54538 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

1See 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. 

2Pursuant 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. 

4Section 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). 

5The 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==/InterestRatesRepository

Selection.pdf and commodities available at http:// 

www2.isda.org/attachment/MzIwNw==/Commodity

RepositorySelection.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. 

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. 

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, 

jburns@cftc.gov; Susan Nathan, Senior 

Special Counsel, Division of Market 

Oversight (‘‘DMO’’), at (202) 418.5133, 

snathan@cftc.gov; or Adedayo Banwo, 

Counsel, OGC, at (202) 418.6249, 

abanwo@cftc.gov, 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, radriance@cftc.gov and 

Sebastian Pujol Schott, Associate 

Deputy Director, Market Compliance, 

DMO, at (202) 418.5641, 

sschott@cftc.gov, 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 RealTime 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. 

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 


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6See 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. 

7Section 21(a)(1)(B) permits derivatives clearing 

organizations (‘‘DCOs’’) to register as SDRs. 

8Commission, Notice of Proposed Rulemaking: 

Swap Data Repositories, 75 FR 80898 (Dec. 23, 

2010). 

9Section 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. 

10Pursuant 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.’’ 

11See 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. 

12This 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’’). 

13Section 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. 

14Section 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). 

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

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. 

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

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

C. Summary of the Proposed Part 49 

Regulations 

Against this background, the 

Commission developed and published 

for comment part 49 of the 


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54540 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

15A full description and discussion of each 

proposed rule can be found in the SDR NPRM, 

supra note 8. 

16Proposed §§ 49.3–49.4 and 49.6–49.7; Proposed 

Form SDR. 

17Proposed § 49.10. Proposed § 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. 

18Proposed § 49.7. 

19Proposed § 49.3(b). 

20Proposed § 49.8. 

21See 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’’). 

22Proposed § 49.6. 

23Section 21(f)(4) of the CEA; see supra note 10. 

24Section 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. 

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) thirdparty 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. 

26Proposed § 49.10. 

27 Id. 

28These proposed confirmation requirements 

would not apply to real-time public reporting. See 

proposed § 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’’). 

29As 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. 

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). 

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 selfcertify that its rules comply with the 

CEA or Commission regulations 

thereunder (‘‘self certification’’).20

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

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 §§ 49.9–49.18 and 49.23–49.27 

described the standards for compliance 

with each of these duties. 

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 DoddFrank 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

Proposed § 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

Proposed § 49.12 implemented 

section 21(c)(3) of the CEA and required 


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30See § 45.2 set forth in the Data NPRM supra 

note 6 and § 43.3 set forth in Real-Time NPRM 

supra note 28. 

31 Id. 

32Proposed § 49.17. 

33 Id. 

34Proposed §§ 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’’). 

35Proposed § 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 

§ 49.2(a)(14). 

37Proposed § 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. 

39 Id. 

40Proposed § 49.18. 

41SDR NPRM supra note 8 at 80910. 

42 Id. at 80911. 

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, § 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

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

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 realtime 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. 

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 thirdparty service providers so long as they 

have implemented stringent 

confidentiality procedures to protect 

data and information from improper 

disclosure.38

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 DoddFrank 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

5. Proposed Regulations Related to 

Emergency Procedures 

To implement section 21(c)(8), the 

Commission proposed § 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, § 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 


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54542 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

43Section 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. 

44Proposed § 49.24. 

45Proposed § 49.25. 

46Proposed § 49.26. 

47Proposed § 49.27. 

48Section 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.’’ 

49See Real-Time NPRM supra note 28. 

50See Part 40 supra note 21. 

51The 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 

Commission of any emergency action 

taken. 

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 § 49.22, which further 

developed and detailed CCO statutory 

requirements and responsibilities. 

Specifically, proposed § 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 § 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. 

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 § 49.20 

(focusing on the transparency of SDR 

governance arrangements) and § 49.21 

(addressing SDR identification and 

mitigation of existing and potential 

conflicts of interest). 

Proposed § 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 § 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 § 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

9. Proposed Regulations Related to RealTime 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 § 49.15 details SDRs’ ability to 

accept and publicly disseminate swap 

transaction and pricing data on a swap 

market as well as those executed offexchange; its provisions apply to offfacility 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, § 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. 

10. Proposed Regulations Relating to 

Implementation of SDR Rules 

Proposed § 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 selfcertify its rules. Proposed § 40.8 

specified procedures applicable to both 

alternatives. 

D. Overview of Comments Received 51

The Commission received a total of 29 

comments from a broad range of 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54543 

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–DataDTCC’’); (2) Encana Marketing (USA) Inc. 

(‘‘Encana’’) on February 7, 2011 (‘‘CL–DataEncana’’); (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. 

52The 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. 

53This form would be used for initial or 

provisional registration as an SDR as well as for any 

amendments to the applicant’s registration status. 

54SDR NPRM supra 8 at 80900–80901. 

55See 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. 

57The 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. 

interested persons, including existing 

trade repositories and potential SDRs, 

foreign regulatory authorities, trade 

organizations, banks, commercial endusers, 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. 

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 § 49.1; 

definitions are contained in § 49.2. 

Proposed §§ 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 § 49.5 governs equity interest 

transfers and § 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 § 49.9 

and detailed in §§ 49.10 through 49.18 

and §§ 49.23 and 49.24. Core principles 

applicable to SDRs as outlined in 

section 21(f) are set forth in §§ 49.19 

through 49.22. Additional duties 

promulgated pursuant to section 21(f)(4) 

of the CEA (‘‘Core Principle 4’’) are set 

forth in §§ 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—§ 49.3 

To implement the requirements of 

section 21(a), the Commission proposed 

§ 49.3 to establish application and 

approval procedures. Proposed § 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 

§§ 49.3–49.7 substantially as proposed 

subject to the minor modifications 

discussed below. 

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

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 

§§ 49.3–49.7.57

(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. 


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54544 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

58Proposed § 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. 

