Vol. 78 Friday, 

No. 105 May 31, 2013 

Part III 

Commodity Futures Trading Commission 

17 CFR Part 43 

Procedures To Establish Appropriate Minimum Block Sizes for Large 

Notional Off-Facility Swaps and Block Trades; Final Rule 


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32866 Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 43 

RIN 3038–AD08 

Procedures To Establish Appropriate 

Minimum Block Sizes for Large 

Notional Off-Facility Swaps and Block 

Trades 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final rule. 

SUMMARY: The Commodity Futures 

Trading Commission is adopting 

regulations to implement certain 

statutory provisions enacted by Title VII 

of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act. 

Specifically, in accordance with section 

727 of the Dodd-Frank Act, the 

Commission is adopting regulations that 

define the criteria for grouping swaps 

into separate swap categories and 

establish methodologies for setting 

appropriate minimum block sizes for 

each swap category. In addition, the 

Commission is adopting further 

measures under the Commission’s 

regulations to prevent the public 

disclosure of the identities, business 

transactions and market positions of 

swaps market participants. 

DATES: Effective date: July 30, 2013. 

FOR FURTHER INFORMATION CONTACT: John 

W. Dunfee, Assistant General Counsel, 

Office of the General Counsel, 202–418– 

5396, jdunfee@cftc.gov; George Pullen, 

Economist, 202–418–6709, 

gpullen@cftc.gov, or Nhan Nguyen, 

Special Counsel, 202–418–5932, 

nnguyen@cftc.gov, Division of Market 

Oversight; Esen Onur, Economist, Office 

of the Chief Economist, 202–418–6146, 

eonur@cftc.gov; Commodity Futures 

Trading Commission, Three Lafayette 

Center, 1155 21st Street NW., 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

A. The Dodd-Frank Act 

B. The Initial Proposal 

1. Overview 

2. Public Comments in Response to the 

Initial Proposal 

C. Issuance of the Real-Time Reporting 

Final Rule 

D. Further Block Proposal 

1. Policy Goals 

2. Summary of Proposed Approach 

3. Overview of Comments Received 

4. Additional Proposal Regarding 

Aggregation of Blocks 

II. Procedures To Establish Appropriate 

Minimum Block Sizes for Large Notional 

Off-Facility Swaps and Block Trades— 

Final Rules 

A. Criteria for Distinguishing Among Swap 

Categories in Each Asset Class 

1. Interest Rate and Credit Asset Classes 

a. Background 

b. Interest Rate Swap Categories 

i. Interest Rate Swap Data Summary 

ii. Summary of Proposed Rule 

c. Credit Swap Categories 

i. Credit Swap Data Summary 

ii. Credit Swap Data Analysis 

2. Swap Category in the Equity Asset Class 

3. Swap Categories in the FX Asset Class 

4. Swap Categories in the Other 

Commodity Asset Class 

5. Comments Regarding Swap Categories 

Across Asset Classes 

B. Appropriate Minimum Block Size 

Methodologies for the Initial and PostInitial Periods 

1. Phase-in of Appropriate Minimum Block 

Sizes 

2. Overview of Proposed Approach 

3. The 67-Percent Notional Amount 

Calculation for Determination of 

Appropriate Minimum Block Sizes 

4. Data for Determination of Appropriate 

Minimum Block Sizes in the Post-Initial 

Period 

5. Methodology for Determining the 

Appropriate Minimum Block Sizes by 

Asset Class 

a. Interest Rate and Credit Default Swaps 

b. Equity 

c. FX 

i. Initial Period Methodology 

ii. Post-Initial Period Methodology 

d. Other Commodity 

i. Initial Period Methodology 

ii. Post-Initial Period Methodology 

6. Special Provisions for the Determination 

of Appropriate Minimum Block Sizes for 

Certain Types of Swaps 

a. Swaps With Optionality 

b. Swaps With Composite Reference Prices 

c. Physical Commodity Swaps 

d. Currency Conversion 

e. Successor Currencies 

C. Procedural Provisions 

1. § 43.6(a) Commission Determination 

2. § 43.6(f)(4) and (5) Publication and 

Effective Date of Post-Initial Appropriate 

Minimum Block Sizes 

3. § 43.6(g) Notification of Election 

4. § 43.7 Delegation of Authority 

5. § 43.6(h)(6)—Aggregation 

6. § 43.6(i) Eligible Block Trade 

Participants 

III. Anonymity Protections for the Public 

Dissemination of Swap Transaction and 

Pricing Data 

A. Policy Goals 

B. Establishing Notional Cap Sizes for 

Swap Transaction and Pricing Data To 

Be Publicly Disseminated in Real-Time 

1. Policy Goals for Establishing Notional 

Cap Sizes 

2. Proposed Amendments Related to Cap 

Sizes—§ 43.2 Definitions and § 43.4 

Swap Transaction and Pricing Data To 

Be Publicly Disseminated in Real-Time 

a. Initial Cap Sizes 

b. Post-Initial Cap Sizes and the 75-Percent 

Notional Amount Calculation 

C. Masking the Geographic Detail of Swaps 

in the Other Commodity Asset Class 

1. Policy Goals for Masking the Geographic 

Detail for Swaps in the Other 

Commodity Asset Class 

2. Proposed Amendments to § 43.4 

3. Application of Proposed § 43.4(d)(4)(iii) 

and Proposed Appendix E to Part 43— 

Geographic Detail for Delivery or Pricing 

Points 

a. U.S. Delivery or Pricing Points 

i. Natural Gas and Related Products 

ii. Petroleum and Related Products 

iii. Electricity and Sources 

iv. All Remaining Other Commodities 

b. Non-U.S. Delivery or Pricing Points 

c. Basis Swaps 

d. Comments Received and Commission 

Determination 

4. Further Revisions to Part 43 

a. Additional Contracts Added to 

Appendix B to Part 43 

b. Technical Revisions to Part 43 

IV. Paperwork Reduction Act 

A. Background 

B. Description of the Collection 

1. § 43.6(g)—Notification of Election 

2. Amendments to § 43.4(d)(4) and 43.4(h) 

V. Cost-Benefit Considerations 

A. Background 

B. The Statutory Mandate To Consider the 

Costs and Benefits of the Commission’s 

Action: Section 15(a) of the CEA 

C. Rules Establishing Determination 

Criteria and Methodology (§ 43.6(a)–(f) 

and (h)) 

1. Rule Summary 

a. Rule 43.6(a) Commission Determination 

b. Rule 43.6(b) Swap Category 

c. Rules 43.6(c)–(f) and (h) Methods for 

Determining Appropriate Minimum 

Block Sizes 

2. Overview of Comments Received 

3. Costs 

a. Direct Costs 

b. Indirect Costs 

4. Benefits 

5. Alternatives 

a. Commission Determination of Minimum 

Block Sizes 

b. Swap Category Alternatives 

c. Block Methodology Alternatives 

6. CEA Section 15(a) Factors 

a. Protection of Market Participants and the 

Public 

b. Efficiency, Competitiveness and 

Financial Integrity of Markets 

c. Price Discovery 

d. Sound Risk Management Practices 

e. Other Public Interest Considerations 

D. Cost-Benefit Considerations Relevant to 

the Block Trade/Large Notional OffFacility Swap Election Process (§ 43.6(g)) 

1. Costs Relevant to the Election Process 

(§ 43.6(g)) 

a. Incremental, Non-Recurring Expenditure 

to a Non-Financial End-user, SEF or 

DCM To Update Existing Technology 

b. Incremental, Non-Recurring Expenditure 

to a Non-Financial End-User, SEF or 

DCM To Provide Training to Existing 

Personnel and Update Written Policies 

and Procedures 

c. Incremental, Recurring Expenses to a 

Non-Financial End-User, DCM or SEF 

Associated With Incremental 

Compliance, Maintenance and 

Operational Support in Connection With 

the Proposed Election Process 


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Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 32867 

1See Public Law 111–203, 124 Stat. 1376 (2010). 

2The short title of Title VII of the Dodd-Frank Act 

is the ‘‘Wall Street Transparency and 

Accountability Act of 2010.’’ 

3See 7 U.S.C. 1 et seq. 

4See generally CEA section 2(a)(13), 7 U.S.C. 

2(a)(13). 

5CEA section 2(a)(13)(A). 

6Section 2(a)(13)(E) explicitly refers to the swaps 

described only in sections 2(a)(13)(C)(i) and 

2(a)(13)(C)(ii) of the CEA (i.e., clearable swaps, 

including swaps that are exempt from clearing). As 

noted in the Commission’s Initial Proposal (as 

defined below), its Real-Time Reporting Final Rule 

(as defined below), and its Further Block Proposal 

(as defined below), the Commission, in exercising 

its authority under CEA section 2(a)(13)(B) to 

‘‘make swap transaction and pricing data available 

to the public in such form and at such times as the 

Commission determines appropriate to enhance 

price discovery,’’ is authorized to prescribe rules 

similar to those provisions in section 2(a)(13)(E) to 

uncleared swaps described in section 2(a)(13)(C)(iii) 

and (iv) of the CEA. 

7CEA section 2(a)(13)(E)(iv). Section 5h(f)(2)(C) of 

the CEA imposes a similar directive upon registered 

swap execution facilities (‘‘SEF’’) by requiring that 

they set forth rules for block trades for swap 

execution purposes. 

8 156 Cong. Rec. S5921 (daily ed. July 15, 2010) 

(Statement of Sen. Blanche Lincoln). 

9This provision does not cover swaps that are 

‘‘determined to be required to be cleared but are not 

cleared.’’ See CEA section 2(a)(13)(C)(iv). 

d. Incremental, Non-Recurring Expenditure 

to an SDR To Update Existing 

Technology To Capture and Publicly 

Disseminate Swap Data for Block Trades 

and Large Notional Off-Facility Swaps 

2. Comments Received 

3. Benefits Relevant to the Election Process 

(§ 43.6(g)) 

4. Alternatives 

5. Application of the Section 15(a) Factors 

to § 43.6(g) 

a. Protection of Market Participants and the 

Public 

b. Efficiency, Competitiveness and 

Financial Integrity 

c. Price Discovery 

d. Sound Risk Management Practices 

e. Other Public Interest Considerations 

E. Costs and Benefits Relevant to 

Anonymity Protections (Amendments to 

§ 43.4(d)(4) and (h)) 

1. Amendments to § 43.4(d)(4) 

2. Amendments to § 43.4(h) 

3. Costs Relevant to the Amendments to 

§ 43.4(d)(4) and (h) 

4. Benefits Relevant to the Amendments to 

§ 43.4 

5. Alternatives 

6. Application of the Section 15(a) Factors 

to the Amendments to § 43.4 

a. Protection of Market Participants and the 

Public 

b. Efficiency, Competitiveness and 

Financial Integrity 

c. Price Discovery 

d. Sound Risk Management Practices 

e. Other Public Interest Considerations 

F. Costs and Benefits Relevant to 

§ 43.6(h)(6)—Aggregation 

1. Overview of Comments Received 

2. Costs 

3. Benefits 

4. Section 15(a) Factors 

a. Protection of Market Participants and the 

Public 

b. Efficiency, Competitiveness, and 

Financial Integrity of the Futures 

Markets 

c. Price Discovery 

d. Sound Risk Management Practices 

e. Other Public Interest Considerations 

G. Costs and Benefits Relevant to 

§ 43.6(i)—Eligible Block Trade Parties 

1. Overview of Comments Received 

2. Costs 

3. Benefits 

4. Section 15(a) Factors 

a. Protection of Market Participants and the 

Public 

b. Efficiency, Competitiveness, and 

Financial Integrity of the Futures 

Markets 

c. Price Discovery 

d. Sound Risk Management Practices 

e. Other Public Interest Considerations 

VI. Regulatory Flexibility Act 

VII. Example of a Post-Initial Appropriate 

Minimum Block Size Determination 

Using the 67-Percent Notional Amount 

Calculation 

VIII. List of Commenters Who Responded to 

the Further Block Proposal 

I. Background 

A. The Dodd-Frank Act 

On July 21, 2010, President Obama 

signed the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(‘‘Dodd-Frank Act’’).1 Title VII of the 

Dodd-Frank Act 2 amended the 

Commodity Exchange Act (‘‘CEA’’) 3 to 

establish a comprehensive new 

regulatory framework for swaps and 

security-based swaps. This legislation 

was enacted to reduce risk, increase 

transparency and promote market 

integrity within the financial system by, 

inter alia: (1) Providing for the 

registration and comprehensive 

regulation of swap dealers (‘‘SDs’’) and 

major swap participants (‘‘MSPs’’); (2) 

imposing mandatory 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. 

Section 727 of the Dodd-Frank Act 

created section 2(a)(13) of the CEA, 

which authorizes and requires the 

Commission to promulgate regulations 

for the real-time public reporting of 

swap transaction and pricing data.4

Section 2(a)(13)(A) provides that ‘‘realtime public reporting’’ means reporting 

‘‘data relating to a swap transaction, 

including price and volume, as soon as 

technologically practicable after the 

time at which the swap transaction has 

been executed.’’ 5 Section 2(a)(13)(B) 

states that the purpose of section 

2(a)(13) is ‘‘to authorize the Commission 

to make swap transaction and pricing 

data available to the public in such form 

and at such times as the Commission 

determines appropriate to enhance price 

discovery.’’ 

In general, section 2(a)(13) of the CEA 

directs the Commission to prescribe 

regulations providing for the public 

availability of transaction and pricing 

data for certain swaps. Section 2(a)(13) 

places two other statutory requirements 

on the Commission that are relevant to 

this final rule. First, sections 

2(a)(13)(E)(ii) and (iii) of the CEA 

respectively require the Commission to 

prescribe regulations specifying ‘‘the 

criteria for determining what constitutes 

a large notional swap transaction (block 

trade) for particular markets and 

contracts’’ and ‘‘the appropriate time 

delay for reporting large notional swap 

transactions (block trades) to the 

public.’’ 6 In promulgating regulations 

under section 2(a)(13), section 

2(a)(13)(E)(iv) directs the Commission to 

take into account whether public 

disclosure of swap transaction and 

pricing data ‘‘will materially reduce 

market liquidity.’’ 7

The second statutory requirement 

relevant to this final rule is found in 

sections 2(a)(13)(E)(i) and 2(a)(13)(C)(iii) 

of the CEA. Through these sections, 

Congress sought to ‘‘ensure that the 

public reporting of swap transaction and 

pricing data [would] not disclose the 

names or identities of the parties to 

[swap] transactions.’’ 8 Accordingly, 

§ 2(a)(13)(E)(i) of the CEA requires the 

Commission to protect the identities of 

counterparties to mandatorily-cleared 

swaps, swaps excepted from the 

mandatory clearing requirement, and 

voluntarily-cleared swaps. Section 

2(a)(13)(C)(iii) of the CEA requires the 

Commission to prescribe rules that 

maintain the anonymity of business 

transactions and market positions of the 

counterparties to an uncleared swap.9

In order to carry out the requirements 

of section 2(a)(13), including among 

other things the two statutory 

requirements regarding blocks and 

anonymity described above, the 

Commission issued a notice of proposed 

rulemaking on December 7, 2010 (the 

‘‘Initial Proposal’’). On January 9, 2012, 

the Commission issued a final rule 

regarding Real-Time Public Reporting of 

Swap Transaction Data adopting several 

provisions contained in the Initial 

Proposal (the ‘‘Real-Time Reporting 

Final Rule’’). The Real-Time Reporting 


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32868 Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 

10See Procedures to Establish Appropriate 

Minimum Block Sizes for Large Notional OffFacility Swaps and Block Trades, 77 FR 15,460, 

Mar. 15, 2012. 

11See Real-Time Public Reporting of Swap 

Transaction Data, 75 FR 76139, Dec. 7, 2010, as 

corrected in Real-Time Public Reporting of Swap 

Transaction Data Correction, 75 FR 76930, Dec. 10, 

2010. Interested persons are directed to the Initial 

Proposal for a full discussion of each of the 

proposed part 43 rules. 

12The Initial Proposal defined the term ‘‘large 

notional swap.’’ See proposed § 43.2(l), 75 FR 

76171. The Real-Time Reporting Final Rule 

finalized the term as ‘‘large notional off-facility 

swap,’’ to denote, in relevant part, that the swap is 

not executed pursuant to a SEF or designated 

contract market’s (‘‘DCM’’) rules and procedures. 

See § 43.2, 77 FR 1182, 1244, Jan. 9, 2012. 

Specifically, the Real-Time Reporting Final Rule 

defined the term as an ‘‘off-facility swap that has 

a notional or principal amount at or above the 

appropriate minimum block size applicable to such 

publicly reportable swap transaction and is not a 

block trade as defined in § 43.2 of the Commission’s 

regulations.’’ Id. Throughout this final rulemaking, 

the Commission uses the term ‘‘large notional offfacility swap’’ as adopted in the Real-Time 

Reporting Final Rule. 

The Initial Proposal’s definition of ‘‘block trade’’ 

was similar to the final definition in the Real-Time 

Reporting Final Rule. See proposed § 43.2(f), 75 FR 

76171. The Real-Time Reporting Final Rule defines 

the term ‘‘block trade’’ as a publicly reportable 

swap transaction that: ‘‘(1) [i]nvolves a swap that 

is listed on a SEF or DCM; (2) [o]ccurs away from 

the [SEF’s or DCM’s] trading system or platform and 

is executed pursuant to the [SEF’s or DCM’s] rules 

and procedures; (3) has a notional or principal 

amount at or above the appropriate minimum block 

applicable to such swap; and (4) [i]s reported 

subject to the rules and procedures of the [SEF or 

DCM] and the rules described in [part 43], 

including the appropriate time delay requirements 

set forth in § 43.5.’’ See § 43.2, 77 FR 1243. 

13See proposed § 43.5, 75 FR 76174–76. 

14Proposed § 43.5(k)(1) in the Initial Proposal 

provided that the time delay for the public 

dissemination of data for a block trade or large 

notional off-facility swap shall commence at the 

time of execution of such trade or swap. See 75 FR 

76176. Proposed § 43.5(k)(2) provided that the time 

delay for standardized block trades and large 

notional off-facility swaps (i.e., swaps that fall 

under CEA Section 2(a)(13)(C)(i) and (iv)) would be 

15 minutes from the time of execution. Id. The 

Initial Proposal did not provide specific time delays 

for large notional off-facility swaps (i.e., swaps that 

fall under Section 2(a)(13)(C)(ii) and (iii)). Instead, 

proposed § 43.5(k)(3) provided that the time delay 

for such swaps shall be reported subject to a time 

delay that may be prescribed by the Commission. 

Id. 

The Real-Time Reporting Final Rule established 

time delays for the public dissemination of block 

trades and large notional off-facility swaps in § 43.5. 

See 77 FR 1247–49. 

15The distribution test, described in proposed 

§ 43.5(g)(1)(i) of the Initial Proposal, required that 

an SDR take the rounded transaction sizes of all 

trades executed over a period of time for a 

particular swap instrument and create a distribution 

of those trades. An SDR would then determine the 

minimum threshold amount as an amount that is 

greater than 95 percent of the notional or principal 

transaction sizes for the swap instrument for an 

applicable period of time. See 75 FR 76175. 

16The multiple test, described in proposed 

§ 43.5(g)(1)(ii) in the Initial Proposal, required that 

an SDR multiply the block trade multiple by the 

‘‘social size’’ of a particular swap instrument. 

Proposed § 43.2(x) defined ‘‘social size’’ as the 

greatest of the mean, median or mode transaction 

size for a particular swap instrument. The 

Commission proposed a block trade multiple of 

five. Id. 

17See proposed § 43.2(y), 75 FR 76172. 

18See 75 FR 76176. 

19See 75 FR 76174. 20See 75 FR 76151 (‘‘In contrast, for those swaps 

that are executed on a swap market, the 

Commission believes that since such contracts will 

be listed on a particular trading platform or facility, 

it will be unlikely that a party to a swap could be 

inferred based on the reporting of the underlying 

asset and therefore parties to swaps executed on 

swap markets must report the specific underlying 

assets and tenor of the swap.’’). 

21See 75 FR 76150–51. 

22See 75 FR 76174. 

Final Rule, however, did not adopt most 

of the provisions in the Initial Proposal 

pertaining to appropriate block sizes 

and anonymity. Instead, the 

Commission issued a further notice of 

proposed rulemaking regarding 

Procedures to Establish Appropriate 

Minimum Block Sizes for Large 

Notional Off-Facility Swaps and Block 

Trades on March 15, 2012 (the ‘‘Further 

Block Proposal’’).10 Each of these 

issuances is described more fully below. 

B. The Initial Proposal 

1. Overview 

On December 7, 2010, the 

Commission published in the Federal 

Register a notice of proposed 

rulemaking to implement section 

2(a)(13) of the CEA, which included 

specific provisions pursuant to sections 

2(a)(13)(E)(i)–(iv) and 2(a)(13)(C)(iii).11

In this Initial Proposal, the Commission 

set out proposed provisions to satisfy, 

among other things, the statutory 

requirements discussed above regarding 

minimum block sizes and anonymity 

protections. With respect to the first 

statutory requirement, the Commission 

proposed: (1) Definitions for the terms 

‘‘large notional off-facility swap’’ and 

‘‘block trade’’; 12 (2) a method for 

determining the appropriate minimum 

block sizes for large notional off-facility 

swaps and block trades; 13 and (3) a 

framework for timely reporting of such 

transactions and trades.14 Proposed 

§ 43.5(g) provided that registered swap 

data repositories (‘‘SDRs’’) would be 

responsible for calculating the 

appropriate minimum block size for 

each ‘‘swap instrument’’ using the 

greater result of the distribution test 15

and the multiple test.16 Proposed 

§ 43.2(y) broadly defined ‘‘swap 

instrument’’ as ‘‘a grouping of swaps in 

the same asset class with the same or 

similar characteristics.’’17 Proposed 

§ 43.5(h) provided that for any swap 

listed on a swap execution facility 

(‘‘SEF’’) or designated contract market 

(‘‘DCM’’), the SEF or DCM must set the 

appropriate minimum block trade size 

at a level at or above that established by 

an SDR for the relevant swap 

instrument.18

With respect to anonymity, the Initial 

Proposal set forth several provisions to 

address issues pertinent to protecting 

the identities of parties to a swap. 

Essentially, these proposed provisions 

sought to protect the identities of parties 

to a swap through the limited disclosure 

of information and data relevant to the 

swap. In particular, proposed 

§ 43.4(e)(1) in the Initial Proposal 

provided that an SDR could not publicly 

report swap transaction and pricing data 

in a manner that discloses or otherwise 

facilitates the identification of a party to 

a swap. Proposed § 43.4(e)(2) would 

have placed a requirement on SEFs, 

DCMs and reporting parties to provide 

an SDR with a specific description of 

the underlying asset and tenor of a 

swap. This proposed section also 

included a qualification with respect to 

the reporting of the specific description. 

In particular, this section provided that 

‘‘[the] description must be general 

enough to provide anonymity but 

specific enough to provide for a 

meaningful understanding of the 

economic characteristics of the 

swap.’’ 19 This qualification would have 

applied to all swaps. 

In the Initial Proposal, the 

Commission acknowledged that swaps 

that are executed on or pursuant to the 

rules of a SEF or DCM do not raise the 

same level of concerns in protecting the 

identities, business transactions or 

market positions of swap counterparties 

since these swaps generally lack 

customization.20 As a result, the 

Commission provided that SEFs and 

DCMs should tailor the description 

required by proposed § 43.2(e) 

depending on the asset class and place 

of execution of each swap. 

In contrast, the Commission 

acknowledged that the public 

dissemination of a description of the 

specific underlying asset and tenor of 

swaps that are not executed on or 

pursuant to the rules of a SEF or DCM 

(i.e., swaps that are executed bilaterally) 

may result in the unintended disclosure 

of the identities, business transactions 

or market positions of swap 

counterparties, particularly for swaps in 

the other commodity asset class.21 To 

address this issue, the Commission 

proposed in § 43.4(e)(2) that an SDR 

publicly disseminate a more general 

description of the specific underlying 

asset and tenor.22 In the Initial Proposal, 

the Commission provided a 

hypothetical example of how an SDR 

could mask or otherwise protect the 

underlying asset from public disclosure 


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Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 32869 

23See 75 FR 76150. The Initial Proposal further 

provided that the requirement in proposed 

§ 43.4(e)(2) was separate from the requirement that 

a reporting party report swap data to an SDR 

pursuant to section 2(a)(13)(G) of the CEA. See 75 

FR 76174. 

24See 75 FR 76152. 

25The initial comment period for the Initial 

Proposal closed on February 7, 2011. The comment 

periods for most proposed rulemakings 

implementing the Dodd-Frank Act—including the 

proposed part 43 rules—subsequently were 

reopened for the period of April 27 through June 

2, 2011. 

26The interested parties who either submitted 

comment letters or met with Commission staff 

included end-users, potential swap dealers, asset 

managers, industry groups/associations, potential 

SDRs, a potential SEF, multiple law firms on behalf 

of their clients and a DCM. Of the 105 comment 

letters submitted in response to the Initial Proposal, 

42 letters focused on various issues relating to block 

trades and large notional off-facility swaps. Of the 

40 meetings, five meetings focused on various 

issues relating to block trades and large notional offfacility swaps. All comment letters received in 

response to the Initial Proposal may be found on the 

Commission’s Web site at: http:// 

comments.cftc.gov/PublicComments/ 

CommentList.aspx?id=919. 

27A list of the full names and abbreviations of 

commenters who responded to the Initial Proposal 

and who the Commission refers to in the Further 

Block Proposal is included in section VI below. As 

noted above, letters from these commenters and 

others submitted in response to the Initial Proposal 

are available through the Commission’s Web site at: 

http://comments.cftc.gov/PublicComments/

CommentList.aspx?id=919. 

28See Further Block Proposal at 77 FR 15463–66. 

29Commission staff also consulted with the staffs 

of several other federal financial regulators in 

connection with the issuance of the Further Block 

Proposal. 

30A detailed discussion of Commission staff’s 

review and analysis process is set out below in 

sections II.A.1.b.i. and c.i. 

31See ISDA, Costs and Benefits of Mandatory 

Electronic Execution Requirements for Interest Rate 

Products, 24 (ISDA Discussion Paper No. 2, Nov. 

2011), available at http://www2.isda.org/

attachment/Mzc0NA==/ISDA%20Mandatory%20

Electronic%20Execution%20

Discussion%20Paper.pdf. This paper cited the 

Commission’s notice of proposed rulemaking with 

respect to SEFs (Core Principles and Other 

Requirements for Swap Execution Facilities, 76 FR 

1214, 1220, Jan. 7, 2011) and the Initial Proposal. 

32See ISDA and SIFMA, Block trade reporting 

over-the-counter derivatives markets, 6 (Jan. 2011), 

available at http://www.isda.org/speeches/pdf/ 

Block-Trade-Reporting.pdf. 

33See Joint Public Roundtable on Issues Related 

to the Schedule for Implementing Final Rules for 

Swaps and Security-Based Swaps Under the DoddFrank Wall Street Reform and Consumer Protection 

Act, 76 FR 23211, Apr. 26, 2011. A copy of the 

transcript is accessible at: http://www.cftc.gov/ucm/ 

groups/public/@newsroom/documents/file/csjac_

transcript050211.pdf. 

34See 77 FR 1182. 

35The Real-Time Reporting Final Rule includes 

final definitions for the following terms: (1) block 

trade; (2) large notional off-facility swap; (3) 

appropriate minimum block size; and (4) asset 

class. As noted above, the Real-Time Reporting 

Final Rule did not define the term swap instrument. 

This final rule adopts a new term, swap category, 

which groups swaps for the purpose of determining 

whether a swap transaction qualifies as a large 

notional off-facility swap or block trade. See note 

17 supra. 

36See § 43.2 of the Commission’s regulations. 77 

FR 1244. The Real-Time Reporting Final Rule 

finalized the definition of ‘‘reporting party’’ as a 

‘‘party to a swap with the duty to report a publicly 

reportable swap transaction in accordance with this 

part [43] and section 2(a)(13)(F) of the [CEA].’’ 77 

FR 1244. 

37See 77 FR 1244. 

38See 77 FR 1185. 

39See 77 FR 15460. 

in a manner too specific so as to divulge 

the identity of a swap counterparty. The 

Commission, however, did not set forth 

a specific manner in which SDRs should 

carry out this requirement.23

To further protect the identities, 

business transactions or market 

positions of swap counterparties, 

proposed § 43.4(i) of the Initial Proposal 

included a rounding convention for all 

swaps, which included a ‘‘notional cap’’ 

provision. The proposed notional cap 

provision provided, for example, that if 

the notional size of a swap is greater 

than $250 million, then an SDR only 

would publicly disseminate a notation 

of ‘‘$250+’’ rather than the actual 

notional size of the swap.24

The Commission issued the Initial 

Proposal for public comment for a 

period of 60 days, but later reopened the 

comment period for an additional 45 

days.25 After issuing the Initial 

Proposal, the Commission received 105 

comment letters and held 40 meetings 

with interested parties regarding the 

proposed provisions.26

2. Public Comments in Response to the 

Initial Proposal 

The commenters to the Initial 

Proposal provided general and specific 

comments relating to the proposed 

provisions regarding the determination 

of appropriate minimum block sizes and 

anonymity protections for the identities, 

business transactions and market 

positions of swap counterparties.27 The 

comments submitted regarding the 

Initial Proposal’s provisions regarding 

appropriate minimum block sizes and 

anonymity protections are summarized 

in detail in the Further Block 

Proposal.28

Following the close of the comment 

period for the Initial Proposal, the 

Commission took several actions in 

consideration of the comments received 

regarding the proposed methodology to 

determine appropriate minimum block 

sizes, the proposed anonymity 

protections and the proposed 

implementation approach.29 A 

discussion of the Commission’s actions 

and their impact on the Further Block 

Proposal is set out immediately below. 

C. Issuance of the Real-Time Reporting 

Final Rule 

In consideration of the public 

comments submitted in response to the 

Initial Proposal, the Commission 

obtained and analyzed swap data in 

order to better understand the trading 

activity of swaps in certain asset 

classes.30 The Commission also 

reviewed additional information, 

including a study pertaining to the 

mandatory trade execution requirement 

and post-trade transparency concerns 

that arose out of two of the 

Commission’s proposed rulemakings,31

as well as a report issued by two 

industry trade associations on block 

trade reporting in the swaps market.32 In 

addition, the Commission and the 

Securities and Exchange Commission 

(‘‘SEC’’) held a two-day public 

roundtable on Dodd-Frank Act 

implementation on May 2–3, 2011 

(‘‘Public Roundtable’’).33 During the 

Public Roundtable and in comment 

letters submitted in support thereof, 

interested parties recommended that the 

Commission adopt a phased-in 

approach with respect to establishing 

block trade rules. 

On January 9, 2012, the Commission 

issued the Real-Time Reporting Final 

Rule, finalizing several provisions that 

were proposed in the Initial Proposal.34

Those provisions implement, among 

other things: (1) Several definitions 

proposed in the Initial Proposal relevant 

to this final rule, including ‘‘asset 

class’’; 35 (2) the scope of part 43; (3) the 

reporting responsibilities of the parties 

to each swap; (4) the requirement that 

SDRs publicly disseminate swap 

transaction and pricing data; (5) the data 

fields that SDRs will publicly 

disseminate; (6) the time-stamping and 

recordkeeping requirements of SDRs, 

SEFs, DCMs and the ‘‘reporting party’’ 

to each swap; 36 (7) the interim time 

delays for public dissemination and the 

time delays for public dissemination of 

large notional off-facility swaps and 

block trades; and (8) interim notional 

cap sizes for all swaps that are publicly 

disseminated.37 Based on commenters’ 

recommendations, however, the 

Commission did not adopt proposed 

§ 43.5 and stated its intent to re-propose 

a calculation methodology for 

appropriate minimum block sizes based 

on additional data and analysis in a 

separate rulemaking.38

D. Further Block Proposal 

On March 15, 2012, the Commission 

issued for comment the Further Block 

Proposal.39 Based on the public 

comments received in response to the 

Initial Proposal, and in order to 

successfully implement the real-time 

public reporting regulatory framework 


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40 In several places in the Real-Time Reporting 

Final Rule, the Commission stated that it planned 

to address these requirements in a separate, 

forthcoming release. See, e.g., 77 FR 1185, 1191, 

1193 and 1217. The Further Block Proposal was 

that release. 

41 In considering the benefits and effects of 

enhanced market transparency, the Commission 

notes that the ‘‘guiding principle in setting 

appropriate block trade levels [is that] the vast 

majority of swap transactions should be exposed to 

the public market through exchange trading.’’ 

Congressional Record—Senate, S5902, S5922 (July 

15, 2010). 

42CEA section 2(a)(13)(E)(iv). See also CEA 

section 5h(f)(2)(C) (concerning the treatment of 

block trades on SEFs for trade execution purposes). 

43See e.g., CEA section 2(a)(13)(B) (‘‘The purpose 

of this section is to authorize the Commission to 

make swap transaction and pricing data available to 

the public in such form and at such times as the 

Commission determines appropriate to enhance 

price discovery.’’). 

44As used in the Further Block Proposal and this 

final rule, an ‘‘outsize swap transaction’’ is a 

transaction that, as a function of its size and the 

depth of the liquidity of the relevant market (and 

equivalent markets), leaves one or both parties to 

such transaction unlikely to transact at a 

competitive price. 

45Consistent with this final rule, the Commission 

clarified in the SEF final rule that a swap 

transaction qualifies as a block trade based on the 

size of the swap transaction, not based on whether 

the swap is subject to the trade execution 

requirement under section 2(h)(8) of the CEA. See 

Core Principles and Other Requirements for Swap 

Execution Facilities, p. 72 (May 16, 2013)]. In 

§ 37.200 of the Commission’s regulations, the 

Commission has codified the statutory text of SEF 

Core Principle 2 under section 5h(f)(2)(C) of the 

CEA, which requires a SEF to establish rules 

governing the operation of its trading facility, 

including trading procedures for block trades. 17 

CFR 37.200(c). Similarly, the Commission’s 

proposed rulemaking regarding core principles and 

other requirements for DCMs under § 38.504 of the 

Commission’s regulations, the Commission requires 

DCMs to adopt rules that comply with all of the 

provisions of part 43, including the block trade 

provisions finalized herein. Core Principles and 

Other Requirements for Designated Contract 

Markets, 75 FR 80572, 80617 (Dec. 22, 2010). 

46The price of such a transaction would reflect 

market conditions for the underlying commodity or 

reference index and the liquidity premium for 

executing the swap transaction. The time delays in 

part 43 of the Commission’s regulations will protect 

end-users and liquidity providers from the expected 

price impact of the disclosure of publicly reportable 

swap transactions. Trading that exploits the need of 

traders to reduce or offset their positions has been 

defined in financial economics literature as 

‘‘predatory trading.’’ See e.g., Markus Brunnermeier 

and Lasse Heje Pedersen, Predatory Trading, 

Journal of Finance LX 4, Aug. 2005, available at 

http://pages.stern.nyu.edu/∼lpederse/papers/ 

predatory_trading.pdf. 

47The Commission proposed the same phased-in 

approach for determining cap sizes, which help to 

protect the anonymity of counterparties’ market 

positions and business transactions as required in 

the CEA. For a more detailed discussion of the 

Commission’s proposed approach with respect to 

cap sizes, see section III.B. 

The two-period, phased-in approach would 

become effective after the implementation of the 

part 43 provisions in the Real-Time Reporting Final 

Rule. Until the date on which the proposed 

provisions in the Further Block Proposal become 

effective, all swaps would be subject to a time delay 

pursuant to the provisions in part 43. 

48The Commission proposed that swaps in the 

equity asset class do not qualify as block trades and 

large notional off-facility swaps. See proposed 

§ 43.6(d). Otherwise, the Commission proposed 

prescribing swap categories for each asset class as 

set forth in proposed § 43.6(b). These swap 

categories would remain the same during the initial 

and post-initial periods. 

49The Commission notes SEFs and DCMs would 

not be prohibited under the Further Block Proposal 

from setting block sizes for swaps at levels that are 

higher than the appropriate minimum block sizes 

as determined by the Commission. 

established in the Real-Time Reporting 

Final Rule, the Commission proposed 

provisions in the Further Block Proposal 

that: (1) Specify the criteria for 

determining swap categories and 

methodologies for determining the 

appropriate minimum block sizes for 

large notional off-facility swaps and 

block trades; and (2) provide increased 

protections to the identities of swap 

counterparties to large swap 

transactions and certain other 

commodity swaps, which were not fully 

addressed in the Real-Time Reporting 

Final Rule.40

1. Policy Goals 

In section 2(a)(13) of the CEA, 

Congress intended that the Commission 

consider both the benefits of enhanced 

market transparency and the effects 

such transparency would have on 

market liquidity.41 Section 

2(a)(13)(E)(iv) of the CEA places 

constraints on the requirements for the 

real-time public reporting of swap 

transaction and pricing data by 

mandating that the Commission shall 

‘‘take into account whether the public 

disclosure [of swap transaction and 

pricing data] will materially reduce 

market liquidity.’’42 While the 

Commission anticipates that the public 

dissemination of swap transaction and 

pricing data will generally reduce costs 

associated with price discovery and 

prevent information asymmetries 

between market makers and endusers,43 it also believes that the benefits 

of enhanced market transparency are 

not boundless, particularly in swap 

markets with limited liquidity. 

The Commission understands that the 

publication of detailed information 

regarding ‘‘outsize swap transactions’’ 44

could expose swap counterparties to 

higher trading costs.45 In this regard, the 

publication of detailed information 

about an outsize swap transaction may 

alert the market to the possibility that 

the original liquidity provider to the 

outsize swap transaction will be reentering the market to offset that 

transaction.46 Other market participants 

might be alerted to the liquidity 

provider’s need to offset risk and 

therefore would have a strong incentive 

to exact a premium from the liquidity 

provider. As a result, liquidity providers 

possibly could be deterred from 

becoming counterparties to outsize 

swap transactions if swap transaction 

and pricing data is publicly 

disseminated before liquidity providers 

can offset their positions. The 

Commission anticipates that, in turn, 

this result could negatively affect 

liquidity in the swaps market. 

In consideration of these potential 

outcomes, the Further Block Proposal 

sought to provide maximum public 

transparency, while taking into account 

the concerns of liquidity providers 

regarding possible reductions in market 

liquidity. To do so, the Further Block 

Proposal established the following more 

detailed criteria: (1) Swap categories 

(relative to the definition of swap 

instrument in the Initial Proposal); (2) a 

phased-in approach to determining 

appropriate minimum block sizes for 

block trades and large notional offfacility swaps; and (3) anonymity 

provisions for the public reporting of 

transaction data. A summary of the 

Commission’s proposed approach is 

provided below. 

2. Summary of Proposed Approach 

The Commission proposed a twoperiod, phased-in approach to 

implement regulations for determining 

appropriate minimum block sizes.47

Specifically, the Commission proposed 

phasing-in minimum block sizes during 

an initial period and setting them 

thereafter on an ongoing basis (i.e., the 

post-initial period) so that market 

participants could better adjust their 

swap trading strategies to manage risk, 

secure new technologies and make 

necessary arrangements in order to 

comply with part 43 reporting 

requirements. The Commission 

proposed two provisions relating to the 

Commission’s determination of 

appropriate minimum block sizes: (1) 

Initial appropriate minimum block sizes 

under proposed § 43.6(e); and (2) postinitial appropriate minimum block sizes 

under proposed § 43.6(f). 

In proposed § 43.6(e), the Commission 

proposed establishing initial 

appropriate minimum block sizes for 

each category of swaps within the 

interest rate, credit, foreign exchange 

(‘‘FX’’) and other commodity asset 

classes.48 The Commission listed the 

prescribed initial appropriate minimum 

block sizes in proposed appendix F to 

part 43 based on these swap 

categories.49 For interest rate and credit 

swaps, the Commission reviewed actual 

market data and prescribed initial 

appropriate minimum block sizes for 

swap categories in these asset classes 


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50See infra notes 169–174 and accompanying 

text. 

51See Swap Data Recordkeeping and Reporting 

Requirements, 77 FR 2136, 2196, Jan. 13, 2012. 

52See ‘‘Commission Q & A—On the Start of Swap 

Data Reporting’’ (Oct. 9, 2012). 

53See ‘‘No-Action Relief for Swap Dealers from 

Certain Swap Data Reporting Requirements of Part 

43, Part 45, and Part 46 of the Commission’s 

Regulations Due to Effects of Hurricane Sandy,’’ 

Commission Letter No. 12–41 (Dec. 5, 2012). 

54See id. 

55See ‘‘Time-Limited No-Action Relief for Swap 

Counterparties that are not Swap Dealers or Major 

Swap Participants, from Certain Swap Data 

Reporting Requirements of Parts 43, 45 and 46 of 

the Commission’s Regulations,’’ Commission Letter 

No. 13–10 (Apr. 9, 2013). 

56See id. 

57See id. 

58See id. 

59 In particular, the Commission proposed a 67- 

percent notional amount calculation, which is 

discussed in more detail in section II.B.3. 

60See infra Section II.B.6. for a discussion of the 

special rules. 

61The Commission proposed to follow the 

necessary procedures for releasing microdata files 

as outlined by the Federal Committee on Statistical 

Methodology: (i) Removal of all direct personal and 

institutional identifiers, (ii) limiting geographic 

detail, and (iii) top-coding high-risk variables which 

are continuous. See Federal Committee on 

Statistical Methodology, Report on Statistical 

Disclosure Limitation Methodology 94 (Statistical 

Policy Working Paper 22, 2d ed. 2005), http:// 

www.fcsm.gov/working-papers/totalreport.pdf. The 

report was originally prepared by the Subcommittee 

on Disclosure Limitation Methodology in 1994 and 

was revised by the Confidentiality and Data Access 

Committee in 2005. 

62A list of the full names and abbreviations of 

commenters who responded to the Further Block 

Proposal is included in section VIII below. As noted 

above, letters from these commenters and others 

submitted in response to the Initial Proposal are 

available through the Commission’s Web site at 

http://comments.cftc.gov/PublicComments/ 

CommentList.aspx?id=919. 

based on that data. For the other asset 

classes, the Commission did not have 

access to relevant market data. As such, 

during the initial period, the 

Commission proposed using a 

methodology based on whether a swap 

or swap category is ‘‘economically 

related’’ to a futures contract.50 Swaps 

and swap categories that are not 

economically related to a futures 

contract would remain subject to a time 

delay (i.e., treated as block trades or 

large notional off-facility swaps, as 

applicable, regardless of notional 

amount) during the initial period. 

In proposed § 43.6(f)(1), the 

Commission provided that the duration 

of this initial period would be no less 

than one year after an SDR started 

collecting reliable data for a particular 

asset class as determined by the 

Commission. During the initial period, 

the Commission would review reliable 

data for each asset class. For the 

purposes of this proposed provision, 

reliable data would include all data 

collected by an SDR for each asset class 

in accordance with the compliance 

chart in the adopting release to part 45 

of the Commission’s regulations.51

The Commission stated in the Further 

Block Proposal and is currently of the 

view that data is per se reliable if it is 

collected by an SDR for an asset class 

after the respective compliance date for 

such asset class as set forth in part 45 

of the Commission’s regulations or by 

other Commission action. The 

Commission notes that SDRs have been 

collecting data pursuant to the 

compliance dates for certain market 

participants and asset classes since 

December 2012. DCMs and Swap 

Dealers (‘‘SDs’’) began reporting swap 

transactions in the interest rate and 

credit default swap asset classes on 

December 31, 2012.52 DCMs and SDs 

began reporting swap transactions in the 

FX, equity, and other commodity asset 

classes on February 28, 2013.53 Major 

Swap Participants (‘‘MSPs’’) began 

reporting swap transactions in all five 

asset classes on February 28, 2013.54

Financial Entities began reporting swap 

transactions in the interest rate and 

credit default swap asset classes on 

April 10, 2013.55 Financial Entities 

begin reporting swap transactions for 

swaps executed starting April 10, 2013, 

in the FX, equity, and other commodity 

asset classes on May 29, 2013.56 NonSDs, non-MSPs, and non-Financial 

Entities begin reporting swap 

transactions for swaps executed starting 

April 10, 2013, in the interest rate and 

credit default swap asset classes on July 

1, 2013.57 Non-SDs, non-MSPs, and 

non-Financial Entities begin reporting 

swap transactions for swaps executed 

starting April 10, 2013, in the FX, 

equity, and other commodity asset 

classes on August 19, 2013.58

Accordingly, the Commission and SDRs 

will have one year of reliable data as of 

April 10, 2014. 

The proposed initial period would 

expire following the publication of a 

Commission determination of postinitial appropriate minimum block sizes 

in accordance with the publication 

process set forth in proposed § 43.6(f)(4) 

and (5). Thereafter, the Commission 

would set post-initial appropriate 

minimum block sizes for swap 

categories no less than once each 

calendar year using the calculation 

methodology set forth in proposed 

§ 43.6(c)(1).59

The Commission also proposed 

special rules for determining 

appropriate minimum block sizes in 

certain instances. In particular, in 

proposed § 43.6(d), the Commission 

prescribed special rules for swaps in the 

equity asset class. In proposed § 43.6(h), 

the Commission proposed establishing 

special rules for determining 

appropriate minimum block sizes in 

certain circumstances including, for 

example, rules for converting currencies 

and rules for determining whether a 

swap with optionality qualifies for block 

trade or large notional off-facility swap 

treatment.60

In the Further Block Proposal’s 

proposed amendments to § 43.4(h) and 

43.4(d)(4), the Commission also 

prescribed measures to fulfill the CEA’s 

anonymity requirements in connection 

with the public dissemination of 

publicly reportable swap transactions. 

The Commission proposed adopting the 

practices used by most federal agencies 

when releasing to the public companyspecific information—by removing 

obvious identifiers, limiting geographic 

detail (e.g., disclosing general, nonspecific geographical information about 

the delivery and pricing points) and 

masking high-risk variables by 

truncating extreme values for certain 

variables (e.g., capping notional 

values).61

3. Overview of Comments Received 

The Commission received comments 

from 35 interested parties representing a 

broad range of interests including: 

financial end-users, swap dealers, asset 

managers, industry groups/associations, 

potential SEFs, and a DCM.62 Some 

commenters expressed general support 

for the Further Block Proposal’s 

provisions regarding minimum block 

sizes and anonymity; others objected to 

particular aspects of the Further Block 

Proposal and/or offered 

recommendations for clarification or 

modification of specific proposed 

regulations. 

In addition to a general solicitation for 

comment on all aspects of the Further 

Block Proposal, the Commission 

requested comment on a number of 

specific, focused questions related to 

particular provisions. For example, 

commenters were asked to address 

issues related to: (i) The appropriate 

criteria for determining swap categories 

in the five asset classes; (ii) the 

appropriate methodology for 

determining appropriate minimum 

block sizes for swaps in the five asset 

classes; (iii) whether and how a phasein of block thresholds should be 

implemented; (iv) special rules with 

respect to swaps with optionality, swaps 

with composite reference prices, 

physical commodity swaps, currency 

conversions, and successor currencies; 

(v) the role of SEFs and DCMs in 


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63Rules Prohibiting the Aggregation of Orders to 

Satisfy Minimum Block Sizes or Cap Size 

Requirements, and Establishing Eligibility 

Requirements for Parties to Block Trades, 77 FR 

38229, June 27, 2012. 

64Proposed § 43.6(b) does not set out a definition 

for the term ‘‘swap category.’’ Instead, proposed 

§ 43.6(b) sets out the provisions that group swaps 

within each asset class with common risk and 

liquidity profiles, as determined by the 

Commission. 

65See § 43.2, 77 FR 1243. 

66 In the Real-Time Reporting Final Rule, the 

Commission determined that cross-currency swaps 

are a part of the interest rate asset class. See 77 FR 

1193. The Commission noted that this 

determination is consistent with industry practice. 

67The U.S. Department of the Treasury 

(‘‘Treasury’’) has issued a Final Determination, 

pursuant to sections 1a(47)(E)(i) and 1b of the CEA, 

that exempts FX swaps and FX forwards from the 

definition of ‘‘swap’’ under the CEA. Therefore, the 

requirements of section 2(a)(13) of the CEA would 

not apply to those transactions, and such 

transactions would not be subject to part 43 of the 

Commission’s regulations. See Determination of 

Foreign Exchange Swaps and Foreign Exchange 

Forwards under the Commodity Exchange Act, 77 

FR 69694, Nov. 20, 2012. Nevertheless, section 

1a(47)(E)(iii) of the CEA provides that FX swaps 

and FX forwards transactions still are not excluded 

from regulatory reporting requirements to an SDR. 

Further, the Commission notes that Treasury’s final 

determination excludes FX swaps and FX forwards, 

but does not apply to FX options or non-deliverable 

FX forwards. As such, FX instruments that are not 

covered by Treasury’s final determination are 

subject to part 43 of the Commission’s regulations. 

68The Real-Time Reporting Final Rule defines the 

term ‘‘other commodity’’ to mean any commodity 

that is not categorized in the other asset classes as 

may be determined by the Commission. See 77 FR 

1244. The definition of asset class in § 43.2 also 

provides that the Commission may later determine 

that there are other asset classes not identified 

currently in that section. See 77 FR 1243. 

69These objectives are specific to the 

determination of appropriate swap category criteria 

and are intended to promote the general policy 

goals described above in section I.D.1. 

determining appropriate minimum 

block sizes for swaps that they list; (vi) 

the process by which the Commission 

would notify the public of appropriate 

minimum block sizes; (vii) the process 

through which a qualifying swap 

transaction would be treated as a block 

trade or large notional off-facility swap; 

(viii) the appropriate methodology for 

determining the maximum limit of the 

principal, notional amount of a swap 

that is publicly disseminated; (ix) 

appropriate anonymity protections for 

the public dissemination of publicly 

reportable swap transactions in the 

other commodity asset class. 

The Commission also requested 

comment with respect to the costbenefit considerations in the Further 

Block Proposal and specifically 

requested commenters to provide a 

feasible alternative approach to 

establishing minimum block sizes that 

would impose less regulatory burden on 

swap market participants and the 

general public. Commenters also were 

expressly invited to provide data 

regarding the direct and indirect 

quantifiable costs with the proposed 

criteria for establishing minimum block 

thresholds. 

4. Additional Proposal Regarding 

Aggregation of Blocks 

Among the requirements contained in 

the Initial Proposal, proposed 

§ 43.5(b)(1) provided that eligible parties 

to a block trade (or large notional swap) 

must be Eligible Contract Participants 

(‘‘ECPs’’), except that a DCM may allow 

a Commodity Trading Advisor (‘‘CTA’’), 

investment advisor, or foreign person 

meeting certain criteria to transact block 

trades for customers who are not ECPs. 

Further, proposed § 43.5(m) prohibited 

aggregation of orders for different 

trading accounts in order to satisfy the 

appropriate minimum block size 

requirement, except if done so on a 

DCM by a CTA, investment adviser, or 

foreign person meeting certain criteria. 

After it issued its Further Block 

Proposal, the Commission determined 

that the aggregation provision and the 

provision that specified the eligible 

parties to a block trade, including the 

proposed requirement that persons 

transacting block trades on behalf of 

customers must receive prior written 

consent to do so, were inadvertently 

omitted from the Further Block 

Proposal. These provisions were then 

the subject of a separate notice of 

proposed rulemaking issued on June 27, 

2012 (‘‘Proposed Aggregation Rule’’).63

The Commission received a total of 

nine comment letters in response to the 

proposed rules regarding eligible parties 

to a block trade and aggregation of 

orders. Four of the letters responded to 

the Initial Proposal and five letters 

responded to the Proposed Aggregation 

Rule. Many of the comments received 

applied equally to the same provisions 

contained in both proposed § 43.6(h)(6) 

and 43.6(i), which address the 

aggregation of orders and the eligible 

parties to a block trade. 

II. Procedures To Establish Appropriate 

Minimum Block Sizes for Large 

Notional Off-Facility Swaps and Block 

Trades—Final Rules 

A. Criteria for Distinguishing Among 

Swap Categories in Each Asset Class 

In the Further Block Proposal, the 

Commission proposed to use the term 

‘‘swap category’’ to convey the concept 

of a grouping of swap contracts that 

would be subject to a common 

appropriate minimum block size.64

Specifically, the Commission proposed 

specific criteria for defining swap 

categories in each asset class. As 

adopted in the Real-Time Reporting 

Final Rule, § 43.2 of the Commission’s 

regulations defines ‘‘asset class’’ as ‘‘a 

broad category of commodities, 

including, without limitation, any 

‘excluded commodity’ as defined in 

section 1a(19) of the [CEA], with 

common characteristics underlying a 

swap.’’ 65 Section 43.2 also identifies the 

following five swap asset classes: 

Interest rates; 66 equity; credit; FX; 67

and other commodities.68

The proposed swap category criteria 

are intended to address the following 

two policy objectives: (1) Categorizing 

together swaps with similar quantitative 

or qualitative characteristics that 

warrant being subject to the same 

appropriate minimum block size; and 

(2) minimizing the number of the swap 

categories within an asset class in order 

to avoid unnecessary complexity in the 

determination process.69 In the 

Commission’s view, balancing these 

policy objectives and considering the 

characteristics of different types of 

swaps within an asset class are 

necessary in establishing appropriate 

criteria for determining swap categories 

within each asset class. The five asset 

classes established by the Commission 

in the Real-Time Reporting Final Rule 

are discussed briefly in the paragraph 

below, followed by a discussion of the 

proposed swap category criteria for each 

asset class. 

In the Further Block Proposal, the 

Commission proposed breaking down 

each asset class into separate swap 

categories to determine appropriate 

minimum block sizes for such 

categories. During the initial and postinitial periods, the Commission would 

group swaps in the five asset classes 

into the prescribed swap categories as 

set forth in proposed § 43.6(b). 


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70See generally CL–AFR; CL–AII; CL–Barclays; 

CL–Better Markets; CL–CME; CL–FIA; CL–GFMA; 

CL–ICAP; CL–ICAP Energy; CL–ICI; CL–ISDA/ 

SIFMA; CL–Kinetix; CL–MFA; CL–Morgan Stanley; 

CL–Parascandola; CL–Parity; CL–Pierpont; CL– 

SDMA; CL–SIFMA; CL–WMBAA; CL–Vanguard. 71CL–Better Markets at 5; CL–ICI at 4. 72CL–Better Markets at 5. 73CL–ICI at 4. 74CL–ICAP at 8. 75The Commission is using the term ‘‘swap 

category’’ instead of ‘‘swap instrument’’ in this final 

rule. Although the Commission is not adopting a 

definition of ‘‘swap category,’’ the Commission 

believes that this term groups swap contracts that 

would be subject to the same appropriate minimum 

block size based on asset class with common 

quantitative or qualitative characteristics, i.e., risk 

and liquidity profiles. 

76As used in the Further Block Proposal, the 

tenor of a swap refers to the amount of time from 

the effective or start date of a swap to the end date 

of such swap. In circumstances where the effective 

or start date of the swap was different from the trade 

date of the swap, the Commission used the later 

occurring of the two dates to determine tenor. 

Two commenters addressed how the Commission 

should determine tenor for backdated swaps. AFR 

stated that backdating a swap is the equivalent of 

a swap with a date of its inception, but with a price 

that includes an adjustment for the backdating 

feature of the transaction; AFR wrote that tenor 

should be determined accordingly. CL–AFR at 5–6. 

Similarly, ISDA/SIFMA requested that the 

Commission determine the tenor of a back dated 

swap as the time from the date of execution of the 

swap (as opposed to the start date) to the maturity 

date of the swap. CL–ISDA/SIFMA at 10. After 

consideration of these comments, the Commission 

maintains the same approach from the Further 

Block Proposal. 

77As generally used in the industry, the term 

‘‘conventional spread’’ represents the equivalent of 

a swap dealer’s quoted spread (i.e., an upfront fee 

based on a fixed coupon and using standard 

assumptions such as auctions and recovery rates). 

More information regarding the use of this term can 

be found at Markit, The CDS Big Bang: 

Understanding the Changes to the Global CDS 

Contract and North American Conventions, at 

http://www.markit.com/cds/announcements/ 

resource/cds_big_bang.pdf, (Mar. 2009), at 19. 

78Section 8(a) of the CEA protects non-public, 

transaction-level data from public disclosure. 

Section 8(a)(1) provides, in relevant part, that ‘‘the 

Commission may not publish data and information 

that would separately disclose the business 

transactions or market positions of any person and 

trade secrets or names of customers . . . .’’ To assist 

commenters, the Further Block Proposal included 

various tables and summary statistics depicting the 

ODSG data in aggregate forms. In the discussion 

that follows, the Commission additionally has 

described the methodology it employed in 

reviewing, analyzing and drawing conclusions 

based on the ODSG data. 

79See OTC Derivatives Supervisors Group— 

Federal Reserve Bank of New York, http:// 

www.ny.frb.org/markets/otc_derivatives

_supervisors_group.html (last visited May 6, 2013). 

The ODSG was formed ‘‘in order to address the 

emerging risks of inadequate infrastructure for the 

rapidly growing market in the credit derivatives . 

. . .’’ The ODSG works directly with market 

participants to plan, monitor and coordinate 

industry progress toward collective commitments 

made by firms. 

80The G–14 banks are Bank of America-Merrill 

Lynch; Barclays Capital; BNP Paribas; Citigroup; 

Credit Suisse; Deutsche Bank AG; Goldman Sachs 

& Co.; HSBC Group; J.P. Morgan; Morgan Stanley; 

The Royal Bank of Scotland Group; Societe 

Generale; UBS AG; and Wells Fargo Bank, N.A. 

81MarkitSERV is a post-trade processing 

company wholly owned by Markit. From its 

formation in 2009 until April 2013, MarkitSERV 

was jointly owned by Markit and The Depository 

Trust & Clearing Corporation (‘‘DTCC’’). 

82The interest rate swap data was limited to 

transactions and events submitted to the 

MarkitWire platform. MarkitWire is a trade 

confirmation service offered by MarkitSERV. 

83The Warehouse Trust, a subsidiary of DTCC 

DerivSERV LLC, is regulated as a member of the 

U.S. Federal Reserve System and as a limited 

purpose trust company by the New York State 

Banking Department. The Warehouse Trust 

provides the market with a trade database and 

centralized electronic infrastructure for post-trade 

processing of OTC credit derivatives contracts over 

their entire lifecycle. See DTCC, The Warehouse 

Trust Company, About the Warehouse Trust 

Company, http://www.dtcc.com/about/subs/ 

derivserv/warehousetrustco.php. 

84The Warehouse Trust data contained 

‘‘allocation-level data,’’ which refers to 

transactional data that does not distinguish between 

isolated transactions and transactions that, although 

documented separately, comprise part of a larger 

transaction. 

The Commission notes the work of other 

regulators in aggregating observations believed to be 

part of a single transaction. See Kathryn Chen, et 

al., Federal Reserve Bank of New York Staff Report, 

An Analysis of CDS Transactions: Implications for 

Public Reporting, (Sept. 2011), at 25, http:// 

www.newyorkfed.org/research/staff_reports/

sr517.html. The Commission notes that this 

allocation-level information could produce a 

downward bias in the notional amounts of the swap 

transactions in the data sets provided by the ODSG. 

In turn, this downward bias would produce smaller 

appropriate minimum block trade sizes relative to 

a data set that, if available with appropriate 

execution time stamps, would reflect the aggregate 

notional amount of swaps completed in a single 

transaction. 

Twenty-one commenters addressed 

the Further Block Proposal’s use of 

swap categories.70 The vast majority of 

the comments did not question the use 

of swap categories generally, and 

focused on the specific criteria proposed 

for determining swap categories within 

each asset class instead. Better Markets 

and ICI expressly supported the 

Commission’s proposed use of swap 

categories.71 Better Markets stated that 

‘‘the concept of a ‘swap category’ is 

useful, in that it allows greater 

granularity than the far broader notion 

of ‘asset class.’ ’’ 72 ICI ‘‘support[ed] the 

CFTC’s proposal to establish categories 

of swaps within different asset classes 

that would be subject to a common 

appropriate minimum block size to 

better calibrate the block thresholds to 

the relative liquidity of the swap 

categories in each asset class.’’ 73 ICAP, 

however, disagreed with the 

Commission’s use of swap categories 

and stated that ‘‘the Commission’s 

proposal is mistaken in its use of ‘swap 

categories’ . . . as opposed to using the 

standard liquid tenors of swap 

contracts.’’ 74

After consideration of the comments 

related to the use of swap categories, the 

Commission is adopting swap categories 

as proposed in § 43.6, with certain 

modifications based upon both general 

concerns expressed by commenters in 

regard to the use of swap categories, 

specific concerns raised in regard to the 

criteria for determining swap categories 

within each asset class, and other 

relevant market developments.75 The 

following sections address the 

comments regarding specific asset 

classes and set out, where appropriate, 

the Commission’s responsive 

modifications of the swap categories 

approach. 

1. Interest Rate and Credit Asset Classes 

a. Background 

The Commission was able to obtain 

and review non-public swap data to 

make inferences about patterns of 

trading activity, price impact and 

liquidity in the markets for swaps in the 

interest rate and credit asset classes. 

Based on that review, the Commission 

proposed criteria for determining swap 

categories in these two asset classes. 

Specifically, the Commission proposed 

defining swap categories for: (1) Interest 

rate swaps based on unique 

combinations of tenor 76 and currency; 

and (2) credit default swaps (‘‘CDS’’) 

based on unique combinations of tenor 

and conventional spread.77

The Commission obtained 

transaction-level data for these asset 

classes from two third-party service 

providers with the assistance of the 

Over-the-Counter Derivatives 

Supervisors Group (‘‘ODSG’’).78

Established in 2005, the ODSG is 

chaired by the Federal Reserve Bank of 

New York and is comprised of domestic 

and international supervisors of 

representatives from major OTC 

derivatives market participants.79 In 

particular, the ODSG coordinated with 

the ‘‘G–14 banks’’ in order to gain 

written permission to access the nonpublic swap data.80

MarkitSERV 81 provided the interest 

rate swap data set. The interest rate 

swap data set covered transactions 

confirmed on the MarkitWire platform 

between June 1, 2010 and August 31, 

2010 where at least one party was a 

G–14 Bank.82

The Warehouse Trust Company LLC 

(‘‘The Warehouse Trust’’) provided the 

CDS data set.83 The CDS data set 

covered CDS transactions for a threemonth period beginning on May 1, 2010 

and ending on July 31, 2010.84

The Commission filtered both data 

sets in order to analyze only transactionlevel data corresponding to ‘‘publicly 

reportable swap transactions,’’ as 

defined in § 43.2 of the Real-Time 


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85 ‘‘Publicly reportable swap transaction’’ means, 

unless otherwise provided in part 43: (1) Any 

executed swap that is an arm’s-length transaction 

between two parties that results in a corresponding 

change in the market risk position between the two 

parties; or (2) any termination, assignment, 

novation, exchange, transfer, amendment, 

conveyance, or extinguishing of rights or 

obligations of a swap that changes the pricing of the 

swap. Examples of an executed swap that do not 

fall within the definition of publicly reportable 

swap transaction may include: (1) Certain internal 

swaps between 100-percent-owned subsidiaries of 

the same parent entity; and (2) portfolio 

compression exercises. These examples represent 

swaps that are not transacted at arm’s length, but 

that do result in a corresponding change in the 

market risk position between two parties. See 77 FR 

1244. 86The excluded records represented activities 

such as option exercises or assignments for 

physical, risk optimization or compression 

transactions, and amendments or cancellations that 

were assumed to be mis-confirmed. A transaction 

was assumed to be mis-confirmed when it was 

canceled without a fee, which the Commission has 

inferred was the result of a confirmation correction. 

The Commission also excluded interest rate 

transactions that were indicated as assignments, 

terminations, and structurally excluded records 

since the Commission was unable to determine if 

these records were price-forming. The Commission 

also excluded CDS transactions that were notated 

as single name transactions. The data sets also 

included transaction records created for workflow 

purposes (and therefore redundant), duplicates and 

transaction records resulting from name changes or 

mergers. 

87The Commission calculated the average daily 

exchange rates between relevant currencies and the 

U.S. dollar for the three-month period covered by 

the data. This average daily exchange rate was then 

applied to the notional amounts for non-U.S. dollar 

denominated swap transactions. 

88The Commission only reviewed relevant 

transaction records in the interest rate swap data 

set. As noted above, the Commission excluded 

duplicate and non-price forming transactions from 

its review. See supra note 86 for a list of excluded 

transaction records. 

89See the International Organization for 

Standardization (ISO) standard ISO 4217 for 

information on the currency codes used by the 

Commission. For information on floating rate 

indexes, see also ISDA, 2006 Definitions (2006), and 

supplements. 

