting 
requirements and suggested that SDRs should not be used to determine 
the timeliness of real-time public reporting.\120\ ICE and DTCC 
believed that SDRs should be designated as the sole vehicle for the 
dissemination of swap data \121\ while DTCC also expressed the concern 
that public dissemination could disclose the identities of swap 
counterparties.\122\ Better Markets also recommended that the 
Commission have real-time streaming or instantaneous access to swap 
transaction data in order to fulfill its regulatory obligations.\123\
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    \116\ See CL-Markit, CL-AMG, CL-Argus, CL-AII, CL-NFPE 
Coalition, CL-DTCC I and CL-DTCC II supra note 51.
    \117\ CL-Markit and CL-Argus supra note 51.
    \118\ CL-Markit supra note 51.
    \119\ CL-AMG and CL-AII supra note 51.
    \120\ CL-NFPE Coalition supra note 51.
    \121\ CL-Data-ICE, CL-DTCC I and CL-DTCC II supra note 51.
    \122\ CL-DTCC I supra note 51.
    \123\ CL-Better Markets supra note 51.
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    The Commission is adopting Sec.  49.15 substantially as proposed. 
As adopted, Sec.  49.15(a) will no longer limit the real-time reporting 
of swap transactions for SDRs to ``off facility swaps.'' The Commission 
is currently considering comments received in connection with the 
proposed part 43 regulations,\124\ including those relating to an SDR's 
role in the public dissemination of swap transaction and pricing data 
in real time. The Commission may include limitations on the type of 
public reporting and dissemination for SDRs. As adopted, Sec.  
49.15(c), relating to the untimely submission of swap data for real-
time public reporting and dissemination purposes will not reference the 
specific time periods and notification procedures proposed in part 43. 
Instead, Sec.  49.15(c) will require SDRs to ``notify the Commission of 
any swap transaction for which the real-time swap data was not received 
by the swap data repository in accordance with part 43 of

[[Page 54550]]

this chapter.'' The Commission believes this change provides 
appropriate flexibility to adjust SDR responsibilities with regard to 
the untimely reporting of swap transaction data in accordance with any 
future adoption of part 43. The Commission will consider the comment 
received in connection with proposed Sec.  49.15(c) when addressing the 
relevant provisions in part 43, which is expected to be finalized 
subsequent to this rulemaking.
---------------------------------------------------------------------------

    \124\ Real-Time NPRM supra note 28.
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    In response to comments received \125\ concerning the commercial 
use of real-time public swap data and the commercialization of data 
generally, the Commission submits that persons responsible \126\ for 
the public dissemination of swap data are prohibited from distributing 
such data prior to public dissemination. Such pre-publicly available 
dissemination would constitute a ``commercial use'' under Sec.  
49.17(g). Therefore, SDRs may not make commercial use of real-time swap 
data before dissemination to the public, including any analysis for 
commercial purposes. As set forth in 49.17(g)(1), the Commission also 
notes that SDRs must maintain appropriate firewalls to protect swap 
data from unlawful commercial uses.
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    \125\ See CL-Markit and CL-Argus supra note 51.
    \126\ Although SDRs are permitted to delegate the performance of 
various functions to 3rd party service providers, the SDR retains 
the responsibility for compliance with this and other regulatory 
restrictions.
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    Additionally, as discussed above, in light of the comments received 
and as a result of its consideration of proposed Sec.  49.15, the 
Commission will continue to consider the role SDRs will play in the 
public dissemination of real-time swap data and will address these 
issues in the context of the part 43 rules.
6. Maintenance of Data Privacy--Sec.  49.16
    To implement the statutory requirements of sections 21(c)(6)\127\ 
and 21(f)(3)\128\ of the CEA, as added by section 728 of the Dodd-Frank 
Act,\129\ the Commission proposed in Sec.  49.16 that SDRs maintain the 
privacy and confidentiality of reported swap data.
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    \127\ 7 U.S.C. 24a(c)(6). For a discussion of commercial data 
privacy, see generally Department of Commerce, Internet Policy Task 
Force, Commercial Data Privacy and Innovation in the Internet 
Economy: A Dynamic Policy Framework (Dec. 2010) and Federal Trade 
Commission (FTC), Preliminary Staff Report, Protecting Consumer 
Privacy in an Era of Rapid Change (Dec. 2010). See also FTC, Final 
Rule: Standards for Safeguarding Customer Information, 67 FR 36484 
(May 23, 2002).
    \128\ According to such ``core principle,'' each SDR shall 
``establish and enforce rules to minimize conflicts of interest in 
[its] decision-making process * * *'' and ``establish a process for 
resolving conflicts of interest. See infra section II D. 4.
    \129\ See section 21(f)(3) of the CEA, 7 U.S.C. 24a(f)(3).
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    Section 21(c)(6) of the CEA provides that an SDR shall ``maintain 
the privacy of any and all swap transaction information that the swap 
data repository receives from an SD, counterparty, or any other 
registered entity.'' Section 21(f)(3) of the CEA also sets forth a 
conflict of interest ``core principle'' applicable to an SDR. As 
detailed further below, the Commission has identified certain conflicts 
that may implicate access, disclosure, or use of SDR Information.\130\ 
SDR Information includes any information that an SDR receives from a 
reporting counterparty,\131\ including market participants \132\ such 
as DCMs, DCOs, SEFs, SDs, MSPs and non-SD/MSP counterparties.
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    \130\ The term ``SDR Information'' is defined in proposed Sec.  
49.2(a)(15) to mean ``any information that the swap data repository 
maintains.'' Sec.  49.17(f) and (g) discussed below contain more 
specific prohibitions on access or use of SDR Information.
    \131\ The term ``reporting counterparty'' is set forth in 
proposed Sec.  45.5 of the Data Rulemaking NPRM. The proposed 
definition is based on section 4r(3) of the CEA.
    \132\ The term ``market participant'' is defined in proposed 
Sec.  49.2(a)(6) to mean any person participating in the swap 
market, including, but not limited to, DCMs, DCOs, SEFs, SDs, MSPs, 
and any other counterparties to a swap transaction.
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    The Commission emphasizes that SDRs are expected to receive two 
separate ``streams'' of data: (i) Data related to real-time public 
reporting which by its nature is publicly available and (ii) data that 
is intended for use by the Commission and other regulators which is 
subject to statutory confidential treatment (``Core Data''). 
Accordingly, pursuant to sections 21(c)(6) and 21(f)(3) (Core Principle 
3--Conflicts of Interest) of the CEA, SDR information that is not 
subject to real-time public reporting should be treated as non-public 
and held strictly confidential such that it may not be accessed, 
disclosed, or used for purposes not related to SDR responsibilities 
under the CEA or the regulations thereunder, unless such use is 
explicitly agreed to by the reporting entities. However, aggregated 
data that cannot be attributed to individual transactions or market 
participants may be disclosed by an SDR on a voluntary basis or as 
required by the Commission.
    As proposed, Sec.  49.16 required SDRs to establish, maintain, and 
enforce specific policies and procedures to protect the privacy or 
confidentiality of any and all SDR Information, including privacy or 
confidentiality policies and procedures for the sharing of SDR 
Information with SDR affiliates \133\ as well as certain non-affiliated 
third parties.\134\ Proposed Sec.  49.16 also required SDRs to 
establish and maintain safeguards, policies, and procedures that would, 
at a minimum, address the misappropriation or misuse of swap data that 
the Commission is prohibited (save for limited exceptions) from 
disclosing Section 8 Material.\135\ As discussed, Section 8 Material is 
that information or material described in section 8(a) of the CEA that 
the Commission is prohibited from publishing if it ``would separately 
disclose the business transactions or market positions of any person 
and trade secrets or names of customers.'' \136\ Such information would 
typically

[[Page 54551]]

include trade data, position data, business transactions, trade secrets 
and any other non-public personal information about a market 
participant or any of its customers. Moreover, proposed Sec.  49.16 
required an SDR to also protect information that is not Section 8 
Material as well as intellectual property that may include trading 
strategies.
---------------------------------------------------------------------------

    \133\ The term ``affiliate'' is defined in proposed Sec.  
49.2(a)(1) to mean a person that ``directly, or indirectly, 
controls, is controlled by, or is under common control with, the 
swap data repository.''
    \134\ The term ``non-affiliated third party'' is defined in 
proposed Sec.  49.2(a)(7) to mean ``any person except (i) swap data 
repository, (ii) the swap data repository's affiliate, or (iii) a 
person employed by a swap data repository and any entity that is not 
the swap data repository's affiliate (and ``non-affiliated third 
party'' includes such entity that jointly employs the person).''
    \135\ The term ``Section 8 Material'' is defined in proposed 
Sec.  49.2(a)(13) as ``the business transactions, trade data, or 
market positions of any person and trade secrets or names of 
customers.'' The legislative history of section 8 of the CEA 
reflects substantial Congressional concern with protecting the 
legitimate interests of certain market participants. In particular, 
Congressional members were concerned that ``bona fide hedging 
transactions'' and ``legitimate'' or ``necessary'' speculative 
transactions would be impracticable if disclosure of positions or 
transactions was permitted. Congress was also concerned that 
publication of the names and market positions of large traders would 
facilitate manipulation and place traders at a competitive 
disadvantage. See generally 61 Cong. Rec. 1321 (1921); Regulation of 
Grain Exchanges, Hearing on H.R. 8829 Before the H. Comm. on 
Agriculture, 73rd Cong. (1934).
    \136\ Section 8(a) of the CEA outlines the scope and authority 
of the Commission to publish or otherwise publicly disclose 
information that is gathered in the course of its investigative and 
market surveillance activities. While the section authorizes the 
Commission to publish or disclose the information obtained through 
the use of its powers, it expressly provides that, except in 
specifically prescribed circumstances, the Commission may not 
lawfully: publish data and information that would separately 
disclose the business transactions or market positions of any person 
and trade secrets or names of customers. * * *
    7 U.S.C. 12(a).
    The statutory bar to disclosure of ``business transactions, 
market positions and trade secrets'' is qualified by several 
narrowly-defined exceptions set forth in section 8(e) of the CEA. 7 
U.S.C. 12(e). Section 8(e) generally provides that ``upon request,'' 
the CFTC may furnish ``any information'' in its possession 
``obtained in connection with its administration of the [CEA]'' to 
another U.S. government department or agency, individual states, 
foreign futures authorities and foreign governments and any 
committee of the U.S. Congress that is ``acting within the scope of 
its jurisdiction.'' Section 8(b) of the CEA permits disclosure of 
Section 8 Material in connection with certain congressional, 
administrative or judicial proceedings. In addition, section 8(e) 
also provides an exception for information that was previously 
disclosed publicly pursuant to section 8.
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    The Commission submits that these SDR safeguards, policies, and 
procedures addressing privacy and confidentiality--as well as misuse 
and misappropriation--of data should provide (i) limitations on access 
related to Section 8 Material and other SDR Information; (ii) standards 
related to controlling persons associated with the SDR trading for 
their personal benefit or the benefit of others; and (iii) adequate 
oversight to ensure SDR compliance with Sec.  49.17. As set forth in 
Sec.  49.17 discussed below in the section entitled ``Access to SDR 
Data,'' an SDR may share swap data and information with certain 
``appropriate'' domestic and foreign regulators. Commercial use of the 
data maintained by an SDR--exclusive of real-time reporting data--is 
strictly circumscribed as provided in Sec.  49.17. As noted above, swap 
data that is publicly disseminated in real-time by SDRs pursuant to 
proposed part 43 of the Commission's Regulation would not be subject to 
the privacy and confidentiality requirements set forth in Sec.  49.16.
    The Commission received two comments relating to privacy and 
confidentiality concerns.\137\ DTCC specifically supported the 
Commission's efforts to keep swap data reported to SDRs confidential 
but noted the possibility of unintentional disclosure of participant 
identities in connection with the public dissemination of swap data. 
The concern raised by DTCC focused on the perceived potential for 
market participants to extrapolate identities of counterparties to a 
transaction that is publicly reported pursuant to the real-time public 
reporting requirements. The Commission, however, believes that the 
manner in which real-time public reporting will occur pursuant to part 
43 will mitigate this concern because counterparty identities will not 
be disclosed and the actual underlying notional amount will not be 
associated with any particular transaction. MFA similarly believes that 
the requirements of Sec.  49.16 may not be sufficient to protect the 
confidentiality of trading positions.
---------------------------------------------------------------------------

    \137\ See CL-DTCC I and CL-MFA supra note 51.
---------------------------------------------------------------------------

    The Commission agrees with MFA that the confidentiality of position 
level data held by an SDR is extremely important and notes that Sec.  
49.16, as proposed, would require that each SDR ``[e]stablish and 
maintain safeguards, policies, and procedures reasonably designed to 
prevent the misappropriation or misuse, directly or indirectly, of: (i) 
Section 8 Material; (ii) other SDR Information; and/or Intellectual 
property * * *'' \138\ Accordingly, the Commission believes that this 
requirement covers the matters that MFA proposed for inclusion in Sec.  
49.16. ``Section 8 Material'' as defined in proposed Sec.  49.2(a)(11) 
means the ``business transactions, trade data or market positions of 
any person and trade secrets or names of customers.'' The details of 
any master agreements governing a swap would clearly fall within a 
``business transaction'' referenced in the definition of Section 8 
Material.
---------------------------------------------------------------------------

    \138\ Proposed Sec.  49.16(a)(2) set forth in SDR NPRM supra 
note 51 at 80931.
---------------------------------------------------------------------------

    In connection with MFA's desire to have the legal standard of care 
set forth in Sec.  49.16, the Commission submits that SDRs, rather than 
the Commission, are in the better position to establish appropriate 
procedures to protect the confidentiality of SDR data consistent with 
Sec.  49.16. In addition, the Commission believes that MFA's 
recommendation to hold current and former SDR employees, directors, 
officers, agents and representatives liable by regulation for any 
breach of the SDR's privacy policies and procedures is beyond the scope 
of section 21(c)(6). Consistent with MFA's comments, the Commission 
believes that SDRs must be prohibited, as a condition of accepting data 
from reporting entities, from requiring the waiver of any legal rights 
such entities may have with respect to breaches of confidentiality by 
the SDR. The Commission also received comments on confidentiality and 
aggregated data from DTCC, which was concerned that market participants 
may be able to identify the parties to a particular transaction through 
extrapolation even though the disclosed data is ``aggregated.'' \139\
---------------------------------------------------------------------------

    \139\ CL-DTCC I supra note 51.
---------------------------------------------------------------------------

    In order to clarify its position with respect to the disclosure of 
``aggregated data,'' the Commission believes that it is permissible 
under the Dodd-Frank Act and part 49 of the Commission's regulations 
for an SDR to disclose, for non-commercial purposes, data on an 
aggregated basis such that the disclosed data reasonably cannot be 
attributed to individual transactions or market participants. In 
addition, the Commission submits that if requested by the Commission, 
an SDR would be required to disclose aggregated data in such form and 
manner as the Commission prescribes.
    Accordingly, the Commission is adopting Sec.  49.16 largely as 
proposed with the addition of (i) paragraph (b) to clarify that an SDR 
is prohibited from requiring a waiver of a reporting entity's legal 
rights for breaches of confidentiality by the SDR or affiliated 
entities; and (ii) paragraph (c) to clarify that SDRs may disclose 
aggregated data voluntarily or as requested by the Commission.
7. Access to SDR Data--Sec.  49.17
(a) Definition of Appropriate Domestic Regulator
    As detailed in the SDR NPRM, the Commission in proposed Sec.  49.17 
specifically included the Federal Reserve Bank of New York (``FRBNY'') 
as an ``Appropriate Domestic Regulator'' because section 21(c)(7) of 
the CEA does not specifically provide for the sharing of information 
between an SDR and the FRBNY. The Commission believes that only 
including the FRBNY as an Appropriate Domestic Regulator is overly 
restrictive, and therefore, is revising the definition of ``Appropriate 
Domestic Regulator'' to include any ``Federal Reserve Bank.'' \140\
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    \140\ The Commission notes that the expansion of ``Appropriate 
Domestic Regulator'' to include any Federal Reserve Bank will serve 
to ensure that the Board of Governors of the Federal Reserve System 
(``FRB'') will be able to effectively and efficiently perform its 
statutory responsibilities as prescribed by the Federal Reserve Act 
(``FRA'').
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(b) Commission Access
    As detailed in the SDR NPRM, a critical function and responsibility 
of an SDR is to provide ``direct electronic access'' to the Commission 
or its designee, which could include another registered entity.\141\ 
The Commission in Sec.  49.17(b)(3) defined the term ``direct 
electronic access'' as ``an electronic system, platform or framework 
that provides internet or web-based access to real-time swap 
transaction data.'' The Commission believes that a clarification to the 
definition of ``direct electronic access'' is necessary to include

[[Page 54552]]

``scheduled data transfers to the Commission's electronic systems.''
---------------------------------------------------------------------------

    \141\ See section 21(c)(4)(A) of the CEA. The term ``registered 
entity'' is defined in section 1a(40) of the CEA to include (i) a 
board of trade designated as a contract market under section 5 of 
the CEA; (ii) a DCO registered under section 5b of the CEA; (iii) a 
SEF registered under section 5h of the CEA; (iv) an SDR registered 
under section 21 of the CEA; and (v) with respect to a contract that 
the Commission determines is a significant price discovery contract, 
any electronic trading facility on which the contract is executed or 
traded. 7 U.S.C. 1a(40).
---------------------------------------------------------------------------

    The Commission received seven comments on direct electronic 
access.\142\ Although most commenters were generally supportive of the 
Commission's approach, a few objected to certain provisions of Sec.  
49.17(c) as proposed. Each comment is discussed below.
---------------------------------------------------------------------------

    \142\ See CL-Better Markets, CL-AFR and CL-Reval I supra note 
51. Compare CL-DTCC II, CL-Data-DTCC, CL-CME and CL-NFPE Coalition 
supra note 51.
---------------------------------------------------------------------------

    In connection with the Commission's request for comment,\143\ 
Better Markets and AFR both registered their preference for real-time 
direct streaming of swap data versus periodic electronic transfer of 
data.\144\ The Commission agrees with both Better Markets and AFR that 
real-time access to swap data is necessary for adequate oversight and 
surveillance of the swaps market.
---------------------------------------------------------------------------

    \143\ The Commission in the SDR NPRM requested comment on real-
time access as follows: ``What are the advantages and disadvantages 
of requiring SDRs to provide a direct streaming of the data to the 
Commission or its designee? Should the Commission require periodic 
electronic transfer of data as an alternative? If so, how often 
should such transfer occur (e.g., hourly, a few times a day, every 
few days, once a week)?'' SDR NPRM supra note 51 at 80906.
    \144\ CL-AFR and CL-Better Markets supra note 51 at 3 and 7-8, 
respectively.
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    In response to a Commission request \145\ for comment relating to 
the most cost-effective method or manner in providing direct electronic 
access, Reval stated that SDRs should be required to provide the 
Commission with internet browser-based access to a hosted SDR solution. 
Consistent with Reval's comments, the Commission believes that an 
internet or Web-based method to access reported swap data held and 
maintained by SDRs would be the least disruptive and most efficient 
process.
---------------------------------------------------------------------------

    \145\ The Commission in the SDR NPRM requested the comment on 
the following: ``What would be the most feasible and cost-effective 
method for an SDR to provide direct electronic access to the 
Commission or its designee?'' SDR NPRM supra note 8 at 80906.
---------------------------------------------------------------------------

    DTCC noted its experience with the Trade Information Warehouse for 
OTC credit derivatives \146\ and recommended that the Commission permit 
SDRs to adopt in their discretion the manner and method of providing 
data sets to the Commission. The Commission believes that the manner 
and method of obtaining access to the swap data held by SDRs is the 
function and prerogative of the Commission and should not be left to 
the judgment or discretion of the SDR and its management. In connection 
with its separate comment letter responsive to the Data NPRM, DTCC also 
asserted that the Commission should allow sufficient reporting 
flexibility. As set forth above, the Commission does not believe that 
SDRs should have the discretion or ability to determine the appropriate 
data sets that should be provided to the Commission.
---------------------------------------------------------------------------

    \146\ CL-DTCC II supra note 51.
---------------------------------------------------------------------------

    CME stated that it is impractical to provide Commission staff with 
access identical to that provided to the SDR's CCO because of technical 
considerations.\147\ CME also disagreed with the premise of ``direct 
electronic access'' set forth in Sec.  49.17(c), maintaining that SDRs 
should not be required to provide ``proprietary'' systems to the 
Commission without compensation and without adequate assurances that 
the swap data would remain confidential. Moreover, CME asserted that 
``real-time'' electronic access to the swap data maintained by an SDR 
is not necessary.
---------------------------------------------------------------------------

    \147\ CL-CME supra note 51 at 5-6.
---------------------------------------------------------------------------

    The Commission disagrees with CME's view regarding Commission 
direct electronic access. As stated previously, section 21(c)(4)(A) of 
the CEA mandates that SDRs provide the Commission (or any Commission 
designee) with direct electronic access.\148\ Accordingly, the 
Commission submits that this requirement to provide the Commission with 
direct electronic access is not qualified or at the discretion of the 
SDR. With respect to CME's concern relating to improper disclosure of 
confidential swap data, the Commission notes that section 8 of the CEA 
prohibits the Commission from disclosing information ``that would 
separately disclose the business transactions or market positions of 
any person and trade secrets or names of customers.'' \149\ 
Accordingly, the Commission believes that CME's comments are 
unwarranted and should not serve to limit direct electronic access by 
the Commission and its staff.
---------------------------------------------------------------------------

    \148\ Id.
    \149\ See 7 U.S.C. 12(a). The statutory bar to disclosure of 
``business transactions, market positions and trade secrets'' is 
qualified by several narrowly-defined exceptions set forth in 
section 8(e) of the CEA.
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    NFPE Coalition commented that the Commission should not have access 
to entity data submitted by non-financial entities, including the 
identity of such entities, unless they engage in swaps to the extent 
that their exposure could pose a systemic risk. The Commission notes 
that the Dodd-Frank Act generally provides regulators with the ability 
to monitor and oversee the swaps markets by reviewing and analyzing the 
data to be held by SDRs. The Commission submits that the ability to 
review and analyze all swap transactions (whether by a financial or 
non-financial entity) is essential in order for the entire market to be 
sufficiently monitored and analyzed. The Commission does not agree with 
the NFPE Coalition's view that non-financial entity transactions should 
remain confidential given the direct statutory requirements in section 
21(c)(6) of the CEA that SDRs ``maintain the privacy of any and all 
swap transaction information that the swap data repository receives 
from a swap dealer, counterparty, or any other registered entity.''
    Based on the analysis set forth above relating to proposed Sec.  
49.17(c) and an SDR's statutory duty to provide the Commission or its 
designee with direct electronic access, the Commission is adopting 
Sec.  49.17(c) as proposed. In addition, as discussed above, the 
Commission is also adopting a minor revision to the definition of 
``direct electronic access'' set forth in Sec.  49.17(b)(3) to clarify 
that ``direct electronic access'' would include ``scheduled data 
transfers to Commission's electronic systems.''
(c) Other Regulator Access to SDR Data
    Section 21(c)(7) \150\ of the CEA requires a registered SDR, on a 
confidential basis pursuant to section 8 of the CEA, upon request and 
after notifying the Commission, to make available all data \151\ 
obtained by the registered SDR, to ``Appropriate Domestic Regulators'' 
and ``Appropriate Foreign Regulators.''
---------------------------------------------------------------------------

    \150\ Section 21(c)(7) of the CEA reads:
    A swap data repository shall--* * * on a confidential basis 
pursuant to Section 8, upon request, and after notifying the 
Commission of the request, make available all data obtained by the 
swap data repository, including individual counterparty trade and 
position data, to--(A) each appropriate prudential regulator; (B) 
the Financial Stability Oversight Council; (C) the Securities and 
Exchange Commission; (D) the Department of Justice; and (E) any 
other person that the Commission determines to be appropriate. * * *
    7 U.S.C. 24a(c)(7). Included in the definition of Appropriate 
Domestic Regulators are all domestic entities listed in section 
21(c)(7) and other persons that the Commission has determined to be 
appropriate.
    \151\ The sharing of data with an Appropriate Domestic Regulator 
by a registered SDR is subject to the confidentiality and 
indemnification restrictions in section 21(d) of the CEA, 7 U.S.C. 
24a(d).
---------------------------------------------------------------------------

    The Commission also proposed that the term ``Appropriate Foreign 
Regulator'' be defined in Sec.  49.17. As proposed, the definition of 
``Appropriate Foreign Regulator'' has two parts or elements. First, 
Sec.  49.17(b)(2) defines an Appropriate Foreign Regulator as those 
``foreign regulators'' \152\ with an existing MOU or

[[Page 54553]]

other similar type of information sharing arrangement executed with the 
Commission. Second, Sec.  49.17(b)(2) provides that foreign regulators 
without an MOU with the Commission may be deemed ``Appropriate Foreign 
Regulators'' as determined on a case-by-case basis by the Commission. 
Accordingly, Sec.  49.17 as proposed set forth detailed filing 
procedures for foreign regulators who do not currently have an MOU with 
the Commission to obtain the status of ``Appropriate Foreign 
Regulator.'' The Commission received no comments relating to the 
proposed definition of Appropriate Domestic Regulator and Appropriate 
Foreign Regulator. Accordingly, the Commission is adopting Sec.  
49.17(b) as proposed.
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    \152\ The term ``foreign regulator'' is defined in proposed 
Sec.  49.2(a)(4) to mean ``a foreign futures authority as defined in 
section 1a(26) of the Commodity Exchange Act, foreign financial 
supervisors, foreign central banks and foreign ministries.''
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    The procedure for Appropriate Domestic Regulators or Appropriate 
Foreign Regulators to gain access to the data held and maintained by an 
SDR was detailed in proposed Sec.  49.17(d). First, an Appropriate 
Domestic Regulator or Appropriate Foreign Regulator is required to 
request access with the registered SDR in sufficient detail so that the 
SDR is able to determine the basis of the request. As part of this 
request, the Appropriate Domestic Regulator or Appropriate Foreign 
Regulator must also certify (i) its statutory authority; and (ii) that 
it is acting within the scope of its jurisdiction. The registered SDR 
must then notify the Commission promptly by electronic means of any 
request received from an Appropriate Domestic Regulator or Appropriate 
Foreign Regulator. As proposed, the registered SDR will then provide 
access to the requested swap data if satisfied that the Appropriate 
Domestic Regulator or Appropriate Foreign Regulator is acting within 
the scope of its authority.
    The Commission received one comment from the OCC expressing concern 
that SDRs would serve a ``gate keeping'' function relating to regulator 
access.\153\ OCC maintained that SDRs should not be permitted to 
question the statutory authority of a regulator to receive swaps data 
maintained by the SDR. Although other commenters \154\ did not 
specifically comment on the procedure set forth in Sec.  49.17(d) 
relating to regulators' access, these commenters generally indicated 
that SDRs should operate in a manner that would freely provide 
information to regulators. These commenters viewed the purpose of SDRs 
as one of assisting regulators in fulfilling their regulatory 
obligations. The theme of these comments is that SDRs should serve as 
an impartial vehicle for assisting regulators.
---------------------------------------------------------------------------

    \153\ CL-OCC supra note 51.
    \154\ See CL-DTCC I, CL-TriOptima, CL-Regis--TR and CL-ESMA 
supra note 51.
---------------------------------------------------------------------------

    Upon review of the comments received and the access procedure 
generally, the Commission believes that other regulator access 
(Appropriate Domestic Regulator and Appropriate Foreign Regulators) 
should not be constrained or limited by SDRs. Therefore, the Commission 
is revising proposed Sec.  49.17(d) so that Appropriate Domestic 
Regulator and Appropriate Foreign Regulators when filing a request for 
access are only required to certify that they are acting within the 
scope of their jurisdiction. As proposed, Sec.  49.17(d)(i) required 
the Appropriate Domestic Regulator or Appropriate Foreign Regulator to 
set forth in sufficient detail the basis for its request. The 
Commission is eliminating this requirement in Sec.  49.17(d) as 
adopted. In addition, proposed Sec.  49.17(d)(3) required an SDR to 
provide access to the requested swap data ``if satisfied that the 
Appropriate Domestic Regulator or Appropriate Foreign Regulator is 
acting within the scope of its authority.'' The Commission is also 
revising proposed Sec.  49.17(d)(3) so that Appropriate Domestic 
Regulators' and Appropriate Foreign Regulators' access to SDR swap data 
is provided once the SDR notifies the Commission of the request.
(d) Confidentiality and Indemnification Agreement
    For the purpose of implementing section 21(c)(7) and (d) of the 
CEA, the Commission proposed Sec.  49.18. Consistent with section 
21(d),\155\ Sec.  49.18, as proposed, provided that an Appropriate 
Domestic Regulator or Appropriate Foreign Regulator prior to receipt of 
any requested data or information from a registered SDR must execute a 
``Confidentiality and Indemnification Agreement'' with the registered 
SDR. The Commission further provided in proposed Sec.  49.18 that an 
Appropriate Domestic Regulator or Appropriate Foreign Regulator must 
notify and provide a copy of the Confidentiality and Indemnification 
Agreement to the Commission.
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    \155\ Section 21(d) of the CEA provides:
    Before the swap data repository may share information with any 
entity described in subsection (c)(7)-(1) the swap data repository 
shall receive a written agreement from each entity stating that the 
entity shall abide by the confidentiality requirements described in 
Section 8 relating to the information on swap transactions that is 
provided; and (2) each entity shall agree to indemnify the swap data 
repository and the Commission for any expenses arising from 
litigation related to the information provided under section 8.
    7 U.S.C. 24a(d).
---------------------------------------------------------------------------