59No comments were received in response to the 

proposed provisional registration provisions. 

60CL–DTCC I supra note 51 at 4. 

61See CL–CME supra note 51. 

62The 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. 

63SDR NPRM supra note 8 at 80902, n.25. 

64See CL–Better Markets supra note 51. 

Both § 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 § 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, § 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 

§ 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 

§ 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 § 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. 

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 

§ 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 § 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. 

(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

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 § 49.3. The Commission 

is making a minor revision to 

§ 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

2. Withdrawal From Registration— 

§ 49.4 

As proposed, § 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 § 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 

§ 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—§ 49.5 

As proposed, § 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

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. 

As proposed, § 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, 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54545 

65Specifically, 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 

§ 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. 

66See CL–DTCC II; CL–Foreign Banks; CL–ESMA; 

CL–TriOptima; CL–Regis-TR; CL–Reval supra note 

51. 

67CL–ESMA supra note 51. 

68CL–Reval II supra note 51. 

69CL–DTCC I supra note 51. 

70Section 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. 

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—§ 49.7 

The Commission proposed § 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, § 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. 

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. 

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 foreignbased 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. 

The Commission notes that the DoddFrank 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. 

1. Acceptance of Data—§ 49.10 

As proposed, § 49.10 required that 

SDRs adopt policies and procedures that 

would enable the SDR to electronically 

accept data and other regulatory 


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54546 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

71See 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. 

72Proposed § 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). 

73As detailed in proposed § 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. 

74See CL–Global FX Division supra note 51 at 2. 

75See CL–DTCC I supra note 51. 

76 Id. 

77See CL–Better Markets, CL–DTCC I and CL– 

Global FX Division supra note 51. 

78See CL–CME supra note 51. 

79See CL–ABC/CIEBA, CL–AMG and CL–CIEBA 

supra note 51. 

80CL–ABC/CIEBA and CL–AMG supra note 51 at 

3–4 and 9, respectively. 

81 Id. 

82CL–CIEBA supra note 51 at 5. 

83See Data NPRM supra note 6. 

84The Data NPRM details and defines 

‘‘confirmation’’ and ‘‘confirmation data.’’ The term 

confirmation is proposed in § 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 § 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. 

85This requirement does not apply to real-time 

public reporting. See proposed § 43.3(f) supra note 

28. 

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. 

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 § 49.2(a)(2) to accurately reflect 

the asset classes employed in the swaps 

market. 

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 § 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 § 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. 

The Commission received four 

comments relating to proposed 

§ 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. 

ABC/CIEBA and AMG requested that 

the Commission clarify that § 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 § 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. 

2. Confirmation of Data Accuracy— 

§ 49.11 

As proposed, § 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 § 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. 

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 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54547 

86See CL–Reval II, CL–DTCC I, CL–MarkitSERV 

I, CL–ABC/CIEBA and CL–Data-Encana supra note 

51. 

87CL–Reval II supra note 51 at 6. 

88CL–DTCC I supra note 51 at 20. 

89CL–MarkitSERV I supra note 51 at 6. 

90See CL–Encana supra note 51. 

91See Data NPRM supra note 6. 

92See CL–Barnard supra note 51 at 2. 

93The 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 § 49.12(a) largely as 

proposed subject to the modifications discussed 

below. 

94Like other rules that are tied to related 

rulemakings, § 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. 

95The 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. 

96See 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). 

97Commission regulation § 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. 

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 

§ 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 DTCC88 and 

MarkitSERV 89 both supported the use 

of confirmation records in fulfilling the 

obligation of the SDR to confirm data 

submissions. 

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, 

§ 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 § 45.10 and 

§ 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 § 45.10 provides 

an ongoing obligation for counterparties 

to provide error corrections, § 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. 

3. Recordkeeping Requirements— 

§ 49.12 

Proposed § 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. 

The Commission received one 

comment 92 recommending that swap 

data be kept indefinitely.93 As 

proposed, § 49.12(a) required SDRs to 

maintain books and records as 

prescribed by proposed § 45.2. Rather 

than specifically referencing and 

incorporating the provisions of 

proposed § 45.2, the Commission 

believes § 49.12(a) should require SDRs 

to comply with any and all 

recordkeeping provisions adopted under 

part 45.94 Accordingly, § 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 § 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

The Commission is revising proposed 

§ 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 § 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 § 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

The Commission believes that the 

proper procedure for Appropriate 

Domestic Regulators to obtain SDR 

Information is through the mechanism 

set forth in § 49.17 (Access to SDR Data) 

discussed below in section II.B.7. 

The Commission is adopting 

§ 49.12(d) largely as proposed, subject to 

a slight modification discussed below in 

connection with § 49.15 relating to realtime public reporting requirements. 


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54548 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

98Section 21(c)(5) of the CEA. 99These 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. 100CL–Barnard, CL–CME, CL–Sungard and CL– 

TriOptima supra note 51. 

101See CL–Sungard supra note 51 at 2. 

102 Id. at 2. See also SDR NPRM supra note 8 at 

80907. 

103Sungard made a number of recommendations 

to ensure the commercial viability of SDRs, 

including (1) a constraint on the growth in 

resources required under § 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. 

104See CL–AFR, CL–Better Markets and CL–CME 

supra note 51. 

105See CL–DTCC I and CL–Reval II supra note 51. 

106AFR 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. 

107CME 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 selfregulatory organization empowered with 

disciplinary powers * * *.’’ Id. 

108CL–DTCC I supra note 51 at 24. 

109CL–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. 

110See proposed § 49.13(a). SDR NPRM supra 

note 8 at 80907. 

111See 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 § 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 

4. Monitoring, Screening and Analyzing 

Swap Data—§ 49.13 and § 49.14 

Proposed §§ 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. 

Proposed §§ 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 

§§ 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 § 49.13(a) and 

(b). 