Reporting Final Rule.85 As such, the Commission excluded from its analysis 

duplicate and non-price forming 

transactions.86 The Commission also 

converted the notional amount of each 

swap transaction into a common 

currency denominator, the U.S. dollar.87

b. Interest Rate Swap Categories 

i. Interest Rate Swap Data Summary 

The filtered transaction records in the 

interest rate swap data set contained 

166,847 transactions with a combined 

notional value of approximately $45.4 

trillion dollars.88 These transactions 

included trades with a wide range of 

notional amounts, 28 different 

currencies, eight product types, 57 

different floating rate indexes and tenors 

ranging from under one week to 55 

years. Summary statistics of the filtered 

interest rate swap data set are presented 

in Table 1.89


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90The percentages were rounded to the nearest 

whole number. Due to the rounding, the total 

percentages for the listed categories do not add up 

to exactly 100%. 

91 In producing Table 1, the Commission counted 

tenors for swaps with an end date within four 

calendar days of a complete month relative to the 

swap’s start date as ending on the nearest complete 

month. 

TABLE 1—SUMMARY STATISTICS FOR THE INTEREST RATE SWAP DATA SET BY PRODUCT TYPE, CURRENCY, FLOATING

INDEX AND TENOR

Number of 

transactions 

Percentage of 

total 

transactions 90

Notional 

amount 

(billions of 

USD) 

Percentage of 

total notional 

amount 

(%) 

Product Type: 

Single Currency Interest Rate Swap ........................................................ 128,658 77 16,276 36 

Over Night Index Swap (OIS) ................................................................... 12,816 8 16,878 37 

Forward Rate Agreement (FRA) .............................................................. 5,936 4 7,071 16 

Swaption ................................................................................................... 11,042 7 2,256 5 

Other ......................................................................................................... 8,395 5 2,909 6 

Currency: 

European Union Euro Area euro (EUR) ................................................... 46,412 28 18,648 41 

United States dollar (USD) ....................................................................... 50,917 31 11,377 25 

United Kingdom pound sterling (GBP) ..................................................... 16,715 10 7,560 17 

Japan yen (JPY) ....................................................................................... 19,502 12 4,253 9 

Other ......................................................................................................... 33,301 20 3,553 8

Floating Index: 

USD–LIBOR–BBA .................................................................................... 48,651 29 9,411 21 

EUR–EURIBOR–Reuters ......................................................................... 39,446 24 9,495 21 

EUR–EONIA–OIS–COMPOUND .............................................................. 6,517 4 9,122 20 

JPY–LIBOR–BBA ..................................................................................... 19,194 12 4,010 9 

GBP–LIBOR–BBA .................................................................................... 12,835 8 2,419 5 

GBP–WMBA–SONIA–COMPOUND ......................................................... 2,014 1 5,123 11 

Other ......................................................................................................... 38,190 23 5,809 13 

Tenor: 91

1 Month ..................................................................................................... 3,171 2 11,859 26 

3 Month ..................................................................................................... 10,229 6 11,660 26 

6 Month ..................................................................................................... 2,822 2 1,701 4 

1 Year ....................................................................................................... 9,522 6 3,484 8 

2 Year ....................................................................................................... 16,450 10 3,347 7 

3 Year ....................................................................................................... 9,628 6 1,488 3 

5 Year ....................................................................................................... 26,139 16 2,712 6 

7 Year ....................................................................................................... 6,599 4 661 1 

10 Year ..................................................................................................... 34,000 20 2,746 6 

30 Year ..................................................................................................... 9,616 6 448 1 

Other ......................................................................................................... 38,671 23 5,284 12 

Sample Totals ................................................................................... 166,847 100 45,390 100 

Table 2 below sets out the notional 

amounts of the interest rate swap data 

set organized by product type, currency, 

floating index and tenor. The table also 

includes the notional amounts in each 

percentile of a distribution of the data 

set. 

TABLE 2—NOTIONAL AMOUNTS OF INTEREST RATE SWAP DATA SET ORGANIZED BY PRODUCT TYPE, CURRENCY, 

FLOATING INDEX AND TENOR

[In millions of USD] 

Mean 

notional 

amount 

Percentiles 

5th 10th 25th 50th 75th 90th 95th 

Product Type: 

Single Currency Interest Rate Swap ........ 127 4 9 23 52 117 252 438 

OIS ............................................................ 1,293 6 13 63 341 1,261 3,784 5,282 

FRA ........................................................... 1,168 90 133 266 631 1,039 2,000 3,018 

Swaption ................................................... 204 3 20 50 100 226 500 642 

Other ......................................................... 346 * 1 23 89 250 631 1,132 

Currency: 

EUR .......................................................... 400 6 15 38 91 249 631 1,617 

USD .......................................................... 221 5 12 31 89 200 500 1,000 

GBP .......................................................... 435 1 1 15 57 167 755 1,698 

JPY ........................................................... 221 11 13 28 57 124 339 790 

Other ......................................................... 108 4 6 13 30 78 175 308 

Floating Index: 

USD–LIBOR–BBA .................................... 192 5 12 30 76 180 500 803 


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92 In producing Table 2, the Commission counted 

tenors for swaps with an end date within four 

calendar days of a complete month relative to the 

swap’s start date as ending on the nearest complete 

month. 

93MarkitSERV anonymized the identities of the 

counterparties and indicated whether a G–14 bank 

was a party to the swap transaction. Summary 

statistics relating to these anonymous numbers 

included the following: (1) The total count of 

unique counterparties was approximately 300; (2) 

the average notional size of transactions involving 

two G–14 banks was approximately $280 million; 

(3) the average notional size of transactions 

involving both a G–14 bank and a non G–14 bank 

(which traded at least 100 swap transactions) was 

approximately $260 million. 

94The Commission chose to extend the tenor 

groups about one-half month beyond the commonly 

observed tenors to group similar tenors together and 

capture variations in day counts. The Commission 

added an additional 15 days beyond a multiple of 

one year to the number of days in each group to 

avoid ending each group on specific years. 

95The Commission considered alternative 

approaches of using the individual floating rate 

indexes or currencies to determine swap categories 

in the interest rate asset class. These alternative 

approaches would have the benefit of being more 

correlated to an underlying curve than the adopted 

currency and tenor groupings. The data contained 

57 floating rate indexes and 28 currencies, which 

would result in 456 and 224 categories respectively, 

after sorting by the eight identified tenor groups. 

The Commission anticipates, however, that 

grouping swaps using individual rates or currencies 

TABLE 2—NOTIONAL AMOUNTS OF INTEREST RATE SWAP DATA SET ORGANIZED BY PRODUCT TYPE, CURRENCY, 

FLOATING INDEX AND TENOR—Continued 

[In millions of USD] 

Mean 

notional 

amount 

Percentiles 

5th 10th 25th 50th 75th 90th 95th 

EUR–EURIBOR–Reuters ......................... 241 8 17 38 79 189 416 757 

EUR–EONIA–OIS–COMPOUND .............. 1,385 4 10 61 315 1,261 3,784 6,306 

JPY–LIBOR–BBA ..................................... 211 11 12 28 57 113 339 658 

GBP–LIBOR–BBA .................................... 181 1 4 23 54 151 377 755 

GBP–WMBA–SONIA–COMPOUND ......... 2,450 75 113 283 1,509 3,018 6,037 9,055 

Other ......................................................... 152 2 4 12 31 88 264 500 

Tenor: 92

1 Month ..................................................... 3,523 37 252 1,251 2,522 3,784 7,546 12,074 

3 Month ..................................................... 1,081 11 38 208 604 1,250 2,000 3,018 

6 Month ..................................................... 581 19 49 150 377 747 1,261 1,892 

1 Year ....................................................... 348 20 31 70 151 341 755 1,261 

2 Year ....................................................... 205 10 16 39 111 243 453 631 

3 Year ....................................................... 154 10 16 44 95 169 315 500 

5 Year ....................................................... 107 5 9 25 63 113 226 316 

7 Year ....................................................... 105 7 13 29 57 113 221 315 

10 Year ..................................................... 83 5 10 23 50 95 175 252 

30 Year ..................................................... 47 4 7 18 26 50 95 132 

Other ......................................................... 249 2 4 15 50 126 340 883 

The Commission also analyzed the 

interest rate swap data set to classify the 

counterparties into broad groups.93 The 

Commission’s analysis of the interest 

rate swap data set revealed that 

approximately 50 percent of the 

transactions were between buyers and 

sellers who were both identified as G– 

14 banks and that these transactions 

represented a combined notional 

amount of approximately $22.85 

trillion, or 50 percent of the relevant IRS 

data set’s total combined notional 

amount. 

ii. Summary of Proposed Rule 

Based upon the data described above, 

the Commission proposed § 43.6(b)(1) 

establishing swap categories in the 

interest rate asset class based on tenor 

and underlying currency. 

The Commission proposed interest 

rate swap tenor groupings based on two 

observations regarding the data in the 

interest rate swap data set. First, the 

Commission observed that points of 

concentrated transaction activity along 

the yield curve correspond with specific 

tenors (e.g., three months, six months, 

one year, two years, etc.). Second, the 

Commission observed a tendency for the 

transacted notional amounts to decrease 

as tenor increased (e.g., longer-dated 

tenors in the data set generally had 

lower average notional sizes). Based on 

these observations, table 3 below details 

the eight proposed tenor groups for the 

interest rate asset class. 

TABLE 3—PROPOSED TENOR GROUPS FOR INTEREST RATES ASSET CLASS 94

Tenor group Tenor greater than And tenor less than or 

equal to 

1 ......................................................... ........................................................................................................................ Three months (107 days). 

2 ......................................................... Three months (107 days) .............................................................................. Six months (198 days). 

3 ......................................................... Six months (198 days) ................................................................................... One year (381 days). 

4 ......................................................... One year (381 days) ...................................................................................... Two years (746 days). 

5 ......................................................... Two years (746 days) .................................................................................... Five years (1,842 days). 

6 ......................................................... Five years (1,842 days) ................................................................................. Ten years (3,668 days). 

7 ......................................................... Ten years (3,668 days) ................................................................................. 30 years (10,973 days). 

8 ......................................................... 30 years (10,973 days) 

Similarly, through its analysis of the 

interest rate swap data set, the 

Commission found that the currency 

referenced in a swap explains a 

significant amount of variation in 

notional size and, hence, can be used to 

categorize interest rate swaps 95 The 


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would not substantially increase the explanation of 

variations in notional amounts, while it could result 

in cells with relatively few observations in some 

currency-tenor categories. Hence, the Commission 

does not believe there would be a significant benefit 

to offset the additional compliance burden that a 

more granular approach would impose on market 

participants. 96Super-major currencies represent over 92 

percent of the total notional amounts and 80 

percent of the total transactions in the data set. It 

is noteworthy that these currencies have welldeveloped, i.e., liquid futures markets for general 

interest rates and FX rates. 

97Major currencies represent about 6 percent of 

the total notional amount and about 10 percent of 

the total transactions in the data set. Some of these 

currencies host liquid futures markets for interest 

rates, and all exhibit liquid FX markets. 

98Non-major currencies represent less than two 

percent of the total notional amount and about 10 

percent of the transactions in the data set. These 

currencies typically do not have corresponding 

interest rate and FX futures markets. 

99The Commission selected these currencies for 

inclusion in the definition of major currencies 

based on the relative liquidity of these currencies 

in the interest rate and FX futures markets. The 

Commission is of the view that this list of 

currencies is consistent, in part, with the 

Commission’s existing regulations in § 15.03(a), 

which defines ‘‘major foreign currency’’ as ‘‘the 

currency, and the cross-rates between the 

currencies, of Japan, the United Kingdom, Canada, 

Australia, Switzerland, Sweden and the European 

Monetary Union.’’ 17 CFR 15.03(a). 

100Tables 5 and 6 do not include sample 

characteristics for swap categories with less than 

200 transactions in order to preserve the anonymity 

of the parties to these transactions. 

Commission proposed currency 

groupings after considering: (1) The 

swap transaction total notional amounts 

and transaction volumes of currency 

groups based on the number of 

transactions; and (2) the average 

transaction notional amounts and lack 

of evidence of large transacted notional 

amounts or substantial volume of 

currency groups. After considering these 

factors, the Commission proposed three 

currency categories for the interest rate 

asset class: (1) Super-major currencies, 

which are currencies with large volume 

and total notional amounts; 96 (2) major 

currencies, which generally exhibit 

moderate volume and total notional 

amounts; 97 and (3) non-major 

currencies, which generally exhibit 

moderate to very low volume and total 

notional amounts.98

Table 4 below summarizes the 

Commission’s three proposed currency 

swap categories. 

TABLE 4—PROPOSED CURRENCY CATEGORIES FOR INTEREST RATES ASSET CLASS

Currency category Component currencies 

Super-Major Currencies .................. United States dollar (USD), European Union Euro Area euro (EUR), United Kingdom pound sterling (GBP), 

and Japan yen (JPY). 

Major Currencies 99 ......................... Australia dollar (AUD), Switzerland franc (CHF), Canada dollar (CAD), Republic of South Africa rand 

(ZAR), Republic of Korea won (KRW), Kingdom of Sweden krona (SEK), New Zealand dollar (NZD), 

Kingdom of Norway krone (NOK) and Denmark krone (DKK). 

Non-Major Currencies ..................... All other currencies. 

Table 5 below presents details on the 

sample characteristics of the interest 

rate swap data set organized by currency 

and tenor swap categories. 

TABLE 5—SAMPLE CHARACTERISTICS OF PROPOSED INTEREST RATE SWAP CATEGORIES 100

Currency category Tenor group Number of 

transactions 

Percent of 

transactions 

(%) 

Notional 

(billions of 

USD) 

Percent of 

total notional 

(%) 

Super-major ......................................................................... 1 11,394 7 22,347 50 

Super-major ......................................................................... 2 2,563 2 1,813 4 

Super-major ......................................................................... 3 6,277 4 3,302 7 

Super-major ......................................................................... 4 12,395 7 3,420 8 

Super-major ......................................................................... 5 32,148 19 4,818 11 

Super-major ......................................................................... 6 42,675 26 4,220 9 

Super-major ......................................................................... 7 24,237 15 1,433 3 

Super-major ......................................................................... 8 1,857 1 56 0 

Major .................................................................................... 1 2,305 1 1,818 4 

Major .................................................................................... 2 445 0 124 0 

Major .................................................................................... 3 2,113 1 302 1 

Major .................................................................................... 4 2,639 2 226 1 

Major .................................................................................... 5 5,380 3 293 1 

Major .................................................................................... 6 3,707 2 129 0 

Major .................................................................................... 7 704 0 19 0 

Major .................................................................................... 8 <200 ........................ ........................ ........................

Non-Major ............................................................................ 1 403 0 64 0 

Non-Major ............................................................................ 2 247 0 26 0 

Non-Major ............................................................................ 3 2,073 1 165 0 

Non-Major ............................................................................ 4 3,354 2 256 1 

Non-Major ............................................................................ 5 5,873 4 116 0 

Non-Major ............................................................................ 6 3,935 2 41 0 

Non-Major ............................................................................ 7 <200 ........................ ........................ ........................

Non-Major ............................................................................ 8 <200 ........................ ........................ ........................

Table 6 below sets out the notional 

amounts of the interest rate swap data 

set organized by currency and tenor 

categories. The table includes the mean 

notional amount of each currency and 

tenor category, as well as the notional 

amounts in each percentile of a 

distribution of the data set. 


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101CL–AFR at 5; CL–Better Markets at 5; CL–MFA 

at 4; CL–Pierpont at 3; CL–SDMA at 8 (‘‘The CFTC 

categories are . . . appropriate and accurate in 

terms of currency, index, and tenor.’’) 

102CL–AII at 8; CL–Barclays at 7; CL–ISDA/ 

SIFMA at 10; CL–SIFMA at 7; CL–Vanguard at 5. 

103See CL–ICI at 5. 

104 Kinetix stated that ‘‘[t]he major flaw comes 

from including in a bucket products with sharply 

different trading volumes.’’ Kinetix recommended 

bucketing products by average trade volume, 

product type, and tenor, but did not suggest specific 

tenor buckets. CL–Kinetix at 2. 

105The Federal Reserve staff specifically found 

that ‘‘when [they] reduced the number of buckets 

at the short end of the trading curve (by merging 

the 0–1 month and 1–3 month buckets into a 0–3 

month bucket), the explanatory power of [their] 

regression declined 24%.’’ Federal Reserve Staff 

Analysis at 16. 

TABLE 6—NOTIONAL AMOUNTS OF INTEREST RATE SWAP DATA SET ORGANIZED BY THE PROPOSED INTEREST RATE

SWAP CATEGORIES

[In millions of USD] 

Currency group Tenor 

group Mean 

Transactions Percentiles 

5th 10th 25th 50th 75th 90th 95th 

Super-major ...................................................................... 1 1,961 10 36 500 1,000 2,260 4,000 6,306 

Super-major ...................................................................... 2 708 13 41 200 500 883 1,500 2,260 

Super-major ...................................................................... 3 526 47 75 150 272 565 1,179 1,809 

Super-major ...................................................................... 4 276 19 43 100 176 304 565 848 

Super-major ...................................................................... 5 150 9 21 50 100 158 301 482 

Super-major ...................................................................... 6 99 6 12 30 54 100 204 305 

Super-major ...................................................................... 7 59 1 5 14 31 63 126 200 

Super-major ...................................................................... 8 30 0 0 1 13 37 65 118 

Major ................................................................................ 1 789 80 133 175 312 573 921 1,313 

Major ................................................................................ 2 279 50 70 120 210 350 480 921 

Major ................................................................................ 3 143 13 26 52 97 175 264 438 

Major ................................................................................ 4 86 9 16 33 66 104 184 240 

Major ................................................................................ 5 54 4 8 19 44 72 109 145 

Major ................................................................................ 6 35 4 7 13 23 46 72 96 

Major ................................................................................ 7 27 5 7 11 20 31 49 75 

Major ................................................................................ 8 <200 ............ ............ ............ ............ ............ ............ ............

Non-major ......................................................................... 1 160 19 37 64 129 225 315 450 

Non-major ......................................................................... 2 106 16 23 39 72 145 233 311 

Non-major ......................................................................... 3 79 8 22 31 56 102 157 224 

Non-major ......................................................................... 4 76 6 9 16 27 50 78 108 

Non-major ......................................................................... 5 20 2 4 8 14 23 39 54 

Non-major ......................................................................... 6 10 2 2 4 8 13 21 29 

Non-major ......................................................................... 7 <200 ............ ............ ............ ............ ............ ............ ............

Non-major ......................................................................... 8 <200 ............ ............ ............ ............ ............ ............ ............

The Commission received twelve 

comments regarding the use of tenor to 

establish swap categories in the interest 

rate swap asset class. Five commenters 

expressed support for the Further Block 

Proposal’s suggested tenor buckets.101

Five other commenters recommended 

nine tenor buckets straddling the most 

liquid tenor points as follows: 0–3 

months, 3–6 months, 6–18 months, 18 

months-3 years, 3–7 years, 7–12 years, 

12–20 years, 20–30 years, and more than 

30 years.102 These commenters 

suggested that these nine tenor 

groupings would provide greater 

granularity and avoid grouping together 

swaps with different levels of liquidity. 

Similarly, ICI suggested that narrower 

tenor groupings would provide greater 

granularity.103 Kinetix also expressed 

concern with the proposed tenor 

buckets, stating that they grouped 

together products with sharply different 

trading volumes.104

In addition to the comments received 

regarding the Further Block Proposal, 

the Commission also considered the 

research in the Federal Reserve Bank of 

New York’s March 2012 staff report 

entitled ‘‘An Analysis of OTC Interest 

Rate Derivatives Transactions: 

Implications for Public Reporting’’ (the 

‘‘Federal Reserve Staff Analysis’’). In 

that report, Federal Reserve staff tested 

for a relationship between tenor and 

trade size. The Federal Reserve staff 

identified nine tenor buckets, as 

opposed to the eight identified by the 

Commission. The tenor buckets 

identified by the Federal Reserve staff 

were the same as those proposed by the 

Commission in the Further Block 

Proposal, with a further division of the 

Commission’s 0–3 month bucket into a 

0–1 month bucket and a 1–3 month 

bucket.105

After consideration of the comments 

received and the Federal Reserve Staff 

Analysis, the Commission is adopting 

§ 43.6(b)(1) with one modification—the 

addition of another tenor grouping at 

the shorter end of the interest rate yield 

curve. The Commission notes, as an 

initial matter, that commenters 

generally supported the use of tenor 

buckets to establish swap categories in 

the interest rate asset class. 

Commenters, however, disagreed with 

the proposed tenor buckets. 

In the Further Block Proposal, tenor 

buckets were proposed based on 

observations of the distributions of 

notional sizes and volume with the 

objectives of grouping swaps with 

similar characteristics while 

maintaining a manageable number of 

swap categories. The tenor buckets 

proposed by the Commission were 

associated with concentrations of 

liquidity at commonly recognized 

points along the interest rate yield 

curve. In general, the Commission 

observed that transactions in the data 

set (and presumed market liquidity) 

tended to cluster at certain tenors. 

In establishing the categories, the 

Commission proposed groupings that 

placed actively traded tenors at the 

upper boundary of the category 

groupings because the calculation of the 

minimum block threshold in a category 

will be most influenced by the notional 

amounts of the most heavily traded 

swaps in a category, i.e., those at the 

active tenor points. Hence, the 

minimum block thresholds for shorter 

dated swaps in a category will tend to 

be set based on the typical notional 

value of longer dated swaps. Since the 

longer dated swaps tend to trade in 

smaller notional amounts, establishing 


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106 In producing Table 7, the Commission 

counted tenors for swaps with an end date within 

four calendar days of a complete month relative to 

the swap’s start date as ending on the nearest 

complete month. 

107Tenor groups include swaps having tenors 

within 4 calendar days of a complete month, plus 

or minus, of the stated tenor. All other swaps are 

included in the ‘‘Other’’ category. 

the categories in this manner will tend 

to result in a more conservative (i.e., 

smaller) minimum block threshold for 

shorter tenored swaps within the 

category. In addition, because the 

shorter-dated swaps within an 

established swap category may 

experience less liquidity, due to smaller 

trading volumes, these swaps may also 

benefit from the setting of a lower 

minimum block threshold. 

The narrower tenor buckets 

recommended by commenters, in 

contrast, tend to straddle the liquid 

tenor points. If the Commission were to 

establish tenor buckets straddling the 

liquid tenor points (rather than having 

a liquid tenor point be the upper 

boundary of a tenor bucket), then the 

minimum block threshold for swaps 

within a category would be more 

heavily influenced by swaps centrally 

located in the category. Thus, longer 

dated swaps in a category, which tend 

to trade in smaller notional sizes, would 

be subject to higher minimum block 

thresholds, meaning fewer would be 

eligible for the block trade exemption. 

To illustrate the impact of placing the 

liquid tenor point at the top of the 

category, consider the impact on a 

seven-year interest rate swap that is 

proposed to be grouped in a tenor 

bucket with swaps having a tenor 

greater than 5 years and less than or 

equal to 10 years. The most liquid tenor 

point (i.e., the tenor point with the 

greatest number of observations) within 

this bucket would be the 10-year 

interest rate swap; thus, the 10-year 

interest rate swap would be the primary 

driver in determining the minimum 

block threshold for swaps in the 5 to 10- 

year tenor bucket. Table 7 is a subset of 

the information from Table 1 that 

illustrates this point. Specifically, there 

are 6,599 swaps with a tenor of seven 

years, yielding an average notional 

amount of $100 million (USD) and 

34,000 swaps with a tenor of ten years 

yielding an average notional size of $81 

million (USD). By combining these into 

the same category, the Commission is 

adopting a conservative approach in 

setting block sizes for the less liquid 

tenors. 

Under the commenters’ approach, 

however, the seven-year interest rate 

swap is grouped in the same tenor 

bucket with the 5-year tenor interest rate 

swaps. In this scenario, the liquid tenor 

point within the bucket is the 5-year 

interest rate swap; thus, the 5-year 

interest rate swap, with more than 

26,000 transactions yielding an average 

notional amount of $104 million (USD), 

is the primary driver in determining the 

minimum block threshold for the tenor 

bucket and results in a larger block size 

for the 7-year tenor interest rate swaps 

than under the currently proposed swap 

category. 

The Commission is of the view that 

the tenor with the most transactions in 

the swap category, and thus having the 

most weight in the block calculations, 

should be at the high end of the tenor 

grouping for the swap category. Given 

the tendency for average notional size to 

decrease as tenor increases as shown in 

Table 7 below, the Commission views 

this as a more conservative approach to 

setting minimum block thresholds, 

which results in lower block sizes for 

swap transactions at tenors that may 

experience less liquidity. 

TABLE 7—SUMMARY STATISTICS FOR THE INTEREST RATE SWAP DATA SET BY TENOR 106

Tenor 107 Number of 

transactions 

Notional amount 

(billions of USD) 

Average notional 

amount 

(billions of USD) 

1 Month ................................................................................................................ 3,171 11,859 3.740 

3 Month ................................................................................................................ 10,229 11,660 1.140 

6 Month ................................................................................................................ 2,822 1,701 0.603 

1 Year .................................................................................................................. 9,522 3,484 0.366 

2 Year .................................................................................................................. 16,450 3,347 0.203 

3 Year .................................................................................................................. 9,628 1,488 0.155 

5 Year .................................................................................................................. 26,139 2,712 0.104 

7 Year .................................................................................................................. 6,599 661 0.100 

10 Year ................................................................................................................ 34,000 2,746 0.081 

30 Year ................................................................................................................ 9,616 448 0.047 

Other .................................................................................................................... 38,671 5,284 0.137 

In response to comments generally 

calling for narrower tenor buckets, the 

Commission is adopting an additional 

tenor bucket in order to provide greater 

granularity as requested by commenters. 

The Commission is splitting the first 

tenor group in the Further Block 

Proposal (0–3 months) into two tenor 

groups (0–46 days, and greater than 46 

days to less than or equal to 3 months). 

While the Commission did not receive 

any comments specifically discussing 

the less than 46 day tenor, the 

Commission received numerous 

comments recommending greater 

granularity. Based upon the comments 

received requesting nine tenor buckets 

and the Federal Reserve Staff Analysis 

identifying nine tenor buckets, the 

Commission has determined to add a 

less than 46 day tenor group. This 

would provide greater granularity and 

establish notional swap groupings that 

account more precisely for the effects of 

increased transparency on liquidity for 

swaps of a shorter tenor. 

Accordingly, the Commission is 

adopting the following tenor buckets: 


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32880 Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 

108As in the Further Block Proposal, the 

Commission chose to extend the tenor groups about 

one-half month beyond the commonly observed 

tenors to group similar tenors together and capture 

variations in day counts. The Commission added an 

additional 15 days beyond a multiple of one year 

to the number of days in each group to avoid ending 

each group on specific months or years. 109CL–AFR at 5; CL–Better Markets at 5; CL–MFA 

at 4; CL–Pierpont at 3; CL–SDMA at 8 (‘‘The CFTC 

categories are . . . appropriate and accurate in 

terms of currency, index, and tenor.’’) 110CL–AII at 8; CL–ICI at 5; CL–SIFMA at 8–9; 

CL–Vanguard at 6. 111CL–Barclays at 7; CL–ISDA/SIFMA at 7–8. 

While ISDA/SIFMA supported separate categories 

for super-major currencies, their comment also 

suggests separate categorization for each individual 

currency. Similarly, SIFMA’s comment, while 

requesting separate categorization generally, states 

that dividing the four proposed super-major 

currencies is most important. CL–SIFMA at 8–9. 

112The Commission notes that the difference 

between the total notional and transactional volume 

of swaps referencing Japanese yen—the lowest 

among those swaps in the super-major currency 

category—and of swaps referencing the Australian 

Dollar—the highest among those swaps in the major 

currency category—is significantly larger than such 

differences between swaps within each adopted 

currency category. This observation supports 

adopting the Commission’s approach in assigning 

certain swaps in the super-major currency category 

against the major currency category. 

113Barclays suggested unique block levels for 

each of the following swap categories: each super 

major currency, swaps against standard floating rate 

indices, basis swaps, inflation swaps, swaptions, 

caps and floors, cross-currency swaps, and 

structured swaps. CL–Barclays at 7–8. ISDA/SIFMA 

suggested the following additional swap categories: 

fixed versus non-benchmark floating rate indexes 

and basis swaps, inflation swaps (a specified 

inflation rate index), options (swaption and cap/ 

floor markets); cross-currency swaps (each leg 

denominated by different currency), and exotics. 

CL–ISDA/SIFMA at 9. SIFMA and Vanguard 

suggested swap categorization based on optionality 

or other characteristics such as distinctions between 

‘‘plain vanilla,’’ ‘‘interest rate options,’’ and 

‘‘other,’’ as well as separate categories for major 

floating rate indices. CL–SIFMA at 8–9; CL– 

Vanguard at 5–6. 

114CL–ICI at 5; CL–MFA at 5. 

115CL–Kinetix at 2. 

116CL–AFR at 5; CL–Better Markets at 5; CL– 

Pierpont at 3; CL–SDMA at 8 (‘‘The CFTC categories 

are . . . appropriate and accurate in terms of 

currency, index, and tenor.’’) 

117CL–AFR at 5; CL–Better Markets at 5. 

TABLE 8—TENOR GROUPS FOR INTEREST RATES ASSET CLASS 108

Tenor group Tenor greater than And tenor less than or 

equal to 

1 ......................................................... ........................................................................................................................ 46 days. 

2 ......................................................... 46 days .......................................................................................................... Three months (107 days). 

3 ......................................................... Three months (107 days) .............................................................................. Six months (198 days). 

4 ......................................................... Six months (198 days) ................................................................................... One year (381 days). 

5 ......................................................... One year (381 days) ...................................................................................... Two years (746 days). 

6 ......................................................... Two years (746 days) .................................................................................... Five years (1,842 days). 

7 ......................................................... Five years (1,842 days) ................................................................................. Ten years (3,668 days). 

8 ......................................................... Ten years (3,668 days) ................................................................................. 30 years (10,973 days). 

9 ......................................................... 30 years (10,973 days) ..................................................................................

The Commission received eleven 

comments regarding whether interest 

rate swaps should be categorized into 

the super-major, major, and non-major 

currency groupings as proposed. Five 

commenters supported the currency 

groupings proposed in the Further Block 

Proposal.109 Four commenters urged the 

Commission to establish a separate 

swap category for each individual 

currency in determining block 

thresholds.110 Two more commenters 

specifically recommended that each of 

the four super-major currencies should 

be categorized separately, rather than as 

a group, in determining block 

thresholds.111

After consideration of the comments 

received, the Commission is adopting 

§ 43.6(b)(1)(i) as proposed in regard to 

currency categories. The currencies 

were grouped into the three categories 

in the Further Block Proposal based 

upon the swap transaction total notional 

amounts and transaction volumes of 

currency groups based on the number of 

transactions, and the average transaction 

notional amounts of currency groups. 

The commenters who requested that all 

currencies be categorized by individual 

currency mainly focused on differences 

in liquidity among the four super-major 

currencies, particularly when 

comparing interest rate swaps in USD 

and EUR to those in JPY and GBP. 

Similarly, the commenters who 

specifically requested that the 

Commission establish separate swap 

categories for each of the super-major 

currencies focused on perceived 

differences in liquidity. While USD and 

EUR interest rate swaps feature the 

highest liquidity, the Commission is of 

the view that, based upon all of the 

criteria mentioned above, the supermajor currencies are most similar to 

each other (and different from major 112

and non-major currencies) to warrant 

treatment as a group, rather than 

separately. 

The Commission considered 

alternative approaches of using the 

individual currencies to determine swap 

categories in the interest rate asset class. 

While these alternative approaches 

would have provided greater correlation 

to an underlying curve than the adopted 

groupings, the Commission believes that 

this would not substantially increase the 

explanation of variations in notional 

amounts, but rather would result in 

categories with too few observations. 

Hence, the Commission does not believe 

that there would be a significant benefit 

to offset the additional compliance 

burden that a more granular approach 

would impose on market participants. 

The Commission notes that adoption of 

the proposed currency categories 

establishes 27 separate swap categories 

for interest rate swaps. Separate 

categorization of all currencies would 

result in nearly 200 separate swap 

categories. Separate categorization of the 

super-major currencies alone would 

result in 54 swap categories. The 

Commission believes that the 27 

separate swap categories contained in 

the rule achieves the objectives of 

grouping swaps with similar 

characteristics while maintaining a 

manageable number of swap categories. 

The Commission also received a 

number of comments recommending 

that interest rate swaps should be 

categorized based on criteria other than 

tenor and currency. Four commenters 

suggested a range of additional interest 

rate swap categories for the purposes of 

establishing block thresholds.113 Two 

other commenters suggested grouping 

swaps by product type in addition to 

tenor and currency groupings.114

Another commenter, Kinetix, 

recommended grouping products by 

average trade volume, as well as by 

product type and tenor.115 Of the four 

commenters who expressed support for 

the proposed tenor and currency 

groupings,116 two of them argued that 

further granularity would cause some 

swaps to be subject to lower block 

thresholds than are appropriate.117

After consideration of the comments 

received, the Commission is adopting 

§ 43.6(b)(1)(i) as proposed and § 43. 

6(b)(1)(ii) with the modifications 

discussed above. Although some level of 


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118See note 85 supra. 119The CDS index transactions in the data set 

made up approximately 33 percent of the total 

filtered records and 75 percent of the CDS markets’ 

notional amount for the three months of data 

provided. The data set contained over 250 different 

reference indexes; 400 reference index and tenor 

combinations; and 450 reference index, tenor, and 

tranche combinations. The data set also contained 

three different currencies: USD (53%), EUR (46%), 

and JPY (1%). The Commission notes that in all but 

a handful of records, each reference index 

transaction was denoted in a single currency. 

120Those indexes were: (1) ABX.HE; (2) CDX.EM; 

(3) CDX.NA.HY; (4) CDX.NA.IG; (5) 

CDX.NA.IG.HVOL; (6) CDX.NA.XO; (7) CMBX.NA; 

(8) IOS.FN30; (9) iTRAXX Asia ex-Japan HY; (10) 

iTRAXX Asia ex-Japan IG; (11) iTRAXX Australia; 

(12) iTRAXX Europe Series; (13) iTRAXX Europe 

Subs; (14) iTRAXX Japan 80; (15) iTRAXX Japan 

HiVol; (16) iTRAXX Japan Series; (17) iTRAXX 

LEVX Senior; (18) iTRAXX SOVX Asia; (19) 

iTRAXX SOVX CEEMA; (20) iTRAXX Western 

Europe; (21) LCDX.NA; (22) MCDX.NA; (23) 

PO.FN30; (24) PRIMEX.ARM; (25) PRIMEX.FRM; 

and (26) TRX.NA. 

categorization of swaps is useful to 

capture different levels of trading 

activity and hedging potential, where a 

number of different swaps could be 

used to hedge the same risk, the overidentification of swap categories will 

eventually lead to a dilution of 

observations within categories. 

Categories having small numbers of 

observations could be subject to highly 

volatile minimum block sizes over time. 

Over-identification also would be 

expected to lead to underestimations of 

the ability to offset risks using related 

swap instruments. The Commission 

believes that it has struck a balance 

between over- and under-categorizing 

swaps that will result in more stable 

minimum block sizes and allow for 

adequate risk offsets using instruments 

within a category. The modification 

described above in regard to tenor will 

provide some further granularity at the 

short end of the yield curve, as 

suggested by commenters above, while 

still achieving the objectives of grouping 

swaps with similar characteristics and 

reducing unnecessary complexity for 

market participants in determining 

whether their swaps are classified 

within a particular swap category. 

c. Credit Swap Categories 

i. Credit Swap Data Summary 

The CDS data set contained 98,931 

CDS index records that would fall 

within the definition of publicly 

reportable swap transactions,118 with a 

combined notional value of 

approximately $4.6 trillion dollars.119

The CDS data set contained transactions 

based on 26 broad credit indexes.120 Of 

those indexes, both the iTraxx Europe 

Series and the Dow Jones North 

America investment grade CDS indexes 

(‘‘CDX.NA.IG’’) served as the basis for 

over 20 percent of the total number of 

transactions and over 33 percent of the 

total notional value in the relevant CDS 

data set. Table 9 sets out summary 

statistics of the CDS data set for CDS 

indexes with greater than five 

transactions per day on average. 

TABLE 9—SUMMARY STATISTICS BY CDS INDEX NAME

Names Number of 

transactions 

Percentage of 

total 

transactions 

(%) 

Notional 

amount 

(in millions of 

USD) 

Percentage of 

total notional 

amount 

(%) 

ITRAXX EUROPE SERIES 13 V1 .................................................................. 18,287 18.48 1,138,362 24.83 

CDX.NA.IG.14 .................................................................................................. 12,611 12.75 1,083,974 23.64 

ITRAXX EUROPE XO SERIES 13 V1 ............................................................ 8,713 8.81 153,365 3.34 

CDX.NA.HY.14 ................................................................................................ 7,984 8.07 172,599 3.76 

ITRAXX EUROPE SENIOR FINANCIALS SERIES 13 V1 ............................. 4,774 4.83 187,978 4.10 

CDX.NA.IG.9 .................................................................................................... 4,134 4.18 388,650 8.48 

ITRAXX EUROPE XO SERIES 13 V2 ............................................................ 3,959 4.00 66,894 1.46 

CDX.NA.IG.9 TRANCHE ................................................................................. 3,357 3.39 112,411 2.45 

ITRAXX SOVX CEEMEA SERIES 3 V1 ......................................................... 3,252 3.29 32,291 0.70 

CDX.EM.13 ...................................................................................................... 3,052 3.08 34,952 0.76 

ITRAXX SOVX WESTERN EUROPE SERIES 3 V1 ...................................... 2,377 2.40 74,068 1.62 

ITRAXX AUSTRALIA SERIES NUMBER 13 V1 ............................................. 2,138 2.16 31,540 0.69 

ITRAXX EUROPE SERIES 9 V1 ..................................................................... 1,893 1.91 188,364 4.11 

ITRAXX EUROPE SUB FINANCIALS SERIES 13 V1 .................................... 1,779 1.80 50,241 1.10 

ITRAXX EUROPE SERIES 9 V1 TRANCHE .................................................. 1,577 1.59 50,269 1.10 

ITRAXX JAPAN SERIES NUMBER 13 V1 ..................................................... 1,406 1.42 19,100 0.42 

ITRAXX ASIA EX–JAPAN IG SERIES NUMBER 13 V1 ................................ 1,319 1.33 15,856 0.35 

ITRAXX SOVX ASIA PACIFIC SERIES 3 V1 ................................................. 1,001 1.01 11,666 0.25 

ITRAXX EUROPE HIVOL SERIES 13 V1 ....................................................... 788 0.80 30,585 0.67 

CMBX.NA.AAA.1 ............................................................................................. 463 0.47 13,384 0.29 

ITRAXX EUROPE SERIES 12 V1 .................................................................. 452 0.46 71,161 1.55 

CMBX.NA.AJ.3 ................................................................................................ 392 0.40 6,332 0.14

CMBX.NA.AAA.2 ............................................................................................. 381 0.39 8,433 0.18 

LCDX.NA.14 .................................................................................................... 380 0.38 7,063 0.15 

MCDX.NA.14 ................................................................................................... 350 0.35 2,798 0.06 

CMBX.NA.AAA.4 ............................................................................................. 337 0.34 6,024 0.13 

CMBX.NA.A.1 .................................................................................................. 332 0.34 3,834 0.08 

IOS.FN30.500.09 ............................................................................................. 317 0.32 7,836 0.17

Total .......................................................................................................... 87,805 88.75 3,970,029 86.59 

ii. Credit Swap Data Analysis 

As noted above, the Commission 

proposed using tenor and conventional 

spread criteria to define swap categories 

for CDS indexes. The Commission 

proposed the following six broad tenor 

groups in the credit asset class: (1) Zero 

to two years (0–746 days); (2) over two 

to four years (747–1,476 days); (3) over 

four to six years (1,477–2,207 days) 

(which include the five-year tenor); (4) 

over six to eight-and-a-half years (2,208– 

3,120 days); (5) over eight-and-a-half to 


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121The Commission assessed the possibility of 

applying the tenor categories proposed for swaps in 

the interest rate asset class to the distribution of 

notional sizes in the CDS indexes and anticipates 

the level of granularity proposed to categorize 

swaps in the interest rate asset class by tenor would 

be inappropriate for the CDS index market. The 

Commission anticipates that this level of 

granularity would be inappropriate because the vast 

majority of CDS index transactions in the data set 

had a tenor of five years (or approximately 1,825 

days). Based on the concentration of CDS index 

transactions in five-year tenors, the Commission 

proposed six tenor bands for CDS indexes. 

The Commission chose to extend the tenor groups 

about one-half month beyond the commonly 

observed tenors to group similar tenors together and 

capture variations in day counts. The Commission 

added an additional 15 days beyond a multiple of 

one year to the number of days in each group to 

avoid ending each group on specific years. 

122See supra note 77 for a definition of 

‘‘conventional spread.’’ 

123The Commission proposed partition levels by 

a qualitative examination of multiple histogram 

distributions of the traded and fixed spreads from 

the CDS data set. This qualitative examination was 

confirmed through a partition test (using JMP 

software), including both before and after 

controlling for the effects of tenor on the 

distribution. The Commission observed that 175 

bps explained the greatest difference in means of 

the two data sets resulting from a single partition 

of the data. The Commission also observed that 350 

bps was an appropriate partition for CDS index 

transactions with spreads over 175 bps. 

124The Commission found that these categories 

were good predictors of notional size. This finding 

was based on an analysis which used the tenor and 

spread categories in Table 9 as explanatory 

variables in a least squares regression, where the 

logged value of the notional amount of the swap 

was the dependent variable. 

125CL–SIFMA at 7–8 (‘‘We believe that such 

groupings would better approximate sets of swaps 

with similar liquidity characteristics’’); CL– 

Vanguard at 5. 

126CL–AII at 8; CL–ICI at 5. 

127CL–MFA at 5. 

128CL–ISDA/SIFMA at 6 (‘‘swap categories 

should be based on the current spread of a 

transaction in order to reflect . . . changes in 

liquidity’’). 

129CL–Barclays at 8. 

130CL–AII at 8; CL–Barclays at 8; CL–ISDA/ 

SIFMA at 6. 

131CL–Better Markets at 6. 

132CL–AII at 8; CL–Barclays at 8; CL–ISDA/ 

SIFMA at 6; MFA at 5. 

133CL–ICI at 5; CL–ISDA/SIFMA at 6. 

134CL–MFA at 5. 

12.5 years (3,121–4,581 days) and (6) 

greater than 12.5 years (4,581 days).121

With respect to the conventional 

spread criterion, the Commission 

determined ranges of spread values 

based on a review of the distribution of 

spreads in the entire CDS data set.122 In 

particular, the Commission observed 

that the relevant CDS data set 

partitioned at the 175 basis points 

(‘‘bps’’) and 350 bps levels.123 The 

Commission found that significant 

differences existed in the CDS data set 

between CDS indexes with spread 

values under 175 bps and those in the 

other two CDS categories (spread values 

between 175 to 350 bps; spread values 

above 350 bps). Accordingly, the 

Commission proposed three separate 

conventional spread levels: (1) CDS 

indexes with spread values under 175 

bps; (2) CDS indexes with spread values 

between 175 and 350 bps; and (3) CDS 

indexes with spread values above 350 

bps. Table 9 shows the summary 

statistics of the proposed criteria to 

determine swap categories for swaps in 

the credit asset class.124

TABLE 9—CDS INDEX SAMPLE STATISTICS BY PROPOSED SWAP CATEGORY CRITERIA

Spread 

Sum of notional 

amounts 

(in billions of USD) 

Number of trades 

≤175 ......................................................................................................................................................... 3,761 59,887 

175-to-350 ................................................................................................................................................ 233 11,045 

350> ......................................................................................................................................................... 577 27,998 

Tenor 

(in calendar days) 

Sum of notional 

amounts Number of trades 

0–746 ....................................................................................................................................................... 146 1,421 

747–1,476 ................................................................................................................................................ 569 6,774 

1,477–2,207 ............................................................................................................................................. 3,490 79,357 

2,208–3,120 ............................................................................................................................................. 159 2,724 

3,121–4,581 ............................................................................................................................................. 18 497 

4,582+ ...................................................................................................................................................... 190 8,157 

The Commission sought comment on 

this proposed approach, a series of 

alternative criteria to be used, and 

alternative categories. The Commission 

received eight comments regarding the 

proposed swap categories for CDS. Five 

of the comments focused on the 

proposed tenor buckets in the Further 

Block Proposal. SIFMA and Vanguard 

suggested that the 4–6 year tenor bucket 

be divided into four buckets: 4 to 4.5 

years, 4.5 to 5 years, 5 to 5.5 years, and 

5.5 to 6 years.125 AII and ICI also 

recommended narrowing the tenor 

categories for CDS.126 MFA generally 

supported the Commission’s proposed 

grouping by tenor.127

Two of the comments focused on the 

proposed conventional spread criteria. 

ISDA/SIFMA expressed support for the 

proposed use of spread criteria, but also 

suggested that the Commission should 

clarify that the spread for a CDS 

transaction will be based on the traded 

spread, rather than on the fixed 

coupon.128 Barclays, however, 

commented that traded spreads should 

not be used for categorizing CDS 

because swaps may move daily between 

threshold buckets as spreads can move 

substantially over short periods, which 

would create an unacceptable level of 

operational risk for market participants 

in trying to achieve compliance.129

In addition to the comments regarding 

the tenor and conventional spread 

criteria proposed, commenters also 

provided a number of recommendations 

regarding other potential swap 

categories for CDS. Three commenters 

suggested separate swap categories for 

individual CDX index series.130 Better 

Markets, however, argued that using 

individual CDX index series to create 

swap categories would be too granular 

and recommended that CDS be divided 

into single-name and index categories, 

with indexes further subdivided into 

five groups: sovereign, corporate, 

municipal, mortgage-backed securities, 

and other.131 Four commenters 

recommended that tranches of indices 

receive their own unique swap 

category.132 Two commenters suggested 

grouping CDS by different product 

type.133 MFA recommended separate 

swap categories for indexes and options 

(as well as tranches).134 Finally, eight 

commenters suggested differentiating 

between on-the-run and off-the-run CDS 


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135MFA specifically suggested separate minimum 

block sizes for the current 5-year on-the-run CDS 

indices for CDX.NA.IG, CDX.NA.HY, iTraxx 

Europe, and iTraxx Europe Crossover. CL–MFA at 

5; CL–AII at 8; CL–Barclays at 8; CL–ICAP at 7; CL– 

ISDA/SIFMA at 5–6; CL–SIFMA at 8; CL–Vanguard 

at 5. 

136CL–MFA at 5. 

137For example, based on the observed CDS data 

set, corporate CDS indexes traded in all but the 

longest of the tenor groups. The vast majority of 

transactions outside of the 4–6 year tenor group 

were off-the-run series. 

138For example, based on the observed CDS data 

set, the majority of municipal credit default index 

swaps traded with tenors of around 10 years. 139An on-the-run CDS index represents the most 

recently issued version of an index. For example, 

every six months, Dow Jones selects 125 investment 

grade entities domiciled in North America to make 

up the Dow Jones North American investment grade 

index (‘‘CDX.NA.IG’’). Each new CDX.NA.IG index 

is given a new series number while market 

participants continue to trade the old or ‘‘off-therun’’ CDX.NA.IG series. The index provider 

determines the composition of each index through 

a defined list of reference entities. The index 

provider has discretion to change the composition 

of the list of reference entities for each new version 

or series of an index. In its analysis of the CDS data 

set, the Commission generally observed either no 

change or a small change (ranging from one percent 

to ten percent) of existing composition in the 

reference entities underlying a new version or series 

of an index. Because of these two dynamics (tenor 

and index composition), the CDS data set contained 

transactions within a given index with different 

versions and series that were, in some instances, 

identical, and in others, not identical, across 

varying tenors. 140This is similar to the example provided for the 

tenor groupings in interest rate swaps in Section 

II.A.1. 

141 In the CDS market, a ‘‘tranche’’ means a 

particular segment of the loss distribution of the 

underlying CDS index. For example, tranches may 

be specified by the loss distribution for equity, 

mezzanine (junior) debt, and senior debt on the 

referenced entities. The Commission found that the 

tranche-level data was even more granular than 

index-level data. Similarly, the Commission 

anticipates that grouping the relevant CDS data set 

in tranche criterion may not be practicable because 

it may produce too many swap categories and as a 

result would impose unnecessary complexity on 

market participants. 

indices.135 MFA specifically suggested 

separate minimum block sizes for the 

current 5-year on-the-run CDS indices 

for CDX.NA.IG, CDX.NA.HY, iTraxx 

Europe, and iTraxx Europe 

Crossover.136

After consideration of the comments 

received, the Commission is adopting 

§ 43.6(b)(2) as proposed. In general, the 

Commission believes that the proposed 

criteria—tenor and conventional 

spread—provide an appropriate way to 

group swaps with economic similarities 

and to reduce unnecessary complexity 

for market participants in determining 

whether a particular swap is classified 

within a particular swap category. In 

regard to ISDA/SIFMA’s suggested 

clarification, the Commission clarifies 

that the spread for a CDS transaction 

will be based on the traded spread, 

rather than on the fixed coupon. 

Specifically, the Commission believes 

that the proposed tenor and 

conventional spread categories 

sufficiently capture the variation in 

notional size that is necessary for setting 

appropriate minimum block sizes and 

that refining these categories as 

suggested by commenters will not 

improve the clustering of swaps in order 

to better set appropriate minimum block 

sizes. For example, the Commission 

notes that the tenor buckets contained 

in the adopted rule generally result in 

separate categorization for on-the-run 

and off-the-run indexes for swaps in the 

CDS data set. On-the-run indexes, for 

example, comprised the vast majority of 

swaps in the 4–6 year tenor bucket, 

while off-the-run indexes were the vast 

majority of swaps in the 0–2, 2–4, and 

6–8.5 year tenor buckets. 

The Commission determined these 

swap categories based on the way 

activity in the CDS data set clustered 

towards the center of each tenor band. 

While the majority of transactions in the 

CDS data set consisted of on-the-run 

corporate credit default index swaps 

with a five-year tenor, the Commission 

found that significant trading of 

corporate credit default index swaps 

also occurred in other tenor ranges.137

The Commission believes that its 

approach is appropriate since CDS on 

indexes other than corporate indexes 

(e.g., asset backed indexes, municipal 

indexes, sovereign indexes) also trade at 

tenors other than five years.138

The Commission, however, decided 

not to use ‘‘on-the-run’’ or ‘‘off-the-run’’ 

designations for grouping CDS indexes 

into categories for the following reasons: 

(i) The underlying components of swaps 

with differing versions or series based 

on the same named index are broadly 

similar, if not the same, and are 

indicative of economic substitutability 

across versions or series; (ii) differences 

in the average notional amount across 

differing versions or series were 

explained by differences in tenor; and 

(iii) using versions or series as the 

criterion for defining CDS swap 

categories may result in an unnecessary 

level of complexity.139 Hence, the 

Commission believes that while on-therun and off-the-run indexes may differ 

in terms of available liquidity, they 

nonetheless are economically related to 

each other within the categories 

proposed by the Commission; therefore, 

on-the-run indexes could be used to 

offset much of the risk associated with 

off-the-run indices. Moreover, while the 

off-the-run swaps generally had less 

trading activity, and presumably less 

liquidity, than the on-the-run swaps, 

off-the-run index swaps had larger 

notional sizes, on average, than on-the 

run swaps in the same category. Hence, 

the more liquid, on-the-run swaps will 

drive the block size in a category and 

will result in lower block sizes for the 

less liquid swaps in the category.140 The 

Commission feels that this is a more 

conservative approach to setting block 

sizes for less liquid swaps. 

In response to the commenters that 

specifically requested a differentiation 

between on-the-run and off-the-run CDS 

indexes, the Commission believes that 

while on-the-run and off-the-run 

indexes may differ in terms of available 

liquidity, they nonetheless are 

economically related to each other 

within the categories proposed by the 

Commission such that on-the-run 

indexes could be used to offset much of 

the risk associated with off-the-run 

indexes. The Commission also notes 

that the tenor buckets contained in the 

adopted rule generally result in separate 

categorization for on-the-run and offthe-run indexes. For the CDS data set, 

the vast majority of swaps in the 4–6 

year tenor bucket were on-the-run 

indexes, while the vast majority of 

swaps in the 0–2, 2–4, and 6–8.5 year 

tenor buckets were off-the-run. 

In response to commenters that 

specifically recommended separate 

swap categorization for tranches, the 

Commission believes that the proposed 

swap categorization based upon 

conventional spread criteria will result 

in separate categorizations related to 

tranches where appropriate.141 For 

example, tranches having significantly 

different levels of risk will potentially 

have spreads traded at levels that differ 

enough from the underlying index so as 

to be placed in categories that would 

receive a different block trade size. The 

conventional spread reflects the risk of 

the underlying transaction and the 

Commission believes that the risk 

associated with the transaction will be 

the primary determinant of how 

difficult a transaction is to hedge. Thus, 

the Commission believes that 

categorization of CDS by conventional 

spread will capture differences related 

to tranches where appropriate. 

The Commission notes that the 

adopted § 43.6(b)(2) establishes 18 

separate swap categories for CDS swaps. 

While none of the commenters provided 

suggestions as to precisely how to 

categorize CDS by tranche, the 

Commission believes that creating 

additional swap categories for tranches 

would result in swap categories totaling 

a multiple of the proposed 18 swap 

categories, as each CDS index has 

multiple tranches. Establishing swap 

categories based upon tenor and 


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142CL–AFR at 6. 143CL–AII at 9; CL–Barclays at 9; CL–ICI at; 

ISDA/SIFMA at 10–11; SIFMA at 5. 144CL–AII at 9. 145CL–Barclays at 9. 146CL–ICI at 5. 147CL–ISDA/SIFMA at 10–11. 148CL–SIFMA at 5. 149See infra Section II.B(5)(b). In the event that 

time delays are established for reporting block 

trades in the underlying equity cash market, the 

Commission may consider establishing swap 

categories and minimum block thresholds for equity 

swaps. 

150The Securities and Exchange Commission 

(‘‘SEC’’) has proposed general criteria that it would 

consider to set appropriate minimum block trade 

sizes for security-based swaps. The SEC, however, 

has not proposed specific numerical thresholds at 

this time, but rather intends to propose such 

thresholds upon the adoption of Regulation SBSR— 

Reporting and Dissemination of Security-Based 

Swap Information. 75 FR 75208, 75228 (Dec. 2, 

2010). On May 1, 2013, the SEC reopened the 

comment period regarding this proposed rule. See 

Reopening of Comment Periods for Certain 

Rulemaking Releases and Policy Statement 

Applicable to Security-Based Swaps Proposed 

Pursuant to the Securities Exchange Act of 1934 

and the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (May 1, 2013). 

151Under § 43.2, a futures-related swap is defined 

as a swap (as defined in section 1a(47) of the Act 

and as further defined by the Commission in 

implementing regulations) that is economically 

related to a futures contract. See infra notes 169– 

174 and accompanying text. Under § 43.6(b)(4)(i), a 

futures-related swap is a swap where one of the 

underlying currencies of the swap is the subject of 

a futures contract listed on a DCM. 

conventional spread criterion as in 

adopted § 43.6(b)(2) meets the objectives 

of grouping swaps with economic 

similarity and reducing confusion for 

market participants in determining 

whether their swaps are classified 

within a particular swap category. 

The Commission believes that this 

approach will mitigate the 

administrative burden to both market 

participants and to the Commission by 

limiting the number of swap categories 

for which appropriate minimum block 

sizes need to be calculated. In regard to 

Barclay’s concern that swaps would 

move between categories, the 

Commission believes that instances 

where a given swap will move daily 

between spread levels will be limited 

given the small number of spread 

categories and the observed distribution 

of trades. Additionally, the quantitative 

nature of the block category calculation 

should limit the operational risk by 

providing clarity and ease of notice to 

market participants as to what the 

minimum block sizes are, even if they 

are subject to change. 

If market participants reach the 

conclusion that the Commission has 

determined specific swap categories in 

a way that will materially reduce market 

liquidity, then those participants are 

encouraged to submit data to support 

their conclusion. If, through its own 

surveillance of swaps market activity, 

the Commission becomes aware that a 

specific swap categorization for 

determination of appropriate minimum 

block levels would reduce market 

liquidity, then the Commission may 

exercise its legal authority to take action 

by rule or order to mitigate the potential 

effects on market liquidity with respect 

to swaps in that swap category. 

2. Swap Category in the Equity Asset 

Class 

The Commission proposed a single 

swap category for swaps in the equity 

asset class. The Commission proposed 

this approach based on: (1) The 

existence of a highly liquid underlying 

cash market for equities; (2) the absence 

of time delays for reporting block trades 

in the underlying equity cash market; 

(3) the small relative size of the equity 

index swaps market relative to the 

futures, options, and cash equity index 

markets; and (4) the Commission’s goal 

to protect the price discovery function 

of the underlying equity cash market 

and futures market. 

The Commission received six 

comments regarding swap categories in 

the equity asset class. AFR supported 

the single swap category proposed for 

the equity asset class.142 Five other 

commenters recommended that the 

Commission treat equity swaps 

similarly to the other asset classes and 

establish swap categories based upon a 

range of criteria.143 AII recommended 

that equity swaps should be treated as 

blocks based on liquidity, and urged the 

Commission to consider linking equity 

swap categories to the liquidity of the 

underlying index.144 Barclays 

recommended that swap categories 

should be established for equity swaps 

taking into account transaction volume 

by index and equity asset class type, 

and that broad-based indices should 

have separate block levels based upon 

futures market levels.145 ICI 

recommended closer study of data on 

equity swap transactions due to 

potential differences in liquidity in the 

underlying equity cash market.146 ISDA/ 

SIFMA recommended categorizing 

equity swaps on the basis of underlying 

index or basket, product type, notional 

size, and tenor.147 SIFMA stated that the 

Commission should establish equity 

swap block categories based upon 

liquidity of the underlying indices.148

After consideration of the comments 

received, the Commission is adopting 

§ 43.6(b)(3) as proposed. While a 

number of the commenters point out 

differences in liquidity in the 

underlying equity indices to support 

separate swap categories within the 

equity asset class and establishment of 

block sizes in equities, these differences 

do not undermine the premises 

underlying the Commission’s proposal. 

Even taking into account differences in 

liquidity, (1) there is still a highly liquid 

underlying cash market for equities; and 

(2) the equity index swaps market is 

small relative to the futures, options, 

and cash equity index markets. These 

characteristics, combined with the fact 

that there are no time delays for 

reporting block trades in the underlying 

equity cash market, makes 

establishment of swap categories, and 

therefore minimum block thresholds, for 

equity swaps inappropriate.149 The 

Commission notes that establishing time 

delays for reporting block trades in the 

swaps market when no time delays exist 

could negatively impact the price 

discovery function of the underlying 

equity cash market and futures market. 

Accordingly, the Commission is 

adopting § 43.6(b)(3) as proposed.150

3. Swap Categories in the FX Asset Class 

The Commission proposed 

establishing swap categories for the FX 

asset class based on unique currency 

combinations, with § 43.6(b)(4)(i) 

distinguishing futures-related swaps 151

from swaps that are not futures-related 

(covered under proposed 

§ 43.6(b)(4)(ii)). Distinguishing futuresrelated swaps from other swaps would 

allow the Commission to set initial 

appropriate minimum block sizes for 

certain swaps based on DCM block sizes 

for FX futures contracts. 

The Commission based its approach 

on the assumption that FX swaps and 

futures contracts based upon the same 

currency draw upon the same liquidity 

pools. The Commission proposed in 

§§ 43.6(b)(4)(i) and (b)(4)(ii) to 

distinguish FX swaps and instruments 

based on the existence of a related 

futures contract. Liquidity in the 

underlying futures market for the 

currency combinations established in 

proposed § 43.6(b)(4)(i) suggested 

sufficient liquidity in the swaps market 

for these currency combinations. 

The Commission proposed 

establishing swap categories for futuresrelated swaps under proposed 

§ 43.6(b)(4)(i) based on the unique 

currency combinations between the 

currency of each of the following: the 

United States, European Union, United 

Kingdom, Japan, Australia, Switzerland, 

Canada, Republic of South Africa, 

Republic of Korea, Kingdom of Sweden, 

New Zealand, Kingdom of Norway, 

Denmark, Brazil, China, Czech 

Republic, Hungary, Israel, Mexico, New 


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152For example, the euro (EUR) and the Canadian 

dollar (CAD) combination would be one swap 

category; whereas, the Swedish krona (SEK) and the 

Korean won (KRW) combination would be a 

separate swap category. 

153Under proposed § 43.6(e)(2), swaps having 

currency combinations described in § 43.6(b)(4)(ii) 

would all be eligible to be treated as a block trade 

or large notional off-facility swap. Only in the postinitial period would the proposed rules set an 

appropriate minimum block size for this category of 

FX swaps. See infra Section II.B(5)(c)(ii). 

154CL–Barclays at 10; CL–GFMA at 2–3. 

155CL–Barclays at 10. 

156CL–GFMA at 2–3. GFMA also suggested that 

(1) FX swaps should be distinguished by tenor, and 

that (2) block size thresholds should vary based on 

time of day, in order to take into account liquidity 

across time zones. 

157CL–AFR at 6. 

158CL–AII at 3; CL–ICI at 5. 

159See Determination of Foreign Exchange Swaps 

and Foreign Exchange Forwards under the 

Commodity Exchange Act, 77 FR 69,694, Nov. 20, 

2012. 

160As set out in Section II.A.1., the super-major 

currencies are the United States dollar (USD), 

European Union Euro Area euro (EUR), United 

Kingdom pound sterling (GBP), and Japan yen 

(JPY). 

161As set out in Section II.A.1., the major 

currencies are the Australia dollar (AUD), 

Switzerland franc (CHF), Canada dollar (CAD), 

Republic of South Africa rand (ZAR), Republic of 

Korea won (KRW), Kingdom of Sweden krona 

(SEK), New Zealand dollar (NZD), Kingdom of 

Norway krone (NOK) and Denmark krone (DKK). 

162As stated above, this section only applies to 

FX options and non-deliverable FX forwards. 

Treasury has exempted FX swaps and FX forwards 

from the definition of ‘‘swap’’ under the CEA. See 

Determination of Foreign Exchange Swaps and 

Foreign Exchange Forwards under the Commodity 

Exchange Act, 77 FR 69,694, Nov. 20, 2012. 

163See Table 10 for the enumerated swap 

categories established by § 43.6(b)(4)(i). 

164According to the BIS Triennial Central Bank 

Survey: Foreign Exchange and Derivatives Market 

Activity in April 2010 (preliminary results, dated 

September 2010), the currency combinations 

enumerated under adopted § 43.6(b)(4)(i) comprise 

more than 80% of global FX market turnover. 

According to the Survey of North American 

Foreign Exchange Volume in October 2012, the 

proposed categories established by § 43.6(b)(4)(i) 

cover more than 86% of the notional value of total 

monthly volume of FX swaps that are priced or 

facilitated by traders in North America. The Survey 

of North American Foreign Exchange Volume is 

conducted by the Foreign Exchange Committee, 

which includes representatives of major financial 

institutions engaged in foreign currency trading in 

the United States and is sponsored by the Federal 

Reserve Bank of New York. The survey is designed 

to measure the level of turnover in the foreign 

exchange market. Turnover is defined as the gross 

value in U.S. dollar equivalents of purchases and 

sales entered into during the reporting period. The 

data covers a one-month period in order to reduce 

the likelihood that very short-term variations in 

activity might distort the data and include all 

transactions that are priced or facilitated by traders 

in North America (United States, Canada, and 

Mexico). Transactions concluded by dealers outside 

of North America are excluded even if they are 

booked to an office within North America. The 

survey also excludes transactions between 

branches, subsidiaries, affiliates, and trading desks 

of the same firm. The October 2012 data can be 

located at http://www.newyorkfed.org/fxc/2012/ 

octfxsurvey2012.pdf. 

165For example, the unique currency 

combination of the Australian Dollar (AUD) and the 

Canadian Dollar (CAD) had a minimum block 

threshold of 10,000,000 CAD in the Further Block 

Proposal. Under adopted § 43.6(b)(4), all trades in 

this unique currency combination will be eligible 

for block treatment. 

166The Commission emphasizes that the swap 

categories for the FX asset class are unique currency 

combinations between each of the super-major 

currencies, major currencies, and additional 

currencies listed. The classification of EUR and 

Continued 

Zealand, Poland, Russia, and Turkey.152

Hence, proposed § 43.6(b)(4)(i) would 

establish a separate swap category for 

each of the 231 unique currency 

combinations between these currencies. 