    Proposed Sec.  49.18 required that the Confidentiality and 
Indemnification Agreement executed with each Appropriate Domestic 
Regulator and/or Appropriate Foreign Regulator provide that such entity 
abide by the confidentiality requirements set forth in section 8 of the 
CEA relating to the swap data that is to be provided by the registered 
SDR. Moreover, the Confidentiality and Indemnification Agreement must 
provide that each section 21(c)(7) entity agree to indemnify the 
registered SDR and the Commission for any expenses arising from 
litigation relating to the information provided under section 8 of the 
CEA. The Commission received four comments \156\ relating to the 
confidentiality and indemnification agreement requirement and/or 
information sharing among regulators.
---------------------------------------------------------------------------

    \156\ See CL-DTCC I, CL-TriOptima, CL-ESMA and CL-Foreign Banks 
supra note 51.
---------------------------------------------------------------------------

    DTCC stated that proposed Sec.  49.18 is not consistent with the 
OTC Derivatives Regulators' Forum (``ODRF'') \157\ guidelines which 
generally provide that ``[a]uthorities, including central banks, 
prudential supervisors, resolution authorities and market regulators, 
with a material interest in [credit derivatives] information in 
furtherance of their regulatory and/or governmental responsibilities 
should have unfettered access to the relevant data, irrespective of the 
location of the trade repository.'' \158\ Accordingly, DTCC recommended 
that the indemnification provisions of section 21(d) as proposed in 
Sec.  49.18 should not apply where regulators are carrying out 
regulatory responsibilities, acting in a manner consistent with 
international agreements and maintaining the confidentiality of the 
data.\159\ With this recommendation, DTCC requested the

[[Page 54554]]

Commission together with other global regulators provide ``model 
indemnity language'' for use by all repositories or SDRs.
---------------------------------------------------------------------------

    \157\ ODRF includes representatives from central banks, 
prudential supervisors and market regulators from over 20 countries 
globally. The ODRF is not a standard-setting body, but instead, 
supports the application of standards set by other bodies in the 
international regulatory community. The Forum provides an 
environment for regulators and authorities to exchange views and to 
share information related to OTC derivatives central counterparties 
and trade repositories on a regular basis. It also provides mutual 
assistance among the authorities in carrying out their respective 
responsibilities with respect to OTC derivatives. However, it is 
important to note that the ODRF does not supersede any regulator's 
statutory mission or national and otherwise applicable laws.
    \158\ See letter from OTC Derivatives Regulators' Forum to the 
Warehouse Trust Company, dated June 18, 2010. Available at: http://www.dtcc.com/downloads/legal/imp_notices/2010/derivserv/tiw044.zip. 
See also Working Group Report supra note 12.
    \159\ Id.
---------------------------------------------------------------------------

    TriOptima specifically encouraged the Commission to ``adopt as 
flexible as interpretation as possible'' of the indemnification 
provision proposed in Sec.  49.18.\160\ Similarly, ESMA questioned the 
necessity of an indemnification agreement between a foreign regulator 
and a U.S.-registered SDR.\161\ ESMA stated that this proposal would 
undermine the trust necessary among various regulators in connection 
with data access from SDRs. Although not specific to the 
indemnification provision, the Foreign Banks also commented that 
regulators should support cross-border information sharing efforts so 
that a complete picture of the overall swaps market is available for 
supervision and surveillance purposes.\162\
---------------------------------------------------------------------------

    \160\ CL-TriOptima supra note 51 at 3-4.
    \161\ CL-ESMA supra note 51.
    \162\ CL-Foreign Banks supra note 51 at 7.
---------------------------------------------------------------------------

    The Commission is mindful that the Confidentiality and 
Indemnification Agreement requirement set forth in section 21(d) and 
Sec.  49.18 may be difficult for certain domestic and foreign 
regulators to execute with an SDR due to various home country laws and 
regulations. We note in this regard that section 752 of the Dodd-Frank 
Act seeks to ``promote effective and consistent global regulation of 
swaps'' and provides that the CFTC and foreign regulators ``may agree 
to such information-sharing arrangements as may be deemed to be 
necessary or appropriate in the public interest * * *.'' In light of 
this statutory directive, the Commission continues to work to provide 
sufficient access to SDR data to appropriate domestic and foreign 
regulatory authorities.
    The Commission believes that, under the circumstances described 
below, certain Appropriate Domestic Regulators may be provided access 
to the swap data reported and maintained by SDRs without being subject 
to the notice and indemnification provisions of section 21(c)(7) and 
(d).\163\ First, the SDR must be subject to the regulatory 
jurisdiction, and register with, the Appropriate Domestic Regulator. 
Second, consistent with section 21(c)(4)(A) of the CEA, the SDR would 
be permitted to provide direct electronic access to such Appropriate 
Domestic Regulator as a designee of the Commission.\164\ Under these 
circumstances, the Appropriate Domestic Regulator would be provided 
direct electronic access to the SDR subject to the same terms and 
conditions as would apply to the Commission.\165\
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    \163\ Pursuant to the directive set forth in section 712(a) of 
the Dodd-Frank Act, 15 U.S.C. 8302, the Commission has interpreted 
this provision as providing the basis to permit access to the swap 
data maintained by SDRs to Appropriate Domestic Regulators that have 
concurrent regulatory jurisdiction over such SDRs, without the 
application of the notice and indemnification provisions of sections 
21(c)(7) and (d) of the CEA, respectively. As indicated above, the 
SDR, among other things, must be subject to the regulatory 
oversight, and be registered with, the Appropriate Domestic 
Regulator.
    \164\ As part of such designation, the Commission would require 
an Appropriate Domestic Regulator to enter into a MOU or similar 
type of information sharing arrangement with the Commission. See 
section 8(e) of the CEA, 7 U.S.C. 12(a).
    \165\ The Commission notes that certain SDRs are likely to 
register with both the Commission and the SEC because the same 
entity will offer its services for both swaps and security-based 
swaps. In addition, the Board of Governors of the Federal Reserve 
System currently supervises the Warehouse Trust, the global 
repository for credit derivatives. The Commission expects Warehouse 
Trust to register with the Commission as an SDR and continue to be a 
member of the Federal Reserve System, thereby, subject to the 
concurrent jurisdiction of the Commission and the Board of Governors 
of the Federal Reserve System.
---------------------------------------------------------------------------

    In connection with foreign regulatory authorities, the Commission 
believes that confidential swap data reported to, and maintained, by an 
SDR may be appropriately accessed by an Appropriate Foreign Regulator 
without the execution of a Confidentiality and Indemnification 
Agreement when the Appropriate Foreign Regulator is acting in a 
regulatory capacity with respect to a SDR that is also registered with 
the Appropriate Foreign Regulator.\166\ In such dual-registration 
cases, the Appropriate Foreign Regulator may receive information 
directly from the SDR without notice to the Commission and/or the 
execution of the Confidentiality and Indemnification Agreement, subject 
to applicable statutory confidentiality provisions set forth in section 
8 of the CEA.\167\
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    \166\ See section 752 of the Dodd-Frank Act, 15 U.S.C. 8325. 
Consistent with the directive in section 752 to ``promote effective 
and consistent global regulation of swaps,'' the Commission does not 
interpret the notice and indemnification provisions set forth in 
sections 21(c)(7) and (d) of the CEA to apply in circumstances in 
which an Appropriate Foreign Regulator possesses independent 
sovereign legal authority to obtain access to the information and 
data held and maintained by an SDR.
    \167\ See Written Testimony of Gary Gensler, Chairman of the 
Commission, before the U.S House Committee on Financial Services on 
June 16, 2011 available at http://www.cftc.gov/PressRoom/SpeechesTestimony/opagensler-86.html and letter from Gary Gensler, 
Chairman of the Commission, and Mary Schapiro, Chairman of the SEC, 
to Michael Barnier, European Commissioner for Internal Markets and 
Services, European Commission, dated June 8, 2011.
---------------------------------------------------------------------------

    Lastly, The Commission notes that the notice and indemnification 
requirements set forth in section 21(c)(7) and (d) of the CEA would not 
apply when the Commission, pursuant to section 8(e) of the CEA, shares 
confidential information in its possession obtained in connection with 
the administration of the CEA to ``any foreign futures authority, 
department or agency of any foreign government or any political 
subdivision thereof'' acting within the scope of their jurisdiction. 
Thus, Appropriate Foreign Regulators may, pursuant to section 8(e), 
receive SDR Information from the Commission without the execution of 
the Confidentiality and Indemnification Agreement.
    Accordingly, the Commission is adopting Sec.  49.18 as revised to 
provide that SDRs that are dually-registered with the Commission and an 
Appropriate Domestic or Foreign Regulator may provide access without 
the execution of a Confidentiality and Indemnification Agreement. The 
Commission is similarly revising Sec.  49.17(d), as noted above, so 
that Appropriate Domestic and Foreign Regulators with regulatory 
responsibilities over SDRs are not required to file data access 
requests with their regulated repository or SDR.
(e) Third-Party Service Providers Employed by SDRs
    The Commission in the SDR NPRM recognized that SDRs from time to 
time may contract with third parties in order to fulfill certain 
operational and data-related obligations. Data access to a third-party 
service provider may be especially important in connection with certain 
technology and infrastructure services.
    The Commission received one comment letter relating to proposed 
Sec.  49.17(e). MFA was concerned that Sec.  49.17(e) may not be 
sufficient to protect data and information held and maintained by SDRs 
from improper disclosure.\168\ MFA recommended that the Commission 
require the confidentiality procedures between an SDR and a third-party 
service provider to follow the same standard of care and protocol that 
applies to an SDR's obligation to protect confidential swap 
information.
---------------------------------------------------------------------------

    \168\ CL-MFA supra note 51.
---------------------------------------------------------------------------

    The Commission agrees with MFA's recommendation and accordingly has 
revised Sec.  49.17(e) to require that any ``Confidentiality 
Agreement'' between an SDR and a third party include a provision that 
the third-party service provider have the same or equivalent 
confidentiality procedures as the SDR outlined in Sec.  49.16.

[[Page 54555]]

(f) Counterparty Access to SDRs
    The Commission proposed Sec.  49.17(f) to generally prohibit access 
to the swaps data maintained by a registered SDR by market 
participants, such as SDs and MSPs, unless the specific data was 
originally submitted by such party. The underlying basis for this 
regulation was to maintain the privacy and confidentiality of the 
reported data while also limiting potential access to reported swap 
data to the rightful parties to a swap.
    The statutory authority for proposed Sec.  49.17(f) is two-fold. 
First, section 21(c)(6) of the CEA requires registered SDRs to maintain 
the privacy of any and all swap transaction information that the 
registered SDR receives from an SD, counterparty, or any other 
registered entity. Second, section 21(f)(3) \169\ of the CEA requires 
an SDR to establish and enforce rules to mitigate conflicts of 
interest.
---------------------------------------------------------------------------

    \169\ See infra section II.D.4.
---------------------------------------------------------------------------

    The Commission received two comment letters relating to Sec.  
49.17(f). ABC/CIBEA noted that Sec.  49.17(f), as proposed, generally 
prohibits access to swap data maintained by an SDR subject to an 
exception permitting access ``* * * if the specific data was originally 
submitted by such party.'' \170\ ABC/CIEBA asserts that this provision 
would only include the reporting party, and therefore, recommended the 
Commission revise Sec.  49.17(f) so that the exception provides 
``[d]ata and information related to a particular swap that is 
maintained by the registered swap data repository may be accessed by 
either counterparty to that particular swap.'' \171\ The Global FX 
Division similarly indicated that Sec.  49.17(f) should be modified to 
permit both counterparties to a swap to view the reported data that is 
held and maintained by such SDR.\172\
---------------------------------------------------------------------------

    \170\ CL-ABC/CIEBA supra note 51.
    \171\ CL-ABC/CIEBA supra note 51 at 6.
    \172\ CL-Global FX Division supra note 51.
---------------------------------------------------------------------------

    Based on the comments noted above, the Commission is adopting Sec.  
49.17(f) largely as proposed with a revision to Sec.  49.17(f)(2) to 
allow both counterparties to a swap to access information held and 
maintained at an SDR for that particular swap.
(g) Commercial Use of Data
    The Commission in the SDR NPRM proposed Sec.  49.17(g) to generally 
prohibit an SDR from using the data it accepts and maintains for 
commercial or business purposes. As part of this prohibition, Sec.  
49.17(g) required a registered SDR to adopt and implement adequate 
``firewalls'' to protect the swaps data from any improper, commercial 
use. Proposed Sec.  49.17(g)(2) provided for a limited exception to the 
commercial use prohibition if the submitters of the data provide 
express written consent to the SDR that its reported data can be used 
for commercial purposes. The statutory basis for Sec.  49.17(g), as 
proposed, is established in sections 21(c)(6) and 21(f)(3) of the 
CEA.\173\
---------------------------------------------------------------------------

    \173\ See section 728 of the Dodd-Frank Act.
---------------------------------------------------------------------------

    Section 21(c)(6) provides that an SDR shall ``maintain the privacy 
of any and all swap transaction information that the swap data 
repository receives from a swap dealer, counterparty, or any other 
registered entity.'' As indicated in the SDR NPRM, SDRs are expected to 
receive two separate ``streams'' of data: (i) Data related to real-time 
public reporting which by its nature is publicly available; and (ii) 
``core'' regulatory data that is intended for use by the Commission and 
other regulators which is subject to statutory confidential treatment 
(``Core Data''). Accordingly, SDR Information that is not subject to 
real-time public reporting should be treated as non-public and subject 
to the prohibitions on commercial use set for in proposed Sec.  
49.17(g). In this manner, the Core Data could not be accessed, 
disclosed, or used for purposes not related to SDR responsibilities 
under the CEA or the regulations thereunder, unless such use is 
explicitly agreed to by the submitters of the data.
    Section 21(f)(3) of the CEA, Core Principle 3, also provides that 
each SDR must establish and enforce rules to minimize conflicts of 
interest in the decision-making process of the SDR and to establish a 
process for resolving such conflicts.\174\ Because of the inherent 
conflicts in connection with maintaining swap data and SDR operations 
(e.g., the incentive to develop ancillary services using swap data), 
the Commission proposed that ``commercial use'' of any data submitted 
and maintained by an SDR must be severely restricted. The Commission 
was also concerned that an SDR may attempt to use this limited 
``commercial use'' exception as a precondition for accepting non-SD/
non-MSP, SD and/or MSP swap transactions. Accordingly, proposed Sec.  
49.27 required registered SDRs to provide fair, open and equal access 
to its services and must not discriminate against submitters of data 
regardless of whether such a submitter has agreed to any ``commercial 
use'' of its data. The Commission received a total of six comment 
letters relating to the commercialization of data.\175\ Each of these 
comments is discussed in turn below.
---------------------------------------------------------------------------

    \174\ See section 21(f)(3) of the CEA, 7 U.S.C. 24a(f)(3) as 
added by section 728 of the Dodd-Frank Act.
    \175\ See CL-Markit, CL-CME, CL-Argus, CL-DTCC I, CL-DTCC II and 
CL-Better Markets supra note 51.
---------------------------------------------------------------------------

    Markit sought clarification regarding the application of proposed 
Sec.  49.17(g) to the (i) preservation of data ownership rights and 
(ii) the permissible uses of data by an SDR.\176\ Markit recommended 
that regulations relating to the real-time reporting of swap data make 
clear that swap data ownership does not transfer to the SEF, DCM or any 
other regulated entity, as appropriate.
---------------------------------------------------------------------------

    \176\ CL-Markit I supra note 51 at 2.
---------------------------------------------------------------------------

    The Commission believes that (i) counterparty ``consent'' to real-
time reporting proposed in part 43 does not provide consent under 
proposed Sec.  49.17(g) adequate to permit an SDR to use such Core Data 
for commercial purposes; and (ii) regulated entities responsible for 
the public dissemination of real-time swap data should be restricted 
from making commercial use of that data prior to public dissemination. 
The Commission does not agree with Markit's suggestion that the 
commercial use of real-time data by SDRs requires the consent of the 
data owners but, as discussed, has modified Sec.  49.17(g)(3) to 
prohibit SDRs from making commercial use of real-time data before 
disseminating such data publicly.
    CME commented that the Commission should adopt more stringent 
requirements to protect commercialization of data received from any 
entity. Accordingly, CME recommended the Commission revise proposed 
Sec.  49.17(g) so that: (i) The SDR must receive express written 
consent before commercializing any data received, whether the entity is 
a swap counterparty or other registered entity (such as a DCO); (ii) 
the term ``market participant'' should apply more broadly than just to 
counterparties; and (iii) information submitted by a DCO to an SDR 
should not be considered to be aggregated data exempt from the 
commercialization prohibition.\177\
---------------------------------------------------------------------------

    \177\ CL-CME supra note 51 at 4-5.
---------------------------------------------------------------------------

    The Commission shares the CME's view that information submitted to 
an SDR by a registered entity, such as a DCO, is not aggregated data 
exempt from the commercialization prohibition.
    The Commission notes that the definition of ``market participant'' 
set forth in proposed Sec.  49.2(a)(6) applies to various registered 
entities such as DCMs, DCOs and SEFs and, therefore, is not limited to 
swap counterparties.

[[Page 54556]]

However, in terms of proposed Sec.  49.17(g) and the underlying privacy 
provision related to SDRs set forth in section 21(c)(6) of the CEA, the 
Commission agrees with the CME's recommendation for additional clarity 
regarding market participants that are able to consent to the 
commercial use of data. Therefore, consistent with CME's comment, the 
Commission is revising proposed Sec.  49.17(g) by replacing the term 
``market participant'' with the language of section 21(c)(6) of the CEA 
which states ``swap dealer, counterparty, or any other registered 
entity.''
    Argus commented that proposed Sec.  49.17(g) may not be sufficient 
to prevent the indirect commercial use of confidential data held by an 
SDR. In its role of collecting and disseminating information for real-
time reporting of swap transactions, Argus believes that SDRs may seek 
to ``monetize'' or commercially use ``real-time'' data.
    The Commission believes that Sec.  49.17(g) adequately protects 
swap data reported to an SDR from improper disclosure to affiliates of 
the SDR and other third parties. In particular, the Commission notes 
that Sec.  49.17(g)(1) specifically requires that an SDR ``adopt and 
implement adequate `firewalls' to protect the data required to be 
maintained under Sec.  49.12 of this part and section 21(b) of the Act 
from any improper, commercial use.'' \178\ As a preliminary matter, the 
Commission believes that adequate controls or firewalls would require 
SDR staff that is involved with any commercial use of real-time data to 
be restricted from obtaining access to any Core Data. The Commission 
does not support Argus' recommendation that would prohibit the 
commercial use of real-time data by an SDR if such SDR has access to 
non real-time data.
---------------------------------------------------------------------------

    \178\ 17 CFR 49.17(g)(1).
---------------------------------------------------------------------------

    DTCC commented that data reported and maintained by SDRs should not 
be ``commercialized.'' \179\ As a result, DTCC believes that a 
prohibition against commercial uses or practices relating to commercial 
use of SDR data will lead to a more cost efficient and less risky swap 
market. DTCC also submitted that SDRs should provide open access to 
offered services while preserving trading parties' control over the 
reported data maintained by the SDR.\180\ Accordingly, DTCC believes 
that the particular SDR for which a trade is reported should be based 
on the counterparty's selection and not by a SEF, DCO, confirmation 
facility or other service provider.
---------------------------------------------------------------------------

    \179\ CL-DTCC I supra note 51 at 3.
    \180\ CL-DTCC II supra note 51 at 3.
---------------------------------------------------------------------------

    The Commission generally agrees with DTCC's views relating to 
commercialization of data. However, with respect to the selection of 
the SDR by the reporting counterparty,\181\ the Commission notes that 
the reporting counterparty may contractually delegate its decision to 
an agent such as a SEF, DCO, confirmation facility or other service 
provider. Accordingly, the Commission does not believe Sec.  49.17(g) 
requires a revision on this point.
---------------------------------------------------------------------------

    \181\ See proposed Sec. Sec.  45.5-45.7 of the Commission's 
Regulations set forth in the Data NPRM supra note 6.
---------------------------------------------------------------------------

    Better Markets asserted that if the SDR uses data for ``commercial 
purposes'' the SDR must be required to provide the data to the public 
on equal terms as to price, priority and speed of transmittal.\182\ The 
Commission believes that generally the reporting counterparty may 
consent to the commercial use of its data without an additional 
requirement on an SDR to provide such data access to the public on 
equal terms.
---------------------------------------------------------------------------

    \182\ Id. at 13.
---------------------------------------------------------------------------

    The Commission continues to believe that conflicts are inherent in 
the reporting and maintaining of swap data by SDRs, and submits that 
the ``commercial use'' of Core Data should be restricted. However, as 
noted above, an SDR could, consistent with section 8 of the CEA, 
commercially use swap data that was reported on a real-time basis 
pursuant to proposed part 43 of the Commission's Regulations. However, 
the Commission notes that an SDR would be in violation of Sec.  
49.17(g) and if it were to require the express consent of a market 
participant to use any reported data held and maintained by the SDR as 
a condition for the reporting of such swap transaction data. 
Accordingly, the Commission is adopting Sec.  49.17(g) largely as 
proposed subject to the revisions noted above.
8. Emergency Authority Procedures and System Safeguards--Sec. Sec.  
49.23 and 49.24
    Section 21(c)(8) of the CEA requires SDRs to ``establish and 
maintain emergency procedures, backup facilities, and a plan for 
disaster recovery that allows for the timely recovery and resumption of 
operations and the fulfillment of the responsibilities and obligations 
of the organization.'' Proposed Sec. Sec.  49.23 and 49.24 of the 
Commission's regulations implement section 21(c)(8).
    Proposed Sec.  49.23, consistent with former DCM Core Principle 6 
\183\ and new application guidance for both DCMs and SEFs,\184\ 
required SDRs to set forth emergency contingency plans, including the 
designation of officials to act in the event of an emergency, chains of 
command and emergency conflict of interest policies and 
procedures.\185\ Consistent with new core principle 20 for DCMs and new 
core principle 14 for SEFs added by sections 735 and 733 of the Dodd 
Frank Act, respectively, proposed Sec.  49.24 required system 
safeguards for SDRs including business continuity and resumption of 
services plans and coordinated system testing.\186\
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    \183\ Former section 5(d)(6) of the CEA, 7 U.S.C. 7(d)(6); 17 
CFR part 38, App. B, Application Guidance for former Core Principle 
6.
    \184\ The new DCM emergency procedures core principle is also 
enumerated as DCM Core Principle 6 and codified in section 5(d)(6) 
of the CEA, 7 U.S.C. 7(d)(6); it is substantively similar to its 
predecessor. The new SEF emergency procedures core principle is 
enumerated as SEF Core Principle 8 and codified in section 5h(f)(8) 
of the CEA, 7 U.S.C. 7b-3(f)(8).
    \185\ See SDR NPRM supra note 8 at 80911-80912.
    \186\ Core principle 20 (DCMs) and core principle 14 (SEFs) are 
virtually identical and provide that each respective registered 
entity shall ``(A) establish and maintain a program of risk analysis 
and oversight to identify and minimize sources of operational risk, 
through the development of appropriate controls and procedures, and 
the development of automated systems, that are reliable, secure, and 
have adequate scalable capacity; (B) establish and maintain 
emergency procedures, backup facilities, and a plan for disaster 
recovery that allow for the timely recovery and resumption of 
operations and the fulfillment of the responsibilities and 
obligations of the board of trade [or swap execution facility]; and 
(C) periodically conduct tests to verify that backup resources are 
sufficient to ensure continued order processing and trade matching, 
price reporting, market surveillance, and maintenance of a 
comprehensive and accurate audit trail.'' The new DCM Core Principle 
20 is codified in section 5(d)(20) of the CEA, 7 U.S.C. 7(d)(20). 
The new SEF Core Principle 14 is codified in section 5h(f)(14) of 
the CEA, 7 U.S.C. 7b-3(f)(14). See DCM NPRM and SEF NPRM, supra note 
111.
---------------------------------------------------------------------------

    Proposed Sec.  49.24(d) specifically required that SDRs have 
sufficient BC-DR plans and resources to enable a resumption of the 
SDR's operations within one business day following a disruption in SDR 
operations. For SDRs determined by the Commission to be ``critical,'' 
\187\ proposed Sec.  49.24(e)

[[Page 54557]]

required that they (i) implement a disaster recovery plan and BC-DR 
resources sufficient to enable a same-day recovery time objective in 
the event that its normal capabilities become inoperable, including a 
wide-scale disruption; and (ii) maintain geographic dispersal of 
infrastructure and personnel sufficient to enable achievement of a 
same-day recovery time objective, in the event of a wide-scale 
disruption.
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    \187\ The Commission in Sec.  49.24 has not defined a 
``critical'' SDR, but instead, believes a determination of 
``critical'' is a fact-intensive analysis. However, the Commission 
submits that a ``critical'' SDR would be an SDR that is integral to 
the swaps market generally or based on a particular asset class. 
Generally, the Commission will evaluate each SDR on a case-by-case 
basis, giving consideration to whether the SDR provides essential 
reporting and other services (such as swap confirmation and/or risk 
management) that is integral to the swaps market. Because of the 
nature of the swaps market and the essential reporting and 
maintenance of accurate data, the Commission is likely to view 
``critical'' on a collective rather than individual basis. The 
Commission may also consider other relevant factors that it finds 
important such as whether a single or select number of SDRs maintain 
the vast majority of swap transaction data. See Commission, Notice 
of Proposed Rulemaking: Business Continuity and Disaster Recovery, 
75 FR 42,633 (July 22, 2010); Interagency Paper on Sound Practices 
to Strengthen the Resilience of the U.S. Financial System issued by 
the Board of Governors of the Federal Reserve System, the Department 
of the Treasury and the SEC, 68 FR 17,809 (Apr. 11, 2003); SEC, 
Policy Statement Relating to Business Continuity Planning for 
Trading Markets, Exchange Act Release No. 48,545 (Sept. 25, 2003), 
68 FR 56,656 (Oct. 1, 2003).
---------------------------------------------------------------------------

    The Commission received no comments regarding the provisions in 
proposed Sec.  49.23. The Commission received one comment from Chris 
Barnard regarding proposed Sec.  49.24(j).\188\ Barnard, in connection 
with proposed recordkeeping requirements, indicated his view that 
proposed Sec.  49.24(j) should be amended so that SDRs are required to 
keep system safeguard records indefinitely. The Commission notes that 
apart from the specific recordkeeping for reported swap transactions 
set forth in proposed Sec.  49.12, the general recordkeeping 
requirements set forth in Sec.  1.31 of the Commission Regulation's 
would apply to BC-DR testing records.\189\ The Commission believes that 
Sec.  1.31 subjects SDRs to adequate record retention requirements for 
BC-DR testing, and therefore, has not adopted Barnard's recommendation.
---------------------------------------------------------------------------

    \188\ CL-Barnard supra note 51 at 2.
    \189\ Sec.  1.31(a)(1) specifically provides that ``[a]ll books 
and records required to be kept by the Act or by these regulations 
shall be kept for a period of five years from the date thereof and 
shall be readily accessible during the first 2 years of the 5-year 
period. All such books and records shall be open to inspection by 
any representative of the Commission or the United States Department 
of Justice.''See 17 CFR 1.31(a)(1).
---------------------------------------------------------------------------

    Upon review of the comment received and the proposed emergency 
procedures and system safeguard regulations, the Commission is adopting 
Sec.  49.23 and Sec.  49.24 as proposed.