Sungard, in particular, expressed 

concern that proposed § 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 § 49.13(b), which 

requires that SDRs maintain sufficient 

resources to fulfill the requirements in 

§ 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

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

Commenters expressed concern that 

§§ 49.13(a) and 49.14 do not sufficiently 

describe the specific tasks SDRs are 

expected to perform. The Commission 

recognizes that §§ 49.13(a) and 49.14 do 

not contain specific requirements. Its 

intention in §§ 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 §§ 49.13(a) and 

49.14. 

Regarding proposed § 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 § 49.13(b). The 

Commission also notes that the 

requirement of § 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 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54549 

surveillance, and real-time market monitoring.’’ 75 

FR 80572, 80613 (Dec. 22, 2010)(‘‘DCM NPRM’’). 

See also proposed § 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’’). 

112CL–DTCC supra note 51 at 24. 

113See Data NPRM supra note 6. 

114The Commission is making two nonsubstantive modifications to §§ 49.13(a) and 49.14. 

The word ‘‘perform’’ will be added to the last 

sentence in § 49.13(a) and the word ‘‘of’’ will be 

added to the last sentence in § 49.14. These 

modifications are being made to improve the 

sentence structure of both of these sections. 

115See Real-Time NPRM supra note 28. As noted 

above, §§ 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. 

116See CL–Markit, CL–AMG, CL–Argus, CL–AII, 

CL–NFPE Coalition, CL–DTCC I and CL–DTCC II 

supra note 51. 

117CL–Markit and CL–Argus supra note 51. 

118CL–Markit supra note 51. 

119CL–AMG and CL–AII supra note 51. 

120CL–NFPE Coalition supra note 51. 

121CL–Data-ICE, CL–DTCC I and CL–DTCC II 

supra note 51. 

122CL–DTCC I supra note 51. 

123CL–Better Markets supra note 51. 

124Real-Time NPRM supra note 28. 

regulatory functions covered by 

proposed § 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 §§ 49.13 and 

49.14, giving SDRs time to also address 

any resulting financial needs. 

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 §§ 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

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. 

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 §§ 49.13 and 

49.14 substantially as proposed.114

5. Real-Time Public Reporting—§ 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

As proposed, § 49.12(d) and § 49.15 

together set forth the requirements for 

SDRs regarding the public 

dissemination of swap transaction and 

pricing data. Proposed § 49.12(d) 

required each SDR to comply generally 

with the requirements prescribed in part 

43, while proposed § 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 

§§ 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 timelimits 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

The Commission is adopting § 49.15 

substantially as proposed. As adopted, 

§ 49.15(a) will no longer limit the realtime 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, § 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, § 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 


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54550 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

125See CL–Markit and CL–Argus supra note 51. 

126Although 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. 

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). 

128According 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. 

129See section 21(f)(3) of the CEA, 7 U.S.C. 

24a(f)(3). 

130The term ‘‘SDR Information’’ is defined in 

proposed § 49.2(a)(15) to mean ‘‘any information 

that the swap data repository maintains.’’ § 49.17(f) 

and (g) discussed below contain more specific 

prohibitions on access or use of SDR Information. 131The term ‘‘reporting counterparty’’ is set forth 

in proposed § 45.5 of the Data Rulemaking NPRM. 

The proposed definition is based on section 4r(3) 

of the CEA. 132The term ‘‘market participant’’ is defined in 

proposed § 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. 133The term ‘‘affiliate’’ is defined in proposed 

§ 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.’’ 

134The term ‘‘non-affiliated third party’’ is 

defined in proposed § 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 ‘‘nonaffiliated third party’’ includes such entity that 

jointly employs the person).’’ 

135The term ‘‘Section 8 Material’’ is defined in 

proposed § 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). 

136Section 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. 

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 

§ 49.15(c) when addressing the relevant 

provisions in part 43, which is expected 

to be finalized subsequent to this 

rulemaking. 

In response to comments received 125

concerning the commercial use of realtime 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 prepublicly available dissemination would 

constitute a ‘‘commercial use’’ under 

§ 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. 

Additionally, as discussed above, in 

light of the comments received and as 

a result of its consideration of proposed 

§ 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—§ 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 § 49.16 

that SDRs maintain the privacy and 

confidentiality of reported swap data. 

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. 

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 realtime 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, § 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 nonaffiliated third parties.134 Proposed 

§ 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 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54551 

137See CL–DTCC I and CL–MFA supra note 51. 

138Proposed § 49.16(a)(2) set forth in SDR NPRM 

supra note 51 at 80931. 

139CL–DTCC I supra note 51. 

140The 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’’). 

141See 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). 

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 § 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. 

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 § 49.17. As set forth in § 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 

§ 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 

§ 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 § 49.16 may not be sufficient to 

protect the confidentiality of trading 

positions. 

The Commission agrees with MFA 

that the confidentiality of position level 

data held by an SDR is extremely 

important and notes that § 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 

§ 49.16. ‘‘Section 8 Material’’ as defined 

in proposed § 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. 

In connection with MFA’s desire to 

have the legal standard of care set forth 

in § 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 § 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

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 § 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—§ 49.17 

(a) Definition of Appropriate Domestic 

Regulator 

As detailed in the SDR NPRM, the 

Commission in proposed § 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

(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 

§ 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 


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142See CL–Better Markets, CL–AFR and CL–Reval 

I supra note 51. Compare CL–DTCC II, CL–DataDTCC, CL–CME and CL–NFPE Coalition supra note 

51. 

143The 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. 

144CL–AFR and CL–Better Markets supra note 51 

at 3 and 7–8, respectively. 

145The 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. 

146CL–DTCC II supra note 51. 

147CL–CME supra note 51 at 5–6. 

148 Id. 

149See 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. 

150Section 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. 

151The 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). 

152The term ‘‘foreign regulator’’ is defined in 

proposed § 49.2(a)(4) to mean ‘‘a foreign futures 

authority as defined in section 1a(26) of the 

‘‘scheduled data transfers to the 

Commission’s electronic systems.’’ 