In proposed § 43.6(b)(4)(ii), the 

Commission would establish an 

additional swap category based on 

unique currency combinations not 

included in proposed § 43.6(b)(4)(i).153

The Commission received six 

comments regarding the proposed swap 

categories for the FX asset class based 

on unique currency combinations. Two 

commenters recommended additional 

swap categories for the FX asset class.154

Barclays suggested that EUR- and USDdenominated transactions should be 

categorized separately from less liquid 

transactions and that distinct block 

levels should apply to the following 

product categories: Forwards, nondeliverable forwards, non-deliverable 

options, vanilla options, and other more 

complex options.155 GFMA 

recommended more granular swap 

categories that would group specific 

instruments according to similarity of 

liquidity profile.156 AFR, however, 

commented that the governing principle 

in establishing swap categories should 

be the reasonable relationship of swaps 

within a category to a liquid class of 

swaps or futures that are potential 

hedges for that category and expressed 

concern that adding any additional 

granularity might violate this 

principle.157 AII and ICI urged the 

Commission to remove block trading 

thresholds so that all transactions would 

be treated as blocks for the FX asset 

class during the initial period, and 

allow for collection and analysis of SDR 

data during this period to determine 

appropriate swap categories for the postinitial period.158

The Commission notes that, since the 

Further Block Proposal, Treasury has 

issued a Final Determination, pursuant 

to sections 1a(47)(E)(i) and 1b of the 

CEA, that exempts FX swaps and FX 

forwards from the definition of ‘‘swap’’ 

under the CEA. Therefore, the 

requirements of section 2(a)(13) of the 

CEA would not apply to those 

transactions, and such transactions 

would not be subject to part 43 of the 

Commission’s regulations.159

Nevertheless, section 1a(47)(E)(iii) of the 

CEA provides that FX swaps and FX 

forwards transactions still are not 

excluded from regulatory reporting 

requirements to an SDR. Further, the 

Commission notes that Treasury’s final 

determination excludes FX swaps and 

FX forwards, but does not apply to FX 

options or non-deliverable FX forwards. 

As such, FX instruments that are not 

covered by Treasury’s final 

determination are subject to part 43 of 

the Commission’s regulations. 

After consideration of the comments 

received and the complexity of the 

proposed approach, the Commission is 

adopting § 43.6(b)(4) with 

modifications. The Commission is 

modifying proposed § 43.6(b)(4)(i) to 

establish swap categories based on the 

unique currency combinations between 

one super-major currency paired with 

one of the following: (1) Another super 

major currency 160; (2) a major 

currency 161; or (3) a currency of Brazil, 

China, Czech Republic, Hungary, Israel, 

Mexico, New Zealand, Poland, Russia, 

or Turkey. This approach differs from 

the proposal in that the adopted swap 

categories will not include the unique 

currency combinations between major 

currencies and other major currencies, 

between major currencies and each of 

the ten additional enumerated nonmajor currencies, and between the ten 

additional enumerated non-major 

currencies. Under § 43.6(b)(4) as 

adopted, all swap transactions subject to 

part 43 162 in these unique currency 

combinations may be treated as 

blocks.163

The changes to § 43.6(b)(4) will 

significantly reduce the number of swap 

categories, hence reducing complexity, 

but will still ensure coverage of the most 

liquid currency combinations.164

While not affording block treatment to 

all swaps in the FX asset class subject 

to part 43, these modifications will 

increase the number of currency 

combinations which will be eligible to 

be blocks, many of which have limited 

liquidity.165 Yet, this modified approach 

still allows the Commission to set initial 

appropriate minimum block sizes for 

the most liquid categories based on the 

block trade size thresholds set by DCMs 

for economically-related futures 

contracts, as enumerated under adopted 

§ 43.6(b)(4)(i). The Commission believes 

that the categories established by 

proposed § 43.6(b)(4)(i) and kept under 

adopted § 43.6(b)(4)(i) provide the 

separate classification for EUR- and 

USD-denominated transactions 

recommended by Barclays.166


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USD as super-major currencies simply means that 

both currencies are individually eligible for 

inclusion among the unique currency combinations 

used for swap categorization. In the FX asset class, 

there is no separate bucket for super-major 

currencies (such as the buckets in the interest rate 

swap asset class described above). 

167CL–Barclays at 10; CL–GFMA at 2–3. 

168 In the Further Block Proposal, every unique 

currency combination would be considered a 

unique swap category, which means there would be 

hundreds of different swap categories for the FX 

asset class. Proposed § 43.6(b)(4)(i) alone 

established 231 swap categories. Many additional 

categories would have been established under 

proposed § 43.6(b)(4)(ii). The adopted § 43.6(b)(4) 

creates 78 categories requiring the calculation of 

appropriate minimum block sizes in the post-initial 

period. 

169Proposed § 43.2 defines a futures-related swap 

as a swap (as defined in section 1a(47) of the Act 

and as further defined by the Commission in 

implementing regulations) that is economically 

related to a futures contract. The Commission is 

adopting this definition as proposed. 

170 In the Real-Time Reporting Final Rule, the 

Commission explained: ‘‘For the purposes of part 

43, swaps are economically related, as described in 

§ 43.4(d)(4)(ii)(B), if such contract utilizes as its sole 

floating reference price the prices generated directly 

or indirectly from the price of a single contract 

described in appendix B to part 43.’’ 77 FR 1211. 

Further, the Commission explained that ‘‘an 

‘indirect’ price link to an Enumerated Physical 

Commodity Contract or an Other Contract described 

in appendix B to part 43 includes situations where 

the swap reference price is linked to prices of a 

cash-settled contract described in appendix B to 

part 43 that itself is cash-settled based on a 

physical-delivery settlement price to such 

contract.’’ Id. at n.289. 

171For example, a swap utilizing the Platts Gas 

Daily/Platts IFERC reference price is economically 

related to the Henry Hub Natural Gas (NYMEX) 

(futures) contract because it is based on the same 

commodity at the same delivery location as that 

underlying the latter contract. 

The Commission will also modify 

§ 43.6(b)(4)(ii) to establish one swap 

category for the currency combinations 

not included in § 43.6(b)(4)(i). This 

category will encompass the other 

currency combinations proposed, but 

not adopted, by the Commission, as well 

as other non-futures related currency 

swaps. With the modifications to 

§ 43.6(b)(4), the euro (EUR) and the 

Canadian dollar (CAD) combination will 

still be one swap category as in the 

original proposal pursuant to 

§ 43.6(b)(4)(i). However, the Swedish 

krona (SEK) and the Korean won (KRW) 

combination will be grouped with all 

the other swaps covered by 

§ 43.6(b)(4)(ii) into one swap category. 

As a further example, a swap of the 

Czech koruna (CZK) and the Brazilian 

real (BRL) will be in the same category 

as the SEK–KRW swap. While the swaps 

grouped into one category by 

§ 43.6(b)(4)(ii) may have different 

liquidity levels, these swaps will all be 

subject to the time delays provided to 

block trades and large notional offfacility swaps in both the initial and 

post-initial periods. 

The Commission notes that the 

adopted § 43.6(b)(4)(i) establishes 78 

unique currency combinations, covering 

a vast majority of the notional value of 

FX swaps concluded by traders in North 

America. Creating additional swap 

categories, as suggested by Barclays and 

GFMA,167 would result in swap 

categories totaling a multiple of this 

already large number without 

drastically increasing the number of 

swaps that will be subject to real-time 

reporting without a delay. Establishing 

swap categories based upon unique 

currency combinations as in adopted 

§ 43.6(b)(4)(i) meets the objectives of 

grouping swaps with economic 

similarity and reducing confusion for 

market participants in determining 

whether their swaps are classified 

within a particular swap category. The 

Commission believes that these changes 

will reduce the administrative burden to 

both market participants and to the 

Commission by reducing the number of 

swap categories for which appropriate 

minimum block sizes need to be 

calculated.168

TABLE 10—SWAP CATEGORIES ESTABLISHED UNDER § 43.6(b)(4)(i) 

Super-major currencies 

Euro 

(EUR) 

British pound 

(GBP) 

Japanese yen 

(JPY) 

U.S. dollar 

(USD) 

British Pound (GBP) ............................................................................ EUR–GBP 

Japanese Yen (JPY) ............................................................................ EUR–JPY GBP–JPY 

U.S. Dollar (USD) ................................................................................ EUR–USD GBP–USD JPY–USD 

Australian Dollar (AUD) ....................................................................... AUD–EUR AUD–GBP AUD–JPY AUD–USD 

Canadian Dollar (CAD) ........................................................................ CAD–EUR CAD–GBP CAD–JPY CAD–USD 

Swiss Francs (CHF) ............................................................................. CHF–EUR CHF–GBP CHF–JPY CHF–USD 

Denmark Krone (DKK) ......................................................................... DKK–EUR DKK–GBP DKK–JPY DKK–USD 

Korean Won (KRW) ............................................................................. KRW–EUR KRW–GBP KRW–JPY KRW–USD 

Swedish Krona (SEK) .......................................................................... SEK–EUR SEK–GBP SEK–JPY SEK–USD 

Norwegian Krone (NOK) ...................................................................... NOK–EUR NOK–GBP NOK–JPY NOK–USD 

New Zealand Dollar (NZD) .................................................................. NZD–EUR NZD–GBP NZD–JPY NZD–USD 

South African Rand (ZAR) ................................................................... ZAR–EUR ZAR–GBP ZAR–JPY ZAR–USD 

Brazilian Real (BRL) ............................................................................ BRL–EUR BRL–GBP BRL–JPY BRL–USD

Czech Koruna (CZK) ........................................................................... CZK–EUR CZK–GBP CZK–JPY CZK–USD 

Hungarian Forint (HUF) ....................................................................... HUF–EUR HUF–GBP HUF–JPY HUF–USD 

Israeli Shekel (ILS) .............................................................................. ILS–EUR ILS–GBP ILS–JPY ILS–USD 

Mexican Peso (MXN) ........................................................................... MXN–EUR MXN–GBP MXN–JPY MXN–USD 

Polish Zloty (PLN) ................................................................................ PLN–EUR PLN–GBP PLN–JPY PLN–USD 

Chinese Renminbi (RMB) .................................................................... RMB–EUR RMB–GBP RMB–JPY RMB–USD 

Russian Ruble (RUB) .......................................................................... RUB–EUR RUB–GBP RUB–JPY RUB–USD 

Turkish Lira (TRY) ............................................................................... TRY–EUR TRY–GBP TRY–JPY TRY–USD 

4. Swap Categories in the Other 

Commodity Asset Class 

The Commission proposed to 

determine swap categories in the other 

commodity asset class based on three 

sets of groupings. The first two sets of 

groupings create categories of swaps 

which are economically related to 

specific futures contracts (i.e., futuresrelated swaps 169) or swap contracts 

under proposed §§ 43.6(b)(5)(i) and (ii). 

The third set of groupings creates 

categories based on swaps sharing a 

common product type under proposed 

§ 43.6(b)(5)(iii). 

The Commission proposed defining 

‘‘economically related’’ 170 in § 43.2 as a 

direct or indirect reference to the same 

commodity at the same delivery 

location or locations,171 or with the 


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172For example, a swap utilizing the Standard 

and Poor’s (‘‘S&P’’) 500 reference price is 

economically related to the S&P 500 Stock Index 

futures contract because it is based on the same 

cash market price series. 

173The Commission proposed to amend § 43.2 to 

define ‘‘reference price’’ as a floating price series 

(including derivatives contract and cash market 

prices or price indices) used by the parties to a 

swap or swaption to determine payments made, 

exchanged or accrued under the terms of a swap 

contract. The Commission proposed to use this term 

in connection with the establishment of a method 

through which parties to a swap transaction may 

elect to apply the lowest appropriate minimum 

block size applicable to one component swap 

category of such swap transaction. See infra Section 

II.B(6)(b). The Commission is adopting this 

definition as proposed. 

174The Real-Time Reporting Final Rule 

previously finalized § 43.4(d)(4)(ii)(B), which 

requires a registered SDR to publicly disseminate 

any publicly reportable swap transaction in the 

other commodity asset class that is ‘‘economically 

related’’ to one of the contracts described in 

appendix B to part 43, but did not define 

‘‘economically related.’’ This definition, as 

proposed and to be adopted here, would apply to 

the use of this term throughout all of part 43 of the 

Commission’s regulations. 

175As noted by the Commission in the Real-Time 

Reporting Final Rule, the 28 Enumerated Physical 

Commodity Contracts are traded on U.S. DCMs, 

while Brent Crude Oil (ICE) futures contracts are 

primarily traded in Europe. 77 FR 1211 n. 288. 

176See infra Section II.B5(d)(i). The Commission 

had previously issued orders deeming these 

contracts as ‘‘significant price discovery contracts’’ 

in connection with trading on exempt commercial 

markets (‘‘ECMs’’), based on, among other factors, 

their material liquidity and price discovery 

function. See infra Section III.C(4)(a). These 

contracts included: AECO Financial Basis Contract 

(‘‘AEC’’) traded on the IntercontinentalExchange, 

Inc. (‘‘ICE’’) (See 75 FR 23697); NWP Rockies 

Financial Basis Contract (‘‘NWR’’) traded on ICE 

(See 75 FR 23704); PG&E Citygate Financial Basis 

Contract (‘‘PGE’’) traded on ICE (See 75 FR 23710); 

Waha Financial Basis Contract (‘‘WAH’’) traded on 

ICE (See 75 FR 24655); Socal Border Financial Basis 

Contract (‘‘SCL’’) traded on ICE (See 75 FR 24648); 

HSC Financial Basis Contract (‘‘HXS’’) traded on 

ICE (See 75 FR 24641); ICE Chicago Financial Basis 

Contract (‘‘DGD’’) traded on ICE (See 75 FR 24633); 

SP–15 Financial Day-Ahead LMP Peak Contract 

(‘‘SPM’’) traded on ICE (See 75 FR 42380); SP–15 

Financial Day-Ahead LMP Off-Peak Contract 

(‘‘OFP’’) traded on ICE (See 75 FR 42380); PJM WH 

Real Time Peak Contract (‘‘PJM’’) traded on ICE (See 

75 FR 42390); PJM WH Real Time Off-Peak Contract 

(‘‘OPJ’’) traded on ICE (See 75 FR 42390); Mid-C 

Financial Peak Contract (‘‘MDC’’) traded on ICE 

(See 75 FR 38469); Mid-C Financial Off-Peak 

Contract (‘‘OMC’’) traded on ICE (See 75 FR 38469). 

As discussed further below, as of October 12, 

2012, ICE withdrew its listing of these contracts as 

a result of converting its cleared OTC swap 

contracts and related options to futures listed at ICE 

Futures U.S. and ICE Futures Europe. Accordingly, 

ICE converted these contracts into economically 

equivalent futures contracts and has listed them for 

trading. See ICE—Swaps to Futures Transition, 

https://www.theice.com/S2F.jhtml (last visited May 

7, 2013). Therefore, as discussed further below, the 

Commission has determined in this final rule to add 

the converted contracts to appendix B to part 43, 

such that each contract will serve as a basis for an 

other commodity swap category. See infra Section 

II.A(4). 

177 77 FR 1211. 

178As proposed, these additional other 

commodity swap categories would be based on the 

following futures contracts: CME Cheese; CBOT 

Distillers’ Dried Grain; CBOT Dow Jones-UBS 

Commodity Index Excess Return; CBOT Ethanol; 

CME Frost Index; CME Goldman Sachs Commodity 

Index (GSCI) (GSCI Excess Return Index); NYMEX 

Gulf Coast Gasoline; NYMEX Gulf Coast Sour Crude 

Oil; NYMEX Gulf Coast Ultra Low Sulfur Diesel; 

CME Hurricane Index; CME International Skimmed 

Milk Powder; NYMEX New York Harbor Ultra Low 

Sulfur Diesel; CBOT Nonfarm Payroll; CME Rainfall 

Index; CME Snowfall Index; CME Temperature 

Index; CME U.S. Dollar Cash Settled Crude Palm 

Oil; and CME Wood Pulp. 

179This distinction is noteworthy because 

proposed § 43.6(e)(3) provides that ‘‘[p]ublicly 

reportable swap transactions described in 

§ 43.6(b)(5)(i) that are economically related to a 

futures contract in appendix B to this part [43] shall 

not qualify to be treated as block trades or large 

notional off-facility swaps (as applicable) [during 

the initial period], if such futures contract is not 

subject to a designated contract market’s block 

trading rules.’’ 

same or substantially similar cash 

market price series.172 The Commission 

noted that this definition would (1) 

ensure that swap contracts with shared 

reference price characteristics indicating 

economic substitutability (i.e., swaps in 

the category can be used to offset some 

or all of the risks associated with 

positions in the underlying commodity) 

are grouped together within a common 

swap category; 173 and (2) provide 

further clarity as to which swaps are 

described in § 43.4(d)(4)(ii)(B), which 

was previously finalized under the RealTime Reporting Final Rule.174

The first set of swap categories, 

covered under proposed § 43.6(b)(5)(i), 

would establish separate swap 

categories for swaps that are 

economically related to one of the 

contracts listed in appendix B to part 

43. Therefore, proposed § 43.6(b)(5)(i) 

would establish one swap category for 

each contract listed in appendix B to 

part 43. The Real-Time Reporting Final 

Rule previously finalized appendix B to 

part 43, which lists 29 Enumerated 

Physical Commodity Contracts and 

Other Contracts (i.e., Brent Crude Oil 

(ICE)).175 In the Further Block Proposal, 

the Commission proposed to add 13 

electricity and natural gas swap 

contracts to appendix B to part 43.176

Therefore, proposed § 43.6(b)(5)(i) 

would establish 42 swap categories such 

that each contract would be the basis for 

its own other commodity swap category, 

and all swaps that are economically 

related to that contract would be 

included in that swap category. 

The Commission has separately 

enumerated these contracts since it 

previously has identified these 

commodity contracts as: (1) Having high 

levels of open interest and significant 

cash flow; and (2) serving as a reference 

price for a significant number of cash 

market transactions. Moreover, the 

Commission has also previously 

determined that any swap that 

references or is economically related to 

these contracts (along with the Brent 

Crude Oil (ICE) contract or any contract 

that is economically related to it) has 

sufficient liquidity to ensure that the 

public dissemination of swap 

transaction and pricing data for swaps 

based on this reference asset poses little 

risk of disclosing identities of parties, 

business transactions, or market 

positions.177

The second set of swap categories, 

covered under proposed § 43.6(b)(5)(ii), 

would establish swap categories based 

on swaps in the other commodity asset 

class that are: (1) Not economically 

related to one of the futures or swap 

contracts listed in appendix B to part 

43; and (2) economically related to a 

relevant futures contract that is subject 

to the block trade rules of a DCM. 

Proposed § 43.6(b)(5)(ii) listed the 18 

futures contracts to which these swaps 

are economically related, and hence, 

establishes 18 swap categories.178 These 

swap categories would include any 

swap that is economically related to 

such contracts. The swap categories 

established by proposed § 43.6(b)(5)(i) 

differ from the swap categories 

established by proposed § 43.6(b)(5)(ii) 

in that the former may be economically 

related to futures or swap contracts that 

are not subject to the block trade rules 

of a DCM, whereas the latter are 

economically related to futures 

contracts that are subject to the block 

trade rules of a DCM.179

The third set of swap categories, 

covered under proposed § 43.6(b)(5)(iii), 

would establish swap categories for all 

other commodity swaps that are not 

categorized under proposed 

§ 43.6(b)(5)(i) or (ii). These swaps are 

not economically related to any of the 

contracts listed in appendix B to part 43 

or any of the contracts listed in 

proposed § 43.6(b)(5)(ii). For these other 

commodity swaps, the Commission 

would determine the appropriate swap 

category based on the product types 

described in appendix D to part 43 to 

which the underlying asset(s) of the 

swap would apply or otherwise relate. 

Proposed appendix D to part 43 

establishes ‘‘Other Commodity Groups’’ 

and certain ‘‘Individual Other 

Commodities’’ within those groups. To 

the extent that there is an ‘‘Individual 

Other Commodity’’ listed, the 

Commission would deem the 

‘‘Individual Other Commodity’’ as a 

separate swap category. For example, 

regardless of whether the underlying 

asset to an off-facility swap is ‘‘Sugar 

No. 14’’ or ‘‘Sugar No. 5,’’ the 

underlying asset would be grouped as 

‘‘Sugar.’’ The Commission thereafter 


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180CL–CME 3–4. Proposed § 43.6(e)(1) 

established appropriate minimum block sizes in the 

initial period for swap categories in proposed 

§ 43.6(b)(5)(i)–(ii) based on the block sizes for 

related futures contracts set by DCMs, except for 

natural gas and electricity swaps proposed to be 

added to appendix B of part 43. 

181CL–ICI at 5. 

182CL–ICAP Energy at 4; CL–fia at 3. 

183CL–Barclays at 9. 

184CL–Better Markets at 6–7; CL–AFR at 6–7. 

185CL–Parity at 4–5. 

186 Id. As proposed, the initial minimum block 

size for swaps that are economically related to 

Henry Hub Natural Gas futures was set at 1,000,000 

mmBtu; the initial minimum block size for Henry 

Hub Natural Gas options was set at 5,500,000 

mmBtu. 

187The Commission is not adopting separate 

swap categories that it proposed in the Further 

Block Proposal for swaps that are economically 

related to the following NYMEX futures contracts: 

Gulf Coast Gasoline; Gulf Coast Ultra Low Sulfur 

Diesel; and New York Harbor Ultra Low Sulfur 

Diesel. As of October 15, 2012, NYMEX eliminated 

block trading in these contracts because they have 

no open interest. The Commission is also removing 

the swap category for swaps that reference or are 

economically related to Non-Farm Payroll futures 

contract, the International Skimmed Milk Powder, 

and Wood Pulp as these contracts are no longer 

listed for trading. 

188See supra note 176. 

189See infra Section II.B(5)(d). 

would set the appropriate minimum 

block size for each of the swap 

categories listed in appendix D to part 

43. 

In circumstances where a swap does 

not apply or otherwise relate to a 

specific ‘‘Individual Other Commodity’’ 

listed under the ‘‘Other Commodity 

Group’’ in appendix D to part 43, the 

Commission would categorize such 

swap as falling under the respective 

‘‘Other’’ swap categories. For example, 

an emissions swap would be categorized 

as ‘‘Emissions,’’ while a swap in which 

the underlying asset is aluminum would 

be categorized as ‘‘Base Metals—Other.’’ 

Additionally, in circumstances where 

the underlying asset of swap does not 

apply or otherwise relate to an 

‘‘Individual Other Commodity’’ or an 

‘‘Other’’ swap category, the Commission 

would categorize such swap as either 

‘‘Other Agricultural’’ or ‘‘Other NonAgricultural.’’ 

Comments on the proposed swap 

categories in the other commodity asset 

class varied. CME Group agreed with 

the proposed approach to establishing 

swap categories in the other commodity 

asset class in the initial period because 

it would allow appropriate minimum 

block level sizes to be set based on the 

minimum block sizes set by DCMs.180

ICI, however, recommended that the 

Commission obtain and analyze trading 

data from SDRs first before determining 

whether the proposed swap categories 

are appropriate.181

Several commenters commented on 

the granularity of the proposed swap 

categories. Some commenters 

recommended more granular categories 

to account for the differences in 

liquidity and execution risk between 

shorter- and longer-dated contracts.182

Similarly, Barclays also commented that 

swap categories in the other commodity 

asset class should consider that 

products typically experience a 

reduction in liquidity beyond the first or 

second year.183 Other commenters, 

however, opposed the proposed 

categories as too narrow and 

recommended broadening the definition 

of ‘‘economically related’’ and reducing 

the number of swap categories to reflect 

increasing price correlation between 

different categories of commodities as 

well as existing hedging practices by 

market participants.184

Parity Energy requested that the 

Commission establish a separate 

category for swaps that are economically 

related to crude oil options because 

transactions in crude oil options are 

typically fewer and larger in size than 

transactions in crude oil futures 

contracts.185 Parity Energy also agreed 

with the proposed distinction in swap 

categories between swaps that are 

economically related to natural gas 

swaps and swaps that are economically 

related to natural gas swap options.186

The Commission is adopting the 

definition of ‘‘economically related’’ as 

proposed. The Commission believes that 

broadening the definition, as suggested 

by some commenters, would reduce the 

precision with which swaps in the other 

commodity asset class can be properly 

categorized. As proposed, the definition 

of ‘‘economically related’’ is sufficient 

in that it (1) ensures that swap contracts 

with shared reference price 

characteristics (indicating economic 

substitutability) are grouped together 

within a common swap category and (2) 

provides further clarity as to which 

swaps are described in 

§ 43.4(d)(4)(ii)(B). 

Furthermore, the Commission 

believes that its general approach to 

establishing swap categories under 

§ 43.6(b)(5)(i)–(iii) is appropriate and is 

adopting the text of § 43.6(b)(5)(i)–(iii) 

largely as proposed, with the exception 

of some proposed swap categories in 

§ 43.6(b)(5)(ii).187 With the conversion 

of the 13 electricity and natural gas 

swap contracts proposed to be added to 

appendix B to part 43 into DCM-listed, 

economically equivalent futures 

contracts,188 the Commission is making 

one modification by establishing swap 

categories and adopting initial 

appropriate minimum block sizes 

corresponding to those set by a DCM for 

those futures contracts. With respect to 

the swap categories established under 

§ 43.6(b)(5)(i), the Commission believes 

that establishing categories for swaps 

that are economically related to one of 

the referenced futures contracts is 

appropriate because these contracts 

have previously been identified as (1) 

having high levels of open interest and 

significant cash flow; and (2) serving as 

a reference price for a significant 

number of cash market transactions. 

With respect to the swap categories 

established under § 43.6(b)(5)(i)–(ii), the 

Commission is establishing swap 

categories and adopting initial 

appropriate minimum block sizes which 

correspond with those set by a DCM for 

economically related futures contracts 

in the initial period.189 Hence, to the 

extent possible, the Commission is 

relying upon the DCMs’ knowledge of 

and experience with liquidity in related 

futures markets until additional data 

becomes available. With respect to the 

swap categories established under 

§ 43.6(b)(5)(iii), the Commission 

believes that setting swap categories by 

product type would allow the 

Commission to set appropriate 

minimum block sizes for groups of 

transactions that have similar 

underlying physical commodity market 

characteristics. Accordingly, the 

Commission does not believe that 

establishing swap categories that are 

broader than proposed is necessary to 

enhance market transparency. 


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190These options contracts listed in proposed 

Appendix F, which are subject to a minimum DCM 

block size rule, included Cocoa (ICE); Coffee (ICE); 

Cotton No. 2 (ICE); Frozen Concentrated Orange 

Juice (ICE); Gold (COMEX and NYSE Liffe); New 

York Harbor No. 2 Heating Oil (NYMEX); Silver 

(COMEX and NYSE Liffe); Sugar #11 (ICE); and 

Sugar #16 (ICE). 

191See infra Section II.C. 

192CL–Javelin at 5–6; CL–SDMA at 6. 

193CL–Barclays at 4. 

194 Id. 

195 ISDA/SIFMA recommended that every 

transaction (regardless of size) in a swap category 

for which there are no more than 14 swaps traded 

per business day receive block treatment for a 

period of 1 year. CL–ISDA/SIFMA at 12. 

196According to ISDA/SIFMA, ‘‘[f]orcing the 

same transparency standards on market participants 

for both liquid and illiquid products will be 

detrimental. Instantaneous trade disclosure for 

highly illiquid products, combined with the 

potential for SEF or DCM execution, is likely to 

erode their liquidity further and to do severe 

damage to the safety and soundness of the system 

as a whole.’’ Id. 

197 Id. 

198CL–GFMA at 3. 

199CL–Parascondola at 1. 

200CL–Kinetix at 1. 

201CL–Vanguard at 5. 

202CL–SIFMA at 10; CL–Vanguard at 7. 

203CL–AII at 6. 

Furthermore, the Commission is not 

using additional criteria to create more 

granular swap categories in the other 

commodity asset class. While 

commodity swaps within a particular 

swap category may feature different 

liquidity and risk profiles based on their 

tenor, the Commission is not aware of 

any data that would warrant additional 

swap categories. As swaps trading data 

becomes available, the Commission will 

examine such data to determine 

whether establishing additional swap 

categories would be appropriate. 

The other main modification to the 

swap categories established under 

§ 43.6(b)(5) is that the Commission is 

not adopting separate swap categories 

for swaps that are economically related 

to the options contracts listed in 

appendix F of the Further Block 

Proposal.190 Consistent with the 

Commission’s definitions of 

‘‘economically-related’’ and ‘‘futuresrelated swap,’’ the Commission 

considers such swaps, which feature an 

optionality component, to be 

economically related to the 

corresponding futures contracts adopted 

in appendix F of this final rule for 

purposes of determining swap 

categories. This approach to 

categorizing such swaps is consistent 

with the Commission’s methodology to 

establish initial appropriate minimum 

block size for swaps with optionality for 

all asset classes.191 Under this 

methodology, the notional size of swaps 

with optionality in the initial period 

will be equal to the notional size of the 

swap component without the optional 

component. As discussed further below, 

the Commission is adopting this 

methodology as proposed, and therefore 

will not consider optionality in the 

determination of a swap contract’s 

notional size—allowing block sizes to be 

established based on the block sizes set 

by DCMs for options contracts would 

contradict this approach. 

5. Comments Regarding Swap 

Categories Across Asset Classes 

The Commission received a number 

of comments suggesting that, for all 

asset classes, the Commission establish 

separate swap categories, with separate 

appropriate minimum block sizes, for 

infrequently traded or illiquid swaps. 

Javelin and SDMA did not think 

infrequently-traded swaps posed an 

obstacle and recommended swap 

categorization that would account for 

hedging for illiquid swaps through 

synthetic/portfolio hedging through 

liquidity of economically equivalent 

swaps.192 Barclays suggested that all 

swaps made available to trade that trade 

less than three times a day should be 

treated as blocks, as market makers 

otherwise will be reluctant to quote 

prices.193 Alternatively, Barclays 

suggested removing such swaps from 

the ‘‘available to trade’’ category and 

thereby exempting them from post-trade 

reporting.194 ISDA/SIFMA requested 

block treatment for all infrequently 

traded swaps and suggested a 

benchmark tied to precise daily trading 

frequency including a time delay for 

illiquid products generally.195 To 

support this approach, ISDA/SIFMA 

cited a Commission study showing that 

market participants prefer off-exchange 

bilateral execution for illiquid 

instruments because of liquidity 

concerns.196 ISDA/SIFMA suggested 

that a single transaction, regardless of 

size, in such infrequently-traded or 

illiquid swaps may move the market.197

GFMA suggested treating all 

infrequently-traded swaps as blocks and 

defines such transactions as exhibiting 

all or some of the following features: (1) 

The constituent swap or swaps to which 

they are economically related are not 

executed on, or pursuant to the rules of, 

a SEF or DCM; (2) few market 

participants have transacted in these 

swaps or in economically-related swaps; 

or (3) few swap transactions are 

executed during a historic period in 

these swaps or in economically-related 

swaps.198 Parascandola recommended 

block treatment for small notional and 

odd-lot trades, particularly in index 

products where the notional amount is 

below $10 million.199 Kinetix suggested 

that transactions in any product with 

fewer than 250 transactions annually 

should receive treatment as block 

trades.200 Vanguard urged a more 

granular approach to swap categories 

and thresholds to ‘‘recognize distinct 

liquidity pools.’’ 201 Vanguard and 

SIFMA suggested that swaps that trade 

fewer than 14 trades per day should be 

blocks.202 AII suggested block treatment 

for swaps that trade less than 5 times 

per day.203

After consideration of the comments 

received, the Commission is adopting 

the swap categories described in the 

sections above. The Commission 

believes that the trade frequency of a 

single instrument is but one measure of 

liquidity for such a swap and does not 

factor in the pool of instruments that are 

capable of providing an economically 

equivalent position, either individually 

or on a portfolio basis. 

B. Appropriate Minimum Block Size 

Methodologies for the Initial and PostInitial Periods 

The Commission proposed a tailored 

approach for determining appropriate 

minimum block sizes during the initial 

and post-initial periods for each asset 

class. In the subsections below, the 

Commission sets out a more detailed 

discussion of the appropriate minimum 

block size methodologies for swaps 

within: (1) Swap categories in the 

interest rate and credit asset classes; (2) 

the single swap category in the equity 

asset class; (3) swap categories in the FX 

asset class; and (4) swap categories in 

the other commodity asset class. 

Thereafter, the Commission discusses 

special rules for determining the 

appropriate minimum block sizes across 

asset classes. 


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204CL–AII at 3; CL–EEI at 5; CL–SIFMA at 3; CL– 

Vanguard at 7. 205CL–AII at 3. 206CL–SIFMA at 3. 207CL–Vanguard at 7. 

208CL–AII at 3. 

209CL–Barclays at 11. 

210CL–GFMA at 3. 

211CL–ICAP Energy at 3. 

212CL–ICI at 7. 

213CL–ISDA/SIFMA at 13. 

214CL–SIFMA at 3. 

215 Id. 

216CL–WMBAA at 4. 

1. Phase-In of Appropriate Minimum 

Block Sizes 

As discussed in Section I.C.2. above, 

the Commission proposed a phase-in of 

its regulations regarding appropriate 

minimum block size methodologies so 

that market participants could better 

adjust their swap trading strategies to 

manage risk, secure new technologies, 

and make necessary arrangements to 

comply with part 43. Thus, the 

Commission proposed two provisions 

relating to the Commission’s 

determination of appropriate minimum 

block sizes: (1) Initial appropriate 

minimum block sizes under proposed 

§ 43.6(e); and (2) post-initial appropriate 

minimum block sizes under proposed 

§ 43.6(f). 

The Commission received ten 

comments regarding the proposed 

phase-in of its appropriate minimum 

block size methodologies. Four 

commenters, AII, EEI, SIFMA, and 

Vanguard, requested that the 

Commission apply block status to all 

swaps during the initial period.204 AII 

stated that removing (or lowering) block 

thresholds would appropriately 

transition the market and avoid harming 

liquidity.205 SIFMA recommended 

collecting SDR data during the initial 

period and gradually and iteratively 

phasing in block thresholds.206

Vanguard also expressed concern 

regarding the liquidity impacts of 

setting block thresholds without more 

data.207

Eight commenters suggested that the 

Commission establish a more 

conservative threshold during the initial 

period. AII recommended that the 

Commission either remove block trading 

thresholds during the initial period or 

lower the thresholds below the 

proposed levels to appropriately 

transition the market and avoid 

unnecessarily harming liquidity.208

Barclays recommended introducing 

block levels that allow for empirical 

analysis of the transaction data and 

sequentially increasing block sizes until 

such point as the desired equilibrium 

between transparency and liquidity is 

reached.209 GFMA stated that, if the 

Commission used a percentage notional 

test, then it should introduce it in a 

phased manner to assess the impact on 

the market over time and ensure it has 

sufficient flexibility to amend the 

notional percentage.210 ICAP Energy 

proposed specific initial block 

thresholds for PJM at 50 MW/Hr and for 

SP–15 and Mid-C at 30 MW/Hr, and for 

natural gas basis swaps at 2500 

MMBTUs/day.211 ICI, while supporting 

a 50 percent notional amount 

calculation, urged the Commission to 

phase-in the calculation for very illiquid 

instruments (less than 3 or 4 trades per 

week) by first implementing a 25 

percent notional amount calculation, in 

order to alleviate potential harmful 

effects of disclosure of large block sizes 

on liquidity, particularly in illiquid 

swaps markets.212 ISDA/SIFMA stated 

that the Commission should phase in 

the block threshold in order to allow 

trading on SEFs and DCMs to develop 

and suggested setting the threshold 

based on a 25-percent notional amount 

calculation.213 SIFMA proposed a multiphase process for establishing block 

levels, starting with a one-year data 

collection phase, followed by an initial 

period with low block levels.214 The 

block levels would then be decreased if 

the Commission found that liquidity 

significantly decreased or bid-ask 

spreads significantly increased over the 

quarter for swaps close to, but below, 

the block threshold.215 WMBAA 

encouraged the Commission to 

implement lower block trade thresholds 

while the post-trade reporting 

requirements are implemented and 

market participants begin providing 

data to SDRs for cleared and uncleared 

swaps.216

After consideration of the comments 

above, the Commission is adopting a 

phased-in approach as proposed, but 

with modifications in response to the 

comments above regarding phasing, as 

more fully described below. 

2. Overview of Proposed Approach 

The chart below summarizes swap 

categories and calculation 

methodologies that the Commission 

proposed for each asset class in both the 

initial period and the post-initial period. 


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217This post-initial implementation period would 

commence after an initial period, lasting at least 

one year. Thereafter, the Commission would 

determine appropriate minimum block sizes a 

minimum of once annually. See proposed 

§ 43.6(f)(1). 

218See proposed § 43.6(b)(1). 

219See proposed § 43.6(c)(1). 

220See proposed § 43.6(f)(2). 

221See proposed § 43.6(b)(2). 

222See proposed § 43.6(b)(4)(i). 

223See proposed § 43.6(e)(1). 

224See proposed § 43.6(b)(4)(ii). 

225See proposed § 43.6(e)(2). 

226See proposed § 43.6(b)(5)(i). 

227See proposed § 43.6(e)(1). 

228See proposed § 43.6(b)(5)(i). 

229See proposed § 43.6(e)(3). 

230See proposed § 43.6(b)(5)(i). 

231See proposed § 43.6(e)(3). 

232See proposed § 43.6(b)(5)(ii). 

233See proposed § 43.6(e)(1). 

234See proposed § 43.6(b)(5)(iii) and the product 

types groupings listed in proposed appendix D to 

part 43. 

235See proposed § 43.6(e)(2). 

236See proposed § 43.6(b)(3). 

237See proposed § 43.6(d). 

238Proposed § 43.6(c)(1) describes the 67-percent 

notional amount calculation. Proposed § 43.6(e)(1) 

provides the provisions relating to the methodology 

for determining appropriate minimum block sizes 

during the initial period for swaps in the interest 

rate and credit asset classes, inter alia. 

239See note 85 supra for the definition of publicly 

reportable swap transaction. Since the Commission 

proposed to determine all appropriate minimum 

block sizes based on reliable data for all publicly 

reportable swap transactions within a specific swap 

category, the Commission does not view the fact 

that more than one SDR may collect such data as 

raising any material concerns. 

240See proposed amendment to § 43.2 and the 

discussion infra in this section. 

PROPOSED APPROACH

Asset class Swap category criteria Initial implementation period Post-initial implementation period 217

Interest Rates ..........

Credit .......................

By unique currency and tenor grouping 218

By tenor and conventional spread 

grouping 221

67-percent notional amount calculation 

by swap category 219

67-percent notional amount calculation 

by swap category 220

FX ............................ By numerated FX currency combinations (i.e., futures related) 222Based on DCM futures block size by 

swap category 223

By non-enumerated FX currency combinations (i.e., non-futures related) 224All trades may be treated as block 

trades 225

Other Commodity .... By economically-related Appendix B to 

part 43 contract if the swap is (1) futures related and (2) the relevant futures contract is subject to DCM 

block trade rules 226

Based on DCM futures block size by 

swap category 227

By economically-related Appendix B to 

part 43 contract if the swap is: (1) 

futures related and (2) the relevant 

futures contract is not subject to 

DCM block trade rules 228

No trades may be treated as blocks 229

By economically-related Appendix B to 

part 43 contract if the swap is (1) a 

listed natural gas or electricity swap 

contract and (2) the relevant Appendix B contract is not futures related 230

Appropriate minimum block size equal 

to $25 million 231

By swaps that are economically related to the list of 18 contracts listed 

in § 43.6(b)(5)(ii) 232

Based on DCM futures block size by 

swap category 233

By Appendix D to part 43 commodity 

group, for swaps not economically 

related to a contract listed in Appendix B to part 43 or to the list of 18 

contracts listed in § 43.6(b)(5)(ii) 234

All trades may be treated as block 

trades 235

Equity ...................... All equity swaps 236 .............................. No trades may be treated as blocks 237

3. The 67-Percent Notional Amount 

Calculation for Determination of 

Appropriate Minimum Block Sizes 

The Commission proposed using a 67- 

percent notional amount calculation to 

determine initial and post-initial 

appropriate minimum block sizes for 

swaps in the interest rate and credit 

asset classes pursuant to proposed 

§§ 43.6(c)(1), 43.6(e)(1), and 

43.6(f)(1).238 The Commission also 

proposed using a 67-percent notional 

amount calculation to determine postinitial appropriate minimum block sizes 

for swaps in the FX and other 

commodity asset classes pursuant to 

§ 43.6(f)(1). 

The 67-percent notional amount 

calculation as proposed is a 

methodology under which the 

Commission would: (Step 1) select all of 

the publicly reportable swap 

transactions within a specific swap 

category using a rolling three-year 

window of data beginning with a 

minimum of one year’s worth of data 

and adding one year of data for each 

calculation until a total of three years of 

data is accumulated; 239 (step 2) convert 

to the same currency or units and use 

a ‘‘trimmed data set’’; 240 (step 3) 

determine the sum of the notional 

amounts of swaps in the trimmed data 

set; (step 4) multiply the sum of the 

notional amount by 67 percent; (step 5) 

rank order the observations by notional 

amount from least to greatest; (step 6) 

calculate the cumulative sum of the 

observations until the cumulative sum 

is equal to or greater than the 67-percent 

notional amount calculated in step 4; 

(step 7) select the notional amount 

associated with that observation; (step 

8) round the notional amount of that 

observation to two significant digits, or 

if the notional amount associated with 

that observation is already significant to 

two digits, increase that notional 

amount to the next highest rounding 


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241For example, if the observed notional amount 

is $1,250,000, the amount should be increased to 

$1,300,000. This adjustment is made to assure that 

at least 67 percent of the total notional amount of 

transactions in a trimmed data set are publicly 

disseminated in real time. 

242Commenters in this category include AII, 

Barclays, CME, Freddie Mac, ICAP Energy, ICAP 

North America, ICI, ISDA/SIFMA, MFA, Morgan 

Stanley, Pierpont, SIFMA, Vanguard, WMBAA. 

243Commenters in this category include Arbor, 

AFR, Barnard, Better Markets, CRT, Currenex, 

Javelin, Jefferies, ODEX, RJ O’Brien, SDMA, Spring 

Trading. 

244CL–GFMA at 3. 

245CL–FIA at 2–3. 

246CL–CME at 2; CL–Barclays at 10. 

247CL–CME at 2. 

248CL–Barclays at 10. 

249CL–AII at 2. 

250CL–Freddie at 2; CL–ICI at 6–7. 

251CL–Pierpont at 3; CL–WMBAA at 3. 

252CL–ICAP Energy at 3; CL–SIFMA at 10. 

253CL–AII at 6; CL–ICAP Energy at 4. 

254CL–MFA at 3–4. 

255CL–Freddie at 2; CL–ICAP Energy at 3. 

256The ‘‘guiding principle in setting appropriate 

block trade levels [is that] the vast majority of swap 

transactions should be exposed to the public market 

through exchange trading.’’ Congressional Record— 

Senate, S5902, S5922 (July 15, 2010); CL–Barnard 

at 3; CL–SDMA at 2. 

257CL–Arbor at 1. 

258CL–CRT at 1–2; CL–Currenex at 2. 

259CL–Jefferies at 1–2. 

260CL–AFR at 8–9; CL–Better Markets at 7–8; CL– 

Spring Trading at 2; CL–ODEX at 1; CL–RJ O’Brien 

at 1; CL–AFR at 8–9; CL–Better Markets at 7–8; CL– 

Javelin at 2; CL–SDMA at 2. 

261CL–ODEX at 1; CL–RJ O’Brien at 1; CL–Spring 

Trading at 2. 

262CL–AFR at 8–9; CL–Better Markets at 7–8; CL– 

Javelin at 2; CL–SDMA at 2. For a discussion of 

market depth and market breadth, see infra note 271 

and accompanying text. 

point of two significant digits; 241 and 

(step 9) set the appropriate minimum 

block size at the amount calculated in 

step 8. An example of how the 

Commission would apply this proposed 

methodology is set forth in section VII 

of this final rule. 

Twenty-eight commenters provided 

general comments on the resulting 

proposed block sizes or on the general 

approach of using a notional amount 

calculation. Out of the 28 commenters, 

14 opposed the 67 percent notional 

amount calculation and/or supported 

lower appropriate minimum block 

sizes,242 12 supported the 67 percent 

notional amount calculation and/or 

supported higher appropriate minimum 

block sizes,243 1 commenter felt unable 

to comment on the 67 percent notional 

amount calculation without actual swap 

data,244 and 1 commenter opposed the 

67 percent notional calculation for the 

other commodity asset class, but also 

felt that the 50 percent notional 

calculation was too low for interest 

rates.245

Of the 14 commenters who opposed 

the 67 percent notional amount 

calculation and/or supported lower 

appropriate minimum block sizes, two 

commenters, CME and Barclays, 

opposed the notional amount 

calculation generally, but not 

necessarily the resulting block sizes.246

CME stated that the rule is arbitrary and 

unrelated to the explicit goals of DoddFrank with respect to setting 

appropriate minimum block sizes.247

Barclays stated that the calculation is 

not based on any analysis of the impact 

that these thresholds will have on 

liquidity or on the corresponding costs 

to market participants.248 The other 

commenters in this group generally 

expressed concern that the appropriate 

minimum block sizes were too large and 

would reduce liquidity and/or disrupt 

markets. For example, AII stated that 

‘‘we believe that if the CFTC utilizes the 

67 percent notional calculation required 

under the Proposed Rules, the CFTC 

will sacrifice liquidity for certain swap 

products and alter the proper 

functioning of the marketplace in the 

name of transparency.’’ 249

Several of the commenters who 

opposed the 67 percent notional amount 

calculation and/or supported lower 

appropriate minimum block sizes 

specifically discussed the 50 percent 

notional amount calculation. These 

commenters generally expressed 

concern that the 67 percent notional 

amount calculation resulted in 

appropriate minimum block sizes that 

are too high and would result in 

reduced liquidity in these markets. 

Freddie Mac and ICI expressly 

supported a 50 percent notional amount 

calculation.250 Pierpont and WMBAA 

recommended a notional amount 

calculation of no greater than 50 

percent.251 ICAP Energy and SIFMA 

recommended a notional amount 

calculation below 50 percent, but 

preferred a 50 percent notional amount 

calculation to a 67 percent notional 

amount calculation.252 AII and ICAP 

recommended not using a notional 

amount calculation at all, but preferred 

a 50 percent notional amount 

calculation to a 67 percent notional 

amount calculation.253

Some of the commenters who 

opposed the 67 percent notional amount 

calculation and/or supported lower 

appropriate minimum block sizes did so 

conditionally. MFA preferred the 50 

percent notional amount calculation 

over the 67 percent primarily in the 

initial period—‘‘if swap categories are 

not properly distinguished, and the 

Commission cannot ensure a calibration 

of the initial minimum block sizes to 

current market conditions, we hesitate 

to endorse the 67 percent notional 

amount calculation in the final 

rulemaking and prefer instead that the 

Commission use a 50 percent notional 

amount calculation, particularly in the 

initial period, with a phase-in to a 67 

percent notional amount calculation 

over time.’’ 254 Two other commenters 

supported the 50 percent notional 

amount calculation, but in the context 

of specific asset classes—Freddie Mac 

for the interest rate asset class and ICAP 

Energy for the other commodity asset 

class ‘‘for year two and beyond.’’ 255

Of the 12 commenters who supported 

the 67 percent notional amount 

calculation and/or higher appropriate 

minimum block sizes, several argued 

that lower appropriate minimum block 

sizes were inconsistent with 

congressional intent. Barnard and 

SDMA specifically stated that a 50 

percent notional amount calculation 

would not constitute a ‘‘vast majority’’ 

of swap transactions as intended by 

Congress.256 Moreover, commenters also 

suggested that the 67 percent notional 

amount calculation supported the 

statutory requirements of section 

2(a)(13) of the CEA as well as 

congressional intent. For example, 

Arbor stated that ‘‘the 67% rule and the 

Market Depth test are consistent with 

[c]ongressional [i]ntent, promotes 

transparency and trading of SEFs, 

provides better market data, and is a 

conservative approach given the 

market’s size.’’ 257 CRT and Currenex 

stated that the 67 percent notional 

amount calculation would achieve a 

proper balance between market 

transparency and market liquidity.258

Jefferies stated that the 67 percent 

notional amount calculation was 

consistent with congressional intent.259

Seven commenters expressed a 

preference for the 67 percent notional 

amount calculation, but also supported 

another alternative.260 ODEX, RJ 

O’Brien, and Spring Trading expressed 

support for the 67 percent notional 

amount calculation, but also suggested 

that a higher notional amount 

calculation would be preferable, 

particularly in the post-initial period.261

AFR, Better Markets, Javelin, and SDMA 

all recommended a 75 percent or higher 

notional amount calculation and a 

market depth and market breadth 

test.262

A number of commenters also 

expressed concern regarding imposing 

the proposed 67 percent notional 

amount calculation prior to analysis of 

swap data collected by SDRs. AII 

recommended lowering or eliminating 

block thresholds until complete data has 

been reported to SDRs so as not to 


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263CL–AII at 6. 

264CL–Barclays at 11. 

265CL–Better Markets at 9–10. 

266CL–GFMA at 3. 

267CL–ICAP Energy at 2. 

268CL–ICI at 4. 

269CL–ISDA/SIFMA at 14. 

270CL–Vanguard at 7. 

271Market depth and market breadth was 

proposed to be calculated as follows: (step 1) 

Identify swap contracts with pre-trade price 

transparency within a swap category; (step 2) 

calculate the total executed notional volumes for 

each swap contract in the set from step 1 and 

calculate the sum total for the swap category over 

the look back period; (step 3) collect a market depth 

snapshot of all of the bids and offers once each 

minute for the pre-trade price transparency set of 

contracts identified in step 1; (step 4) identify the 

four 30-minute periods that contain the highest 

amount of executed notional volume each day for 

each contract of the pre-trade price transparency set 

identified in step 1 and retain 120 observations 

related to each 30-minute period for each day of the 

look-back period; (step 5) determine the average 

bid-ask spread over the look-back period of one year 

by averaging the spreads observed between the 

largest bid and executed offer for all the 

observations identified in step 3; (step 6) for each 

of the 120 observations retained in step 4, calculate 

the sum of the notional amount of all orders 

collected from step 3 that fall within a range, 

calculate the average of all of these observations for 

the look-back period and divide by two; (step 7) to 

determine the trimmed market depth, calculate the 

sum of the market depth determined in step 6 for 

all swap contracts within a swap category; (step 8) 

to determine the average trimmed market depth, use 

the executed notional volumes determined in step 

2 and calculate a notional volume-weighted average 

of the notional amounts determined in step 6; (step 

9) using the calculations in steps 7 and 8, calculate 

the market breadth based on the following formula: 

market breadth = averaged trimmed market depth 

+ (trimmed market depth ¥ average trimmed 

market depth) × .75; (step 10) set the appropriate 

minimum block size equal to the lesser of the 

values from steps 8 and 9. 77 FR 15,482. 

272CL–CME at 2; CL–ODEX at 2; CL–Spring 

Trading at 2; CL–MFA at 7; CL–FIA at 2. 

273CL–Arbor at 1; CL–AFR at 8–9; CL–Jeffries at 

2; CL–SDMA at 3–6; CL–Javelin at 4–6; CL–RJ 

O’Brien at 1; CL–Better Markets at 9–10; CL–CRT 

at 2; CL–FIA at 2. 

274CL–AFR at 9; CL–Spring Trading at 2; CL–FIA 

at 2; CL–SDMA at 8. 

275CL–Arbor at 1; CL–CME at 2; CL–AFR at 3. 

276CL–MFA at 7. 

277CL–MFA at 7; CL–SDMA at 7; CL–Spring 

Trading at 2. 

278CL–SDMA at 5; CL–Javelin at 2. 

279CL–AFR at 9. 

280CL–Spring Trading at 2. 

281CL–Jefferies at 3. 

282CL–AFR at 9. 

283CL–Jefferies at 2; CL–Javelin at 6; CL–Arbor at 

1; CL–RJ O’Brien at 1; CL–CRT at 2. 

284CL–Better Markets at 10; CL–SDMA at 7; CL– 

Vanguard at 7. 

impair market liquidity.263 Barclays 

recommended introducing block levels 

that allow for empirical analysis of the 

transaction data and sequentially 

increasing block sizes until such point 

as the desired equilibrium between 

transparency and liquidity is 

reached.264 Better Markets suggested 

transitioning to a market depth and 

market breadth test after the 

Commission has collected a year of SDR 

data.265 GFMA could not comment on 

the 67 percent notional amount 

calculation in the absence of swap 

data.266 ICAP Energy stated that once 

post-implementation swap data is 

obtained, then the Commission and 

industry will be in better position to 

assess liquidity and propose block 

levels.267 ICI stated that, for those asset 

classes where no data is available, it is 

impossible to determine whether the 

Commission has identified the most 

relevant criteria for swap categories.268

ISDA/SIFMA suggested that for new 

interest rate swap products the 

Commission should allow for block 

treatment until sufficient data is 

available.269 Vanguard stated that block 

thresholds cannot be established absent 

an adequate data source and time for 

assessment.270

In the Further Block Proposal, the 

Commission specifically requested 

comment regarding other potential 

methods for determining appropriate 

minimum block thresholds. While the 

Commission received numerous 

comments regarding the efficacy of a 

notional amount calculation and the 

appropriate percentage to use in making 

such a calculation, the Commission only 

received significant comments regarding 

one other method. The Commission 

received a number of comments 

regarding whether the Commission 

should use a market depth and market 

breadth test, instead of the 67 percent 

notional amount calculation 

methodology, to calculate the relevant 

initial minimum block sizes and the 

post-initial minimum block sizes.271

Many commenters expressed support 

for adopting the market depth test 272

and other commenters additionally 

supported utilizing the market breadth 

test.273 Several commenters stated that 

such tests would provide a more 

accurate depiction of overall liquidity in 

specific markets, and thus would 

produce more appropriate minimum 

block sizes.274 Other commenters stated 

that employing the tests would be 

consistent with congressional intent 

expressed in the Dodd-Frank Act.275

MFA, however, cautioned that current 

market depth may be an unreliable 

indicator because it may vary over time 

and be subject to manipulation.276

Several commenters supported using 

the market depth and market breadth 

test in conjunction with the proposed 

notional amount calculation 

methodology and proposed different 

approaches. Some commenters 

recommended using the market depth 

test during the initial period as a crosscheck against the Commission’s 

notional amount calculations.277 SDMA 

and Javelin argued that a market depth 

and market breadth analysis would 

justify adoption of a 75-percent notional 

amount threshold in the initial 

period; 278 AFR suggested, however, that 

such a threshold could be set as a floor, 

with higher thresholds available based 

on liquidity levels.279 Spring Trading 

suggested using the market depth test on 

a quarterly basis to refine the 67-percent 

threshold during the initial period.280

Jefferies recommended using the test in 

the post-initial period to complement 

the 67-percent notional amount 

calculation in the initial period for 

interest rate and credit swaps.281

Some commenters noted the need for 

available and sufficient data to adopt 

the market depth and market breadth 

tests. AFR commented that sufficient 

data was already available based on 

information provided on trading screens 

of trading venues.282 Other commenters, 

however, stated that additional market 

data would allow the tests to produce a 

more adequate snapshot of liquidity.283

For example, SDMA recommended 

adopting the tests after obtaining six 

months of data; Vanguard and Better 

Markets recommended a year.284

After consideration of the comments 

received in regard to phasing-in the 

appropriate minimum block size and 

the 67-percent notional amount 

calculation, the Commission is adopting 

§ 43.6(e)(1) with the following 

modifications. For the initial period, the 

Commission is adopting the 50 percent 

notional amount calculation to 

determine appropriate minimum block 

sizes in the interest rate swaps and 

credit asset classes. The Commission is 

of the view that this approach provides 

for a more gradual phase-in of minimum 

block sizes as recommended by 

numerous commenters. Moreover, this 

will allow SDRs to collect at least one 

year of reliable data for each swap 

category prior to the application of the 

higher 67-percent notional amount 

calculation to determine appropriate 

minimum block sizes in the post initial 

period, which the Commission is 

adopting as discussed below. 

For the post-initial period, the 

Commission is adopting § 43.6(f)(1) as 

proposed. The 67-percent notional 

amount calculation is intended to 

ensure that within a swap category, 

approximately two-thirds of the sum 

total of all notional amounts are 

reported on a real-time basis. This 

approach would ensure that market 

participants have a timely view of a 

substantial portion of swap transaction 

and pricing data to assist them in 

determining, inter alia, the competitive 


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285The proposed calculation stands in contrast to 

the proposed 95th percentile-based distribution test 

set out in the Initial Proposal. See the discussion 

in section I.B. of the Further Block Proposal. 

286See note 41 supra. This phased-in approach 

seeks to improve transparency while not having a 

negative impact on market liquidity. 

287 7 U.S.C. 2(a)(13)(E)(iv). 

288The Commission received two comments 

supporting the Commission’s authority to set 

appropriate minimum block sizes outside of the 

proposed annual look-back period. MFA argued 

that the Commission’s goal to balance transparency 

and liquidity would be better achieved with the 

flexibility to adjust minimum block sizes quickly to 

respond to material market changes. CL–MFA at 8. 

MFA recommended that the Commission should 

have the authority to update post-initial minimum 

block sizes in extraordinary circumstances and on 

a case-by-case basis, based on SDR data that it 

receives for individual or across multiple swap 

categories. Id. GFMA stated that if the Commission 

establishes a notional calculation test, then it 

should ensure that it has sufficient flexibility to 

amend minimum block sizes. CL–GFMA at 4. 

GFMA recommended that the Commission should 

be able to ‘‘swiftly alter’’ block trade levels to 

enable some trading to be conducted in a newly 

illiquid market, without the benefit of reference to 

a data set. Id. The Commission notes that 

§ 43.6(f)(1) provides that the Commission shall 

update post-initial appropriate minimum block 

levels ‘‘[n]o less than once each calendar year.’’ 

Accordingly, the Commission notes that it has the 

ability to adjust post-initial minimum block sizes 

under the types of extraordinary circumstances 

raised by commenters. 

289See ‘‘Commission Q & A—On the Start of 

Swap Data Reporting’’ (Oct. 9, 2012). 290See ‘‘No-Action Relief for Swap Dealers from 

Certain Swap Data Reporting Requirements of Part 

43, Part 45, and Part 46 of the Commission’s 

Regulations Due to Effects of Hurricane Sandy,’’ 

Commission Letter No. 12–41 (Dec. 5, 2012). 291See id. 292See ‘‘Time-Limited No-Action Relief for Swap 

Counterparties that are not Swap Dealers or Major 

Swap Participants, from Certain Swap Data 

Reporting Requirements of Parts 43, 45 and 46 of 

the Commission’s Regulations,’’ Commission Letter 

No. 13–10 (Apr. 9, 2013). 293See id. 294See id. 

295See id. 

price for swaps within a relevant swap 

category. The Commission anticipates 

that enhanced price transparency would 

encourage market participants to 

provide liquidity (e.g., through the 

posting of bids and offers), particularly 

when transaction prices move away 

from the competitive price. The 

Commission also anticipates that 

enhanced price transparency would 

improve market integrity and price 

discovery, while reducing information 

asymmetries enjoyed by market makers 

in predominately opaque swap 

markets.285

In the Commission’s view, using the 

67-percent notional amount calculation 

in the post-initial period also would 

minimize the potential impact of realtime public reporting on liquidity risk. 

The Commission views this calculation 

methodology as an incremental 

approach to achieve real-time price 

transparency in swaps markets. The 

Commission believes that its 

methodology, in conjunction with the 

50-percent notional amount calculation 

during the initial period, represents a 

tailored approach towards achieving the 

goal of subjecting ‘‘a vast majority’’ of 

swap transactions to real-time public 

reporting.286

As noted above, CEA section 

2(a)(13)(E)(iv) directs the Commission to 

take into account whether the public 

disclosure of swap transaction and 

pricing data ‘‘will materially reduce 

market liquidity.’’ 287 If market 

participants conclude that the 

Commission has set appropriate 

minimum block sizes for a specific swap 

category in a way that will materially 

reduce market liquidity, then those 

participants are encouraged to submit 

data to support their conclusion. In 

addition, through its own surveillance 

of swaps market activity, the 

Commission may become aware that an 

appropriate minimum block size would 

reduce market liquidity for a specific 

swap category.288 In response to either 

a submission or its own surveillance of 

swaps market activity the Commission 

may exercise its legal authority to take 

action by rule or order to mitigate the 

potential effects on market liquidity 

with respect to swaps in a particular 

swap category. 

With respect to the market depth and 

market breadth test, the Commission is 

declining to adopt this approach to 

determine appropriate minimum block 

sizes at this time. The Commission 

considers the test a viable alternative to 

the notional amount calculation 

methodology, but also recognizes 

several prerequisites to implementing 

such a test. For example, the 

Commission would need to determine 

which contracts within a swap category 

offer pre-trade price transparency— 

electronically displayed and executable 

bids and offers as well as displayed 

available volumes for execution. As 

noted by commenters, adequate market 

trading data also must be available to 

collect a market depth snapshot of all of 

the bids and offers for the pre-trade 

price transparency set of applicable 

contracts. The Commission is also 

cognizant of MFA’s concerns regarding 

the potential for manipulation of market 

depth. Given the time needed for 

trading infrastructure to develop and the 

significant time and cost considerations 

involved in collecting such data from 

SEFs and DCMs, the Commission will 

continue to examine the merits of 

adopting the market depth and market 

breadth test. 

The Commission is currently of the 

view that data is per se reliable if it is 

collected by an SDR for an asset class 

after the respective compliance date for 

such asset class as set forth in part 45 

of the Commission’s regulations or by 

other Commission action. The 

Commission notes that SDRs have been 

collecting data pursuant to the 

compliance dates for certain market 

participants and asset classes since 

December 2012. DCMs and Swap 

Dealers (‘‘SDs’’) began reporting swap 

transactions in the interest rate and 

credit default swap asset classes on 

December 31, 2012.289 DCMs and SDs 

began reporting swap transactions in the 

FX, equity, and other commodity asset 

classes on February 28, 2013.290 Major 

Swap Participants (‘‘MSPs’’) began 

reporting swap transactions in all five 

asset classes on February 28, 2013.291

Financial Entities began reporting swap 

transactions in the interest rate and 

credit default swap asset classes on 

April 10, 2013.292 Financial Entities 

begin reporting swap transactions for 

swaps executed starting April 10, 2013, 

in the FX, equity, and other commodity 

asset classes on May 29, 2013.293 NonSDs, non-MSPs, and non-Financial 

Entities begin reporting swap 

transactions for swaps executed starting 

April 10, 2013, in the interest rate and 

credit default swap asset classes on July 

1, 2013.294 Non-SDs, non-MSPs, and 

non-Financial Entities begin reporting 

swap transactions for swaps executed 

starting April 10, 2013, in the FX, 

equity, and other commodity asset 

classes on August 19, 2013.295

Accordingly, the Commission and SDRs 

will have one year of reliable data as of 

April 10, 2014. 

The Commission notes that in 

response to either a submission or its 

own surveillance of swaps market 

activity, the Commission may exercise 

its legal authority to take action by rule 

or order to delay the imposition of postinitial appropriate minimum block 

sizes, particularly with respect to swap 

categories in the other commodity asset 

class. 

4. Data for Determination of Appropriate 

Minimum Block Sizes in the Post-Initial 

Period 

As referenced above in § 43.6(f)(2), the 

Commission proposed determining 

post-initial appropriate minimum block 

sizes utilizing a three-year rolling 

window (beginning with a minimum of 

one year and adding one year of data for 

each calculation until a total of three 

years of data is accumulated) of swap 

transaction and pricing data. 

The Commission received eight 

comments regarding the use of a threeVerDate Mar<15>2010 18:49 May 30, 2013 Jkt 229001 PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 E:\FR\FM\31MYR2.SGM 31MYR2

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Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 32895 

296CL–AII at 11. 

297CL–GFMA at 4. 

298CL–ICI at 7–8. 

299CL–ISDA/SIFMA at 14. 

300CL–Kinetix at 1. 

301CL–MFA at 8. 

302CL–SIFMA at 6–7. 

303CL–Vanguard at 7. 

304CL–ISDA/SIFMA at 14. 

305 Id. 

306 Id. 

307CL–Javelin at 5; CL–SDMA at 8. 

308CL–AFR at 7; CL–Better Markets at 9. 

309CL–Better Markets at 9. 

310A measure of central tendency, also known as 

a measure of location, in a distribution is a single 

value that represents the typical transaction size. 

Two such measures are the mean and the median. 