C. Designation of Chief Compliance Officer--Sec.  49.22

    Section 21(e) of the CEA, as amended by section 728 of the Dodd-
Frank Act, establishes the position of CCO and enumerates specific 
responsibilities for CCOs at all SDRs. Section 21(e) contains three 
parts, which, taken together, establish CCOs as the focal points for 
SDRs' compliance with the CEA and applicable Commission regulations. 
Section 21(e) requires, first, that every SDR designate an individual 
to serve as CCO.\190\ Second, it enumerates specific duties for CCOs 
and establishes their responsibilities within an SDR.\191\ Third, it 
outlines the requirements of a mandatory annual report from SDRs to the 
Commission, which must be prepared and signed by an SDR's CCO.\192\
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    \190\ See section 21(e)(1) of the CEA, 7 U.S.C. 24a(e)(1).
    \191\ See section 21(e)(2) of the CEA, adopted as part of the 
Dodd-Frank Act, providing that a CCO shall:
    (A) report directly to the board or to the senior officer of the 
swap data repository; (B) review the compliance of the swap data 
repository with respect to the requirements and core principles 
described in this section; (C) in consultation with the board of the 
swap data repository, a body performing a function similar to the 
board of the swap data repository, or the senior officer of the swap 
data repository, resolve any conflicts of interest that may arise; 
(D) be responsible for administering each policy and procedure that 
is required to be established pursuant to this section; (E) ensure 
compliance with this Act (including regulations) relating to 
agreements, contracts, or transactions, including each rule 
prescribed by the Commission under this section; (F) establish 
procedures for the remediation of noncompliance issues identified by 
the chief compliance officer through any--(i) compliance office 
review; (ii) look-back; (iii) internal or external audit finding; 
(iv) self-reported error; or (v) validated complaint; and (G) 
establish and follow appropriate procedures for the handling, 
management response, remediation, retesting, and closing of 
noncompliance issues.
    7 U.S.C. 24a(e)(2).
    \192\ See section 21(e)(3)(A) of the CEA, adopted as part of the 
Dodd-Frank Act, providing that a CCO shall:
    [A]nnually prepare and sign a report that contains a description 
of--(i) the compliance of the swap data repository of the chief 
compliance officer with respect to this Act (including regulations); 
and (ii) each policy and procedure of the swap data repository of 
the chief compliance officer (including the code of ethics and 
conflict of interest policies of the swap data repository). (B) 
REQUIREMENTS.--A compliance report under subparagraph (A) shall--(i) 
accompany each appropriate financial report of the swap data 
repository that is required to be furnished to the Commission 
pursuant to this section; and (ii) include a certification that, 
under penalty of law, the compliance report is accurate and 
complete.
    7 U.S.C. 24a(e)(3)(A)-(B).
---------------------------------------------------------------------------

    Proposed Sec.  49.22 expanded upon the statutory provisions of 
section 21(e) of the CEA and granted CCOs the authority necessary to 
fulfill their responsibilities.\193\ Proposed Sec.  49.22 is composed 
of six general parts. Proposed Sec.  49.22(a) defined the term ``board 
of directors.'' Proposed Sec.  49.22(b) set forth the requirement that 
each SDR must appoint a CCO, and detailed the minimum qualifications 
for the CCO. Proposed Sec.  49.22(c) provided for the supervisory 
structure that the CCO is subject to within an SDR. Proposed Sec.  
49.22(d) enumerated the duties and responsibilities of the CCO. 
Proposed Sec. Sec.  49.22(e) and (f) detailed the information that must 
be included in the annual compliance report and set forth the process 
by which this report must be submitted to the Commission. Lastly, 
proposed Sec.  49.22(g) detailed the recordkeeping requirements that 
the swap data repository must follow in relation to compliance matters 
and the annual compliance report that is submitted to the Commission.
---------------------------------------------------------------------------

    \193\ See SDR NPRM supra note 51.
---------------------------------------------------------------------------

    The Commission requested comment on a number of issues relating to 
proposed Sec.  49.22. Of particular note were two issues relating to 
the appointment and supervisory structure of the CCO. Due to concerns 
about potential conflicts of interest, the Commission requested comment 
on whether a CCO should be permitted to also serve as the general 
counsel of an SDR or as a member of the SDR's legal department. The 
Commission also requested comment on any additional measures that could 
be required of an SDR to adequately protect CCOs from undue influence 
in the performance of their duties.\194\ These issues, and any comments 
received, are discussed in greater detail below.
---------------------------------------------------------------------------

    \194\ SDR NPRM supra note 8 at 80914.
---------------------------------------------------------------------------

    The Commission received six comments relating to the SDR's CCO 
provisions, including three from potential SDRs, one from an operator 
of a number of registered DCMs, one from a public interest 
organization, and one from a private individual.\195\
---------------------------------------------------------------------------

    \195\ The potential SDR commenters included: TriOptima, Reval 
and DTCC. The public interest organization commenter was Better 
Markets and the private individual commenter was Chris Barnard. CME 
submitted a comment letter on behalf of the four DCMs which it 
operates. See CL-TriOptima, CL-Reval, CL-DTCC I, CL-Better Markets, 
CL-Barnard and CL-CME supra note 51.
---------------------------------------------------------------------------

    In response to persuasive arguments by various commenters, Sec.  
49.22 as adopted includes a number of revisions. The Commission is 
modifying: (1) The qualifications of a CCO to include a requirement 
that the CCO not serve as the general counsel of the SDR or be a member 
of the SDR's legal department; (2) the procedures relating to removing 
the CCO to require that an SDR notify the Commission when a CCO is 
removed; (3) the enumerated duties of the CCO to clarify that potential 
conflicts of interest listed are not exhaustive and that the CCO is not 
required to guarantee compliance with Commission regulations, but only 
to take reasonable steps to ensure compliance; (4) the required 
contents of the annual compliance report that must be submitted to the 
Commission to reflect that policies and procedures cannot guarantee 
compliance with Commission regulations; (5) the

[[Page 54558]]

procedures relating to the submission of the annual compliance report 
to the Commission to clarify that the report must be submitted with the 
annual amendment to Form SDR and to remove certain provisions relating 
to the process by which the Commission may disclose the report to other 
parties; and (6) additional provisions as detailed below.
1. Definition of Board of Directors
    The Commission in proposed Sec.  49.22(a) defined the term ``board 
of directors'' as ``the board of directors of a swap data repository or 
for those swap data repositories whose organizational structure does 
not include a board of directors, a body performing a function similar 
to a board of directors.'' \196\ The Commission also requested comment 
on a number of issues, including whether: (1) There should be 
additional rules around the types of bodies which may perform board-
like functions at an SDR; (2) the proposed definition of board of 
directors appropriately address issues related to parent companies, 
subsidiaries, affiliates, and SDRs located in foreign jurisdictions; 
and (3) the proposed rule allowed for sufficient flexibility with 
regard to an SDR's business structure.\197\
---------------------------------------------------------------------------

    \196\ SDR NPRM supra note 8 at 80934.
    \197\ SDR NPRM supra note 8 at 80913.
---------------------------------------------------------------------------

    The Commission received no comments on the proposed definition of 
board of directors.
    The Commission believes that the flexibility of the proposed 
definition of board of directors adequately reflects the various forms 
of business associations which an SDR could conceivably take, including 
forms which do not include a corporate board of directors. Accordingly, 
the Commission is adopting Sec.  49.22(a) as proposed.
2. Designation and Qualifications of Chief Compliance Officer
    The Commission received three comments related to the designation 
and qualifications of an SDR's CCO, as described in proposed Sec.  
49.22(b)(1) and Sec.  49.22(b)(2), respectively. Two of these comments, 
from Chris Barnard and Better Markets, relate to whether a CCO should 
be allowed to serve as general counsel of the SDR. The third comment, 
from CME, discusses its concern regarding the CCO's authority to 
``enforce'' policies and procedures necessary to fulfill the duties set 
forth for CCOs.\198\
---------------------------------------------------------------------------

    \198\ CL-CME supra note 51 at 7.
---------------------------------------------------------------------------

    Better Markets and Chris Barnard commented that the CCO should not 
be allowed to serve as general counsel or be a member of the legal 
department of the SDR. Both commenters were concerned about the 
conflicts of interest that would result from a CCO also representing 
the SDR in legal matters. In addition to its comment regarding CCO's 
serving as general counsel, Better Markets also commented that in 
situations where there are a number of affiliate organizations, ``a 
single senior CCO should have overall responsibility of each affiliated 
and controlled entity, even if individual entities within the group 
have CCOs.'' \199\
---------------------------------------------------------------------------

    \199\ CL-Better Markets supra note 51 at 10.
---------------------------------------------------------------------------

    Proposed Sec.  49.22(b)(1), pertaining to the designation of a CCO, 
also addresses the authority and resources available to a CCO. In 
connection, CME commented that the use of the word ``enforce'' in 
proposed Sec.  49.22(b)(1)(i) gives the CCO authority that should be 
reserved for senior management.
    The Commission agrees with the comments made by Better Markets and 
Chris Barnard regarding the inherent conflicts of interest that would 
occur if a CCO were to serve as general counsel of an SDR or as an 
attorney in the legal department. Any member of the legal department of 
an SDR must act as an advocate for the SDR and pursue the SDR's self-
interest as narrowly defined by management. If a CCO were to serve as 
general counsel of the SDR or as a member of the legal department, this 
role as an advocate may diverge with the CCO's statutory and regulatory 
responsibilities. The Commission believes that placing both sets of 
obligations in a single individual creates potential conflicts of 
interest, and therefore, has determined to mitigate such potential 
conflicts by prohibiting the CCO of an SDR from serving in the SDR's 
legal department.\200\ As a result, the Commission is revising proposed 
Sec.  49.22(b)(2) to add Sec.  49.22(b)(2)(ii), which states that 
``[t]he chief compliance officer may not be a member of the swap data 
repository's legal department or serve as its general counsel.''
---------------------------------------------------------------------------

    \200\ The Dodd-Frank Act also created the position of CCO for a 
number of other regulated entities, including swap execution 
facilities. For these other regulated entities the Commission 
determined that the conflicts of interest associated with a CCO 
serving as in-house counsel were substantial and prohibited the CCO 
from serving as in-house counsel for these regulated entities. See 
proposed Sec.  37.1501(b)(2)(ii) and SEF NPRM supra note 111 at 
1251.
---------------------------------------------------------------------------

    In other respects, the Commission disagrees with commenters' views 
on the structure and conception of the CCO position. Section 21(e)(2) 
of the CEA requires the CCO to ``resolve any conflicts of interest that 
may arise'' and ``ensure compliance with this Act.'' \201\ These duties 
suggest that the CCO is more than just an advisor to management and 
would have the ability to enforce compliance with the CEA and 
Commission regulations. While the CEA does not specifically use the 
word ``enforce,'' the Commission believes that this language is 
necessary to ensure that CCOs have the authority to fulfill their 
statutory and regulatory obligations and is consistent with the 
statutory directive for the CCO to ``ensure compliance with the Act 
(including regulations).'' \202\ These considerations are particularly 
important given an SDR CCO's unique responsibilities with respect to 
fair and open access requirements set forth in Sec.  49.27 and 
protecting commercially valuable swap data from improper use. The 
Commission notes that the authority granted to the CCO pursuant to 
Sec.  49.22(b)(1)(i) does not include the ability to hire and fire SDR 
personnel other than its compliance staff. For purposes of 
clarification, however, the Commission is adopting a minor modification 
to Sec.  49.22(b)(1)(ii) to state that ``[t]he chief compliance officer 
shall have supervisory authority over all staff acting at the direction 
of the chief compliance officer.'' Section 49.22(b)(1)(ii) now provides 
greater clarity as to the SDR staff that must be under the managerial 
oversight of the CCO.
---------------------------------------------------------------------------

    \201\ Sections 21(e)(2)(C) and (E) of the CEA.
    \202\ Section 21(e)(2)(E) of the CEA.
---------------------------------------------------------------------------

    The Commission believes that Sec.  49.22(b) effectively establishes 
the CCO as the focal point of regulatory compliance at an SDR and 
ensures that the CCO will have the authority to fulfill his or her 
duties as set forth in the CEA and Commission regulations. Accordingly, 
the Commission is adopting Sec.  49.22(b)(1) and Sec.  49.22(b)(2) 
subject to the above modifications.
3. Appointment, Supervision and Removal of Chief Compliance Officer
    As set forth in the SDR NPRM, proposed Sec. Sec.  49.22(c)(1), 
49.22(c)(2) and 49.22(c)(3) provide the supervisory regime applicable 
to CCOs \203\ by requiring that a CCO be appointed by a majority of the 
SDR's board of directors or senior officer, and that a majority of the 
board or senior officer be responsible for approving the CCO's 
compensation; by allowing an SDR with a board of directors to grant 
oversight authority to either its board or to its senior officer; and 
by requiring the approval of a majority of an SDR's board of directors 
for CCO removal (or in the

[[Page 54559]]

case where a SDR has no board of directors, its senior officer).\204\
---------------------------------------------------------------------------

    \203\ SDR NPRM supra note 8 at 80914.
    \204\ Id. at 80934.
---------------------------------------------------------------------------

    Proposed Sec. Sec.  49.22(c)(1) and 49.22(c)(3) sought ``to provide 
an SDR's CCO with a measure of independence from management in the 
performance of his or her duties.'' \205\ However, the Commission 
requested comment regarding any additional measures that should be 
required to adequately protect CCOs from undue influence. The 
Commission was particularly interested in how it might offer such 
protection to a CCO who reports to his or her senior officer, either at 
the SDR's choosing or because the SDR does not have a board of 
directors.
---------------------------------------------------------------------------

    \205\ Id. at 80914.
---------------------------------------------------------------------------

    The Commission specifically requested comments on (1) whether a CCO 
should report to the SDR's board rather than to its senior officer; (2) 
what potential conflicts of interest might arise if a CCO reports to 
the senior officer rather than to the board, and how might those 
conflicts be mitigated; and (3) whether ``senior officer'' of an SDR 
should be a defined term, and if so, how the term should be 
defined.\206\ In addition, the Commission also requested comment on 
whether the provision that would require a majority of a board of 
directors to remove the CCO is sufficiently specific.\207\
---------------------------------------------------------------------------

    \206\ SDR NPRM supra note 8 at 80914.
    \207\ Id.
---------------------------------------------------------------------------

    The Commission received four comments relating to the appointment, 
supervision and removal of a CCO. Three of these comments suggested 
additional measures to protect the CCO from excessive influence by 
management. The fourth commenter requested that, in the final rule, 
SDRs be granted ``a reasonable amount of flexibility in determining how 
certain aspects of the CCO role (e.g., reporting lines, measures to 
ensure CCO independence) will be designed.'' \208\
---------------------------------------------------------------------------

    \208\ See CL-CME supra note 51 at 7.
---------------------------------------------------------------------------

    Chris Barnard and Better Markets both recommended that the ability 
to appoint or remove the CCO be granted to only the independent public 
directors of the board and not of the entire board. Better Markets also 
commented that the CCO ``must have a direct reporting line to the 
independent directors or Audit Committee.'' \209\ Additionally, Better 
Markets stated that the CCO should be required to meet with the entire 
board of directors and the senior officer at least once a year and meet 
with the independent directors at least quarterly. Better Markets 
believes that these quarterly meetings should be required to ensure 
that the independent members of the board can adequately supervise the 
CCO. With regard to compensation, Better Markets commented that the 
CCO's compensation should be set by the independent members of the 
board and should not be the responsibility of the senior officer. Chris 
Barnard also commented on compensation, stating that the compensation 
of the CCO must be ``specifically designed in such a way that avoids 
potential conflicts of interest with its compliance role.'' \210\
---------------------------------------------------------------------------

    \209\ CL-Better Markets supra note 51 at 11.
    \210\ CL-Barnard supra note 51 at 3.
---------------------------------------------------------------------------

    Reval commented that a CCO should have ``a direct reporting line to 
the senior officer of the company,'' but should also report to a 
compliance or audit committee at the board level and have the ability 
to take any compliance matters to this committee if the CCO does not 
feel the senior officer has properly addressed the issue.\211\ 
Additionally, in response to the Commission's request for comment, 
Reval commented that it was not necessary for the Commission to define 
``senior officer.''
---------------------------------------------------------------------------

    \211\ CL-Reval supra note 51 at 10.
---------------------------------------------------------------------------

    As stated above, the proposal, in connection with the oversight and 
reporting structure of the CCO, was modeled on section 21(e)(2)(A) of 
the CEA, which requires a CCO to ``report directly to the board or to 
the senior officer of the swap data repository.'' \212\ However, the 
Commission notes that Sec.  49.22(c) sets forth the minimum standards, 
so that SDRs may implement additional measures if deemed necessary to 
insulate the CCO from influence. The Commission encourages SDRs to 
review and enact conflict mitigation procedures as appropriate for 
their specific corporate and/or organizational structure.
---------------------------------------------------------------------------

    \212\ Section 21(e)(2)(A) of the CEA.
---------------------------------------------------------------------------

    While a majority of commenters expressed their concern that the 
proposed rules do not sufficiently protect the independence of the CCO, 
the Commission believes that the package of protections offered in the 
proposed rules are appropriately calibrated to insulate the CCO from 
day-to-day commercial pressure. The proposed rules set forth detailed 
appointment, supervisory and removal procedures that protect the CCO 
from undue influence. Accordingly, the Commission does not believe it 
is necessary to adopt commenters' recommendations. The Commission has 
revised proposed Sec.  49.22(c)(1) in one respect, however, by 
eliminating the requirement that a CCO's appointment and compensation 
require the approval of a majority of an SDR's board of directors. The 
Commission believes that board approval is a sufficient requirement, 
and that SDRs should have appropriate discretion to determine the 
voting percentage necessary to appoint a CCO or determine their salary.
    However, to further protect the CCO, the Commission will clarify 
and expand on the notification procedures regarding the appointment and 
removal of a CCO. Proposed Sec.  49.22(c)(3) required an SDR to notify 
the Commission within two business days of appointing any new CCO. 
While this would effectively require an SDR to notify the Commission 
whenever a CCO is removed, the Commission believes that an explicit 
requirement is appropriate. Therefore, the Commission is adding the 
following sentence to Sec.  49.22(c)(3): ``The swap data repository 
shall notify the Commission of such removal within two business days.''
    The Commission believes that the appointment, supervisory and 
removal provisions of Sec.  49.22(c) will serve to effectively protect 
the CCO from undue influence and will ensure that the CCO will be 
sufficiently shielded against retaliatory termination by the board or 
the senior officer of the SDR. Accordingly, the Commission is adopting 
Sec.  49.22(c)(2) as proposed and is adopting Sec. Sec.  49.22(c)(1) 
and 49.22(c)(3) subject to the above modifications.
4. Duties of the Chief Compliance Officer
    Proposed Sec.  49.22(d) detailed the duties of a CCO and is based 
on the CCO duties set forth in section 21(e)(2) of the CEA. The 
proposed rule listed the following as duties of the CCO: (1) Overseeing 
and reviewing compliance with the CEA and Commission regulations; (2) 
in consultation with the board of directors or the senior officer, 
resolving any conflicts of interest that may arise; (3) establishing 
and administering written policies and procedures designed to prevent 
violations of the CEA and Commission regulations; (4) ensuring 
compliance with the CEA and Commission regulations relating to 
agreements, contracts, or transactions, and with commission regulations 
under section 21 of the CEA; (5) establishing procedures for the 
remediation of noncompliance issues identified by the chief compliance 
officer; (6) establishing and following appropriate procedures for the 
handling, management response, remediation, retesting, and closing of 
noncompliance issues; and (7) establishing and administering a written 
code of ethics. In expanding on the CCO's duty to resolve conflicts of

[[Page 54560]]

interest, the proposed rule also listed a number of potential conflicts 
that may confront a CCO.\213\ This list of conflicts of interest was 
intended to indicate ``the types of conflicts that the Commission 
believes an SDR's CCOs should be aware of, but [was] not exhaustive.'' 
\214\ Additionally, to assist the CCO in meeting these 
responsibilities, proposed Sec.  49.22(b)(1), granted a CCO oversight 
authority over all compliance functions and staff acting in furtherance 
of those compliance functions.
---------------------------------------------------------------------------

    \213\ SDR NPRM supra note 8 at 80934.
    \214\ Id. at 80914.
---------------------------------------------------------------------------

    In the SDR NPRM, the Commission requested comment on any additional 
CCO duties which the Commission should include, particularly addressing 
a CCO's role in managing conflicts of interest within an SDR, the types 
of conflicts which commenters believe might arise within an SDR, and 
how and by whom those conflicts should be resolved. The Commission also 
requested comment on whether the Commission should adopt a rule that 
prohibits an officer, director or person employed by the SDR or related 
person to coerce, manipulate, mislead, or fraudulently influence the 
CCO in performing his or her duties.\215\
---------------------------------------------------------------------------

    \215\ Id.
---------------------------------------------------------------------------

    The Commission received four comments relating to the duties of an 
SDR's CCO.\216\ Three of the commenters--TriOptima, DTCC and CME--
expressed concern that the enumerated duties of the CCO may cause the 
CCO to infringe on traditionally management functions. CME also stated 
the Commission should not require the CCO to ``ensure'' compliance with 
the CEA and Commission regulations. Additionally, as summarized below, 
Better Markets and DTCC commented on the CCO's duty to resolve any 
conflicts of interest that may arise.
---------------------------------------------------------------------------

    \216\ See CL-TriOptima, CL-DTCC I, CL-CME and CL-Better Markets 
supra note 51.
---------------------------------------------------------------------------

    DTCC expressed its belief that the CCO should not be ``required to 
be responsible for the overall operation of the SDR's business.'' \217\ 
DTCC noted that while there are regulatory components in many areas, 
oversight of certain functions such as operational readiness and data 
security should not be the responsibility of the CCO, but should 
instead remain with senior management. TriOptima expressed similar 
concerns and stated its belief that the CCO's duties should focus on 
establishing, monitoring and reporting on the SDR's compliance 
policies. CME took issue with what it believes is an overly broad set 
of responsibilities assigned to CCOs; it objects to, among other 
provisions, a CCO's duty to ``resolve conflicts of interest.'' \218\ 
While the CEA directs an SDR's CCO to, among other things, ``resolve 
any conflicts of interest that may arise,'' \219\ CME believes that the 
word ``resolving'' in proposed Sec.  49.22(d)(2) gives the CCO 
authority that should be reserved for senior management.
---------------------------------------------------------------------------

    \217\ CL-DTCC I supra note 51 at 27.
    \218\ CL-CME supra note 51 at 7.
    \219\ Section 21(e)(2)(C) of the CEA.
---------------------------------------------------------------------------

    CME also commented on proposed Sec.  49.22(d)(4), which listed 
``ensuring compliance with the Act and Commission regulations relating 
to agreements, contracts, or transactions and with Commission 
regulations under section 21 of the Act'' as one of the CCO's 
duties.\220\ CME believes that instead of requiring the CCO to 
``ensure'' compliance, the rule should require the CCO to ``establish 
policies and procedures reasonably designed to ensure compliance.'' 
\221\
---------------------------------------------------------------------------

    \220\ SDR NPRM supra note 8 at 80934.
    \221\ CL-CME supra note 51 at 4.
---------------------------------------------------------------------------

    DTCC also requested that the Commission provide greater detail as 
to which conflicts of interest the CCO is responsible for resolving. It 
believes that ``the Commission should clarify that the CCO's specific 
responsibilities related to conflicts are limited to compliance with 
the provisions of section 21 of the CEA and the final rules thereunder 
as they relate to the swap operations of an SDR.'' \222\ DTCC also 
suggested a materiality threshold for conflicts that require the CCO to 
consult with the board of directors. Lastly, Better Markets requested 
that the CCO be required to consult with both the independent members 
of the board of directors and the senior officer of the SDR when 
resolving conflicts of interest.
---------------------------------------------------------------------------

    \222\ CL-DTCC I supra note 51 at 28.
---------------------------------------------------------------------------

    The Commission does not agree with those commenters that suggest 
that the proposed duties of the CCO improperly infringe on areas that 
are traditionally management functions. Many of the commenters based 
their objections on their view that the role of a CCO should be limited 
to monitoring compliance and advising management on compliance issues. 
The Commission does not believe that this limited view is appropriate 
for the CCO of an SDR. In listing the duties of a CCO, section 21(e)(2) 
of the CEA specifies that the CCO shall ``resolve any conflicts of 
interest that may arise'' and ``ensure compliance with this Act.'' 
\223\ As stated above, successful execution of these duties will 
require that a CCO have the ability to enforce compliance with the CEA 
and Commission regulations. The Commission believes the language of the 
CEA suggests that the CCO is more than just an advisor to management on 
compliance issues.
---------------------------------------------------------------------------

    \223\ Sections 21(e)(2)(C) and (E) of the CEA, 7 U.S.C. 
24a(e)(2)(C) and (E).
---------------------------------------------------------------------------

    In that regard, the Commission understands that a single individual 
cannot guarantee an SDR's compliance with the CEA and Commission 
regulations. However, an individual can take reasonable steps to ensure 
compliance. Accordingly, the Commission is revising Sec.  49.22(d)(4) 
to state that one of the CCO's duties shall include ``taking reasonable 
steps to ensure compliance with the Act and Commission regulations 
relating to agreements, contracts, or transactions, and with Commission 
regulations under Section 21 of the Act, including confidentiality and 
indemnification agreements entered into with foreign or domestic 
regulators pursuant to Section 21(d) of the Act.''
    The Commission also disagrees with DTCC's comment that a CCO's duty 
to resolve conflicts of interest should be limited to those conflicts 
that relate to the swap operations of an SDR or that there be a 
materiality threshold for the CCO to consult with the board of the SDR. 
The Commission based this duty on the language of section 21(e)(2)(C) 
of the CEA. This section does not limit the CCO's duty to resolve 
conflicts to only those that relate to the swap operations of an SDR, 
nor does it suggest that there be a materiality threshold for 
consultation with the board of directors. Similarly, the Commission 
does not agree with Better Market's recommendation to add a requirement 
that the CCO consult with both the independent members of the board and 
the senior officer when resolving conflicts of interest. However, the 
Commission notes that while section 21(e)(2)(C) of the CEA and Sec.  
49.22(d)(2) do not require SDRs to consult both the independent members 
of the board and the senior officer when resolving conflicts of 
interest, the Commission would be supportive of any SDR that enacts 
this measure.
    In proposed Sec. Sec.  49.22(d)(2)(i)-(iii), the Commission 
identified a number of potential conflicts that may confront a 
CCO.\224\ While the SDR NPRM expressly stated that this list of 
conflicts ``is not exhaustive,'' the Commission believes that Sec.  
49.22(d)(2) should be modified to clarify this point.\225\ Therefore, 
the

[[Page 54561]]

Commission has revised proposed Sec.  49.22(d)(2) to add the word 
``including'' before the list of potential conflicts of interest.
---------------------------------------------------------------------------

    \224\ SDR NPRM supra note 8 at 80934.
    \225\ See SDR NPRM supra note 8 at 80914 which states: ``The 
proposed Regulation also lists a number of potential conflicts that 
may confront a CCO. The list of conflicts of interest indicates the 
types of conflicts that the Commission believes an SDR's CCOs should 
be aware of, but it is not exhaustive.''
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    The Commission believes the revisions to Sec.  49.22(d) discussed 
above will provide greater clarity and effectiveness with respect to 
the duties of an SDR's CCO. Accordingly, the Commission is adopting 
Sec.  49.22(d) largely as proposed, with the modifications detailed 
above for Sec.  49.22(d)(2), and Sec.  49.22(d)(4).
5. Preparation and Submission of Annual Compliance Report
    The Commission in proposed Sec.  49.22(e) detailed the information 
that must be included in the annual compliance report, including a 
description of the SDR's written policies and procedures, an assessment 
by the CCO of the effectiveness of the SDR's policies and procedures in 
ensuring compliance with section 21 of the CEA and a description of any 
material changes to the policies and procedures that were made to these 
since the last annual compliance report.\226\ In addition, proposed 
Sec.  49.22(e) also required the annual report to include a 
certification by the CCO that, under penalty of law, the compliance 
report is accurate and complete.\227\
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    \226\ SDR NPRM supra note 8 at 80934.
    \227\ Id. at 80934-80935.
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    Proposed Sec.  49.22(f)(1) set forth the procedures for review of 
the annual compliance report by the board of directors or senior 
officer of the SDR prior to submission to the Commission and proposed 
Sec.  49.22(f)(2) described the process for the submission of the 
report.\228\
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    \228\ See proposed Sec. Sec.  49.22(f)(1) and(2). Id. at 80935.
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    The Commission requested comment with respect to whether the annual 
compliance report should contain additional content beyond what is 
proposed in Sec.  49.22(e) and whether additional provisions are 
necessary to ensure that an SDR's board of directors cannot adversely 
influence the content of an annual compliance report as drafted by the 
CCO.\229\ Alternatively, the Commission also requested comment on any 
additional provisions that might be necessary to ensure that individual 
directors or other SDR employees have an adequate opportunity to 
register any concerns or objections they might have to the contents of 
an annual compliance report. The Commission received three comments 
regarding the preparation and submission of the annual compliance 
report. Both CME and DTCC commented primarily on the required 
provisions of the report, whereas Better Markets commented on the 
procedures for review by the board and submission to the Commission.
---------------------------------------------------------------------------

    \229\ Id. at 80915.
---------------------------------------------------------------------------

    CME suggested that the Commission require that the SDR's senior 
officer, not its CCO, make the required certification under Sec.  
49.22(e)(7). DTCC expressed its belief that the report should be 
limited to detailing compliance with requirements of the CEA and the 
policies and procedures of the SDR that relate to its swap activities.
    Better Markets supported the requirement that the CCO present the 
report to the board of directors prior to its submission to the 
Commission and proposed that the Board be required to approve the 
report in its entirety or detail where and why it disagrees with any 
provision. Better Markets also proposed that this approval or statement 
of disagreement be submitted to the Commission along with the report. 
DTCC also expressed its concern about public release of the reports and 
stated its belief that the annual report should be kept confidential by 
the Commission and should not be available to the public or to market 
participants.
    The Commission understands that compliance with the CEA and 
Commission regulations cannot be guaranteed by an individual or by any 
policies or procedures and accordingly is revising proposed Sec.  
49.22(e)(2)(i) to require that the annual compliance report identify 
``the policies and procedures that are designed to ensure compliance 
with each subsection and core principle, including each duty specified 
in section 21(c).'' The Commission is also removing proposed Sec.  
49.22(e)(6). While some commenters were supportive of the provision, 
the Commission has determined that it is not necessary as a mandatory 
requirement. The annual compliance report is a product of the CCO and 
intended to reflect his or her assessment of an SDR's compliance. The 
board of directors may append its own comments if desired, but the 
statutory text and the Commission's implementing regulations do not 
require it.
    The Commission disagrees with CME's comment regarding the 
certification requirement for the annual compliance report. While the 
CEA does not explicitly require that the CCO certify the report, it 
does require that the CCO ``annually prepare and sign'' and that the 
report ``include a certification that, under penalty of law, the 
compliance report is accurate and complete.'' \230\ The Commission 
believes that these two requirements read together provide sufficient 
basis for the CCO to certify that the report is accurate and complete. 
However, the Commission is modifying Sec.  49.22(e) to explicitly state 
that the CCO ``sign'' the annual compliance report in order to follow 
the statutory text more closely. The Commission also disagrees with 
DTCC's comment regarding limiting the scope of the report. There is no 
indication in the CEA that the report should be limited to only the 
swap activities of the SDR and the Commission believes there is no 
reason for the report to be limited in such a manner.
---------------------------------------------------------------------------

    \230\ Section 21(e)(3) of the CEA.
---------------------------------------------------------------------------

    The Commission also disagrees with Better Market's suggestion to 
require the board to approve the report in its entirety or submit a 
statement detailing its objection. The Commission believes that 
requiring the board to approve the report would increase the risk that 
the CCO would be subject to undue influence by the board or by 
management. The proposed rule, as modified above, strikes the 
appropriate balance between ensuring that the board cannot adversely 
influence the content of a report and giving the board the opportunity 
to express their opinion of the report to the Commission. Additionally, 
the Commission acknowledges DTCC's concerns regarding public release of 
the report but believes that part 145 of Commission regulations 
sufficiently ensures that the annual compliance report will remain 
confidential. The Commission also does not believe Sec.  49.22(f)(5) is 
necessary to protect the report from unnecessary release to the public 
or market participants. Therefore, the Commission has modified Sec.  
49.22(f) to remove Sec.  49.22(f)(5).
    Section 21(e)(3)(B)(i) of the CEA requires that an annual 
compliance report ``accompany each appropriate financial report of the 
swap data repository that is required to be furnished to the Commission 
pursuant to this section.'' \231\ Under the proposed rules, since an 
SDR's year-end financial information must be submitted as an exhibit to 
Form SDR, the annual compliance report was required to accompany this 
annual amendment to Form SDR.\232\ Because this language was missing 
from proposed Sec.  49.22(f)(2), the Commission has revised Sec.  
49.22(f)(2) to state that ``The annual compliance report shall be 
provided electronically