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 § 49.17(c) as 

proposed. Each comment is discussed 

below. 

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. 

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. 

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. 

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 § 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. 

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. 

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 § 49.17(c) and an 

SDR’s statutory duty to provide the 

Commission or its designee with direct 

electronic access, the Commission is 

adopting § 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 

§ 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.’’ 

The Commission also proposed that 

the term ‘‘Appropriate Foreign 

Regulator’’ be defined in § 49.17. As 

proposed, the definition of 

‘‘Appropriate Foreign Regulator’’ has 

two parts or elements. First, 

§ 49.17(b)(2) defines an Appropriate 

Foreign Regulator as those ‘‘foreign 

regulators’’ 152 with an existing MOU or 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54553 

Commodity Exchange Act, foreign financial 

supervisors, foreign central banks and foreign 

ministries.’’ 153CL–OCC supra note 51. 154See CL–DTCC I, CL–TriOptima, CL–Regis—TR 

and CL–ESMA supra note 51. 

155Section 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). 

156See CL–DTCC I, CL–TriOptima, CL–ESMA 

and CL–Foreign Banks supra note 51. 

157ODRF 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. 

158See 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. 

other similar type of information 

sharing arrangement executed with the 

Commission. Second, § 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-bycase basis by the Commission. 

Accordingly, § 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 § 49.17(b) as 

proposed. 

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 § 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 § 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. 

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 § 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, 

§ 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 § 49.17(d) as adopted. In 

addition, proposed § 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 

§ 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 § 49.18. 

Consistent with section 21(d),155

§ 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 § 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. 

Proposed § 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. 

DTCC stated that proposed § 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 § 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 


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54554 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

160CL–TriOptima supra note 51 at 3–4. 

161CL–ESMA supra note 51. 

162CL–Foreign Banks supra note 51 at 7. 

163Pursuant 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. 

164As 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). 

165The 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. 

166See 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. 

167See 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. 168CL–MFA supra note 51. 

Commission together with other global 

regulators provide ‘‘model indemnity 

language’’ for use by all repositories or 

SDRs. 

TriOptima specifically encouraged the 

Commission to ‘‘adopt as flexible as 

interpretation as possible’’ of the 

indemnification provision proposed in 

§ 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

The Commission is mindful that the 

Confidentiality and Indemnification 

Agreement requirement set forth in 

section 21(d) and § 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

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

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 § 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 § 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 datarelated 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 

§ 49.17(e). MFA was concerned that 

§ 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. 

The Commission agrees with MFA’s 

recommendation and accordingly has 

revised § 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 § 49.16. 


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169See infra section II.D.4. 

170CL–ABC/CIEBA supra note 51. 

171CL–ABC/CIEBA supra note 51 at 6. 

172CL–Global FX Division supra note 51. 

173See section 728 of the Dodd-Frank Act. 

174See section 21(f)(3) of the CEA, 7 U.S.C. 

24a(f)(3) as added by section 728 of the Dodd-Frank 

Act. 

175See CL–Markit, CL–CME, CL–Argus, CL– 

DTCC I, CL–DTCC II and CL–Better Markets supra 

note 51. 

176CL–Markit I supra note 51 at 2. 

177CL–CME supra note 51 at 4–5. 

(f) Counterparty Access to SDRs 

The Commission proposed § 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 

§ 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. 

The Commission received two 

comment letters relating to § 49.17(f). 

ABC/CIBEA noted that § 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 § 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 § 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

Based on the comments noted above, 

the Commission is adopting § 49.17(f) 

largely as proposed with a revision to 

§ 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 § 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, § 49.17(g) required a 

registered SDR to adopt and implement 

adequate ‘‘firewalls’’ to protect the 

swaps data from any improper, 

commercial use. Proposed § 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 § 49.17(g), as proposed, is 

established in sections 21(c)(6) and 

21(f)(3) of the CEA.173

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 § 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 § 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. 

Markit sought clarification regarding 

the application of proposed § 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. 

The Commission believes that (i) 

counterparty ‘‘consent’’ to real-time 

reporting proposed in part 43 does 

not provide consent under proposed 

§ 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 

§ 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 § 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

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 § 49.2(a)(6) applies to 

various registered entities such as 

DCMs, DCOs and SEFs and, therefore, is 

not limited to swap counterparties. 


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54556 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

178 17 CFR 49.17(g)(1). 

179CL–DTCC I supra note 51 at 3. 

180CL–DTCC II supra note 51 at 3. 

181See proposed §§ 45.5–45.7 of the 

Commission’s Regulations set forth in the Data 

NPRM supra note 6. 

182 Id. at 13. 

183Former 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. 

184The 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). 

185See SDR NPRM supra note 8 at 80911–80912. 

186Core 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. 

187The Commission in § 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 

However, in terms of proposed 

§ 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 § 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 

§ 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 

§ 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 § 49.17(g)(1) 

specifically requires that an SDR ‘‘adopt 

and implement adequate ‘firewalls’ to 

protect the data required to be 

maintained under § 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. 

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. 

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 § 49.17(g) 

requires a revision on this point. 

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. 

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 § 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 § 49.17(g) largely as proposed 

subject to the revisions noted above. 

8. Emergency Authority Procedures and 

System Safeguards—§§ 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 §§ 49.23 and 

49.24 of the Commission’s regulations 

implement section 21(c)(8). 

Proposed § 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 § 49.24 required system 

safeguards for SDRs including business 

continuity and resumption of services 

plans and coordinated system testing.186

Proposed § 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 § 49.24(e) 


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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). 

188CL–Barnard supra note 51 at 2. 

189 § 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). 

190See section 21(e)(1) of the CEA, 7 U.S.C. 

24a(e)(1). 

191See 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). 

192See 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). 

193See SDR NPRM supra note 51. 

194SDR NPRM supra note 8 at 80914. 

195The 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. 

required that they (i) implement a 

disaster recovery plan and BC–DR 

resources sufficient to enable a sameday 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 widescale disruption. 