For a general discussion of statistical methods, see 

e.g., Wilcox, R. R., Fundamentals of Modern 

Statistical Methods (Springer 2d ed. 2010), (2010). 

year rolling window of data. AII 

believed it would be more prudent for 

the Commission to base block trading 

thresholds on a shorter time frame, 

using newer data. AII recommended 

that the Commission should only use 

the highest of the three-year, one-year, 

or one-quarter data collected in the 

determinations.296 GFMA stated that the 

three-year rolling data set is unlikely to 

be sensitive enough to shorter term 

changes in market liquidity and 

therefore risks setting block sizes that do 

not reflect current market conditions.297

ICI believed that a three-year window 

may not provide an appropriate data set 

to calculate the block threshold, and 

encouraged the Commission to look at a 

one-year set of data and a one-quarter 

set of data to determine whether the 

calculation would produce more 

accurate results.298 ISDA/SIFMA 

recommended a 6-month window for 

determining appropriate minimum 

block sizes, as a three-year rolling 

window is over-inclusive, particularly 

in CDS.299 Kinetix expressed concern 

that historical data may not be 

indicative of current market 

conditions.300 MFA was concerned that 

the three-year window would constrain 

the ability to shorten the look-back 

period if material changes in market 

conditions warranted a smaller data set, 

and recommended retaining the option 

to shorten the look-back window for the 

observed data set.301 SIFMA believed 

that block reassessments should look to 

data on swaps executed since the 

previous reassessment, rather than from 

a three-year data window as proposed 

by the Commission.302 Vanguard 

believed the assessment should be made 

on the basis of data recorded over a 

rolling three-month period for each 

swaps category.303

After consideration of the comments 

received, the Commission is adopting 

§ 43.6(f)(2) with modifications. Based 

upon the numerous comments 

recommending a data set covering a 

shorter time frame, the Commission will 

determine post-initial appropriate 

minimum block sizes under § 43.6(f)(2) 

utilizing a one-year window of swap 

transaction and pricing data. This 

approach will allow the Commission to 

better calibrate block thresholds to 

changes in market liquidity, while at the 

same time providing enough data to 

smooth out fluctuations in data such as 

those that may result from, for example, 

seasonality. 

As referenced above, the Commission 

proposed to amend § 43.2 of the 

Commission’s regulations to define the 

term ‘‘trimmed data set’’ as a data set 

that has had extraordinarily large 

notional transactions removed by 

transforming the data into a logarithm 

with a base of ten (Log10), computing the 

mean, and excluding transactions that 

are beyond four standard deviations 

above the mean. Proposed § 43.6(c) uses 

this term in connection with the 

calculations that the Commission would 

undertake in determining appropriate 

minimum block sizes and cap sizes. 

The Commission received five 

comments regarding the proposed use of 

a trimmed data set. Three commenters 

supported the use of a trimmed data set, 

but suggested alternative approaches. 

ISDA/SIFMA opposed the proposed 

methodology and believed that it would 

establish a threshold that is too high to 

exclude large transactions.304 Therefore, 

ISDA/SIFMA recommended that the 

Commission look instead at the raw 

block size (calculated based on all 

transactions in the relevant swap 

category) and eliminate any trades more 

than five times larger than the block 

threshold.305 ISDA/SIFMA alternatively 

recommended that the Commission only 

exclude transactions that are three 

standard deviations beyond the mean 

because the proposed methodology 

(excluding transactions that are four 

standard deviations beyond the mean) 

would capture large transactions that 

would otherwise skew the data.306 For 

purposes of applying a market depth 

and market breadth test, Javelin and 

SDMA recommended trimming each 

data set to focus only on bids or offers 

at the ‘‘current price’’—the Commission 

would (1) determine the mid-point of 

the bid-offer spread; (2) capture orders 

between the bid and this value; and (3) 

capture orders between the offer and 

this value.307

Two commenters opposed data 

trimming on the grounds that it is 

irrelevant to the purpose of determining 

minimum block trade sizes. AFR and 

Better Markets believed that trimming 

the data set would ultimately skew 

minimum block size calculations, such 

that certain-sized trades would be 

classified as block trades.308 Better 

Markets stated that the Commission 

should disclose the discrepancies 

between using a trimmed data set versus 

an unfiltered data set to calculate the 

block size threshold because the public 

lacks the data to make this 

determination on its own.309

After consideration of the comments 

received, the Commission is adopting 

§ 43.2 as proposed and applying the 

concept of a trimmed data set in 

§ 43.6(c) as proposed. The Commission 

believes that removing the largest 

transactions, but not the smallest 

transactions, may provide a better data 

set for establishing the appropriate 

minimum block size, given that the 

smallest transactions may reflect 

liquidity available to offset large 

transactions. Moreover, in the context of 

setting a block trade level (or large 

notional off-facility swap level), a 

method to determine relatively large 

swap transactions should be 

distinguished from a method to 

determine extraordinarily large 

transactions; the latter may skew 

measures of the central tendency of 

transaction size (i.e., transactions of 

usual size) away from a more 

representative value of the center.310

Therefore, trimming the data set 

increases the power of these statistical 

measures. In response to the 

commenters who oppose data trimming, 

the Commission emphasizes that 

trimming the data set is necessary to 

avoid the skewing of these measures, 

which could lead to the establishment 

of inappropriately high minimum block 

sizes. 

5. Methodology for Determining the 

Appropriate Minimum Block Sizes by 

Asset Class 

a. Interest Rate and Credit Default 

Swaps 

As described above, the Commission 

proposed using a 67-percent notional 

amount calculation to determine 

appropriate minimum block sizes for 

swaps in the interest rate and credit 

asset classes in both the initial and postinitial periods pursuant to §§ 43.6(c)(1), 

43.6(e)(1), and 43.6(f)(1). There was an 

exception to the use of the 67-percent 

notional amount calculation for the 

initial period in three swap categories in 

the interest rate and credit asset classes 

which contained less than 30 

transactions that would meet the 

definition of publicly reportable swap 

transaction: (1) Interest rate swap 


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311 77 FR at 15480. 

312CL–Javelin at 1–2. 

313CL–FIA at 2. 

314CL–Javelin at 2; CL–ODEX at 1; CL–SDMA at 

2; CL–Spring Trading at 2. 

315CL–Javelin at 2; CL–SDMA at 2. 

316CL–Freddie at 2. 

317CL–Pierpont at 3. 

318CL–Javelin at 1–2. 

319CL–Javelin at 2. 

320CL–CRT at 1–2; CL–Javelin at 5–6; CL–Jefferies 

at 2; CL–SDMA at 2–7. 

321CL–AII at 7. 

322CL–ICI at 5. 

323CL–Freddie at 2. 

324CL–ICAP at 8. 

325CL–MFA at 6–7. 

326CL–Vanguard at 7. 

327CL–WMBAA at 4–5. 

328See supra Section II.B(3). 

category—major currency/30 years +; (2) 

interest rate swap category—non-major 

currency/30 years +; and (3) 

CDScategory—350 bps +/6 to 8.5 years. 

If the Commission were to use the 

proposed 67 percent notional 

calculation method, then two of the 

three swap categories would have 

resulted in appropriate minimum block 

sizes higher than those proposed. The 

remaining swap category contained no 

data. Accordingly, for these three swap 

categories in the initial period, the 

Commission proposed using the lowest 

appropriate minimum block size for 

their respective asset classes based on 

the respective data set.311 In the interest 

rate asset class, the swap category with 

the lowest block size was the non-major 

currency/5 to 10 years, with an 

appropriate minimum block size of $22 

million (USD). In the credit asset class, 

the swap category with the lowest block 

size was the category 350 bps +/8.5 to 

12.5 years, with an appropriate 

minimum block size of $21 million 

(USD). Hence, the appropriate minimum 

block size was proposed to be set at $22 

million (USD) for the two interest rate 

swap categories with insufficient data 

and at $21 million (USD) for the 

corresponding CDS category. 

For interest rate swaps specifically, 

the Commission received eight 

comments regarding the application of 

the 67 percent notional amount 

calculation to determine initial and 

post-initial minimum block sizes. 

Jefferies supported the Commission’s 

proposal, stating that the 67 percent 

notional amount calculation was 

consistent with congressional intent and 

observed liquidity.312 FIA did not 

explicitly support the 67 percent 

notional amount calculation, but stated 

that a 50 percent notional amount 

calculation for interest rate swaps 

would be significantly too low.313

Javelin, ODEX, SDMA, and Spring 

Trading all recommended that the 

Commission maintain the proposed 67 

percent notional amount calculation or 

raise the threshold higher.314 Javelin 

and SDMA both suggested a 75 percent 

notional amount calculation in 

conjunction with a market breadth and 

market depth approach.315 Other 

commenters, however, suggested lower 

values for the notional amount 

calculation—Freddie recommended a 50 

percent notional calculation in the 

absence of more comprehensive data 

about liquidity and depth of swaps 

markets.316 Pierpont commented that, 

for instances where one counterparty to 

a swap is not a registered swap dealer, 

the Commission should determine block 

levels based on a 25 percent notional 

amount calculation.317

For credit default swaps, the 

Commission received four comments 

regarding the application of the 67 

percent notional amount calculation to 

determine initial and post-initial 

minimum block sizes. Jefferies 

supported the Commission’s proposal, 

stating that the 67 percent notional 

amount calculation was consistent with 

congressional intent and observed 

liquidity.318 Javelin recommended that 

the Commission maintain the proposed 

67 percent notional amount calculation 

or raise the threshold higher, to a 75 

percent notional amount calculation.319

Four commenters supported a market 

depth and market breadth test for 

CDS.320

The Commission also received seven 

comments specifically regarding the 

interest rate swaps and CDS data sets 

used for determining swap categories 

and establishing appropriate minimum 

block thresholds in the initial period. 

AII commented that the data for interest 

rate swaps and CDS is no longer 

reflective of the market, nor is it 

reflective of the market that will result 

once the Commission’s regulations are 

implemented in full, and urged the 

Commission not to rely on minimal and 

outdated data.321 ICI stated that the 

historical data on which the 

Commission relies may not be reflective 

of the swaps market once the DoddFrank Act requirements are fully 

implemented.322 Freddie stated that the 

interest rate data set may not be 

comprehensive enough to form the basis 

of the proposed minimum block sizes, 

particularly where the proposed postinitial appropriate minimum block sizes 

are determined after transaction and 

pricing data has been collected for a 

year.323 ICAP recommended that, if the 

Commission relies on historical market 

data, then it should use data that is 

more current and demonstrated to be 

representative of the market.324 MFA 

stated that, given limitations related to 

the size, composition, and timeliness of 

the data set that the Commission used 

for the initial period, the Commission 

should calibrate initial minimum block 

sizes against current market 

conditions.325 Vanguard stated that 

block thresholds cannot be established 

absent an adequate data source and time 

for assessment.326 WMBAA believed 

that, in basing rules on three months of 

data from over two years ago, the 

Commission has failed to ‘‘examine the 

relevant data and articulate a 

satisfactory explanation for its action 

including a rational connection between 

the facts found and the choices made’’ 

as well as ‘‘determine as best it can the 

economic implications of the rule.’’ 327

As described more fully above, in 

response to comments regarding the 

data sets used for interest rate and credit 

default swaps, the use of an incremental 

approach, and the comments regarding 

phasing and the 67-percent notional 

amount calculation regardless of asset 

class, the Commission is adopting a 

phased-in approach to notional amount 

calculation. The Commission is 

adopting § 43.6(e)(1) and (f)(1) as 

proposed, with modifications. In the 

initial period, the Commission is 

adopting the 50-percent notional 

amount calculation to determine 

appropriate minimum block sizes in the 

interest rate and credit asset classes. The 

Commission believes that this approach 

provides for a more gradual phase-in of 

minimum block sizes, as explained 

more fully above.328

The Commission did not receive any 

comments regarding the exception to 

the 67 percent notional amount 

calculation for swap categories 

containing fewer than 30 transactions. 

Accordingly, the Commission will 

continue to apply this exception in 

instances where the a Interest Rate or 

Credit swap category contains fewer 

than 30 transactions in calculating 

appropriate minimum block thresholds 

for the initial period. 

b. Equity 

The Commission proposed under 

§ 43.6(d) that all swaps in the equity 

asset class would not qualify for 

treatment as a block trade or large 

notional off-facility swap (i.e., these 

swaps would not be subject to a 

reporting time delay under part 43). As 

noted above, the Commission proposed 

this approach based on (1) the existence 

of a highly liquid underlying cash 

market; (2) the absence of time delays 

for reporting block trades in the 

underlying equity cash market; (3) the 


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329CL–AFR at 6. 

330CL–AII at 9; CL–Barclays at 9; CL–ICI at; 

ISDA/SIFMA at 10–11; SIFMA at 5. 

331CL–AII at 9. 

332CL–Barclays at 9. 

333 Id. 

334CL–ICI at 5. 

335CL–ISDA/SIFMA at 10–11. 

336CL–SIFMA at 5. 

337 In the event that time delays are established 

for reporting block trades in the underlying equity 

cash market, the Commission may consider 

establishing swap categories and block thresholds 

for equity swaps. 

338See supra note 169. 

339For example, if swap A is economically 

related to futures F, and futures F is subject to the 

block trade rules of a DCM that applies at a notional 

amount of $1 million, then swap A would qualify 

for treatment as a block trade or large notional offfacility swap if the notional amount of swap A 

exceeds $1 million. 

340 In situations when two or more DCMs offer for 

trading futures contracts that are economically 

related, the Commission has selected the lowest 

applicable non-zero futures block size as the initial 

appropriate minimum block size. The Commission 

believes that this approach would reduce the 

chance that the appropriate minimum block size 

established by the Commission in the initial period 

would have an unintended adverse effect on market 

liquidity for the relevant swap category. 

341CL–SDMA at 2. 

342CL–AII at 3 n.10. 

343CL–ICAP at 10. 

344See Determination of Foreign Exchange Swaps 

and Foreign Exchange Forwards under the 

Commodity Exchange Act, 77 FR 69694, Nov. 20, 

2012. 

small relative size of the equity swaps 

market relative to the futures, options 

and cash equity index markets; and (4) 

the Commission’s goal to protect the 

price discovery function of the 

underlying equity cash market and 

futures market. 

The Commission received six 

comments regarding swap categories in 

the equity asset class. One commenter, 

AFR, felt that no block trade treatment 

is appropriate as proposed for the equity 

asset class.329 Five other commenters 

recommended that the Commission treat 

equity swaps similarly to the other asset 

classes and establish swap categories 

based upon a range of criteria.330

AII disagreed with the Commission’s 

proposal that no equity swaps should be 

treated as blocks and suggested 

harmonization with the SEC’s approach 

for large equity trades.331 Barclays also 

disagreed with disallowing block levels 

for all equity swaps and recommended 

that the equity asset class should be 

treated similarly to the other asset 

classes, such that broad based indices 

should have separate block levels based 

upon futures market levels.332 Barclays 

also suggested that the Commission 

coordinate with the SEC in setting 

minimum block levels.333 ICI 

recommended interim time delays for 

all equity swaps until a closer study of 

data on equity swap transactions is 

completed, due to potential differences 

in liquidity in the underlying equity 

cash market.334 ISDA/SIFMA requested 

that the Commission reconsider its 

proposal and suggested that the 

Commission establish block sizes based 

on the consideration of total trading 

volume of swaps linked to the relevant 

underlying index or basket of equity 

securities.335 SIFMA stated that the 

Commission should establish 

appropriate minimum block sizes for 

equity swaps based upon liquidity of 

the underlying indices.336

After consideration of the comments 

received, the Commission is adopting 

§ 43.6(d) as proposed. While a number 

of the commenters pointed out 

differences in liquidity in the 

underlying equity indices as a 

justification for swap categorization, 

these differences do not alter the 

premises underlying the Commission’s 

proposal. Even taking these differences 

into account, there is still (1) a highly 

liquid underlying cash market; and (2) 

a small equity swaps market relative to 

the futures, options, and cash equity 

index markets. These characteristics, 

combined with the fact that there are no 

time delays for reporting block trades in 

the underlying equity cash market, 

makes establishment of swap categories 

and block thresholds for equity swaps 

inappropriate.337 Accordingly, the 

Commission is adopting § 43.6(d) as 

proposed. 

c. FX 

The Commission proposed to use 

different methodologies for the initial 

and post-initial periods to determine 

appropriate minimum block sizes for 

swaps categories in the FX asset class. 

The Commission’s proposed approach is 

premised on the absence of actual 

market data on which to determine 

appropriate minimum block sizes in the 

initial period. Subsection a. below 

includes a discussion of the initial 

period methodology. Subsection ii. 

below includes a discussion of the postinitial period methodology. 

i. Initial Period Methodology 

The Commission proposed under 

§ 43.6(e)(1) to set the appropriate 

minimum block sizes for swaps in the 

FX asset class during the initial period 

based on whether such swap is 

economically related to a futures 

contract, i.e., a futures-related swap.338

For futures-related swaps in the FX 

asset class, proposed § 43.6(e)(1) 

provides that the Commission would 

establish the appropriate minimum 

block sizes based on the block trade size 

thresholds set by DCMs for 

economically-related futures 

contracts.339 The Commission set forth 

the initial appropriate minimum block 

sizes in proposed appendix F to part 43 

of the Commission’s regulations.340 For 

non-futures related swaps in the FX 

asset class in the initial period, the 

Commission proposed under § 43.6(e)(2) 

that all such swaps would qualify to be 

treated as block trades or large notional 

off-facility swaps (i.e., these swaps 

would be subject to a time delay under 

part 43 of the Commission’s 

regulations). The Commission expected 

that this provision, as provided, only 

would apply to the most illiquid swaps. 

The Commission received three 

comments specifically related to the 

proposed methodology for determining 

appropriate minimum block sizes for 

swap categories in the FX asset class 

during the initial period. SDMA 

supported the Commission’s proposed 

block trade thresholds for the FX asset 

class.341 AII, however, urged the 

Commission to consider removing the 

block trading threshold during the 

initial period for the FX asset class, so 

as to allow the Commission to use SDR 

data to properly evaluate the market.342

ICAP recommended an initial block 

level of $10 million in the 1-month 

contract on a variety of FX nondeliverable forward contracts.343

The Commission notes that, since the 

Further Block Proposal, Treasury has 

issued a Final Determination, pursuant 

to sections 1a(47)(E)(i) and 1b of the 

CEA, that exempts FX swaps and FX 

forwards from the definition of ‘‘swap’’ 

under the CEA. Therefore, the 

requirements of section 2(a)(13) of the 

CEA would not apply to those 

transactions, and such transactions 

would not be subject to part 43 of the 

Commission’s regulations.344

Nevertheless, section 1a(47)(E)(iii) of the 

CEA provides that FX swaps and FX 

forwards transactions still are not 

excluded from regulatory reporting 

requirements to an SDR. Further, the 

Commission notes that Treasury’s final 

determination excludes FX swaps and 

FX forwards, but does not apply to FX 

options or non-deliverable FX forwards. 

As such, FX instruments that are not 

covered by Treasury’s final 

determination are subject to part 43 of 

the Commission’s regulations. 

After consideration of the comments 

received, the Commission is adopting 

§ 43.6(e)(1) and (2) as proposed. 

However, given the changes to proposed 

§ 43.6(b)(4)(i), which significantly 

reduce the number of swap categories, 

the Commission believes that this 

approach encompasses the most liquid 

FX swaps and instruments, including all 


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345See Q18 of the Further Block Proposal, which 

sets forth an alternative approach to proposed swap 

categories based on unique currency combinations. 

77 FR 15476. 346The Commission notes further that DCMs 

historically have had the appropriate incentive to 

balance these considerations because they benefit 

from liquidity generally (i.e., commissions from 

transaction volume in block and non-block trades 

provides DCMs with their primary source of 

revenue). 

347The Commission is of the view that the pretrade and post-trade contexts are sufficiently similar 

such that policies directed at balancing 

transparency and liquidity concerns in a pre-trade 

context are relevant in considering what an 

appropriate balance is in the post-trade context. In 

the pre-trade context, block sizes are set near or at 

the point where a trader would be able to offset the 

risk of an equally large transaction without bearing 

liquidity risk. 

348Core Principle 9 of section 5(d) of the CEA 

provides that a DCM ‘‘shall provide a competitive, 

open, and efficient market and mechanism for 

executing transactions. . . . ’’ 7 U.S.C. 7(d)(9). 

Current appendix B to part 38 of the Commission’s 

regulations provides that in order to maintain 

compliance with Core Principle 9, DCMs allowing 

block trading ‘‘should ensure that the block trading 

does not operate in a manner that compromises the 

integrity of prices or price discovery on the relevant 

market.’’ See 17 CFR 38 app. B. 

349For example, section 40.6 of the Commission’s 

regulations include a process by which registered 

entities may certify rules or rule amendments that 

establish or change block trade sizes for futures 

contracts. See 17 CFR 40.6. 

350CL–SDMA at 2. 

351CL–Barclays at 10; CL–GFMA at 3. 

352See supra note 256. 

353See proposed § 43.6(b)(5)(i). The Commission 

is adopting most of the proposed categories in this 

final rule, subject to some modifications. See supra 

note 190 and accompanying text. 

354As proposed under § 43.6(b)(5)(ii), these 

futures contracts were: CME Cheese; CBOT 

Distillers’ Dried Grain; CBOT Dow Jones-UBS 

Commodity Index Excess Return; CBOT Ethanol; 

CME Frost Index; CME Goldman Sachs Commodity 

Index (GSCI) (GSCI Excess Return Index); NYMEX 

Gulf Coast Gasoline; Gulf Coast Sour Crude Oil; 

NYMEX Gulf Coast Ultra Low Sulfur Diesel; CME 

Hurricane Index; CME International Skimmed Milk 

Powder; NYMEX New York Harbor Ultra Low 

Sulfur Diesel; CBOT Nonfarm Payroll; CME Rainfall 

Index; CME Snowfall Index; CME Temperature 

Index; CME U.S. Dollar Cash Settled Crude Palm 

Oil; and CME Wood Pulp. The Commission is 

adopting most of the proposed categories in this 

final rule, subject to some modifications. See supra 

note 187. 

355See proposed § 43.6(b)(5)(iii). 

356The Commission notes that pursuant to 

proposed § 43.6(b)(5)(i), each of the listed natural 

gas and electricity swap contracts proposed to be 

listed in appendix B to part 43 would be considered 

its own swap category. As discussed further above, 

the Commission is adopting these categories in this 

final rule. See supra Section II.A(4). 

357The futures contracts that are currently listed 

on appendix B to part 43 are the 28 Enumerated 

Reference Contracts plus Brent Crude Oil (ICE). The 

13 electricity and natural gas swap contracts that 

the Commission had proposed to add to appendix 

B to part 43 of the Commission’s regulations were 

not futures contracts. As noted above, however, 

these contracts have been converted into 

economically equivalent futures contracts that are 

listed on a DCM. See supra note 176. 

super-major currency combinations, as 

well as all super-major and major 

currency combinations. This approach 

further encompasses many important 

super-major and non-major currency 

combinations, many of which already 

have block trade size thresholds set by 

DCMs for economically-related futures 

contracts.345 The Commission believes 

that this approach is appropriate during 

the initial period in the absence of 

actual swap data. The approach during 

the initial period would draw upon the 

experience of DCMs in considering the 

potential impacts on liquidity risk that 

enhanced transparency may cause in 

connection with futures contract 

execution.346 The Commission 

understands that DCMs have set block 

sizes primarily in consideration of the 

objectives of enhancing pre-trade 

transparency and reducing liquidity 

risk.347 The Commission notes that 

DCMs are required to set block sizes for 

futures in compliance with relevant core 

principles (including Core Principle 

9) 348 and Commission regulations.349

ii. Post-Initial Period Methodology 

In the post-initial period, the 

Commission proposed under § 43.6(f)(2) 

to utilize the 67 percent notional 

amount calculation to determine 

appropriate minimum block sizes for 

swap categories in the FX asset class. 

The Commission would group all 

publicly reportable swap transactions in 

the FX asset class into their respective 

swap categories and then apply the 67 

percent notional amount calculation to 

determine the appropriate minimum 

block sizes. 

The Commission received three 

comments specific to the proposed 

methodology for determining 

appropriate minimum block sizes for 

swap categories in the FX asset class 

during the post-initial period. SDMA 

supported the Commission’s proposed 

block trade thresholds for the FX asset 

class.350 Barclays and GFMA, however, 

expressed concern that the 67 percent 

notional amount calculation was 

proposed without actual swap data 

regarding the FX asset class.351

After consideration of the comments 

received, the Commission is adopting 

§ 43.6(f)(2) with the modification that 

only those swap categories established 

in § 43.6(b)(4)(i) will have minimum 

block sizes set using this methodology 

in the post-initial period, while the 

remainder of the swaps covered by 

§ 43.6(b)(4)(ii) will continue to be 

treated as blocks. The Commission 

believes that applying the 67 percent 

notional amount calculation will ensure 

that the vast majority of swap 

transactions are subject to real-time 

reporting.352 In addition, applying the 

67 percent notional amount calculation 

to all five asset classes in the post-initial 

period provides a consistent, bright-line 

rule regarding how appropriate 

minimum block thresholds will be 

calculated, thus providing clarity to 

market participants engaging in swap 

transactions. By allowing all swaps 

covered by § 43.6(b)(4)(ii) to be treated 

as blocks, the Commission is being 

conservative in its approach in 

potentially less liquid markets where 

the impacts to market participants of 

inappropriate block trades could be 

substantial. The Commission believes 

that this approach provides additional 

time to analyze data in order to establish 

improved swap categories as suggested 

by commenters. 

d. Other Commodity 

The Commission proposed using 

different methodologies for the initial 

and post-initial periods to determine 

appropriate minimum block sizes for 

swaps categories in the other 

commodity asset class. The proposed 

methodology for determining the 

appropriate minimum block sizes in the 

initial period differs based on the three 

types of other commodity swap 

categories: (1) Those swaps based on 

contracts listed in appendix B to part 43 

of the Commission’s regulations; 353 (2) 

swaps that are economically related to 

certain futures contracts; 354 and (3) 

other swaps.355 With regards to (1), the 

Commission proposed setting initial 

appropriate minimum block sizes for 

publicly reportable swap transactions in 

which the underlying asset directly 

references or is economically related to 

the natural gas or electricity swap 

contracts listed in appendix B to part 43 

of the Commission’s regulations.356 The 

proposed methodology for determining 

the appropriate minimum block sizes 

for other commodity swaps in the postinitial period follows the same 

methodology—the 67 percent notional 

amount methodology—used for 

determining the post-initial appropriate 

minimum block sizes in the interest 

rate, credit and FX asset classes. A more 

detailed description of the 

methodologies during the initial and 

post-initial periods, as well as the rules 

for the special treatment of listed 

natural gas and electricity swaps are 

presented in the subsections below. 

i. Initial Period Methodology 

With respect to swaps that reference 

or are economically related to one of the 

futures contracts listed in appendix B to 

part 43 357 or in § 43.6(b)(5)(ii), the 

Commission proposed to set the 

appropriate minimum block size based 

on the block sizes for related futures 


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358 In situations when two or more DCMs offer for 

trading futures contracts that are economically 

related, the Commission has selected the lowest 

applicable non-zero futures block size among the 

DCMs as the initial appropriate minimum block 

size. The Commission believes that this approach 

would reduce the chance that the appropriate 

minimum block size established by the Commission 

in the initial period would have an unintended 

adverse effect on market liquidity for the relevant 

swap category. 

359These non-futures related swaps are not 

economically related to one of the futures contracts 

listed in proposed appendix B to part 43 or in 

proposed § 43.6(b)(5)(ii). See proposed 

§ 43.6(b)(5)(iii). 

360See supra Section II.A(4). 

361For swaps in which the underlying asset 

references or is economically related to one of the 

natural gas or electricity swaps, the Commission 

proposed to treat such natural gas and electricity 

swaps differently than other publicly reportable 

swap transactions in the other commodity asset 

class when setting the initial appropriate minimum 

block sizes. The Commission recognized that 

traders typically offset their positions in the natural 

gas and electricity markets through trading OTC 

forward contracts, swaps, plain vanilla options, 

non-standard options and other customized 

arrangements since existing futures contracts listed 

on DCMs only cover a limited number of electricity 

delivery points. The proposed $25 million initial 

minimum block level corresponded to the level of 

the interim and initial cap sizes. For a discussion 

of interim and initial cap sizes, see supra section 

III.A of the Further Block Proposal. 

362CL–SDMA at 2 n.1. 

363CL–EEI at 11 n. 29. 

364 Id. 

365CL–ICAP Energy at 4; CL–Barclays at 9. 

366CL–ICAP Energy at 4. 

367 Id. 

368CL–ICAP Energy at 5; CL–EEI at 5. 

369CL–ICAP Energy at 5. 

370CL–EEI at 8. 

371CL–EEI at 8. 

372According to EEI, the proposed initial 

minimum block size of 1,000,000 mmBtu for the 

Henry Hub Natural Gas futures contract is 

approximately equal to a minimum block size of $3 

million. EEI Comment Letter at 8–9. 

373CL–ICAP Energy at 5. 

374CL–Parity at 3. 

375 Id. at 4–5. 

contracts set by DCMs.358 Similar to its 

rationale with respect to setting initial 

appropriate minimum block sizes for 

swaps in the FX asset class, the 

Commission believed that this approach 

would utilize the experience of DCMs in 

considering liquidity effects of 

enhancing pre-trade transparency in 

setting block sizes for these contracts. 

For swaps that reference or are 

economically related to a futures 

contract listed in appendix B to part 43 

that is not subject to a DCM block trade 

rule, the Commission proposed in 

§ 43.6(e)(3) to disallow treatment as a 

block trade or large notional off-facility 

swap. The Commission based this 

approach on an inference that DCMs 

have not set block trade rules for certain 

futures contracts because of the degree 

of liquidity in those futures markets. 

In the initial period, the Commission 

proposed in § 43.6(e)(2) to treat all nonfutures-related swaps 359 in the other 

commodity asset class as block trades or 

large notional off-facility swaps (i.e., 

these swaps would be subject to a 

reporting time delay under part 43, 

irrespective of notional amount). The 

Commission believed that non-futuresrelated swaps in the other commodity 

asset class generally have lower 

liquidity in contrast to the more liquid 

interest rate, credit and equity asset 

classes, as well as other commodity 

swaps that are economically related to 

liquid futures contracts (i.e., those 

futures contracts listed in appendix B to 

part 43). 

The Commission also proposed to 

amend appendix B to part 43 of the 

Commission’s regulations to add 13 

natural gas and electricity swap 

contracts, which the Commission 

previously has determined to be liquid 

contracts serving a price discovery 

function,360 with each contract serving 

as the basis for a swap category in the 

other commodity asset class. The 

Commission further proposed to set the 

initial appropriate minimum block size 

for each of these categories to $25 

million (USD), which would apply to 

natural gas and electricity swaps that 

reference or are economically related to 

these natural gas and electricity swap 

contracts.361

SDMA expressed support for the 

proposed methodology for swaps in the 

other commodity asset class.362 With 

respect to the swaps in which the 

underlying asset references or is 

economically related to one of the 

natural gas or electricity swaps listed in 

appendix B to part 43, EEI also 

expressed support for denominating the 

minimum block size in U.S. dollars, 

rather than by a quantity such as 

Mwh.363 EEI argued that denominating 

minimum block sizes in U.S. dollars 

would promote standardization across 

the various trading hubs in the 

electricity and natural gas markets.364

Several commenters, however, 

objected to certain aspects of the 

proposed $25 million (USD) initial 

appropriate minimum block size. Two 

commenters recommended setting the 

block sizes based on mmBtu/day and 

MW/hr for natural gas and electricity 

swaps, respectively, rather than setting 

the block sizes based on notional 

amount.365 ICAP Energy commented in 

particular that adopting the latter 

approach would be inappropriate, given 

that prices for such commodities 

fluctuate due to peak season usage or 

delivery location.366 ICAP Energy also 

commented that it was not clear as to 

how the notional value of swaps with 

optionality would be calculated; 

calculating notional value based on the 

premium of the option, for example, 

would adversely affect low-premium 

options such as out-of-the-money calls 

and puts.367

Two commenters opposed the 

proposed $25 million (USD) initial 

minimum block size with respect to the 

swap categories for the electricity swaps 

added to appendix B to part 43. ICAP 

Energy and EEI argued that the 

proposed limits were too high given the 

relative illiquidity of these markets.368

ICAP Energy recommended the 

following minimum block sizes: PJM 

WH (on-peak and off-peak)—50 MW/hr; 

SP–15 Financial Day-Ahead LMP (onpeak and off-peak)—30/MW/hr; Mid-C 

Financial (on-peak and off-peak—30 

MW/hr).369 EEI requested that the 

Commission treat all electricity swaps 

transactions as block trades during the 

initial period or, in the alternative, set 

the initial minimum block size at no 

higher than $3 million.370

ICAP Energy and EEI also opposed the 

proposed $25 million initial minimum 

block size with respect to the swap 

categories for the natural gas swaps 

proposed to be added to appendix B to 

part 43. EEI requested that the 

Commission treat all natural gas swaps 

transactions as block trades during the 

initial period because of their relatively 

illiquid markets.371 In the alternative, 

EEI recommended setting the initial 

minimum block size at no higher than 

$3 million, which would approximately 

equate the proposed initial block size 

for the Henry Hub Natural Gas futures 

contract.372 ICAP Energy recommended 

setting the initial minimum block size at 

2500 mmBtu.373

Parity Energy commented on the 

ambiguity of the term ‘‘economically 

related’’ and requested clarification that 

natural gas swaps with optionality that 

reference or are economically related to 

the Henry Hub Natural Gas options 

would be subject to the initial minimum 

block size proposed for that particular 

swap category (5,500,000 mmBtu), 

rather than the block size for Henry Hub 

Natural Gas futures (1,000,000 

mmBtu).374

Parity Energy opposed the proposed 

initial minimum block size of 100,000 

bbl. to crude oil swaps with optionality 

as too low and recommended that the 

Commission establish a separate initial 

minimum block size for such swaps at 

1,000,000 bbl., which would be 

consistent with CME’s minimum block 

size for Light Sweet Crude Oil 

options.375

ICAP Energy commented that swaps 

that reference or are economically 


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376CL–ICAP Energy at 1–2. 

377See supra note 176. 

378See supra note 187 and accompanying text. 

379See infra Section II.C. 

380See infra Section II.B. 

381The Commission is also amending the initial 

minimum block size for swaps that reference or are 

economically related to the GSCI Excess Return 

Index, Dow Jones-UBS Commodity Index, Gulf 

Coast Sour Crude Oil, and Palladium futures 

contract. The Commission is also removing the 

initial minimum block size for swaps that reference 

or are economically related to the Non-Farm 

Payroll, International Skimmed Milk Powder, and 

Wood Pulp futures contracts, as these contracts are 

no longer listed for trading. See supra note 187. 

382CL–Barclays at 10; CL–CME at 2, 4; CL– 

WMBAA at 2–3. 

383CL–CME at 4; CL–WMBAA at 2–3. 

384CL–Barclays at 10. 

385CL–ICAP Energy at 3. 386CL–EEI at 8–9. 387 Id. at 9. 388EEI requested that the Commission delay the 

adoption of minimum block sizes for the swaps in 

these categories for at least one year until it has 

obtained at least one year of data from an SDR; in 

the interim, all relevant transactions would be 

eligible for block trade treatment. CL–EEI at 11. 389See note 41 supra. 390 In the Further Block Proposal, the Commission 

proposed amending § 43.2 to define ‘‘swaps with 

related to the NYMEX New York Harbor 

RBOB Gasoline futures contract, for 

which the Commission has not set an 

initial minimum block size under 

proposed appendix F, should be subject 

to a block size that is consistent with the 

one set by DCMs for the related futures 

contract.376

The Commission has considered the 

comments above regarding the 

appropriate unit of measurement and 

initial appropriate minimum block size 

for the natural gas and electricity swap 

categories in the other commodity asset 

class. Based on those comments and the 

other commodity swap categories 

adopted by the Commission in this final 

rule that are based on the converted 

natural gas and electricity futures 

contracts,377 the Commission is setting 

the appropriate minimum block sizes 

for these categories in the initial period 

based on the block sizes set by DCMs for 

these futures contracts. The Commission 

is adopting this approach for several 

reasons. This approach is consistent 

with the Commission’s approach for 

swaps that reference or are 

economically related to one of the 

futures contracts previously listed in 

appendix B to part 43 or adopted 

§ 43.6(b)(5)(ii), which utilizes the 

experience of DCMs in setting block 

sizes for these contracts. The 

Commission also believes this approach 

is more conservative than the proposed 

$25 million initial minimum block size, 

which might adversely affect market 

liquidity for the electricity and natural 

gas swaps markets. Further, this 

approach responds to comments by 

setting the initial minimum block sizes 

based on underlying units, rather than 

notional amount, and would be more 

appropriate to avoid price fluctuations 

and to establish consistency with postinitial calculation methodology. 

In response to Parity Energy and 

consistent with the Commission’s 

adopted approach to swaps categories in 

the other commodity asset class under 

§ 43.6(b)(5)(i)–(ii), the Commission is 

not establishing initial appropriate 

minimum block sizes based on DCM 

block sizes for swaps that reference or 

are economically related to the options 

contracts listed in proposed appendix 

F.378 The Commission is establishing 

initial appropriate minimum block size 

for such swaps based on the adopted 

methodology for swaps with optionality, 

as discussed further below.379 The 

notional size of swaps with optionality 

in the initial period will be equal to the 

notional size of the swap component 

without the optional component; 

accordingly, the appropriate minimum 

block size will be based on the block 

sizes for economically related futures 

contracts set by DCMs.380

The Commission is otherwise 

adopting the rule generally as proposed 

under § 43.6(e) with respect to swaps in 

the other commodity asset class, but 

also is updating initial appropriate 

minimum block sizes proposed in 

appendix F, consistent with block sizes 

set by DCMs for the relevant related 

futures contract.381 In response to ICAP 

Energy’s request, the Commission is also 

setting an initial minimum block size 

for swaps that reference or are 

economically related to the NYMEX 

New York Harbor RBOB Gasoline 

futures contract that is based on the 

DCM block size set for that contract. 

ii. Post-Initial Period Methodology 

In the post-initial period, the 

Commission provided in proposed 

§ 43.6(f)(3) to determine appropriate 

minimum block sizes for swaps in the 

other commodity asset class by using 

the 67-percent notional amount 

calculation set forth in proposed 

§ 43.6(c)(1). The 67-percent notional 

amount calculation would be applied to 

publicly reportable swap transactions in 

each swap category observed during the 

appropriate time period. 

Several commenters opposed the 67- 

percent notional amount calculation 

methodology for swaps in the other 

commodity asset class in the post-initial 

period.382 CME and WMBAA 

characterized the proposed 

methodology as overbroad and 

recommended a more tailored approach 

based on the trading profiles of each 

particular market.383 Barclays 

commented that the Commission has no 

data or evidence demonstrating that 

such a notional amount would properly 

balance liquidity and transparency 

considerations.384 ICAP Energy 

recommended a lower post-initial 

notional amount—either 33 or 50 

percent—that would account for the 

illiquid nature of the electricity and 

natural gas basis swaps market.385 Based 

on the non-standardized and bespoke 

nature of many electricity and natural 

gas swap transactions, EEI 

recommended that the Commission 

eliminate post-initial minimum block 

sizes for the electricity and natural gas 

swap categories for the swaps added to 

appendix B to part 43.386 EEI also 

recommended that the Commission 

eliminate minimum post-initial block 

sizes for the electricity swap category 

under appendix D.387 In the alternative, 

EEI recommended that the Commission 

set the minimum block sizes for each of 

these categories at no greater than $3 

million.388

After consideration of the comments 

received, the Commission is adopting 

§ 43.6(f)(1) as proposed for swap 

categories in the other commodity asset 

class for the post-initial period. The 

reasons stated by the Commission above 

in support of this methodology in the 

post-initial period also apply to swaps 

in this asset class. The Commission 

believes that this methodology will 

ensure that the vast majority of swap 

transactions are subject to real-time 

reporting.389 In addition, applying the 

same post-initial notional amount 

calculation to the other commodity asset 

class provides a consistent, bright-line 

rule regarding how appropriate 

minimum block thresholds will be 

calculated, thus providing clarity to 

market participants engaging in swap 

transactions. 

6. Special Provisions for the 

Determination of Appropriate Minimum 

Block Sizes for Certain Types of Swaps 

The Commission recognizes the 

complexity of the swaps market may 

make it difficult to determine 

appropriate minimum block sizes for 

particular types of swaps under the 

methodologies discussed above. For that 

reason, the Commission proposed 

§ 43.6(h), which sets out a series of 

special rules that apply to the 

determination of the appropriate 

minimum block sizes for particular 

types of swaps. The Commission 

proposed special rules with respect to: 

(a) Swaps with optionality; (b) swaps 

with composite reference prices 390; (c) 


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composite reference prices’’ as swaps based on 

reference prices composed of more than one 

reference price that are in differing swap categories. 

The Commission proposed to use this term in 

connection with the establishment of a method 

through which parties to a swap transaction can 

determine whether a component to their swap 

would qualify the entire swap as a block trade or 

large notional off-facility swap. The Commission is 

adopting this definition as proposed. 

391 In the Further Block Proposal, the Commission 

proposed to amend § 43.2 of the Commission’s 

regulations by defining the term ‘‘physical 

commodity swap’’ as a swap in the other 

commodity asset class that is based on a tangible 

commodity. The Commission is adopting this 

definition as proposed. 

392 In essence, this approach would assume a 

delta factor of one with respect to the underlying 

swap for swaptions. 

393CL–FIA at 3. 

394 Id. 

395CL–ICAP Energy at 6. 

396 Id. 

397CL–ICAP Energy at 7. 

398Swaps with composite reference prices are 

composed of reference prices that relate to one 

another based on the difference between two or 

more underlying reference prices—for example, a 

locational basis swap (e.g., a natural gas Rockies 

Basis swap) that utilizes a reference price based on 

the difference between a price of a commodity at 

one location (e.g., a Henry Hub index price) and a 

price at another location (e.g., a Rock Mountains 

index price). 

399 In other words, swaps with a composite 

reference price composed of reference prices that 

relate to one another based on an additive 

relationship. This term would include swaps that 

are priced based on a weighted index of reference 

prices. 

400CL–AFR at 5. 

401CL–ICAP Energy at 6. 

402The real-time public reporting rules would 

apply to each of the separate USIs as previously 

finalized in part 43. 17 CFR 45.5. 

‘‘physical commodity swaps’’ 391; (d) 

currency conversions; and (e) successor 

currencies. Each of these special rules is 

discussed in the subsections below. 

a. Swaps With Optionality 

A swap with optionality highlights 

special concerns in terms of 

determining whether the notional size 

of such swap would be treated as a 

block trade or large notional off-facility 

swap. Proposed § 43.6(h)(1) addressed 

these concerns by providing that the 

notional size of swaps with optionality 

would equal the notional size of the 

swap component without the optional 

component. For example, a LIBOR 3- 

month call swaption with a calculated 

notional size of $9 billion for the swap 

component—regardless of option 

component, strike price, or the 

appropriate delta factor—would have a 

notional size of $9 billion for the 

purpose of determining whether the 

swap would qualify as a block trade or 

large notional off-facility swap.392

The Commission received two 

comments regarding proposed 

§ 43.6(h)(1). FIA stated that the 

approach failed to recognize potential 

differences in liquidity between the 

swap and an underlying swaption.393

FIA also pointed out that the Further 

Block Proposal did not explicitly 

address how to handle combinations of 

options.394 With respect to options 

transactions involving swaps in the 

electricity, natural gas, and crude oil 

swap categories that are used to carry 

out complex strategies, ICAP Energy 

recommended treating all such 

transactions, as well as related swap 

hedges, as block trades.395 ICAP Energy 

cited the complex nature of these 

transactions and the common 

involvement of an intermediary in 

carrying them out as reasons for acrossthe-board treatment as block trades.396

ICAP Energy, however, supported the 

proposed approach of adopting the 

block sizes set by DCMs for natural gas 

and electricity outright options.397

After consideration of the comments 

received, the Commission is adopting 

§ 43.6(h)(1) as proposed. In response to 

ICAP Energy, the Commission believes 

that the proposed approach provides an 

easily calculable method for market 

participants to ascertain whether their 

swaps with optionality features would 

qualify as a block trade or large notional 

off-facility swap. The Commission is 

aware that this approach does not take 

into account the risk profile of a swap 

with optionality compared to that of a 

‘‘plain-vanilla swap,’’ but believes that 

this approach is reasonable to minimize 

complexity. 

b. Swaps With Composite Reference 

Prices 

Swaps with two or more reference 

prices (i.e., composite reference prices) 

raise concerns as to which reference 

price market participants should use to 

determine whether such swap qualifies 

as a block trade or large notional offfacility swap.398 Proposed § 43.6(h)(2) 

provides that the parties to a swap 

transaction with composite reference 

prices (i.e., two or more reference 

prices) may elect to apply the lowest 

appropriate minimum block size 

applicable to any component swap 

category. This provision also would 

apply to: (1) Locational or grade-basis 

swaps that reflect differences between 

two or more reference prices; and (2) 

swaps utilizing a reference price based 

on weighted averages of component 

reference prices.399

Under proposed § 43.6(h)(2), market 

participants would need to decompose 

their composite reference price swap 

transaction in order to determine 

whether their swap would qualify as a 

block trade or large notional off-facility 

swap. For example, assume that the 

appropriate minimum block size for 

futures A-related swaps is $3 million, 

for futures B-related swaps is $800,000, 

for futures C-related swaps is $1.2 

million and for futures D-related swaps 

is $1 million. If a swap is based on a 

composite reference price that itself is 

based on the weighted average of futures 

price A, futures price B, futures price C, 

and futures price D (25% equal 

weightings for each), and the notional 

size of the swap is $4 million (i.e., $1 

million for each component swap), then 

the swap would qualify as a block trade 

or large notional off-facility swap based 

on the futures B-related swap 

appropriate minimum block size. 

The Commission received one 

comment regarding proposed 

§ 43.6(h)(2). AFR recommended that 

transactions that are composites of 

swaps that are economically equivalents 

of futures contracts should be 

disaggregated and separately priced for 

the purpose of determining applicability 

of the block rules. AFR also 

recommended that the Commission be 

vigilant of the use of composite swaps 

by counterparties in order to ‘‘evade the 

purpose of Section 727 and the 

Proposed Rules.’’ 400

With respect to spread transactions, 

ICAP Energy recommended that the 

minimum block size limit be based 

upon the lowest limit leg of the 

transaction, in a manner consistent with 

the proposed approach to setting 

minimum block size limits for the 

mixed asset swap class.401

Based upon the comments received, 

the Commission is adopting § 43.6(h)(2) 

with certain clarifications based upon 

general concerns expressed by 

commenters regarding the use of 

composite swaps to evade minimum 

block sizes. The Commission is of the 

view that this rule provides market 

participants with a straightforward and 

uncomplicated way in which to 

determine whether such swap would 

qualify as a block trade or large notional 

off-facility swap, but that a clarification 

is needed to avoid the risk of evasion 

raised by commenters. In response to 

ICAP Energy’s comments, the 

Commission highlights to provide 

clarity that ‘‘any component swap 

category’’ as used above in the 

methodology applies to swaps with a 

single Unique Swap Identifier (‘‘USI’’) 

for the combination of swaps identified 

with a single Unique Product Identifier 

(‘‘UPI’’) and not to groups of different 

swaps each with separate USIs 

transacted on or near the same time.402

Further, the reference to ‘‘any 

component swap category’’ does not 


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403See proposed § 43.6(b)(1)(i) and the related 

discussion in section II.B.1. of the Further Block 

Proposal. 

404See the proposed amendment to § 43.2, 

defining ‘‘super-major currencies.’’ 

405The 17 European Union member states that 

use the euro are: Austria, Belgium, Cyprus, Estonia, 

Finland, France, Germany, Greece, Ireland, Italy, 

Luxembourg, Malta, the Netherlands, Portugal, 

Slovakia, Slovenia and Spain. 

406See proposed § 43.6(h)(6)(i). 

407See proposed § 43.6(h)(6)(ii). 

408See proposed § 43.6(h)(6)(iii). 

409CL–CME at 3. 

410CL–ICAP at 5–6. 

411CL–Morgan Stanley at 3. 

limit the application of this standard to 

those composite reference swaps 

comprised of only multiple asset classes 

and instead should be understood to 

apply more broadly to composite swaps 

of multiple asset classes (i.e., a mixed 

asset swap), intra asset classes, and intra 

swap category composite reference 

prices. 

To provide further clarity and 

clarification in response to AFR’s 

comment, the Commission provides the 

following additional example of 

determining whether a composite 

reference price swap transaction would 

qualify as a block trade or large notional 

off-facility swap. For example, assume 

that the appropriate minimum block 

size for swap category E is $50 million 

and for swap category F is $200 million. 

If a single swap transaction with a 

corresponding singular reporting 

obligation is based on a composite 

reference price that itself is based on the 

weighted average of (1) one component 

in swap category E; (2) a second 

component in swap category E; and (3) 

a component in swap category F (33% 

equal weightings for each), and the 

notional size of the swap is $75 million 

(i.e., $25 million for each component 

swap), then the swap would not qualify 

as a block trade or large notional offfacility swap based on either the swap 

category E or the swap category F 

appropriate minimum block size. 

c. Physical Commodity Swaps 

Block trade sizes for physical 

commodities are generally expressed in 

terms of notional quantities (e.g., 

barrels, bushels, gallons, metric tons, 

troy ounces, etc.). The Commission 

proposed a similar convention for 

determining the appropriate minimum 

block sizes for block trades and large 

notional off-facility swaps. In particular, 

proposed § 43.6(h)(3) provides that 

notional sizes for physical commodity 

swaps shall be expressed in terms of 

notional quantities using the notional 

unit measure utilized in the related 

futures contract market or the 

predominant notional unit measure 

used to determine notional quantities in 

the cash market for the relevant, 

underlying physical commodity. This 

approach ensures that appropriate 

minimum block size thresholds for 

physical commodities are not subject to 

volatility introduced by fluctuating 

prices. This approach also eliminates 

complications arising from converting a 

physical commodity transaction in one 

currency into another currency to 

determine qualification for treatment as 

a block trade or large notional offfacility swap. 

The Commission received no 

comments regarding proposed 

§ 43.6(h)(3). The Commission is 

adopting § 43.6(h)(3) as proposed. 

d. Currency Conversion 

Under proposed § 43.6(h)(4), the 

Commission provided that when 

determining whether a swap transaction 

denominated in a currency other than 

U.S. dollars qualifies as a block trade or 

large notional off-facility swap, swap 

counterparties and registered entities 

may use a currency exchange rate that 

is widely published within the 

preceding two business days from the 

date of execution of the swap 

transaction in order to determine such 

qualification. This proposed approach 

would enable market participants to use 

a currency exchange rate that they deem 

to be the most appropriate or easiest to 

obtain. 

The Commission received no 

comments regarding proposed 

§ 43.6(h)(4). The Commission is 

adopting § 43.6(h)(4) as proposed. 

e. Successor Currencies 

As noted above, the Commission 

proposed using currency as a criterion 

to determine swap categories in the 

interest rate asset class.403 The 

Commission also proposed to classify 

the euro (EUR) as a super-major 

currency, among other currencies.404

Proposed § 43.6(h)(5) provides that for 

currencies that succeed a super-major 

currency, the appropriate currency 

classification for such currency would 

be based on the corresponding nominal 

gross domestic product (‘‘GDP’’) 

classification (in U.S. dollars) as 

determined in the most recent World 

Bank World Development Indicator at 

the time of succession. This proposed 

provision is intended to address the 

possible removal of one or more of the 

17 EU member states that use the 

euro.405

Proposed § 43.6(h)(5)(i)–(iii) further 

specifies the manner in which the 

Commission would classify a successor 

currency for each country that was once 

a part of the predecessor currency. 

Specifically, the Commission proposes 

to use GDP to determine how to classify 

a successor currency. For countries with 

a GDP greater than $2 trillion, the 

Commission would classify the 

successor currency to be a super-major 

currency.406 For countries with a GDP 

greater than $500 billion but less than 

$2 trillion, the Commission would 

classify the successor currency as a 

major currency.407 For nations with a 

GDP less than $500 billion, the 

Commission would classify the 

successor currency as a non-major 

currency.408

The Commission received no 

comments regarding proposed 

§ 43.6(h)(5). The Commission is 

adopting § 43.6(h)(5) as proposed. 

C. Procedural Provisions 

1. Sec. 43.6(a) Commission 

Determination 

The Commission proposed that it 

determine the appropriate minimum 

block size for any swap listed on a SEF 

or DCM, and for large notional offfacility swaps. Proposed § 43.6(a) 

specifically provides that the 

Commission would establish the 

appropriate minimum block sizes for 

publicly reportable swap transactions 

based on the swap categories set forth in 

proposed § 43.6(b) in accordance with 

the provisions set forth in proposed 

§§ 43.6(c), (d), (e), (f) and (h), as 

applicable. 

The Commission received eight 

comments regarding determination of 

appropriate minimum block sizes for 

swaps listed on a SEF or DCM. Four 

commenters favored allowing SEFs and 

DCMs to set appropriate minimum 

block sizes for the swaps they list. CME 

stated that the Commission would be 

better served by retaining the ability to 

set block levels in the private, bilateral 

swaps market and deferring to the 

expertise of SEFs and DCMs to set the 

levels in their markets.409 ICAP 

suggested that the Commission utilize 

the same approach as for the futures 

markets, where futures exchanges set 

their own block sizes, and allow SEFs 

to set block sizes since they have an 

incentive to provide as much 

information about trading interest as 

possible without hurting liquidity.410

Morgan Stanley suggested that the 

Commission could allow DCMs and 

SEFs to set appropriate block sizes, 

subject to Commission approval, as 

DCMs and SEFs would benefit from 

setting block sizes in a way that 

maximizes liquidity.411 WMBAA stated 

that the Commission should authorize 

SEFs to analyze ongoing swaps market 


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412CL–WMBAA at 5. 

413CL–Javelin at 6. 

414CL–SIFMA at 11–12. 

415CL–AII at 10. 

416CL–SIFMA at 11–12; 7 U.S.C. 2(a)(13)(E)(ii). 

417CL–GFMA at 3. 

418CL–ICI at 7; CL–AII at 11; CL–SIFMA at 6–7. 

419CL–TeraExchange at 2; CL–Vanguard at 7. 

420CL–Kinetix at 2. 

421CL–MFA at 8. 

422CL–GFMA at 4. 

423CL–MFA at 8. 

424CL–ICAP Energy at 4. 

trading activity and trade data to 

determine uniform thresholds that 

distinguish transactions that move 

markets from those that do not, and 

work to ensure that block trade regimes 

for swaps executed on SEFs and DCMs 

are as consistent as possible to avoid 

arbitrage.412

Four commenters supported the 

Commission’s proposal that the 

Commission set minimum block levels. 

Three of those commenters 

recommended that SEFs and DCMs 

should not be able to set minimum 

block thresholds above the level 

mandated by the Commission. Javelin 

asserted that the CFTC should set block 

trade rules and not SEFs, so as to avoid 

a race to the bottom that would harm 

transparency and threaten 

competition.413 SIFMA stated that the 

Commission should set minimum block 

trade size thresholds and argued that 

allowing SEFs and DCMs to set a block 

size threshold above the minimum level 

mandated by the Commission without 

guidance is inconsistent with the 

Commission’s statutory duty ‘‘to specify 

the criteria for determining what 

constitutes a large notional swap 

transaction (block trade) for particular 

markets and contracts.’’ 414 AII also 

stated that SEFs or DCMs should not 

have the ability to set block sizes for 

swaps at higher levels than the 

appropriate minimum block sizes 

determined by the Commission, as SEFs 

in particular have interests that may not 

be aligned with buy-side firms and may 

not be incentivized to ensure that 

market disruption is minimal.415

In addition, ICAP Energy stated that 

SEF block limits for futures equivalent 

swap contracts should adjust 

automatically to meet DCM contract 

limits adjustments between annual 

revisions of SEF block limits, so that the 

Commission does not set SEF block 

levels at levels higher than the block 

levels set by DCMs. 

Based upon the comments received, 

the Commission is adopting § 43.6(a) as 

proposed. The Commission agrees with 

the commenters who recommended that 

appropriate minimum block thresholds 

for swaps be set by the Commission, 

rather than SEFs or DCMs. The 

Commission concurs with SIFMA that it 

has a statutory duty ‘‘to specify the 

criteria for determining what constitutes 

a large notional swap transaction (block 

trade) for particular markets and 

contracts.’’ 416 The Commission also 

agrees with Javelin that allowing SEFs 

and DCMs to set appropriate minimum 

block thresholds could lead to a race to 

the bottom that would harm 

transparency and reduce competition. In 

the Commission’s view, the 

Commission’s approach is also the least 

burdensome from a cost-benefit 

perspective because it significantly 

reduces the direct costs imposed on 

registered entities. Moreover, while 

§ 43.6(a) states that the Commission will 

determine minimum block sizes, as 

recommended by some of the 

commenters, the Commission notes that 

SEFs and DCMs nonetheless will have 

the discretion to set block sizes for 

swaps at levels that are higher than the 

appropriate minimum block sizes 

determined by the Commission. 

2. 43.6(f)(4) and (5) Publication and 

Effective Date of Post-Initial 

Appropriate Minimum Block Sizes 

Proposed § 43.6(f)(3) provided that the 

Commission would publish the postinitial appropriate minimum block sizes 

on its Web site. Proposed § 43.6(f)(4) 

provided that these sizes would become 

effective on the first day of the second 

month following the date of publication. 

Per proposed § 43.6(f)(1), the 

Commission would publish updated 

post-initial appropriate minimum block 

sizes in the same manner no less than 

once each calendar year. 

Several commenters recommended 

that post-initial appropriate minimum 

block sizes should be updated more 

frequently than on an annual basis.417

ICI, AII and SIFMA recommended a 

quarterly or at least a semi-annual 

calculation in order to account for 

changes in liquidity in the market.418

Spring Trading and Vanguard 

recommended a quarterly calculation 

that would allow block levels to be more 

responsive to the market.419 Kinetix, 

however, recommended that 

calculations should be carried out on a 

monthly basis.420 MFA suggested that 

the Commission maintain the optional 

ability to update the minimum block 

size on a more frequent basis as well as 

shorten the look-back window for the 

relevant data set.421

Some commenters asserted that the 

Commission should have the authority 

to update appropriate minimum block 

sizes outside of the proposed 1-year set 

look-back period. GFMA believed that 

the Commission should have this 

authority, without reference to a data 

set, to respond to a market that quickly 

becomes illiquid.422 MFA also 

supported providing this authority, but 

believed that the Commission should 

exercise this authority based on SDR 

data received for individual or multiple 

swap categories.423

Based on its argument that block 

levels set by SEFs should not be higher 

than those set by DCMs, ICAP Energy 

recommended allowing for automatic 

adjustment to occur during the course of 

the year.424

The Commission is adopting the rule 

as proposed, with the one modification 

that proposed § 43.6(f)(3) and (4) will be 

adopted as § 43.6(f)(4) and (5). The rule 

as adopted only requires that the 

Commission to update post-initial 

minimum block sizes at least once a 

year and therefore does not preclude the 

Commission from doing so on a more 

frequent basis. The Commission 

anticipates that it will examine and recalculate such block sizes at regular 

intervals, but also acknowledges that the 

liquidity of a swap market may change 

significantly outside of such intervals. 

Therefore, the Commission reserves the 

authority to update minimum block 

sizes when warranted and as necessary 

to respond to such circumstances. In 

response to GFMA and MFA, the 

Commission agrees with MFA and 

emphasizes that in all circumstances, 

minimum block sizes will be updated 

based on the relevant market data 

received. 

In response to ICAP Energy’s 

recommendation, the Commission notes 

that adopting such a requirement would 

potentially create minimum block size 

re-alignment issues for SEFs, 

particularly during the initial period for 

swaps in the other commodity class. 

Under this requirement, SEFs would be 

de facto subject to a DCM’s own 

business decisions, i.e., block trade size 

calculations that are based on trading 

that does not occur on their own facility 

or platform. Further, the Commission 

has noted that SEFs and DCMs may set 

minimum block sizes that are higher 

than those prescribed by the 

Commission; this recommended 

requirement would otherwise preclude 

such an ability in certain cases. 

Accordingly, the Commission declines 

to adopt this requirement. 

3. Sec. 43.6(g) Notification of Election 

Proposed § 43.6(g) set forth the 

election process through which a 

qualifying swap transaction would be 

treated as a block trade or large notional 


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425 In order to qualify as a block trade, a swap 

must (1) be listed on a registered SEF or DCM; (2) 

occur away from the registered SEF’s or DCM’s 

trading system or platform and is executed pursuant 

to its rules and procedures; and (3) have a notional 

or principal amount at or above the appropriate 

minimum block size applicable to such swap. See 

§ 43.2. By definition, a block trade must occur away 

from the SEF or DCM’s trading system or platform 

and thus cannot be transacted on the SEF or DCM’s 

trading system or platform. Moreover, the swap 

must be at or above the appropriate minimum block 

size at the time that it becomes a publicly reportable 

swap transaction. Any swap that is executed on a 

SEF or DCM’s trading system or platform, regardless 

of whether it is for a size at or above the appropriate 

minimum block size for such swap, is not a block 

trade under this definition, and, thus, is required 

to be publicly disseminated in real-time pursuant 

to § 43.4. 

426See the discussion of post-initial cap sizes in 

section III.B. infra. As noted above, the Commission 

proposed an amendment to § 43.2 to define the term 

‘‘cap size’’ as the maximum limit of the principal, 

notional amount of a swap that is publicly 

disseminated. This term applies to the cap sizes 

determined in accordance with the proposed 

amendments to § 43.4(h) of the Commission’s 

regulations. 

427CL–Barnard at 2. 

428CL–Barnard at 2. 

429CL–ABC/CIEBA at 3. 

430CL–Tradeweb at 5. Tradeweb’s comment was 

received in response to the Initial Proposal and not 

the Aggregation Proposed Rule, the latter which 

allowed for CTAs to aggregate on SEFs. 75 FR at 

76174. 

431CL–JPM at 9, n.13. 

432CL–ICI at 3. 

off-facility swap, as applicable. 

Proposed § 43.6(g)(1) would establish a 

two-step notification process relating to 

block trades. Proposed § 43.6(g)(2) 

would establish the notification process 

relating to large notional off-facility 

swaps. 

Proposed § 43.6(g)(1)(i) contained the 

first step in the two-step notification 

process relating to block trades. In 

particular, the parties to a publicly 

reportable swap transaction that has a 

notional amount at or above the 

appropriate minimum block size would 

be required to notify the SEF or DCM 

(pursuant to the rules of such SEF or 

DCM) of their election to have their 

qualifying publicly reportable swap 

transaction treated as a block trade.425

With respect to the second step, 

proposed § 43.6(g)(1)(ii) provided that 

the SEF or DCM that receives an 

election notification would be required 

to notify the relevant SDR of such block 

trade election when transmitting swap 

transaction and pricing data to the SDR 

for public dissemination. 

Similar to the first step set forth in 

proposed § 43.6(g)(1), proposed 

§ 43.6(g)(2) would provide, in part, that 

a reporting party who executes an offfacility swap with a notional amount at 

or above the applicable appropriate 

minimum block size would be required 

to notify the relevant SDR of its election 

to treat such swap as a large notional 

off-facility swap. This section provided 

further that the reporting party would be 

required to notify the relevant SDR in 

connection with the reporting party’s 

transmission of swap transaction and 

pricing data to the SDR pursuant to 

§ 43.3 of the Commission’s regulations. 

The Commission received no 

comments regarding proposed § 43.6(g). 

The Commission is adopting § 43.6(g) as 

proposed. 

4. Sec. 43.7 Delegation of Authority 

Under proposed § 43.7(a), the 

Commission would delegate the 

authority to undertake certain 

Commission actions to the Director of 

the Division of Market Oversight 

(‘‘Director’’) and to other employees as 

designated by the Director from time to 

time. In particular, this proposed 

delegation would grant to the Director 

the authority to determine: (1) New 

swap categories as described in 

proposed § 43.6(b); (2) post-initial 

appropriate minimum block sizes as 

described in proposed § 43.6(f); and (3) 

post-initial cap sizes as described in the 

proposed amendments to § 43.4(h)(2) of 

the Commission’s regulations.426 The 

purpose of the proposed delegation 

provision would be to facilitate the 

Commission’s ability to respond 

expeditiously to ever-changing swap 

market and technological conditions. 