[[Page 54562]]

to the Commission not more than 60 days after the end of the registered 
swap data repository's fiscal year, concurrently with the filing of the 
annual amendment to Form SDR that must be submitted to the Commission 
pursuant to Sec.  49.3(a)(5) of this part.''
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    \231\ Section 21(e)(3)(B)(i) of the CEA.
    \232\ See Exhibits M and N of proposed Form SDR set forth in the 
SDR NPRM supra note 8 at 80943.
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    The Commission believes that Sec. Sec.  49.22(e) and (f) 
successfully establish requirements to ensure that the annual 
compliance report accomplishes the regulatory goal of providing the 
Commission with a complete and accurate picture of an SDR's regulatory 
compliance program. Accordingly, the Commission is adopting Sec. Sec.  
49.22(e) and (f) as proposed, with the exception that Sec. Sec.  
49.22(e), 49.22(e)(2)(i), 49.22(e)(6), 49.22(f)(2), and 49.22(f)(5) are 
revised as detailed above.
6. Recordkeeping
    Proposed Sec.  49.22(g) detailed recordkeeping requirements for 
records relating to a CCO's areas of responsibility. This proposed 
regulation required an SDR to maintain: (1) A copy of its written 
policies and procedures, including its code of ethics and conflicts of 
interest policies; (2) copies of all materials, including written 
reports provided to the board of directors in connection with review of 
the annual report, as well as the board minutes or other similar 
written records, that record the submission of the annual compliance 
report to an SDR's board of directors or its senior officer; and (3) 
any records relevant to an SDR's annual report. The proposed rule 
required SDRs to maintain these records in accordance with Sec.  1.31 
of the Commission's regulations.
    The Commission received one comment regarding the compliance 
recordkeeping provisions in proposed Sec.  49.22(g) from Chris Barnard, 
who recommended that compliance records be kept indefinitely.
    As stated in the SDR NPRM, the Commission designed Sec.  49.22(g) 
to ensure that Commission staff would be able to obtain the information 
necessary to determine whether an SDR has complied with the CEA and 
applicable regulations.\233\ The Commission believes that proposed 
Sec.  49.22(g) successfully accomplishes this goal in accordance with 
existing Commission regulation Sec.  1.31 which requires that regulated 
entities maintain records for five years. Accordingly, the Commission 
is adopting Sec.  49.22(g) as proposed.
---------------------------------------------------------------------------

    \233\ Id. at 80915.
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D. Core Principles Applicable to SDRs--Sec.  49.19

    Proposed Sec. Sec.  49.19-49.21 implement the three substantive 
core principles prescribed by section 21(f) of the CEA for registered 
SDRs.\234\ The Commission is largely adopting the core principles as 
proposed. Each core principle is discussed in turn below.
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    \234\ Section 21(f)(4), 7 U.S.C. 24a(f)(4), establishes as a 
fourth core principle Commission authority to establish additional 
rules for registered SDRs. The Commission proposed and is today 
adopting Sec. Sec.  49.25-49.27 pursuant to this authority. These 
rules are discussed in section E, below.
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1. Antitrust Considerations (Core Principle 1)
    Core Principle 1 directs SDRs to consider competition issues in 
connection with its rules and/or activities.\235\ The Commission is 
adopting as proposed Sec.  49.19 (Core Principle 1),\236\ which 
provides that unless appropriate to achieve the purposes of the CEA, a 
registered SDR shall avoid adopting any rule or taking any action that 
results in any unreasonable restraint of trade, or imposing any 
material anticompetitive burden on trading, clearing or reporting 
swaps. Like all core principles, Sec.  49.19 directly incorporates 
statutory language, and the absence of particular guidance or safe 
harbors at this time does not diminish an SDR's obligation to comply 
with the core principle itself.
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    \235\ The Commission itself is required to consider the 
antitrust laws in fulfilling its statutory obligations. Section 
15(b) of the CEA provides that the Commission shall take into 
consideration the public interest to be protected by the 
antitrustlaws and endeavor to take the least anticompetitive means 
of achieving the objective of this chapter, as well as the policies 
and purposes of this chapter, in issuing any order or adopting any 
Commission rule or regulation * * * or in requiring or approving any 
bylaw, rule or regulation of a contract market or registered futures 
association * * *
    \236\ The Commission received no comments in connection with 
proposed Sec.  49.19.
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2. Governance Arrangements (Core Principle 2) and Conflicts of Interest 
(Core Principle 3)
    Section 21(f)(2) of the CEA, Core Principle 2, requires that each 
SDR establish governance arrangements that are transparent to fulfill 
public interest requirements and to support the objectives of the 
Federal Government, owners, and participants. Section 21(f)(3) of the 
CEA, Core Principle 3, provides that each SDR must establish and 
enforce rules to minimize conflicts of interest in the decision-making 
process of the SDR and to establish a process for resolving such 
conflicts. In the SDR NPRM, the Commission proposed regulations 
regarding (i) the transparency of SDR governance arrangements (Proposed 
Sec.  49.20) and (ii) SDR identification and mitigation of existing and 
potential conflicts of interest (Proposed Sec.  49.21), in order to 
implement Core Principles 2 and 3, respectively.
    The Commission received ten comments from interested parties.\237\ 
As discussed below, the Commission is adopting Sec.  49.20 and Sec.  
49.21 substantially as proposed, subject to the revisions described 
below.
---------------------------------------------------------------------------

    \237\ See CL-AFR, CL-CME, CL-Council, CL-DTCC I, CL-DTCC II, CL-
Reval II, CL-TriOptima, CL-Better Markets, CL-ABC/CIEBA and CL-
Barnard supra note 51.
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3. Governance Arrangements (Core Principle 2)--Sec.  49.20
(a) Transparency of Governance Arrangements
    Proposed Sec.  49.20(a) required each registered SDR to establish 
governance arrangements that are well-defined and include a clear 
organizational structure with consistent lines of responsibility and 
effective internal controls.\238\ In addition, proposed Sec.  49.20(b) 
mandated certain minimum standards for the transparency of SDR 
governance arrangements. These minimum standards required an SDR to: 
(1) Include a statement in its charter documents regarding the 
transparency of its governance arrangements, and the manner in which 
such transparency supports the objectives of the Federal Government; 
(2) make available certain information to the public and relevant 
authorities;\239\ (3) ensure that the information made available is 
current, accurate, clear and readily accessible; and (4) disclose 
summaries of significant decisions in a sufficiently comprehensive and 
detailed fashion so that the public and relevant authorities would have 
the ability to discern the SDR policies or procedures implicated and 
the manner in which SDR decisions

[[Page 54563]]

implement or amend such policies or procedures.\240\ Proposed Sec.  
49.20(b) would not require SDRs to publicly disclose minutes of board 
of directors or committee meetings, however, disclosure to the 
Commission would be required upon request.
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    \238\ See SDR NPRM supra note 8 at 80932-80933.
    \239\ Such information includes: (i) The registered SDR mission 
statement; (ii) the mission statement and/or charter of the 
registered SDR Board of Directors and certain committees; (iii) the 
board of directors nominations process of the registered SDR, as 
well as the process for assigning members of the board of directors 
or other persons to certain committees; (iv) names of all members of 
(a) the board of directors and (b) certain committees; (v) a 
description of how the board of directors and certain committees 
consider an independent perspective in their decision-making 
processes; (vi) the lines of responsibility and accountability for 
each operational unit of the registered SDR; and (vii) summaries of 
significant decisions implicating the public interest, the rationale 
for such decisions, and the process for reaching such decisions. 
These significant decisions include decisions relating to pricing of 
repository services, the offering of ancillary services, access to 
data, and the use of SDR Information. SDR NPRM supra note 8 at 
80916.
    \240\ SDR NPRM supra note 8 at 80933 n.116.
---------------------------------------------------------------------------

    The Commission received no comments addressing proposed Sec.  
49.20(a), but received two comment letters related to proposed Sec.  
49.20(b). One comment, from the Council, discussed the need for greater 
transparency in certain areas including SDR director independence. 
TriOptima's comment related to the public disclosure of summaries of 
significant decisions implicating the public interest.
    The Council commented that the Commission's proposal relating to 
the public disclosure of an SDR's mission statement, board nomination 
process and board committee assignment process is consistent with the 
Council's best practices for corporate boards.\241\ However, the 
Council requested that the Commission consider whether there should be 
greater transparency with respect to: (1) Director independence; (2) 
the board's role in risk oversight; and (3) director compensation in 
the final rule.\242\
---------------------------------------------------------------------------

    \241\ CL-Council supra note 51 at 1.
    \242\ Id. at 2.
---------------------------------------------------------------------------

    TriOptima expressed its concern regarding proposed Sec.  
49.20(b)(vii), which required each registered SDR to make available to 
the public and relevant authorities, including the Commission, 
summaries of significant decisions implicating the public 
interest.\243\ As an alternative to public disclosure, TriOptima 
proposed that the Commission require SDRs to make ongoing reports to 
the Commission regarding board of directors and committee decisions 
that affect SDR compliance with the applicable regulations, 
particularly changes to its procedures and compliance status.\244\
---------------------------------------------------------------------------

    \243\ CL-TriOptima supra note 51 at 5.
    \244\ Id.
---------------------------------------------------------------------------

    The Commission has considered the Council's comments regarding the 
need for greater transparency with respect to: (1) Director 
independence; (2) the board's role in risk oversight and (3) director 
compensation, and has concluded that the proposed minimum transparency 
requirements are sufficient to support the objectives of the Federal 
Government and fulfill the public interest. With respect to TriOptima's 
proposed alternative regarding the public disclosure of significant 
decisions, the Commission declines to adopt TriOptima's recommendation 
to report only SDR board of directors or committee decisions that would 
affect the SDR's compliance with the Commission's regulations and to 
limit such reporting to the Commission solely. Since an SDR is required 
to have governance arrangements that are transparent to fulfill the 
public interest,\245\ the Commission believes that the public should be 
fully informed of the manner in which an SDR satisfies such 
requirement. The Commission emphasizes, however, that SDRs should not 
be required to disclose Section 8 Material (as defined in Sec.  
49.2(a)(14)) or, where appropriate, information that the SDR may have 
received on a confidential basis from a reporting entity. Accordingly, 
the Commission has adopted Sec.  49.20(a) as proposed and has revised 
Sec.  49.20(b) to exclude the disclosure of Section 8 Material and, 
where appropriate, information received by an SDR from a reporting 
entity on a confidential basis.
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    \245\ Section 21(f)(2) of the CEA, 7 U.S.C. 24a(f)(2).
---------------------------------------------------------------------------

(b) Consideration of an Independent Perspective
    In proposed Sec.  49.20(c)(1)(i)(A), the Commission required that 
each registered SDR establish, maintain, and enforce policies and 
procedures to ensure that (i) its board of directors, as well as (ii) 
any SDR committee that has the authority to (A) act on behalf of the 
board of directors or (B) amend or constrain the action thereof, 
adequately considers a perspective independent of competitive, 
commercial, or industry interests in its deliberations.\246\ As 
discussed in the SDR NPRM, ``the Commission believes that the board of 
directors, as well as each abovementioned committee, would be more 
likely to contemplate the manner in which a decision might affect all 
constituencies, and less likely to concentrate on the manner in which a 
decision affects the interests of the control group, if it integrates 
an independent perspective in its deliberations.'' \247\ Therefore, in 
counterbalancing the perspective of certain reporting entities 
controlling an SDR, the Commission believes that the integration of an 
independent perspective would aid in addressing the conflicts of 
interest identified in the SDR NPRM. The Commission also proposed that 
the independent perspective be reflected in the nominations process for 
the board of directors, as well as the process for assigning members of 
the board of directors or other persons to the abovementioned class of 
committees. Thus, proposed Sec.  49.20(c)(1)(i)(B) also required each 
registered SDR to establish, maintain, and enforce policies and 
procedures to ensure that such nominations and assignment processes 
adequately incorporate an independent perspective. In addition to the 
independent perspective requirement, the Commission proposed to promote 
the transparency of governance arrangements through proposed Sec.  
49.20(c)(1)(ii), which required that a registered SDR meet certain 
reporting requirements relating to its board of directors, as well as 
each SDR committee of the type mentioned above.\248\
---------------------------------------------------------------------------

    \246\ SDR NPRM supra note 8 at 80917 (discussing the importance 
of the independent perspective in mitigating conflicts of interest).
    \247\ Id.
    \248\ Specifically, the Commission proposed to require an SDR to 
submit the following within thirty (30) days after an election of 
the board of directors: (i) For the board of directors, as well as 
each such committee, a list of all members; (ii) a description of 
the relationship, if any, between such members and the SDR or its 
affiliates; and (iii) any amendments to the policies and procedures 
that the SDR maintains with respect to consideration of the 
independent perspective. See SDR NPRM supra note 8 at 80933.
---------------------------------------------------------------------------

    The Commission received no comments regarding the reporting 
requirements in Sec.  49.20(c)(1)(ii) and has adopted this regulation 
as proposed. The Commission received three comment letters regarding 
its proposed independent perspective requirement.\249\
---------------------------------------------------------------------------

    \249\ See CL-DTCC II, CL-Barnard and CL-Reval II supra note 51.
---------------------------------------------------------------------------

    DTCC recommended that SDR conflicts of interest be mitigated 
through the imposition of structural governance requirements designed 
to ensure an independent perspective on the board of directors and 
committees, as well as broad representation from all classes of market 
participants.\250\ In addition, DTCC indicated that an SDR should have 
governance that is independent from its affiliates and that such 
independence and the broad representation of market participants would 
support the Commission's open access provisions.\251\ Barnard suggested 
that the Commission require an SDR to have independent public directors 
on their boards of directors and any committee that has authority to 
act on behalf of the board directors or amend or constrain the action 
of the board of directors.\252\ Reval recommended that the Commission 
prohibit a representative of a reporting entity from sitting on a board 
committee that

[[Page 54564]]

nominates public directors or governs compliance, or on any other 
relevant committee.\253\
---------------------------------------------------------------------------

    \250\ CL-DTCC I supra note 51 at 16.
    \251\ Id.
    \252\ CL-Barnard supra note 51 at 3.
    \253\ CL-Reval supra note 51 at 5.
---------------------------------------------------------------------------

    The Commission agrees with DTCC regarding the importance of open 
access, and notes that proposed Sec. Sec.  49.20 and 49.21 complement 
the proposed SDR open access requirements set forth in Sec.  49.27. The 
Commission notes that an SDR could choose to have governance that is 
independent from affiliates, as one of a number of complementary 
methods to ensure the consideration of an independent perspective. 
However, the Commission declines to include a ``fair representation'' 
requirement as DTCC recommends. Section 21(f)(2) of the CEA requires an 
SDR to establish governance arrangements that are transparent (i) to 
fulfill public interest requirements; and (ii) to support the 
objectives of the Federal Government, owners, and participants. The 
Commission observes that even if an SDR is governed by a broad cross-
section of market participants, such governance may not serve the 
public interest. For example, if an SDR is governed by three 
constituencies with equal voice and two are conflicted (but in the same 
direction), the decision of such conflicted constituencies would stand.
    With respect to requiring an SDR to include public directors on its 
board of directors and any committee that has authority to act on 
behalf of the board directors or amend or constrain the action of the 
board of directors, the Commission declines to mandate the method in 
which an SDR incorporates the consideration of an independent 
perspective on its board of directors or committees. As discussed 
below, the Commission believes that it is appropriate to afford SDRs 
more flexibility in determining their ownership, and governance, 
structures. The Commission notes that an SDR's implementation of the 
``public director'' concept (e.g., as explicitly set forth for DCOs, 
DCMs and SEFs) would be one method of meeting the requirement to 
consider an independent perspective with a greater degree of certainty.
    The Commission also declines to adopt Reval's recommendation with 
respect to the board and committee nominations processes. The 
Commission believes that the inclusion of an independent perspective in 
the board nominations process, as well as on board committees that 
govern compliance (or other relevant committees), is sufficient to 
counterbalance the perspective of reporting entities that sit on such 
bodies, especially given the Commission's preference to afford SDRs 
flexibility. Accordingly, the Commission is adopting the ``independent 
perspective'' requirement in Sec.  49.20(c)(1) as proposed.
(c) Structural Governance Requirements and Limitations on Ownership of 
Voting Equity and the Exercise of Voting Rights
    Although the Commission did not propose specific structural 
governance requirements relating to the composition of the Board of 
Directors and the establishment of board committees for SDRs or 
limitations on ownership of SDR voting equity and the exercise of 
voting rights, the Commission requested comment on the imposition of 
such requirements and limitations in the SDR NPRM.\254\ Six commenters 
\255\ addressed the necessity of such requirements for SDRs, and two 
commenters \256\ discussed the effect of such requirements on 
competition.
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    \254\ SDR NPRM supra note 8 at 80917.
    \255\ See CL-AFR, CL-Barnard, CL-Better Markets, CL-DTCC I, CL-
Reval and CL-TriOptima supra note 51.
    \256\ See CL-Reval and CL-TriOptima supra note 51.
---------------------------------------------------------------------------

    AFR, Barnard and Better Markets \257\ suggested that, at a minimum, 
the SDR governance regulations should contain the same board 
composition requirements and ownership and voting limitations that the 
Commission proposed for DCOs, DCMs, and SEFs in the Conflicts of 
Interest Notice of Proposed Rulemaking.\258\ AFR submitted that ``the 
information controlled by SDRs can create conflicts that are 
potentially as great as many of the conflicts that could exist for 
other derivatives infrastructure organizations'' such as DCOs, DCMs, 
and SEFs,\259\ while Better Markets submitted that the potential 
conflicts of interest for an SDR stem from the SDR being dominated by 
or subject to the direct or indirect influence of their major 
customers--large financial institutions which generate the data that an 
SDR collects, manages and distributes.\260\ For these reasons, both AFR 
and Better Markets believe that SDR governance regulations should 
parallel the governance rules of a DCO, DCM and SEF.
---------------------------------------------------------------------------

    \257\ CL-AFR supra note 51 at 2; CL-Barnard, supra note 51 at 3 
(stating that there should be a level playing field between SDRs and 
DCOs with respect to board membership requirements and ownership and 
voting limits); and CL-Better Markets supra note 51 at 10.
    \258\ Commission, Notice of Proposed Rulemaking: Requirements 
For Derivatives Clearing Organizations, Designated Contract Markets, 
And Swap Execution Facilities Regarding The Mitigation Of Conflicts 
Of Interest, 75 FR 63732 (Oct. 18, 2010) (``Conflicts of Interest 
NPRM''). In the Conflicts of Interest NPRM, the Commission proposed 
rules to mitigate potential conflicts of interest in the operation 
of a DCO, DCM, and SEF through (i) structural governance 
requirements and (ii) limits on the ownership of voting equity and 
the exercise of voting power. The proposed structural governance 
requirements include composition requirements for DCO, DCM, or SEF 
Boards of Directors. Specifically, such boards must be composed of 
at least 35 percent, but no less than two, public directors. With 
respect to limits on ownership of voting equity and the exercise of 
voting power, the proposed rules limit DCM or SEF members (and 
related persons) from beneficially owning more than twenty (20) 
percent of any class of voting equity in the registered entity or 
from directly or indirectly voting an interest exceeding twenty (20) 
percent of the voting power of any class of equity interest in the 
registered entity. With respect to a DCO only, the proposed rules 
require a DCO to choose one of two alternative limits on the 
ownership of voting equity or the exercise of voting power. Under 
the first alternative, no individual member may beneficially own 
more than twenty (20) percent of any class of voting equity in the 
DCO or directly or indirectly vote an interest exceeding twenty (20) 
percent of the voting power of any class of equity interest in the 
DCO. In addition, the enumerated entities, whether or not they are 
DCO members, may not collectively own on a beneficial basis more 
than forty (40) percent of any class of voting equity in a DCO, or 
directly or indirectly vote an interest exceeding forty (40) percent 
of the voting power of any class of equity interest in the DCO. 
Under the second alternative, no DCO member or enumerated entity, 
regardless of whether it is a DCO member, may own more than five (5) 
percent of any class of voting equity in the DCO or directly or 
indirectly vote an interest exceeding five (5) percent of the voting 
power of any class of equity interest in the DCO. The proposed rules 
also provide a procedure for the DCO to apply for, and the 
Commission to grant, a waiver of the limits specified in the first 
and second alternative.
    \259\ CL-AFR supra note 51 at 2.
    \260\ CL-Better Markets supra note 51 at 9-10.
---------------------------------------------------------------------------

    Only one commenter stated that ownership and voting limitations 
should not be considered for SDRs.\261\ DTCC indicated that the 
imposition of such limitations ``would be an imprecise tool with which 
to achieve the policy goals of the Commission regarding conflicts of 
interest.'' \262\
---------------------------------------------------------------------------

    \261\ See CL-DTCC I and CL-DTCC II supra note 51 at 16 and 2, 
respectively.
    \262\ Id.
---------------------------------------------------------------------------

    Reval and TriOptima expressed the concern that, as proposed, 
Sec. Sec.  49.20 and 49.21 would create an ``uncompetitive 
environment'' by deterring independent service providers from 
registering as SDRs.\263\ Both Reval and TriOptima recommended that the 
Commission impose certain structural governance requirements and/or 
ownership and voting limitations to market participants that own or 
control an SDR to mitigate such an anticompetitive effect. 
Specifically, Reval recommended that the Commission require that (i) no 
financial entity, swap dealer, or major swap participant be allowed to 
become an SDR, (ii) no SDR permit its equity or

[[Page 54565]]

debt to be held by any market participant that, together with its 
related persons, would have more than 5 percent of the notional 
principal swap volume in the asset class for which the SDR is 
registering, and (iii) no SDR permit any market participant to hold 
more than 5 percent of its equity (or alternatively, 20 percent, if the 
Commission believes that 5 percent is too low a threshold).\264\ 
TriOptima recommended that potential conflicts of interest and 
compliance with the applicable Core Principles be addressed by more 
tailored rules that distinguish between ``Independent SDRs'' and ``Tied 
SDRs,'' which are actually or presumptively, controlled by swap market 
participants.\265\ Therefore, TriOptima suggested that the Commission 
adopt a two-tiered approach to mitigating SDR conflicts of 
interest.\266\ Under this approach, ``Tied SDRs'' would be subject to 
the full panoply of conflicts of interest and governance requirements, 
including (i) restrictions on ownership and voting rights, (ii) 
provisions for board nominations procedures and public directors, and 
(iii) requirements for policies and procedures to ensure that board 
members and certain committees do not favor the interests of a control 
group. In contrast, ``Independent SDRs'' would be subject only to 
requirements that concentrate on procedures, reporting and examination, 
which would ensure that changes in the SDR's business, governance 
structure or organization do not adversely affect impartiality.\267\
---------------------------------------------------------------------------

    \263\ CL-Reval supra note 51 at 5 and CL-TriOptima supra note 51 
at 4.
    \264\ CL-Reval supra note 51 at 4. Reval suggested that bank-
related trade repositories be permitted to be a third-party 
reporting entity that can, on behalf of its owners, report to a 
registered SDR.
    \265\ CL-TriOptima supra note 51 at 4. TriOptima defines a Tied 
SDR as an SDR with voting stock that is more than 50 percent owned 
or controlled, directly or indirectly, by one or more market 
participants, or where a majority of its board was nominated or 
appointed, directly or indirectly, by one or more market 
participants, or where the Commission has determined, after 
examination and review, that an SDR is under effective control of 
one or more market participants. TriOptima defines an Independent 
SDR as one that meets none of the above criteria.
    \266\ CL-TriOptima supra note 51 at 4.
    \267\ Id.
---------------------------------------------------------------------------

    In determining the appropriate regulatory approach for the 
governance and the mitigation of potential conflicts of interest in the 
operation of DCOs, DCMs, SEFs and SDRs, the Commission examined the 
ways in which such entities exercised discretion in performing their 
respective functions. The Commission notes that the discretion 
exercised by a DCO, DCM or SEF with respect to their ability to 
influence participation on the entity (e.g., execution, clearing 
membership, portfolio compression) or the acceptance of all trades in 
an asset class differs significantly from that of an SDR. The 
Commission agrees with DTCC that an SDR lacks discretion similar to 
that exercised by DCOs, DCMs and SEFs in its collection and maintenance 
of data related to swap transactions in that ``the SDR is not defining 
the reporting party, timeliness, or content for public dissemination, 
and similarly the SDR is not defining the reporting party, content, or 
process for regulatory access. The SDR does not have significant 
influence over the inclusion or omission of information in the 
reporting process, nor does it control the output of the process.'' 
\268\ Accordingly, the Commission believes that it is appropriate to 
afford SDRs more flexibility in determining their ownership and 
governance structures, in contrast to DCOs, DCMs and SEFs and declines 
to impose additional structural governance requirements and ownership 
and voting limitations on SDRs. However, the Commission may in the 
future re-examine SDR governance requirements based on changing 
conditions and/or market developments.
---------------------------------------------------------------------------

    \268\ CL-DTCC I supra note 51 at 16.
---------------------------------------------------------------------------

    The Commission has also considered and rejected Reval and 
TriOptima's recommendations to impose limitations on SDR ownership and 
voting equity as well as separate regulatory schemes for independent 
and tied/market participant owned or controlled SDRs. Preliminarily, 
the Commission notes that the Dodd-Frank Act neither endorses nor 
discourages a particular SDR market structure (e.g., the ``public 
utility'' or the ``for-profit'' model); from a policy perspective, so 
long as an entity complies with the CEA and the regulations thereunder, 
the Commission has no preference whether the entity is an ``Independent 
SDR,'' a ``Tied SDR,'' or a market-participant owned or controlled SDR. 
The Commission acknowledges that control of an SDR by one or more 
reporting entities may lead to conflicts of interest; however, the 
Commission notes that ownership is only one form of control. The 
Commission believes that the substantive requirements (e.g., 
transparency of governance arrangements, consideration of an 
independent perspective, policies and procedures on conflicts of 
interest) proposed in part 49 appropriately mitigate SDR conflicts of 
interest, especially in conjunction with (i) non-discrimination 
requirements regarding access and fees; and (ii) limitations on 
disclosure and use of non-public information. Moreover, the Commission 
notes that these substantive requirements are the minimum requirements 
necessary to ensure the adequacy of governance arrangements and the 
amelioration of conflicts of interest, for an ``Independent SDR,'' a 
``Tied SDR,'' or a market-participant owned or controlled SDR.
    (d) Substantive Requirements for SDR Boards of Directors (and 
Certain SDR Committees)
    The Commission proposed a number of substantive requirements for 
SDR boards of directors and certain SDR committees to mitigate existing 
and potential conflicts of interest. Proposed Sec.  49.20(c)(5) 
required that the SDR board of directors, SDR senior management, and 
members of any SDR committee that has the authority to (i) act on 
behalf of the board of directors; or (ii) amend or constrain the 
actions thereof, in each case, have the following attributes: (a) 
Sufficiently good reputations; (b) the requisite skills and expertise 
to fulfill their responsibilities in the management and governance of 
the registered SDR; (c) a clear understanding of such responsibilities; 
and (d) the ability to exercise sound judgment about SDR affairs.
    In addition to the expertise requirement, the Commission proposed 
other substantive requirements in Sec.  49.20(c) to enhance the 
accountability of SDR boards of directors to the Commission.
    The Commission received one comment regarding the substantive 
requirements for SDR boards of directors and certain committees. DTCC 
addressed the expertise requirement in proposed Sec.  49.20(c)(5). DTCC 
recognized the value of requiring that an SDR board incorporate an 
independent perspective, but questioned whether potential directors 
that do not directly participate in the markets would have 
``sufficient, timely, and comprehensive expertise on issues critical to 
the extraordinarily complex financial operations of an SDR.'' \269\
---------------------------------------------------------------------------

    \269\ CL-DTCC I supra note 51 at 16-17.
---------------------------------------------------------------------------

    Since the operations of an SDR are not specialized in the same 
manner as, for example, a DCO, the Commission questions whether the 
``comprehensive'' expertise referenced by DTCC is necessary. The 
Commission is not persuaded that it will be difficult to find directors 
that can (i) bring an independent perspective; and (ii) sufficient, 
timely and comprehensive expertise. In addition, the Commission is not 
convinced that directors with an independent perspective would lack 
incentive to acquire any necessary

[[Page 54566]]

expertise (especially because such directors may be removed). 
Accordingly, the Commission is adopting Sec.  49.20(c)(5) as proposed.
    The Commission received no comments on the proposed substantive 
requirements mandated by Sec.  49.20(c)(1)(i)(C) and Sec.  49.20(c)(2)-
(4) and is adopting these regulations as proposed.
4. Conflicts of Interest (Core Principle 3)--Sec.  49.21
    In the SDR NPRM, the Commission discussed the conflicts of interest 
that a registered SDR may confront in its operations.\270\ As the 
Commission noted, such conflicts may involve (i) discrimination against 
certain reporting entities in SDR access, pricing, and provision of 
services; and (ii) unfair or anticompetitive disclosure or use of SDR 
Information.\271\ The Commission noted that such conflicts of interest 
may originate in the control of an SDR by one reporting entity or a 
small subset of reporting entities (a ``control group''). Such control 
may result from representation on SDR governing bodies, whether through 
(i) ownership of voting equity or the exercise of voting rights; or 
(ii) other direct or indirect means. As the Commission stated, a 
control group may compete with other reporting entities in the 
execution or clearing of swap transactions and may have an incentive to 
leverage its influence over the registered SDR to gain a competitive 
advantage in relation to other reporting entities.
---------------------------------------------------------------------------