The Commission received no 

comments regarding the provisions in 

proposed § 49.23. The Commission 

received one comment from Chris 

Barnard regarding proposed 

§ 49.24(j).188 Barnard, in connection 

with proposed recordkeeping 

requirements, indicated his view that 

proposed § 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 

§ 49.12, the general recordkeeping 

requirements set forth in § 1.31 of the 

Commission Regulation’s would apply 

to BC–DR testing records.189 The 

Commission believes that § 1.31 subjects 

SDRs to adequate record retention 

requirements for BC–DR testing, and 

therefore, has not adopted Barnard’s 

recommendation. 

Upon review of the comment received 

and the proposed emergency procedures 

and system safeguard regulations, the 

Commission is adopting § 49.23 and 

§ 49.24 as proposed. 

C. Designation of Chief Compliance 

Officer—§ 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

Proposed § 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 § 49.22 is 

composed of six general parts. Proposed 

§ 49.22(a) defined the term ‘‘board of 

directors.’’ Proposed § 49.22(b) set forth 

the requirement that each SDR must 

appoint a CCO, and detailed the 

minimum qualifications for the CCO. 

Proposed § 49.22(c) provided for the 

supervisory structure that the CCO is 

subject to within an SDR. Proposed 

§ 49.22(d) enumerated the duties and 

responsibilities of the CCO. Proposed 

§§ 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 § 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. 

The Commission requested comment 

on a number of issues relating to 

proposed § 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. 

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

In response to persuasive arguments 

by various commenters, § 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 


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54558 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

196SDR NPRM supra note 8 at 80934. 

197SDR NPRM supra note 8 at 80913. 

198CL–CME supra note 51 at 7. 

199CL–Better Markets supra note 51 at 10. 

200The 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 

§ 37.1501(b)(2)(ii) and SEF NPRM supra note 111 at 

1251. 

201Sections 21(e)(2)(C) and (E) of the CEA. 

202Section 21(e)(2)(E) of the CEA. 

203SDR NPRM supra note 8 at 80914. 

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 

§ 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

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 § 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 § 49.22(b)(1) and 

§ 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

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

Proposed § 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 § 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 

§ 49.22(b)(2) to add § 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.’’ 

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 

§ 49.27 and protecting commercially 

valuable swap data from improper use. 

The Commission notes that the 

authority granted to the CCO pursuant 

to § 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 § 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. 

The Commission believes that 

§ 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 § 49.22(b)(1) and § 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 §§ 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 


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204 Id. at 80934. 

205 Id. at 80914. 

206SDR NPRM supra note 8 at 80914. 

207 Id. 

208See CL–CME supra note 51 at 7. 

209CL–Better Markets supra note 51 at 11. 

210CL–Barnard supra note 51 at 3. 

211CL–Reval supra note 51 at 10. 

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

case where a SDR has no board of 

directors, its senior officer).204

Proposed §§ 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. 

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

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

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

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.’’ 

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 

§ 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. 

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 dayto-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 § 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 § 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 § 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 § 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 § 49.22(c)(2) as proposed and 

is adopting §§ 49.22(c)(1) and 

49.22(c)(3) subject to the above 

modifications. 

4. Duties of the Chief Compliance 

Officer 

Proposed § 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 


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54560 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

213SDR NPRM supra note 8 at 80934. 

214 Id. at 80914. 

215 Id. 

216See CL–TriOptima, CL–DTCC I, CL–CME and 

CL–Better Markets supra note 51. 

217CL–DTCC I supra note 51 at 27. 

218CL–CME supra note 51 at 7. 

219Section 21(e)(2)(C) of the CEA. 

220SDR NPRM supra note 8 at 80934. 

221CL–CME supra note 51 at 4. 

222CL–DTCC I supra note 51 at 28. 

223Sections 21(e)(2)(C) and (E) of the CEA, 7 

U.S.C. 24a(e)(2)(C) and (E). 

224SDR NPRM supra note 8 at 80934. 

225See SDR NPRM supra note 8 at 80914 which 

states: ‘‘The proposed Regulation also lists a 

number of potential conflicts that may confront a 

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 

§ 49.22(b)(1), granted a CCO oversight 

authority over all compliance functions 

and staff acting in furtherance of those 

compliance functions. 

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

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. 

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 § 49.22(d)(2) gives the CCO 

authority that should be reserved for 

senior management. 

CME also commented on proposed 

§ 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

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. 

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. 

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 § 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 § 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 §§ 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 § 49.22(d)(2) should be modified to 

clarify this point.225 Therefore, the 


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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.’’ 

226SDR NPRM supra note 8 at 80934. 

227 Id. at 80934–80935. 

228See proposed §§ 49.22(f)(1) and(2). Id. at 

80935. 

229 Id. at 80915. 

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

231Section 21(e)(3)(B)(i) of the CEA. 

232See Exhibits M and N of proposed Form SDR 

set forth in the SDR NPRM supra note 8 at 80943. 

Commission has revised proposed 

§ 49.22(d)(2) to add the word 

‘‘including’’ before the list of potential 

conflicts of interest. 

The Commission believes the 

revisions to § 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 § 49.22(d) 

largely as proposed, with the 

modifications detailed above for 

§ 49.22(d)(2), and § 49.22(d)(4). 

5. Preparation and Submission of 

Annual Compliance Report 

The Commission in proposed 

§ 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 § 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

Proposed § 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 § 49.22(f)(2) described the 

process for the submission of the 

report.228

The Commission requested comment 

with respect to whether the annual 

compliance report should contain 

additional content beyond what is 

proposed in § 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. 

CME suggested that the Commission 

require that the SDR’s senior officer, not 

its CCO, make the required certification 

under § 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 § 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 

§ 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 § 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. 