The Commission is of the view that this 

delegation would help ensure timely 

and accurate real-time public reporting 

of swap transaction and pricing data 

and further ensure anonymity in 

connection with the public reporting of 

such data. Proposed § 43.7(b) provided 

that the Director may submit to the 

Commission for its consideration any 

matter that has been delegated pursuant 

to this authority. Proposed § 43.7(c) 

provided that the delegation to the 

Director would not prevent the 

Commission, at its election, from 

exercising the delegated authority. 

The Commission received no 

comments regarding proposed § 43.7(a) 

and therefore is adopting § 43.7(a) as 

proposed. 

5. Section 43.6(h)(6) Aggregation 

Proposed § 43.6(h)(6) would prohibit 

the aggregation of orders for different 

trading accounts in order to satisfy the 

minimum block size or cap size 

requirements, except that aggregation 

would be permissible if done on a DCM 

or SEF by a person who: (i)(A) Is a CTA 

registered pursuant to Section 4n of the 

CEA or exempt from such registration 

under the Act, or a principal thereof, 

and who has discretionary trading 

authority or directs client accounts, (B) 

is an investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of this chapter, 

or (C) is a foreign person who performs 

a similar role or function as the persons 

described in (A) or (B) and is subject as 

such to foreign regulation, and (ii) has 

more than $25 million in total assets 

under management. In the 

Commission’s view, such a prohibition 

would be integral to ensuring the 

integrity of block trade principles and 

preserving the basis for the anonymity 

associated with establishing cap sizes. 

The Commission received a number 

of comments on the proposed 

aggregation rule, particularly as to the 

enumerated persons who would 

otherwise be allowed to aggregate orders 

from different trading accounts. Barnard 

supported the rule, noting that it would 

help ensure that non-block transactions 

comply with the exchange trading 

requirements and real-time reporting 

obligations, thereby increasing 

transparency and price discovery, 

promoting market integrity, improving 

efficiency and competitiveness in the 

swap markets, and ultimately providing 

timely information to enable market 

participants to improve their risk 

management practices.427 Barnard 

suggested that the Commission add an 

additional requirement—that the ‘‘block 

trade is suitable for customers of such 

persons’’—on the basis that such a 

requirement would improve consistency 

in the rules applicable to swap and 

futures markets.428

ABC and CIEBA stated that qualified 

investment advisers who are not CTAs 

should be able to aggregate block trade 

orders for different trading accounts.429

Tradeweb commented that CTAs who 

trade on a SEF should also be permitted 

to aggregate trades on behalf of their 

customers for purposes of block 

trades.430 JP Morgan commented that 

this rule appears to reflect a concern 

that private negotiation affords less 

protection to unsophisticated investors 

than trading through the central 

markets, and that since all entities that 

transact in the OTC market already must 

be ECPs, the analogous concern about 

customer protection in the swaps 

market is already addressed.431

ICI opposed the minimum assets 

under management requirement in 

proposed § 43.6(h)(6)(ii) and argued that 

the Commission did not articulate a 

rationale or policy reason for this 

requirement.432 ICI stated that while 

advisers to registered funds would 

typically meet the asset requirement, 

advisers with less than the proposed 


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433 Id. 

434 Id. at 4. An investment adviser satisfies the 

criteria of § 4.7(a)(2)(v) if the investment adviser 

registers pursuant to § 203 of the Investment 

Advisers Act of 1940, or pursuant to the laws of any 

state, and the investment adviser has been 

registered and active for two years or provides 

security investment advice to securities accounts 

which, in the aggregate, have total assets in excess 

of $5,000,000 deposited at one or more registered 

securities brokers. 17 CFR 4.7(a)(2)(v). 

435CL–ICI at 3. 

436CL–WMBAA at 2. During a work up 

transaction, a swap price is agreed upon for trading 

and the trade is then reported to market 

participants, who then have the opportunity to 

‘‘join the trade’’ by placing a firm bid or offer to buy 

or sell a particular quantity. Id. 

437 Id. at 2–3. 

438 Id. at 3. 

439 Id. 

440See infra Section II.C(6). 

441CL–Barnard at 2. 

442See, e.g., Chicago Mercantile Exchange Rule 

526(I). See also Chicago Board of Trade Rule 526(I); 

Eris Exchange, LLC Rule 601(b)(10); and New York 

Mercantile Exchange, Inc. Rule 526(I). 

443See CEA section 4o (CTAs); Investment 

Advisors Act of 1940 section 206. 

444See, e.g., CME Rule 526. See also CBOE 

Futures Exchange LLC Rule 415(a)(i); Chicago 

Board of Trade Rule 526; Eris Exchange, LLC Rule 

601(b)(10); ICE Futures U.S. Rule 4.07; NASDAQ 

OMX Futures Exchange, Inc. Rule E23; New York 

Mercantile Exchange, Inc. Rule 526(I); NYSE Liffe 

US, LLC Rule 423; and OneChicago LLC Rule 417. 

445See CME Submission 00–99 (Sept. 21, 2000) 

(modifying CME Rule 526 to reduce the threshold 

from $50,000,000 to $25,000,000). CME originally 

planned to lower the threshold from $50,000,000 to 

$5,000,000, but withdrew the submission and 

instead proposed to lower the threshold to 

$25,000,000, based on customer suggestions. See 

CME Submission 00–93 (Sept. 1, 2000); CME 

Submission 00–99 at 5–6. 

446 Id. at 6 (quoting letter addressed to Jean A. 

Webb, Secretary of the Commission from John G. 

Gaine, President, Managed Funds Association dated 

April 24, 2000 regarding ‘‘Chicago Mercantile 

Exchange new Proposed Rule 526’’). 

447 Id. at 4, 6–7. CME also stated in the filing that 

it planned to readdress the threshold amount as it 

gained experience with block trades, but has 

declined to modify the amount. 

448 17 CFR 4.7(a)(2)(v). 

449 57 FR 34853, 34854–55 (Aug. 7, 1992). The 

final rule reduced the amount on deposit threshold 

to $5 million from the $10 million required by the 

proposed rule. See 57 FR 3148, 3152 (Jan. 28, 1992). 

450See 57 FR at 34854 (quoting 57 FR at 3152). 

451 65 FR 11253, 11257–58 (Mar. 2, 2000). 

452 Id. at 11257 (quoting 57 FR at 3152). 

minimum would also have a valid need 

to engage in block trades on behalf of 

the funds they manage.433 ICI further 

stated that no relationship exists 

between the amount of assets managed 

and the legitimacy of aggregating client 

orders. ICI also disagreed that an 

investment adviser seeking to aggregate 

orders must satisfy the criteria of 

§ 4.7(a)(2)(v) of the Commission’s 

regulations.434 ICI suggested that the 

Commission only require an investment 

adviser to be registered under § 203 of 

the Investment Advisers Act of 1940 or 

pursuant to the laws of any state 

without specifying a minimum 

registration length or location for 

deposit of client assets.435

Two comments requested 

clarifications to the proposed rule. 

WMBAA sought clarification that the 

Commission did not intend for the 

Proposed Rule to prevent the use of 

‘‘work up’’ in over-the-counter 

swaps.436 WMBAA stated that a block 

size calculation should not be 

performed until the work up period 

ends, but expressed concern that the 

work up trades could be considered 

aggregation.437 SIFMA noted that 

proposed § 43.6(h)(6) does not restrict 

the aggregation prohibition to ‘‘block 

trades’’ and, as a result, ‘‘large notional 

off-exchange swaps’’ could be subject to 

the aggregation prohibition.438 SIFMA 

requested that the Commission add 

language to clarify that the aggregation 

prohibition does not apply to large 

notional off-exchange swaps.439

After consideration of the comments 

received, the Commission is adopting 

proposed § 43.6(h)(6) as proposed. In 

response to the comment by ABC and 

CIEBA, the Commission notes that 

qualified investment advisers, who are 

not CTAs, are able to aggregate block 

trade orders from different trading 

accounts. Under § 43.6(h)(6)(i)(B) and 

(ii), investment advisers that satisfy the 

criteria under § 4.7(a)(2)(v) and have 

more than $25 million in total assets 

under management are able to aggregate 

orders from different accounts. The 

Commission also agrees that CTAs who 

trade on a SEF should be permitted to 

aggregate customer trades, which would 

be allowed under the rule as adopted, 

subject to the enumerated conditions. 

With respect to JP Morgan’s comment, 

the Commission notes that customers 

trading swaps on DCMs do not have to 

be ECPs. As discussed further below, 

adopted § 43.6(i)(1) allows non-ECP 

customers to be parties to block trades 

through a qualifying CTA, investment 

adviser, or similar foreign person.440 It 

is possible, therefore, that those nonECP DCM customers may not be aware 

if they received the best terms for their 

individual swap transactions that are 

aggregated with other transactions. 

Protection for such customers is 

therefore necessary, as it is for 

unsophisticated customers in other 

markets. 

In response to Barnard’s suggested 

additional requirement,441 the 

Commission acknowledges that the 

same or similar phrase appears in the 

rules of many exchanges.442 The 

Commission, however, does not believe 

that it is necessary to incorporate such 

specific language to the rule because 

persons such as CTAs and investment 

advisers are already subject to broad 

anti-fraud prohibitions under their 

governing statutes.443 Moreover, 

adopted § 43.6(i)(2), discussed further 

below, also requires that any person 

transacting a block trade on behalf of a 

customer receive prior written 

instruction or consent from the 

customer. 

In response to ICI’s opposition to the 

minimum asset threshold under 

§ 43.6(h)(6)(ii), the Commission notes 

that this threshold reflects common 

industry practice.444 CME, for example, 

has enforced the $25 million threshold 

in its rules since September 2000.445

CME has stated that the threshold ‘‘is an 

effort to establish the professionalism 

and sophistication of the registrant’’ 446

while also expanding the number of 

CTAs and investment advisers eligible 

to aggregate trades.447 The Commission 

believes that the $25 million threshold 

is an appropriate requirement to ensure 

that persons allowed to aggregate trades 

are appropriately sophisticated with 

these transactions, while at the same 

time not excluding an unreasonable 

number of CTAs, investment advisers, 

and similar foreign persons. 

The Commission also disagrees with 

ICI’s contention that investment 

advisers should not be required to 

satisfy the criteria under § 4.7(a)(2)(v), 

which requires an investment adviser to 

(1) be registered and active as an 

investment adviser for two years or 

(2) provide securities investment advice 

to securities accounts which, in the 

aggregate, have total assets in excess of 

$5 million deposited at one or more 

registered securities brokers.448 The 

Commission first adopted provisions 

similar to current § 4.7(a)(2)(v) in 

1992 449 as objective indications that a 

person had the investment 

sophistication and experience needed to 

evaluate the risks and benefits of 

investing in commodity pools or a 

portfolio large enough to indicate the 

same, along with the financial resources 

to withstand the investment risks.450 In 

2000,451 the Commission extended the 

same criteria in current § 4.7(a)(2)(v) to 

registered investment advisers for the 

same reasons.452 The Commission 

believes that these objective criteria, 

which demonstrate that an investment 

adviser possesses the necessary 

investment expertise, should also apply 

with respect to allowing such persons to 

aggregate client orders. 

In response to WMBAA, the 

Commission clarifies that the 

aggregation prohibition will not affect 

the work up process. By definition, a 

block trade occurs away from a DCM or 


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453Section 43.2 defines a ‘‘block trade’’ as a 

publicly reportable swap transaction that ‘‘occurs 

away from the registered swap execution facility’s 

or designated contract market’s trading system or 

platform and is executed pursuant to the registered 

swap execution facility’s or designated contract 

market’s rules and procedures.’’ 

454Section 43.2 defines a ‘‘large notional off 

facility swap’’ as having ‘‘notional or principal 

amount at or above the appropriate minimum block 

size.’’ 

455CL–ICI at 3. 456CL–ICI at 5; CL–SIFMA at 1–2. 457CL–ICI at 5. 458 Id. 459CL–SIFMA at 1. 460 Id. at 2. 461 Id. 462 Id. at 1 n.4. 

463 Id. 

464Core Principles and Other Requirements for 

Designated Contract Markets. 75 FR 80572, Dec. 22, 

2010. The final DCM rule, however, did not include 

this proposed regulation which was promulgated, 

along with various other regulations, to implement 

Core Principle 9. As noted in the final rule, given 

the number of comments received under Core 

Principle 9, the Commission believed that 

additional time was appropriate before finalizing 

the proposed rules for Core Principle 9; it expects 

to consider the proposed rules at a future date. 77 

FR 36643, June 19, 2012. 

SEF.453 The trades that are part of the 

work up process will occur on a DCM 

or SEF, and therefore are not block 

trades and are not subject to the 

aggregation prohibition. 

Finally, as to SIFMA’s requested 

clarification, the Commission notes that 

that it does intend to include large 

notional off-facility swaps in the 

aggregation prohibition under 

§ 43.6(h)(6). The appropriate minimum 

block size applies to both block trades 

and large notional off-facility swaps,454

and thus the aggregation prohibition 

should be applied to both types of 

transactions. 

6. Section 43.6(i) Eligible Block Trade 

Participants 

Proposed § 43.6(i)(1) provided that 

parties to a block trade must be ECPs, 

as defined under Section 1a(18) of the 

CEA and the Commission’s regulations. 

The proposed rule includes an 

exception to the ECP requirement by 

providing that a DCM may allow (i) A 

CTA registered pursuant to Section 4n 

of the CEA, or exempt from registration 

under the CEA, or a principal thereof, 

who has discretionary trading authority 

or directs client accounts, (ii) an 

investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria the criteria of 4.7(a)(2)(v0 of the 

Commission’s regulations, or (iii) a 

foreign person who performs a similar 

role or function to the persons described 

in (i) or (ii) and is subject as such to 

foreign regulation, to transact block 

trades for customers who are not ECPs, 

if such CTA, investment adviser or 

foreign person has more than $25 

million in total assets under 

management. Proposed § 43.6(i)(2) 

further provided that a person 

transacting a block trade on behalf of a 

customer must receive prior written 

instruction or consent from the 

customer to do so. Such instruction or 

consent may be provided in a power of 

attorney or similar document, by which 

the customer provides the person with 

discretionary trading authority or the 

authority to direct the trading in the 

customer’s account. 

As discussed above, similar 

comments regarding the exceptions to 

the prohibitions against aggregation for 

certain persons were submitted with 

respect to the exception to certain 

persons transacting blocks on a DCM on 

behalf of non-ECPs. For example, ICI 

opposed the minimum assets under 

management requirement in proposed 

§§ 43.6(i)(1) and similarly argued that 

the Commission did not articulate a 

rationale or policy reason for this 

requirement.455

Specific comments were also received 

on proposed § 43.6(i)(2).456 ICI 

requested a clarification that only a 

person transacting a block trade on 

behalf of a customer who is not an ECP 

must receive prior written instruction or 

consent.457 ICI argued that written 

instruction or consent from an ECP is 

not necessary because these customers 

can engage in block trades and that 

investment advisers with discretionary 

trading authority registered with the 

SEC already have the ability to aggregate 

orders on behalf of clients without 

obtaining separate consent.458

SIFMA commented that proposed 

§ 43.6(i)(2) may require asset managers 

to obtain consent from each client for 

whom they will engage in block 

trades.459 SIFMA contended that this 

requirement would be costly and 

unnecessary, and that notice to the 

customers 460 or a general grant of 

investment discretion in the investment 

management agreement, power of 

attorney, or similar document should be 

sufficient.461 SIFMA further commented 

that proposed § 43.6(i)(2) is unlike rules 

governing DCMs in the futures 

context.462 SIFMA also argued that DCM 

rules requiring consent for block trades 

only require the direct members of the 

DCM to obtain consent from the 

members’ direct customers, not from the 

customers’ customers. Additionally, 

SIFMA contended that a client consent 

requirement does not apply to advisers 

with respect to futures trades and 

should not apply to advisers with 

respect to swaps trades.463

After consideration of the comments 

received, the Commission is adopting 

§ 43.6(i) as proposed. The Commission 

declines to adopt ICI’s clarification and 

notes that § 43.6(i)(2) is intended to 

ensure that all customers of CTAs, 

investment advisers, and similar foreign 

persons, whether the customers are 

ECPs or not, are fully informed of the 

use of block trades on their behalf. 

The Commission also disagrees with 

SIFMA’s contention regarding the 

burdens of obtaining consent. This 

burden consent will be minimal because 

§ 43.6(i)(2) states that the instruction or 

consent may be provided through a 

power of attorney or similar document 

that provides discretionary trading 

authority or the authority to direct 

trading in the account. The consent may 

therefore be included in existing and 

future customer agreements. The 

Commission further disagrees that a 

general grant of investment discretion or 

notice to the customer should satisfy 

§ 43.6(i)(2). A customer’s written 

instruction or consent is necessary 

because a customer potentially may not 

receive the best terms for an individual 

swap transaction that is part of an 

aggregation. The written instruction or 

consent makes the customer aware that 

block trades may be used on its behalf, 

allowing the customer to decide 

whether to allow these transactions. 

The Commission notes that a similar 

consent requirement was included in 

the Commission’s proposed DCM 

rule.464 The Commission believes that 

the customer protection functions of the 

consent requirement apply, regardless of 

the degree of separation between the 

customer and the DCM or SEF. As 

discussed above, the consent 

requirement ensures that customers are 

informed of the use of block trades for 

their accounts. If a CTA, an investment 

adviser, or a similar foreign person 

plans to aggregate customer orders for 

block trades, then the customers must 

have the opportunity to evaluate 

whether the customer agrees to the use 

of aggregation, as evidenced by the 

written instruction or consent, 

regardless of whether the CTA, 

investment adviser, or similar foreign 

person is a direct member of a DCM or 

SEF. 

III. Anonymity Protections for the 

Public Dissemination of Swap 

Transaction and Pricing Data 

A. Policy Goals 

Section 2(a)(13)(E)(i) of the CEA 

directs the Commission to protect the 

identities of counterparties to swaps 

subject to the mandatory clearing 

requirement, swaps excepted from the 


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465This provision does not cover swaps that are 

‘‘determined to be required to be cleared but are not 

cleared.’’ See 7 U.S.C. 2(a)(13)(C)(iv). 

466The Commission is following the necessary 

procedures for releasing microdata files as outlined 

by the Federal Committee on Statistical 

Methodology: (i) Removal of all direct personal and 

institutional identifiers, (ii) limiting geographic 

detail, and (iii) top-coding high-risk variables which 

are continuous. See Federal Committee on 

Statistical Methodology, Report on Statistical 

Disclosure Limitation Methodology 94 (Statistical 

Policy Working Paper 22, 2d ed. 2005), http:// 

www.fcsm.gov/working-papers/totalreport.pdf. The 

report was originally prepared by the Subcommittee 

on Disclosure Limitation Methodology in 1994 and 

was revised by the Confidentiality and Data Access 

Committee in 2005. 

467See 7 U.S.C. 2(a)(13)(C)(iii). 

468See 7 U.S.C. 2(a)(13)(E)(iv). 

469See 77 FR 1247. 

470Sections 43.4(h)(1)–(5) established the 

following interim cap sizes for the corresponding 

asset classes: (1) Interest rate swaps at $250 million 

for tenors greater than zero up to and including two 

years, $100 million for tenors greater than two years 

up to and including 10 years, and $75 million for 

tenors greater than 10 years; (2) credit swaps at 

$100 million; (3) equity swaps at $250 million; (4) 

foreign exchange swaps at $250 million; and (5) 

other commodity swaps at $25 million. 

471See 77 FR 1215. 

472Leading industry trade associations agree that 

cap sizes are an appropriate mechanism to ensure 

that price discovery remains intact for block trades, 

while also protecting post-block trade risk 

management needs from being anticipated by other 

market participants. See ISDA and SIFMA, Block 

Trade Reporting for Over-the-Counter Derivatives 

Market, Jan. 18, 2011. 

473The Commission does not intend the 

provisions in this final rule to prevent a SEF or 

DCM from sharing the exact notional amounts of a 

swaps transaction on or pursuant to the rules of its 

platform with market participants on such platform 

irrespective of the cap sizes set by the Commission. 

To share the exact notional amounts of swaps, the 

SEF or DCM must comply with § 43.3(b)(3)(i) of the 

Commission’s regulations. See 77 FR 1245. 

474The initial period is the period prior to the 

effective date of a Commission determination to 

establish applicable post-initial cap sizes. See 

proposed § 43.4(h)(1). 

475See 77 FR 1249. 

476CL–AII at 12; CL–ISDA/SIFMA at 15. 

477CL–EEI at 11–12. 

mandatory clearing requirement, and 

voluntarily cleared swaps. Similarly, 

section 2(a)(13)(C)(iii) of the CEA 

requires that the Commission prescribe 

rules that maintain the anonymity of 

business transactions and market 

positions of the counterparties to an 

uncleared swap.465 In proposed 

amendments to § 43.4(h) and 43.4(d)(4), 

as described further below, the 

Commission proposed measures to 

protect the identities of counterparties 

and to maintain the anonymity of their 

business transactions and market 

positions in connection with the public 

dissemination of publicly reportable 

swap transactions. The Commission 

proposed to follow the practices used by 

most federal agencies when releasing to 

the public company-specific 

information—by removing obvious 

identifiers, limiting geographic detail 

(e.g., disclosing general, non-specific 

geographical information about the 

delivery and pricing points) and 

masking high-risk variables by 

truncating extreme values for certain 

variables (e.g., capping notional 

values).466

B. Establishing Notional Cap Sizes for 

Swap Transaction and Pricing Data to 

Be Publicly Disseminated in Real-Time 

1. Policy Goals for Establishing Notional 

Cap Sizes 

In addition to establishing appropriate 

minimum block sizes, the Commission 

also proposed to amend § 43.4(h) to 

establish cap sizes for notional and 

principal amounts that would mask the 

total size of a swap transaction if it 

equals or exceeds the appropriate 

minimum block size for a given swap 

category. For example, if the block size 

for a category of interest rate swaps was 

$1 billion, the cap size was $1.5 billion, 

and the actual transaction had a 

notional value of $2 billion, then this 

swap transaction would be publicly 

reported with a delay and with a 

notional value of $1.5+ billion. 

The proposed cap size provisions are 

consistent with the two relevant 

statutory requirements in section 

2(a)(13) of the CEA. First, the cap size 

provisions would help protect the 

anonymity of counterparties’ market 

positions and business transactions as 

required in section 2(a)(13)(C)(iii) of the 

CEA.467 Second, the masking of 

extraordinarily large positions also takes 

into consideration the requirement 

under section 2(a)(13)(E)(iv) that the 

Commission take into account the 

impact that real-time public reporting 

could have in reducing market 

liquidity.468

2. Proposed Amendments Related to 

Cap Sizes—§ 43.2 Definitions and § 43.4 

Swap Transaction and Pricing Data To 

Be Publicly Disseminated in Real-Time 

The Commission proposed an 

amendment to § 43.2 to define the term 

‘‘cap size’’ as the maximum limit of the 

principal, notional amount of a swap 

that is publicly disseminated. This term 

applies to the cap sizes determined in 

accordance with the proposed 

amendments to § 43.4(h) of the 

Commission’s regulations. 

Section 43.4(h) of the Commission’s 

regulations currently establishes interim 

cap sizes for rounded notional or 

principal amounts for all publicly 

reportable swap transactions. In the 

Real-Time Reporting Final Rule, the 

Commission finalized § 43.4(h) to 

provide that the notional or principal 

amounts shall be capped in a manner 

that adjusts in accordance with the 

appropriate minimum block size that 

corresponds to a publicly reportable 

swap transaction.469 Section 43.4(h) 

further provides that if no appropriate 

minimum block size exists, then the cap 

size on the notional or principal amount 

shall correspond to the interim cap sizes 

that the Commission has established for 

the five asset classes.470 In § 43.4(h) and 

as described in the Real-Time Reporting 

Final Rule, the Commission notes that 

SDRs will apply interim cap sizes until 

such time as appropriate minimum 

block sizes are established.471 The 

Commission continues to believe that 

the interim cap sizes for each swap 

category should correspond with the 

applicable appropriate minimum block 

size, to the extent that an appropriate 

minimum block size exists.472

The Commission proposed to amend 

§ 43.4(h) both to establish initial cap 

sizes for each swap category within the 

five asset classes and also to delineate 

a process for the post-initial period 

through which the Commission would 

establish post-initial cap sizes for each 

swap category.473 The Commission also 

proposed changing the term ‘‘interim’’ 

as it is used in § 43.4(h) in the RealTime Reporting Rule to ‘‘initial’’ in 

order to correspond with the description 

of the initial period in proposed 

§ 43.6(e). 

a. Initial Cap Sizes 

In the initial period,474 proposed 

§ 43.4(h)(1) would set the cap size for 

each swap category as the greater of the 

interim cap sizes in all five asset classes 

set forth in the Real-Time Reporting 

Final Rule (§ 43.4(h)(1)–(5)) or the 

appropriate minimum block size for the 

respective swap category.475 If such 

appropriate minimum block size does 

not exist, then the cap sizes shall be set 

at the interim cap sizes set forth in the 

Real-Time Reporting Final Rule 

(§ 43.4(h)(1)–(5)). 

For the initial period, AII and ISDA/ 

SIFMA argued that the cap size should 

be the lower of block size and the 

interim cap size in § 43.4(h)(1).476 EEI 

stated that the cap size of $25 million 

for both the electricity swap contracts 

proposed to be added to appendix B and 

the electricity swaps in the other 

commodity swap categories in appendix 

D, which would be based on the interim 

cap sizes established by the Commission 

in the Real-Time Reporting Final Rule, 

is too high. EEI instead recommended 

both a fixed cap size and a minimum 

block size of $3 million.477

After consideration of the comments 

received, the Commission is adopting 


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478See proposed § 43.6(c)(2). 

479See proposed § 43.6(c)(2). 

480CL–Javelin at 2. 

481CL–AII at 12. 

482CL–GFMA at 5. 

483CL–ICI at 8. 

484CL–ISDA/SIFMA at 15. 

485CL–MFA at 8–9. 

486CL–SIFMA at 12. 

487CL–Vanguard at 7. 

488CL–Barclays at 6. 

489CL–EEI at 11–12. 

§ 43.4(h)(1) as proposed. EEI 

recommends a lower cap size for 

specific swap categories—particularly 

electricity swaps—but it does not 

recommend any change to the proposed 

interplay between cap size and 

appropriate minimum block size during 

the interim period. The cap size for the 

interim period was established by the 

Real-Time Reporting Final Rule, and the 

Commission considered the appropriate 

level for these cap sizes at that time. The 

Commission did not propose altering 

the interim cap size in the Further Block 

Proposal, and thus did not receive 

comments regarding altering the interim 

cap size beyond that of EEI. The 

Commission does not believe that 

altering the interim cap size would be 

appropriate under such circumstances. 

AII and ISDA/SIFMA recommended 

that the cap size be set as the lower of 

the appropriate minimum block size 

and the interim cap sizes set forth in the 

Real-Time Reporting Rule. The 

Commission, however, disagrees with 

this view of the relationship between 

block thresholds and cap sizes. All of 

the information regarding a block trade 

is reported to the market at the end of 

the block time delay. Cap sizes, on the 

other hand, are never expressed to the 

market. Because this information is not 

reported to the market in real-time, nor 

reported to the market at all, the 

Commission believes that cap sizes 

should be set at a higher level than 

block sizes, in order to minimize the 

amount of information that is never 

publicly disseminated. Accordingly, the 

Commission is adopting § 43.4(h)(1) as 

proposed. 

b. Post-Initial Cap Sizes and the 75- 

Percent Notional Amount Calculation 

Pursuant to proposed § 43.4(h)(2)(ii), 

the Commission would use a 75 percent 

notional amount calculation, as 

proposed in § 43.6(c)(2), to determine 

the appropriate post-initial cap sizes for 

all swap categories for the purpose of 

reporting block trades or large notional 

off-facility swaps of significant size.478

This calculation methodology would be 

different from the 67 percent notional 

amount calculation methodology that 

the Commission proposed in 

§ 43.6(c)(1), which would be used to 

determine appropriate minimum block 

sizes.479

For the 75 percent notional amount 

calculation, the Commission would 

determine the appropriate cap size 

through the following process, pursuant 

to proposed § 43.6(c)(2): (step 1) select 

all of the publicly reportable swap 

transactions within a specific swap 

category using a rolling three-year 

window of data beginning with a 

minimum of one year’s worth of data 

and adding one year of data for each 

calculation until a total of three years of 

data is accumulated; (step 2) convert to 

the same currency or units and use a 

trimmed data set; (step 3) determine the 

sum of the notional amounts of swaps 

in the trimmed data set; (step 4) 

multiply the sum of the notional 

amount by 75 percent; (step 5) rank 

order the observations by notional 

amount from least to greatest; (step 6) 

calculate the cumulative sum of the 

observations until the cumulative sum 

is equal to or greater than the 75 percent 

notional amount calculated in step 4; 

(step 7) select the notional amount 

associated with that observation; (step 

8) round the notional amount of that 

observation to two significant digits, or 

if the notional amount associated with 

that observation is already significant to 

two digits, increase that notional 

amount to the next highest rounding 

point of two significant digits; and (step 

9) set the appropriate minimum block 

size at the amount calculated in step 8. 

Consistent with the Commission’s 

proposed process to determine the 

appropriate post-initial minimum block 

sizes, proposed § 43.4(h)(3) provided 

that the Commission would publish 

post-initial cap sizes on its Web site. 

Proposed § 43.4(h)(4) provided that 

unless otherwise indicated on the 

Commission’s Web site, the post-initial 

cap sizes would become effective on the 

first day of the second month following 

the date of publication. 

The Commission received 10 

comments regarding the 75 percent 

notional amount calculation for 

determining post-initial cap sizes. One 

commenter, Javelin, supported the 75 

percent notional amount calculation 

and stated that it was consistent with 

the minimum block size threshold 

established by the Commission.480

Seven commenters, however, 

recommended that the Commission set 

post-initial cap sizes matching the postinitial minimum block size thresholds 

established by the Commission. AII 

recommended setting the post-initial 

cap size for each swap category at the 

same level as the post-initial block size 

threshold and states that the 75 percent 

notional amount calculation is far too 

high.481 GFMA similarly stated that the 

same rationale should apply to cap and 

block sizes, as both have potential 

negative impacts on liquidity.482 ICI 

stated that the 75 percent notional 

amount would be too high for 

determining cap size because the lack of 

depth and liquidity in the swaps market 

could cause public reporting of block 

sizes to reveal identities, business 

transactions, and market positions of 

participants, and recommended a 67 

percent notional amount calculation for 

determining cap size in the post-initial 

period.483 ISDA/SIFMA also stated that 

the added transparency from reporting 

transaction sizes between 67 percent 

and 75 percent would not outweigh the 

harm to liquidity from additional 

disclosure, and urges the Commission to 

ensure that the post-initial cap size is 

always equal to the relevant block 

size.484 MFA commented that it is 

unnecessary for the Commission to 

establish cap sizes that differ from 

minimum block sizes as there is not a 

meaningful transparency benefit that 

would outweigh the resource burdens 

on the Commission, SDRs, SEFs, and 

other market participants.485 SIFMA 

recommended that the Commission 

should set the notional cap size at the 

block threshold, as the added public 

dissemination could harm liquidity in 

the same manner that a higher block 

trade size threshold might.486 Vanguard 

believes that it is essential that the cap 

match the block trade threshold, as to 

do otherwise would compromise the 

liquidity protections afforded by the 

nuanced assessment of block trade 

thresholds.487

Two other commenters suggested 

alterations of the Commission’s 

proposed cap sizes. Barclays 

recommended that the post-initial 

period cap sizes be introduced at more 

nuanced levels that reflect the 

differences between product’s traded 

volumes.488 EEI recommended a much 

lower fixed cap size for Electricity Swap 

Contracts and the Other Commodity 

Electricity Swap Category.489

After consideration of the comments 

above, the Commission is adopting 

§ 43.4(h)(2)(ii) as proposed. The 

Commission is of the view that setting 

post-initial cap sizes above appropriate 

minimum block sizes would provide 

additional pricing information with 

respect to large swap transactions, 

which are large enough to be treated as 

block trades (or large notional offfacility swaps), but small enough that 

they do not exceed the applicable postVerDate Mar<15>2010 18:49 May 30, 2013 Jkt 229001 PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 E:\FR\FM\31MYR2.SGM 31MYR2

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490See § 43.4(d)(1) of the Commission’s 

regulations. 

491Appendix B to part 43 provides a list of 28 

‘‘Enumerated Physical Commodity Contracts’’ as 

well as 1 contract under the ‘‘Other Contracts’’ 

heading. See 77 FR 1182 app. B. 

492Appendix B to part 43 currently lists only 

Brent Crude Oil (ICE) under the ‘‘Other Contracts’’ 

heading. 

493See 77 FR 1211. 

494See sections 2(a)(13)(E)(i) and 2(a)(13)(C)(iii) 

of the CEA. 7 U.S.C. 2(a)(13)(C)(iii), (E)(i). 

495Limiting the geographical detail is a typical 

statistical disclosure control used by other federal 

agencies as described in the Report on Statistical 

Disclosure Limitation Methodology. See supra note 

61. 

initial cap size. This additional 

information may enhance price 

discovery by publicly disseminating 

more information relating to market 

depth and the notional sizes of publicly 

reportable swap transactions, while still 

protecting the anonymity of swap 

counterparties and their ability to lay off 

risk when executing extraordinarily 

large swap transactions. 

The Commission notes that Section 

2(a)(13) tasks the Commission with 

bringing real-time public reporting to 

the swaps market. Section 2(a)(13)(E) 

expressly provides that the Commission 

determine appropriate time delays for 

block trades and large notional offfacility swaps. However, these 

provisions only call for a time delay— 

they do not provide for information to 

be kept from the market in perpetuity. 

All of the information regarding a block 

trade is reported to the market at the 

end of the block time delay. Cap sizes, 

on the other hand, are never expressed 

to the market. Because this information 

is not reported to the market in realtime, nor reported to the market at all, 

the Commission believes that cap sizes 

should be set at a higher level than 

block sizes. The 75 percent notional test 

balances the competing interests of 

providing meaningful real-time public 

reporting to the swaps market and 

protecting the anonymity of swap 

market participants, while taking into 

account potential impacts on market 

liquidity. 

If market participants conclude that 

the Commission has set cap sizes for a 

specific swap category in a way that will 

materially reduce market liquidity, then 

those participants are encouraged to 

submit data to support their conclusion. 

In addition, through its own 

surveillance of swaps market activity, 

the Commission may become aware that 

a cap size would reduce market 

liquidity for a specific swap category. In 

response to either a submission or its 

own surveillance of swaps market 

activity, the Commission has the legal 

authority to take action by rule or order 

to mitigate the potential effects on 

market liquidity of cap sizes with 

respect to swaps in a particular swap 

category. 

C. Masking the Geographic Detail of 

Swaps in the Other Commodity Asset 

Class 

1. Policy Goals for Masking the 

Geographic Detail for Swaps in the 

Other Commodity Asset Class 

In the Real-Time Reporting Final 

Rule, the Commission sets forth general 

protections for the identities, market 

positions and business transactions of 

swap counterparties in § 43.4(d). 

Section 43.4(d) generally prohibits an 

SDR from publicly disseminating swap 

transaction and pricing data in a manner 

that discloses or otherwise facilitates the 

identification of a swap counterparty.490

Notwithstanding that prohibition, 

§ 43.4(d)(3) provides that SDRs are 

required to publicly disseminate data 

that discloses the underlying asset(s) of 

publicly reportable swap transactions. 

Section 43.4(d)(4) contains special 

provisions for swaps in the other 

commodity asset class. These swaps 

raise special concerns because the 

public disclosure of the underlying 

asset(s) may in turn reveal the identities, 

market positions and business 

transactions of the swap counterparties. 

To address these concerns, § 43.4(d)(4) 

limits the types of swaps in the other 

commodity asset class that are subject to 

public dissemination. Specifically, 

§ 43.4(d)(4)(ii) of the Commission’s 

regulations provides that, for publicly 

reportable swap transactions in the 

other commodity asset class, SDRs must 

publicly disseminate the actual 

underlying assets only for: (1) those 

swaps executed on or pursuant to the 

rules of a SEF or DCM; (2) those swaps 

referencing one of the contracts 

described in appendix B to part 43; and 

(3) those swaps that are economically 

related to one of the contracts described 

in appendix B to part 43.491 Essentially, 

the Commission has determined that 

these three categories of swap have 

sufficient liquidity such that the 

disclosure of the underlying asset would 

not reveal the identities, market 

positions and business transactions of 

the swap counterparties. 

In its Real-Time Reporting Final Rule, 

the Commission included in appendix B 

to part 43 a list of contracts that, if 

referenced as an underlying asset, 

should be publicly disseminated in full 

without limiting the commodity or 

geographic detail of the asset. In the 

Further Block Proposal, the Commission 

proposed adding 13 contracts to 

appendix B to part 43 under the ‘‘Other 

Contracts’’ heading.492 The Commission 

believes that since it previously has 

determined that these 13 contracts have 

material liquidity and price references, 

among other things, the public 

dissemination of the full underlying 

asset for publicly reportable swap 

transactions that reference such 

contracts (and any underlying assets 

that are economically related thereto) 

would not disclose the identities, 

market positions and business 

transactions of swap counterparties. 

Pursuant to the Real-Time Reporting 

Final Rule, any publicly reportable 

swap transaction in the other 

commodity asset class that is excluded 

under § 43.4(d)(4)(ii) would not be 

subject to the reporting and public 

dissemination requirements for part 43 

upon the effective date of the Real-Time 

Reporting Final Rule. The Commission 

noted in the Real-Time Reporting Final 

Rule that it planned to address the 

group of other commodity swaps that 

were not subject to the rules of part 43 

in a forthcoming release.493

Accordingly, the Commission proposed 

in the Further Block Proposal to address 

the public dissemination of swap 

transaction and pricing data for the 

group of other commodity swaps that 

are not covered currently by 

§ 43.4(d)(4)(ii). 

The Commission is of the view that 

given the lack of data on the liquidity 

for certain swaps in the other 

commodity asset class, the lack of data 

on the number of market participants in 

these other commodity swaps markets, 

and the statutory requirement to protect 

the anonymity of market participants,494

the public dissemination of less specific 

information for swaps with specific 

geographic or pricing detail may be 

appropriate. The Commission believes 

that the public dissemination of the 

exact underlying assets for swaps in this 

group of the other commodity asset 

class may subject the identities, market 

positions and business transactions of 

market participants to unwarranted 

public disclosure if additional 

protections are not established with 

respect to the geographic detail of the 

underlying asset. For that reason, the 

Commission proposed that SDRs mask 

or otherwise disguise the geographic 

details related to the underlying assets 

of a swap in connection with the public 

dissemination of such swap transaction 

and pricing data.495

2. Proposed Amendments to § 43.4 

In order to accommodate the policy 

goals described above, the Commission 

proposed adding § 43.4(d)(4)(iii) to part 

43 to establish rules regarding the 


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32910 Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 

496 In addition to proposing limitations on the 

geographic detail for public dissemination of 

underlying assets for certain swaps in the other 

commodity asset class, the Commission also 

proposed amending § 43.4(g) and (h) to make 

conforming changes. 

497For the purposes of the Further Block Proposal 

and this final rule, basis swaps are defined as swap 

transactions in which one leg of the swap references 

a contract described in appendix B to part 43 (or 

is economically related thereto) and the other leg 

of the swap does not. 

498See FERC, National Gas Markets—Overview, 

http://www.ferc.gov/market-oversight/mkt-gas/ 

overview.asp (last viewed May 6, 2013). 

499See FERC, Natural Gas Market Overview: Spot 

Gas Prices, http://www.ferc.gov/market-oversight/ 

mkt-gas/overview/ngas-ovr-avg-spt-ng-pr.pdf 

(updated Jan.10, 2013). In addition, there is 

evidence that the spot prices in these markets and 

the corresponding futures prices are highly 

correlated. D. Murray, Z. Zhu, ‘‘Asymmetric price 

responses, market integration and market power: A 

study of the U.S. natural gas market,’’ Energy 

Economics, 30 (2008) 748–65. 

500The District of Columbia would be included 

in this region, if any specific delivery or pricing 

points existed at the time of the Further Block 

Proposal. 

501See PADD Map, Appendix A, Petroleum 

Administration for Defense Districts, http:// 

www.eia.gov/todayinenergy/detail.cfm?id=4890, 

(last viewed May 6, 2013). 

public dissemination of the remaining 

group of swaps in the other commodity 

asset class (i.e., those not described in 

§ 43.4(d)(4)(ii)). In the Commission’s 

view, proposed § 43.4(d)(4)(iii) would 

ensure that the public dissemination of 

swap transaction and pricing data 

would not unintentionally disclose the 

identities, market positions and 

business transactions of any swap 

counterparty to a publicly reportable 

swap transaction in the other 

commodity asset class. In particular, 

proposed § 43.4(d)(4)(iii) provides that 

SDRs must publicly disseminate the 

details about the geographic location of 

the underlying assets of the other 

commodity swaps not described in 

§ 43.4(d)(4)(ii) (i.e., other commodity 

swaps that have a specific delivery or 

pricing point) pursuant to proposed 

appendix E to part 43. Proposed 

appendix E to part 43 is discussed in the 

next subsection. 

The Commission recognizes that 

requiring the public dissemination of 

less specific geographic detail for an 

other commodity swap may, to some 

extent, diminish the price discovery 

value of swap transaction and pricing 

data for such swap. The Commission 

believes, however, that the public 

dissemination of such data will still 

provide the market with useful 

information relating to market depth, 

trading activity and pricing information 

for similar types of swaps. 

The Commission also proposed 

making conforming amendments to 

§ 43.4(d). Specifically, the Commission 

proposed amending the introductory 

language to § 43.4(d)(4)(i) by deleting 

‘‘§ 43.4(d)(4)(ii)’’ and adding in its place 

‘‘§ 43.4(d)(4)(ii) and (iii)’’ to make clear 

that SDRs have to publicly disseminate 

swaps data under § 43.4(d)(4)(iii) in 

accordance with part 43.496

The Commission received no 

comments regarding § 43.4(d)(4)(i) and 

(ii). The Commission is adopting 

§ 43.4(d)(4)(i) and (ii) as proposed. 

3. Application of Proposed 

§ 43.4(d)(4)(iii) and Proposed Appendix 

E to Part 43—Geographic Detail for 

Delivery or Pricing Points 

Proposed appendix E to part 43 

includes the system that SDRs would be 

required to use to mask the specific 

delivery or pricing points that are a part 

of an underlying asset in connection 

with the public dissemination of swap 

transaction and pricing data for certain 

swaps in the other commodity asset 

class. To the extent that the underlying 

asset of a publicly reportable swap 

transaction described in proposed 

§ 43.4(d)(4)(iii) does not have a specific 

delivery or pricing point, the provisions 

of proposed § 43.4(d)(4)(iii) and 

proposed appendix E to part 43 would 

not apply. Specifically, proposed 

appendix E to part 43 provides topcoding for various geographic regions, 

both in the United States and 

internationally. 

Subsection (a) below includes a 

description of the top-coding U.S. 

regions. Subsection (b) below includes a 

description of the top-coding non-U.S. 

regions. Finally, subsection (c) below 

outlines the proposed system for SDRs 

to publicly disseminate ‘‘basis 

swaps.’’497

a. U.S. Delivery or Pricing Points 

Table E1 in proposed appendix E to 

part 43 lists the geographic regions that 

an SDR would publicly disseminate for 

an off-facility swap in the other 

commodity asset class that is described 

in proposed § 43.4(d)(4)(iii). The 

Commission proposed that an SDR 

publicly disseminate swap transaction 

and pricing data for certain energy and 

power swaps in the other commodity 

asset class, as described in more detail 

below, in a different manner than the 

remaining other commodities. In order 

to mask the specific delivery or pricing 

detail of these energy and power swaps, 

the Commission proposed using 

established regions or markets that are 

associated with these underlying assets. 

i. Natural Gas and Related Products 

In proposed § 43.4(d)(4)(iii) and 

proposed appendix E to part 43, the 

Commission set forth a method to 

describe the publicly reportable swap 

transactions that have natural gas or 

related products as an underlying asset 

and have a specific delivery or pricing 

point in the United States. In particular, 

the proposal required SDRs to publicly 

disseminate a description of the specific 

delivery or pricing point based on one 

of the five industry specific natural gas 

markets set forth by the Federal Energy 

Regulatory Commission (‘‘FERC’’).498

The FERC Natural Gas Markets reflect 

natural deviations found in the spot 

prices in different markets.499 The 

Commission anticipates that a 

distinction for natural gas is necessary 

to enhance price discovery while 

protecting the identities of the parties, 

business transactions and market 

positions of market participants. 

The proposed five markets for public 

dissemination of delivery or pricing 

points for natural gas swaps are as 

follows: (i) Midwest (including North 

Dakota, South Dakota, Minnesota, 

Wisconsin, Michigan, Indiana, Illinois, 

Iowa, Nebraska, Kansas, Oklahoma, 

Missouri and Arkansas); (ii) Northeast 

(including Maine, New Hampshire, 

Vermont, Massachusetts, Rhode Island, 

Vermont, Connecticut, New York, 

Pennsylvania, Kentucky, Ohio, West 

Virginia, New Jersey, Delaware, 

Maryland and Virginia); 500 (iii) Gulf 

(including Louisiana and Texas); (iv) 

Southeast (including Tennessee, North 

Carolina, South Carolina, Georgia, 

Florida, Alabama and Mississippi); and 

(v) Western (including Montana, 

Wyoming, Colorado, New Mexico, 

Idaho, Utah, Washington, Oregon, 

California, Nevada and Arizona). For 

any other pricing points in the United 

States, SDRs would publicly 

disseminate ‘‘Other U.S.’’ in place of the 

actual pricing or delivery point for such 

natural gas swaps. 

ii. Petroleum and Related Products 

In proposed § 43.4(d)(4)(iii) and 

proposed appendix E to part 43, the 

Commission set forth a method to 

describe the publicly reportable swap 

transactions that have petroleum or 

related products as an underlying asset 

and have a specific delivery or pricing 

point in the United States. In particular, 

the proposal would require SDRs to 

publicly disseminate a description of 

the specific delivery or pricing point 

based on one of the seven Petroleum 

Administration for Defense Districts 

(‘‘PADD’’) regions.501 The PADD regions 

indicate economically and 

geographically distinct regions for the 

purposes of administering oil allocation. 


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502See U.S. Energy Information Administration 

(EIA)—Petroleum & Other Liquids, http:// 

www.eia.gov/petroleum/data.cfm (last viewed May 

6, 2013). 

503Alternatively, the Commission is considering 

combining the East Coast PADD into one category, 

such that any oil swap with a specific delivery or 

pricing point as PADD 1A (New England), PADD 1B 

(Central Atlantic) or PADD 1C (Lower Atlantic) 

would be publicly disseminated as PADD 1 (East 

Coast). 

504See FERC, Electric Power Markets—Overview, 

http://www.ferc.gov/market-oversight/mkt-electric/ 

overview.asp (last viewed May 6, 2013). 

505See U.S. Energy Information Administration, 

U.S. Federal Region Map, http://www.eia.gov/ 

electricity/regionsmap/fedregstates.html (last 

visited May 6, 2013). 

506Note that Russia is not included in ‘‘Eastern 

Europe’’ or in ‘‘Northern Asia’’ and instead should 

be publicly disseminated as ‘‘Russia.’’ 

The Department of Energy’s Energy 

Information Administration (‘‘EIA’’) 

collects and publishes oil supply and 

demand data with respect to the PADD 

regions.502 Accordingly, to provide 

consistency with EIA publications and 

information regarding regional patterns, 

the Commission proposed that specific 

delivery or pricing points with respect 

to such petroleum product swaps are 

publicly disseminated based on PADD 

regions. 

The PADD regions for public 

dissemination of delivery or pricing 

points for such petroleum product 

swaps are as follows: (i) PADD 1A (New 

England); (ii) PADD 1B (Central 

Atlantic); (iii) PADD 1C (Lower 

Atlantic); (iv) PADD 2 (Midwest); (v) 

PADD 3 (Gulf Coast); (vi) PADD 4 

(Rocky Mountains); and (vii) PADD 5 

(West Coast).503 For any other pricing 

points in the United States, SDRs would 

publicly disseminate the term ‘‘Other 

U.S.’’ in place of the actual pricing or 

delivery point for such petroleum 

product swaps. 

iii. Electricity and Sources 

In proposed § 43.4(d)(4)(iii), the 

Commission also set forth a method to 

describe publicly reportable swap 

transactions that have electricity and 

sources as an underlying asset and have 

a specific delivery or pricing point in 

the United States. In particular, the 

proposal would require SDRs to 

publicly disseminate the specific 

delivery or pricing point based on a 

description of one of the FERC Electric 

Power Markets.504

The markets for public dissemination 

of delivery or pricing points for such 

electricity swaps are as follows: (i) 

California (CAISO); (ii) Midwest 

(MISO); (iii) New England (ISO–NE); 

(iv) New York (NYISO); (v) Northwest; 

(vi) Pennsylvania-New Jersey-Maryland 

(PJM); (vii) Southeast; (viii) Southwest; 

(ix) Southwest Power Pool (SPP); and 

(x) Texas (ERCOT). For any other 

pricing points in the United States, 

SDRs would publicly disseminate the 

term ‘‘Other U.S.’’ in place of the actual 

pricing or delivery point for such 

electricity and sources swaps. 

iv. All Remaining Other Commodities 

In proposed § 43.4(d)(4)(iii) and 

proposed appendix E to part 43, the 

Commission set forth a method to 

describe any swaps in the other 

commodity asset class that do not have 

oil, natural gas, electricity, or petroleum 

as an underlying asset, but have specific 

delivery or pricing points in the United 

States. In particular, the Commission 

proposed that SDRs publicly 

disseminate information with respect to 

these swaps based on the 10 federal 

regions established by the U.S. Energy 

Information Administration (‘‘EIA’’). 

The Commission believed that the use 

of the 10 federal regions would provide 

consistency among different types of 

underlying assets in the other 

commodity asset class with respect to 

delivery and pricing point descriptions. 

The 10 federal regions that SDRs 

would use for public dissemination 

under the proposal for all remaining 

other commodity swaps are as follows: 

(i) Region I (including Connecticut, 

Maine, Massachusetts, New Hampshire, 

Rhode Island and Vermont); (ii) Region 

II (including New Jersey and New York); 

(iii) Region III (including Delaware, 

District of Columbia, Maryland, 

Pennsylvania, Virginia and West 

Virginia); (iv) Region IV (including 

Alabama, Florida, Georgia, Kentucky, 

Mississippi, North Carolina, South 

Carolina and Tennessee); (v) Region V 

(including Illinois, Indiana, Michigan, 

Minnesota, Ohio and Wisconsin); (vi) 

Region VI (including Arkansas, 

Louisiana, New Mexico, Oklahoma and 

Texas); (vii) Region VII (including Iowa, 

Kansas, Missouri and Nebraska); (viii) 

Region VIII (including Colorado, 

Montana, North Dakota, South Dakota, 

Utah and Wyoming); (ix) Region IX 

(including Arizona, California, Hawaii 

and Nevada); and (x) Region X 

(including Alaska, Idaho, Oregon and 

Washington).505

b. Non-U.S. Delivery or Pricing Points 

Table E2 in proposed appendix E to 

part 43 provided the appropriate 

manner for SDRs to publicly 

disseminate non-U.S. delivery or pricing 

points for all publicly reportable swap 

transactions described in the proposed 

§ 43.4(d)(4)(iii). The Commission is of 

the view that SDRs should not publicly 

disseminate the actual location for these 

international delivery or pricing points 

since the public disclosure of such 

information may disclose the identities 

of parties, business transactions and 

market positions of market participants. 

In Table E2, the Commission proposed 

the countries and regions that an SDR 

must publicly disseminate. In proposing 

the use of these geographic breakdowns 

for the public reporting of international 

delivery or pricing points, the 

Commission considered world regions 

that have significant energy 

consumption, whether ISDA-specific 

documentation exists for a particular 

country, and whether public disclosure 

would compromise the anonymity of 

the swap counterparties. 

The Commission proposed the 

following international regions for 

publicly disseminating specific delivery 

or pricing points of publicly reportable 

swap transactions described in 

§ 43.4(d)(4)(iii): (i) North America 

(publicly disseminate ‘‘Canada’’ or 

‘‘Mexico’’); (ii) Central America 

(publicly disseminate ‘‘Central 

America’’); (iii) South America (publicly 

disseminate ‘‘Brazil’’ or ‘‘Other South 

America’’); (iv) Europe (publicly 

disseminate ‘‘Western Europe,’’ 

‘‘Northern Europe,’’ ‘‘Southern Europe,’’ 

or ‘‘Eastern Europe’’); (v) Russia 

(publicly disseminate ‘‘Russia’’); 506 (vi) 

Africa (publicly disseminate ‘‘Northern 

Africa,’’ ‘‘Western Africa,’’ ‘‘Eastern 

Africa,’’ ‘‘Central Africa,’’ or ‘‘Southern 

Africa’’); (vii) Asia-Pacific (publicly 

disseminate ‘‘Northern Asia,’’ ‘‘Central 

Asia,’’ ‘‘Eastern Asia,’’ ‘‘Western Asia,’’ 

‘‘Southeast Asia,’’ or ‘‘Australia/New 

Zealand/Pacific Islands’’). The 

Commission considered whether a more 

granular approach is necessary for 

certain regions in order to enhance price 

discovery while still protecting 

anonymity. For example, Mexico, 

Canada and Russia may benefit from a 

more granular public dissemination of 

delivery or pricing points given the 

amount of energy production in those 

regions. 

To the extent that a publicly 

reportable swap transaction described in 

proposed § 43.4(d)(4)(iii) references the 

United States as a whole and not a 

specific delivery or pricing point, 

proposed appendix E would require an 

SDR to publicly disseminate that 

reference. For example, an SDR would 

publicly disseminate a weather swap 

that references ‘‘U.S. Heating Monthly’’ 

as ‘‘U.S. Heating Monthly.’’ 

c. Basis Swaps 

The Commission proposed requiring 

SDRs to ensure that specific underlying 

assets are publicly disseminated for 

basis swaps that qualify as publicly 


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507CL–EEI at 12–13. 

508CL–Barclays at 6. 

509See NERC, Key Players: Regional Entities, 

http://www.nerc.com/ 

page.php?cid=1%7C9%7C119 (last visited May 6, 

2013). 

510See supra note 176. 

511 Id. 

512The Dodd-Frank Act deleted and replaced 

CEA section 2(h)(7), which contained the five 

criteria for determining a SPDC. The Dodd-Frank 

Act amended CEA section 4a(a) to include CEA 

section 4a(a)(4), which contains a similar version of 

the five criteria for determining a SPDC in the 

context of excessive speculation. 

513The Commission notes that it is not adding 

‘‘Henry Financial LD1 Fixed Price,’’ a listed futures 

contract that was converted from ‘‘Henry Financial 

LD1 Fixed Price Swap’’ (which was previously 

deemed by the Commission to be a SPDC), to 

appendix B to part 43. This contract is 

economically related to the ‘‘New York Mercantile 

Exchange Henry Hub Natural Gas,’’ which is listed 

under ‘‘Enumerated Physical Commodity 

Contracts’’ in appendix B to part 43. Therefore, 

listing this contract again would be redundant. 

reportable swap transactions. The 

Commission recognizes that basis swaps 

exist in which one leg of the swap 

references a contract described in 

appendix B to part 43 (or is 

economically related to one such 

contract) and the other leg of the swap 

references an asset or pricing point not 

listed in appendix B to part 43. 

Currently, § 43.4(d)(4)(ii)(A)–(B) 

requires an SDR to publicly disseminate 

the actual underlying asset of the leg of 

the basis swap that references or is 

economically related to a contract listed 

in appendix B to part 43. To the extent 

that a basis swap is executed on or 

pursuant to the rules of a SEF or DCM, 

an SDR would also publicly disseminate 

the specific underlying asset. With 

respect to the leg of a basis swap that 

does not reference a contract in 

appendix B to part 43, however, the 

Commission proposed to require SDRs 

to publicly disseminate the underlying 

asset of that leg pursuant to proposed 

§ 43.4(d)(4)(iii) and proposed appendix 

E to part 43, i.e., with top-coding 

provisions. 

d. Comments Received and Commission 

Determination 

The Commission received three 

comments regarding the masking of 

specific delivery or pricing detail of 

energy and power swaps. EEI 

recommended that the Commission 

mask data regarding Other Commodity 

Electricity Swaps according to the North 

American Electric Reliability 

Corporation eight regions rather than 

the FERC regions proposed.507 Barclays 

recommended that the Commission use 

wider geographic regions when publicly 

disseminating data for commodity 

swaps with very specific underlying 

assets and/or delivery points and 

develop an appropriate process to avoid 

identifying issuers of debt.508 Spring 

Trading supported further measures to 

prevent public disclosure of identities, 

business transactions, and market 

positions of swap market participants, 

and recommended disclosing a subset of 

data on a collective basis at a later date. 

After consideration of the comments 

received, the Commission is adopting 

§ 43.4(d)(4)(iii) with the following 

modification. For publicly reportable 

swap transactions that have electricity 

and sources as an underlying asset and 

have a specific delivery or pricing point 

in the United States, the Commission is 

requiring SDRs to publicly disseminate 

the specific delivery or pricing point 

based on a description of one of the 

North American Electric Reliability 

Corporation (‘‘NERC’’) regions for 

publicly disseminating delivery or 

pricing points for electricity swaps 

described in proposed § 43.4(d)(4)(iii). 

The NERC regions are broader than the 

FERC regions and include much of 

Canada. Specifically, the NERC regions 

are as follows: (i) Florida Reliability 

Coordinating Council (FRCC); (ii) 

Midwest Reliability Organization 

(MRO); (iii) Northeast Power 

Coordinating Council (NPCC); (iv) 

ReliabilityFirst Corporation (RFC); (v) 

SERC Reliability Corporation (SERC); 

(vi) Southwest Power Pool, RE (SPP); 

(vii) Texas Regional Entity (TRE); (viii) 

Western Electricity Coordinating 

Council (WECC).509 The Commission is 

of the view that using these regions as 

suggested by EEI will provide further 

masking of specific delivery details and 

thus further protection against public 

disclosure of identities, business 

transactions, and market positions of 

swap market participants, as 

recommended by Barclays and Spring 

Trading. 

4. Further Revisions to Part 43 

a. Additional Contracts Added to 

Appendix B to Part 43 

Appendix B to part 43 currently lists 

contracts that, if referenced as an 

underlying asset, would require SDRs to 

publicly disseminate the full geographic 

detail of the asset. In the Real-Time 

Reporting Final Rule, the Commission 

provided that SDRs were required to 

publicly disseminate any underlying 

asset of a publicly reportable swap 

transaction that references or is 

economically related to any contract or 

contracts listed in appendix B to part 43 

in the same manner. 

As noted above, the Commission 

proposed adding 13 natural gas and 

electricity contracts under the ‘‘Other 

Commodity’’ heading in appendix B to 

part 43 that have been de-listed and 

converted into futures contracts listed 

on a DCM.510 Nevertheless, the addition 

of these 13 contracts to appendix B 

effectively would require SDRs to 

publicly disseminate these contracts the 

same way as the other contracts that are 

currently listed in appendix B to part 

43. That is, an SDR would publicly 

disseminate the actual underlying asset 

(and any underlying asset(s) that are 

economically related) without any 

limitation of the geographic detail. 

The Commission had previously 

determined that these 13 contracts—as 

swaps—were significant price discovery 

contracts (‘‘SPDCs’’) in connection with 

trading on exempt commercial markets 

(‘‘ECMs’’).511 Each of the 13 contracts 

had undergone an analysis in which the 

Commission considered the following 

five criteria: (i) Price linkage (the extent 

to which the contract uses or otherwise 

relies on a daily or final settlement price 

of a contract listed for trade on or 

subject to the rules of a DCM); (ii) 

arbitrage (the extent to which the price 

of the contract is sufficiently related to 

the price of a contract listed on a DCM 

to permit market participants to 

effectively arbitrage between the two 

markets); (iii) material price reference 

(the extent to which, on a frequent and 

recurring basis, bids, offers or 

transactions in a commodity are directly 

based on, or are determined by 

referencing, the prices generated by 

contracts being traded or executed on 

the ECM); (iv) material liquidity (the 

extent to which volume of the contract 

is sufficient to have a material effect on 

other contracts listed for trading); and 

(v) other material factors.512

To the extent that the SPDC contracts 

have been de-listed and replaced by 

listed futures contracts, the Commission 

believes that the latter contracts have 

similar material liquidity and material 

price reference, among other things. 

Therefore, the Commission anticipates 

that, the public dissemination of the full 

underlying asset for publicly reportable 

swap transactions that reference such 

futures contracts (and any underlying 

assets that are economically related 

thereto) would not disclose the 

identities, market positions and 

business transactions of market 

participants and would enhance price 

discovery in the related markets.513 The 

Commission did not receive any other 

comments, and accordingly, is adopting 

these additions to appendix B. 

b. Technical Revisions to Part 43 

In the Real-Time Reporting Final 

Rule, the Commission states that the 


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514See 44 U.S.C. 3501. 

515See 44 U.S.C. 3502. 

516See 5 CFR 1320.3(c)(1). 

517See 44 U.S.C. 3506. 

518The Commission has previously estimated that 

125 SDs and MSPs will register with the 

Commission and 1,000 non-financial end-users (i.e., 

non-SD/non-MSPs) will be required to report swap 

transactions annually. 77 FR 1229–30. 

519The Commission anticipates that these figures 

will change as a function of changes in the market 

structure and practices in the U.S. swaps markets. 

520The Commission estimates the total number of 

notifications as follows: 125 SDs/MSPs × 1,000 

notifications = 125,000 notifications per year; 1,000 

non-SDs/non-MSPs × 5 notifications = 5,000 

notifications per year; therefore, the total across all 

types of entities would be 130,000 notifications per 

year. 

transactions described 

§ 43.4(d)(4)(ii)(A)–(C), i.e., the instances 

in which the actual underlying asset for 

a publicly reportable swap transaction 

in the other commodity asset class is to 

be publicly disseminated, are meant to 

be exclusive of one another. Under these 

sections, an SDR is required to publicly 

disseminate the actual underlying 

asset(s) of a swap in the other 

commodity asset class, where the swap 

(1) is executed on or pursuant to the 

rules of a SEF or DCM; (2) references a 

contract listed on appendix B to part 43; 

or (3) is economically related to a 

contract on appendix B. Accordingly, 

the Commission proposed a technical 

clarification to § 43.4(d)(4)(ii)(B) to 

clarify the intent that these elements are 

exclusive of one another, as articulated 

in the preamble to the Real-Time 

Reporting Final Rule. 

The Commission did not receive any 

comments regarding the technical 

clarification to § 43.4(d)(4)(ii)(B). 

Accordingly, the Commission is 

adopting § 43.4(d)(4)(ii)(B) as proposed. 

IV. Paperwork Reduction Act 

A. Background 

The purposes of the Paperwork 

Reduction Act of 1995, 44 U.S.C. 3501 

et seq. (‘‘PRA’’) are, among other things, 

to minimize the paperwork burden to 

the private sector, ensure that any 

collection of information by a 

government agency is put to the greatest 

possible uses, and minimize duplicative 

information collections across the 

government.514 The PRA applies with 

extraordinary breadth to all information, 

‘‘regardless of form or format,’’ 

whenever the government is ‘‘obtaining, 

causing to be obtained [or] soliciting’’ 

information, and includes required 

‘‘disclosure to third parties or the 

public, of facts or opinions,’’ when the 

information collection calls for 

‘‘answers to identical questions posed 

to, or identical reporting or 

recordkeeping requirements imposed 

on, ten or more persons.’’ 515 The PRA 

requirements have been determined to 

include not only mandatory but also 

voluntary information collections, and 

include both written and oral 

communications.516

To effectuate the purposes of the PRA, 

Congress requires all agencies to 

quantify and justify the burden of any 

information collection it imposes.517

This requirement includes submitting 

each collection, whether or not it is 

contained in a rulemaking, to the Office 

of Management and Budget (‘‘OMB’’) for 

review. The OMB submission process 

included completing a supporting 

statement with the agency’s burden 

estimate and justification for the 

collection. The information collection 

established within this rulemaking, 

which included the agency’s burden 

estimate and justification, was subjected 

to the rulemaking’s public comment 

process. No public comments were 

received affecting the information 

burden and justification. 

Section 43.6 and amendments to 

§ 43.4 amend an existing collection of 

information within the meaning of the 

PRA in two respects. Accordingly, the 

Commission submitted the Further 

Block Proposal to the OMB for review 

pursuant to 44 U.S.C. 3507(d) and 5 

CFR1320.11. OMB has assigned control 

number 3038–0070 to the existing 

collection of information, which is titled 

‘‘Part 43—Real-Time Public Reporting.’’ 