    \270\ SDR NPRM supra note 8 at 80918-80919.
    \271\ Id. at 80916 n.106. In addition, the Commission stated 
that ``the existence of such conflicts may frustrate the public 
interest, as well as the objectives of the Federal Government, 
certain owners, and participants, in facilitating the reporting of 
swap transactions. Therefore, in establishing governance 
arrangements that are transparent as to (i) the sources of such 
control and (ii) the decisions resulting from such control, the SDR 
may be satisfying Core Principles 2 and 3 simultaneously.'' Id.
---------------------------------------------------------------------------

    In addition, the Commission discussed the commercial value of swap 
data and SDR analyses of SDR information and the incentive that a 
control group may have to ``(i) limit or burden access to such analyses 
on a discriminatory basis; or (ii) disclose or use the data of other 
reporting entities for its own competitive purposes (e.g., front-
running).'' \272\ The Commission also stated that ``the control group 
may also have an incentive to cause the SDR to provide such data to an 
affiliate for derivative applications or ancillary services (especially 
if such applications or services are bundled).'' \273\
---------------------------------------------------------------------------

    \272\ Id. at 80919.
    \273\ Id.
---------------------------------------------------------------------------

    The Commission is concerned that a control group can dominate an 
SDR to further its economic interests to the detriment of other 
reporting entities. The Commission proposed Sec.  49.21 to implement 
Core Principle 3 and to mitigate this and other conflicts that may 
arise in the operation of an SDR. Proposed Sec.  49.21(a) required each 
registered SDR to establish and enforce rules to minimize conflicts of 
interest in the decision-making process of the SDR, and establish a 
process for resolving such conflicts of interest. The Commission also 
proposed in Sec.  49.21(b) that each registered SDR maintain and 
enforce rules (i) that would identify, on an ongoing basis, existing 
and potential conflicts of interest; and (ii) that would enable the SDR 
to make decisions if a conflict exists. As stated in the SDR NPRM, the 
Commission believes such rules should require, at a minimum, the 
recusal of any person involved in the conflict from such decision-
making.
    The Commission received three comments on the identification of 
conflicts of interest and proposed Sec.  49.21.\274\ AFR expressed 
concern regarding the vulnerability of SDRs to significant conflicts of 
interest that could interfere with their public utility mission.\275\ 
Specifically, AFR expressed concern that ``the owners of SDRs could use 
preferential access to the information gathered to favor some market 
participants at the expense of others, or to deny transparent pricing 
information to customers.'' \276\ DTCC reiterated its view that 
potential conflicts of interest are best addressed by open access 
provisions, governance that is independent from its affiliates, and a 
market participant owned SDR.\277\ ABC/CIEBA voiced concerns relating 
to swap counterparties who are SDs/MSPs electing the SDR to be used 
where the SD/MSP has an ownership or governance interest in the SDR.
---------------------------------------------------------------------------

    \274\ See CL-AFR, CL-DTCC I and CL-ABC/CIEBA supra note 51.
    \275\ CL-AFR supra note 51 at 1.
    \276\ Id. at 2.
    \277\ CL-DTCC I and CL-DTCC II supra note 51 at 17 and 2, 
respectively.
---------------------------------------------------------------------------

    For swaps that could be cleared by multiple SDRs, ABC/CIEBA 
suggested that, if the Commission required the swap counterparty that 
is not the SD/MSP to elect the SDR to be used, then such requirement 
may address potential conflicts of interest where the SD/MSP has an 
ownership or governance interest in a particular SDR and then attempts 
to steer reported trades to the SDR.\278\
---------------------------------------------------------------------------

    \278\ CL-ABC/CIEBA supra note 51 at 13.
---------------------------------------------------------------------------

    The Commission is adopting Sec.  49.21(a) and (b) as proposed. The 
Commission believes that the substantive requirements of Sec. Sec.  
49.20 and 49.21 (e.g., transparency of governance arrangements, 
consideration of an independent perspective, policies and procedures on 
conflicts of interest) appropriately mitigate SDR conflicts of 
interest, especially in conjunction with (i) non-discrimination 
requirements regarding access and fees; and (ii) limitations on 
disclosure and use of non-public information. In addition, Sec.  49.21 
simply requires an SDR to have policies and procedures to (i) identify, 
on an ongoing basis, existing and potential conflicts of interest; and 
(ii) make decisions in the event of a conflict of interest. Even 
assuming that the specified requirements resolve all current conflicts 
of interest, they may not be sufficient to address future conflicts. 
Thus, the Commission believes that having policies and procedures to 
resolve future as well as current conflicts is central to compliance 
with Core Principle 3. With respect to ABC/CIEBA's comment, the 
Commission believes that if an SD/MSP elects to report transactions at 
an SDR that it owns or governs, that action may constitute a SD/MSP 
conflict (presuming that such election does not serve the interests of 
its swap counterparties), but not an SDR conflict under Core Principle 
3. The Commission will consider this comment in connection with its 
final rulemaking for Swap Data Recordkeeping and Reporting 
Requirements.\279\
---------------------------------------------------------------------------

    \279\ See Data NPRM supra note 6.
---------------------------------------------------------------------------

5. Core Principle Compliance
    Both proposed Sec.  49.20(d) and Sec.  49.21(c) required the SDR's 
CCO to review the compliance of the SDR with Core Principles 2 and 3, 
respectively. The Commission received one comment letter discussing SDR 
and DCO core principle compliance. CME suggested that a DCO that is 
also registered as an SDR should be able to achieve compliance with SDR 
core principles by demonstrating compliance with applicable DCO core 
principles.\280\ The Commission has considered CME's comment and 
maintains that DCOs which are SDRs are responsible for compliance with 
the SDR core principles. Should a particular DCO core principle be 
identical in its requirements to an SDR core principle, compliance with 
the latter could be demonstrated by showing compliance with the 
former.\281\
---------------------------------------------------------------------------

    \280\ CL-CME supra note 51 at 2-3.
    \281\ The Commission reiterates that if a DCO registers as an 
SDR the DCO would be expected to meet the more stringent set of 
rules to the extent that the SDR and DCO final rules on governance 
and conflicts of interest differ. See also SDR NPRM supra note 8 at 
80899 n.9.

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[[Page 54567]]

E. Additional Duties

    In addition to the core principles set forth above in section D, 
section 21(f)(4) of the CEA authorized the Commission to prescribe 
additional duties for SDRs for the purpose of minimizing conflicts of 
interest, protecting data, ensuring compliance and guaranteeing the 
safety and security of the SDR. In its SDR NPRM, the Commission 
proposed four additional duties that would require an SDR to (i) adopt 
and implement system safeguards, including BC-DR plans; (ii) maintain 
sufficient financial resources; (iii) furnish to market participants a 
disclosure document setting forth the risks and costs associated with 
using the services of the SDR; and (iv) provide fair and open access to 
the SDR and fees that are equitable and non-discriminatory. In 
connection with final part 49 regulations, the Commission has adopted 
only three of the four proposed additional duties pursuant to section 
21(f)(4). The Commission has determined that the statutory authority 
for adopting proposed Sec.  49.24 relating to system safeguards is 
properly and adequately established in section 21(c)(8) of the CEA, and 
this is not an additional duty imposed under the authority of section 
21(f)(4). Accordingly, the Commission believes that it is unnecessary 
to use its discretion under section 21(f)(4) of the CEA to adopt Sec.  
49.24. A description of the three additional duties and related 
comments are discussed in turn below.
1. Financial Resources--Sec.  49.25
    Proposed Sec.  49.25(a)(1) required an SDR to maintain sufficient 
financial resources to fulfill its responsibilities as set forth in 
proposed Sec.  49.9 and the core principles set forth in proposed Sec.  
49.19. As described in the SDR NPRM, the Commission believes that 
``requiring SDRs to maintain sufficient financial resources will help 
to ensure the protection of the swap data maintained by the SDR as well 
as the safety and security of the SDR.'' \282\
---------------------------------------------------------------------------

    \282\ SDR NPRM supra note 8 at 80937.
---------------------------------------------------------------------------

    Proposed Sec.  49.25(b) established that the financial resources 
relied upon by the SDR to meet its obligations under paragraph (a) may 
include the SDR's own capital and any other financial resource 
acceptable to the Commission.\283\ Additionally, proposed Sec.  
49.25(c) provided that an SDR must compute, at least on a quarterly 
basis, its financial resource requirement, making a reasonable 
calculation of its projected operating costs over a 12-month period. 
The proposed rule allowed the SDR reasonable discretion in determining 
the methodology used to compute such projected operating costs, 
although the Commission reserved the right to review the methodology 
utilized by the SDR and require changes as appropriate.\284\ Similarly, 
under proposed Sec.  49.25(d), an SDR must undertake to compute, at 
least quarterly, ``the current market value of each financial resource 
used to meet its obligations under [Sec.  49.25(a)]'' with appropriate 
reductions in value (haircuts) applied to reflect market and credit 
risk.
---------------------------------------------------------------------------

    \283\ Id.
    \284\ Id.
---------------------------------------------------------------------------

    The Commission requested comment on ``whether the methodology set 
forth [in Sec.  49.25] for determining sufficient financial resources 
would provide the necessary resources to ensure the financial integrity 
of the SDR.'' \285\ If not, the Commission requested that commenters 
submit different methodologies or manner for calculating sufficient SDR 
financial resources.\286\
---------------------------------------------------------------------------

    \285\ SDR NPRM supra note 8 at 80920.
    \286\ Id.
---------------------------------------------------------------------------

    The Commission received three comments relating to the financial 
resources required of SDRs.\287\ While the letters were generally 
supportive of the proposed rules and their objectives, the commenters 
articulated concern with respect to (1) the length of the resource 
requirement; (2) the types of financial resources required by the 
Commission; (3) the use of a parent company's financial resources for 
purposes of Sec.  49.25; and (4) the reporting of an SDR's solvency 
ratio.
---------------------------------------------------------------------------

    \287\ See CL-Barnard, CL-Reval and CL-TriOptima supra note 51.
---------------------------------------------------------------------------

    One area of concern was the proposed requirement in Sec.  
49.25(a)(3) that an SDR's financial resources would only be considered 
sufficient if their value were equal to the total operating costs of 
the SDR for a period of at least one year. Reval believed that SDRs 
should not be required to have 12 months of operating expenses on an 
on-going basis. It argued that requiring 12 months of operating 
expenses on hand ``would not be how most businesses operate and would 
be prohibitive to many new businesses from forming an SDR * * * .'' 
\288\ In addition, it noted that such a requirement would ``be a 
constraint limiting the SDRs from: improving technology, having the 
proper resources, and making other long-term investments.'' \289\ Chris 
Barnard, on the other hand, articulated support for the ``requirement 
that an SDR maintain financial resources exceeding the total amount 
that would cover its operating costs for a 1-year rolling period.'' 
\290\
---------------------------------------------------------------------------

    \288\ CL-Reval supra note 51 at 10.
    \289\ Id.
    \290\ CL-Barnard supra note 51 at 4. The Commission notes that 
its proposal under Sec.  49.25(a)(3) required that the financial 
resource of an SDR be at least equal to its operating costs for at 
least one year, calculated on a rolling basis.
---------------------------------------------------------------------------

    A second area of concern was the types of financial resources 
deemed acceptable by the Commission in proposed Sec.  49.25(b). Reval's 
comment letter argued for broader allowances in the measures used to 
determine whether an SDR has sufficient resources. It suggested the 
Commission consider an SDR's profitability, level of positive operating 
cash flow, and cash balance. Reval also suggested that perhaps 
initially an SDR should be allowed to demonstrate sufficient working 
capital either directly, or through its parent company, or from debt, 
letters of credit or capital call structures. Under Reval's plan, after 
an initial 12-month period an SDR should ``be able to demonstrate that 
it has adequate financial support from one or more of the following: 
positive operating cash flow, six months of operating expenses on hand, 
or profitability on a quarterly basis.'' \291\
---------------------------------------------------------------------------

    \291\ CL-Reval supra note 51 at 10-11.
---------------------------------------------------------------------------

    Reval and TriOptima offered comments on parent company 
contributions to SDR resources and, conversely, on their contribution 
to an SDR's calculated resource requirements for purposes of Sec.  
49.25. Reval suggested that ``[n]ot allowing the SDR to be financially 
supported by a parent company may also limit the pool of companies 
willing to register to become an SDR as it would involve raising new 
capital for a start-up business.'' \292\ TriOptima believes that the 
``proposed rule should be drafted broadly enough to recognize that an 
SDR may be a stand-alone entity or a unit or division of a larger 
entity'' and that the financial resource requirements be limited to the 
activities of the SDR ``and not to the broader activities of the entity 
as a whole.'' \293\
---------------------------------------------------------------------------

    \292\ CL-Reval supra note 51 at 10.
    \293\ CL-TriOptima letter supra note 51 at 6.
---------------------------------------------------------------------------

    Lastly, Chris Barnard suggested that, in addition to the proposed 
requirements in Sec.  49.25, an SDR should be required to calculate and 
regularly publish a solvency ratio and that such ratio should not fall 
below 105%.\294\ Barnard also believes that the ``CFTC should be 
immediately notified when the Solvency Ratio falls below 105%.'' \295\
---------------------------------------------------------------------------

    \294\ CL-Barnard supra note 51 at 4.
    \295\ CL-Barnard supra note 51 at 4.
---------------------------------------------------------------------------

    Proposed Sec.  49.25 was intended to ensure the protection of the 
swap data maintained by the SDRs, the financial

[[Page 54568]]

safety and security of SDRs, and an orderly wind-down of individual 
SDRs without disruption to the markets., The framework established by 
the Dodd-Frank Act and envisioned in the Commission's proposed 
regulations places important responsibilities upon all SDRs to serve as 
centralized storehouses of swap transaction data, facilitate 
regulators' surveillance of swaps markets, and help mitigate systemic 
risk in the financial system. As described above, SDRs' 
responsibilities will include accepting swap data from counterparties, 
confirming the accuracy of the swap data, and maintaining data 
according to standards prescribed by the Commission. SDRs may also 
disseminate swap transaction data to the public, on a real-time basis, 
and will engage in monitoring, screening, and analyzing swap data to 
assist the Commission in the fulfillment of its regulatory objectives 
with respect to the swap markets. Given the vital importance of the 
functions described above, the Commission believes that adequate 
financial resource requirements are of the upmost importance for all 
SDRs. Accordingly, the Commission disagrees with Reval's suggestion 
that an SDR should be subject to the proposed financial resource 
requirements only for the initial 12 months, and to a lower standard 
after the first year of operation, as the important responsibilities 
placed upon an SDR continue past its first year of operation. 
Additionally, sufficient resources to execute an orderly wind-down will 
be crucial to any SDR no matter how long it has been in business. The 
Commission believes that proposed Sec.  49.25(a) strikes a proper 
balance between the potential barrier to entry posed by its financial 
resources requirements, on the one hand, and the protection of a 
systemically important entity, on the other.\296\
---------------------------------------------------------------------------

    \296\ The Commission in the final adoption of Sec.  49.25(a)(2), 
relating to DCOs that also operate as SDRs, revised the reference to 
DCO financial resource requirements to refer to Sec.  39.11 of the 
Commission's Regulations rather than ``core principles.''
---------------------------------------------------------------------------

    The Commission acknowledges the detailed alternatives articulated 
in Reval's comment letter regarding the types of financial resources 
that should be acceptable in satisfaction of the requirements proposed 
in Sec.  49.25(a). In particular, Reval suggested that measures to 
determine if an SDR has sufficient resources to ensure the financial 
integrity of the SDR could include the SDRs profitability, level of 
positive operating cash flow, and cash balance. After considering these 
alternative measures, however, the Commission has determined to adopt 
Sec.  49.25(b) as proposed. The Commission again notes that the purpose 
of proposed Sec.  49.25 was not only to ensure the continued viability 
of an operating SDR, but also the orderly wind-down of a failing SDR. 
As such, the intent of the rule is to be certain that each SDR has 
sufficient capital on hand to cover its operating costs for one year, 
regardless of its profitability or cash flow; Reval's proposed 
alternatives do not capture this intent. The Commission emphasizes that 
the provision Sec.  49.25(b)(2) stating that the acceptable financial 
resources include an SDR's own capital and ``any other financial 
resources deemed acceptable by the Commission'' was meant to capture 
other types of resources on a case-by-case basis and provide 
flexibility to SDRs and the Commission.\297\
---------------------------------------------------------------------------

    \297\ For example, the Commission believes that commitments from 
equity investors to provide the resources necessary to fulfill the 
SDR's responsibilities would satisfy the requirements of Sec.  
49.25(b).
---------------------------------------------------------------------------

    The Commission also disagrees with Reval that, at least initially, 
an SDR should be able to demonstrate sufficient working capital through 
a letter of credit or similar type of credit facility. The Commission 
clarifies that a letter of credit should not be taken into account in 
calculating the financial resource requirement in proposed Sec.  
49.25(a). However, an SDR may be able to take into account a committed 
letter of credit or line of credit for the six month liquidity 
requirement in proposed Sec.  49.25(e) if there are no, or very few, 
restrictions on the credit and, for example, the credit is available 
even if the SDR's financial position changes in a materially adverse 
manner.
    Finally, the Commission is not adopting Reval's recommendation that 
an SDR should be allowed to be financially supported by a parent 
company. The Commission believes that when relying on the resources of 
a parent company, there is a risk that future capital contributions, 
even if contractually obligated, will not be paid if an SDR must wind-
down its business. Due to the risk of potential harm caused from 
possible data loss and market disruptions, the Commission does not view 
this as a viable alternative. Conversely, the Commission does agree 
with TriOptima that an SDR's financial resource requirements should be 
limited to the activities of the SDR and not to the broader activities 
of the parent company.
    The Commission also declines to adopt Barnard's recommendation that 
an SDR be required to calculate and publish its solvency ratio. 
Accordingly, for the reasons discussed above, the Commission is 
adopting Sec.  49.25 as proposed.
3. Disclosure Requirements of Swap Data Repositories--Sec.  49.25
    The Commission proposed that SDRs furnish market participants a 
disclosure document (``SDR Disclosure Document'') setting forth the 
risks and costs associated with using the services of the SDR. 
Specifically, Sec.  49.26 required that each SDR Disclosure Document 
contain the following information:
    <bullet> The SDR's criteria for providing others with access to 
services offered and data maintained by the SDR;
    <bullet> The SDR's criteria for those seeking to connect to or link 
with the SDR;
    <bullet> A description of the SDR's policies and procedures 
regarding its safeguarding of data and operational reliability, as 
described in proposed Sec.  49.24;
    <bullet> The SDR's policies and procedures designed to protect the 
privacy and confidentiality of any and all swap transaction information 
that the SDR receives from market participants, as described in 
proposed Sec.  49.16;
    <bullet> The SDR's policies and procedures regarding its non-
commercial and/or commercial use of the swap data;
    <bullet> The SDR's dispute resolution procedures involving market 
participant;
    <bullet> A description of all the SDR's services, including any 
ancillary services;
    <bullet> The SDR's updated schedule of any fees, rates, dues, 
unbundled prices, or other charges for all of its services, including 
any ancillary services; any discounts or rebates offered; and the 
criteria to benefit from such discounts or rebates; and
    <bullet> A description of the SDR's governance arrangements.
    The Commission in proposing this disclosure requirement believed it 
would benefit market participants and the swap market generally by 
helping to (i) minimize conflicts of interest; and (ii) ensure SDR 
compliance with its statutory responsibilities and duties.
    The Commission received a comment from DTCC related to the proposal 
that SDRs furnish a disclosure document outlining the costs and risks 
of using such services.\298\ DTCC noted in particular the requirements 
set forth in Sec.  49.26 and indicated that they provide market 
participants with sufficient disclosure of the costs and risks through 
disclosure documents and other information provided on their Web site.

[[Page 54569]]

The Commission believes that the prominent posting of the SDR 
Disclosure Document itself or the information contained in the SDR 
Disclosure Document on an SDR's Web site is sufficient for compliance 
with this Sec.  49.26.
---------------------------------------------------------------------------

    \298\ CL-DTCC I supra note 51 at 25.
---------------------------------------------------------------------------

    The Commission notes that the disclosure of SDR costs and risks 
will provide market participants with information regarding SDR 
operations that is essential for informed decision-making. 
Specifically, the Commission believes that it is especially important 
for market participants to know an SDR's policies and procedures 
relating to the safeguarding and use of reported data as well as the 
operational capability and reliability of the SDR.
    After reviewing Sec.  49.26 generally and the comment received, the 
Commission is adopting Sec.  49.26 as proposed.
4. Access and Fees--Sec.  49.27
    The Commission proposed in Sec.  49.27 to establish open, non-
discriminatory access to the services provided by SDRs. The Commission 
believes that the Dodd-Frank Act requires SDRs to provide services on a 
non-discriminatory basis based largely on the requirement in section 
2(a)(13)(G) of the CEA \299\ that all swap transactions be reported to 
an SDR. The Commission further believes that the intent and purpose of 
section 21 of the CEA \300\ is for SDRs to provide open and equal 
access to its services. Consistent with the principles of open and 
equal access to SDR services, the Commission submits that the fees or 
charges adopted by an SDR must also be equitable and otherwise non-
discriminatory.
---------------------------------------------------------------------------

    \299\ See section 727 of the Dodd-Frank Act.
    \300\ See section 728 of the Dodd-Frank Act.
---------------------------------------------------------------------------

(a) Access
    As proposed, Sec.  49.27(a) required that the services provided by 
SDRs be available to all market participants, such as DCMs, SEFs, DCOs, 
SDs, MSPs and any other counterparty, on a fair, open and equal basis. 
SDRs that register and agree to accept swap data in a particular asset 
class (such as interest rates or commodities) could not offer their 
services on a discriminatory basis to select market participants or 
select categories of market participants. The Commission continues to 
believe that access should be fair, open and equal.
    The Commission received four comment letters from interested 
parties relating to open access.\301\ Several additional comments 
relating to fees (discussed below) that raise open access issues will 
also be discussed in connection with the fee provisions of Sec.  
49.27(b).
---------------------------------------------------------------------------

    \301\ See CL-ABC/CIEBA, CL-DTCC II and CL-MarkitServ I supra 
note 51.
---------------------------------------------------------------------------

    ABC/CIEBA asserted that the ``open access'' provision set forth in 
proposed Sec.  49.27(a) could allow an SDR to set discriminatory 
restrictions on the type of swap transaction terms it could receive to 
the detriment of benefit and pension plans. ABC/CIEBA requested the 
Commission in its adoption of Sec.  49.27(a) provide additional clarity 
that an SDR may not ``* * * require, as a condition to reporting a swap 
transaction or providing information to an SDR, that a counterparty be 
exposed to more liability (via a user agreement or otherwise) than it 
would have otherwise been exposed to had its transaction not been 
reported to the SDR.'' \302\
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    \302\ CL-ABC/CIEBA supra note 51 at 5.
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    The Commission in the SDR NPRM recognized the potential difficulty 
for plan fiduciaries in managing benefit plans, and accordingly, 
proposed Sec.  49.10(c) to partly address concerns regarding the 
modification or invalidation of swap transaction terms. In addition, 
Sec.  49.27(a), as proposed, was intended to prevent discriminatory 
access to SDR services.
    The Commission believes that ABC/CIEBA's proposed clarification is 
overly broad, and may place an SDR in a position to determine whether 
any given counterparty will be exposed to additional liability--even a 
non- reporting counterparty's. The Commission submits that this could 
place the SDR in a position of evaluating risks outside of the 
statutory mandate imposed by the Dodd-Frank Act. Therefore, the 
Commission believes that the measures proposed in Sec. Sec.  49.10(c) 
and 49.27(a) to prevent modification and invalidation and to ensure 
fair and equal access adequately address ABC/CIEBA's concerns.
    DTCC commented that SDRs should provide open access to services 
offered while also preserving the trading parties' control over the 
reported data maintained by the SDR.\303\ DTCC specifically believes 
that agents of a reporting party (such as a SEF, DCO, confirmation 
facility or other service provider) must be acting on behalf of the 
reporting counterparty and submits that the particular SDR for which 
the trade is reported should be based on the counterparty's selection 
and not by the SEF, DCO, confirmation facility or other service 
provider.
---------------------------------------------------------------------------

    \303\ CL-DTCC II supra note 51 at 3.
---------------------------------------------------------------------------

    Although the Commission largely shares DTCC's views regarding the 
authority of the reporting counterparty to choose or select the 
particular SDR for the reporting of swaps, the Commission submits that 
this authority to select a particular SDR may be contractually 
delegated to other parties. In addition, the rules and regulations of a 
particular SEF, DCM or DCO may provide for the reporting to a 
particular SDR. However, the Commission notes that this would not 
prevent the counterparties from also reporting their swap transaction 
data to an additional SDR for recordkeeping and other risk management 
or ancillary purposes consistent with the requirements set forth in 
proposed part 45 of the Commission's Regulations. Accordingly, the 
Commission believes that the reporting of swap transaction data to SDRs 
is adequately addressed in proposed part 45 of the Commission's 
Regulations \304\ and section 4r(3) of the CEA.
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    \304\ See Data NPRM supra note 6.
---------------------------------------------------------------------------

    MarkitSERV commented that it generally supports the proposed open 
access and fee provision set forth in Sec.  49.27.\305\ However, 
MarkitSERV believes that if Sec.  49.27 is implemented, as proposed, it 
may have some unintended consequences. In particular, MarkitSERV 
asserted that without clarification as to the meaning of ``non-
discriminatory'' fees and ``preferential pricing arrangements,'' the 
``dealer-pays'' fee structure historically used by SDR-like entities 
could be seen as preferential.
---------------------------------------------------------------------------

    \305\ CL-MarkitServ I supra note 51.
---------------------------------------------------------------------------

    MarkitSERV believes that the current ``dealer pays'' pricing model 
ensures fair and open access because buy-side participants are often 
smaller entities that may find it difficult to afford SDR fees. 
MarkitSERV is concerned that without clarification the proposed 
regulation could cause an increase in costs for buy-side market 
participants, and thereby, discourage the use of SDRs. The Commission 
believes that this argument ignores the statutory mandate that all 
swaps whether cleared or uncleared must be reported to an SDR.\306\
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    \306\ Section 2(a)(13)(G) of the CEA, 7 U.S.C. 2(a)(13)(G).
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    The Commission further believes that, consistent with fair, open 
and equal access, an SDR may appropriately utilize any pricing model 
subject to Sec.  49.27(b)'s requirement that such fees be non-
discriminatory. The Commission notes that ``open access'' and ``non-
discriminatory'' fees are complementary notions of fair dealing and 
open market access that are necessary in order for compliance with the 
statutory mandate

[[Page 54570]]

set forth in the Dodd-Frank Act that all swaps be reported to an SDR.
    The Commission also received several comments in connection with 
the issue of bundling or tying of SDR regulatory services with 
ancillary services.\307\ DTCC urged the Commission to prohibit the 
bundling of core regulatory services mandated by the Dodd-Frank and 
part 49 with non-core or ancillary services. Similarly, MarkitSERV also 
recommended that the SDR regulations be amended to explicitly prohibit 
tying of core services and ancillary services. MarkitSERV also 
commented that SDRs be allowed (but not required) to offer an array of 
services that are ancillary to those narrowly defined duties outlined 
in the Dodd-Frank Act and part 49. TriOptima requested clarification on 
the ability of an SDR or its affiliates to offer ancillary services on 
terms commercially agreed to between the SDR and its customer/
subscriber.
---------------------------------------------------------------------------

    \307\ See CL-DTCC, CL-MarkitSERV, CL-MarkitSERV II and CL-
TriOptima supra note 51. The Commission understands ancillary 
services to consist of asset servicing; confirmation, verification 
and affirmation facilities; collateral management, settlement, trade 
compression and netting services; valuation, pricing and 
reconciliation functionalities; position limits management; dispute 
resolution; and counterparty identify verification.
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    The Commission believes that it is appropriate for SDRs to offer 
ancillary services to market participants. However, SDRs in offering 
such ancillary services are prohibited from bundling these services 
with mandated regulatory services such as swap data reporting. 
Accordingly, the Commission is revising Sec.  49.27 to clarify that 
SDRs are prohibited from requiring market participants to make use of 
SDR ancillary services in order to gain access to the SDR's mandated 
regulatory services.
    For the reasons discussed above, the Commission is adopting Sec.  
49.27(a) largely as proposed with the modification relating to bundling 
noted above.
(b) Fees
    As proposed, Sec.  49.27(b) ensured that fees or other charges 
established by an SDR are not used as a means to deny access to some 
market participants by employing disparate and/or discriminatory 
pricing. The Commission continues to be concerned that SDRs could 
attempt to adopt disparate pricing for performing their statutory 
duties and obligations set forth in section 21 of the CEA. The 
Commission believes that such action would be inconsistent with Core 
Principle 3 discussed above, the CEA generally, and the guiding 
principles set forth in the Dodd-Frank Act.
    The Commission recognizes that SDRs will be subjected to 
significant costs both in connection with part 49, as well as the 
recordkeeping and reporting of swap data as proposed in part 45 and 
real-time public reporting as proposed in part 43.\308\ These costs, in 
part, include the ability to accept and maintain reported swaps data, 
technology, personnel, technical support and appropriate BC-DR plans. 
Accordingly, Sec.  49.27(b), as proposed, seeks to ensure that the fees 
charged to reporting parties are equitable and do not become an 
artificial barrier to access. The Commission is concerned that the 
swaps markets are dominated by a select number of financial entities 
and related utilities, and therefore, sought through proposed Sec.  
49.27 to promote fair and open competition for SDR services.
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    \308\ See SDR NPRM supra note 8 and Real-Time NPRM supra note 
28.
---------------------------------------------------------------------------