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 

§ 49.22(f)(5) is necessary to protect the 

report from unnecessary release to the 

public or market participants. Therefore, 

the Commission has modified § 49.22(f) 

to remove § 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 § 49.22(f)(2), the 

Commission has revised § 49.22(f)(2) to 

state that ‘‘The annual compliance 

report shall be provided electronically 


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54562 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

233 Id. at 80915. 

234Section 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 

§§ 49.25–49.27 pursuant to this authority. These 

rules are discussed in section E, below. 

235The 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 

*** 

236The Commission received no comments in 

connection with proposed § 49.19. 

237See 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. 

238See SDR NPRM supra note 8 at 80932–80933. 

239Such 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. 

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 § 49.3(a)(5) of this part.’’ 

The Commission believes that 

§§ 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 §§ 49.22(e) and 

(f) as proposed, with the exception that 

§§ 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 § 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 § 1.31 of the Commission’s 

regulations. 

The Commission received one 

comment regarding the compliance 

recordkeeping provisions in proposed 

§ 49.22(g) from Chris Barnard, who 

recommended that compliance records 

be kept indefinitely. 

As stated in the SDR NPRM, the 

Commission designed § 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 § 49.22(g) 

successfully accomplishes this goal in 

accordance with existing Commission 

regulation § 1.31 which requires that 

regulated entities maintain records for 

five years. Accordingly, the Commission 

is adopting § 49.22(g) as proposed. 

D. Core Principles Applicable to SDRs— 

§ 49.19 

Proposed §§ 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. 

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 § 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, § 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. 

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 § 49.20) and (ii) 

SDR identification and mitigation of 

existing and potential conflicts of 

interest (Proposed § 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 § 49.20 and § 49.21 

substantially as proposed, subject to the 

revisions described below. 

3. Governance Arrangements (Core 

Principle 2)—§ 49.20 

(a) Transparency of Governance 

Arrangements 

Proposed § 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 § 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 


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240SDR NPRM supra note 8 at 80933 n.116. 

241CL–Council supra note 51 at 1. 

242 Id. at 2. 

243CL–TriOptima supra note 51 at 5. 

244 Id. 

245Section 21(f)(2) of the CEA, 7 U.S.C. 24a(f)(2). 

246SDR NPRM supra note 8 at 80917 (discussing 

the importance of the independent perspective in 

mitigating conflicts of interest). 

247 Id. 

248Specifically, 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. 

249See CL–DTCC II, CL–Barnard and CL–Reval II 

supra note 51. 

250CL–DTCC I supra note 51 at 16. 

251 Id. 

252CL–Barnard supra note 51 at 3. 

implement or amend such policies or 

procedures.240 Proposed § 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. 

The Commission received no 

comments addressing proposed 

§ 49.20(a), but received two comment 

letters related to proposed § 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

TriOptima expressed its concern 

regarding proposed § 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

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 § 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 § 49.20(a) as proposed and 

has revised § 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. 

(b) Consideration of an Independent 

Perspective 

In proposed § 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 § 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 

§ 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

The Commission received no 

comments regarding the reporting 

requirements in § 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

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 


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253CL–Reval supra note 51 at 5. 

254SDR NPRM supra note 8 at 80917. 

255See CL–AFR, CL–Barnard, CL–Better Markets, 

CL–DTCC I, CL–Reval and CL–TriOptima supra 

note 51. 

256See CL–Reval and CL–TriOptima supra note 

51. 

257CL–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. 

258Commission, 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. 

259CL–AFR supra note 51 at 2. 

260CL–Better Markets supra note 51 at 9–10. 

261See CL–DTCC I and CL–DTCC II supra note 51 

at 16 and 2, respectively. 

262 Id. 

263CL–Reval supra note 51 at 5 and CL– 

TriOptima supra note 51 at 4. 

nominates public directors or governs 

compliance, or on any other relevant 

committee.253

The Commission agrees with DTCC 

regarding the importance of open 

access, and notes that proposed §§ 49.20 

and 49.21 complement the proposed 

SDR open access requirements set forth 

in § 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 crosssection 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 § 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. 

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. 

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

Reval and TriOptima expressed the 

concern that, as proposed, §§ 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 


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264CL–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. 

265CL–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. 

266CL–TriOptima supra note 51 at 4. 

267 Id. 268CL–DTCC I supra note 51 at 16. 269CL–DTCC I supra note 51 at 16–17. 

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

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. 

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) nondiscrimination 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 

§ 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 

§ 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 § 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

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 


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270SDR 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. 

272 Id. at 80919. 

273 Id. 

274See CL–AFR, CL–DTCC I and CL–ABC/CIEBA 

supra note 51. 275CL–AFR supra note 51 at 1. 276 Id. at 2. 277CL–DTCC I and CL–DTCC II supra note 51 at 

17 and 2, respectively. 278CL–ABC/CIEBA supra note 51 at 13. 

279See Data NPRM supra note 6. 

280CL–CME supra note 51 at 2–3. 

281The 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 

expertise (especially because such 

directors may be removed). 

Accordingly, the Commission is 

adopting § 49.20(c)(5) as proposed. 

The Commission received no 

comments on the proposed substantive 

requirements mandated by 

§ 49.20(c)(1)(i)(C) and § 49.20(c)(2)–(4) 

and is adopting these regulations as 

proposed. 

4. Conflicts of Interest (Core Principle 

3)—§ 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. 

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

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 § 49.21 to 

implement Core Principle 3 and to 

mitigate this and other conflicts that 

may arise in the operation of an SDR. 

Proposed § 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 § 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 

§ 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. 

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

The Commission is adopting 

§ 49.21(a) and (b) as proposed. The 

Commission believes that the 

substantive requirements of §§ 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, 

§ 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

5. Core Principle Compliance 

Both proposed § 49.20(d) and 

§ 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


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and conflicts of interest differ. See also SDR NPRM 

supra note 8 at 80899 n.9. 

282SDR NPRM supra note 8 at 80937. 

283 Id. 

284 Id. 

285SDR NPRM supra note 8 at 80920. 