The Commission invited the public to 

comment on any aspect of the proposed 

amendments to existing collections of 

information. The responses to this 

amended collection of information are 

mandatory. The Commission did not 

receive any comments regarding the 

proposed amendments. Accordingly, the 

Commission is not revising the 

estimates contained in the Further Block 

Proposal, which are described in the 

following sections. 

B. Description of the Collection 

On January 9, 2012, the Commission 

issued the Real-Time Reporting Final 

Rule, which includes three collections 

of information requirements within the 

meaning of the PRA. The first collection 

of information requirement under Part 

43 imposed a reporting requirement on 

a SEF or DCM when a swap is executed 

on a trading facility or on the parties to 

a swap transaction when the swap is 

executed bilaterally. The second 

collection of information requirement 

under Part 43 created a public 

dissemination requirement on SDRs. 

The third collection of information 

requirement created a recordkeeping 

requirement for SEFs, DCMs, SDRs and 

any reporting party (as such term is 

defined in part 43 of the Commission’s 

regulations). 

Sections 43.4 and 43.6 amend the first 

and second collections of information 

within the meaning of the PRA as 

described below. The analysis with 

respect to the amended collections as a 

result of § 43.6 is set out in section 1 

below. The analysis with respect to the 

amended collections as a result of 

amendments to § 43.4 is set out in 

section 2 below. 

1. § 43.6(g)—Notification of Election 

Section 43.6(g) amends the first and 

second collections of information 

within the meaning of the PRA. In 

particular, § 43.6(g) contains the 

provisions regarding the election to 

have a swap transaction treated as a 

block trade or large notional off-facility 

swap, as applicable. Section 43.6(g)(1) 

establishes a two-step notification 

process relating to block trades. Section 

43.6(g)(2) establishes the notification 

process relating to large notional offfacility swaps. Section 43.6(g) is an 

essential part of this rulemaking because 

it provides the mechanism through 

which market participants will be able 

to elect to treat their qualifying swap 

transaction as a block trade or large 

notional off-facility swap. 

Section 43.6(g)(1)(i) contains the first 

step in the two-step notification process 

relating to block trades. In particular, 

this section provides that the parties to 

a swap that are executed at or above the 

appropriate minimum block size for the 

applicable swap category are required to 

notify the SEF or DCM (as applicable) of 

their election to have their qualifying 

swap transaction treated as a block 

trade. The Commission understands that 

SEFs and DCMs use automated, 

electronic, and in some cases, voice 

processes to execute swap transactions; 

therefore, the transmission of the 

notification of a block trade election 

also would either be automated, 

electronic or communicated through 

voice. 

The Commission estimates that there 

are 125 SDs and MSPs, and 1,000 other 

non-financial end-user parties.518 The 

Commission estimates that, on average, 

SD/MSP reporting parties would likely 

notify a SEF or DCM of a block trade 

election approximately 1,000 times per 

year while non-SD/MSP reporting 

parties likely would notify a SEF or 

DCM of a block trade election 

approximately five times per year.519

Thus, the Commission estimates that 

there would be 130,000 notifications of 

a block trade election by reporting 

parties under § 43.6(g) each year.520


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521The Commission previously has utilized wage 

rate estimates based on average salary and average 

prior year bonus information for the securities 

industry compiled by SIFMA. These wage estimates 

are derived from an industry-wide survey of 

participants and thus reflect an average across 

entities; the Commission notes that the actual costs 

for any individual company or sector may vary from 

the average. 

The Commission estimated the dollar costs of 

hourly burdens for different types of relevant 

professionals using the following calculations: 

(1) [(2010 salary + bonus) * (salary growth per 

professional type, 2010–2011)] = Estimated 2010 

total annual compensation. The most recent data 

provided by the SIFMA report describe the 2010 

total compensation (salary + bonus) by professional 

type, the growth in base salary from 2010 to 2011 

for each professional type, and the 2011 base salary 

for each professional type; therefore, the 

Commission estimated the 2011 total compensation 

for each professional type, but, in the absence of 

similarly granular data on salary growth or 

compensation from 2011 to 2012 and beyond, did 

not estimate dollar costs beyond 2011. [(Estimated 

2011 total annual compensation)/(1,800 annual 

work hours)] = Hourly wage per professional type.] 

(2) [(Hourly wage) * (Adjustment factor for 

overhead and other benefits, which the Commission 

has estimated to be 1.3)] = Adjusted hourly wage 

per professional type.] 

(3) [(Adjusted hourly wage) * (Estimated hour 

burden for compliance)] = Dollar cost of compliance 

for each hour burden estimate per professional 

type.] 

The sum of each of these calculations for all 

professional types involved in compliance with a 

given element of the Further Block Proposal 

represents the total cost for each counterparty, 

reporting party, swap dealer, major swap 

participant, SEF, DCM, or SDR, as applicable to that 

element of the proposal. 522To comply with the election process in 

proposed § 43.6(g), a market participant likely 

would need to provide training to its existing 

personnel and update its written policies and 

procedures to account for this new process. The 

total annual burden hours equals the total hours for 

swap dealers and major swap participants plus the 

total hours for non-swap dealers and non-major 

swap participants. 

523The underlying adjusted labor cost estimate of 

$184.90 per hour used in this estimate is calculated 

based on the adjusted wages of swap traders. See 

note 521 supra. 524The estimated costs are based on the 

Commission’s estimate of the incremental, nonrecurring expenditures to reporting entities, 

including non-SD/non-MSPs (i.e., non-financial 

end-users) to: (1) update existing technology, 

including updating its OMS system ($7,170); and 

(2) provide training to existing personnel and 

update written policies and procedures ($3,360). 

See section V.D.1. infra. The Commission believes 

that SDs/MSPs would incur similar non-recurring 

start-up costs. The Commission has previously 

estimated that 125 SDs and MSPs will register with 

the Commission and 1,000 non-financial end-users 

(i.e., non-SD/non-MSPs) will be required to report 

in a year. See 77 FR 1229–30. 

525The Commission bases this estimate on 58 

projected SEFs and DCMs, each of which will incur 

costs of investing in update technology, including 

updating its OMS system ($6,761.20); and training 

existing personnel and updating written policies 

and procedures ($3,195.00). See section V.D.1. 

infra. 

526The economic costs associated with entering 

into a third party service arrangement to transmit 

an electronic notice to an SDR are difficult to 

determine. There are too many variables that are 

involved in determining those costs. 

Notwithstanding this difficulty, the Commission 

foresees that, for many reporting parties that 

infrequently trade swaps, the annualized cost of 

entering into a third-party service arrangement of 

this type would likely be less than the total annual 

cost of building an electronic infrastructure to 

transmit electronic notices directly to an SDR. 

527See note 521 supra. 

528The labor hour estimate is calculated as 

follows: (125 SDs/MSPs × 500 notifications) + 

(1,000 non-SDs/non-MSPs × 5 notifications) = 

67,500 notifications × 2 minutes/notification = 

135,000 minutes/60 minutes/hour = 2,250 hours. 

The labor cost estimate is calculated as follows: 

2,250 labor hours × $140.93 per hour total 

compensation = $317,092. The Commission notes 

that the calculation in the Further Block Proposal 

incorrectly listed the labor hour estimate as 2,255 

hours (rather than 2,250). The labor cost estimate 

was then incorrectly listed as $317,797 (rather than 

$317,092) due to the incorrect labor hour estimate. 

The Commission estimates that the 

burden hours associated with 

§ 43.6(g)(1)(i) would include: (i) 30 

seconds on average for parties to a swap 

to determine whether a particular swap 

transaction qualifies as a block trade 

based on the appropriate minimum 

block size of the applicable swap 

category; and (ii) 30 seconds on average 

for the parties to electronically transmit 

or otherwise communicate their notice 

of election. SDs, MSPs and reporting 

parties would use existing traders (or 

other professionals earning similar 

salaries) to electronically transmit or 

otherwise communicate their notice of 

election. Based on the Securities 

Industry and Financial Market 

Association’s 2011 Securities Industry 

Salary Survey, the Commission 

estimates that these block traders would 

earn approximately $184.90 per hour in 

total compensation.521 Accordingly, the 

Commission estimates that the total 

annual burden hour costs associated 

with the first step in proposed 

§ 43.6(g)(1)(i) would be 2,167 hours 522

or $400,678 in total annual burden 

hours costs 523 and $11.8 million in total 

start-up capital costs.524

With respect to the second step, 

proposed § 43.6(g)(1)(ii) provides that 

the SEF or DCM, as applicable, that 

receives an election notification is 

required to notify an SDR of a block 

trade election when transmitting swap 

transaction and pricing data to such 

SDR for public dissemination. As noted 

above, the Commission anticipates that 

SEFs and DCMs would use automated, 

electronic and, in some cases, voice 

processes to execute swap transactions. 

The Commission estimates that there 

will be approximately 58 SEFs and 

DCMs. Accordingly, the Commission 

estimates that the total annual burden 

associated with the second step in 

§ 43.6(g)(1)(ii) would be approximately 

$610,740 in non-recurring annualized 

capital and start-up costs.525 The RealTime Reporting Final Rule already has 

addressed the recurring annualized 

costs for the hour burden. 

Section 43.6(g)(2) is similar to the first 

step set forth in § 43.6(g)(1). That is, 

§ 43.6(g)(2) provides, in part, that a 

reporting party who executes a bilateral 

swap transaction that is at or above the 

appropriate minimum block size is 

required to notify the SDR of its election 

to treat such swap as a large notional 

off-facility swap. This section provides 

further that the reporting party is 

required to notify the SDR in connection 

with the reporting party’s transmission 

of swap transaction and pricing data to 

the SDR for public dissemination. The 

Commission anticipates that reporting 

parties may have various methods 

through which they will transmit 

information to SDRs, which would 

include a large notional off-facility swap 

election. Most reporting parties would 

use automated and electronic methods 

to transmit this information; other 

reporting parties, because of the expense 

associated with building an electronic 

infrastructure, may contract with third 

parties (including their swap 

counterparty) to transmit the 

notification of a large notional offfacility swap election. 

The Commission estimates that the 

incremental time and cost burden 

associated with the § 43.6(g)(2) would 

include: (i) One minute for a reporting 

party to determine whether a particular 

swap transaction qualifies as a large 

notional off-facility swap based on the 

appropriate minimum block size of the 

applicable swap category; and (ii) one 

minute for the reporting party (or its 

designee) to electronically transmit or 

communicate through voice processes 

its notice of election. The Commission 

estimates that, of the approximately 

2,250 hours incurred by 125 SDs/MSPs 

and 1,000 non-SD/MSPs, all of those 

hours would be spent by traders and 

market analysts (or designee).526

SIFMA’s report states that traders and 

market analysts make $184.90 per hour 

in total compensation.527

The Commission estimates that, on 

average, each of the estimated 125 SD/ 

MSP counterparties would likely notify 

an SDR of a large notional off-facility 

swap election approximately 500 times 

per year while each of the estimated 

1,000 non-SD/MSP counterparties 

would notify an SDR approximately five 

times per year. Accordingly, the 

Commission estimates that there are, on 

average, approximately 67,500 

notifications large notional off-facility 

swaps under § 43.6 each year. 

Accordingly, the Commission estimates 

that the total annual burden associated 

with § 43.6(g)(2) would be 

approximately 2,250 annual labor hours 

or $416,025 in annual labor costs.528


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529The estimated costs are based on the 

Commission’s estimate of the incremental, nonrecurring expenditures to reporting entities, 

including non-SD/non-MSPs (i.e., non-financial 

end-users) to (1) update existing technology, 

including updating its OMS system ($6,761.20); and 

(2) provide training to existing personnel and 

update written policies and procedures ($3,195.00). 

See section V.D.1. infra. The Commission believes 

that SDs/MSPs would incur similar non-recurring 

start-up costs. The Commission has previously 

estimated that 125 SDs and MSPs will register with 

the Commission and 1,000 non-financial end-users 

(i.e., non-SD/non-MSPs) will be required to report 

in a year. 77 FR 1229–30. 

530See 77 FR at 1232. 

531The Commission estimates that there will be 

5 SDRs, which will collect swaps data in the other 

commodity asset class. Each SDR would collect 

swaps data on approximately 10,000 swap 

transactions in the other commodity asset class. The 

commission estimates that it will take each SDR on 

average approximately 1 minute to publicly 

disseminate swaps data related to these new swap 

transactions. The number of burden hours for these 

SDRs would be 833 hours. As referenced in note 

523 supra, the total labor costs for a swap trader is 

$140.93. Thus, the total number of burden hour 

costs equal the total number of burden hours (833 

burden hours) × $140.93. 

532The Real-Time Reporting Final Rule 

calculated and addressed the total ongoing burden 

hours and burden hour costs. See 77 FR 11232. 

533The economic costs associated with entering 

into a third party service arrangement to transmit 

an electronic notice to an SDR are difficult to 

determine because of too many variables involved 

in determining those costs. Notwithstanding this 

difficulty, the Commission believes that, for many 

reporting parties that infrequently trade swaps, the 

annualized cost of entering into a third-party 

service arrangement of this type would likely be 

less than the total annual cost of building an 

electronic infrastructure to transmit electronic 

notices directly to an SDR. 

534 7 U.S.C. 19(a). 

535Real-Time Public Reporting of Swap 

Transaction Data, 77 FR 1182, Jan. 9, 2012. 

536 Dodd-Frank Wall Street Reform and Consumer 

Protection Act section 727, Public Law 111–203, 

124 Stat. 1376 (2010) (‘‘Dodd-Frank Act’’). 

537 Dodd-Frank Act section 701, et seq. 

538See, e.g., Financial Crisis Inquiry Commission, 

‘‘The Financial Crisis Inquiry Report: Final Report 

of the National Commission on the Causes of the 

Financial and Economic Crisis in the United 

States,’’ Jan. 2011, at xxiv, available at http:// 

www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPOFCIC.pdf (listing uncontrolled leverage; lack of 

transparency, capital and collateral requirements; 

speculation; interconnection among firms; and 

concentrations of risk in the market as contributing 

factors). 

539S. Rep. No. 111–176, at 92 (2010). 

540CEA section 2(a)(13)(B). 

541CEA section 2(a)(13)(A). 

542CEA section 2(a)(13)(C). 

In addition, the Commission estimates 

that § 43.6(g)(2) results in $11.8 million 

in non-recurring annualized capital and 

start-up costs.529 The Real-Time 

Reporting Final Rule addressed all 

ongoing operational and maintenance 

costs.530

2. Amendments to § 43.4(d)(4) and 

43.4(h) 

The Commission addresses the public 

dissemination of certain swaps in the 

other commodity asset class in 

§ 43.4(d)(4). Section 43.4(d)(4)(ii) 

provides that for publicly reportable 

swaps in the other commodity asset 

class, the actual underlying assets must 

be publicly disseminated for: (1) Those 

swaps executed on or pursuant to the 

rules of a SEF or DCM; (2) those swaps 

referencing one of the contracts 

described in appendix B to part 43; and 

(3) any publicly reportable swap 

transaction that is economically related 

to one of the contracts described in 

appendix B to part 43. Pursuant to the 

Real-Time Reporting Final Rule, any 

swap that is in the other commodity 

asset class that does not fall under 

§ 43.4(d)(4)(ii) would not be subject to 

reporting and public dissemination 

requirements upon the effective date of 

the Real-Time Reporting Final Rule. 

In this final rule, the Commission is 

promulgating a new provision 

(§ 43.4(d)(4)(iii)), which would develop 

a system for the public dissemination of 

exact underlying assets in the other 

commodity asset class with a ‘‘mask’’ 

based on geographic detail. The 

Commission is adopting a new 

appendix to part 43, which contains the 

geographical top-codes that SDRs would 

use in masking certain other commodity 

swaps in connection with such swaps 

public dissemination of swap 

transaction and pricing data under part 

43. The Commission anticipates that 

there will be approximately 50,000 

additional swaps reported to an SDR 

each year in the other commodity asset 

class, which the Commission estimates 

would be $154,021 in annualized hour 

burden costs.531

The Commission’s regulations 

currently provide a system establishing 

cap sizes. Section 43.4(h) of the 

Commission’s regulations provides that 

cap sizes for swaps in each asset class 

shall equal the appropriate minimum 

block size corresponding to such 

publicly reportable swap transaction. If 

no appropriate minimum block size 

exists, then § 43.4(h) sets out specific 

interim cap sizes for each asset class.532

This final rule amends § 43.4(h) to 

establish new cap sizes in the postinitial period using a 75-percent 

notional amount calculation. Under this 

amendment, the Commission will 

perform the calculation; however, SDRs 

will update their technology and other 

systems at a minimum of once per year 

to publicly disseminate swap 

transaction and pricing data with the 

cap sizes issued by the Commission. 

The Commission estimates that the 

incremental start-up costs associated 

with the amendment to §§ 43.4(d)(4) 

and 43.4(h) for an SDR would include: 

(1) Reprograming its technology 

infrastructure to accommodate the 

masking system and post-initial cap 

sizes methodology; (2) updating its 

written policies and procedures to 

ensure compliance with § 43.4(d)(4)(iii) 

and the amendment to § 43.4(h); and (3) 

training staff on the new policies and 

procedures.533

V. Cost-Benefit Considerations 

A. Background 

Section 15(a) of the Commodity 

Exchange Act 534 (‘‘CEA’’) mandates that 

the Commission consider the costs and 

benefits of this rulemaking, which 

amends portions of part 43 (the RealTime Reporting Final Rule).535 Part 43 

implements section 727 of the DoddFrank Act.536

Enacted in the wake of the 2008 

financial crisis with the aim of 

preventing a repeat of the severe harm 

that crisis caused, Title VII of the DoddFrank Act establishes a comprehensive 

new regulatory framework for swaps 

and security-based swaps.537 Among 

other things, the legislation seeks to 

promote market integrity, reduce risk, 

and increase transparency within the 

financial system as a whole and swaps 

markets in particular. Consistent with 

the view that the financial crisis was not 

attributable to a single weakness, but a 

combination of several,538 Title VII does 

not provide for a single-dimensional fix. 

Rather, it weaves together a 

multidimensional regulatory construct 

designed to ‘‘mitigate costs and risks to 

taxpayers and the financial system.’’ 539

Section 727 concerns a fundamental 

component in the Dodd-Frank Act 

construct: public swap transaction 

reporting. This provision adds section 

2(a)(13) to the CEA ‘‘to authorize the 

Commission to make swap transaction 

and pricing data available to the public 

in such form and at such times as the 

Commission determines appropriate to 

enhance price discovery.’’ 540 In 

addition, the section directs the 

Commission to promulgate certain rules, 

including rules that: 

• Require ‘‘real-time public 

reporting’’—i.e., ‘‘reporting data related 

to a swap transaction, including price 

and volume, as soon as technologically 

practicable after the time at which the 

swap transaction has been 

executed’’ 541—of swap transactions 542; 

• specify ‘‘the criteria for determining 

what constitutes a large notional swap 

transaction (block trade) for particular 

markets and contracts’’ and ‘‘the 

appropriate time delay for reporting 


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543See CEA sections 2(a)(13)(E)(ii) and (iii). 

Section 2(a)(13)(E) explicitly refers to the swaps 

described only in sections 2(a)(13)(C)(i) and 

2(a)(13)(C)(ii) of the CEA (i.e., clearable swaps, 

including swaps that are exempt from clearing). The 

Commission, in exercising its authority under CEA 

section 2(a)(13)(B) to ‘‘make swap transaction and 

pricing data available to the public in such form 

and at such times as the Commission determines 

appropriate to enhance price discovery,’’ is 

authorized to prescribe rules similar to those 

provisions in section 2(a)(13)(E) to uncleared swaps 

described in section 2(a)(13)(C)(iii) and (iv) of the 

CEA. Thus, the Commission is establishing block 

thresholds for the swaps described in Sections 

2(a)(13)(C)(i) and 2(a)(13)(C)(ii) of the CEA as 

required by Section 2(a)(13)(E). The Commission is 

establishing large notional off-facility swap 

thresholds for swaps described in Sections 

2(a)(13)(C)(iii) and 2(a)(13)(C)(iv) pursuant to its 

authority under Section 2(a)(13)(B). 

544CEA section 2(a)(13)(E)(iv). 

545See CEA sections 2(a)(13)(E)(i) and 

2(a)(13)(C)(iii). 

546Real-Time Public Reporting of Swap 

Transaction Data, 77 FR 1182, Jan. 9, 2012. 

547The Real-Time Reporting Final Rule defines 

the term ‘‘Block trade’’ as a publicly reportable 

swap transaction that: ‘‘(1) [i]nvolves a swap that 

is listed on a SEF or DCM; (2) [o]ccurs away from 

the [SEF’s or DCM’s] trading system or platform and 

is executed pursuant to the [SEF’s or DCM’s] rules 

and procedures; (3) has a notional or principal 

amount at or above the appropriate minimum block 

applicable to such swap ; and (4) [i]s reported 

subject to the rules and procedures of the [SEF or 

DCM] and the rules described in [part 43], 

including the appropriate time delay requirements 

set forth in § 43.5.’’ See § 43.2, 77 FR 1243. 

The Real-Time Reporting Final Rule defined the 

term ‘‘Large notional off-facility swap as an ‘‘offfacility swap that has a notional or principal 

amount at or above the appropriate minimum block 

size applicable to such publicly reportable swap 

transaction and is not a block trade as defined in 

§ 43.2 of the Commission’s regulations.’’ Id. 

548See § 43.3, 77 FR 1244. 

549See § 43.4, 77 FR 1246. 

550See § 43.5, 77 FR 1247. 551See § 43.4 (d) and (h), 77 FR 1,246. Section 

43.4(h) states that ‘‘[t]he rounded notional or 

principal amount that is publicly disseminated for 

a publicly reportable swap transaction shall be 

capped. . . . ’’ If the notional or principal amount 

of a publicly reportable swap transaction is greater 

than the cap size, the publicly reported size for the 

trade will be ‘‘[cap size]+.’’ For example, if the 

relevant cap size is 250 million, the publicly 

reported size will be ‘‘250+.’’ 552 77 FR 1217; see also § 43.5(c). 

553See § 43.5(c)(1). 

554See § 43.6(b), which defines swap category by 

asset class. 

555See § 43.6(e) and (f). 

556See § 43.6(e) and appendix F to part 43. 

557See § 43.6(c) and (f). 

558See § 43.6(g). 

559See amendments to § 43.4(d)(4). 

560See §§ 43.4(h) and 43.6(c). 

561The costs and benefits attendant to the time 

delay and development of an infrastructure for 

block trades and large notional off-facility swaps are 

discussed in Real-Time Public Reporting of Swap 

Transaction Data, 77 FR 1182, 1232, Jan. 9, 2012. 

562See, the Core Principles and Other 

Requirements for Swap Execution Facilities notice 

of proposed rulemaking, 76 FR 1214 (Jan. 7, 2011). 

563The Commission separately proposed rules to 

determine whether a swap is ‘‘made available to 

trade’’ for purposes of the trade execution 

requirement in CEA section 2(h)(8). Process for a 

Designated Contract Market or Swap Execution 

Facility To Make a Swap Available to Trade, 76 FR 

77728 (proposed Dec. 14, 2011). 

large notional swap transactions (block 

trades) to the public;’’ 543

• take into account whether public 

disclosure of swap transaction and 

pricing data ‘‘will materially reduce 

market liquidity’’ 544; 

• protect the identities of 

counterparties to swaps and maintain 

the anonymity of business transactions 

and market positions of swap 

counterparties.545

In January 2012, the Commission 

adopted the part 43 Real-Time 

Reporting Final Rule implementing 

section 2(a)(13)of the CEA.546 Generally 

summarized, the Real-Time Reporting 

Final Rule defined the terms ‘‘block 

trade’’ and ‘‘large notional off-facility 

swap,’’ 547 and established the: (1) 

Responsibilities of the parties to each 

swap to report swap transaction and 

pricing data to a swap data repository 

(‘‘SDR’’) and the types of data they must 

report 548; (2) requirements for SDRs to 

publicly disseminate such data in realtime or, in the case of block trades and 

large-notional off-facility swaps, subject 

to a time delay 549; (3) applicable time 

delays for public dissemination of block 

trades and large-notional off-facility 

swaps data according to asset class 550; 

and (4) a system to protect the 

anonymity of parties to a swap, 

including interim notional cap sizes for 

all swaps that are publicly disseminated 

and the creation of an exception from 

the real-time public reporting 

requirement for certain swaps in the 

‘‘other commodity’’ asset class.551

The Real-Time Public Reporting Final 

Rule as adopted in January 2012, 

however, deferred its responsibility to 

promulgate rules that ‘‘specify the 

criteria for determining what constitutes 

a large notional [off-facility] swap 

transaction [or block trade] for 

particular markets and contracts’’ as 

CEA section 2(a)(13)(E)(ii) requires. 

Pending the adoption of such 

supplemental part 43 rules, the 

Commission adopted ‘‘interim time 

delays for all swaps.’’ 552 Accordingly, at 

present no swap transaction data is 

publicly disseminated in real-time; 

interim time delays are in place for all 

swaps.553

The final rules adopted in this release 

amend part 43 to establish appropriate 

minimum block sizes, lift the blanket 

interim time-delay for all swaps from 

real-time public reporting, and provide 

further anonymity provisions to protect 

the identities of swap counterparties 

and transactions. More specifically, and 

as discussed in more detail above, these 

rules do so by: 

• creating ‘‘swap categories’’ (i.e., 

groupings of swaps within the same 

asset class based on underlying 

characteristics) to which a common 

appropriate minimum block size 

applies 554; 

• prescribing a two-period, phased in 

approach to implement regulations, 

comprised of an initial period and an 

on-going (post-initial) period to allow 

market participants sufficient time for 

compliance 555; 

• establishing initial appropriate 

minimum block sizes based on the 

Commission’s review and analysis of 

swap market data across certain asset 

classes 556; 

• obligating set forth a methodology 

for calculating post-initial appropriate 

minimum block sizes 557; 

• providing a procedure that allows 

parties to a swap to elect block trade or 

large notional off-facility swap 

treatment for a swap transaction; 558 and 

• establishing a system to ensure the 

anonymity of certain swaps in the other 

commodity asset class,559 including a 

methodology for the calculation of 

initial or post-initial cap sizes.560

The rules do not, however, amend part 

43 in a manner that alters the 

appropriate time delays for block trades 

and large notional off-facility swaps, nor 

do they require investment in a 

completely new information 

infrastructure beyond what is necessary 

to comply with the existing provisions 

of part 43.561 With this release, in 

conjunction with the separate SEF core 

principles rulemaking 562 and the made 

available to trade rulemaking,563 the 

Commission is implementing the trade 

execution mandate of CEA Section 

2(h)(8). Due to the clearing mandate, the 

Final Rule at this time mainly will affect 

pre-trade transparency only in the 

interest rate and credit default asset 

classes. In regard to the foreign 

exchange and other commodity asset 

classes, the Commission notes that there 

is no clearing mandate for foreign 

exchange swaps and other commodity 

swaps at this time. Thus, the swaps 

block rule does not currently affect pretrade transparency for these asset 

classes. As these markets evolve, the 

Commission will continue to monitor 

developments within each asset class 

and may exercise its legal authority to 

take action by rule or order if necessary 

to address changes in the markets. 

This rulemaking requires the 

Commission to carefully navigate a 

tension that CEA section 2(a)(13) 

recognizes: while section 2(a)(13)(C) 

requires the Commission to promulgate 

rules to bring real-time public reporting 

to the swaps market, section 

2(a)(13)(E)(iv) requires that in doing so 


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564The benefits of public dissemination of swap 

transaction and pricing data are detailed in RealTime Public Reporting of Swap Transaction Data, 

77 FR at 1234. As the Commission explained in that 

release and reaffirms here, swap transaction 

reporting and public dissemination benefits market 

participants and the public in a number of respects. 

Among others discussed in that earlier release, and 

considered by reference herein, these include 

enhanced: price discovery, ability to manage risk as 

a result of improved visibility into swap market risk 

pricing, and improved swap market price 

competition. Additionally, the transparency 

afforded through public dissemination of swap 

transaction and pricing data ‘‘will enhance the 

Commission’s ability to detect anomalies in the 

market . . . and provide a check against a 

reoccurrence of the type of systemic risk build-up 

that occurred in 2008 when ‘the market permitted 

enormous exposure to risk to grow out of the sight 

of regulators and other traders [and d]erivatives 

exposures that could not be readily quantified 

exacerbated panic and uncertainty about the true 

financial condition of other market participants, 

contributing to the freezing of credit markets.’ ’’ Id. 

(quoting Congressional Research Service Report for 

Congress, The Dodd-Frank Wall Street Reform and 

Consumer Protection Act: Title VII, Derivatives, by 

Mark Jickling and Kathleen Ann Ruane (August 30, 

2010). 

565 Indeed, CEA section 2(a)(13)(E)(iv), in simply 

requiring that the Commission ‘‘take into account 

whether public disclosure will materially reduce 

market liquidity,’’ does not require that the 

Commission attempt to determine the precise 

optimal relationship between transparency and 

liquidity or assure no liquidity loss. 

566Using the Over-the-Counter Derivatives 

Supervisors Group (‘‘ODSG’’) data for interest rate 

swaps, the Commission notes that the 67 percent 

notional amount calculation would result in 94 

percent of trades being reported in real-time. A 

discussion of the ODSG and the data set is set forth 

in section II.C.1 of this final rule. 

567See § 43.6(f). 

568 7 U.S.C. 19(a). 

569See § 43.5(c). 

570Currently, the part 43 requirements are not 

applicable to swaps in the other commodities asset 

class that reference underlying assets not included 

in Appendix B to Part 43. The Real-Time Reporting 

Rule provides notice that, until such time as the 

anonymity provisions of this final rule are finalized, 

those off-facility swaps not listed in appendix B to 

part 43 are not be required to comply with the realtime reporting and public dissemination 

requirements under part 43. However, such swaps 

are subject to the regulatory reporting requirements, 

described in proposed part 45. According to the BIS 

report http://bis.org/publ/qtrpdf/r_qs1209.pdf, 

commodities (as a whole and not just the subset 

identified above) only represent slightly more than 

one third of one percent (0.36%) of the notional 

amounts outstanding as a percentage of the global 

OTC derivatives market for the end of December 

2011. For this small subset of other commodity 

swaps, the starting point for the purposes of the 

Commission’s consideration of the costs and 

benefits is the same as the starting point for the 

Commission’s consideration of costs and benefits of 

the Real-Time Reporting Rule. A detailed 

discussion of the Commission’s consideration of 

those costs and benefits is contained in the RealTime Reporting Rule. See 77 FR at 1232–1240. 

571A non-financial end-user is a new market 

entrant with no prior swaps market participation or 

infrastructure. This reference point is different from 

the reference point(s) used in the PRA analysis in 

section V above for the following two reasons: (1) 

the burdens in the PRA are narrower than the costs 

discussed in this section (i.e., the PRA analysis 

solely discusses costs relating to collections of 

information, whereas this cost-benefit analysis 

considers all costs relating to the proposed rules); 

and (2) as discussed above, the cost-benefit analysis 

determines costs relative to one market participant 

that presumably would bear the highest burdens in 

implementing the proposed rules, whereas the PRA 

analysis seeks to estimate the costs of the proposed 

rules on all market participants. 

the Commission ‘‘take into account 

whether the public disclosure will 

materially reduce market liquidity.’’ The 

Commission has followed both 

directives. Accordingly, a central focus 

of the Commission’s consideration of 

costs and benefits of this rulemaking is 

the interplay between the important 

benefits of enhanced swap transaction 

transparency that real-time public 

dissemination affords 564 and the 

potential that, in certain circumstances, 

transparency could reduce swap market 

liquidity. As evident by commenters’ 

divergent opinions, the optimal point in 

this interplay, and how to set it, defies 

precision.565 Given this fact, these rules 

reflect the Commission’s reasoned 

judgment of how best to meaningfully 

effectuate real-time public reporting of 

swap transactions—and the 

transparency Congress intended—in a 

manner that takes into account the 

impact on market liquidity. Briefly, the 

Commission will use a 67% percent 

notional calculation to determine the 

threshold over which block trades and 

large notional off-facility swaps will be 

eligible for block trade treatment, 

meaning that most swaps will be 

reported in real-time.566 At the same 

time, a phased implementation schedule 

assures that transparency is introduced 

incrementally, taking into account 

whether public disclosure will 

‘‘materially reduce market liquidity.’’ 

For example, to cushion potential 

liquidity impact, the thresholds for 

swaps in the interest rate and credit 

assets classes will initially rest 

conservatively at 50 percent, thus 

allowing transactions above 50 percent 

of the notional amount to remain 

shielded from real-time public 

reporting, before transitioning to 67 

percent in the post-initial period. While 

this departure from the proposal means 

that fewer swaps will be subject to realtime transparency during the initial 

period, it affords the Commission the 

opportunity to collect and analyze data 

on the use of block thresholds and to 

apply that data to its evaluation of the 

risks attendant to a less transparent 

market. Simultaneously introducing a 

conservative, 50 percent threshold also 

allows the Commission to assess 

whether there are material reductions in 

the liquidity for some swaps and take 

any measures to stave off those 

reductions, as the rules allow the 

Commission to review and refine the 

thresholds as liquidity and transparency 

needs may warrant in the future.567

B. The Statutory Mandate To Consider 

the Costs and Benefits of the 

Commission’s Action: Section 15(a) of 

the CEA 

Section 15(a) of the CEA 568 requires 

the Commission to consider the costs 

and benefits of its actions before 

promulgating a regulation under the 

CEA or issuing certain orders. Section 

15(a) further specifies that the costs and 

benefits shall be evaluated in light of the 

following 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 considers the costs and 

benefits resulting from its discretionary 

determinations with respect to the 

section 15(a) factors. 

These amending rules become 

effective in—and their costs and 

benefits are considered relative to—the 

context of the conditions now in place 

under part 43. That is: all publicly 

reportable swap transactions are 

currently subject to a time delay and are 

not publicly reported in real-time.569 570

Unless otherwise indicated, the 

Commission has looked to a nonfinancial end-user that already has 

developed the technical capability and 

infrastructure necessary to comply with 

the requirements set forth in part 43 as 

a reference entity for estimating this 

rulemaking’s direct costs under the 

assumption that the costs for this 

particular market participant would 

represent the maximum degree of 

compliance costs.571 The Commission 

anticipates, however, that in many cases 

the actual costs to established market 

participants (including swap 

counterparties, SDRs and other 

registered entities) would be lower than 

for the reference entity—perhaps 

significantly so, depending on the type, 

flexibility, and scalability of systems 

already in place. 

Wherever reasonably feasible, the 

Commission has endeavored to quantify 

the costs and benefits of this 

rulemaking. In a number of instances, 

the Commission lacks the data and 

information required to precisely 

estimate costs, owing to the fact that 

these markets do not yet exist or are not 

yet fully developed. The Commission 

requested that commenters provide any 

data or other information that would be 

useful in the estimation of the 


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572Further Block Proposal Q93(a)–(e), 77 FR at 

15507. 573See section II, supra. 

574 Data was supplied to the Commission by 

MarkitSERV and The Warehouse Trust Company 

LLC. The data is more fully described in Section 

II.A.1.a. of this release. 

575A discussion of the ODSG and the data set is 

set forth in section II.C.1 of this final rule. 

576As explained above in section II.C., the 

Commission believes that the difference in 

methodology for determining initial appropriate 

minimum block sizes for swaps in the FX and other 

commodity asset classes is warranted because: (1) 

Swaps in these asset classes are closely linked to 

futures markets; and (2) DCMs have experience in 

setting block sizes for futures. 

577See proposed rule § 43.6(h). 

578E.g., CL–AII at 6; CL–SIFMA at 10; CL– 

WMBAA at 8; CL–CME at 2; CL–Vanguard at 3; CL– 

Morgan Stanley at 3; CL–ICAP Energy at 3; CL– 

Barnard at 1; CL–Freddie at 2; CL–Barclays at 10. 

579The estimate is calculated as follows: (Senior 

Programmer at 20 hours) + (Systems Analyst at 20 

hours). A senior programmer’s adjusted hourly 

wage is $81.52. A systems analyst’s adjusted hourly 

wage is $54.89. See note 521 supra. 

quantifiable costs and benefits of this 

rulemaking 572; no commenters supplied 

such data or other information. Where it 

was not feasible to quantify (e.g., 

because of the lack of accurate data or 

appropriate metrics), the Commission 

has considered the costs and benefits of 

these rules in qualitative terms. 

For purposes of considering their 

costs and benefits, the Commission has 

organized these rules in three groups: 

(1) Block trade rules concerning the 

criteria for determining swap categories 

and the methodologies to be used to 

determine the initial and post-initial 

appropriate minimum block sizes for 

large notional off-facility swaps and 

block trades; (2) block trade rules 

concerning the method by which swap 

counterparties may elect to treat a 

qualifying swap transaction as a block 

trade or a large notional off-facility 

swap, as applicable, and SEFs and 

DCMs notify an SDR of a block trade 

election; and (3) rules concerning 

anonymity protections. Each group is 

discussed below. 

C. Rules Establishing Determination 

Criteria and Methodology (§ 43.6(a)–(f) 

and (h)) 

Rules 43.6(a)–(f) and (h) specify the 

Commission’s criteria for establishing 

swap categories and methodology for 

determining appropriate minimum 

block sizes. The subsections that follow 

provide a brief contextual summary 

description of the rules; identify and 

discuss the costs and benefits 

attributable to the rules in light of 

comments; consider alternatives; and 

consider costs and benefits relative to 

factors specified in CEA section 15(a). 

1. Rule Summary 

Rules 43.6(a)–(f) and (h) are described 

previously in this release.573 A 

summary of each follows: 

a. Rule 43.6(a) Commission 

Determination 

Rule 43.6(a) provides that the 

Commission will determine the 

appropriate minimum block size for any 

swap on a SEF or DCM, and for large 

notional off-facility swaps. The rule also 

sets forth a schedule whereby the 

Commission will calculate and publish 

all appropriate minimum block sizes 

across all asset classes no less than once 

each calendar year, following an initial 

period (as described below). 

b. Rule 43.6(b) Swap Category 

Rule 43.6(b) specifies the 

Commission’s approach for grouping 

swaps by asset class based on existing 

liquidity in underlying cash markets, 

relevant economic indicators, the 

underlying asset class, and the 

Commission’s analysis of relevant swap 

market data supplied to the 

Commission.574

c. Rules 43.6(c)–(f) and (h) Methods for 

Determining Appropriate Minimum 

Block Sizes 

Rules 43.6(c)–(f) and (h) prescribe a 

phased-in approach, with an initial 

period and a post-initial period for 

determining appropriate minimum 

block sizes for each swap category. 

Appendix F to part 43 contains a 

schedule of appropriate minimum block 

sizes effective during the initial period. 

The schedule reflects a different 

appropriate minimum block size 

methodology for the interest rate and 

credit asset classes than for the equity, 

FX and other commodity asset classes. 

The initial appropriate minimum block 

sizes for the interest rate and credit asset 

class are derived from data supplied by 

the ODSG.575 As set forth in Appendix 

F to this Final Rule, the Commission is 

calculating the appropriate minimum 

block sizes in interest rate and credit 

asset classes based upon the 50-percent 

notional amount calculation set forth in 

§ 43.6(c)(1) in the initial period. 

Rule 43.6(d) states that swaps in the 

equity asset class shall not be treated as 

block trades or large notional off-facility 

swaps (i.e., equity swaps would not be 

subject to a time delay as provided in 

part 43). 

With respect to the FX and other 

commodity asset classes, the 

appropriate minimum block sizes for 

swaps during the initial period is 

divided primarily between swaps that 

are futures-related swaps and those that 

are not futures-related.576 Appendix F to 

part 43 lists the proposed initial 

appropriate minimum block sizes for 

swap categories in the FX and other 

commodity asset classes. For swaps in 

the FX and other commodity asset 

classes that are not listed in appendix F 

to part 43, § 43.6(e)(2) generally 

provides that these swaps will be 

considered block trades or large 

notional off-facility swaps. 

After an SDR has collected reliable 

data for a particular asset class, 

§ 43.6(f)(1) provides that the 

Commission shall determine post-initial 

appropriate minimum block sizes for all 

swaps in the interest rate, credit, FX and 

other commodity asset classes based on 

the 67-percent notional amount 

calculation. The Commission is also 

adopting special rules for the 

determination of appropriate minimum 

block sizes that would apply to all asset 

classes, including rules applicable to 

swaps with optionality, swaps with 

composite reference prices, physical 

commodity swaps, currency conversion, 

and successor currencies.577

2. Overview of Comments Received 

The Commission received numerous 

comments regarding the potential costs 

and benefits to market participants and 

the public in response to the rules 

establishing the criteria and 

methodology for determining block 

thresholds. Commenters were divided 

on whether the Commission properly 

considered costs or misstated or ignored 

the benefits of the rules. Some 

commenters touched on the cost benefit 

considerations directly by promoting 

various alternatives to the proposed 

rules.578 Comments relating to the 

Commission’s consideration of costs 

and benefits are discussed specifically 

in the sections below. 

3. Costs 

a. Direct Costs 

Rules 43.6(a)–(f) and (h) will impose 

recurring costs on swap market 

participants and registered entities (i.e., 

SEFs, DCMs, or SDRs) to accommodate 

the Commission’s publication of postinitial appropriate minimum block sizes 

at least once each calendar year 

following the initial period. In the 

Further Block Proposal, the Commission 

anticipated that in order for registered 

entities to comply with the rule, they 

would need to update their existing data 

systems and that process would entail 

approximately 40 initial, non-recurring 

personnel hours at an approximate cost 

of $2,728 for each registered entity.579

This estimate included the potential 

number of burden hours required to 


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580This estimate is calculated as follows: 

(Compliance Manager at 10 hours) + (Director of 

Compliance at 3 hours) + (Compliance Attorney at 

2 hours) = 15 hours per non-financial end-user who 

is a reporting party. A compliance manager’s 

adjusted hourly wage is $77.77. A director of 

compliance’s hourly wage is $158.21. A compliance 

attorney’s hourly wage is $89.43. See note 521 

supra. 

581CL–WMBAA at 8. 

582The estimate is calculated as follows: (Senior 

Programmer at 20 hours) + (Systems Analyst at 20 

hours). A senior programmer’s adjusted hourly 

wage is $86.89. A systems analyst’s adjusted hourly 

wage is $56.79. See note 521 supra. 

583This estimate is calculated as follows: 

(Compliance Manager at 10 hours) + (Director of 

Compliance at 3 hours) + (Compliance Attorney at 

2 hours) = 15 hours per non-financial end-user who 

is a reporting party. A compliance manager’s 

adjusted hourly wage is $74.17. A director of 

compliance’s hourly wage is $169.16. A compliance 

attorney’s hourly wage is $103.18. See note 521 

supra. 

584CL–AII at 6; CL–SIFMA at 10; CL–WMBAA at 

8; CL–CME at 2; CL–Vanguard at 3; CL–Morgan 

Stanley at 3; CL–ICAP Energy at 3; CL–Barnard at 

1; CL–Freddie at 2; CL–Barclays at 10. 

585CL–AII at 6; CL–SIFMA at 10. 

586CL–AII at 6; CL–SIFMA at 10. 

587CL–AII at 6. 

588CL–SIFMA at 10. 

589CL–SIFMA at 10. 

590CL–WMBAA at 8. 

591CL–CME at 2. 

592CL–Vanguard at 3. 

593CL–Vanguard at 3. 

594CL–Vanguard at 3. 

make a one-time adjustment to internal 

procedures, reprogram systems and 

implement processes to segregate the 

data by swap categories and incorporate 

data on appropriate minimum block 

sizes as published by the Commission at 

least once each calendar year. 

Market participants other than 

registered entities, and specifically nonfinancial end users, expectedly will 

need to train their existing personnel 

and update their written policies and 

procedures to comply with § 43.6(a)–(f) 

and (h). The Commission estimated that 

the training and updating of policies 

and procedures will impose an initial 

non-recurring burden of approximately 

15 personnel hours at an approximate 

cost of $1,430 for each non-financial 

end-user.580 This cost estimate included 

the number of potential burden hours 

required to produce and design training 

materials, conduct training with existing 

personnel, and revise and circulate 

written policies and procedures in 

compliance with the proposed 

requirements. 

The Commission received one 

comment specifically addressing direct 

costs. WMBAA disagreed with the 

Further Block Proposal’s projected cost 

estimates and contended that the 

Commission’s approach ‘‘is overly 

simplistic and does not contemplate the 

actual efforts a SEF will have to 

undertake to implement the block trade 

regime, including the two-step 

notification process, the technology 

upgrades, providing training to existing 

personnel and updating written policies 

and procedures, among other necessary 

actions to comply with the CFTC’s 

proposed rule.’’ 581

Because WMBAA did not provide 

data to support or monetize its cost 

concern, the Commission has 

considered them qualitatively. Further, 

WMBAA’s disagreement with the 

Further Block Proposal’s cost estimates 

does not concern the incremental cost to 

augment and maintain systems and 

processes that the Commission believes 

entities need have in place to comply 

with the real time reporting requirement 

of Section 2(a)(13) of the CEA; rather it 

concerns the cost to comply with that 

statutory requirement as prescribed by 

the existing part 43 implementation 

regulations. SEFs and DCMs would 

incur these costs regardless of how the 

Commission determines block 

thresholds. Accordingly, the 

Commission considers WMBAA’s 

criticism of the cost estimates in this 

rulemaking misplaced. Moreover, the 

Commission has intentionally 

structured the requirements of § 43.6(a) 

to mitigate these costs; this rule’s 

approach seeks to leverage the existing 

connectivity, infrastructure and 

arrangements that market participants 

and registered entities will have already 

established to comply with the part 43 

regulations. 

The Commission did not find, nor 

was it provided, additional information 

that was sufficient to change the cost 

basis. Therefore, the Commission is 

maintaining the Further Block 

Proposal’s approach to calculating the 

direct costs resulting from the 

methodology for determining block 

thresholds. However, the Commission is 

revising its estimates to reflect wage rate 

data updated since the Further Block 

Proposal was published. The 

Commission estimates that for registered 

entities to update existing technology as 

necessary will entail approximately 40 

initial, non-recurring personnel hours at 

an approximate cost of $2,874 for each 

registered entity.582 The Commission 

estimates that training for existing 

personnel and updating written policies 

and procedures will impose an initial 

non-recurring burden of approximately 

15 personnel hours at an approximate 

cost of $1,456 for each non-financial 

end-user.583

b. Indirect Costs 

The Commission received numerous 

comments regarding indirect costs that 

could result from the establishment of 

criteria and methodology for setting 

appropriate minimum block thresholds. 

The majority of these comments focused 

on the issue of market liquidity; and 

many of the comments provided 

alternatives for either lower notional 

amount calculation thresholds, and 

extended phase-in or restricting the 

asset classes to which thresholds would 

apply. Eleven commenters suggested 

that the 67 percent notional amount 

calculation set forth in proposed 

§ 43.6(c)(1) would have a negative 

impact on market liquidity.584

SIFMA and AII asserted that the 67 

percent notional amount calculation is 

under inclusive for most swap 

categories and that the Commission 

should start with low block sizes (or 

classify all swaps as block trades) until 

data can be accumulated.585

Consequences of a high threshold, they 

maintain, would be reduced liquidity, 

fragmentation of trading, higher 

transaction costs and higher swap 

pricing costs to end users.586 AII stated 

that high block sizes would permit front 

running of swap dealers’ hedging 

activities.587 SIFMA suggested that the 

Commission identify minimum 

liquidity thresholds for certain swaps in 

each swap category below which all 

swaps should be treated as blocks.588

SIFMA stated that 67 percent is too high 

to prevent liquidity impact; that 20–33 

percent of trades should be blocks; and 

that 50 percent is better than 67 

percent.589

WMBAA advocated using a 50 

percent or lower block level and that the 

Commission rely on more timely and 

complete data to avoid impairing 

liquidity.590 CME asserted that 67 

percent is arbitrary, has no relationship 

to the explicit goals of Dodd-Frank with 

respect to block trading of swaps, and 

would materially reduce market 

liquidity.591

Vanguard commented that block rules 

bringing transparency may ultimately 

increase liquidity, but an abrupt change 

could decrease liquidity.592 Vanguard 

instead favored a lower, 25 percent 

initial notional calculation methodology 

or perhaps providing block treatment to 

all swaps for one-year before phasing in 

notional amount calculation thresholds, 

maintaining that a lack of data 

compromises the setting of blocks and 

risks a negative liquidity impact.593

Vanguard further urged more swap 

category granularity by identifying 

discrete ‘‘liquidity pools’’, and asserted 

that the lack of a sufficient time delay 

would hamper liquidity providers’ 

ability to enter into off-setting trades.594


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595CL–Morgan Stanley at 3; CL–AII at 6; CL–CME 

at 2. 

596CL–Morgan Stanley at 3. 

597CL–Morgan Stanley at 3. 

598CL–ICAP Energy at 3; CL–Barnard at 1. 

599CL–ICAP Energy at 3. 

600CL–ICAP at Energy at 3. 

601CL–Freddie at 2. 

602CL–Barclays at 10. 

603CL–SIFMA at 4. 

604CL–SIFMA at 4. 

605CL–SIFMA at 4. 

606CL–Vanguard at 3; CL–ISDA/SIFMA at 11–13; 

CL–SIFMA at 10; CL–WMBAA at 8; and CL–AII at 

6. 

607CL–AII at 6. 

608CL–Vanguard at 3. 

609CL–SIFMA at 4. 

610CL–ODEX at 2; CL–SDMA at 3–6; CL–Javelin 

at 4–6; CL–Arbor at 1. 

611CL–Javelin at 2. 

612CL–SDMA at 1. 

613CL–AFR at 4. 

614CL–Better Markets at 4. 

615CL–Better Markets at 4. 

Morgan Stanley, AII, and CME all 

stated that the approach in the Further 

Block Proposal would sacrifice liquidity 

in the name of transparency in 

contravention of the statute.595

Specifically, Morgan Stanley 

commented that the proposed rules 

would diminish liquidity because the 

market would know details of 

transactions that are about to take place; 

Morgan Stanley also provided examples 

of IRS swaps under the proposed 

threshold that might move the market 

and, without providing further support, 

stated that application of the 67 percent 

notional amount calculation in CDS 

would result in too few trades receiving 

treatment as blocks and reduce 

liquidity.596 Morgan Stanley urged the 

Commission to lower block thresholds 

and apply them only to vanilla 

structures with standard maturities; 

Morgan Stanley further advocated for 

DCM/SEFs to set block sizes because 

they would maximize liquidity.597

ICAP and Barnard asserted that the 

Further Block Proposal fails to evaluate 

the effect of the block thresholds on 

liquidity.598 ICAP stated that the 

Commission misconstrued the 

legislative intent of Dodd-Frank Act 

because the Further Block Proposal 1) 

proposes a ‘‘results-oriented’’ approach; 

2) does not determine if the 67 percent 

methodology would minimize impact 

on market liquidity; and 3) establishes 

block size thresholds based on notional 

size rather than number of 

transactions.599 In addition, ICAP stated 

that the Further Block Proposal failed to 

identify a ‘‘market moving’’ transaction 

for certain swaps, as intended by 

Congress and does not propose a 

methodology.600 Freddie stated that, in 

the absence of data, minimum block 

sizes for Interest Rate swaps are too high 

and will materially reduce market 

liquidity.601

The Commission also received 

comments raising potential indirect 

costs besides market liquidity impact. 

Barclays stated that mandatory clearing 

and uncleared margin requirements may 

compound the costs of increased 

transparency created by high block trade 

thresholds.602 SIFMA stated that the 

Commission’s cost-benefit consideration 

is insufficient and incorrect in the 

context of mandatory execution under 

the proposed SEF rules.603 SIFMA 

expressed the concern that ‘‘liquidity 

seekers’ [sic] could provide other market 

participants with the information 

needed to front run the successful 

dealer in the hedge market.’’ 604 SIFMA 

concluded that ‘‘the Commission should 

implement lower block trade size 

thresholds to avoid significant decreases 

in liquidity or increases in bid-ask 

spreads.’’ 605

Several commenters objected to the 

Commission’s use of data in the Further 

Block Proposal. Five commenters 606

asserted that the Further Block Proposal 

fails to adequately consider costs and 

benefits and relies upon obsolete data. 

AII 607 stated that the Commission relies 

upon inadequate and outdated data, that 

the rules will impede competition and 

increase costs, and that the Commission 

should look to TRACE as a model for 

more deliberate disclosure 

implementation. 

Vanguard 608 suggested phasing in the 

requirements because the new rules are 

a ‘‘paradigm shift,’’ and issuing final 

rules on block trades requires more data 

collection before implementation. 

Several commenters suggest the 

Commission collect more and better 

data before setting block levels. They 

criticize not only the dearth of relevant 

data but how the Commission has 

interpolated the data through trimming 

mechanism. SIFMA suggests that all 

swaps should be treated as blocks for 

first year of compliance during which 

data is collected, then the Commission 

should take a conservative approach to 

establish and iteratively modify 

thresholds based on liquidity and bidask spread of swaps that near the 

established block size threshold.609

The Commission also received 

comments suggesting costs in terms of 

market liquidity or other factors in 

setting the appropriate minimum block 

thresholds too low (or benefits in setting 

the appropriate minimum block 

thresholds at 67 percent of notional or 

higher). Conversely, four commenters 

expressed support for the Further Block 

Proposal’s 67 percent notional amount 

calculation methodology or suggested 

that a lower threshold would result in 

a decrease in liquidity.610

Specifically, Javelin stated that the 

Commission should set a higher block 

threshold than the 67 percent notional 

amount calculation ‘‘where the market 

is protected from disruption and where 

greater transparency, competition and 

liquidity are ensured.’’ 611 SDMA 

commented that ‘‘[t]oo low a block 

threshold and fewer trades will be 

executed on SEFs as little structural 

change in swaps execution occurs, 

increased competition fails to manifest 

itself and more diverse liquidity is 

impaired.’’ 612 AFR asserted that some 

drop in liquidity was assumed by 

Congress when it enacted the provision 

and that ‘‘there is no authoritative study 

supporting the concept that immediate 

disclosure would distort prices because 

of market liquidity.’’ 613 Similarly, 

Better Markets argued that any 

information embargo should be 

eliminated, stating that ‘‘there is no 

authoritative study validating the notion 

that market liquidity would be 

adversely affected if Block Trade data 

were fully disclosed.’’ 614 Better Markets 

also stated that the public benefits of 

swap data transparency under the 

Further Block Proposal greatly outweigh 

the private costs to the disclosing 

entities and to the swaps market 

participants; Better Markets argued that 

Congress’ ultimate objective in the 

Dodd-Frank Act was to prevent another 

crisis and avert the massive costs it 

would inflict upon the public (including 

all market participants), and that the 

consideration of costs and benefits 

should focus on this overriding public 

interest.615

In response to comments advocating 

for a more gradual phase in of 

appropriate minimum block thresholds, 

the Commission is adopting rules 

establishing a more conservative 50 

percent notional amount calculation for 

determining block thresholds in the 

Interest Rate Swap and Credit Default 

Swap categories during the initial 

period. This will allow for a more 

gradual phase-in of the 67 percent 

notional amount calculation for 

determining block thresholds in the 

post-initial period than what was 

proposed. The block trade methodology 

that will be implemented by the 

Commission also allows minimum 

appropriate block trade amounts to 

change periodically in response to the 

new data collected in the market. 

The Commission believes that this 

implements the congressional directive 


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616See, the Core Principles and Other 

Requirements for Swap Execution Facilities notice 

of proposed rulemaking, 76 FR 1214 (Jan. 7, 2011), 

for details of functionalities that provide flexibility 

to promote trading of swaps on SEFs. 

617Historically (and under a rule proposed in a 

pending rulemaking concerning Core Principle 9 for 

Designated Contract Markets (‘‘DCMs’’)), DCMs 

have discretion to set minimum block thresholds 

for futures trading, the Dodd-Frank Act amended 

the CEA to require that the Commission specify 

criteria to determine swap block trades without 

imposing an equivalent requirement for 

Commission specification of futures block criteria. 

See Core Principles and Other Requirements for 

Designated Contract Markets, 75 FR 80572, 80616– 

17 (Dec. 22, 2010) (Notice of Proposed Rulemaking; 

proposed § 38.503(a) would require that a board of 

trade that permits block trade transactions on 

futures contracts have rules governing such 

transactions, including rules limiting block trades 

to large transactions and imposing minimum size 

requirements, and that block trade size be certified 

or approved by the Commission); Core Principles 

and Other Requirements for Designated Contract 

Markets, 77 FR 36612, 36643 (Final Rule; 

announces Commission intent to take additional 

time to consider the proposed rules for block 

transactions and other aspects of proposed rules 

under Core Principle 9). 

618See 77 FR 1240. 

for transparency while accounting for 

possible material reductions in liquidity 

through the phasing-in of real-time 

reporting of a portion of the swaps 

market. In contrast, SIFMA’s suggestion 

of treating all swaps as blocks while the 

Commission collects data inverts the 

public policy rationale underlying 

congressional requirements for 

transparency through real-time public 

reporting. The most useful data for 

determining at what levels blocks would 

be appropriate is data collected for 

swaps reported in real-time when 

market participants have the ability to 

execute block trades above minimum 

block thresholds. Data collected prior to 

the point where real-time reporting and 

block levels are functioning together is 

useful (and has been used by the 

Commission in fashioning block 

thresholds in the initial period for 

swaps in the interest rate and credit 

asset classes), but provides an 

incomplete picture absent 

implementation of the real-time 

reporting regime. The Commission’s 67 

percent notional amount calculation in 

the post-initial period is designed to 

adjust appropriate minimum block 

levels once this data becomes available. 

Notwithstanding the fact that the 

commenters did not provide data to 

support or monetize their cost concerns, 

the Commission has considered their 

qualitative comments regarding the 

potential costs that the Commission’s 

appropriate minimum block threshold 

methodology may have on market 

liquidity. 

The Commission agrees with 

Vanguard that transparency ultimately 

promotes increased market liquidity. 

Transparency afforded through the 

publication of swap transaction and 

pricing data is likely to attract more 

market participants to the market place, 

thereby increasing market liquidity 

depth. However, the Commission also 

understands the tension between 

achieving greater swap transaction 

transparency and liquidity: required 

reporting of large transactions without a 

time delay (i.e., as soon as 

technologically practicable) presents 

potential for downside cost to certain 

market participants, most particularly 

market makers providing liquidity. The 

immediate reporting of swaps that 

approach, but fall shy of the appropriate 

minimum block size threshold, may in 

certain circumstances increase the 

difficulty, and thus cost, for liquidity 

providers to lay off attendant price risks 

in the market. As the commenters 

suggest, market makers ultimately could 

pass these costs on to their end-user 

clients. 

Recognizing the potential for such 

indirect costs, the Commission believes 

it has designed the criteria and 

methodology outlined in the rule in a 

manner that strikes an appropriate 

balance between the importance of price 

discovery and transparency, and 

concerns about potential costs to market 

participants. By establishing a 67 

percent notional amount calculation for 

appropriate minimum block thresholds 

in the post initial period, the 

Commission will bring transparency 

through real-time reporting to the vast 

majority of transactions in the swap 

market. 

The Commission believes that the 

phase-in approach provides swap 

market participants with adequate time 

to incrementally adjust their trading 

practices, technology infrastructure and 

business arrangements to comply with 

the new block trade regime. As a result, 

the rule’s approach promotes liquidity 

since the Commission believes that a 

transparent market with improved pretrade price transparency is likely to 

attract customers. The Commission 

expects that indirect costs described 

above will be mitigated through 

improved price discovery and a 

decrease in the cost of hedging practices 

for end users due to improved 

transparency and competition in the 

marketplace. 

The Commission also considered the 

potential that different swaps and 

futures block criteria and methodology 

might competitively disadvantage SEFs 

to the extent certain market participants 

consider swaps and futures products 

competitive substitutes; thus, in turn, 

frustrating public interests that 

Congress, in authorizing SEFs in the 

Dodd-Frank Act, intended to further. 

For several reasons, the Commission 

does not believe this will occur. First, as 

discussed in the SEF Rulemaking, the 

Commission has provided SEFs with 

various functionalities designed to 

provide flexibility that will promote the 

trading of swaps on SEFs.616 Second, by 

using futures block thresholds as a 

reference for initially setting the criteria 

for economically related swaps, the rule, 

at a minimum, substantially mitigates 

any such theoretical costs. Further, the 

Commission has, and will use, 

corrective tools if experience in these 

newly-regulated markets indicates 

potential for differences in swaps and 

futures block criteria and methodology 

to harm market users through hindered 

product competition. These tools 

include periodical recalibration of swap 

criteria as anticipated under this rule as 

well as the Commission’s ability to 

exercise its legal authority to take action 

by rule or order to mitigate any potential 

harm due to hindered competition.617

4. Benefits 

The Commission believes that 

§ 43.6(a)–(f) and (h) will generate several 

overarching benefits to swap market 

participants, registered entities and the 

general public. Most notably, the 

Commission expects that the criteria 

and methodologies for setting 

appropriate minimum block sizes will 

provide greater price transparency for a 

substantial portion of swap transactions 

in a manner carefully calibrated to 

preserve and promote swaps market 

liquidity. More specifically, the 

regulations will provide price 

transparency by lifting the current part 

43 real-time reporting time delay 618 in 

a measured manner for swap 

transactions with notional values under 

specified threshold levels. 

At the same time, the Commission’s 

criteria and methodology—including 

carefully crafted block trade and largenotional off-facility swap categories— 

are designed to retain time-delay status 

for those high-notional-value 

transactions, where doing otherwise 

could negatively impact market 

liquidity. In addition to avoiding 

potential negative market liquidity 

impact associated with transactions that 

remain eligible for a reporting timedelay, the Commission also expects the 

liquidity in the market to increase since 

a more transparent market is likely to 

attract more customers. The 

Commission expects improved 

transparency and liquidity to have a 

positive effect on the prices market 

participants will pay for their swaps as 


tkelley on DSK3SPTVN1PROD with RULES2
32922 Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 

619See also 111 Cong. Rec. S. 5921 (daily ed., July 

15, 2010) (Statement of Sen Lincoln) (the regulators 

are given authority to establish what constitutes a 

‘block trade’ or ‘large notional’ swap transaction for 

particular contracts as well as appropriate time 

delay in reporting transactions to the public’’). 620CL–Vanguard at 7; CL–ISDA/SIFMA at 14; 

CL–SIFMA at 10; and CL–Better Markets at 4. 621CL–Vanguard at 7. 622CL–ISDA/SIFMA at 14; and CL–SIFMA at 10. 623CL–ISDA/SIFMA at 14; CL–Vanguard at 7. 624CL–ISDA/SIFMA at 14. 

625CL–ODEX at 1; CL–RJ O’Brien at 1. 

626CL–AFR at 8–9; CL–Better Markets at 7–8; CL– 

Javelin at 2; CL–SDMA at 2. 

well as to cause a decrease in the cost 

of hedging due to improved 

transparency and competition in the 

market. The Commission also expects 

that lower hedging costs and improved 

transparency will reduce systemic risk 

potential. A swaps market that is 

transparent to regulators and the public 

in real-time, without the interim delays 

for all transactions imposed in Part 43, 

provides for a system that will assist the 

Commission’s oversight ability. Finally, 

the Commission believes that this added 

transparency will ultimately strengthen 

the swaps market by affording 

academics, the media, public and 

market participants the opportunity to 

monitor, study, and analyze these 

previously opaque segments of the 

economy. 

The rules’ phased-in implementation 

will introduce greater transparency in 

an incremental, measured and flexible 

manner so that appropriate minimum 

block sizes can respond to changing 

markets. Section 43.6(f)(2) permits the 

Commission to set appropriate 

minimum block sizes no less than once 

annually during the post-initial period. 

If swap market conditions were to 

change significantly after the 

implementation of the provisions of this 

final rule, there is nothing that prevents 

the Commission from reacting to take 

action further improving price 

transparency or mitigating adverse 

effects on market liquidity. In an effort 

to add more flexibility to respond to 

continuing swaps market evolution, the 

methodology in § 43.6(c)–(f) and (h) will 

recalibrate appropriate minimum block 

sizes regularly to ensure that those sizes 

remain appropriate for, and responsive 

to, these changing markets. 