    As proposed, Sec.  49.27(b) prohibited SDRs from offering 
preferential pricing arrangements to any market participant, including 
volume discounts or reductions, unless such discounts or reductions 
apply to all market participants uniformly and are not otherwise 
established in a manner that would effectively limit the application of 
such discount or reduction to a market participant or a select number 
of market participants. Proposed Sec.  49.27 also would require SDRs to 
provide fee transparency to market participants through its Web site as 
well as in the Disclosure Document discussed above in Sec.  49.26.
    The Commission received seven comment letters relating to SDR 
pricing from various interested parties.\309\
---------------------------------------------------------------------------

    \309\ See CL-Reval I, CL-MarkitSERV I, CL-Sungard, CL-DTCC I, 
CL-AFR and CL-Better Market supra note 51.
---------------------------------------------------------------------------

    Reval commented that the core component of pricing will be a per 
transaction charge with each SDR having varying costs and quality of 
service. Reval thought that a comparison of pricing among SDRs may be 
difficult because of the many aspects that will comprise SDR pricing. 
Reval submitted that SDRs should be able to charge for client 
implementation, consulting or development services that are separate 
and apart from the ``core'' regulatory services of SDR reporting. Given 
the level of transparency as proposed by the Commission in Sec.  49.27, 
Reval expects robust price competition under the assumption that 
several SDRs become registered.
    MarkitSERV generally supported the principle set forth in proposed 
Sec.  49.27 that fees charged by SDRs must be equitable and established 
in a uniform and non-discriminatory manner. However, as discussed 
above, MarkitSERV questioned the application of ``non-discriminatory'' 
fees and ``preferential pricing arrangements,'' based on its belief 
that current repository fee structures are preferential. For example, 
MarkitSERV commented that current trade repositories commonly require 
only dealer participants to pay for the cost of reporting swaps.\310\
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    \310\ CL-MarkitSERV I supra note 51 at 4. The Commission submits 
in a reporting party fee pricing model that reporting fees paid by 
SD/MSP reporting counterparties to an SDR would be factored into the 
pricing between the SD/MSP and its buy-side customer so that the 
buy-side customer does not directly pay for reporting.
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    As discussed above, MarkitSERV is concerned that, without 
clarification, the regulation as proposed could increase the costs for 
end-users (buy-side participants) and thereby discourage end-users from 
using SDRs. In addition to the reasons discussed above, the Commission 
believes that this argument fails to address the reporting regime set 
forth in the Data NPRM and section 4r of the CEA, and further, assumes 
that a single entity serves as the SDR so that buy-side participants 
are unable to ``shop'' for competitive pricing.
    MarkitSERV recommended that the Commission explicitly endorse the 
``dealer pays'' commercial model. DTCC echoed MarkitSERV's approach 
with its view that fee structures should reflect an ``at cost'' pricing 
model with only SDs subject to fees.\311\ Alternatively, MarkitSERV 
thought the Commission could clarify Sec.  49.27, as proposed, so that 
different fee structures for different classes of participants would 
not be deemed discriminatory as long as the pricing model is not 
discriminatory within those classes. In addition, MarkitSERV also 
asserted that adopting a ``reporting party pays'' pricing model would 
meet the Commission's objectives of uniform and non-discriminatory 
fees. Lastly, MarkitSERV asserted that the application of Sec.  49.27 
to ancillary services may prove detrimental to the market. MarkitSERV 
believes that because ancillary services are non-core services, and 
therefore, may be provided independently by un-regulated third-party 
service providers, these services should be priced commercially and 
consistently with market practices if they are also offered by SDRs.
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    \311\ CL-DTCC I supra note 51 at 3.
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    Sungard acknowledged the Commission's rationale for applying an

[[Page 54571]]

equitable standard to fees charged by SDRs and supports the 
Commission's decision in Sec.  49.27 to refrain from acting as a ``rate 
setter'' with respect to the establishment of SDR fees. Sungard 
specifically noted that proposed Sec.  49.27(b)(3) does not call for 
specific Commission review and approval of fees. The Commission notes 
that although SDR fees would not be ``approved,'' any and all fees 
charged by SDRs will be filed with the Commission and subject to 
sufficient transparency and disclosure via the SDR's Web site and SDR 
Disclosure Document. AFR recommended that all market participants be 
treated equally by requiring SDRs to provide the Commission with a 
justification for its fees.
    The Commission does not endorse or adopt any particular business or 
pricing model but instead believes that any regulation should permit a 
variety of business models to flourish. Accordingly, the Commission is 
adopting Sec.  49.27 as proposed. The Commission submits that a 
determination of what may constitute an ``equitable'' and ``non-
discriminatory'' price must be performed on a case-by-case basis. In 
response to DTCC, the Commission believes that the cost of offering a 
service or product is not determinative, but is one factor in this 
analysis.\312\ The Commission in proposing Sec.  49.27 was careful not 
to designate or sanction any particular pricing or business model 
relating to SDRs. Instead, the Commission seeks to foster or encourage 
competition as the best way in which to keep swap reporting costs to a 
minimum.
---------------------------------------------------------------------------

    \312\ See e.g. Report of SEC Advisory Committee On Market 
Information: A Blueprint For Responsible Change (September 14, 2001) 
(known as the ``Seligman Report'') available at http://www.sec.gov/divisions/marketreg/marketinfo/finalreport.htm. See also, SEC, 
Concept Release: Regulation of Market Information Fees and Revenues, 
Securities Exchange Act Release No. 42208 (December 9, 1999), 64 FR 
70613 (December 17, 1999). Cost basis pricing in connection with 
national securities exchange market data fees was recently discussed 
in NetCoalition v. Securities and Exchange Commission, 615 F.3d 525 
(DC Cir. 2010).
---------------------------------------------------------------------------

    Given the varying cost structures and business models that may 
emerge, the Commission will not approve or set ``fees.'' In addition, 
the Commission believes that the Dodd-Frank Act and the CEA requires 
the Commission, to the extent possible, to promote competition between 
and among various SDRs. The Commission notes that Sec.  49.27 would 
prohibit SDRs from establishing fees in a manner that restrict fair, 
free and open access to SDR services.
    Both AFR and Better Markets argue that the Commission should 
prohibit volume discounts in SDR pricing based on their belief that 
most reporting flow will be ``dealer dominated,'' and therefore, 
unfairly discriminate against non-SDs/MSPs (i.e. end-users). This may 
be true for more ``customized'' swap transactions; however, for those 
more standardized transactions that may be executed on a SEF or DCM, 
reporting to an SDR would be part of the SEF's or DCM's transaction 
services. Accordingly, the reporting flow in these cases would be 
determined by the SEF or DCM and not the SD/MSP. In addition, SDs/MSPs 
will be required to negotiate customer agreements with non-SD/MSP 
counterparties so that volume pricing discounts should otherwise be 
reflected in the pricing structure to the non-SD/MSP counterparty. This 
will especially be the case because any fees charged by SDRs for 
services must be transparent and disclosed publicly.
    Accordingly, the Commission will permit volume discounts as long as 
these discounts are not structured in a way that is anti-competitive. 
However, the Commission expects to study the effect of volume discounts 
that are offered by SDRs, and will re-evaluate both its view and Sec.  
49.27, if warranted.
    With respect to MarkitSERV and DTCC's comments relating to the 
``dealer pays'' commercial pricing model, the Commission is not 
entirely persuaded regarding this recommendation but does agree that an 
SDR may appropriately utilize a pricing model by which the reporting 
entity is required to pay the SDR reporting fees. In this manner, the 
reporting entity--SD, MSP or non-SD/MSP--and its counterparty will as 
part of their agreement negotiate the payment of SDR fees. Consistent 
with MarkitSERV's comments, the Commission believes that SDRs may 
charge participants a reasonable fee to recoup additional costs 
associated with accepting and processing ``customized'' reportable 
transactions to the SDR.

F. Procedures for Implementing Swap Data Repository Rules

    The Commission's part 40 regulations contain provisions related to 
submissions to the Commission by registered entities of new products 
and rules. In order to implement new statutory provisions imposed by 
the Dodd-Frank Act, the Commission has adopted amendments to its part 
40 rules.\313\ These amendments implement a new statutory framework for 
certification and approval procedures for new products, new rules and 
rule amendments submitted to the Commission by registered entities and, 
as relevant to this rulemaking, include new registered entities such as 
SDRs.
---------------------------------------------------------------------------

    \313\ See Part 40 supra note 21.
---------------------------------------------------------------------------

    In this connection, the Commission proposed Sec.  49.8 to conform 
to the framework established in the part 40 rules. The proposed rule 
provided that an applicant for registration as an SDR may request that 
the Commission approve, pursuant to section 5c(c) of the CEA, any or 
all of its rules and subsequent amendments, either prior to 
implementation or, notwithstanding the provisions of section 5c(c)(2) 
of the CEA, at any time thereafter, under the procedures established in 
Sec.  40.5 of the Commission's Regulations. Under the proposal, rules 
of an SDR not voluntarily submitted for prior Commission approval as 
described above must be submitted to the Commission with a 
certification that the rule or rule amendment complies with the CEA and 
Commission Regulations under the procedures specified in Sec.  40.6.
    The Commission received no comments on Sec.  49.8. Based on its 
review of the proposed regulation and the absence of comments, the 
Commission is adopting Sec.  49.8 as proposed.

III. Effectiveness and Transition Period

    Consistent with section 754 of the Dodd-Frank Act, part 49 of the 
Commission's Regulations will be effective on October 31, 2011 
(``Effective Date''). Once part 49 is effective, the Commission will 
accept applications to register as an SDR on new Form SDR adopted by 
the Commission in this Adopting Release.\314\ As explained below and as 
noted elsewhere in this Adopting Release, the compliance date for 
various regulatory requirements is contingent upon the adoption and 
effectiveness of other, related, regulatory provisions and definitions. 
Because the Commission believes that the suite of rules implementing 
the Dodd-Frank Act are complex and interconnected, it has determined 
that implementation can best be accomplished through a separate 
rulemaking. The Commission expects in this separate rulemaking to 
establish an implementation and phase-in plan for

[[Page 54572]]

the numerous rulemakings related to the Dodd-Frank Act.\315\
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    \314\ The Commission notes that although it is unable to mandate 
registration as an SDR prior to the effective date of the swap 
definition rulemaking, SDRs can file applications with, and be 
granted approval, on a provisional basis, prior to that date. See 
Commission and SEC, Notice of Proposed Joint Rulemaking: Further 
Definition of ``Swap,'' ``Security-Based Swap,'' and ``Security-
Based Swap Agreement;'' Mixed Swaps; Security-Based Swap Agreement 
Recordkeeping, 76 FR 29818 (May 23, 2011). Authority for 
registration in advance of an effective date is provided in section 
712(f) of the Dodd-Frank Act, 15 U.S.C. 8302(f).
    \315\ In connection with the SDR Rulemaking, the Commission 
received fourteen comments that directly relate to implementation 
and phase-in. These comments resulted from the Commission re-opening 
of the comment period for several rulemakings, including the SDR 
Rulemaking, and a request for comment on the order in which it 
should consider final rulemakings made under the Dodd-Frank Act. See 
Commission, Reopening and Extension of Comment Periods for 
Rulemakings Implementing the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, 76 FR 25274 (May 4, 2011). Comments 
addressing implementation and phase-in were received from: (1) 
Working Group of Commercial Energy Firms (``WGCEF'') on March 23, 
2011; (2) CME on March 23, 2011; (3) Financial Services Roundtable 
on April 6, 2011; (4) Financial Services Forum, Futures Industry 
Association, International Swaps and Derivatives Association and the 
Securities Industry and Financial Markets Association on May 4, 
2011; (5) Financial Services Roundtable, on May 12, 2011; (6) Swaps 
& Derivatives Market Association on June 1, 2011; (7) AII on June 2, 
2011; (8) Wholesale Markets Brokers' Association Americas on June 3, 
2011; (9) Encana on June 7, 2011; (10) Chris Barnard on June 8, 
2011; (11) Alternative Investment Management Association on June 10, 
2011; (12) Futures Industry Association, Institute of International 
Bankers, International Swaps and Derivatives Association, Investment 
Company Institute, Securities Industry and Financial Markets 
Association, U.S. Chamber of Commerce on June 10, 2011; (13) AII on 
June 10, 2011; and (14) MarkitSERV on June 10, 2011. All comment 
letters are available through the Commission Web site at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=939.
---------------------------------------------------------------------------

    The Commission in this Adopting Release has not established a 
``compliance date'' for SDRs that differs from the effective date of 
part 49. The Commission believes that the adoption of registration 
requirements (including a provisional registration) and applicable 
statutory duties and core principles does not itself necessitate a 
delayed compliance date with part 49 for registered SDRs. In 
particular, the adoption of the provisional registration process set 
forth in Sec.  49.3(b) should provide SDR applicants with sufficient 
time to fully comply with part 49 while at the same time permitting 
those SDR that are operational to function. Entities that currently 
operate in a manner similar to an SDR and seek to be registered under 
part 49 will require operational and systems changes in order to comply 
with part 49. For those entities that do not currently operate as a 
repository or in a similar capacity, the Commission believes that 
significant operational and technology resources would be required in 
order for such entities to register and comply with part 49.
    The Commission notes that SDRs will not otherwise be fully 
operational as of the effective date of part 49 but instead will 
require an implementation or compliance period based on requirements 
for reporting swap transaction data as well as the real-time 
dissemination of swap data that are the subject of separate rulemakings 
by the Commission.\316\ In both the Data and Real-Time Rulemakings, a 
delayed effectiveness date or compliance date is likely given the 
complexities and technology changes that must be implemented on an 
industry-wide basis.
---------------------------------------------------------------------------

    \316\ See Data NRPM and Real-Time NPRM supra notes 6 and 28, 
respectively.
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IV. Related Matters

A. 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 issued by the Office of Management and 
Budget (``OMB''). The final part 49 rules result in information 
collection requirements within the meaning of the Paperwork Reduction 
Act of 1995 (``PRA'').\317\ The Commission submitted its proposing 
release and supporting documentation to OMB for review in accordance 
with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The Commission requested that 
OMB approve, and assign a new control number for, the collections of 
information covered by the proposing release. The information 
collection burdens created by the Commission's proposed rules, which 
were discussed in detail in the proposing release,\318\ are identical 
to the collective information collection burdens of the final rules.
---------------------------------------------------------------------------

    \317\ 44 U.S.C. 3301 et seq.
    \318\ SDR NPRM supra note 8 at 80923-80925.
---------------------------------------------------------------------------

    The Commission invited the public and other Federal agencies to 
comment on any aspect of the information collection requirements 
discussed in the NPRM.\319\ Pursuant to 44 U.S.C. 3506(c)(2)(B), the 
Commission solicited comments in order to: (i) Evaluate whether the 
proposed collections of information were 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 estimates of the burden of the proposed collections 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 collections of information on those who 
are to respond, including through the use of automated collection 
techniques or other forms of information technology. The Commission 
received no comment on its burden estimates or on any other aspect of 
the information collection requirements contained in its proposing 
release.
---------------------------------------------------------------------------

    \319\ Id. at 80925.
---------------------------------------------------------------------------

    The title for the collection of information under part 49 is ``Swap 
Data Repositories Registration and Regulatory Requirements.'' OMB has 
approved and assigned OMB control number 3038-0086 to this collection 
of information.

B. Cost-Benefit Considerations

    Section 15(a) of the CEA explicitly requires the Commission to 
consider the costs and benefits of its actions before promulgating a 
regulation under the CEA. In particular, costs and benefits must 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 depending upon 
the nature of the regulatory action.
    Section 728 of the Dodd-Frank Act provides the Commission with 
authority to adopt and implement rules and regulations regarding the 
registration and regulation of SDRs. Pursuant to that authority the 
Commission proposed the adoption of new part 49 to the Commission's 
regulations to require persons that meet the definition of an SDR to 
register and comply with specific duties and core principles enumerated 
in section 21 as well as other requirements that the Commission may 
prescribe by regulation. In particular, the Commission proposed to (1) 
create a new part 49 of its regulations for the registration and 
regulation of SDRs and (2) the adoption of a new form, Form SDR, to 
register as an SDR with the Commission.
    The cost-benefit discussion in the proposing release \320\ analyzed 
the costs and benefits of adopting new part 49 to the market generally 
and to the limited number of potential entities expected to register as 
SDRs. Specifically, the Commission determined that the proposed 
regulations would benefit market participants and the public by 
improving transparency in the swaps market and fostering competition in 
the data and trade repository industries. In addition, by providing 
regulators with access to the data maintained by SDRs, the Commission 
believed that its proposal would promote greater risk management and 
give global regulators a better measure of systematic risk

[[Page 54573]]

throughout the financial markets.\321\ The Commission stated in the SDR 
NPRM that the failure to enact proposed part 49 regulations would be a 
cost measured by the absence of transparency in the swaps market. This 
determination was based on the belief that costs would appear as a 
result of market inefficiencies related to price discovery and risk 
management and the inability of regulators to properly monitor systemic 
risk.\322\
---------------------------------------------------------------------------

    \320\ SDR NPRM supra note 8 at 80925.
    \321\ Id.
    \322\ Id.
---------------------------------------------------------------------------

    The Commission has considered the costs and benefits of the final 
regulations pursuant to section 15(a) of the Act. The Commission has 
considered the public comments received regarding costs and benefits in 
response to the SDR NPRM. A discussion of the final regulations in 
light of section 15(a) factors is set out immediately below, followed 
by a discussion of comments on cost-benefit considerations received in 
response to the SDR NRPM.
1. Protection of Market Participants and the Public
    The Commission believes that the registration and regulation of 
SDRs under part 49 of the Commission's Regulations will serve to better 
protect market participants by providing the Commission and other 
regulators with important oversight tools to monitor, measure, and 
comprehend the swaps markets. It is expected that the Commission's 
surveillance and enforcement capabilities will accordingly be enhanced 
by the adoption of part 49. In addition, the greater transparency to be 
furnished by mandated reporting to SDRs will also better improve the 
management of systemic risk throughout the financial markets by the 
Commission as well as the FSOC and OFR.
    The Commission has estimated that the initial start up cost for the 
estimated 15 SDR registrants to become registered under part 49 is 
between $105.5 and $135.5 million, including between $60 and $90 
million for initial technological capital costs.\323\ Ongoing 
operations are estimated to be between $47.07 and $77.072 million 
annually for all SDRs, which includes between $30 and $60 million 
dedicated to ongoing annual technological costs.\324\
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    \323\ These estimates were provided to the Office of Management 
and Budget in compliance with the Paperwork Reduction Act of 1995 
(``PRA''), 44 U.S.C. 3501 et seq. The estimates were arrived at by 
considering the document entitled ``Possible Role for NFA as a 
Utility for Swap Transactions,'' which appears on the NFA Web site 
at http://www.cftc.gov/ucm/groups/public@swaps/documents/file/derivative13sub083110-nfa.pdf. These estimates do not include 
personnel costs. Because the Commission has not regulated the swap 
market, it has not previously collected data on actual costs. 
Accordingly, the Commission solicited comment on any aspect of the 
reporting and recordkeeping burdens associated with the proposed 
rules, including the accuracy of the Commission's estimates of the 
burdens, in connection with OMB's review of the proposed rules and 
the attendant information collections. See SDR NPRM supra note 8 at 
80925. No comments were received. The Commission's submissions to 
OMB, including supporting documentation, may be obtained by visiting 
the Web site RegInfo.gov.
    \324\ This estimate was obtained in consultation with the 
Commission's IT staff.
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    The Commission is unable to estimate accurately the cost of 
recordkeeping given existing technologies, the current state of the 
swaps market and the potential growth in the future. The difficulty in 
estimating future and ongoing costs for SDRs is significantly related 
to the range of duties that can vary by asset class as well as the 
probability that SDR responsibilities will increase and change over 
time.
2. Efficiency, Competitiveness, and Financial Integrity of Futures 
Markets
    The Commission believes that the adoption of the SDR regulation set 
forth in part 49 together with the swap data recordkeeping and 
reporting requirements proposed in part 45 will provide a robust source 
of information on activities in the swaps market that is expected to 
promote increased efficiency and competition. To date, the swaps market 
generally has been characterized by a lack of transparency with a 
select number of dealers dominating the business. Although dealers will 
likely continue to have a significant presence in the swaps market, the 
transparency that is envisioned in the Dodd-Frank Act and thereby 
implemented by part 49 is expected to provide enhanced competition for 
services, and accordingly, lead to greater efficiencies for market 
participants executing swap transactions.
    In addition, greater transparency for the Commission and other 
regulators will provide better oversight of the swaps market and its 
various market participants. Specifically, based on Sec.  49.17, SDRs 
will provide transaction data, including price points and counterparty 
matches, to a host of regulatory agencies (including the Commission) 
providing regulators additional tools for various surveillance and 
enforcement programs. This type of transparency is currently 
unavailable to regulators monitoring the swaps market. In addition, 
empirical data obtained from SDRs will also be employed by the 
Commission and other regulatory agencies to further study the behavior 
of the swaps market.
    The Commission also believes that the introduction of SDRs will 
further automate the execution and reporting of swap transactions. This 
is likely to benefit market participants and reduce transactional risks 
through SDRs and related service providers offering important ancillary 
services such as confirmation and matching services, valuations, 
pricing, reconciliation functions, position limits management, dispute 
resolution and counterparty identification. The ability of regulators 
to access the swap data maintained by SDRs will assist regulators to, 
among other things, monitor risk exposures of individual counterparties 
to swap transactions, monitor concentrations of risk exposure, and 
evaluate systemic risk. In addition, the ability of DCOs to also 
register as SDRs will help regulators better identify the significant 
participants in the swap market and better assess their financial 
exposures.
    The Commission believes that the ``cost'' of the ``public'' or 
regulatory function of an SDR could potentially conflict with its 
commercial interests. This is especially true for those SDRs that seek 
registration that are privately-owned and managed. As a result, the 
Commission in adopting Sec.  49.17(g) and Sec.  49.21 has sought to 
identify various conflicts inherent in SDR operations with the 
expectation that these conflicts be minimized to the greatest extent 
possible.
    The Commission notes that SDRs could potentially commercialize the 
swap transactional data that is reported to it through relationships 
and alliances with various market data vendors and similar firms. 
Moreover, the disclosure of certain proprietary swap data potentially 
could compromise the submitters' intellectual property rights or 
proprietary interests--for example, investment strategies, technology 
systems and algorithmic trading systems. The Commission has attempted 
to minimize this possibility through the adoption of Sec.  49.17(g) 
which prohibits the commercial use of data by SDRs unless consented to 
by the reporting party. The Commission believes that ancillary services 
provided by SDRs or related entities may also create incentives for 
SDRs to further promote such ancillary services. This conflict could be 
manifested in the manner in which swaps are required to be reported and 
through various legal provisions in user agreements between the SDR and 
reporting party.
    In the Commission's view, fees charged by SDRs for reporting and 
storage of data will depend upon a

[[Page 54574]]

number of factors including, but not limited to, the (1) SDR's cost 
structure; (2) availability of competitors; and (3) regulatory 
oversight of fees. A variety of different business models could develop 
whereby the reporting and storage of data to the SDR is but one facet 
of the SDR's operations with various ancillary services taking on 
greater importance.
    Because of the global nature of the swaps market, ``regulatory 
arbitrage'' could occur in connection with the reporting of swap data 
to an SDR or repository if there are significant differences in the 
regulatory regimes in the U.S. and abroad. In such a scenario, SDs 
could find it advantageous to report their trades to a foreign-based 
repository that is not subject to the stringent requirements embodied 
in the Dodd-Frank Act. The Commission and other regulators globally 
have been working to reduce the instances of regulatory arbitrage that 
may occur in connection with the regulation of the swaps markets. In 
particular, regulators have focused on SDRs and the reporting of swaps 
as an area that should be relatively consistent or uniform worldwide. 
The Commission continues to work with other regulators to coordinate 
and harmonize laws and regulations relating to SDRs or repositories.
3. Price Discovery
    The Commission believes that part 49, together with such Dodd-Frank 
Act requirements as mandatory clearing and trading, will promote 
greater price efficiency and increased competition for swaps and other 
related financial instruments. Part 49's provisions relating to 
regulator access will permit the Commission, other domestic regulators 
and foreign regulators to examine potential price discrepancies and 
other trading inconsistencies in the swaps market.
    The Commission notes that requirements set forth in Sec.  49.13, 
relating to an SDR's obligation to confirm the accuracy of reported 
data, will create additional cost burdens for SDRs that may marginally 
increase based on the scope and volume of data transmitted. In adopting 
Sec.  49.13, the Commission recognizes the potential cost burdens of 
this regulation based on section 21(c)(2) of the CEA, and has sought to 
reduce the effect on SDRs by permitting an SDR to rely on the accuracy 
of reported data if submitted by an electronic matching/confirmation 
platform.
    Where there are multiple SDRs for a particular asset class, the 
Commission is concerned that swap data may be vulnerable to 
fragmentation due to the potential for swaps in such an asset class to 
be reported to more than one SDR. In addition, the Commission submits 
that permitting a DCO acting as an SDR to limit its reporting to 
``cleared'' swap transactions would further fragment data 
reporting.\325\ The Commission also notes that if SDR regulations 
adopted by the Commission and the SEC significantly diverge, SDRs and 
market participants would accordingly be subject to potentially higher 
fees and charges because of conflicting and/or duplicative 
requirements.
---------------------------------------------------------------------------

    \325\ See CL-CME supra note 51.
---------------------------------------------------------------------------

4. Sound Risk Management Practices
    The Commission believes that part 49 and related part 45, which 
addresses the reporting and recordkeeping of swap transactions by all 
market participants, will greatly strengthen the risk management 
practices of the swap industry. Prior to this time, participants in the 
swaps markets have operated largely unregulated and without obligation 
to disclose transactions to regulators and/or the public. The Dodd-
Frank Act specifically changed the transparency of the swaps market 
with the adoption of section 21 of the CEA and the establishment of 
SDRs as the entity to which swap transaction data will be reported and 
maintained for the use of regulators. The Commission believes that the 
reporting of all swap transactions to an SDR will serve to improve risk 
management practices by market participants through better knowledge of 
open positions and SDR services related to various trade, collateral, 
and risk management practices that are likely to be offered. The 
Commission notes that total transaction costs incurred by market 
participants will invariably increase as a result of additional 
reporting and business conduct obligations.
    As adopted, Sec.  49.17 (c) provides the Commission with direct 
electronic access to SDR data on a real-time basis. This access will 
enable the Commission to better monitor the swap market and promptly 
react to potential market emergencies from unreasonable risks and 
exposures. In addition, the requirement that SDRs have in place a CCO--
mandated by section 21(e) of the CEA and implemented in Sec.  49.22--
will further support the importance of risk management and proper 
conflict of interest management going forward.
    Consistent with the Dodd-Frank Act, part 49 provides that swap data 
reported and maintained by SDRs will be made available to both U.S. and 
foreign regulators in an effort to increase global transparency and 
reduce systemic risk. Because of the global and international aspects 
of the swaps market, the Commission has sought, to the extent possible, 
to coordinate and cooperate with foreign regulators in order to 
facilitate access to swap data.
    To ensure that swap data will not impermissibly be disclosed or 
breached, potentially subjecting SDRs and the Commission to litigation 
risks and expenses, the Dodd-Frank Act in section 21(d) of the CEA 
mandated that domestic and foreign regulators (except for Supervisory 
Appropriate Foreign Regulators) must execute a confidentiality and 
indemnification agreement with the SDR prior to receiving access to SDR 
information. Section 49.18, implementing section 21(d) of the CEA, 
provides that other domestic and foreign regulators must comply with 
the confidentiality requirements set forth in section 8 of the CEA 
relating to the swap data that is to be provided by the registered SDR. 
This confidentiality and indemnification agreement would require the 
regulator to indemnify the SDR and the Commission for any expenses 
arising from litigation relating to the information provided under 
section 8 of the CEA. The Commission received a comment regarding 
access to SDR data by foreign regulators that raised concerns with 
respect to confidentiality and the role of the Commission as a 
gatekeeper.\326\
---------------------------------------------------------------------------

    \326\ See CL-MFA supra note 51 at 3-4. MFA urged that the 
Commission actively participate in verifying the validity of access 
requests by foreign regulators. The Commission believes it is 
inappropriate to place unnecessary burdens on foreign regulators' 
access to swap data held by U.S. SDRs. The confidentiality and 
indemnification agreement required to be executed between the SDR 
and foreign regulators, as well as any memorandum of understanding 
MOU between the Commission and foreign regulators, should ensure 
that data is accessed appropriately and maintained confidentially.
---------------------------------------------------------------------------

    The Commission believes that regulator access (both domestic and 
foreign) to the data held by an SDR is essential for appropriate risk 
management to be performed by regulators. This is especially important 
for regulators to be able to monitor the swap market and certain 
participants relating to systemic risk.
5. Other Public Interest Considerations
    The Commission believes that increased transparency resulting from 
the data collected from SDRs will facilitate greater understanding of 
how the swaps market interacts with and affects financial markets and 
the overall economy. Increased transparency and disclosure through SDRs 
to various

[[Page 54575]]

regulators will support oversight and enforcement efforts and 
capabilities. In addition, empirical data that will be provided to the 
Commission from SDRs in all asset classes should provide the 
Commission, legislators and the public with a better understanding of 
the market, thereby producing more effective public policy to reduce 
overall systemic risk.
    The Dodd-Frank Act and implementing regulations such as part 49 
will likely have extraterritorial effects because of the global nature 
of the swaps market and market participant operations. Consequently, 
the Commission is cognizant of the potential for part 49 to overlap 
with foreign regulations with respect to repositories or SDRs that also 
operate in foreign jurisdictions. Duplicative or overlapping 
regulations would potentially burden SDRs and firms that operate 
globally. The Commission in implementing part 49 expects to rely on 
foreign regulators and regulations to the extent possible consistent 
with the Dodd-Frank Act. However, section 4(c) of the CEA, as amended 
by the Dodd-Frank Act, severely limits the Commission's ability to 
accommodate SDRs because of the prohibition against providing any 
exemptive relief under section 21.
    Pursuant to section 2(a)(13)(G) and proposed part 43 of the 
Commission's regulations, the Commission expects SDRs to play a 
significant role in the public dissemination of swap data. Because it 
is likely that SDRs will assume a major role in the real time 
dissemination of swap data, SDRs may incur greater costs in the 
development of increased technology and operational resources. The 
Commission is unable presently to quantify those costs; they will be 
addressed in the context of the part 43 rules.
6. Comments
    In the SDR NPRM, the Commission solicited comment on its 
consideration of these costs and benefits. The Commission received two 
comments with respect to the cost benefit analysis in the SDR 
NPRM.\327\ In addition, several market participants commented more 
generally that the registration procedures as proposed by the 
Commission in part 49 are burdensome and could be revised to reduce the 
burden on applicants for registration.\328\ CME Group asserted that the 
Commission's primary focus in implementing the Dodd-Frank Act should be 
on the least costly, least burdensome and most efficient alternatives 
available. In that regard, CME suggested that DCOs that are also SDRs 
can achieve compliance with SDR core principles by demonstrating 
compliance with analogous DCO core principles. By the same token, CME 
urges that the Commission offer registration relief to DCOs wishing to 
register as SDRs in order to reduce the burden of filing duplicative 
materials. After careful consideration, the Commission has concluded, 
first, that the burden of filing duplicative materials is limited to 
the costs of providing these materials electronically. Second, with 
respect to core principle compliance, where a particular DCO core 
principle is identical in its requirements to an SDR core principle, 
the Commission believes that compliance with the latter could be 
demonstrated by compliance with the former. Potential non-U.S. SDRs 
expressed concern with respect to the burden of registering in multiple 
countries or jurisdictions. The Dodd-Frank Act does not permit 
exceptions to its registration requirements; however, as noted above in 
the discussion related to registration, the Commission is undertaking 
to work cooperatively with foreign regulators toward establishing, 
where appropriate, a form of recognition regime to partly alleviate the 
perceived burden.\329\
---------------------------------------------------------------------------

    \327\ CL-CME and CL-NFPE Coalition supra note 51.
    \328\ See CL-CME, CL-Foreign Banks, CL-TriOptima, CL-Regis-TR 
and CL-DTCC I supra note 51. These comments are discussed above in 
connection with the Commission's registration procedures set forth 
in Sec.  49.3.
    \329\ See CL-NFPE Coalition supra note 51. As a separate matter, 
the NFPE Coalition highlighted what it views as the potential 
increased burden on end-users who employ swaps to hedge against 
commercial risk. The NFPE Coalition expressed concern that non-
financial entities would be treated in a substantially similar 
manner as swap dealers or financial services firms, thereby 
unnecessarily increasing the burdens on such non-financial entities. 
The Commission believes that these concerns are more properly 
addressed in the Data and Real-Time Reporting rulemakings. See Data 
NPRM supra note 6 and Real-Time NPRM supra note 28.
---------------------------------------------------------------------------

    Consistent with section 15(a) of the CEA, the Commission believes 
that part 49 as adopted is in the public interest and will further 
protect participants and the public, promote efficiency, competition 
and the financial integrity of financial markets, promote accurate and 
efficient price discovery, enhance sound risk management practices and 
address other public interest considerations such as access to SDR data 
by other domestic and foreign regulators.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., 
requires that agencies consider the impact of their rules on small 
businesses. The Commission noted in the proposing release that although 
it has established certain definitions of ``small entity'' to be used 
in evaluating the impact of its rules under the RFA,\330\ it had not 
previously addressed the question of whether SDRs are small entities 
for purposes of the RFA. For the reasons set forth in the proposing 
release, the Commission determined that, similar to DCOs and DCMs, SDRs 
are not ``small entities'' for purposes of the RFA. Accordingly, the 
Chairman, on behalf of the Commission, certified in the NPRM pursuant 
to 5 U.S.C. 605(b) that the actions to be taken herein will not have a 
significant economic impact on a substantial number of small 
entities.\331\
---------------------------------------------------------------------------

    \330\ The Commission previously has established that, because of 
the central role they play in the regulatory scheme concerning 
futures trading, the importance of futures trading in the national 
economy, and the stringent requirements of the CEA, DCOs and DCMs 
are not small entities. See SDR NPRM supra note 8 at 80926.
    \331\ SDR NPRM supra note 8 at 80926.
---------------------------------------------------------------------------

V. List of Subjects

List of Subjects in 17 CFR Part 49

    Swap data repositories; registration and regulatory requirements.