286 Id. 

287See CL–Barnard, CL–Reval and CL–TriOptima 

supra note 51. 

288CL–Reval supra note 51 at 10. 

289 Id. 

290CL–Barnard supra note 51 at 4. The 

Commission notes that its proposal under 

§ 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. 

291CL–Reval supra note 51 at 10–11. 

292CL–Reval supra note 51 at 10. 

293CL–TriOptima letter supra note 51 at 6. 

294CL–Barnard supra note 51 at 4. 

295CL–Barnard supra note 51 at 4. 

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 nondiscriminatory. 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 § 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 § 49.24. A description of 

the three additional duties and related 

comments are discussed in turn below. 

1. Financial Resources—§ 49.25 

Proposed § 49.25(a)(1) required an 

SDR to maintain sufficient financial 

resources to fulfill its responsibilities as 

set forth in proposed § 49.9 and the core 

principles set forth in proposed § 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

Proposed § 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 

§ 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 § 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 [§ 49.25(a)]’’ with 

appropriate reductions in value 

(haircuts) applied to reflect market and 

credit risk. 

The Commission requested comment 

on ‘‘whether the methodology set forth 

[in § 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

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 § 49.25; and (4) the 

reporting of an SDR’s solvency ratio. 

One area of concern was the proposed 

requirement in § 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

A second area of concern was the 

types of financial resources deemed 

acceptable by the Commission in 

proposed § 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

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 § 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

Lastly, Chris Barnard suggested that, 

in addition to the proposed 

requirements in § 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

Proposed § 49.25 was intended to 

ensure the protection of the swap data 

maintained by the SDRs, the financial 


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54568 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

296The Commission in the final adoption of 

§ 49.25(a)(2), relating to DCOs that also operate as 

SDRs, revised the reference to DCO financial 

resource requirements to refer to § 39.11 of the 

Commission’s Regulations rather than ‘‘core 

principles.’’ 

297For 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 

§ 49.25(b). 298CL–DTCC I supra note 51 at 25. 

safety and security of SDRs, and an 

orderly wind-down of individual SDRs 

without disruption to the markets., The 

framework established by the DoddFrank 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 winddown will be crucial to any SDR no 

matter how long it has been in business. 

The Commission believes that proposed 

§ 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

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 § 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 

§ 49.25(b) as proposed. The Commission 

again notes that the purpose of proposed 

§ 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 § 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

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 § 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 

§ 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 § 49.25 as 

proposed. 

3. Disclosure Requirements of Swap 

Data Repositories—§ 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, § 49.26 

required that each SDR Disclosure 

Document contain the following 

information: 

• The SDR’s criteria for providing 

others with access to services offered 

and data maintained by the SDR; 

• The SDR’s criteria for those seeking 

to connect to or link with the SDR; 

• A description of the SDR’s policies 

and procedures regarding its 

safeguarding of data and operational 

reliability, as described in proposed 

§ 49.24; 

• 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 § 49.16; 

• The SDR’s policies and procedures 

regarding its non-commercial and/or 

commercial use of the swap data; 

• The SDR’s dispute resolution 

procedures involving market 

participant; 

• A description of all the SDR’s 

services, including any ancillary 

services; 

• 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 

• 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 

§ 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. 


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299See section 727 of the Dodd-Frank Act. 

300See section 728 of the Dodd-Frank Act. 

301See CL–ABC/CIEBA, CL–DTCC II and CL– 

MarkitServ I supra note 51. 

302CL–ABC/CIEBA supra note 51 at 5. 

303CL–DTCC II supra note 51 at 3. 

304See Data NPRM supra note 6. 

305CL–MarkitServ I supra note 51. 

306Section 2(a)(13)(G) of the CEA, 7 U.S.C. 

2(a)(13)(G). 

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 § 49.26. 

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 decisionmaking. 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 § 49.26 generally and 

the comment received, the Commission 

is adopting § 49.26 as proposed. 

4. Access and Fees—§ 49.27 

The Commission proposed in § 49.27 

to establish open, non-discriminatory 

access to the services provided by SDRs. 

The Commission believes that the DoddFrank 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 nondiscriminatory. 

(a) Access 

As proposed, § 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 

§ 49.27(b). 

ABC/CIEBA asserted that the ‘‘open 

access’’ provision set forth in proposed 

§ 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 

§ 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

The Commission in the SDR NPRM 

recognized the potential difficulty for 

plan fiduciaries in managing benefit 

plans, and accordingly, proposed 

§ 49.10(c) to partly address concerns 

regarding the modification or 

invalidation of swap transaction terms. 

In addition, § 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 nonreporting 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 

§§ 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. 

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. 

MarkitSERV commented that it 

generally supports the proposed open 

access and fee provision set forth in 

§ 49.27.305 However, MarkitSERV 

believes that if § 49.27 is implemented, 

as proposed, it may have some 

unintended consequences. In particular, 

MarkitSERV asserted that without 

clarification as to the meaning of ‘‘nondiscriminatory’’ fees and ‘‘preferential 

pricing arrangements,’’ the ‘‘dealerpays’’ fee structure historically used by 

SDR-like entities could be seen as 

preferential. 

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

The Commission further believes that, 

consistent with fair, open and equal 

access, an SDR may appropriately 

utilize any pricing model subject to 

§ 49.27(b)’s requirement that such fees 

be non-discriminatory. The Commission 

notes that ‘‘open access’’ and ‘‘nondiscriminatory’’ fees are complementary 

notions of fair dealing and open market 

access that are necessary in order for 

compliance with the statutory mandate 


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54570 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

307See 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. 

308See SDR NPRM supra note 8 and Real-Time 

NPRM supra note 28. 309See CL–Reval I, CL–MarkitSERV I, CL– 

Sungard, CL–DTCC I, CL–AFR and CL–Better 

Market supra note 51. 

310CL–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. 

311CL–DTCC I supra note 51 at 3. 

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. 