5. Alternatives 

The Commission considered 

alternatives to the determination criteria 

and methodology adopted in this 

rulemaking. The chief alternatives 

raised by commenters or otherwise 

considered by the Commission 

concerned three topics—Commission’s 

determination of minimum block sizes, 

swap categories, and block 

methodology—as discussed below. 

a. Commission Determination of 

Minimum Block Sizes 

Under § 43.6(a) the Commission will 

determine minimum block sizes; this 

approach limits the direct burden on 

market participants and registered 

entities relative to an alternative that 

would require them to engage a 

quantitative analysis to ascertain 

appropriate minimum block sizes for 

themselves. Such an alternative 

approach is inconsistent with the 

statutory requirement of CEA section 

2(a)(13)(E)(ii) that the Commission 

‘‘specify the criteria for determining 

what constitutes a large notional swap 

transaction (block trade) for particular 

markets and contracts.’’ 619

b. Swap Category Alternatives 

Commenters 620 noted what they 

described as a lack of granularity in the 

Commission’s choice of swaps 

categories, which they cautioned would 

result in the grouping of liquid swaps 

together with illiquid swaps in the same 

swap category. Vanguard 621 suggested a 

more granular approach to setting swap 

categories and block sizes according to 

‘‘distinct liquidity pools.’’ ISDA/ 

SIFMA 622 suggested subjecting a swap 

to block thresholds as long as the swap 

has sufficient trading frequency and 

trades in such volume that allows full 

hedging in a short period of time and 

also prevents widening of the spread as 

a result of public reporting. In support 

of such a test, the comment cited 

research and data to suggest that 

disclosure does not necessarily lead to 

increased transparency and swaps with 

varying levels of liquidity will be 

subject to the same block size. Many 

commenters expressed that the 

Commission’s determination of swap 

categories would result in block levels 

that are insufficiently granular to 

account for differences between swap 

asset classes and within swap 

categories, including the differences in 

transaction frequency and volume.623

Some commenters suggested that all 

infrequently traded swaps, under a 

specified level, should be treated as 

block trades.624 The various swap 

category alternatives suggested by 

commenters are more fully discussed 

and considered in Sections II.A.1–5 of 

this final rule. 

The Commission believes that its 

approach of establishing specific criteria 

for grouping swaps into a finite set of 

defined swap categories is preferable to 

the alternatives noted; it provides (1) 

appropriate granularity that mitigates 

the potential for like risks to trade 

differently; and (2) a clear 

organizational framework that avoids 

administrative burdens for market 

participants that otherwise could arise 

from more numerous and/or nonuniform swap categories. The 

Commission made use of swaps market 

data, as well as market convention, in 

making its determination of how best to 

form swap categories and asset classes 

as well as buckets within each asset 

class. Ultimately, the Commission 

determined that that the best approach 

was to allow for products with similar 

characteristics and risk structures to be 

grouped together, given that in certain 

circumstances market participants view 

similar financial products as close 

substitutes and use them as such for risk 

mitigating purposes. The Commission 

has fashioned its swaps categories to, 

where possible, group together swaps 

that could be used to hedge the same 

risk or otherwise establish an equivalent 

position. 

Grouping economically-substitutable 

swaps together makes the setting of 

appropriate minimum block sizes on an 

individual product basis unnecessary 

and potentially dangerous in that it 

would allow for like risks to trade 

differently. 

c. Block Methodology Alternatives 

The Commission also considered 

various alternatives to its proposed 

methodologies for determining 

appropriate minimum block thresholds 

in both the initial and the post initial 

periods. As discussed more fully in 

Section II.B., the Commission received 

various comments suggesting 

alternatives to the phased-in approach 

contained in the Further Block Proposal. 

Many commenters compared the 67 

percent notional amount calculation to 

a 50 percent notional amount 

calculation, as specifically requested by 

the Commission in Question 33 of the 

Further Block Proposal. Twelve 

commenters preferred the 67 percent 

notional amount calculation to a 50 

percent notional amount calculation; 

whereas, nine commenters preferred the 

50 percent notional amount calculation 

to the 67 percent notional amount 

calculation. ODEX, RJ O’Brien, and 

Spring Trading expressed support for 

the 67 percent notional amount 

calculation, but also suggested that a 

higher notional amount calculation 

would be preferable, particularly in the 

post-initial period.625 AFR, Better 

Markets, Javelin, and SDMA all 

recommended a 75 percent or higher 

notional amount calculation and a 

market depth and market breadth 

test.626


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627CL–Freddie at 2; CL–ICI at 6–7. 

628CL–Pierpont at 3; CL–WMBAA at 3. 

629CL–ICAP Energy at 3; CL–SIFMA at 10. 

630CL–AII at 6; CL–ICAP Energy at 4. 

631CL–AII at 6. 

632CL–Barclays at 11. 

633CL–Better Markets at 9–10. 

634See Further Block Proposal, Q32–54. 

635See Note 262 for an in depth description of the 

market depth and market breadth test. 

636Market depth and market breadth was 

proposed to be calculated as follows: (step 1) 

Identify swap contracts with pre-trade price 

transparency within a swap category; (step 2) 

calculate the total executed notional volumes for 

each swap contract in the set from step 1 and 

calculate the sum total for the swap category over 

the look back period of one year; (step 3) collect a 

market depth snapshot of all of the bids and offers 

once each minute for the pre-trade price 

transparency set of contracts identified in step 1; 

(step 4) identify the four 30-minute periods that 

contain the highest amount of executed notional 

volume each day for each contract of the pre-trade 

price transparency set identified in step 1 and 

retain 120 observations related to each 30-minute 

period for each day of the look-back period; (step 

5) determine the average bid-ask spread over the 

look-back period of one year by averaging the 

spreads observed between the largest bid and 

executed offer for all the observations identified in 

step 3; (step 6) for each of the 120 observations 

retained in step 4, calculate the sum of the notional 

amount of all orders collected from step 3 that fall 

within a range, calculate the average of all of these 

observations for the look-back period and divide by 

two; (step 7) to determine the trimmed market 

depth, calculate the sum of the market depth 

determined in step 6 for all swap contracts within 

a swap category; (step 8) to determine the average 

trimmed market depth, use the executed notional 

volumes determined in step 2 and calculate a 

notional volume weighted average of the notional 

amounts determined in step 6; (step 9) using the 

calculations in steps 7 and 8, calculate the market 

breadth based on the following formula: market 

breadth = averaged trimmed market depth + 

(trimmed market depth ¥ average trimmed market 

depth) × .75; (step 10) set the appropriate minimum 

block size equal to the lesser of the values from 

steps 8 and 9. 77 FR 15482. 

637CME–CL at 2; ODEX–CLetter at 2; Spring 

Trading-CL at 2; MFA–CL at 7; FIA–CL at 2. 

638Arbor-CL at 1; AFR–CL at 8–9; Jeffries-CL at 

2; SDMA–CL at 3–6; Javelin-CL at 4–6; RJ O’BrienCL at 1; Better Markets-CL at 9–10; CRT–CL at 2; 

FIA–CL at 2. 

639The proposed calculation stands in contrast to 

another alternative—the proposed 95th percentilebased distribution test set out in the Initial 

Proposal. See the discussion in section I.B. of the 

Further Block Proposal. No commenters suggested 

or supported the distribution test in response to the 

Further Block Proposal. 640The ‘‘guiding principle in setting appropriate 

block trade levels [is that] the vast majority of swap 

transactions should be exposed to the public market 

through exchange trading.’’ Congressional Record— 

Senate, S5902, S5922 (July 15, 2010). As discussed 

above, this phased-in approach seeks to improve 

transparency while not having a negative impact on 

market liquidity. 

641 7 U.S.C. 2(a)(13)(E)(iv). 

Nine commenters preferred the 50 

percent notional amount calculation to 

the 67 percent notional amount 

calculation. 

Freddie Mac and ICI expressly 

supported a 50 percent notional amount 

calculation.627 Pierpont and WMBAA 

recommended a notional amount 

calculation of no greater than 50 

percent.628 ICAP Energy and SIFMA 

recommended a notional amount 

calculation below 50 percent, but 

preferred a 50 percent notional amount 

calculation to a 67 percent notional 

amount calculation.629 AII and ICAP 

recommended not using a notional 

amount calculation at all, but preferred 

a 50 percent notional amount 

calculation to a 67 percent notional 

amount calculation.630

AII recommended lowering or 

eliminating block thresholds until 

complete data has been reported to 

SDRs so as not to impair market 

liquidity.631 Barclays recommended 

introducing block levels that allow for 

empirical analysis of the transaction 

data and sequentially increasing block 

sizes until such point as the desired 

equilibrium between transparency and 

liquidity is reached.632 Better Markets 

suggested transitioning to a market 

depth/market breadth test after the 

Commission has collected a year of SDR 

data.633

The Commission also specifically 

requested comments regarding other 

potential methods for determining 

appropriate minimum block 

thresholds.634 While numerous 

comments addressed the efficacy of a 

notional amount calculation and the 

appropriate percentage to use in making 

such a calculation, the comments reveal 

only one significant alternative 

methodology to calculating relevant 

initial and post-initial minimum block 

thresholds in place of a notional amount 

calculation: block thresholds based on 

market depth and market breadth.635

The Commission received a number of 

comments regarding whether the 

Commission should use either market 

depth or market breadth criteria, instead 

of the 67-percent notional amount 

calculation methodology, to calculate 

the relevant initial minimum block sizes 

and the post-initial minimum block 

sizes.636 Many commenters expressed 

support for adopting the market depth 

test 637 and other commenters 

additionally supported utilizing the 

market breadth test.638

As discussed more fully in Section 

II.B., for the initial period the 

Commission is adopting the 50 percent 

notional amount calculation to 

determine appropriate minimum block 

sizes in the interest rate and credit asset 

classes. This approach provides for a 

more gradual phase-in of minimum 

block sizes, as recommended by 

numerous commenters. The 

Commission believes that the phase-in 

approach should provide swap market 

participants with an adequate amount of 

time to incrementally adjust their 

trading practices, technology 

infrastructure and business 

arrangements to comply with the new 

block trade regime. 

For the post-initial period, the 

Commission is adopting § 43.6(f)(1) as 

proposed. The 67-percent notional 

amount calculation means that, within a 

swap category, approximately twothirds of the sum total of all notional 

amounts will be reported on a real-time 

basis. This approach will afford market 

participants a timely view of a 

substantial portion of swap transaction 

and pricing data to assist them in 

determining the competitive price for 

swaps within a relevant swap category. 

The Commission anticipates that this 

enhanced price transparency will 

encourage market participants to 

provide liquidity (e.g., through the 

posting of bids and offers), particularly 

when transaction prices move away 

from the competitive price. The 

Commission also anticipates that 

enhanced price transparency thereby 

will improve market integrity and price 

discovery, while also reducing 

information asymmetries enjoyed by 

market makers in predominately opaque 

swap markets.639

In the Commission’s view, using the 

67-percent notional amount calculation 

also would minimize the potential 

impact of real-time public reporting on 

liquidity risk compared to other 

alternatives. The 67 percent notional 

amount calculation represents a middle 

ground between the many commenters 

who supported higher block thresholds 

and the many commenters who 

preferred much more conservative 

thresholds. The Commission believes 

that its methodology, in conjunction 

with the 50-percent notional amount 

calculation during the initial period, 

represents a tailored and incremental 

approach for achieving the goal of ‘‘a 

vast majority’’ of swap transactions 

becoming subject to real-time public 

reporting.640

As noted above, CEA section 

2(a)(13)(E)(iv) directs the Commission to 

take into account whether the public 

disclosure of swap transaction and 

pricing data ‘‘will materially reduce 

market liquidity.’’ 641 If market 

participants reach the conclusion that 

the Commission has set appropriate 

minimum block sizes for a specific swap 

category in a way that will materially 

reduce market liquidity, then those 

participants are encouraged to submit 

data to support their conclusion. In 

addition, the Commission will conduct 

its own surveillance of swaps market 


tkelley on DSK3SPTVN1PROD with RULES2
32924 Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 

642The Commission received two comments 

supporting the Commission’s authority to set 

appropriate minimum block sizes outside of the 

proposed annual look-back period. MFA argued 

that the Commission’s goal to balance transparency 

and liquidity would be better achieved with the 

flexibility to adjust minimum block sizes quickly to 

respond to material market changes. MFA 

recommended that the Commission should have the 

authority to update post-initial minimum block 

sizes in extraordinary circumstances and on a caseby-case basis, based on SDR data that it receives for 

individual or across multiple swap categories. 

GFMA stated that if the Commission establishes a 

notional calculation test, then it should ensure that 

it has sufficient flexibility to amend minimum 

block sizes. GFMA recommended that the 

Commission should be able to ‘‘swiftly alter’’ block 

trade levels to enable some trading to be conducted 

in a newly illiquid market, without the benefit of 

reference to a data set. The Commission notes that 

§ 43.6(f)(1) provides that the Commission shall 

update post-initial appropriate minimum block 

levels ‘‘[n]o less than once each calendar year.’’ 

Accordingly, the Commission notes that it has the 

ability to adjust post-initial minimum block sizes 

under the types of extraordinary circumstances 

raised by commenters. 

643The Commission sees no potential impact to 

the financial integrity of futures markets from the 

criteria and methodology in its consideration of 

section 15(a)(2)(B) of the CEA. Although by its 

terms, section 15(a)(2)(B) applies to futures, the 

Commission finds this factor useful in analyzing the 

costs and benefits of swaps regulation, as well. 

644As noted above, under part 43 of the 

Commission’s regulations (as now promulgated in 

the Real-Time Reporting Final Rule), all publicly 

reportable swap transactions are subject to a time 

delay pending further amending regulation to 

establish the criteria and methodology to 

distinguish block trades and large notional offfacility swaps from those swaps that do not meet 

those definitions. See 77 FR 1217. As a result, SDRs 

as of now are not required to publicly disseminate 

publicly reportable swap transactions as soon as 

technologically practicable. 

activity and how block sizes affect 

market liquidity in each of the specified 

swap categories.642 In response to either 

a submission or its own surveillance of 

swaps market activity the Commission 

may exercise its legal authority to take 

action by rule or order to mitigate the 

potential effects on market liquidity 

with respect to swaps in a particular 

swap category. 

The Commission acknowledges that 

the market depth and market breadth 

test is a viable alternative to the notional 

amount calculation methodology. 

However, it has several prerequisite 

conditions that complicate the ability to 

implement it. For example, the 

Commission would need to determine 

which contracts within a swap category 

offer pre-trade price transparency— 

electronically displayed and executable 

bids and offers as well as displayed 

available volumes for execution. As 

noted by commenters, adequate market 

trading data also must be available to 

collect a market depth snapshot of all of 

the bids and offers for the pre-trade 

price transparency set of applicable 

contracts. The Commission is also 

cognizant of MFA’s concerns regarding 

the potential for manipulation of market 

depth. Given the time needed for 

trading infrastructure to develop and the 

significant time and cost considerations 

involved in collecting such data from 

SEFs and DCMs, the Commission deems 

it unfeasible to implement at this time; 

the Commission will continue to 

examine the merits of doing so in the 

future. 

6. CEA Section 15(a) Factors 

a. Protection of Market Participants and 

the Public 

The Commission believes that the 

criteria and methodology in § 43.6(a)–(f) 

and (h) will protect swap market 

participants by extending the delay for 

reporting for publicly reportable swap 

transactions, as appropriate, while also 

accommodating the market participant 

and public interest with enhanced 

transparency. By setting appropriate 

minimum block sizes in a thoughtful 

and measured manner as contemplated 

in the final rule, the Commission 

believes that it has properly balanced 

the tradeoff between transparency and 

liquidity interests. As a result, swap 

market participants will retain a means 

to offset risk exposures related to their 

swap transactions at competitive prices. 

In addition, the phased-in 

implementation scheme outlined in this 

rulemaking will introduce greater 

transparency in an incremental, 

measured and flexible manner so that 

appropriate minimum block sizes are 

responsive to changing markets. 

Specifically, the Commission expects 

that the availability of real-time pricing 

information for carefully enumerated 

categories of swap transactions will 

draw increased swap market liquidity 

through the competitive appeal of 

improved pricing efficiency that greater 

transparency affords. More liquid, 

competitive swap markets, in turn, 

allow businesses to offset costs more 

efficiently than in completely opaque 

markets, thus serving the interests of 

both market participants and the public 

who should benefit through lower costs 

of goods and services. 

Another benefit of increasing swaps 

market transparency to regulators and 

the public in real-time, without the 

interim delays for all transactions 

imposed in Part 43, is better protection 

of market participants and the public by 

improving the Commission’s oversight 

ability and by giving academics, the 

media, public and market participants 

the opportunity to monitor, study, and 

analyze these previously opaque 

segments of the economy. 

b. Efficiency, Competitiveness and 

Financial Integrity of Markets 643

The criteria and methodology set out 

in the rules will promote market 

efficiency, competitiveness and 

financial integrity of markets in several 

ways. The Commission acknowledges 

that because responsibility for 

specifying swap categories and 

determining appropriate minimum 

block sizes is with the Commission 

rather than registered entities, the 

administrative burden on swap market 

participants is minimized. Further, the 

rules afford flexibility to respond to 

continuing swaps market evolution, 

including but not limited to changing 

industry practices and activities that the 

Commission foresees occurring as 

market participants comply with 

regulations, including part 43, 

implementing the Dodd-Frank Act 

regulatory regime. More specifically, the 

methodology in § 43.6(c)–(f) and (h) will 

recalibrate appropriate minimum block 

sizes regularly to ensure that those sizes 

remain appropriate for, and responsive 

to, these changing markets. This ability, 

coupled with the potential for the 

Commission to adjust futures block 

requirements in pending and future 

rulemakings (among other tools) also 

helps assure that competitive 

implications that could arise between 

substitutable swaps and futures as 

markets evolve are appropriately 

addressed. The Commission believes 

that the rules will introduce increased 

market transparency for swaps in a 

careful, measured manner that the 

Commission believes will optimize the 

balance between liquidity and 

transparency concerns.644

c. Price Discovery 

The criteria and methodology set out 

in the rules will enhance swap market 

price discovery by eliminating, to the 

extent appropriate, the time delays for 

the real-time public reporting. The 

methodology of this final rule will 

ensure that an SDR will be able to 

publicly disseminate data for certain 

swaps as soon as technologically 

practicable and the majority of the 

transactions in the market will be 

visible to traders as well as the public. 

Since the majority of trades will be 

published and visible in real-time, 

reported prices are likely to be better 

indicators of competitive pricing. As 

such, the rules promote improved price 

discovery. 


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645See 77 FR 1237. As noted in the Real-Time 

Reporting Final Rule, non-financial end-users (that 

do not contract with a third party) will have initial 

costs consisting of: (i) Developing an internal order 

management system capable of capturing all 

relevant data ($26,689 per non-financial end-user) 

and a recurring annual burden of ($27,943 per nonfinancial end-user); (ii) establishing connectivity 

with an SDR that accepts data ($12,824 per nonfinancial end-user); (iii) developing written policies 

and procedures to ensure compliance with part 43 

($14,793 per non-financial end-user); and (iv) 

compliance with error correction procedures 

($2,063 per non-financial end-user). See id. With 

respect to recurring costs, a non-financial end-user 

will have: (i) Recurring costs for compliance, 

maintenance and operational support ($13,747 per 

non-financial end-user); (ii) recurring costs to 

maintain connectivity to an SDR ($100,000 per nonfinancial end-user); and (iii) recurring costs to 

maintain systems for purposes of reporting errors or 

omissions ($1,366 per non-financial end user). See 

id. 

SDRs (that do not enter into contracts with a third 

party) would have incremental costs related to 

compliance with part 43 beyond those costs 

identified in the release adopting part 49 of the 

Commission’s regulations. See Swap Data 

Repositories: Registration Standards, Duties and 

Core Principles, 76 FR 54538 (Sept. 1, 2011). In the 

Real-Time Reporting Final Rule, the Commission 

stated that each SDR would have: (i) A recurring 

burden of approximately $856,666 and an annual 

burden of $666,666 for system maintenance per 

SDR; (ii) non-recurring costs to publicly 

disseminate ($601,003 per SDR); and (iii) recurring 

cots to publicly disseminate ($360,602 per SDR). 

See id. 

In the Real-Time Reporting Final Rule, the 

Commission assumed that SEFs and DCMs will 

experience the same or lower costs as a nonfinancial end-user. See id. 

646SDRs that do not enter into contracts with a 

third party would have incremental costs related to 

compliance with part 43 of the Commission’s 

regulations beyond those cost identified in the 

release adopting part 49 of the Commission’s 

regulations. See Swap Data Repositories: 

Registration Standards, Duties and Core Principles, 

76 FR 54538 (Sept. 1, 2011). In the Real-Time 

Reporting Final Rule, the Commission stated that 

each SDR would have: (1) A recurring burden of 

approximately $856,666 and an annual burden of 

$666,666 for system maintenance per SDR; (2) nonrecurring costs to publicly disseminate ($601,003 

per SDR); and (3) recurring costs to publicly 

disseminate ($360,602 per SDR). See id. 

647For the same reasons stated in the Real-Time 

Reporting Final Rule, the Commission assumes that 

SEFs and DCMs would experience the same or less 

costs as a non-financial end-user. See 77 FR 1236. 

Under § 43.6(g)(1), SEFs or DCMs would be 

required to transmit a block trade election to an 

SDR only when the SEF or DCM receives notice of 

a block trade election from a reporting party. 

d. Sound Risk Management Practices 

As discussed above, the Commission 

believes that the criteria and 

methodology set forth in the rules will 

enhance price discovery since SDRs will 

publicly disseminate price and other 

data relevant to valuation as soon as 

technologically practicable for the 

swaps for which the time-delay is lifted. 

This better and more accurate data will 

enable swap market participants, 

generally, to better measure risk. An 

ability to better manage risk at an entity 

level should translate to improved 

market participant risk management 

generally. Improved risk measurement 

and management potential, in turn, 

mitigates the risk of another financial 

crisis by better equipping market 

participants to value their swap 

contracts and other assets during times 

of market instability. 

e. Other Public Interest Considerations 

The Commission believes that the 

criteria and methodology in § 43.6(a)–(f) 

and (h) will allow the majority of swap 

transactions and prices to be publicly 

disseminated, giving academics, the 

media, public and market participants 

the opportunity to monitor, study, and 

analyze these previously opaque 

segments of the economy. This would 

allow the public to be better informed 

about swaps markets and analyze 

publicly available market data 

disseminated in real-time. 

D. Cost-Benefit Considerations Relevant 

to the Block Trade/Large Notional OffFacility Swap Election Process 

(§ 43.6(g)) 

Section 43.6(g) specifies the process 

for a market participant to elect that a 

swap transaction be treated as a block 

trade or large notional off-facility swap 

(‘‘the election process’’). Section 

43.6(g)(1) establishes a two-step 

notification process relating to block 

trades. Section 43.6(g)(2) establishes the 

notification process relating to large 

notional off-facility swaps. 

Section 43.6(g)(1)(i) sets out the first 

step in the block trade notification 

process: parties to a swap executed at or 

above the appropriate minimum block 

size for the applicable swap category are 

required to notify the SEF or DCM, as 

applicable, of their election to have their 

qualifying swap transaction treated as a 

block trade. Section 43.6(g)(1)(ii) sets 

out the second step: the SEF or DCM, as 

applicable, that receives an election 

notification is required to notify an SDR 

of a block trade election when 

transmitting swap transaction and 

pricing data to such SDR for public 

dissemination. The Commission expects 

SEFs and DCMs to use automated, 

electronic—and in some cases voice— 

processes to execute swap transactions; 

the transmission of the notification of a 

block trade election, which may occur 

separately from the execution process, 

also will be either automated, electronic 

or communicated through voice 

processes. 

Section 43.6(g)(1)(ii) sets out the 

second step: the SEF or DCM, as 

applicable, that receives an election 

notification is required to notify an SDR 

of a block trade election when 

transmitting swap transaction and 

pricing data to such SDR for public 

dissemination. 

1. Costs Relevant to the Election Process 

(§ 43.6(g)) 

Non-financial end-users who are 

reporting parties, as well as SEFs, 

DCMs, and SDRs will likely bear the 

costs of complying with the election 

process in § 43.6(g). To comply with the 

real-time reporting requirements of part 

43 already in place, these entities will 

have already invested in technology and 

personnel as well as established 

programs for continued systems 

maintenance, support and compliance; 

the Commission has previously 

described and considered these costs in 

the Real-Time Reporting Final Rule.645

The Commission specifically designed 

the election process so that nonfinancial end-users, SEFs, DCMs, and 

SDRs would be able to leverage any 

investments made for compliance with 

part 43 to also comply with § 43.6(g). 

Accordingly, the Commission expects 

non-financial end-users, SEFs, DCMs 

and SDRs to have the following direct, 

quantifiable costs: (a) An incremental, 

non-recurring expenditure to update 

existing technology to comply with 

§ 43.6(g); (b) an incremental nonrecurring expenditure for training 

existing personnel and updating written 

policies and procedures for compliance 

with amendments to part 43; (c) 

incremental recurring expenses 

associated with compliance, 

maintenance and operational support in 

connection with the election process; 

and (d) additional incremental, nonrecurring expenditures to update 

existing technology exclusive to SDRs. 

SDRs also would have incremental, nonrecurring expenditures to update 

existing technology.646 The Commission 

also recognizes that the election process 

in § 43.6(g) is voluntary and that eligible 

entities would not elect block trade 

treatment for a swap transaction in 

circumstances in which they did not 

perceive a net benefit in doing so. In the 

paragraphs that follow, the Commission 

discusses each of these costs. 

a. Incremental, Non-Recurring 

Expenditure to a Non-Financial EndUser, SEF or DCM to Update Existing 

Technology 647

To comply with the election process 

in § 43.6(g), a non-financial end-user, 

SEF, or DCM likely would need to: (1) 

Update its Order Management System 

(‘‘OMS’’) to capture the election to treat 

a qualifying publicly reportable swap 

transaction as a block trade or large 

notional off-facility swap. In the Further 

Block Proposal, the Commission 


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648This estimate was calculated as follows: 

(Compliance Manager at 15 hours) + (Director of 

Compliance at 10 hours) + (Compliance Attorney at 

5 hours) + (Senior Systems Analyst at 30) + (Senior 

Programmer at 20) = 80 hours per non-financial 

end-user who is a reporting party. A compliance 

manager has adjusted hourly wages of $77.77. A 

director of compliance has adjusted hourly wages 

of $158.21. A compliance attorney has adjusted 

hourly wages of $89.43. A senior systems analyst 

has adjusted hourly wages of $64.50. A senior 

programmer has adjusted hourly wages of $81.52. 

649This estimate was calculated as follows: 

(Compliance Manager at 15 hours) + (Director of 

Compliance at 10 hours) + (Compliance Attorney at 

5 hours) + (Senior Systems Analyst at 30) + (Senior 

Programmer at 20) = 80 hours per non-financial 

end-user who is a reporting party. A compliance 

manager has adjusted hourly wages of $74.16. A 

director of compliance adjusted hourly wages of 

$169.16. A compliance attorney has adjusted hourly 

wages of $103.17. A senior systems analyst has 

adjusted hourly wages of $70.45. A senior 

programmer has adjusted hourly wages of $86.89. 

650This estimate is calculated as follows: 

(Compliance Manager at 5 hours) + (Director of 

Compliance at 2 hours) + (Compliance Attorney at 

2 hours) + (Senior Systems Analyst at 10) + (Senior 

Programmer at 20) = 39 hours per non-financial 

end-user who is a reporting party. A compliance 

manager has adjusted hourly wages of $77.77. 

651This estimate was calculated as follows: 

(Compliance Manager at 5 hours) + (Director of 

Compliance at 2 hours) + (Compliance Attorney at 

2 hours) + (Senior Systems Analyst at 10) + (Senior 

Programmer at 20) = 39 hours per non-financial 

end-user who is a reporting party. A compliance 

manager has adjusted hourly wages of $74.16. A 

director of compliance adjusted hourly wages of 

$169.16. A compliance attorney has adjusted hourly 

wages of $103.17. A senior systems analyst has 

adjusted hourly wages of $70.45. A senior 

programmer has adjusted hourly wages of $86.89. 

652This estimate is calculated as follows: 

(Director of Compliance at 1 hour) + (Compliance 

Clerk at 3 hours) + (Compliance Attorney at 1 hour) 

= 5 hours per year per non-financial end-user who 

is a reporting party. A director of compliance has 

adjusted hourly wages of $158.21. A compliance 

clerk (junior compliance advisor) has adjusted 

hourly wages of $31.22. A compliance attorney has 

adjusted hourly wages of 89.43. 

653This estimate is calculated as follows: 

(Director of Compliance at 1 hour) + (Compliance 

Clerk at 3 hours) + (Compliance Attorney at 1 hour) 

= 5 hours per year per non-financial end-user who 

is a reporting party. A director of compliance’s 

adjusted hourly wage is $169.16. A compliance 

clerk (junior compliance advisor) has adjusted 

hourly wages of $33.52. A compliance attorney’s 

adjusted hourly wage is $103.17. 

654This estimate is calculated as follows: (Sr. 

Programmer at 8 hours) + (Sr. Systems Analyst at 

3 hours) + (Compliance Manager at 2 hours) + 

(Director of Compliance at 2 hours) = 15 hours per 

SDR. A senior programmer has adjusted hourly 

wages of $81.52. A senior systems analyst has 

adjusted hourly wages of $64.50. A compliance 

manager has adjusted hourly wages of $77.77. A 

director of compliance has adjusted hourly wages 

of $158.21. 

655This estimate is calculated as follows: (Senior 

Programmer at 8 hours) + (Senior Systems Analyst 

estimated that updating an OMS system 

to permit notification to an SDR of a 

block trade or large notional off-facility 

swap election would impose an initial 

non-recurring burden of approximately 

80 personnel hours at an approximate 

cost of $6,761 for each non-financial 

end-user, SEF or DCM.648 This cost 

estimate included an estimate of the 

number of potential burden hours 

required to amend internal procedures, 

reprogram systems and implement 

processes to permit a non-financial enduser to elect to treat their qualifying 

swap transaction as a block trade or 

large notional off-facility swap in 

compliance with the requirements set 

forth in § 43.6(g). The Commission is 

revising its estimates based on updated 

wage rate data. The Commission 

estimates that updating an OMS system 

to permit notification to an SDR of a 

block trade or large notional off-facility 

swap election would impose an initial 

non-recurring burden of approximately 

80 personnel hours at an approximate 

cost of $7,171 for each non-financial 

end-user, SEF or DCM.649

b. Incremental, Non-Recurring 

Expenditure to a Non-Financial EndUser to Provide Training To Existing 

Personnel and Update Written Policies 

and Procedures 

To comply with the election process 

in § 43.6(g), a non-financial end-user 

likely would need to provide training to 

its existing personnel and update its 

written policies and procedures to 

account for this new process. In the 

Further Block Proposal, the Commission 

estimated that providing training to 

existing personnel and updating written 

policies and procedures would impose 

an initial non-recurring burden of 

approximately 39 personnel hours at an 

approximate cost of $3,200 for each 

non-financial end-user.650 This cost 

estimate included the number of 

potential burden hours required to 

produce design training materials, 

conduct training with existing 

personnel, and revise and circulate 

written policies and procedures in 

compliance with the requirements set 

forth in § 43.6(g). The Commission is 

revising its estimates based on updated 

wage rate data. The Commission 

estimates that providing training to 

existing personnel and updating written 

policies and procedures would impose 

an initial non-recurring burden of 

approximately 39 personnel hours at an 

approximate cost of $3,360 for each 

non-financial end-user.651

c. Incremental, Recurring Expenses to a 

Non-Financial End-User, DCM or SEF 

Associated With Incremental 

Compliance, Maintenance and 

Operational Support in Connection 

With the Election Process 

A non-financial end-user, DCM or 

SEF likely would incur costs on an 

annual basis in order to comply with the 

election process in § 43.6(g). In the 

Further Block Proposal, the Commission 

estimated that annual compliance; 

maintenance and operation support 

would impose an incremental, recurring 

burden of approximately five personnel 

hours at an approximate cost of $340 for 

each non-financial end-user, DCM or 

SEF.652 This cost estimate included the 

number of potential burden hours 

required to design training materials, 

conduct training with existing 

personnel, and revise and circulate 

written policies and procedures in 

compliance with the requirements set 

forth in § 43.6(g). The Commission is 

revising its estimates based on updated 

wage rate data. The Commission 

estimates the updated approximate cost 

of designing training materials, 

conducting training with existing 

personnel, and revising and circulating 

written policies and procedures in 

compliance with the requirements set 

forth in § 43.6(g) to be $370 for each 

non-financial end-user, DCM, or SEF.653

d. Incremental, Non-Recurring 

Expenditure to an SDR To Update 

Existing Technology To Capture and 

Publicly Disseminate Swap Data for 

Block Trades and Large Notional OffFacility Swaps 

To comply with the election process 

in § 43.6(g), an SDR likely would need 

to update its existing technology to 

capture elections and disseminate 

qualifying publicly reportable swap 

transactions as block trades or large 

notional off-facility swaps. In the 

Further Block Proposal, the Commission 

estimated that updating existing 

technology to capture elections would 

impose an initial non-recurring burden 

of approximately 15 personnel hours at 

an approximate cost of $1,310 for each 

SDR.654 This cost estimate included the 

number of potential burden hours 

required to amend internal procedures, 

reprogram systems, and implement 

processes to capture and publicly 

disseminate swap transaction and 

pricing data for block trades and large 

notional off-facility swaps in 

compliance with the requirements set 

forth in § 43.6(g). The Commission is 

revising its estimates based on updated 

wage rate data. The Commission 

estimates the updated approximate cost 

required to amend internal procedures, 

reprogram systems, and implement 

processes to capture and publicly 

disseminate swap transaction and 

pricing data for block trades and large 

notional off-facility swaps in 

compliance with the requirements set 

forth in § 43.6(g) to be $1,390 for each 

SDR.655


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at 3 hours) + (Compliance Manager at 2 hours) + 

(Director of Compliance at 2 hours) = 15 hours per 

SDR. A senior programmer has adjusted hourly 

wages of $86.89. A senior systems analyst has 

adjusted hourly wages of $70.45. A compliance 

manager has adjusted hourly wages of $74.16. A 

director of compliance has adjusted hourly wages 

of $169.16. 

656CL–WMBAA at 8. 

657See the discussion of benefits in section 

VI.E.1.e above with respect to § 43.6(a)–(f) and (h). 

658Although by its terms, section 15(a)(2)(B) of 

the CEA applies to futures and not swaps, the 

Commission finds this factor useful in analyzing the 

costs and benefits of regulating swaps, as well. See 

7 U.S.C. 19(a)(2)(B). 

2. Comments Received 

The Commission received one 

comment directly related to the costs of 

the election process. As discussed more 

fully above, WMBAA disagreed with the 

Further Block Proposal projected cost 

estimates generally and contended that 

the Commission failed to contemplate 

the actual efforts a SEF will have to 

undertake to implement the block trade 

regime, including the two-step 

notification process.656 In addition to 

the fact that WMBAA did not provide 

data to support or monetize its position, 

WMBAA’s disagreement with the 

Further Block Proposal’s election 

process cost estimates does not concern 

the incremental cost to augment and 

maintain systems and processes that the 

Commission believes entities need have 

in place to comply with the real time 

reporting requirement of Section 

2(a)(13) of the CEA; rather it concerns 

the cost to comply with that statutory 

requirement as prescribed by the 

existing part 43 implementation 

regulations. SEFs and DCMs would 

incur these costs regardless of how the 

Commission determines block 

thresholds. Accordingly, the 

Commission considers WMBAA’s 

criticism of the cost estimates in this 

rulemaking misplaced. Therefore, the 

Commission is maintaining the Further 

Block Proposal’s approach to calculating 

the direct costs resulting from the 

methodology for determining block 

thresholds, but is revising its estimates 

based on updated wage rate data. 

3. Benefits Relevant to the Election 

Process (§ 43.6(g)) 

The Commission has identified two 

overarching benefits that the election 

process in § 43.6(g) would confer on 

swap market participants, registered 

entities and the general public. First, 

although § 43.6(g) sets out a purely 

administrative process with which 

market participants and registered 

entities must comply, the Commission 

views this process as an integral 

component of the block trade framework 

in this rulemaking and in part 43. 

Consequently, this election process will 

benefit market participants, registered 

entities and the general public by 

providing greater price transparency in 

swaps markets than currently exists 

under part 43.657 Since this election 

process is optional, entities need avail 

themselves of the process only in 

circumstances where the attendant 

benefits warrant. 

Second, the Commission believes that 

the election process will promote 

market efficiency by creating a 

standardized process in § 43.6(g) for 

market participants to designate 

publicly reportable swap transactions 

that are eligible for block trade or large 

notional off-facility swap treatment. In 

addition, this standardized process will 

further promote efficiency by allowing 

market participants and registered 

entities to leverage their existing 

technology infrastructure, connectivity, 

personnel and other resources required 

under parts 43 and 49 of the 

Commission’s regulations. The 

Commission believes the final rule 

avoids imposing duplicative or 

conflicting obligations on market 

participants and registered entities. 

4. Alternatives 

The Commission specifically asked 

commenters whether there were 

alternative methods through which a 

reporting party could elect to treat its 

qualifying swap transaction as a block 

trade or large notional off-facility swap. 

In addition, the Commission asked 

whether it should require a variation on 

the proposed election process where 

SEFs, DCMs, and reporting parties 

would be required to indicate under 

which swap category they were 

claiming block or large notional offfacility swap treatment. Finally, the 

Commission asked whether it should 

establish an alternative approach for 

small end-users when such an end-user 

is the reporting party to a qualified swap 

transaction. 

No comments were received either 

proposing or otherwise supporting an 

alternative approach and as such, the 

Commission is adopting in § 43.6(g) 

relative to possible alternatives. 

5. Application of the Section 15(a) 

Factors to § 43.6(g) 

a. Protection of Market Participants and 

the Public 

Section 43.6(g) is an essential part of 

this rulemaking because it provides the 

mechanism through which market 

participants will be able to elect to treat 

their qualifying swap transaction as a 

block trade or large notional off-facility 

swap. Consequently, this process 

contributes to providing greater swap 

market transparency than what 

currently exists under part 43 of the 

Commission’s regulations. Market 

participants, registered entities and the 

general public benefit from this 

enhanced swap market price 

transparency. 

b. Efficiency, Competitiveness and 

Financial Integrity.658

As noted above, the election process 

will promote efficiency by providing 

market participants and registered 

entities with a standardized process to 

delineate which publicly reportable 

swap transactions are block trades or 

large notional off-facility swaps. The 

voluntary nature of this election process 

will also add to the efficiency of the 

swaps market since eligible entities will 

only choose to elect if it is financially 

beneficial for them to do so. In addition, 

the proposed election process will 

promote efficiency by allowing nonfinancial end-users, SEFs, DCMs and 

SDRs to leverage their existing 

technology infrastructure, connectivity, 

personnel and other resources required 

under part 43 and part 49 of the 

Commission’s regulations. The use of 

existing technologies, connectivity, 

personnel and other resources will 

create efficiencies for these entities and 

mitigate the cost to comply § 43.6(g). 

The Commission has identified no 

potential impact on competitiveness 

and financial integrity that would result 

from the implementation of the 

proposed election process. 

c. Price Discovery 

The Commission has identified no 

potential material impact to price 

discovery that would result from the 

implementation of the election process 

outside of those discussed in section b. 

above. 

d. Sound Risk Management Practices 

The Commission has identified no 

potential impact on sound risk 

management practices that would result 

from the implementation of the election 

process outside of those discussed in 

section b. above. 

e. Other Public Interest Considerations 

The Commission has identified no 

potential impact on other public interest 

considerations (other than those 

identified above) that would result from 

the implementation of the election 

process. 


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659The Commission received numerous 

comments suggesting that the block thresholds and 

cap sizes established by the Commission should be 

the same. However, block thresholds and cap sizes 

have different statutory mandates and serve 

different purposes. 

660See note 470 supra, which lists the interim 

cap sizes set forth in § 43.4(h)(1)–(5). 

661The Commission anticipates that reporting 

parties, SEFs and DCMs would not incur any new 

costs related to the amendments to § 43.4 because 

this section relates to the data that an SDR must 

publicly disseminate. Section 43.3 of the 

Commission’s regulations sets out the requirements 

for reporting parties, SEFs and DCMs in terms of 

what is transmitted to an SDR. 

662See 76 FR 54572–75. As noted in SDR final 

rule, SDRs (that do not enter into contracts with a 

third party) would have incremental costs related 

to compliance with part 43 beyond those costs 

identified in the release adopting part 49 of the 

Commission’s regulations. See 76 FR 54573. In the 

Real-Time Reporting Final Rule, the Commission 

stated that each SDR would have: (i) A recurring 

burden of approximately $856,666 and an annual 

burden of $666,666 for system maintenance per 

SDR; (ii) non-recurring costs to publicly 

disseminate ($601,003 per SDR); and (iii) recurring 

cots to publicly disseminate ($360,602 per SDR). 

See 77 FR 1238. 

663This estimate is calculated as follows: (Sr. 

Programmer at 20 hours) + (Sr. Systems Analyst at 

10 hours) + (Compliance Manager at 2 hours) + 

(Director of Compliance at 2 hours) = 34 hours per 

SDR. A senior programmer has adjusted hourly 

wages of $81.52. A senior systems analyst has 

adjusted hourly wages of $64.50. A compliance 

manager has adjusted hourly wages of $77.77. A 

director of compliance has adjusted hourly wages 

of $158.21. The total number was calculated 

incorrectly in the Further Block Proposal. The 

initial cost to an SDR should have been $2,747, 

rather than $3,190. 

E. Costs and Benefits Relevant to 

Anonymity Protections (Amendments to 

§ 43.4(d)(4) and (h)) 

This section discusses the two 

amendments to § 43.4. Section 43.4 as 

now promulgated prescribes the manner 

in which SDRs must publicly 

disseminate swap transaction and 

pricing data. One amendment adds a 

system for masking the geographical 

data for certain swaps in the other 

commodity asset class not currently 

subject to public dissemination, which 

provides limited, but not detailed 

information on the geographic location 

of the underlying assets of those swaps. 

The other amendment establishes a 

methodology to establish cap sizes that 

masks the size of swap transactions 

above a certain threshold, which is 

different from the methodology for 

determining appropriate minimum 

block sizes. Both amendments seek to 

protect the anonymity of the parties and 

certain identifying information for 

swaps while also providing increased 

transparency in swaps markets. 

1. Amendments to § 43.4(d)(4) 

The Commission addresses the public 

dissemination of information regarding 

certain swaps in the other commodity 

asset class in § 43.4(d)(4). Section 

43.4(d)(4)(ii) currently provides that for 

publicly reportable swaps in this 

commodity asset class, information 

identifying the underlying assets of the 

swap must be publicly disseminated for: 

(a) those swaps executed on or pursuant 

to the rules of a SEF or DCM; (b) those 

swaps referencing one of the contracts 

described in appendix B to part 43; and 

(c) any publicly reportable swap 

transaction that is economically related 

to one of the contracts described in 

appendix B to part 43. Pursuant to the 

Real-Time Reporting Final Rule, any 

swap that is in the other commodity 

asset class that falls under 

§ 43.4(d)(4)(ii) will be subject to 

reporting and public dissemination 

requirements. 

In this final rule, the Commission is 

adopting a new provision, 

§ 43.4(d)(4)(iii), that prescribes a system 

for the public dissemination of exact 

underlying assets in the other 

commodity asset class with a ‘‘mask’’ 

for sensitive and potentially revealing 

geographic detail. The Commission also 

is adopting guidance in the form of a 

new appendix to part 43 that contains 

the geographical details that SDRs will 

be able to use in masking eligible other 

commodity swaps while maintaining 

compliance with public dissemination 

of swap transaction and pricing data. 

2. Amendments to § 43.4(h) 

Section 43.4(h) establishes cap sizes 

for ‘‘rounded notional or principal swap 

amounts’’ above which information on 

swaps transactions is publicly 

reportable, for the purpose of providing 

anonymity for transactions where 

information on the notional or principal 

amounts alone would likely reveal the 

identity of the parties to the swap or 

sensitive business information. In doing 

so, the Commission notes that the 

objective of establishing cap sizes differs 

from that of establishing appropriate 

minimum block sizes.659 With respect to 

the latter, the objective is to ensure that 

a block trade or large notional offfacility swap can be sufficiently offset 

during a relatively short reporting delay. 

The former is strictly for the protection 

of the counterparties’ identity and 

sensitive business information. 

Section 43.4(h) currently requires 

SDRs to publicly disseminate the 

notional or principal amounts of a 

publicly reportable swap transaction 

represented by a cap size (i.e., $XX+) 

that adjusts in accordance with the 

respective appropriate minimum block 

size for the relevant swap category. 

Section 43.4(h) further provides that if 

no appropriate minimum block size 

exists with respect to a swap category, 

then the cap size on the notional or 

principal amount will correspond with 

interim cap sizes that the Commission 

has established for the five asset 

classes.660

The amendment to § 43.4(h) will 

require SDRs to continue to publicly 

disseminate cap sizes that correspond to 

their respective appropriate minimum 

block sizes during the initial period. 

However, when the Commission 

publishes the post-initial appropriate 

minimum block sizes in accordance 

with § 43.6(f), it will also publish postinitial cap sizes for each swap category 

by applying a 75-percent notional 

amount calculation on data collected by 

SDRs. The Commission will apply the 

75-percent notional amount calculation 

to a one-year rolling window of such 

data corresponding to each relevant 

swap category for each calendar year. 

3. Costs Relevant to the Amendments to 

§ 43.4(d)(4) and (h) 

SDRs will bear some costs of 

complying with the amendments to 

§ 43.4(d)(4) and (h).661 The Commission 

set forth the potential costs of these 

provisions in the Further Block Proposal 

and requested comments regarding its 

estimates. The Commission did not 

receive any comments regarding its 

estimates. 

The Commission anticipates that 

these entities already will have made 

non-recurring expenditures in 

technology and personnel in connection 

with the requirements set forth in part 

43 and part 49 (which contain rules 

regarding the registration and regulation 

of SDRs). As such, SDRs already will be 

required to pay recurring expenses 

associated with systems maintenance, 

support and compliance as described in 

the cost-benefit discussion in the RealTime Reporting Final Rule.662

Notwithstanding these recurring 

expenses, an SDR will have additional 

non-recurring expenditures associated 

with the amendments to § 43.4. 

Specifically, the Commission estimated 

that updating existing technology will 

impose an initial non-recurring burden 

of approximately 34 personnel hours at 

an approximate cost of $3,190 for each 

SDR.663 This cost estimate included an 

estimate of the number of potential 

burden hours required to amend 

internal procedures, reprogram systems 

and implement processes to capture and 

publicly disseminate swap transaction 

and pricing data for block trades and 

large notional off-facility swaps in 


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664This estimate is calculated as follows: (Sr. 

Programmer at 20 hours) + (Sr. Systems Analyst at 

10 hours) + (Compliance Manager at 2 hours) + 

(Director of Compliance at 2 hours) = 34 hours per 

SDR. A senior programmer has adjusted hourly 

wages of $86.89. A senior systems analyst has 

adjusted hourly wages of $70.45. A compliance 

manager has adjusted hourly wages of $74.16. A 

director of compliance has adjusted hourly wages 

of $169.16. 

665The Commission estimates that there will be 

5 SDRs, which will collect swaps data in the other 

commodity asset class. Each SDR would collect 

swaps data on approximately 10,000 swap 

transactions in the other commodity asset class. The 

commission estimates that it will take each SDR on 

average approximately 1 minute to publicly 

disseminate swaps data related to these new swap 

transactions. The number of burden hours for these 

SDRs would be 833 hours. As referenced in note 

523 supra, the total labor costs for a swap trader is 

$184.90. Thus, the total number of burden hour 

costs equal the total number of burden hours (833 

burden hours) × $184.90. 

666CL–GFMA at 5. 

667CL–ICI at 8. 

668CL–ISDA/SIFMA at 15. 

669CL–MFA at 8–9. 

670CL–SIFMA at 12. 

671CL–Vanguard at 7. 

672This benefit is consistent with one of the 

considerations for implementation identified by 

ISDA and SIFMA in their January 18, 2011 report. 

See Block trade reporting for over-the-counter 

derivatives markets, note 32 supra. 

673See proposed § 43.6(c)(1). 

674See proposed § 43.6(c)(2). 

compliance with the requirements set 

forth in § 43.4(d). 

The Commission is revising its 

estimates based on updated wage rate 

data. The Commission estimates the 

updated approximate cost required to 

amend internal procedures, reprogram 

systems and implement processes to 

capture and publicly disseminate swap 

transaction and pricing data for block 

trades and large notional off-facility 

swaps in compliance with the 

requirements set forth in § 43.4(d) to be 

$2,930 for each SDR.664

In addition, the Commission believes 

that § 43.4(d)(4)(iii) will result in some 

incremental, recurring costs for SDRs 

because they will be required to 

publicly disseminate other commodity 

swaps data that were not previously 

within the scope of the public 

dissemination requirement in § 43.4. 

The Commission estimates that there 

will be approximately 50,000 additional 

swaps reported to an SDR each year in 

the other commodity asset class, which 

the Commission estimates will be 

$154,021 in annualized costs.665

The Commission also anticipates that 

§ 43.4(d)(4)(iii) will result in some 

indirect costs to the market through 

reduced information, since notional 

values of transactions beyond the cap 

size limits will not be revealed to the 

public. The Commission lacks data to 

quantify the costs associated with the 

reduction of information. However, 

given the statutory mandate to protect 

market participant identities, the 

Commission believes such costs are 

warranted and contemplated by 

Congress. 

The Commission also received a 

number of comments regarding 

potential costs arising from the 

established level for cap size. GFMA 

stated that the same rationale should 

apply to cap and block sizes, as both 

have potential negative impacts on 

liquidity.666 ICI stated that the 75 

percent notional amount would be too 

high for determining cap size because 

the lack of depth and liquidity in the 

swaps market could cause public 

reporting of block sizes to reveal 

identities, business transactions, and 

market positions of participants, and 

recommends a 67 percent notional 

amount calculation for determining cap 

size in the post-initial period.667 ISDA/ 

SIFMA stated that the added 

transparency from reporting transaction 

sizes between 67 percent and 75 percent 

would be outweighed by the harm to 

liquidity from additional disclosure, 

and urges the Commission to ensure 

that the post-initial cap size is always 

equal to the relevant block size.668 MFA 

stated that it is unnecessary for the 

Commission to establish cap sizes that 

differ from minimum block sizes as 

there is not a meaningful transparency 

benefit that would outweigh the 

resource burdens on the Commission, 

SDRs, SEFs, and other market 

participants.669 SIFMA stated that the 

Commission should set the notional cap 

size at the block threshold, as the added 

public dissemination could harm 

liquidity in the same manner that a 

higher block trade size threshold 

might.670 Vanguard stated that it is 

essential that the cap match the block 

trade threshold, as to do otherwise 

would compromise the liquidity 

protections afforded by the nuanced 

assessment of block trade thresholds.671

The additional information provided 

to the market regarding the size of block 

trades that are below the cap size may 

enhance price discovery by publicly 

disseminating more information relating 

to market depth and the notional sizes 

of publicly reportable swap 

transactions. This, in turn, promotes 

increased market liquidity. 

In addition, the rule incorporates 

flexibility to adjust post-initial cap sizes 

in response to changing markets. 

Section 43.4(h) will permit the 

Commission to set cap sizes no less than 

once annually during the post-initial 

period. If swap market conditions 

change significantly after the 

implementation of the provisions of this 

rulemaking, then the Commission can 

react in a timely manner to further 

improve price transparency or to 

mitigate adverse effects on market 

liquidity.672

4. Benefits Relevant to the Amendments 

to § 43.4 

The Commission anticipates that the 

anonymity provisions of § 43.4 will 

generate several overarching benefits to 

swap market participants, registered 

entities and the general public. In the 

first instance, the Commission 

anticipates that the cap size 

amendments to § 43.4(h) will benefit 

market participants, registered entities 

and the general public by providing 

greater price transparency with respect 

to swaps with notional amounts that fall 

between the post-initial appropriate 

minimum block size and post-initial cap 

size for a particular swap category. 

During the post-initial period, the 

Commission will set appropriate 

minimum block sizes based on the 67 

percent notional amount calculation 673

and cap sizes based on the 75-percent 

notional amount calculation.674

Although swaps with notional amounts 

that fall between these two sizes will be 

subject to a time delay, the exact 

notional amounts of these swaps 

eventually will be publicly disclosed. 

The delayed public disclosure of the 

notional amount of these swaps will 

provide market participants, registered 

entities and the general public with 

meaningful price transparency. 

The masking provisions in the 

amendment to § 43.4(d)(4) and appendix 

D to part 43 will further benefit market 

participants, registered entities and the 

general public by enhancing price 

discovery with respect to swaps that 

currently are not required to be publicly 

disclosed under part 43. Section 

43.4(d)(4) currently requires SDRs to 

publicly disseminate swap transaction 

and pricing data for publicly reportable 

swap transactions that reference or are 

economically related to the 29 contracts 

identified in appendix B to part 43. 

However, the Commission believes 

there are a significant number of swaps 

in the other commodity asset class that 

are not economically related to the 29 

contracts identified on this appendix to 

part 43. The amendment creating new 

§ 43.4(d)(4)(iii) will require the public 

dissemination of data on these swaps. 

The real-time public reporting of these 

swaps will enhance price discovery in 

the other commodity asset class. 


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675This benefit is consistent with one of the 

considerations for implementation identified by 

ISDA and SIFMA in their January 18, 2011 report. 

See Block trade reporting for over-the-counter 

derivatives markets, note 32 supra. 

676CL–AII at 12. 

677CL–AII at 12; CL–ISDA/SIFMA at 15. 

678CL–Barclays at 6. 

679CL–EEI at 5. 

680Section 2(a)(13)(E) of the CEA. 

681CL–EEI at 12–13. 

682CL–Barclays at 6. 

683The Commission recognizes that adoption of 

rules that delineate cap sizes insufficient to provide 

anonymity could cause prospective counterparties 

to forego swap transactions, thus adversely 

impacting market liquidity. 

In addition, the rule incorporates 

flexibility to adjust post-initial cap sizes 

in response to changing markets. 

Section 43.4(h) will permit the 

Commission to set cap sizes no less than 

once annually during the post-initial 

period. If swap market conditions 

change significantly after the 

implementation of the provisions of this 

rulemaking, then the Commission can 

react in a timely manner to further 

improve price transparency or to 

mitigate adverse effects on market 

liquidity.675

5. Alternatives 

The Commission received numerous 

comments supporting alternatives to the 

proposed anonymity provisions in 

§ 43.4(d)(4) and (h). These alternatives 

fall into two basic categories: (1) Postinitial cap size level; and (2) preventing 

public disclosure of swap market 

participant identity. In regard to cap 

size, seven commenters recommended 

that the Commission set post-initial cap 

sizes matching the minimum block size 

thresholds established by the 

Commission. AII supported setting the 

post-initial cap size for each swap 

category at the same level as the block 

size threshold and states that the 75 

percent notional amount calculation is 

far too high.676

For the initial period, AII and ISDA/ 

SIFMA argued that the cap size should 

be the lower of block size and the 

interim cap size in § 43.4(h)(1).677

Barclays recommended that the post 

initial period cap sizes be introduced at 

more nuanced levels that reflect the 

differences between product’s traded 

volumes.678 EEI stated that the initial 

cap size of $25 million for both the 

Electricity Swap Contracts and the 

Other Commodity Electricity Swap 

Category is too high, as is the 75 percent 

notional amount for the post-initial 

period. EEI recommended that the 

Commission adopt a fixed cap size of $3 

million for both periods.679

The Commission has evaluated these 

various alternatives concerning postinitial cap size levels against the 

statutory requirements imposed upon it 

by Section 2(a)(13): bring real-time 

public reporting to the swaps market 

subject to time delays for block trades 

and large notional off-facility swaps that 

it determines appropriate.680 However, 

the statute only calls for a time delay— 

it does not provide for information to be 

kept from the market in perpetuity. All 

of the information regarding a block 

trade is reported to the market at the 

end of the block time delay. Notional or 

principal amount information above cap 

sizes, on the other hand, is never 

expressed to the market. Because the 

notional amount of the trade is neither 

reported to the market in real-time, nor 

reported to the market at all, the 

Commission believes that cap sizes 

should be set at a higher level than 

block sizes. The 75 percent notional test 

balances the competing interests of 

providing meaningful real-time public 

reporting to the swaps market and 

protecting the anonymity of swap 

market participants, while taking into 

account potential impacts on market 

liquidity. 

The additional information provided 

to the market regarding the size of block 

trades that are below the cap size may 

enhance price discovery by publicly 

disseminating more information relating 

to market depth and the notional sizes 

of publicly reportable swap 

transactions. This, in turn, promotes 

increased market liquidity. 

In regard to alternatives for preventing 

the public disclosure of the identities of 

swap market participants, the 

Commission received three comments 

regarding the masking of specific 

delivery or pricing detail of energy and 

power swaps. EEI recommended that 

the Commission mask data regarding 

Other Commodity Electricity Swaps 

according to the North American 

Electric Reliability Corporation eight 

regions rather than the FERC regions 

proposed.681 Barclays recommended 

that the Commission use wider 

geographic regions when publicly 

disseminating data for commodity 

swaps with very specific underlying 

assets and/or delivery points and 

develop an appropriate process to avoid 

identifying issuers of debt.682 Spring 

Trading supported further measures to 

prevent public disclosure of identities, 

business transactions, and market 

positions of swap market participants, 

and recommended disclosing a subset of 

data on a collective basis at a later date. 

After consideration of the alternatives 

suggested by commenters, the 

Commission is adopting § 43.4(d)(iii) 

with the following modification that it 

believes affords greater anonymity 

protection relative to the Further Block 

Proposal, without adversely impacting 

transparency. The modification is: For 

publicly reportable swap transactions 

that have electricity and sources as an 

underlying asset and have a specific 

delivery or pricing point in the United 

States, the Commission is requiring 

SDRs to public disseminate the specific 

delivery or pricing point based on a 

description of one of the North 

American Electric Reliability 

Corporation (‘‘NERC’’) regions for 

publicly disseminating delivery or 

pricing points for electricity swaps 

described in proposed § 43.4(d)(4)(iii). 

Using the regions suggested by EEI 

further masks specific delivery details 

and thus provides additional protection 

against public disclosure of identities, 

business transactions, and market 

positions of swap market participants, 

as recommended by Barclays and Spring 

Trading. 

The Commission also considered the 

alternative of having DCMs and SEFs set 

cap sizes. The Commission ultimately 

chose to determine cap sizes itself for 

the reason that doing so limits the direct 

burden on registered entities to 

determine and implement appropriate 

cap sizes themselves. As such, the 

chosen approach will promote market 

efficiency for market participants and 

registered entities. 

6. Application of the Section 15(a) 

Factors to the Amendments to § 43.4 

a. Protection of Market Participants and 

the Public 

The amendments to § 43.4 protect 

swap counterparty anonymity on an 

ongoing basis. While cap sizes for some 

transactions can exceed appropriate 

minimum block sizes in certain 

circumstances (resulting in the public 

dissemination of notional/principalamount information after a time delay), 

the Commission believes that for the 

vast majority of impacted swap 

transactions, the cap-size process and 

methodology is sufficient to distinguish 

correctly between those for which 

masking of notional or principal amount 

is required to maintain anonymity and 

those for which it is not.683 The 

Commission believes that setting postinitial cap sizes above appropriate 

minimum block sizes will provide 

additional pricing information with 

respect to large swap transactions, 

which are large enough to be treated as 

block trades (or large notional offfacility swaps), but small enough that 

they do not exceed the applicable postVerDate Mar<15>2010 18:49 May 30, 2013 Jkt 229001 PO 00000 Frm 00066 Fmt 4701 Sfmt 4700 E:\FR\FM\31MYR2.SGM 31MYR2

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Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 32931 

684Although by its terms, section 15(a)(2)(B) 

applies to futures and not swaps, the Commission 

finds this factor useful in analyzing the costs and 

benefits of swaps regulation, as well. 7 U.S.C. 

19(a)(2)(B). 

685See proposed § 43.6(c)(1). 

686See proposed § 43.6(c)(2). 

687CL–JPM at 9, n.13. 

688CL–ICI at 3. 

689 Id. at 4. An investment adviser satisfies the 

criteria of § 4.7(a)(2)(v) if the investment adviser 

registers pursuant to § 203 of the Investment 

Advisers Act of 1940, or pursuant to the laws of any 

state, and the investment adviser has been 

registered and active for two years or provides 

security investment advice to securities accounts 

which, in the aggregate, have total assets in excess 

of $5,000,000 deposited at one or more registered 

securities brokers. 17 CFR 4.7(a)(2)(v). 

690See infra Section II.C.6. 

691See, e.g., CME Rule 526. See also CBOE 

Futures Exchange LLC Rule 415(a)(i); Chicago 

Board of Trade Rule 526; Eris Exchange, LLC Rule 

601(b)(10); ICE Futures U.S. Rule 4.07; NASDAQ 

OMX Futures Exchange, Inc. Rule E23; New York 

Mercantile Exchange, Inc. Rule 526(I); NYSE Liffe 

US, LLC Rule 423; and OneChicago LLC Rule 417. 

initial cap size. This additional 

information may enhance price 

discovery by publicly disseminating 

more information relating to market 

depth and the notional sizes of publicly 

reportable swap transactions, while still 

protecting the anonymity of swap 

counterparties and their ability to lay off 

risk when executing extraordinarily 

large swap transactions. 

b. Efficiency, Competitiveness and 

Financial Integrity 684

The Commission believes that 

amendments to § 43.4(h) promote 

market efficiencies and competitiveness 

since the approach will provide market 

participants with the ability to continue 

transacting swaps with the protection of 

anonymity, while promoting greater 

price transparency. 

The Commission does not believe that 

the implementation of the anonymity 

protections established in § 43.4(h) will 

adversely impact the financial integrity 

of swap markets. The Commission has 

considered the comments provided 

regarding impacts on liquidity arising 

out of the 75 percent notional cap size. 

The Commission does not agree that the 

cap size will have a substantial negative 

impact on market liquidity. As stated 

above, the additional pricing 

information available to the market as a 

result of the 75 percent notional cap size 

promotes enhanced price discovery by 

publicly disseminating more 

information relating to market depth 

and the notional sizes of publicly 

reportable swap transactions, while still 

protecting the anonymity of swap 

counterparties and their ability to lay off 

risk when executing extraordinarily 

large swap transactions. This, in turn, 

promotes market liquidity. 

c. Price Discovery 

The cap size amendments to § 43.4(h) 

should benefit market participants, 

registered entities and the general 

public by providing greater price 

transparency with respect to swaps with 

notional amounts that fall between the 

post-initial appropriate minimum block 

size and post-initial cap size for a 

particular swap category. During the 

post-initial period, the Commission will 

set appropriate minimum block sizes 

based on the 67 percent notional 

amount calculation 685 and cap sizes 

based on the 75-percent notional 

amount calculation.686 Although swaps 

with notional amounts that fall between 

these two sizes will be subject to a time 

delay, the exact notional amounts of 

these swaps will be publicly disclosed 

after the established time delay for 

blocks and large notional off-facility 

swaps. 

The masking provisions in the 

amendment to § 43.4(d)(4) and appendix 

D to part 43 further benefit market 

participants, registered entities and the 

general public by enhancing price 

discovery with respect to swaps that 

currently are not required to be publicly 

disclosed under part 43. The 

amendment creating new 

§ 43.4(d)(4)(iii) will require the public 

dissemination of data on these swaps. 

The Commission expects that the realtime public reporting of these swaps 

will enhance price discovery in the 

other commodity asset class. 

d. Sound Risk Management Practices 

To the extent that the amendments to 

§ 43.4 mask the identity, business 

transactions and market positions of 

swap counterparties, the Commission 

expects that the amendments to § 43.4 

provide those traders with the 

anonymity and time delay they require 

to manage their market risk efficiently. 

e. Other Public Interest Considerations 

The Commission does not anticipate 

that the amendment to § 43.4(h) will 

have a material effect on public interest 

considerations other than those 

identified above. 

F. Costs and Benefits Relevant to 

§ 43.6(h)(6)—Aggregation 

Section 43.6(h)(6) specifies that, 

except as otherwise provided, it is 

impermissible to aggregate orders for 

different accounts in order to satisfy 

minimum block trade or cap size 

requirements. The rule further provides 

that aggregation may be permitted on a 

DCM or SEF if done by a person who: 

(i)(A) is a CTA who is registered 

pursuant to Section 4n of the Act or is 

exempt from registration under the Act, 

or a principal thereof, and has 

discretionary trading authority or 

directs client accounts, (B) is an 

investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of the 

Commission’s regulations, or (C) is a 

foreign person who performs a role or 

function similar to the persons 

described in (A) or (B) and is subject as 

such to foreign regulation, and (ii) has 

more than $25,000,000 in total AUM. 

1. Overview of Comments Received 

The Commission received a number 

of comments with the proposed 

aggregation rule but none directly 

addressing the costs and benefits 

considerations of the rule. 