    In consideration of the foregoing, and pursuant to the authority in 
the Commodity Exchange Act, as amended, and in particular sections 
8a(5) and 21 of the Act, the Commission hereby adopts an amendment to 
Chapter I of Title 17 of the Code of Federal Regulation by adding a new 
part 49 as follows:

PART 49--SWAP DATA REPOSITORIES

Sec.
49.1 Scope.
49.2 Definitions.
49.3 Procedures for registration.
49.4 Withdrawal from registration.
49.5 Equity interest transfers.
49.6 Registration of successor entities.
49.7 Swap data repositories located in foreign jurisdictions.
49.8 Procedures for implementing registered swap data repository 
rules.
49.9 Duties of registered swap data repositories.
49.10 Acceptance of data.
49.11 Confirmation of data accuracy.
49.12 Swap data repository recordkeeping requirements.
49.13 Monitoring, screening and analyzing swap data.
49.14 Monitoring, screening and analyzing end-user clearing 
exemption claims by individual and affiliated entities.
49.15 Real-time public reporting of swap data.
49.16 Privacy and confidentiality requirements of swap data 
repositories.

[[Page 54576]]

49.17 Access to SDR data.
49.18 Confidentiality and indemnification agreement.
49.19 Core principles applicable to registered swap data 
repositories.
49.20 Governance arrangements (Core Principle 2).
49.21 Conflicts of interest (Core Principle 3).
49.22 Chief compliance officer.
49.23 Emergency policies and procedures.
49.24 System safeguards.
49.25 Financial resources.
49.26 Disclosure requirements of swap data repositories.
49.27 Access and fees.
Appendix A to Part 49--Form SDR

    Authority: 7 U.S.C. 12a and 24a, as amended by Title VII of the 
Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 
124 Stat. 1376 (2010), unless otherwise noted.


Sec.  49.1  Scope.

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


Sec.  49.2  Definitions.

    (a) As used in this part:
    (1) Affiliate. The term ``affiliate'' means a person that directly, 
or indirectly, controls, is controlled by, or is under common control 
with, the swap data repository.
    (2) Asset Class. The term ``asset class'' means the particular 
broad category of goods, services or commodities underlying a swap. The 
asset classes include credit, equity, interest rates, foreign exchange, 
other commodities, and such other asset classes as may be determined by 
the Commission.
    (3) Commercial Use. The term ``commercial use'' means the use of 
swap data held and maintained by a registered swap data repository for 
a profit or business purposes. The use of swap data for regulatory 
purposes and/or responsibilities by a registered swap data repository 
would not be considered a commercial use regardless of whether the 
registered swap data repository charges a fee for reporting such swap 
data.
    (4) Control. The term ``control'' (including the terms ``controlled 
by'' and ``under common control with'') means the possession, direct or 
indirect, of the power to direct or cause the direction of the 
management and policies of a person, whether through the ownership of 
voting securities, by contract, or otherwise.
    (5) Foreign Regulator. The term ``foreign regulator'' means a 
foreign futures authority as defined in Section 1a(26) of the Act, 
foreign financial supervisors, foreign central banks and foreign 
ministries.
    (6) Independent Perspective. The term ``independent perspective'' 
means a viewpoint that is impartial regarding competitive, commercial, 
or industry concerns and contemplates the effect of a decision on all 
constituencies involved.
    (7) Market Participant. The term ``market participant'' means any 
person participating in the swap market, including, but not limited to, 
designated contract markets, derivatives clearing organizations, swaps 
execution facilities, swap dealers, major swap participants, and any 
other counterparties to a swap transaction.
    (8) Non-affiliated third party. The term ``non-affiliated third 
party'' means any person except:
    (i) The swap data repository;
    (ii) The swap data repository's affiliate; or
    (iii) A person employed by a swap data repository and any entity 
that is not the swap data repository's affiliate (and ``non-affiliated 
third party'' includes such entity that jointly employs the person).
    (9) Person Associated with a Swap Data Repository. The term 
``person associated with a swap data repository'' means:
    (i) Any partner, officer, or director of such swap data repository 
(or any person occupying a similar status or performing similar 
functions);
    (ii) Any person directly or indirectly controlling, controlled by, 
or under common control with such swap data repository; or
    (iii) Any person employed by such swap data repository.
    (10) Position. The term ``position'' means the gross and net 
notional amounts of open swap transactions aggregated by one or more 
attributes, including, but not limited to, the:
    (i) Underlying instrument;
    (ii) Index, or reference entity;
    (iii) Counterparty;
    (iv) Asset class;
    (v) Long risk of the underlying instrument, index, or reference 
entity; and
    (vi) Short risk of the underlying instrument, index, or reference 
entity.
    (11) Registered Swap Data Repository. The term ``registered swap 
data repository'' means a swap data repository that is registered under 
Section 21 of the Act.
    (12) Reporting Entity. The term ``reporting entity'' means those 
entities that are required to report swap data to a registered swap 
data repository. These reporting entities include designated contract 
markets, swaps execution facilities, derivatives clearing 
organizations, swap dealers, major swap participants and certain non-
swap dealers/non-major swap participant counterparties.
    (13) SDR Information. The term ``SDR Information'' means any 
information that the swap data repository receives or maintains.
    (14) Section 8 Material. The term ``Section 8 Material'' means the 
business transactions, trade data, or market positions of any person 
and trade secrets or names of customers.
    (15) Swap Data. The term ``swap data'' means the specific data 
elements and information set forth in part 45 of this chapter that is 
required to be reported by a reporting entity to a registered swap data 
repository.
    (b) Defined Terms. Capitalized terms not defined in this part shall 
have the meanings assigned to them in Sec.  1.3 of this chapter.


Sec.  49.3  Procedures for registration.

    (a) Application Procedures. (1) An applicant, person or entity 
desiring to be registered as a swap data repository shall file 
electronically an application for registration on Form SDR provided in 
appendix A to this part, with the Secretary of the Commission at its 
headquarters in Washington, DC in a format and in the manner specified 
by the Secretary of the Commission in accordance with the instructions 
contained therein.
    (2) The application shall include information sufficient to 
demonstrate compliance with core principles specified in Section 21 of 
the Act and the regulations thereunder. Form SDR consists of 
instructions, general questions and a list of Exhibits (documents, 
information and evidence) required by the Commission in order to 
determine whether an applicant is able to comply with the core 
principles. An application will not be considered to be materially 
complete unless the applicant has submitted, at a minimum, the exhibits 
as required in Form SDR. If the application is not materially complete, 
the Commission shall notify the applicant that the application will not 
be deemed to have been submitted for purposes of the 180-day review 
procedures.
    (3) 180-Day Review Procedures. The Commission will review the 
application for registration as a swap data repository within 180 days 
of the date of the filing of such application. In considering an 
application for registration as a swap data repository, the staff of 
the Commission shall include in its review, an applicant's past 
relevant submissions and compliance history. At or prior to

[[Page 54577]]

the conclusion of the 180-day period, the Commission will either by 
order grant registration; extend, by order, the 180-day review period 
for good cause; or deny the application for registration as a swap data 
repository. The 180-day review period shall commence once a completed 
submission on Form SDR is submitted to the Commission. The 
determination of when such submission on Form SDR is complete shall be 
at the sole discretion of the Commission. If deemed appropriate, the 
Commission may grant registration as a swap data repository subject to 
conditions. If the Commission denies an application for registration as 
a swap data repository, it shall specify the grounds for such denial. 
In the event of a denial of registration for a swap data repository, 
any person so denied shall be afforded an opportunity for a hearing 
before the Commission.
    (4) Standard for Approval. The Commission shall grant the 
registration of a swap data repository if the Commission finds that 
such swap data repository is appropriately organized, and has the 
capacity: to ensure the prompt, accurate and reliable performance of 
its functions as a swap data repository; comply with any applicable 
provisions of the Act and regulations thereunder; carry out its 
functions in a manner consistent with the purposes of Section 21 of the 
Act and the regulations thereunder; and operate in a fair, equitable 
and consistent manner. The Commission shall deny registration of a swap 
data repository if it appears that the application is materially 
incomplete; fails in form or substance to meet the requirements of 
Section 21 of the Act and part 49; or is amended or supplemented in a 
manner that is inconsistent with this Sec.  49.3. The Commission shall 
notify the applicant seeking registration that the Commission is 
denying the application setting forth the deficiencies in the 
application, and/or the manner in which the application fails to meet 
the requirements of this part.
    (5) Amendments and Annual Filing. If any information reported on 
Form SDR or in any amendment thereto is or becomes inaccurate for any 
reason, whether before or after the application for registration has 
been granted, the swap data repository shall promptly file an amendment 
on Form SDR updating such information. In addition, the swap data 
repository shall annually file an amendment on Form SDR within 60 days 
after the end of each fiscal year.
    (6) Service of Process. Each swap data repository shall designate 
and authorize on Form SDR an agent in the United States, other than a 
Commission official, who shall accept any notice or service of process, 
pleadings, or other documents in any action or proceedings brought 
against the swap data repository to enforce the Act and the regulations 
thereunder.
    (b) Provisional Registration. The Commission, upon the request of 
an applicant, may grant provisional registration of a swap data 
repository if such applicant is in substantial compliance with the 
standards set forth in paragraph (a)(4) of this section and is able to 
demonstrate operational capability, real-time processing, multiple 
redundancy and robust security controls. Such provisional registration 
of a swap data repository shall expire on the earlier of: the date that 
the Commission grants or denies registration of the swap data 
repository; or the date that the Commission rescinds the temporary 
registration of the swap data repository. This paragraph (b) shall 
terminate within such time as determined by the Commission. A 
provisional registration granted by the Commission does not affect the 
right of the Commission to grant or deny permanent registration as 
provided under paragraph (a)(3) of this section.
    (c) Withdrawal of Application for Registration. An applicant for 
registration may withdraw its application submitted pursuant to 
paragraph (a) of this section by filing with the Commission such a 
request. Withdrawal of an application for registration shall not affect 
any action taken or to be taken by the Commission based upon actions, 
activities, or events occurring during the time that the application 
for registration was pending with the Commission, and shall not 
prejudice the filing of a new application by such applicant.
    (d) Reinstatement of Dormant Registration. Before accepting or re-
accepting swap transaction data, a dormant registered swap data 
repository as defined in Sec.  40.1(e) of this chapter shall reinstate 
its registration under the procedures set forth in paragraph (a) of 
this section; provided, however, that an application for reinstatement 
may rely upon previously submitted materials that still pertain to, and 
accurately describe, current conditions.
    (e) Delegation of Authority. (1) The Commission hereby delegates, 
until it orders otherwise, to the Director of the Division of Market 
Oversight or the Director's delegates, with the consultation of the 
General Counsel or the General Counsel's delegates, the authority to 
notify an applicant seeking registration as a swap data repository 
pursuant to Section 21 of the Act that the application is materially 
incomplete and the 180-day period review period is extended.
    (2) The Director of the Division of Market Oversight may submit to 
the Commission for its consideration any matter which has been 
delegated in this paragraph.
    (3) Nothing in this paragraph prohibits the Commission, at its 
election, from exercising the authority delegated in paragraph (e)(1) 
of this section.
    (f) Request for Confidential Treatment. An applicant for 
registration may request confidential treatment for materials submitted 
in its application as set forth in Sec. Sec.  40.8 and 145.9 of this 
chapter. The applicant shall identify with particularity information in 
the application that will be subject to a request for confidential 
treatment.


Sec.  49.4  Withdrawal from registration.

    (a)(1) A registered swap data repository may withdraw its 
registration by giving notice in writing to the Commission requesting 
that its registration as a swap data repository be withdrawn, which 
notice shall be served at least sixty days prior to the date named 
therein as the date when the withdrawal of registration shall take 
effect. The request to withdraw shall be made by a person duly 
authorized by the registrant and shall specify:
    (i) The name of the registrant for which withdrawal of registration 
is being requested;
    (ii) The name, address and telephone number of the swap data 
repository that will have custody of data and records of the 
registrant;
    (iii) The address where such data and records will be located; and
    (iv) A statement that the custodial swap data repository is 
authorized to make such data and records available in accordance with 
Sec.  1.44.
    (2) Prior to filing a request to withdraw, a registered swap data 
repository shall file an amended Form SDR to update any inaccurate 
information. A withdrawal of registration shall not affect any action 
taken or to be taken by the Commission based upon actions, activities 
or events occurring during the time that the facility was designated by 
the Commission.
    (b) A notice of withdrawal from registration filed by a swap data 
repository shall become effective for all matters (except as provided 
in this paragraph (b)) on the 60th day after the filing thereof with 
the Commission, within such longer period of time as to which such swap 
data repository

[[Page 54578]]

consents or which the Commission, by order, may determine as necessary 
or appropriate in the public interest.
    (c) Revocation of Registration for False Application. If, after 
notice and opportunity for hearing, the Commission finds that any 
registered swap data repository has obtained its registration by making 
any false or misleading statements with respect to any material fact or 
has violated or failed to comply with any provision of the Act and 
regulations thereunder, the Commission, by order, may revoke the 
registration. Pending final determination whether any registration 
shall be revoked, the Commission, by order, may suspend such 
registration, if such suspension appears to the Commission, after 
notice and opportunity for hearing, to be necessary or appropriate and 
in the public interest.


Sec.  49.5  Equity interest transfers.

    (a) Equity transfer notification. Upon entering into any 
agreement(s) that could result in an equity interest transfer of ten 
percent or more in the swap data repository, the swap data repository 
shall file a notification of the equity interest transfer with the 
Secretary of the Commission at its headquarters in Washington, DC in a 
format and in the manner specified by the Secretary of the Commission, 
no later than the business day, as defined in Sec.  40.1 of this 
chapter, following the date on which the swap data repository enters 
into a firm obligation to transfer the equity interest. The swap data 
repository shall also amend any information that is no longer accurate 
on Form SDR consistent with the procedures set forth in Sec.  49.3 of 
this part.
    (b) Required information. The notification must include and be 
accompanied by: any relevant agreement(s), including any preliminary 
agreements; any associated changes to relevant corporate documents; a 
chart outlining any new ownership or corporate or organizational 
structure; a brief description of the purpose and any impact of the 
equity interest transfer; and a representation from the swap data 
repository that it meets all of the requirements of Section 21 of the 
Act and Commission regulations adopted thereunder. The swap data 
repository shall keep the Commission apprised of the projected date 
that the transaction resulting in the equity interest transfer will be 
consummated, and must provide to the Commission any new agreements or 
modifications to the original agreement(s) filed pursuant to this 
section. The swap data repository shall notify the Commission of the 
consummation of the transaction on the day in which it occurs.
    (c) Certification. (1) Upon a transfer of an equity interest of ten 
percent or more in a registered swap data repository, the registered 
swap data repository shall file with the Secretary of the Commission at 
its headquarters in Washington, DC in a format and in the manner 
specified by the Secretary of the Commission, a certification that the 
registered swap data repository meets all of the requirements of 
Section 21 of the Act and Commission regulations adopted thereunder, no 
later than two business days, as defined in Sec.  40.1 of this chapter, 
following the date on which the equity interest of ten percent or more 
was acquired. Such certification shall state whether changes to any 
aspects of the swap data repository's operations were made as a result 
of such change in ownership, and include a description of any such 
change(s).
    (2) The certification required under this paragraph may rely on and 
be supported by reference to an application for registration as a swap 
data repository or prior filings made pursuant to a rule submission 
requirement, along with any necessary new filings, including new 
filings that provide any and all material updates of prior submissions.


Sec.  49.6  Registration of successor entities.

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


Sec.  49.7  Swap data repositories located in foreign jurisdictions.

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


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

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


Sec.  49.9  Duties of registered swap data repositories.

    (a) Duties. To be registered, and maintain registration, as a swap 
data repository, a registered swap data repository shall:
    (1) Accept swap data as prescribed in Sec.  49.10 for each swap;
    (2) Confirm, as prescribed in Sec.  49.11, with both counterparties 
to the swap the accuracy of the swap data that was submitted;
    (3) Maintain, as prescribed in Sec.  49.12, the swap data described 
in part 45 of the

[[Page 54579]]

Commission's Regulations in such form and manner as provided therein 
and in the Act and the rules and regulations thereunder;
    (4) Provide direct electronic access to the Commission (or any 
designee of the Commission, including another registered entity) as 
prescribed in Sec.  49.17;
    (5) Provide the information set forth in Sec.  49.15 to comply with 
the public reporting requirements set forth in Section 2(a)(13) of the 
Act;
    (6) Establish automated systems for monitoring, screening, and 
analyzing swap data as prescribed in Sec.  49.13;
    (7) Establish automated systems for monitoring, screening and 
analyzing end-user clearing exemption claims as prescribed in Sec.  
49.14;
    (8) Maintain the privacy of any and all swap data and any other 
related information that the swap data repository receives from a 
reporting entity as prescribed in Sec.  49.16;
    (9) Upon request of certain appropriate domestic and foreign 
regulators, provide access to swap data and information held and 
maintained by the swap data repository as prescribed in Sec.  49.17;
    (10) Adopt and establish appropriate emergency policies and 
procedures, including business continuity and disaster recovery plans, 
as prescribed in Sec.  49.23 and Sec.  49.24.
    (11) Designate an individual to serve as a chief compliance officer 
who shall comply with Sec.  49.22; and
    (12) Subject itself to inspection and examination by the 
Commission.
    (b) This Regulation is not intended to limit, or restrict, the 
applicability of other provisions of the Act, including, but not 
limited to, Section 2(a)(13) of the Act and rules and regulations 
promulgated thereunder.


Sec.  49.10  Acceptance of data.

    (a) A registered swap data repository shall establish, maintain, 
and enforce policies and procedures for the reporting of swap data to 
the registered swap data repository and shall accept and promptly 
record all swap data in its selected asset class and other regulatory 
information that is required to be reported pursuant to part 45 and 
part 43 of this chapter by designated contract markets, derivatives 
clearing organizations, swap execution facilities, swap dealers, major 
swap participants and/or non-swap dealer/non-major swap participant 
counterparties.
    (1) Electronic Connectivity. For the purpose of accepting all swap 
data as required by part 45 and part 43, the registered swap data 
repository shall adopt policies and procedures, including technological 
protocols, which provide for electronic connectivity between the swap 
data repository and designated contract markets, derivatives clearing 
organizations, swaps execution facilities, swap dealers, major swap 
participants and/or certain other non-swap dealer/non-major swap 
participant counterparties who report such data. The technological 
protocols established by a swap data repository shall provide for the 
receipt of swap creation data, swap continuation data, real-time public 
reporting data, and all other data and information required to be 
reported to such swap data repository. The swap data repository shall 
ensure that its mechanisms for swap data acceptance are reliable and 
secure.
    (b) A registered swap data repository shall set forth in its 
application for registration as described in Sec.  49.3 the specific 
asset class or classes for which it will accept swaps data. If a swap 
data repository accepts swap data of a particular asset class, then it 
shall accept data from all swaps of that asset class, unless otherwise 
prescribed by the Commission.
    (c) A registered swap data repository shall establish policies and 
procedures reasonably designed to prevent any provision in a valid swap 
from being invalidated or modified through the confirmation or 
recording process of the swap data repository. The policies and 
procedures must ensure that the swap data repository's user agreements 
are designed to prevent any such invalidation or modification.
    (d) A registered swap data repository shall establish procedures 
and provide facilities for effectively resolving disputes over the 
accuracy of the swap data and positions that are recorded in the 
registered swap data repository.


Sec.  49.11  Confirmation of data accuracy.

    (a) A registered swap data repository shall establish policies and 
procedures to ensure the accuracy of swap data and other regulatory 
information required to be reported by part 45 that it receives from 
reporting entities or certain third-party service providers acting on 
their behalf, such as confirmation or matching service providers.
    (b) A registered swap data repository shall confirm the accuracy of 
all swap data that is submitted pursuant to part 45.
    (1) Confirmation of data accuracy for swap creation data as defined 
in part 45.
    (i) A registered swap data repository has confirmed the accuracy of 
swap creation data that was submitted directly by a counterparty if the 
swap data repository has notified both counterparties of the data that 
was submitted and received from both counterparties acknowledgement of 
the accuracy of the swap data and corrections for any errors.
    (ii) A registered swap data repository has confirmed the accuracy 
of swap creation data that was submitted by a swap execution facility, 
designated contract market, derivatives clearing organization, or 
third-party service provider who is acting on behalf of a counterparty, 
if the swap data repository has complied with each of the following:
    (A) The swap data repository has formed a reasonable belief that 
the swap data is accurate;
    (B) The swap data that was submitted, or any accompanying 
information, evidences that both counterparties agreed to the data; and
    (C) The swap data repository has provided both counterparties with 
a 48 hour correction period after which a counterparty is assumed to 
have acknowledged the accuracy of the swap data.
    (2) Confirmation of data accuracy for swap continuation data as 
defined in part 45.
    (i) A registered swap data repository has confirmed the accuracy of 
the swap continuation data that was submitted directly by a 
counterparty if the swap data repository has notified both 
counterparties of the data that was submitted and provided both 
counterparties with a 48 hour correction period after which a 
counterparty is assumed to have acknowledged the accuracy of the data.
    (ii) A registered swap data repository has confirmed the accuracy 
of swap continuation data that was submitted by a swap execution 
facility, designated contract market, derivatives clearing 
organization, or third-party service provider who is acting on behalf 
of a counterparty, if the swap data repository has complied with each 
of the following:
    (A) The swap data repository has formed a reasonable belief that 
the swap data is accurate; and
    (B) The swap data repository has provided both counterparties with 
a 48 hour correction period after which a counterparty is assumed to 
have acknowledged the accuracy of the swap data.
    (c) A registered swap data repository shall keep a record of 
corrected errors that is available upon request to the Commission.

[[Page 54580]]

Sec.  49.12  Swap data repository recordkeeping requirements.

    (a) A registered swap data repository shall maintain its books and 
records in accordance with the requirements of part 45 of this chapter 
regarding the swap data required to be reported to the swap data 
repository.
    (b) A registered swap data repository shall maintain swap data 
(including all historical positions) throughout the existence of the 
swap and for five years following final termination of the swap, during 
which time the records must be readily accessible by the swap data 
repository and available to the Commission via real-time electronic 
access; and in archival storage for which such swap data is retrievable 
by the swap data repository within three business days.
    (c) All records required to be kept pursuant to this Regulation 
shall be open to inspection upon request by any representative of the 
Commission and the United States Department of Justice. Copies of all 
such records shall be provided, at the expense of the swap data 
repository or person required to keep the record, to any representative 
of the Commission upon request, either by electronic means, in hard 
copy, or both, as requested by the Commission.
    (d) A registered swap data repository shall comply with the real 
time public reporting and recordkeeping requirements prescribed in 
Sec.  49.15 and part 43 of this chapter.
    (e) A registered swap data repository shall establish policies and 
procedures to calculate positions for position limits and any other 
purpose as required by the Commission, for all persons with swaps that 
have not expired maintained by the registered swap data repository.


Sec.  49.13  Monitoring, screening and analyzing swap data.

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


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

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


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

    (a) Scope. The provisions of this Sec.  49.15 apply to real-time 
public reporting of swap data, as defined in part 43 of this chapter.
    (b) Systems to Accept and Disseminate Swap Data In Connection With 
Real-Time Public Reporting. A registered swap data repository shall 
establish such electronic systems as are necessary to accept and 
publicly disseminate real-time swap data submitted to meet the real-
time public reporting obligations of part 43 of this chapter. Any 
electronic systems established for this purpose must be capable of 
accepting and ensuring the public dissemination of all data fields 
required by part 43 of this chapter.
    (c) Duty to Notify the Commission of Untimely Data. A registered 
swap data repository must notify the Commission of any swap transaction 
for which the real-time swap data was not received by the swap data 
repository in accordance with part 43 of this chapter.


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

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


Sec.  49.17  Access to SDR data.