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 § 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 § 49.27(a) 

largely as proposed with the 

modification relating to bundling noted 

above. 

(b) Fees 

As proposed, § 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, § 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 § 49.27 to 

promote fair and open competition for 

SDR services. 

As proposed, § 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 § 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 § 49.26. 

The Commission received seven 

comment letters relating to SDR pricing 

from various interested parties.309

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 § 49.27, Reval expects 

robust price competition under the 

assumption that several SDRs become 

registered. 

MarkitSERV generally supported the 

principle set forth in proposed § 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

As discussed above, MarkitSERV is 

concerned that, without clarification, 

the regulation as proposed could 

increase the costs for end-users (buyside 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 § 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 nondiscriminatory fees. Lastly, MarkitSERV 

asserted that the application of § 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 unregulated third-party service providers, 

these services should be priced 

commercially and consistently with 

market practices if they are also offered 

by SDRs. 

Sungard acknowledged the 

Commission’s rationale for applying an 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54571 

312See 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). 313See Part 40 supra note 21. 

314The 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). 

equitable standard to fees charged by 

SDRs and supports the Commission’s 

decision in § 49.27 to refrain from acting 

as a ‘‘rate setter’’ with respect to the 

establishment of SDR fees. Sungard 

specifically noted that proposed 

§ 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 § 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-bycase 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 § 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. 

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 § 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 § 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. 

In this connection, the Commission 

proposed § 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 § 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 

§ 40.6. 

The Commission received no 

comments on § 49.8. Based on its review 

of the proposed regulation and the 

absence of comments, the Commission 

is adopting § 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 


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54572 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

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 reopening 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. 

316See Data NRPM and Real-Time NPRM supra 

notes 6 and 28, respectively. 

317 44 U.S.C. 3301 et seq. 

318SDR NPRM supra note 8 at 80923–80925. 

319 Id. at 80925. 320SDR NPRM supra note 8 at 80925. 

the numerous rulemakings related to the 

Dodd-Frank Act.315

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 § 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. 

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. 

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. 

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 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54573 

321 Id. 

322 Id. 

323These 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. 

324This estimate was obtained in consultation 

with the Commission’s IT staff. 

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

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

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 

§ 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 privatelyowned and managed. As a result, the 

Commission in adopting § 49.17(g) and 

§ 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 § 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 


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54574 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

325See CL–CME supra note 51. 

326See 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. 

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 DoddFrank 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 § 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 § 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. 

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 DoddFrank 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, § 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 § 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

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 


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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54575 

327CL–CME and CL–NFPE Coalition supra note 

51. 

328See 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 § 49.3. 

329See 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. 

330The 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. 

331SDR NPRM supra note 8 at 80926. 

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 DoddFrank 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 DoddFrank 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

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

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. 


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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. 

§ 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. 

§ 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 § 1.3 of 

this chapter. 

§ 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 


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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 § 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 reaccepting swap transaction data, a 

dormant registered swap data repository 

as defined in § 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 §§ 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. 

§ 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 § 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 


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54578 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

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. 

§ 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 § 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 § 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 § 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. 

§ 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. 

§ 49.7 Swap data repositories located in 

foreign jurisdictions. 

Any swap data repository located 

outside of the United States applying for 

registration pursuant to § 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. 

§ 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 

§ 40.5 of this chapter. 

(b) Notwithstanding the timeline 

under § 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 § 49.3 of this part or 

to reinstate the registration of a dormant 

registered swap data repository, as 

defined in § 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 § 40.6 of this chapter, as 

applicable. 

§ 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 

§ 49.10 for each swap; 

(2) Confirm, as prescribed in § 49.11, 

with both counterparties to the swap the 

accuracy of the swap data that was 

submitted; 

(3) Maintain, as prescribed in § 49.12, 

the swap data described in part 45 of the 


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

§ 49.17; 

(5) Provide the information set forth 

in § 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 § 49.13; 

(7) Establish automated systems for 

monitoring, screening and analyzing 

end-user clearing exemption claims as 

prescribed in § 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 § 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 § 49.17; 

(10) Adopt and establish appropriate 

emergency policies and procedures, 

including business continuity and 

disaster recovery plans, as prescribed in 

§ 49.23 and § 49.24. 

(11) Designate an individual to serve 

as a chief compliance officer who shall 

comply with § 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. 

§ 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 nonswap 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 § 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. 

§ 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 thirdparty 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. 


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54580 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

§ 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 § 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. 

§ 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 § 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. 

§ 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. 

§ 49.15 Real-time public reporting of swap 

data. 

(a) Scope. The provisions of this 

§ 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. 

§ 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. 

§ 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 

§ 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; 


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(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 

§ 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 § 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 

§ 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 § 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. Thirdparty 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 


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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 § 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 

§ 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. 

§ 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 § 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 § 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. 

§ 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 § 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 § 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 § 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 § 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 § 49.27. 

§ 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. 

§ 49.22 of this part contains rules on 

internal controls applicable to 

administration and accounting. § 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 


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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 decisionmaking process, as § 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 § 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 § 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. 

§ 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 

§ 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 § 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. 

§ 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. 


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54584 Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 

(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 § 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 


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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 § 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 § 1.31 of this chapter. 

§ 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 decisionmaking process. Underlying 

documentation shall be made available 

to the Commission upon request. 

§ 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 


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set forth in § 49.9 and the core 

principles set forth in § 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 sameday 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 widescale 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 

§§ 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 continuitydisaster 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. 

§ 49.25 Financial resources. 

(a) General rule. (1) A registered swap 

data repository shall maintain sufficient 

financial resources to perform its 


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statutory duties set forth in § 49.9 and 

the core principles set forth in § 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 § 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. 

§ 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 § 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 § 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. 

§ 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 


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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. § 13 and 18 

U.S.C. § 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 § 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 § 40.8, and § 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. 

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Federal Register / Vol. 76, No. 170 / Thursday, September 1, 2011 / Rules and Regulations 54597 

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] 

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