    (a) Purpose. This Section provides a procedure by which the 
Commission, other domestic regulators and foreign regulators may obtain 
access to the swaps data held and maintained by registered swap data 
repositories. Except as specifically set forth in this Regulation, the 
Commission's duties and obligations regarding the confidentiality of 
business transactions or market positions of any person and trade 
secrets or names of customers identified in Section 8 of the Act are 
not affected.
    (b) Definitions. For purposes of this Sec.  49.17, the following 
terms shall be defined as follows:
    (1) Appropriate Domestic Regulator. The term ``Appropriate Domestic 
Regulator'' shall mean:
    (i) The Securities and Exchange Commission;
    (ii) Each prudential regulator identified in Section 1a(39) of the 
Act with respect to requests related to any of such regulator's 
statutory authorities, without limitation to the activities listed for 
each regulator in Section 1a(39);
    (iii) The Financial Stability Oversight Council;
    (iv) The Department of Justice;
    (v) Any Federal Reserve Bank;

[[Page 54581]]

    (vi) The Office of Financial Research; and
    (vii) Any other person the Commission deems appropriate.
    (2) Appropriate Foreign Regulator. The term ``Appropriate Foreign 
Regulator'' shall mean those Foreign Regulators with an existing 
memorandum of understanding or other similar type of information 
sharing arrangement executed with the Commission and/or Foreign 
Regulators without an MOU as determined on a case-by-case basis by the 
Commission.
    (i) Filing Requirements. For those Foreign Regulators who do not 
currently have a memorandum of understanding with the Commission, the 
Commission has determined to provide the following filing process for 
those Foreign Regulators that may require swap data or information 
maintained by a registered swap data repository. The filing requirement 
set forth in this Sec.  49.17 will assist the Commission in its 
analysis of whether a specific Foreign Regulator should be considered 
``appropriate'' for purposes of Section 21(c)(7) of the Act.
    (A) The Foreign Regulator is required to file an application in the 
form and manner prescribed by the Commission.
    (B) The Foreign Regulator in its application is required to provide 
sufficient facts and procedures to permit the Commission to analyze 
whether the Foreign Regulator employs appropriate confidentiality 
procedures and to satisfy itself that the information will be disclosed 
only as permitted by Section 8(e) of the Act.
    (ii) The Commission in its analysis of Foreign Regulator 
applications shall be satisfied that any information potentially 
provided by a registered swap data repository will not be disclosed 
except in limited circumstances, such as an adjudicatory action or 
proceeding involving the Foreign Regulator, as identified in Section 8 
of the Act.
    (iii) The Commission reserves the right in connection with any 
determination of an ``Appropriate Foreign Regulator'' to revisit or 
reassess a prior determination consistent with the Act.
    (3) Direct Electronic Access. For the purposes of this regulation, 
the term ``direct electronic access'' shall mean an electronic system, 
platform or framework that provides Internet or Web-based access to 
real-time swap transaction data and also provides scheduled data 
transfers to Commission electronic systems.
    (c) Commission Access.
    (1) Direct Electronic Access. A registered swap data repository 
shall provide direct electronic access to the Commission or the 
Commission's designee, including another registered entity, in order 
for the Commission to carry out its legal and statutory 
responsibilities under the Act and related regulations.
    (2) Monitoring Tools. A registered swap data repository is required 
to provide the Commission with proper tools for the monitoring, 
screening and analyzing of swap transaction data, including, but not 
limited to, Web-based services, services that provide automated 
transfer of data to Commission systems, various software and access to 
the staff of the swap data repository and/or third-party service 
providers or agents familiar with the operations of the registered swap 
data repository, which can provide assistance to the Commission 
regarding data structure and content. These monitoring tools shall be 
substantially similar in analytical capability as those provided to the 
compliance staff and the Chief Compliance Officer of the swap data 
repository.
    (3) Authorized Users. The swap transaction data provided to the 
Commission by a registered swap data repository shall be accessible 
only by authorized users. The swap data repository shall maintain and 
provide a list of authorized users in the manner and frequency 
determined by the Commission.
    (d) Other Regulators. (1) General Procedure for Gaining Access to 
Registered Swap Data Repository Data. Appropriate Domestic Regulators 
and Appropriate Foreign Regulators seeking to gain access to the swap 
data maintained by a swap data repository are required to apply for 
access by filing a request for access with the registered swap data 
repository and certifying that it is acting within the scope of its 
jurisdiction.
    (2) Appropriate Domestic Regulator with Regulatory Responsibility 
over a Swap Data Repository. An Appropriate Domestic Regulator that has 
regulatory jurisdiction over a swap data repository registered with it 
pursuant to a separate statutory authority that is also registered with 
the Commission pursuant to this chapter is not subject to this 
paragraph (d) and Sec.  49.18(b) as long as the following conditions 
are met:
    (i) The Appropriate Domestic Regulator executes a memorandum of 
understanding or similar information sharing arrangement with the 
Commission; and
    (ii) The Commission, consistent with Section 21(c)(4)(A) of the 
Act, designates the Appropriate Domestic Regulator to receive direct 
electronic access.
    (3) Appropriate Foreign Regulator with Regulatory Responsibility 
over a Swap Data Repository. An Appropriate Foreign Regulator that has 
supervisory authority over a swap data repository registered with it 
pursuant to foreign law and/or regulation that is also registered with 
the Commission pursuant to this chapter is not otherwise subject to 
this paragraph (d) and Sec.  49.18(b).
    (4) Obligations of the Registered Swap Data Repository in 
Connection with Appropriate Domestic Regulator or Appropriate Foreign 
Regulator Requests for Data Access.
    (i) A registered swap data repository shall promptly notify the 
Commission regarding any request received by an Appropriate Domestic 
Regulator or Appropriate Foreign Regulator to gain access to the swaps 
transaction data maintained by such swap data repository.
    (ii) The registered swap data repository shall notify the 
Commission electronically in a format specified by the Secretary of the 
Commission.
    (5) Timing. Once the swap data repository provides the Commission 
with notification of a request for data access by an Appropriate 
Domestic Regulator or Appropriate Foreign Regulator as required by 
paragraph (d)(2) of this section, such swap data repository shall 
provide access to the requested swap data.
    (6) Confidentiality and Indemnification Agreement. Consistent with 
Sec.  49.18 of this part, the Appropriate Domestic Regulator or 
Appropriate Foreign Regulator prior to receipt of any requested data or 
information shall execute a ``Confidentiality and Indemnification 
Agreement'' with the registered swap data repository as set forth in 
Section 21(d) of the Act.
    (e) Third-Party Service Providers to a Registered Swap Data 
Repository. Access to the data and information maintained by a 
registered swap data repository may be necessary for certain third 
parties that provide various technology and data-related services to a 
registered swap data repository. Third-party access to the swap data 
maintained by a swap data repository is permissible subject to the 
following conditions:
    (1) Both the registered swap data repository and the third party 
service provider shall have strict confidentiality procedures that 
protect data and information from improper disclosure.
    (2) Prior to swap data access, the third-party service provider and 
the

[[Page 54582]]

registered swap data repository shall execute a ``Confidentiality 
Agreement'' setting forth minimum confidentiality procedures and 
permissible uses of the information maintained by the swap data 
repository that are equivalent to the privacy procedures for swap data 
repositories outlined in Sec.  49.16.
    (f) Access by Market Participants. (1) General. Access of swap data 
maintained by the registered swap data repository to market 
participants is generally prohibited.
    (2) Exception. Data and information related to a particular swap 
that is maintained by the registered swap data repository may be 
accessed by either counterparty to that particular swap.
    (g) Commercial Uses of Data Accepted and Maintained by the 
Registered Swap Data Repository Prohibited. Swap data accepted and 
maintained by the swap data repository generally may not be used for 
commercial or business purposes by the swap data repository or any of 
its affiliated entities.
    (1) The registered swap data repository is required to adopt and 
implement adequate ``firewalls'' or controls to protect the reported 
swap data required to be maintained under Sec.  49.12 of this part and 
Section 21(b) of the Act from any improper commercial use.
    (2) Exception. (A) The swap dealer, counterparty or any other 
registered entity that submits the swap data maintained by the 
registered swap data repository may permit the commercial or business 
use of that data by express written consent.
    (B) Swap data repositories shall not as a condition of the 
reporting of swap transaction data require a reporting party to consent 
to the use of any reported data for commercial or business purposes.
    (3) Swap data repositories responsible for the public dissemination 
of real-time swap data shall not make commercial use of such data prior 
to its public dissemination.


Sec.  49.18  Confidentiality and indemnification agreement.

    (a) Purpose. This section sets forth the obligations of registered 
swap data repositories to execute a ``Confidentiality and 
Indemnification Agreement'' in connection with providing access to swap 
data to certain domestic and foreign regulators.
    (b) Confidentiality and Indemnification Agreement. Prior to the 
registered swap data repository providing access to the swap data with 
any Appropriate Domestic Regulator or Appropriate Foreign Regulator as 
defined in Sec.  49.17(b), the swap data repository shall receive a 
written agreement from each such entity stating that the entity shall 
abide by the confidentiality requirements described in Section 8 of the 
Act relating to the swap data that is provided; and each such entity 
shall agree to indemnify the swap data repository and the Commission 
for any expenses arising from litigation relating to the information 
provided under Section 8 of the Act.
    (c) Certain Appropriate Domestic and Foreign Regulators with 
Regulatory Responsibility over a Swap Data Repository. The requirements 
set forth above in paragraph (b) shall not apply to certain Appropriate 
Domestic and Foreign Regulators with regulatory responsibility over a 
swap data repository as described in Sec.  49.17(d)(2) and (3). The 
swap data repository and such Appropriate Domestic or Foreign Regulator 
in each case is required to comply with Section 8 of the Act and any 
other relevant statutory confidentiality provisions.


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

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


Sec.  49.20  Governance arrangements (Core Principle 2).

    (a) General. (1) Each registered swap data repository shall 
establish governance arrangements that are transparent to fulfill 
public interest requirements, and to support the objectives of the 
Federal Government, owners, and participants.
    (2) Each registered swap data repository shall establish governance 
arrangements that are well-defined and include a clear organizational 
structure with consistent lines of responsibility and effective 
internal controls, including with respect to administration, 
accounting, and the disclosure of confidential information. Sec.  49.22 
of this part contains rules on internal controls applicable to 
administration and accounting. Sec.  49.16 of this part contains rules 
on internal controls applicable to the disclosure of confidential 
information.
    (b) Transparency of Governance Arrangements. (1) Each registered 
swap data repository shall state in its charter documents that its 
governance arrangements are transparent to support, among other things, 
the objectives of the Federal Government pursuant to Section 21(f)(2) 
of the Act.
    (2) Each registered swap data repository shall, at a minimum, make 
the following information available to the public and relevant 
authorities, including the Commission:
    (i) The mission statement of the registered swap data repository;
    (ii) The mission statement and/or charter of the board of 
directors, as well as of each committee of the registered swap data 
repository that has:
    (A) The authority to act on behalf of the board of directors or
    (B) The authority to amend or constrain actions of the board of 
directors;
    (iii) The board of directors nomination process for the registered 
swap data repository, as well as the process for assigning members of 
the board of directors or other persons to

[[Page 54583]]

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


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

    (a) General. (1) Each registered swap data repository shall 
establish and enforce rules to minimize conflicts of interest in the 
decision-making process of the swap data repository, and establish a 
process for resolving such conflicts of interest.
    (2) Nothing in this section shall supersede any requirement 
applicable to the swap data repository pursuant to Sec.  49.20 of this 
part.
    (b) Policies and Procedures. (1) Each registered swap data 
repository shall establish, maintain, and enforce written procedures 
to:
    (i) Identify, on an ongoing basis, existing and potential conflicts 
of interest; and
    (ii) Make decisions in the event of a conflict of interest. Such 
procedures shall include rules regarding the recusal, in applicable 
circumstances, of parties involved in the making of decisions.
    (2) As further described in Sec.  49.20 of this part, the chief 
compliance officer of the registered swap data repository shall, in 
consultation with the board of directors or a senior officer of the 
swap data repository, as applicable, resolve any such conflicts of 
interest.
    (c) Compliance with Core Principle. The chief compliance officer of 
the registered swap data repository shall review the compliance of the 
swap data repository with this core principle.


Sec.  49.22  Chief compliance officer.

    (a) Definition of Board of Directors. For purposes of this part 49, 
the term ``board of directors'' means the board of directors of a 
registered swap data repository, or for those swap data repositories 
whose organizational structure does not include a board of directors, a 
body performing a function similar to that of a board of directors.

[[Page 54584]]

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

[[Page 54585]]

to the board or senior officer, and any subsequent discussion of the 
report, shall be recorded in board minutes or similar written record, 
as evidence of compliance with this requirement.
    (2) The annual compliance report shall be provided electronically 
to the Commission not more than 60 days after the end of the registered 
swap data repository's fiscal year, concurrently with the filing of the 
annual amendment to Form SDR that must be submitted to the Commission 
pursuant to Sec.  49.3(a)(5) of this part.
    (3) Promptly upon discovery of any material error or omission made 
in a previously filed compliance report, the chief compliance officer 
shall file an amendment with the Commission to correct any material 
error or omission. An amendment shall contain the oath or certification 
required under paragraph (e)(67) of this section.
    (4) A registered swap data repository may request the Commission 
for an extension of time to file its compliance report based on 
substantial, undue hardship. Extensions for the filing deadline may be 
granted at the discretion of the Commission.
    (g) Recordkeeping. (1) The registered swap data repository shall 
maintain:
    (i) A copy of the written policies and procedures, including the 
code of ethics and conflicts of interest policies adopted in 
furtherance of compliance with the Act and Commission regulations;
    (ii) Copies of all materials, including written reports provided to 
the board of directors or senior officer in connection with the review 
of the annual compliance report under paragraph (f)(1) of this section 
and the board minutes or similar written record of such review, that 
record the submission of the annual compliance report to the board of 
directors or senior officer; and
    (iii) Any records relevant to the registered swap data repository's 
annual compliance report, including, but not limited to, work papers 
and other documents that form the basis of the report, and memoranda, 
correspondence, other documents, and records that are:
    (A) Created, sent or received in connection with the annual 
compliance report and
    (B) Contain conclusions, opinions, analyses, or financial data 
related to the annual compliance report.
    (2) The registered swap data repository shall maintain records in 
accordance with Sec.  1.31 of this chapter.


Sec.  49.23  Emergency authority policies and procedures.

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


Sec.  49.24  System safeguards.

    (a) Each registered swap data repository shall, with respect to all 
swap data in its custody:
    (1) Establish and maintain a program of risk analysis and oversight 
to identify and minimize sources of operational risk through the 
development of appropriate controls and procedures and the development 
of automated systems that are reliable, secure, and have adequate 
scalable capacity;
    (2) Establish and maintain emergency procedures, backup facilities, 
and a business continuity-disaster recovery plan that allow for the 
timely recovery and resumption of operations and the fulfillment of the 
duties and obligations of the swap data repository; and
    (3) Periodically conduct tests to verify that backup resources are 
sufficient to ensure continued fulfillment of all duties of the swap 
data repository established by the Act or the Commission's regulations.
    (b) A registered swap data repository's program of risk analysis 
and oversight with respect to its operations and automated systems 
shall address each of the following categories of risk analysis and 
oversight:
    (1) Information security;
    (2) Business continuity--disaster recovery planning and resources;
    (3) Capacity and performance planning;
    (4) Systems operations;
    (5) Systems development and quality assurance; and
    (6) Physical security and environmental controls.
    (c) In addressing the categories of risk analysis and oversight 
required under paragraph (b) of this section, a registered swap data 
repository should follow generally accepted standards and best 
practices with respect to the development, operation, reliability, 
security, and capacity of automated systems.
    (d) A registered swap data repository shall maintain a business 
continuity--disaster recovery plan and business continuity--disaster 
recovery resources, emergency procedures, and backup facilities 
sufficient to enable timely recovery and resumption of its operations 
and resumption of its ongoing fulfillment of its duties and obligations 
as a swap data repository following any disruption of its operations. 
Such duties and obligations include, without limitation, the duties

[[Page 54586]]

set forth in Sec.  49.9 and the core principles set forth in Sec.  
49.19; and maintenance of a comprehensive audit trail. The swap data 
repository's business continuity--disaster recovery plan and resources 
generally should enable resumption of the swap data repository's 
operations and resumption of ongoing fulfillment of the swap data 
repository's duties and obligations during the next business day 
following the disruption.
    (e) Registered swap data repositories determined by the Commission 
to be critical swap data repositories are subject to more stringent 
requirements as set forth below.
    (1) Each swap data repository that the Commission determines is 
critical must maintain a disaster recovery plan and business continuity 
and disaster recovery resources, including infrastructure and 
personnel, sufficient to enable it to achieve a same-day recovery time 
objective in the event that its normal capabilities become temporarily 
inoperable for any reason up to and including a wide-scale disruption.
    (2) A same-day recovery time objective is a recovery time objective 
within the same business day on which normal capabilities become 
temporarily inoperable for any reason up to and including a wide-scale 
disruption.
    (3) To ensure its ability to achieve a same-day recovery time 
objective in the event of a wide-scale disruption, each swap data 
repository that the Commission determines is critical must maintain a 
degree of geographic dispersal of both infrastructure and personnel 
such that:
    (i) Infrastructure sufficient to enable the swap data repository to 
meet a same-day recovery time objective after interruption is located 
outside the relevant area of the infrastructure the entity normally 
relies upon to conduct activities necessary to the reporting, 
recordkeeping and/or dissemination of swap data, and does not rely on 
the same critical transportation, telecommunications, power, water, or 
other critical infrastructure components the entity normally relies 
upon for such activities; and
    (ii) Personnel sufficient to enable the swap data repository to 
meet a same-day recovery time objective, after interruption of normal 
swap data reporting, recordkeeping and/or dissemination by a wide-scale 
disruption affecting the relevant area in which the personnel the 
entity normally relies upon to engage in such activities are located, 
live and work outside that relevant area.
    (4) Each swap data repository that the Commission determines is 
critical must conduct regular, periodic tests of its business 
continuity and disaster recovery plans and resources and its capacity 
to achieve a same-day recovery time objective in the event of a wide-
scale disruption. The swap data repository shall keep records of the 
results of such tests, and make the results available to the Commission 
upon request.
    (f) A registered swap data repository that is not determined by the 
Commission to be a critical swap data repository satisfies the 
requirement to be able to resume operations and resume ongoing 
fulfillment of the swap data repository's duties and obligations during 
the next business day following a disruption by maintaining either:
    (1) Infrastructure and personnel resources of its own that are 
sufficient to ensure timely recovery and resumption of its operations, 
duties and obligations as a registered swap data repository following 
any disruption of its operations; or
    (2) Contractual arrangements with other registered swap data 
repositories or disaster recovery service providers, as appropriate, 
that are sufficient to ensure continued fulfillment of all of the swap 
data repository's duties and obligations following any disruption of 
its operations, both with respect to all swaps reported to the swap 
data repository and with respect to all swap data contained in the swap 
data repository.
    (g) A registered swap data repository shall notify Commission staff 
promptly of all:
    (1) Systems malfunctions;
    (2) Cyber security incidents or targeted threats that actually or 
potentially jeopardize automated system operation, reliability, 
security, or capacity; and
    (3) Any activation of the swap data repository's business 
continuity-disaster recovery plan.
    (h) A registered swap data repository shall give Commission staff 
timely advance notice of all:
    (1) Planned changes to automated systems that may impact the 
reliability, security, or adequate scalable capacity of such systems; 
and
    (2) Planned changes to the swap data repository's program of risk 
analysis and oversight.
    (i) A registered swap data repository shall provide to the 
Commission upon request current copies of its business continuity and 
disaster recovery plan and other emergency procedures, its assessments 
of its operational risks, and other documents requested by Commission 
staff for the purpose of maintaining a current profile of the swap data 
repository's automated systems.
    (j) A registered swap data repository shall conduct regular, 
periodic, objective testing and review of its automated systems to 
ensure that they are reliable, secure, and have adequate scalable 
capacity. It shall also conduct regular, periodic testing and review of 
its business continuity-disaster recovery capabilities. Both types of 
testing should be conducted by qualified, independent professionals. 
Such qualified independent professionals may be independent contractors 
or employees of the swap data repository, but should not be persons 
responsible for development or operation of the systems or capabilities 
being tested. Pursuant to Sec. Sec.  1.31, 49.12 and 45.2 of the 
Commission's Regulations, the swap data repository shall keep records 
of all such tests, and make all test results available to the 
Commission upon request.
    (k) To the extent practicable, a registered swap data repository 
should:
    (1) Coordinate its business continuity-disaster recovery plan with 
those of swap execution facilities, designated contract markets, 
derivatives clearing organizations, swap dealers, and major swap 
participants who report swap data to the swap data repository, and with 
those regulators identified in Section 21(c)(7) of the Act, in a manner 
adequate to enable effective resumption of the registered swap data 
repository's fulfillment of its duties and obligations following a 
disruption causing activation of the swap data repository's business 
continuity and disaster recovery plan;
    (2) Participate in periodic, synchronized testing of its business 
continuity--disaster recovery plan and the business continuity--
disaster recovery plans of swap execution facilities, designated 
contract markets, derivatives clearing organizations, swap dealers, and 
major swap participants who report swap data to the registered swap 
data repository, and the business continuity--disaster recovery plans 
required by the regulators identified in Section 21(c)(7) of the Act; 
and
    (3) Ensure that its business continuity--disaster recovery plan 
takes into account the business continuity--disaster recovery plans of 
its telecommunications, power, water, and other essential service 
providers.


Sec.  49.25  Financial resources.

    (a) General rule. (1) A registered swap data repository shall 
maintain sufficient financial resources to perform its

[[Page 54587]]

statutory duties set forth in Sec.  49.9 and the core principles set 
forth in Sec.  49.19.
    (2) An entity that operates as both a swap data repository and a 
derivatives clearing organization shall also comply with the financial 
resource requirements applicable to derivatives clearing organizations 
under Sec.  39.11 of this chapter.
    (3) Financial resources shall be considered sufficient if their 
value is at least equal to a total amount that would enable the swap 
data repository, or applicant for registration, to cover its operating 
costs for a period of at least one year, calculated on a rolling basis.
    (4) The financial resources described in this paragraph (a) must be 
independent and separately dedicated to ensure that assets and capital 
are not used for multiple purposes.
    (b) Types of financial resources. Financial resources available to 
satisfy the requirements of paragraph (a) of this section may include:
    (1) The swap data repository's own capital; and
    (2) Any other financial resource deemed acceptable by the 
Commission.
    (c) Computation of financial resource requirement. A registered 
swap data repository shall, on a quarterly basis, based upon its fiscal 
year, make a reasonable calculation of its projected operating costs 
over a 12-month period in order to determine the amount needed to meet 
the requirements of paragraph (a) of this section. The swap data 
repository shall have reasonable discretion in determining the 
methodology used to compute such projected operating costs. The 
Commission may review the methodology and require changes as 
appropriate.
    (d) Valuation of financial resources. At appropriate intervals, but 
not less than quarterly, a registered swap data repository shall 
compute the current market value of each financial resource used to 
meet its obligations under paragraph (a) of this section. Reductions in 
value to reflect market and credit risk (haircuts) shall be applied as 
appropriate.
    (e) Liquidity of financial resources. The financial resources 
allocated by the registered swap data repository to meet the 
requirements of paragraph (a) shall include unencumbered, liquid 
financial assets (i.e., cash and/or highly liquid securities) equal to 
at least six months' operating costs. If any portion of such financial 
resources is not sufficiently liquid, the swap data repository may take 
into account a committed line of credit or similar facility for the 
purpose of meeting this requirement.
    (f) Reporting requirements. (1) Each fiscal quarter, or at any time 
upon Commission request, a registered swap data repository shall report 
to the Commission the amount of financial resources necessary to meet 
the requirements of paragraph (a), the value of each financial resource 
available, computed in accordance with the requirements of paragraph 
(d); and provide the Commission with a financial statement, including 
the balance sheet, income statement, and statement of cash flows of the 
swap data repository or of its parent company. Financial statements 
shall be prepared in conformity with generally accepted accounting 
principles (GAAP) applied on a basis consistent with that of the 
preceding financial statement.
    (2) The calculations required by this paragraph shall be made as of 
the last business day of the swap data repository's fiscal quarter.
    (3) The report shall be filed not later than 17 business days after 
the end of the swap data repository's fiscal quarter, or at such later 
time as the Commission may permit, in its discretion, upon request by 
the swap data repository.


Sec.  49.26  Disclosure requirements of swap data repositories.

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


Sec.  49.27  Access and fees.

    (a) Fair, Open and Equal Access. (1) A registered swap data 
repository, consistent with Section 21 of the Act, shall provide its 
services to market participants, including but not limited to 
designated contract markets, swap execution facilities, derivatives 
clearing organizations, swap dealers, major swap participants and any 
other counterparties, on a fair, open and equal basis. For this 
purpose, a swap data repository shall not provide access to its 
services on a discriminatory basis but is required to provide its 
services to all market participants for swaps it accepts in an asset 
class.
    (2) Consistent with the principles of open access set forth in 
paragraph (a)(1) of this Regulation, a registered swap data repository 
shall not tie or bundle the offering of mandated regulatory services 
with other ancillary services that a swap data repository may provide 
to market participants.
    (b) Fees. (1) Any fees or charges imposed by a registered swap data 
repository in connection with the reporting of swap data and any other 
supplemental or ancillary services provided by such swap data 
repository shall be equitable and established in a uniform and non-
discriminatory manner. Fees or charges shall not be used as an 
artificial barrier to access to the swap data repository. Swap data 
repositories shall not offer preferential pricing arrangements to any 
market participant on any basis, including volume discounts or 
reductions unless such discounts or reductions apply to all market 
participants uniformly and are not otherwise established in a manner 
that would effectively limit the application of such discount or 
reduction to a select number of market participants.
    (2) All fees or charges are to be fully disclosed and transparent 
to market

[[Page 54588]]

participants. At a minimum, the registered swap data repository shall 
provide a schedule of fees and charges that is accessible by all market 
participants on its Web site.
    (3) The Commission notes that it will not specifically approve the 
fees charged by registered swap data repositories. However, any and all 
fees charged by swap data repositories must be consistent with the 
principles set forth in paragraph (b)(1) of this section.

Appendix A to Part 49--Form SDR

COMMODITY FUTURES TRADING COMMISSION

FORM SDR

SWAP DATA REPOSITORY APPLICATION OR AMENDMENT TO APPLICATION FOR

REGISTRATION REGISTRATION INSTRUCTIONS

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

DEFINITIONS

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

GENERAL INSTRUCTIONS

    1. Form SDR and Exhibits thereto are to be filed with the Commodity 
Futures Trading Commission by Applicants for registration as a swap 
data repository, or by a registered swap data repository amending such 
registration, pursuant to Section 21 of the Commodity Exchange Act and 
the regulations thereunder. Upon the filing of an application for 
registration, the Commission will publish notice of the filing and 
afford interested persons an opportunity to submit written data, views 
and arguments concerning such application. No application for 
registration shall be effective unless the Commission, by order, grants 
such registration.
    2. Individuals' names shall be given in full (Last Name, First 
Name, Middle Name).
    3. Signatures must accompany each copy of the Form SDR filed with 
the Commission. If this Form SDR is filed by a corporation, it must be 
signed in the name of the corporation by a principal officer duly 
authorized; if filed by a limited liability company, this Form SDR must 
be signed in the name of the limited liability company by a member duly 
authorized to sign on the limited liability company's behalf; if filed 
by a partnership, this Form SDR must be signed in the name of the 
partnership by a general partner authorized; if filed by an 
unincorporated organization or association which is not a partnership, 
it must be signed in the name of the organization or association by the 
managing agent, i.e., a duly authorized person who directs, manages or 
who participates in the directing or managing of its affairs.
    4. If Form SDR is being filed as an initial application for 
registration, all applicable items must be answered in full. If any 
item is not applicable, indicate by ``none,'' ``not applicable,'' or 
``N/A'' as appropriate.
    5. Under Section 21 of the Commodity Exchange Act and the 
regulations thereunder, the Commission is authorized to solicit the 
information required to be supplied by this form from Applicants for 
registration as a swap data repository and from registered swap data 
repositories amending their registration. Disclosure of the information 
specified on this form is mandatory prior to processing of an 
application for registration as a swap data repository. The information 
will be used for the principal purpose of determining whether the 
Commission should grant or deny registration to an Applicant. The 
Commission may determine that additional information is required from 
the Applicant in order to process its application. An Applicant is 
therefore encouraged to supplement this Form SDR with any additional 
information that may be significant to its operation as a swap data 
repository and to the Commission's review of its application. A Form 
SDR which is not prepared and executed in compliance with applicable 
requirements and instructions may be returned as not acceptable for 
filing. Acceptance of this Form SDR, however, shall not constitute any 
finding that the Form SDR has been filed as required or that the 
information submitted is true, current or complete.
    6. Except in cases where confidential treatment is requested by the 
Applicant and granted by the Commission pursuant to the Freedom of 
Information Act and Commission Regulation Sec.  145.9, information 
supplied on this form will be included routinely in the public files of 
the Commission and will be available for inspection by any interested 
person. The Applicant must identify with particularity the information 
in these exhibits that will be subject to a request for confidential 
treatment and supporting documentation for such request pursuant to 
Commission Regulations Sec.  40.8, and Sec.  145.9.

UPDATING INFORMATION ON THE FORM SDR

    1. Section 21 requires that if any information contained in Items 1 
through 17, 23, 29, and Item 53 of this application, or any supplement 
or amendment thereto, is or becomes inaccurate for any reason, an 
amendment must be filed promptly, unless otherwise specified, on Form 
SDR correcting such information.
    2. Registrants filing Form SDR as an amendment (other than an 
annual amendment) need file only the first page of Form SDR, the 
signature page (Item 13), and any pages on which an answer is being 
amended, together with such exhibits as are being amended. The 
submission of an amendment represents that all unamended items and 
exhibits remain true, current and complete as previously filed.

ANNUAL AMENDMENT ON THE FORM SDR

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

WHERE TO FILE

    File registration application and appropriate exhibits 
electronically with the Commission at the Washington, D.C. headquarters 
in a format and in the manner specified by the Secretary of the 
Commission.
BILLING CODE 6351-01-P

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    Issued in Washington, DC, on August 4, 2011, by the Commission.
David A. Stawick,
Secretary of the Commission.

Appendix To Swap Data Repositories: Registration Standards, Duties and 
Core

Principles--Commission Voting Summary

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

Appendix 1--Commission Voting Summary

    On this matter, Chairman Gensler and Commissioners Dunn, Chilton 
and O'Malia voted in the affirmative; Commissioner Sommers voted in 
the negative.

Appendix 2--Chairman Gary Gensler Statement

    I support the final rulemaking to establish registration and 
regulatory requirements for swap data repositories (SDRs). When this 
rule is fully implemented, all swaps--whether cleared or uncleared--
will be reported to an SDR registered with the Commodity Futures 
Trading Commission (CFTC). Registration will enable the Commission 
and other regulators to monitor market participants for compliance 
with the Dodd-Frank Wall Street Reform and Consumer Protection Act 
as well as CFTC regulations. The rule implements congressional 
direction that the Commission and other regulators have direct 
access to the information maintained by SDRs. It requires SDRs to 
verify the accuracy and completeness of all of the swaps data they 
accept. It also contains provisions to permit SDRs to aggregate 
certain information for regulators and the public. This rule will 
enhance transparency in the swaps market and help reduce systemic 
risk.

[FR Doc. 2011-20817 Filed 8-31-11; 8:45 am]
BILLING CODE 6351-01-C


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