JP Morgan commented that the rule 

appears to reflect a concern that private 

negotiation affords less protection to 

unsophisticated investors than trading 

through the central markets, and that 

since all entities that transact in the 

OTC market already must be ECPs, the 

analogous concern about customer 

protection in the swaps market is 

already addressed.687

ICI opposed the minimum assets 

under management requirement in 

proposed § 43.6(h)(6)(ii) and argued that 

the Commission did not articulate a 

rationale or policy reason for this 

requirement.688 ICI also disagreed that 

an investment adviser seeking to 

aggregate orders must satisfy the criteria 

of § 4.7(a)(2)(v) of the Commission’s 

regulations.689

With respect to JP Morgan’s comment, 

the Commission notes that customers 

trading swaps on DCMs do not have to 

be ECPs. As discussed further below, 

adopted § 43.6(i)(1) allows non-ECP 

customers to be parties to block trades 

through a qualifying CTA, investment 

adviser, or similar foreign person.690 It 

is possible, therefore, that those nonECP DCM customers may not be aware 

if they received the best terms for their 

individual swap transactions that are 

aggregated with other transactions. 

Protection for such customers is 

therefore necessary, as it is for 

unsophisticated customers in other 

markets. 

In response to ICI’s opposition to the 

minimum asset threshold under 

§ 43.6(h)(6)(ii), the Commission notes 

that this threshold reflects common 

industry practice.691 CME, for example, 

has enforced the $25 million threshold 


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32932 Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 

692See CME Submission 00–99 (Sept. 21, 2000) 

(modifying CME Rule 526 to reduce the threshold 

from $50,000,000 to $25,000,000). CME originally 

planned to lower the threshold from $50,000,000 to 

$5,000,000, but withdrew the submission and 

instead proposed to lower the threshold to 

$25,000,000, based on customer suggestions. See 

CME Submission 00–93 (Sept. 1, 2000); CME 

Submission 00–99 at 5–6. 

693 Id. at 6 (quoting letter addressed to Jean A. 

Webb, Secretary of the Commission from John G. 

Gaine, President, Managed Funds Association dated 

April 24, 2000 regarding ‘‘Chicago Mercantile 

Exchange new Proposed Rule 526’’). 

694 Id. at 4, 6–7. CME also stated in the filing that 

it planned to readdress the threshold amount as it 

gained experience with block trades, but has 

declined to modify the amount. 

695 17 CFR 4.7(a)(2)(v). 

696 57 FR 34853, 34854–55 (Aug. 7, 1992). The 

final rule reduced the amount on deposit threshold 

to $5 million from the $10 million required by the 

proposed rule. See 57 FR 3148, 3152 (Jan. 28, 1992). 

697See 57 FR at 34854 (quoting 57 FR at 3152). 

698 65 FR 11253, 11257–58 (Mar. 2, 2000). 

699 Id. at 11257 (quoting 57 FR at 3152). 

in its rules since September 2000.692

CME has stated that the threshold ‘‘is an 

effort to establish the professionalism 

and sophistication of the registrant’’ 693

while also expanding the number of 

CTAs and investment advisers eligible 

to aggregate trades.694 The Commission 

believes that the $25 million threshold 

is an appropriate requirement to ensure 

that persons allowed to aggregate trades 

are appropriately sophisticated with 

these transactions, while at the same 

time not excluding an unreasonable 

number of CTAs, investment advisers, 

and similar foreign persons. 

The Commission also disagrees with 

ICI’s contention that investment 

advisers should not be required to 

satisfy the criteria under § 4.7(a)(2)(v), 

which requires an investment adviser to 

(1) be registered and active as an 

investment adviser for two years or (2) 

provide securities investment advice to 

securities accounts which, in the 

aggregate, have total assets in excess of 

$5 million deposited at one or more 

registered securities brokers.695 The 

Commission first adopted provisions 

similar to current § 4.7(a)(2)(v) in 

1992 696 as objective indications that a 

person had the investment 

sophistication and experience needed to 

evaluate the risks and benefits of 

investing in commodity pools or a 

portfolio large enough to indicate the 

same, along with the financial resources 

to withstand the investment risks.697 In 

2000,698 the Commission extended the 

same criteria in current § 4.7(a)(2)(v) to 

registered investment advisers for the 

same reasons.699 The Commission 

believes that these objective criteria, 

which demonstrate that an investment 

adviser possesses the necessary 

investment expertise, should also apply 

with respect to allowing such persons to 

aggregate client orders. 

The Commission believes that the $25 

million threshold, as well as requiring 

investment advisers to satisfy the 

criteria under § 4.7(a)(2)(v), are both 

important for certifying that persons 

allowed to aggregate trades are 

appropriately sophisticated and 

important for protection of market 

participants and public. 

2. Costs 

The Commission expects that there 

will be some incremental cost attendant 

to compliance with § 43.6(h)(6). The 

Commission believes that the overall 

benefits to the market of allowing for the 

aggregation of orders under certain 

circumstances (i.e., if done on a 

designated contract market or a swap 

execution facility by certain CTAs, 

investment advisers or foreign persons) 

will mitigate costs of reduced market 

liquidity that could result from 

execution of such transactions away 

from the centralized marketplace. The 

Commission also expects there to be 

some advisors who will be prohibited 

from aggregating orders for different 

trading accounts in order to satisfy the 

minimum block size, or cap size 

requirements. The Commission also 

believes that as a result of some advisers 

not being allowed to aggregate, there 

might be some minimal unquantifiable 

cost associated with a decrease in 

competition among such traders in the 

market. 

3. Benefits 

The rule is designed, in large part, to 

prevent circumvention of the exchange 

trading requirements and of the realtime reporting obligations associated 

with non-block transactions. Absent this 

prohibition, the goals of the 

Commission’s regulations regarding 

block trading, namely increased 

transaction transparency, better price 

discovery and improved 

competitiveness in the markets as well 

as better risk management, could be 

frustrated by those whose trades 

individually fail to meet the minimum 

block trade threshold (and cap size 

threshold as a result), but nevertheless 

achieve the benefits intended for 

extraordinarily large positions by 

aggregating those individual trades. In 

other words, such entities would be able 

to evade the exchange-trading and 

reporting obligations that are integral to 

price transparency. 

4. Section 15(a) Factors 

a. Protection of Market Participants and 

the Public 

The Commission believes that the rule 

will protect market participants from 

unfair practices by preventing trades 

that do not meet the minimum block 

trade threshold from enjoying extended 

reporting times. This means that trades 

that are not extraordinarily large, and 

hence, that do not need extra reporting 

time will not qualify as block trades and 

will be made public as soon as 

technologically practicable. Hence, the 

rule will increase transparency of nonblock transactions, and thus, would 

protect market participants by informing 

their trading determinations through 

increased transparency and price 

discovery. 

b. Efficiency, Competitiveness, and 

Financial Integrity of the Futures 

Markets 

The Commission expects the 

prohibition of aggregation of trades to 

improve efficiency and competitiveness 

in the markets by allowing more trades 

to be reported without the time delay 

that is applied to qualifying block 

trades. This means that a higher number 

of trades will be eligible for real time 

reporting, and that will increase market 

transparency as well as promote 

competition in the swap markets. The 

rule also will protect the integrity of the 

derivatives market by ensuring that 

smaller trades, which do not qualify as 

block transactions, are executed on the 

trading system where there is pre-trade 

and post-trade transparency. 

The Commission also recognizes that 

advisors who are prohibited from 

aggregating orders in order to satisfy the 

minimum block size or cap size 

requirements might not trade at the 

most favorable prices in the market, 

which might have a negative effect on 

the number of such traders in the 

market. While the Commission expects 

that competition in the market may be 

negatively affected as a result of 

prohibiting aggregation, the Commission 

anticipates that the positive effects of 

the rule on competition outweigh its 

negative effects. 

c. Price Discovery 

The Commission expects the rule to 

improve price discovery in the swap 

markets by preventing aggregation of 

trades and as a result promoting more 

trades to be publicly reported as soon as 

technologically practicable. This will 

result in enhanced swap market price 

discovery, since market participants and 

the public will be able to observe realtime pricing information for a higher 


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700CL–ICI at 3. 

701CL–SIFMA at 1. 

702 Id. at 2. 703 Id. 

704The estimate is calculated as follows: 

Compliance manager at 2 hours. A compliance 

manager’s adjusted hourly wage is $77.77. See note 

521 supra. 

percentage of transactions in the market. 

In addition, the Commission expects 

that the rule will enhance price 

discovery by ensuring that smaller 

trades, which do not qualify as block 

transactions, are executed on the trading 

system where there is pre-trade and 

post-trade transparency and where 

buyers and sellers may make informed 

trading decisions based on the market’s 

transparency. 

d. Sound Risk Management Practices 

The Commission anticipates that the 

criteria will likely result in enhanced 

price discovery as discussed above. 

With better and more accurate data, 

swap market participants will likely be 

better able to measure and manage risk. 

The Commission believes that if the 

prohibition of aggregation of trades was 

not adopted, swap transactions may not 

be reported to an SDR ‘‘as soon as 

technologically practicable.’’ The 

Commission also believes that by 

preventing this delay in the reporting 

period of a swap transaction to an SDR, 

the Commission will possess the 

information it needs to monitor the 

transfer and positions of risk among 

counterparties in the swaps market. 

e. Other Public Interest Considerations 

The Commission has not identified 

any other public interest considerations 

regarding the rule. 

G. Costs and Benefits Relevant to 

§ 43.6(i)—Eligible Block Trade Parties 

1. Overview of Comments Received 

The Commission received few 

comments with respect to the eligible 

block trade parties rule. As discussed 

above, similar comments regarding the 

exceptions to the prohibitions against 

aggregation for certain persons were 

submitted with respect to the exception 

to certain persons transacting blocks on 

a DCM on behalf of non-ECPs. For 

example, ICI opposed the minimum 

assets under management requirement 

in proposed § 43.6(i)(1) and similarly 

argued that the Commission did not 

articulate a rationale or policy reason for 

this requirement.700

The Commission received one 

specific comment related to costs on 

proposed § 43.6(i)(2). SIFMA 

commented that proposed § 43.6(i)(2) 

may require asset managers to obtain 

consent from each client for whom they 

will engage in block trades.701 SIFMA 

contended that this requirement would 

be costly and unnecessary, and that 

notice to the customers 702 or a general 

grant of investment discretion in the 

investment management agreement, 

power of attorney, or similar document 

should be sufficient.703

The Commission disagrees with 

SIFMA’s contention regarding the 

burdens of obtaining consent. This 

burden consent will be minimal because 

§ 43.6(i)(2) states that the instruction or 

consent may be provided through a 

power of attorney or similar document 

that provides discretionary trading 

authority or the authority to direct 

trading in the account. The consent may 

therefore be included in existing and 

future customer agreements. The 

Commission further disagrees that a 

general grant of investment discretion or 

notice to the customer should satisfy 

§ 43.6(i)(2). A customer’s written 

instruction or consent is necessary 

because a customer potentially may not 

receive the best terms for an individual 

swap transaction that is part of an 

aggregation. The written instruction or 

consent makes the customer aware that 

block trades may be used on its behalf, 

allowing the customer to decide 

whether to allow these transactions, 

through which the rule has the added 

benefit of protection of market 

participants and public. The 

Commission also would like to point 

out that a cost estimate for that burden 

has already been presented in the 

proposed rule and received no direct 

comments on that cost estimate. 

2. Costs 

Section 43.6(i)(1) requires that parties 

to a block trade must be eligible contract 

participants, as defined under the CEA 

and Commission regulations, except 

that a DCM may allow: (i) A CTA 

registered pursuant to Section 4n of the 

Act or exempt from registration under 

the Act, or a principal thereof, and who 

has discretionary trading authority or 

directs client accounts, (ii) an 

investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of the 

Commission’s regulations, or (iii) a 

foreign person who performs a similar 

role or function to the persons described 

in (i) or (ii) and is subject as such to 

foreign regulation, to transact block 

trades for customers who are not eligible 

contract participants, if such CTA, 

investment adviser or foreign person has 

more than $25,000,000 in total AUM. 

This rule codifies, in part, the 

requirement under Section 2(e) of the 

CEA, which requires that ‘‘[i]t shall be 

unlawful for any person, other than an 

eligible contract participant, to enter 

into a swap unless the swap is entered 

into on, or subject to the rules of....a 

designated contract market.’’ In 

addition, the provisions allowing 

certain entities (as described in this 

release) to enter into block trades on 

behalf of their non-ECP customers on 

DCMs is substantially similar to the 

existing DCM rules that allow block 

trading in the futures market. 

Section 43.6(i)(2) further provides that 

no person may conduct a block trade on 

behalf of a customer unless the person 

receives prior written instruction or 

consent to do so. The rule further 

provides that such instruction or 

consent may be provided in the power 

of attorney or similar document by 

which the customer provides the person 

with discretionary trading authority or 

the authority to direct the trading in its 

account. The Commission is of the view 

that the cost associated with the written 

instruction or consent is minimal. The 

Commission estimates that a prior 

written instruction or consent 

requirement would impose an initial 

non-recurring burden of approximately 

2 personnel hours at an approximate 

cost of $155.54 for each CTA, 

investment adviser or foreign person.704

3. Benefits 

The Commission has determined that 

the benefits of § 43.6(i) are significant. 

The rule allows customers who are not 

ECPs to engage in block trade 

transactions through certain entities as 

outlined in the rule. By permitting 

certain CTAs, investment advisers and 

foreign persons to transact swaps on 

behalf of non-ECP customers, the rule 

provides important safeguards for nonECPs when entering into block 

transactions in swaps. The Commission 

believes that access to block trades will 

allow customers who are not ECPs to 

diversify their risk or improve their 

investment strategies. In addition, the 

Commission also anticipates the access 

to block trades for non-ECPs to increase 

their participation in swap markets, 

increasing liquidity in the markets for 

everyone. 

The Commission acknowledges that 

§ 43.6(i)(2) has the added benefit of 

protection of market participants and 

public since the written instruction or 

consent required in § 43.6(i)(2) of the 

rule makes the customer aware that 

block trades may be used on its behalf, 

allowing the customer to decide 

whether to allow these transactions. 


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705See 5 U.S.C. 601 et seq. 

706See 5 U.S.C. 601(2), 603, 604, and 605. 

707As discussed more fully in the Further Block 

Proposal, the Commission is of the view that 

registered entities such as SDs and MSPs are not 

small businesses. 

708 77 FR at 15499. See 17 CFR part 40 Provisions 

Common to Registered Entities, 75 FR 67282 (Nov. 

2, 2010); see also 47 FR 18618, 18619, Apr. 30, 1982 

and 66 FR 45604, 45609, Aug. 29, 2001. 

709 77 FR at 15499. 

710See 77 FR 1240 (‘‘[T]he Commission 

recognized that the proposed rule could have an 

economic effect on certain single end users, in 

particular those end users that enter into swap 

transactions with another end-user. Unlike the 

other parties to which the proposed rulemaking 

would apply, these end users are not subject to 

designation or registration with or to 

comprehensive regulation by the Commission. The 

Commission recognized that some of these end 

users may be small entities.’’). The term reporting 

party also includes swap dealers and major swap 

participants. 

The Commission previously has determined that 

these entities do fall within the definition of small 

business for the purpose of the RFA. See 75 FR at 

76170. 

711See 77 FR 1240. 

4. Section 15(a) Factors 

a. Protection of Market Participants and 

the Public 

As discussed above, § 43.6(i)(2), by 

requiring that no person may conduct a 

block trade on behalf of a customer 

unless the person receives prior written 

instruction or consent to do so, protects 

the customer by making sure the 

customer is aware that block trades may 

be used on its behalf. This means better 

protection for market participants and 

the public since no one will be able to 

conduct a block trade on their behalf 

without their consent. 

b. Efficiency, Competitiveness, and 

Financial Integrity of the Futures 

Markets 

The Commission expects the rule to 

improve competitiveness in the markets 

by allowing customers who are not ECPs 

to have access to block trades through 

certain CTAs, investment advisers and 

foreign persons. The Commission 

anticipates an increase in 

competitiveness due to the fact that 

more customers would use the swap 

markets as a result of this rule. An 

increased participation in a market will 

also serve to increase liquidity, as well 

as competition, in that market. 

c. Price Discovery 

The Commission does not anticipate 

the rule to have any significant effect on 

price discovery in the market. 

d. Sound Risk Management Practices 

The Commission does not anticipate 

the rule to have any significant effect on 

risk management practices. 

e. Other Public Interest Considerations 

The Commission has not identified 

any other public interest considerations 

regarding the rule. 

VI. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) requires Federal agencies to 

consider the impact of its rules on 

‘‘small entities.’’ 705 A regulatory 

flexibility analysis or certification 

typically is required for ‘‘any rule for 

which the agency publishes a general 

notice of proposed rulemaking pursuant 

to’’ the notice-and-comment provisions 

of the Administrative Procedure Act, 5 

U.S.C. 553(b).706 With respect to the 

Further Block Proposal, the Commission 

provided in its RFA statement that the 

proposed rule would have a direct effect 

on a number of entities, specifically 

DCMs, SEFs, SDs, MSPs, and certain 

single end-users.707 In the Further Block 

Proposal, the Chairman, on behalf of the 

Commission, certified that the 

rulemaking would not have a significant 

economic effect on a substantial number 

of small entities. Comments on that 

certification were sought. 

In the Further Block Proposal, the 

Commission provided that it previously 

had established that certain entities 

subject to its jurisdiction are not small 

entities for purposes of the RFA. 

Specifically, the Commission stated that 

it had previously determined that SEFs 

and DCMs are not small businesses.708

The Commission also stated that it is of 

the view that SDs and MSPs are not 

small businesses.709

The Commission recognized that the 

proposed rule could impose direct 

burdens on parties to a swap, which the 

Commission has determined previously 

may include a percentage of small end 

users that are considered small 

businesses for the purposes of the 

RFA.710

Notwithstanding the imposition of 

this burden, however, the determination 

to certify pursuant to § 605(b) of the 

RFA that the proposed rule would not 

have a significant economic effect on a 

substantial number of small entities was 

based upon two major considerations. 

First, Section 43.3 of the Commission’s 

regulations already requires these 

entities to report their swap transaction 

and pricing data to an SDR.711 The 

Commission is of the view that 

requiring these entities to include an 

additional notification or field in 

conjunction with the reporting of such 

data would impose, at best, a marginal 

and incremental cost. Second, the 

proposed rule was structured so that 

most swaps that are expected to be 

executed by an end user would not 

require notification of the election by 

the end user, but rather by a party that 

is subject to Commission registration 

and regulation. 

The Commission did not receive any 

comments respecting its RFA 

certification. Accordingly, for the 

reasons stated in the Further Proposal 

and set forth above, the Commission 

continues to believe that the rulemaking 

will not have a significant impact on a 

substantial number of small entities. 

Therefore, the Chairman, on behalf of 

the Commission, hereby certifies, 

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

procedure to establish appropriate 

minimum block sizes adopted herein 

will not have a significant economic 

impact on a substantial number of small 

entities. 

VII. Example of a Post-initial 

Appropriate Minimum Block Size 

Determination Using the 67-percent 

Notional Amount Calculation 

The example below describes the 

steps necessary for the Commission to 

determine the post-initial appropriate 

minimum block size based on 

§ 43.6(c)(1) for a sample set of data in 

‘‘Swap Category Z.’’ For the purposes of 

this example, Swap Category Z had 35 

transactions over the given observation 

period. The observations are described 

in table A below and are ordered by 

time of execution (i.e., Transaction #1 

was executed prior to Transaction #2). 

TABLE A—SWAP CATEGORY Z TRANSACTIONS

Transaction #1 Transaction #2 Transaction #3 Transaction #4 Transaction #5 

5,000,000 25,000,000 50,000,000 1.05 3,243,571 


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TABLE A—SWAP CATEGORY Z TRANSACTIONS—Continued 

Transaction #1 Transaction #2 Transaction #3 Transaction #4 Transaction #5 

Transaction #6 Transaction #7 Transaction #8 Transaction #9 Transaction #10 

100,000,000 525,000,000 10,000,000 15,000,000 25,000,000 

Transaction #11 Transaction #12 Transaction #13 Transaction #14 Transaction #15 

100,000,000 265,000,000 25,000,000 100,000,000 100,000,000 

Transaction #16 Transaction #17 Transaction #18 Transaction #19 Transaction #20 

100,000,000 150,000,000 50,000,000 100,000,000 50,000,000 

Transaction #21 Transaction #22 Transaction #23 Transaction #24 Transaction #25 

75,000,000 82,352,124 100,000,000 1,235,726 60,000,000 

Transaction #26 Transaction #27 Transaction #28 Transaction #29 Transaction #30 

100,000,000 50,000,000 50,000,000 100,000,000 100,000,000 

Transaction #31 Transaction #32 Transaction #33 Transaction #34 Transaction #35 

100,000,000 100,000,000 32,875,000 50,000,000 440,000,000 

Step 1: Remove the transactions that 

do not fall within the definition of 

‘‘publicly reportable swap transactions’’ 

as described in § 43.2. 

In this example, assume that five of 

the 35 transactions in Swap Category Z 

do not fall within the definition of 

‘‘publicly reportable swap transaction.’’ 

These five transactions, listed in table B 

below would be removed for the data set 

that will be used to determine the postinitial appropriate minimum block size. 

TABLE B—TRANSACTIONS THAT DO NOT FALL WITHIN THE DEFINITION OF ‘‘PUBLICLY REPORTABLE SWAP TRANSACTION’’ 

Transaction #4 Transaction #13 Transaction #16 Transaction #20 Transaction #21 

1.05 25,000,000 100,000,000 50,000,000 75,000,000 

Step 2A: Convert the publicly 

reportable swap transactions in the 

swap category to the same currency or 

units. 

In order to accurately compare the 

transactions in a swap category and 

apply the appropriate minimum block 

size calculation, the transactions must 

be converted to the same currency or 

unit. 

In this example, the publicly 

reportable swap transactions were all 

denominated in U.S. dollars, so no 

conversion was necessary. If the 

notional amounts of any of the publicly 

reportable swap transactions in Swap 

Category Z had been denominated in a 

currency other than U.S. dollars, then 

the notional amounts of such publicly 

reportable swap transactions would 

have been adjusted by the daily 

exchange rates for the period to arrive 

at the U.S. dollars equivalent notional 

amount. 

Step 2B: Examine the remaining data 

set for any outliers and remove any such 

outliers, resulting in a trimmed data set. 

The publicly reportable swap 

transactions are examined to identify 

any outliers. If an outlier is discovered, 

then it would be removed from the data 

set. To conduct this analysis, the 

notional amounts of all of the publicly 

reportable swap transactions remaining 

after step 1 and step 2A are transformed 

by Log10. The average and standard 

deviation (‘‘STDEV’’) of these 

transformed notional amounts would 

then be calculated. Any transformed 

notional amount of a publicly reportable 

swap transaction that is larger than the 

average of all transformed notional 

amounts plus four times the standard 

deviation would be omitted from the 

data set as an outlier. 

In the data set used in this example, 

none of the observations were large 

enough to qualify as an outlier, as 

shown in the calculations described in 

Table C. 

TABLE C—TESTING FOR OUTLIERS IN THE PUBLICLY REPORTABLE SWAP TRANSACTION DATA SET

Log10 Average ......................................................... 7.75 4*STDEV+Average ................................................... 10.2 

Log10 STDEV ........................................................... 0.611359 Omitted Values ......................................................... None 

4* STDEV ................................................................. 2.45 

Step 3: Sum the notional amounts of 

the remaining publicly reportable swap 

transactions in the data set resulting 

after step 2B. Note: The notional 

amounts being summed in this step are 

the original amounts following step 2A 

and not the Log10 transformed amounts 

used for the process in step 2B used to 

identify and omit any outliers. 

Using the equation described 

immediately below, the notional 

amounts are added to determine the 


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sum total of all notional amounts 

remaining in the data set for a particular 

swap category. In this example, the 

notional amounts of the 30 remaining 

publicly reportable swap transactions in 

Swap Category Z are added together to 

come up with a net value of 

2,989,706,421. 

30 = Notional amount of swap transaction 

i = Index variable of summation for the set 

Ti = Indicator for publicly reportable swap 

transactions 

PRSTNV = Sum total of the notional amounts 

of all remaining publicly reportable swap 

transactions in the set 

PRSTNV = 2,989,706,421 

Step 4: Calculate the 67 Percent 

Notional Amount. 

Using the resulting amount from step 

2B, a 67-percent notional amount value 

would be calculated by using the 

equation: 

PRSTNV * 0.67 = G 

G = 67 percent of the sum total of the 

notional amounts of all remaining 

publicly reportable swap transactions in 

the set. 

G = 2,003,103,302 

Step 5: Order and rank the 

observations based on notional amount 

of the publicly reportable swap 

transaction from least to greatest. 

The remaining publicly reportable 

swap transactions having previously 

been converted to U.S. dollar 

equivalents must be ranked, based on 

the notional sizes of such transactions, 

from least to greatest. The resulting 

ranking yields the PRSTib. Table D 

below reflects the ranking of the 

remaining publicly reportable swap 

transactions based on their notional 

amount sizes for this example. 

PRSTi = a publicly reportable swap 

transaction in the data set ranked from 

least to greatest based on the notional 

amounts of such transactions. 

Step 6A: Calculate the running sum of 

all PRSTi. 

A running sum would be calculated 

by adding together the ranked and 

ordered publicly reportable swap 

transactions from step 5 (PRSTi) in least 

to greatest order. The calculations of 

running sum values with respect to this 

example are reflected in Table D below. 

RS Values = Running sum values 

TABLE D—PRSTi VALUES AND RS VALUES

Rank Order #1 Rank Order #2 Rank Order #3 Rank Order #4 Rank Order #5 

PRSTi Values ............................... 1,235,726 3,243,571 5,000,000 10,000,000 15,000,000 

RS Values .................................... 1,235,726 4,479,297 9,479,297 19,479,297 34,479,297 

Rank Order #6 Rank Order #7 Rank Order #8 Rank Order #9 Rank Order #10 

PRSTi Values ............................... 25,000,000 25,000,000 32,875,000 50,000,000 50,000,000 

RS Values .................................... 59,479,297 84,479,297 117,354,297 167,354,297 217,354,297 

Rank Order #11 Rank Order #12 Rank Order #13 Rank Order #14 Rank Order #15 

PRSTi Values ............................... 50,000,000 50,000,000 50,000,000 60,000,000 82,352,124 

RS Values .................................... 267,354,297 317,354,297 367,354,297 427,354,297 509,706,421 

Rank Order #16 Rank Order #17 Rank Order #18 Rank Order #19 Rank Order #20 

PRSTi Values ............................... 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 

RS Values .................................... 609,706,421 709,706,421 809,706,421 909,706,421 1,009,706,421 

Rank Order #21 Rank Order #22 Rank Order #23 Rank Order #24 Rank Order #25 

PRSTi Values ............................... 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 

RS Values .................................... 1,109,706,421 1,209,706,421 1,309,706,421 1,409,706,421 1,509,706,421 

Rank Order #26 Rank Order #27 Rank Order #28 Rank Order #29 Rank Order #30 

PRSTi Values ............................... 100,000,000 150,000,000 265,000,000 440,000,000 525,000,000 

RS Values .................................... 1,609,706,421 1,759,706,421 2,024,706,421 2,464,706,421 2,989,706,421 

Step 6B: Select first RS Value that is 

greater than or equal to G. 

In this example, G is equal to 

2,003,103,302, meaning that the RS 

Value that must be selected would have 

to be greater than that number. The first 

RS Value that is greater than or equal to 

G can be found in the observation that 

corresponds to Rank Order #28 (see 

Table D). The RS Value of the Rank 

Order #28 observation is 2,024,706,421. 

Step 7: Select the PRSTt that 

corresponds to the observation 

determined in step 6B. 

In this example, the PRSTt that 

corresponds to the RS Value determined 

in step 6B (Rank Order #28) is 

265,000,000. 

Step 8: Determine the rounded 

notional amount. 

Calculate the rounded notional 

amount under the process described in 

the proposed amendment to § 43.2. The 

265,000,000 amount would be rounded 

to the nearest 10 million for public 

dissemination, or 270,000,000. 

Step 9: Set the appropriate minimum 

block size at the amount calculated in 

step 8. 

In this example, the appropriate 

minimum block size for swap category 

Z would be 270,000,000 for the 

observation period. 

Post-Initial Appropriate Minimum 

Block Size = $270,000,000 

VIII. List of Commenters Who 

Responded to the Further Block 

Proposal 

Acronym/Abbreviation Commenter 

Abbott ................................. Abbott, Robert. 

AFR .................................... Americans for Financial Reform. 

ABC .................................... American Benefits Counsel. 

Arbor ................................... Arbor Research & Trading, Inc. 

AII ....................................... Association of Institutional Investors. 

Barclays .............................. Barclays Bank PLC. 

Barnard ............................... Barnard, Chris. 

Better Markets .................... Better Markets, Inc. 

CIEBA ................................. Committee on the Investment of Employee Benefit Assets. 

CME Group ........................ CME Group Inc. 


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Acronym/Abbreviation Commenter 

CRT .................................... CRT Capital Group LLC. 

Currenex ............................. Currenex, Inc. 

EEI ...................................... Edison Electric Institute. 

FIA ...................................... Futures Industry Association Principle Traders Group. 

Freddie ............................... Freddie Mac. 

GFMA ................................. Global Foreign Exchange Division of the Global Financial Markets Association. 

ICAP Energy ....................... ICAP Energy LLC. 

ICAP ................................... ICAP North America Inc. 

ISDA/SIFMA ....................... International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association. 

ICI ....................................... Investment Company Institute. 

Javelin ................................ Javelin Capital Markets, LLC. 

Jefferies .............................. Jefferies & Co., Inc. 

JPM .................................... J.P. Morgan. 

Kearney .............................. Kearney, Timothy. 

Kinetix ................................. Kinetix Trading Solutions. 

MFA .................................... Managed Funds Association. 

Morgan Stanley .................. Morgan Stanley. 

ODEX ................................. ODEX Group. 

Parascandola ...................... Parascandola, James. 

Parity .................................. Parity Energy, Inc. 

Pierpont .............................. Pierpont Securities Holdings LLC. 

R.J. O’Brien ........................ R.J. O’Brien & Associates, Inc. 

SIFMA ................................. Asset Management Group of the Securities Industry and Financial Markets Association. 

SDMA ................................. Swaps & Derivatives Market Association. 

Spring Trading .................... Spring Trading, Inc. 

Vanguard ............................ Vanguard. 

WMBAA .............................. Wholesale Market Brokers’ Association, Americas. 

Wolkoff ................................ Wolkoff Consulting Services LLC. 

List of Subjects in 17 CFR Part 43 

Real-time public reporting, Block 

trades, Large notional off-facility swaps, 

Reporting and recordkeeping 

requirements. 

Accordingly, for the reasons 

discussed in the preamble, the 

Commodity Futures Trading 

Commission amends 17 CFR part 43 as 

follows: 

PART 43—REAL-TIME PUBLIC 

REPORTING 

■ 1. The authority citation for part 43 is 

revised to read as follows: 

Authority: 7 U.S.C. 2(a), 12a(5) and 24a, as 

amended by Pub. L. 111–203, 124 Stat. 1376 

(2010). 

■ 2. Amend § 43.2 by adding the 

following definitions in alphabetical 

order to read as follows: 

§ 43.2 Definitions. 

* * * * * 

Cap size means, for each swap 

category, the maximum notional or 

principal amount of a publicly 

reportable swap transaction that is 

publicly disseminated. 

* * * * * 

Economically related means a direct 

or indirect reference to the same 

commodity at the same delivery 

location or locations, or with the same 

or a substantially similar cash market 

price series. 

* * * * * 

Futures-related swap means a swap 

(as defined in section 1a(47) of the Act 

and as further defined by the 

Commission in implementing 

regulations) that is economically related 

to a futures contract. 

* * * * * 

Major currencies means the 

currencies, and the cross-rates between 

the currencies, of Australia, Canada, 

Denmark, New Zealand, Norway, South 

Africa, South Korea, Sweden, and 

Switzerland. 

Non-major currencies means all other 

currencies that are not super-major 

currencies or major currencies. 

* * * * * 

Physical commodity swap means a 

swap in the other commodity asset class 

that is based on a tangible commodity. 

* * * * * 

Reference price means a floating price 

series (including derivatives contract 

prices and cash market prices or price 

indices) used by the parties to a swap 

or swaption to determine payments 

made, exchanged or accrued under the 

terms of a swap contract. 

* * * * * 

Super-major currencies means the 

currencies of the European Monetary 

Union, Japan, the United Kingdom, and 

United States. 

Swaps with composite reference 

prices means swaps based on reference 

prices that are composed of more than 

one reference price from more than one 

swap category. 

* * * * * 

Trimmed data set means a data set 

that has had extraordinarily large 

notional transactions removed by 

transforming the data into a logarithm 

with a base of 10, computing the mean, 

and excluding transactions that are 

beyond four standard deviations above 

the mean. 

* * * * * 

■ 3. Amend § 43.4 as follows: 

■ A. Revise paragraph (d)(4)(i); 

■ B. Revise paragraph (d)(4)(ii)(B); 

■ C. Add paragraph (d)(4)(iii); 

■ D. Revise paragraph (h). 

The revisions and addition read as 

follows: 

§ 43.4 Swap transaction and pricing data 

to be publicly disseminated in real-time. 

* * * * * 

(d) * * * 

(4) * * * 

(i) A registered swap data repository 

shall publicly disseminate swap 

transaction and pricing data for publicly 

reportable swap transactions in the 

other commodity asset class in the 

manner described in paragraphs 

(d)(4)(ii) and (d)(4)(iii) of this section. 

(ii) * * * 

(B) Any publicly reportable swap 

transaction that is economically related 

to one of the contracts described in 

Appendix B of this part; or 

* * * * * 


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(iii) The underlying assets of swaps in 

the other commodity asset class that are 

not described in paragraph (d)(4)(ii) of 

this section shall be publicly 

disseminated by limiting the geographic 

detail of the underlying assets. The 

identification of any specific delivery 

point or pricing point associated with 

the underlying asset of such other 

commodity swap shall be publicly 

disseminated pursuant to Appendix E of 

this part. 

* * * * * 

(h) Cap sizes. 

(1) Initial cap sizes. Prior to the 

effective date of a Commission 

determination to establish an applicable 

post-initial cap size for a swap category 

as determined pursuant to paragraph 

(h)(2) of this section, the initial cap sizes 

for each swap category shall be equal to 

the greater of the initial appropriate 

minimum block size for the respective 

swap category in Appendix F of this 

part or the respective cap sizes in 

paragraphs (h)(1)(i) through (h)(1)(v) of 

this section. If Appendix F of this part 

does not provide an initial appropriate 

minimum block size for a particular 

swap category, the initial cap size for 

such swap category shall be equal to the 

appropriate cap size as set forth in 

paragraphs (h)(1)(i) through (h)(1)(v) of 

this section. 

(i) For swaps in the interest rate asset 

class, the publicly disseminated 

notional or principal amount for a swap 

subject to the rules in this part shall be: 

(A) USD 250 million for swaps with 

a tenor greater than zero up to and 

including two years; 

(B) USD 100 million for swaps with 

a tenor greater than two years up to and 

including ten years; and 

(C) USD 75 million for swaps with a 

tenor greater than ten years. 

(ii) For swaps in the credit asset class, 

the publicly disseminated notional or 

principal amount for a swap subject to 

the rules in this part shall be USD 100 

million. 

(iii) For swaps in the equity asset 

class, the publicly disseminated 

notional or principal amount for a swap 

subject to the rules in this part shall be 

USD 250 million. 

(iv) For swaps in the foreign exchange 

asset class, the publicly disseminated 

notional or principal amount for a swap 

subject to the rules in this part shall be 

USD 250 million. 

(v) For swaps in the other commodity 

asset class, the publicly disseminated 

notional or principal amount for a swap 

subject to the rules in this part shall be 

USD 25 million. 

(2) Post-initial cap sizes. Pursuant to 

the process described in § 43.6(f)(1), the 

Commission shall establish post-initial 

cap sizes using reliable data collected by 

registered swap data repositories, as 

determined by the Commission, based 

on the following: 

(i) A one-year window of swap 

transaction and pricing data 

corresponding to each relevant swap 

category recalculated no less than once 

each calendar year; and 

(ii) The 75-percent notional amount 

calculation described in § 43.6(c)(3) 

applied to the swap transaction and 

pricing data described in paragraph 

(h)(2)(i) of this section. 

(3) Commission publication of postinitial cap sizes. The Commission shall 

publish post-initial cap sizes on its Web 

site at http://www.cftc.gov. 

(4) Effective date of post-initial cap 

sizes. Unless otherwise indicated on the 

Commission’s Web site, the post-initial 

cap sizes shall be effective on the first 

day of the second month following the 

date of publication. 

■ 4. Add § 43.6 to read as follows: 

§ 43.6 Block trades and large notional offfacility swaps. 

(a) Commission determination. The 

Commission shall establish the 

appropriate minimum block size for 

publicly reportable swap transactions 

based on the swap categories set forth in 

paragraph (b) of this section in 

accordance with the provisions set forth 

in paragraphs (c), (d), (e), (f) or (h) of 

this section, as applicable. 

(b) Swap categories. Swap categories 

shall be established for all swaps, by 

asset class, in the following manner: 

(1) Interest rates asset class. Interest 

rate asset class swap categories shall be 

based on unique combinations of the 

following: 

(i) Currency by: 

(A) Super-major currency; 

(B) Major currency; or 

(C) Non-major currency; and 

(ii) Tenor of swap as follows: 

(A) Zero to 46 days; 

(B) Greater than 46 days to three 

months (47 to 107 days); 

(C) Greater than three months to six 

months (108 to 198 days); 

(D) Greater than six months to one 

year (199 to 381 days); 

(E) Greater than one to two years (382 

to 746 days); 

(F) Greater than two to five years (747 

to 1,842 days); 

(G) Greater than five to ten years 

(1,843 to 3,668 days); 

(H) Greater than ten to 30 years (3,669 

to 10,973 days); or 

(I) Greater than 30 years (10,974 days 

and above). 

(2) Credit asset class. Credit asset 

class swap categories shall be based on 

unique combinations of the following: 

(i) Traded Spread rounded to the 

nearest basis point (0.01) as follows: 

(A) 0 to 175 points; 

(B) 176 to 350 points; or 

(C) 351 points and above; 

(ii) Tenor of swap as follows: 

(A) Zero to two years (0–746 days); 

(B) Greater than two to four years 

(747–1,476 days); 

(C) Greater than four to six years 

(1,477–2,207 days); 

(D) Greater than six to eight-and-a-half 

years (2,208–3,120 days); 

(E) Greater than eight-and-a-half to 

12.5 years (3,121–4,581 days); and 

(F) Greater than 12.5 years (4,582 days 

and above). 

(3) Equity asset class. There shall be 

one swap category consisting of all 

swaps in the equity asset class. 

(4) Foreign exchange asset class. 

Swap categories in the foreign exchange 

asset class shall be grouped as follows: 

(i) By the unique currency 

combinations of one super-major 

currency paired with one of the 

following: 

(A) Another super major currency; 

(B) A major currency; or 

(C) A currency of Brazil, China, Czech 

Republic, Hungary, Israel, Mexico, 

Poland, Russia, and Turkey; or 

(ii) By unique currency combinations 

not included in paragraph (b)(4)(i) of 

this section. 

(5) Other commodity asset class. 

Swap contracts in the other commodity 

asset class shall be grouped into swap 

categories as follows: 

(i) For swaps that are economically 

related to contracts in Appendix B of 

this part, by the relevant contract as 

referenced in Appendix B of this part; 

or 

(ii) For swaps that are not 

economically related to contracts in 

Appendix B of this part, by the 

following futures-related swaps— 

(A) CME Cheese; 

(B) CBOT Distillers’ Dried Grain; 

(C) CBOT Dow Jones-UBS Commodity 

Index; 

(D) CBOT Ethanol; 

(E) CME Frost Index; 

(F) CME Goldman Sachs Commodity 

Index (GSCI), (GSCI Excess Return 

Index); 

(G) NYMEX Gulf Coast Sour Crude 

Oil; 

(H) CME Hurricane Index; 

(I) CME Rainfall Index; 

(J) CME Snowfall Index; 

(K) CME Temperature Index; 

(L) CME U.S. Dollar Cash Settled 

Crude Palm Oil; or 

(iii) For swaps that are not covered in 

paragraphs (b)(5)(i) and (b)(5)(ii) of this 

section, the relevant product type as 

referenced in Appendix D of this part. 


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(c) Methodologies to determine 

appropriate minimum block sizes and 

cap sizes. In determining appropriate 

minimum block sizes and cap sizes for 

publicly reportable swap transactions, 

the Commission shall utilize the 

following statistical calculations— 

(1) 50-percent notional amount 

calculation. The Commission shall use 

the following procedure in determining 

the 50-percent notional amount 

calculation: 

(i) Select all of the publicly reportable 

swap transactions within a specific 

swap category using a one-year window 

of data beginning with a minimum of 

one year’s worth of data; 

(ii) Convert to the same currency or 

units and use a trimmed data set; 

(iii) Determine the sum of the notional 

amounts of swaps in the trimmed data 

set; 

(iv) Multiply the sum of the notional 

amount by 50 percent; 

(v) Rank order the observations by 

notional amount from least to greatest; 

(vi) Calculate the cumulative sum of 

the observations until the cumulative 

sum is equal to or greater than the 50- 

percent notional amount calculated in 

paragraph (c)(1)(iv) of this section; 

(vii) Select the notional amount 

associated with that observation; 

(viii) Round the notional amount of 

that observation to two significant 

digits, or if the notional amount 

associated with that observation is 

already significant to two digits, 

increase that notional amount to the 

next highest rounding point of two 

significant digits; and 

(ix) Set the appropriate minimum 

block size at the amount calculated in 

paragraph (c)(1)(viii) of this section. 

(2) 67-percent notional amount 

calculation. The Commission shall use 

the following procedure in determining 

the 67-percent notional amount 

calculation: 

(i) Select all of the publicly reportable 

swap transactions within a specific 

swap category using a one-year window 

of data beginning with a minimum of 

one year’s worth of data; 

(ii) Convert to the same currency or 

units and use a trimmed data set; 

(iii) Determine the sum of the notional 

amounts of swaps in the trimmed data 

set; 

(iv) Multiply the sum of the notional 

amount by 67 percent; 

(v) Rank order the observations by 

notional amount from least to greatest; 

(vi) Calculate the cumulative sum of 

the observations until the cumulative 

sum is equal to or greater than the 67- 

percent notional amount calculated in 

paragraph (c)(2)(iv) of this section; 

(vii) Select the notional amount 

associated with that observation; 

(viii) Round the notional amount of 

that observation to two significant 

digits, or if the notional amount 

associated with that observation is 

already significant to two digits, 

increase that notional amount to the 

next highest rounding point of two 

significant digits; and 

(ix) Set the appropriate minimum 

block size at the amount calculated in 

paragraph (c)(2)(viii) of this section. 

(3) 75-percent notional amount 

calculation. The Commission shall use 

the following procedure in determining 

the 75-percent notional amount 

calculation: 

(i) Select all of the publicly reportable 

swap transactions within a specific 

swap category using a one-year window 

of data beginning with a minimum of 

one year’s worth of data; 

(ii) Convert to the same currency or 

units and use a trimmed data set; 

(iii) Determine the sum of the notional 

amounts of swaps in the trimmed data 

set; 

(iv) Multiply the sum of the notional 

amount by 75 percent; 

(v) Rank order the observations by 

notional amount from least to greatest; 

(vi) Calculate the cumulative sum of 

the observations until the cumulative 

sum is equal to or greater than the 75- 

percent notional amount calculated in 

paragraph (c)(3)(iv) of this section; 

(vii) Select the notional amount 

associated with that observation; 

(viii) Round the notional amount of 

that observation to two significant 

digits, or if the notional amount 

associated with that observation is 

already significant to two digits, 

increase that notional amount to the 

next highest rounding point of two 

significant digits; and 

(ix) Set the appropriate minimum 

block size at the amount calculated in 

paragraph (c)(3)(viii) of this section. 

(d) No appropriate minimum block 

sizes for swaps in the equity asset class. 

Publicly reportable swap transactions in 

the equity asset class shall not be treated 

as block trades or large notional offfacility swaps. 

(e) Initial appropriate minimum block 

sizes. Prior to the Commission making a 

determination as described in paragraph 

(f)(1) of this section, the following initial 

appropriate minimum block sizes shall 

apply: 

(1) Prescribed appropriate minimum 

block sizes. Except as otherwise 

provided in paragraph (e)(1) of this 

section, for any publicly reportable 

swap transaction that falls within the 

swap categories described in paragraphs 

(b)(1), (b)(2), (b)(4)(i), (b)(5)(i) or 

(b)(5)(ii) of this section, the initial 

appropriate minimum block size for 

such publicly reportable swap 

transaction shall be the appropriate 

minimum block size that is in Appendix 

F of this part. 

(2) Certain swaps in the foreign 

exchange and other commodity asset 

classes. All swaps or instruments in the 

swap categories described in paragraphs 

(b)(4)(ii) and (b)(5)(iii) of this section 

shall be eligible to be treated as a block 

trade or large notional off-facility swap, 

as applicable. 

(3) Exception. Publicly reportable 

swap transactions described in 

paragraph (b)(5)(i) of this section that 

are economically related to a futures 

contract in Appendix B of this part shall 

not qualify to be treated as block trades 

or large notional off-facility swaps (as 

applicable), if such futures contract is 

not subject to a designated contract 

market’s block trading rules. 

(f) Post-initial process to determine 

appropriate minimum block sizes. 

(1) Post-initial period. After a 

registered swap data repository has 

collected at least one year of reliable 

data for a particular asset class, the 

Commission shall establish, by swap 

categories, the post-initial appropriate 

minimum block sizes as described in 

paragraphs (f)(2) through (f)(5) of this 

section. No less than once each calendar 

year thereafter, the Commission shall 

update the post-initial appropriate 

minimum block sizes. 

(2) Post-initial appropriate minimum 

block sizes for certain swaps. The 

Commission shall determine post-initial 

appropriate minimum block sizes for 

the swap categories described in 

paragraphs (b)(1), (b)(2), (b)(4)(i) and 

(b)(5) of this section by utilizing a oneyear window of swap transaction and 

pricing data corresponding to each 

relevant swap category reviewed no less 

than once each calendar year, and by 

applying the 67-percent notional 

amount calculation to such data. 

(3) Certain swaps in the foreign 

exchange asset class. All swaps or 

instruments in the swap category 

described in paragraph (b)(4)(ii) of this 

section shall be eligible to be treated as 

a block trade or large notional offfacility swap, as applicable. 

(4) Commission publication of postinitial appropriate minimum block 

sizes. The Commission shall publish the 

appropriate minimum block sizes 

determined pursuant to paragraph (f)(1) 

of this section on its Web site at 

http://www.cftc.gov. 

(5) Effective date of post-initial 

appropriate minimum block sizes. 

Unless otherwise indicated on the 

Commission’s Web site, the post-initial 

appropriate minimum block sizes 

described in paragraph (f)(1) of this 


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32940 Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 

section shall be effective on the first day 

of the second month following the date 

of publication. 

(g) Required notification. 

(1) Block trade election. 

(i) The parties to a publicly reportable 

swap transaction that has a notional 

amount at or above the appropriate 

minimum block size shall notify the 

registered swap execution facility or 

designated contract market, as 

applicable, pursuant to the rules of such 

registered swap execution facility or 

designated contract market, of its 

election to have the publicly reportable 

swap transaction treated as a block 

trade. 

(ii) The registered swap execution 

facility or designated contract market, as 

applicable, pursuant to the rules of 

which a block trade is executed shall 

notify the registered swap data 

repository of such a block trade election 

when transmitting swap transaction and 

pricing data to such swap data 

repository in accordance with 

§ 43.3(b)(1). 

(2) Large notional off-facility swap 

election. A reporting party who executes 

an off-facility swap that has a notional 

amount at or above the appropriate 

minimum block size shall notify the 

applicable registered swap data 

repository that such swap transaction 

qualifies as a large notional off-facility 

swap concurrent with the transmission 

of swap transaction and pricing data in 

accordance with this part. 

(h) Special provisions relating to 

appropriate minimum block sizes and 

cap sizes. The following special rules 

shall apply to the determination of 

appropriate minimum block sizes and 

cap sizes— 

(1) Swaps with optionality. The 

notional amount of a swap with 

optionality shall equal the notional 

amount of the component of the swap 

that does not include the option 

component. 

(2) Swaps with composite reference 

prices. The parties to a swap transaction 

with composite reference prices may 

elect to apply the lowest appropriate 

minimum block size or cap size 

applicable to one component reference 

price’s swap category of such publicly 

reportable swap transaction. 

(3) Notional amounts for physical 

commodity swaps. Unless otherwise 

specified in this part, the notional 

amount for a physical commodity swap 

shall be based on the notional unit 

measure utilized in the related futures 

contract market or the predominant 

notional unit measure used to determine 

notional quantities in the cash market 

for the relevant, underlying physical 

commodity. 

(4) Currency conversion. Unless 

otherwise specified in this part, when 

the appropriate minimum block size or 

cap size for a publicly reportable swap 

transaction is denominated in a 

currency other than U.S. dollars, parties 

to a swap and registered entities may 

use a currency exchange rate that is 

widely published within the preceding 

two business days from the date of 

execution of the swap transaction in 

order to determine such qualification. 

(5) Successor currencies. For 

currencies that succeed a super-major 

currency, the appropriate currency 

classification for such currency shall be 

based on the corresponding nominal 

gross domestic product classification (in 

U.S. dollars) as determined in the most 

recent World Bank, World Development 

Indicator at the time of succession. If the 

gross domestic product of the country or 

nation utilizing the successor currency 

is: 

(i) Greater than $2 trillion, then the 

successor currency shall be included 

among the super-major currencies; 

(ii) Greater than $500 billion but less 

than $2 trillion, then the successor 

currency shall be included among the 

major currencies; or 

(iii) Less than $500 billion, then the 

successor currency shall be included 

among the non-major currencies. 

(6) Aggregation. Except as otherwise 

stated in this paragraph, the aggregation 

of orders for different accounts in order 

to satisfy the minimum block trade size 

or the cap size requirement is 

prohibited. Aggregation is permissible 

on a designated contract market or swap 

execution facility if done by a person 

who: 

(i) (A) Is a commodity trading advisor 

registered pursuant to Section 4n of the 

Act, or exempt from registration under 

the Act, or a principal thereof, who has 

discretionary trading authority or 

directs client accounts, 

(B) Is an investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of this chapter, 

or 

(C) Is a foreign person who performs 

a similar role or function as the persons 

described in paragraphs (h)(6)(i)(A) or 

(h)(6)(i)(B) of this section and is subject 

as such to foreign regulation; and, 

(ii) Has more than $25,000,000 in total 

assets under management. 

(i) Eligible Block Trade Parties. 

(1) Parties to a block trade must be 

‘‘eligible contract participants,’’ as 

defined in Section 1a(18) of the Act and 

the Commission’s regulations. However, 

a designated contract market may allow: 

(i) A commodity trading advisor 

registered pursuant to Section 4n of the 

Act, or exempt from registration under 

the Act, or a principal thereof, who has 

discretionary trading authority or 

directs client accounts, 

(ii) An investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of this chapter, 

or 

(iii) a foreign person who performs a 

similar role or function as the persons 

described in paragraphs (i)(1)(i) or (ii) of 

this section and is subject as such to 

foreign regulation, to transact block 

trades for customers who are not eligible 

contract participants if such commodity 

trading advisor, investment adviser or 

foreign person has more than 

$25,000,000 in total assets under 

management. 

(2) A person transacting a block trade 

on behalf of a customer must receive 

prior written instruction or consent 

from the customer to do so. Such 

instruction or consent may be provided 

in the power of attorney or similar 

document by which the customer 

provides the person with discretionary 

trading authority or the authority to 

direct the trading in its account. 

■ 5. Add § 43.7 to read as follows: 

§ 43.7 Delegation of authority. 

(a) Authority. The Commission hereby 

delegates, until it orders otherwise, to 

the Director of the Division of Market 

Oversight or such other employee or 

employees as the Director may designate 

from time to time, the authority: 

(1) To determine whether swaps fall 

within specific swap categories as 

described in § 43.6(b); 

(2) To determine and publish postinitial, appropriate minimum block 

sizes as described in § 43.6(f); and 

(3) To determine post-initial cap sizes 

as described in § 43.4(h). 

(b) Submission for Commission 

consideration. The Director of the 

Division of Market Oversight may 

submit to the Commission for its 

consideration any matter that has been 

delegated pursuant to this section. 

(c) Commission reserves authority. 

Nothing in this section prohibits the 

Commission, at its election, from 

exercising the authority delegated in 

this section. 

■ 6. Amend Appendix B to Part 43 to 

add the following contracts under the 

heading ‘‘Energy’’ after the existing 

listing for ‘‘New York Mercantile 

Exchange New York Harbor Heating 

Oil’’: 

Appendix B to Part 43—Enumerated 

Physical Commodity Contracts and 

Other Contracts 

* * * * * 


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Energy 

* * * * * 

ICE Futures SP–15 Day-Ahead Peak Fixed 

Price 

ICE Futures SP–15 Day-Ahead Off-Peak 

Fixed Price 

ICE Futures PJM Western Hub Real Time 

Peak Fixed Price 

ICE Futures PJM Western Hub Real Time OffPeak Fixed Price 

ICE Futures Mid-Columbia Day-Ahead Peak 

Fixed Price 

ICE Futures Mid-Columbia Day-Ahead OffPeak Fixed Price 

Chicago Basis 

HSC Basis 

Socal Border Basis 

Waha Basis 

ICE Futures AB NIT Basis 

NWP Rockies Basis 

PG&E Citygate Basis 

* * * * * 

■ 7. Add Appendix D to Part 43 to read 

as follows: 

Appendix D to Part 43—Other 

Commodity Swap Categories 

Other Commodity Group 

Individual Other Commodity 

Grains 

Oats 

Wheat 

Corn 

Rice 

Grains—Other 

Livestock/Meat Products 

Live Cattle 

Pork Bellies 

Feeder Cattle 

Lean Hogs 

Livestock/Meat Products—Other 

Dairy Products 

Milk 

Butter 

Cheese 

Dairy Products—Other 

Oilseed and Products 

Soybean Oil 

Soybean Meal 

Soybeans 

Oilseed and Products—Other 

Fiber 

Cotton 

Fiber—Other 

Foodstuffs/Softs 

Coffee 

Frozen Concentrated Orange Juice 

Sugar 

Cocoa 

Foodstuffs/Softs—Other 

Petroleum and Products 

Jet Fuel 

Ethanol 

Biodiesel 

Fuel Oil 

Heating Oil 

Gasoline 

Naphtha 

Crude Oil 

Diesel 

Petroleum and Products—Other 

Natural Gas and Related Products 

Natural Gas Liquids 

Natural Gas 

Natural Gas and Related Products—Other 

Electricity and Sources 

Coal 

Electricity 

Uranium 

Electricity and Sources—Other 

Precious Metals 

Palladium 

Platinum 

Silver 

Gold 

Precious Metals—Other 

Base Metals 

Steel 

Copper 

Base Metals—Other 

Wood Products 

Lumber 

Pulp 

Wood Products—Other 

Real Estate 

Real Estate 

Chemicals 

Chemicals 

Plastics 

Plastics 

Emissions 

Emissions 

Weather 

Weather 

Multiple Commodity Index 

Multiple Commodity Index 

Other Agricultural 

Other Agricultural 

Other Non-Agricultural 

Other Non-Agricultural 

■ 8. Add Appendix E to Part 43 to read 

as follows: 

Appendix E to Part 43—Other 

Commodity Geographic Identification 

for Public Dissemination Pursuant to 

§ 43.4(d)(4)(iii) 

Registered swap data repositories are 

required by § 43.4(d)(4)(iii) to publicly 

disseminate any specific delivery point or 

pricing point associated with publicly 

reportable swap transactions in the ‘‘other 

commodity’’ asset class pursuant to Tables 

E1 and E2 in this appendix. If the underlying 

asset of a publicly reportable swap 

transaction described in § 43.4(d)(4)(iii) has a 

delivery or pricing point that is located in the 

United States, such information shall be 

publicly disseminated pursuant to the 

regions described in Table E1 in this 

appendix. If the underlying asset of a 

publicly reportable swap transaction 

described in § 43.4(d)(4)(iii) has a delivery or 

pricing point that is not located in the United 

States, such information shall be publicly 

disseminated pursuant to the countries or 

sub-regions, or if no country or sub-region, by 

the other commodity region, described in 

Table E2 in this appendix. 

Table E1. U.S. Delivery or Pricing Points 

Other Commodity Group 

Region 

Natural Gas and Related Products 

Midwest 

Northeast 

Gulf 

Southeast 

Western 

Other—U.S. 

Petroleum and Products 

New England (PADD 1A) 

Central Atlantic (PADD 1B) 

Lower Atlantic (PADD 1C) 

Midwest (PADD 2) 

Gulf Coast (PADD 3) 

Rocky Mountains (PADD 4) 

West Coast (PADD 5) 

Other—U.S. 

Electricity and Sources 

Florida Reliability Coordinating Council 

(FRCC) 

Midwest Reliability Organization (MRO) 

Northeast Power Coordinating Council 

(NPCC) 

Reliability First Corporation (RFC) 

SERC Reliability Corporation (SERC) 

Southwest Power Pool, RE (SPP) 

Texas Regional Entity (TRE) 

Western Electricity Coordinating Council 

(WECC) 

Other—U.S. 

All Remaining Other Commodities (Publicly 

disseminate the region. If pricing or 

delivery point is not region-specific, 

indicate ‘‘U.S.’’) 

Region 1—(Includes Connecticut, Maine, 

Massachusetts, New Hampshire, Rhode 

Island, Vermont) 

Region 2—(Includes New Jersey, New 

York) 

Region 3—(Includes Delaware, District of 

Columbia, Maryland, Pennsylvania, 

Virginia, West Virginia) 

Region 4—(Includes Alabama, Florida, 

Georgia, Kentucky, Mississippi, North 

Carolina, South Carolina, Tennessee) 

Region 5—(Includes Illinois, Indiana, 

Michigan, Minnesota, Ohio, Wisconsin) 

Region 6—(Includes Arkansas, Louisiana, 

New Mexico, Oklahoma, Texas) 

Region 7—(Includes Iowa, Kansas, 

Missouri, Nebraska) 

Region 8—(Includes Colorado, Montana, 

North Dakota, South Dakota, Utah, 

Wyoming) 

Region 9—(Includes Arizona, California, 

Hawaii, Nevada) 

Region 10—(Includes Alaska, Idaho, 

Oregon, Washington) 

Table E2. Non-U.S. Delivery or Pricing Points 

Other Commodity Regions 

Country or Sub-Region 

North America (Other than U.S.) 

Canada 

Mexico 

Central America 

South America 

Brazil 

Other South America 

Europe 

Western Europe 

Northern Europe 

Southern Europe 

Eastern Europe (excluding Russia) 

Russia 

Africa 

Northern Africa 

Western Africa 

Eastern Africa 

Central Africa 

Southern Africa 

Asia-Pacific 

Northern Asia (excluding Russia) 


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Central Asia 

Eastern Asia 

Western Asia 

Southeast Asia 

Australia/New Zealand/Pacific Islands 

■ 9. Add Appendix F to Part 43 to read 

as follows: 

Appendix F to Part 43—Initial 

Appropriate Minimum Block Sizes by 

Asset Class for Block Trades and Large 

Notional Off-Facility Swaps 

Currency group Currencies 

Super-Major Currencies .............. United States dollar (USD), European Union Euro Area euro (EUR), United Kingdom pound sterling (GBP), 

and Japan yen (JPY). 

Major Currencies ......................... Australia dollar (AUD), Switzerland franc (CHF), Canada dollar (CAD), Republic of South Africa rand (ZAR), 

Republic of Korea won (KRW), Kingdom of Sweden krona (SEK), New Zealand dollar (NZD), Kingdom of 

Norway krone (NOK), and Denmark krone (DKK). 

Non-Major Currencies ................. All other currencies. 

INTEREST RATE SWAPS 

Currency group Tenor greater than Tenor less than or equal to 50% Notional 

(in millions) 

Super-Major ............................................ ................................................................ 46 days .................................................. 6,400 

Super-Major ............................................ 46 days .................................................. Three months (107 days) ...................... 2,100 

Super-Major ............................................ Three months (107 days) ...................... Six months (198 days) ........................... 1,200 

Super-Major ............................................ Six months (198 days) ........................... One year (381 days) .............................. 1,100 

Super-Major ............................................ One year (381 days) .............................. Two years (746 days) ............................ 460 

Super-Major ............................................ Two years (746 days) ............................ Five years (1,842 days) ......................... 240 

Super-Major ............................................ Five years (1,842 days) ......................... Ten years (3,668 days) .......................... 170 

Super-Major ............................................ Ten years (3,668 days) .......................... 30 years (10,973 days) .......................... 120 

Super-Major ............................................ 30 years (10,973 days) .......................... ................................................................ 67 

Major ....................................................... ................................................................ 46 days .................................................. 2,200 

Major ....................................................... 46 days .................................................. Three months (107 days) ...................... 580 

Major ....................................................... Three months (107 days) ...................... Six months (198 days) ........................... 440 

Major ....................................................... Six months (198 days) ........................... One year (381 days) .............................. 220 

Major ....................................................... One year (381 days) .............................. Two years (746 days) ............................ 130 

Major ....................................................... Two years (746 days) ............................ Five years (1,842 days) ......................... 88 

Major ....................................................... Five years (1,842 days) ......................... Ten years (3,668 days) .......................... 49 

Major ....................................................... Ten years (3,668 days) .......................... 30 years (10,973 days) .......................... 37 

Major ....................................................... 30 years (10,973 days) .......................... ................................................................ 15 

Non-Major ............................................... ................................................................ 46 days .................................................. 230 

Non-Major ............................................... 46 days .................................................. Three months (107 days) ...................... 230 

Non-Major ............................................... Three months (107 days) ...................... Six months (198 days) ........................... 150 

Non-Major ............................................... Six months (198 days) ........................... One year (381 days) .............................. 110 

Non-Major ............................................... One year (381 days) .............................. Two years (746 days) ............................ 54 

Non-Major ............................................... Two years (746 days) ............................ Five years (1,842 days) ......................... 27 

Non-Major ............................................... Five years (1,842 days) ......................... Ten years (3,668 days) .......................... 15 

Non-Major ............................................... Ten years (3,668 days) .......................... 30 years (10,973 days) .......................... 16 

Non-Major ............................................... 30 years (10,973 days) .......................... ................................................................ 15 

CREDIT SWAPS

Spread group 

(Basis Points) Traded tenor greater than Traded tenor less than or equal to 50% Notional (in Millions) 

Less than or equal to 175 ...................... ................................................................ Two years (746 days) ............................ 320 

Less than or equal to 175 ...................... Two years (746 days) ............................ Four years (1,477 days) ........................ 200 

Less than or equal to 175 ...................... Four years (1,477 days) ........................ Six years (2,207 days) ........................... 110 

Less than or equal to 175 ...................... Six years (2,207 days) ........................... Eight years and six months (3,120 

days).

110 

Less than or equal to 175 ...................... Eight years and six months (3,120 

days).

Twelve years and six months (4,581 

days).

130 

Less than or equal to 175 ...................... Twelve years and six months (4,581 

days).

................................................................ 46 

Greater than 175 and less than or equal 

to 350.

................................................................ Two years (746 days) ............................ 140 

Greater than 175 and less than or equal 

to 350.

Two years (746 days) ............................ Four years (1,477 days) ........................ 82 

Greater than 175 and less than or equal 

to 350.

Four years (1,477 days) ........................ Six years (2,207 days) ........................... 32 

Greater than 175 and less than or equal 

to 350.

Six years (2,207 days) ........................... Eight years and six months (3,120 

days).

20 

Greater than 175 and less than or equal 

to 350.

Eight years and six months (3,120 

days).

Twelve years and six months (4,581 

days).

26 

Greater than 175 and less than or equal 

to 350.

Twelve years and six months (4,581 

days).

................................................................ 63 

Greater than 350 .................................... ................................................................ Two years (746 days) ............................ 66 


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Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 32943 

CREDIT SWAPS—Continued 

Spread group 

(Basis Points) Traded tenor greater than Traded tenor less than or equal to 50% Notional (in Millions) 

Greater than 350 .................................... Two years (746 days) ............................ Four years (1,477 days) ........................ 41 

Greater than 350 .................................... Four years (1,477 days) ........................ Six years (2,207 days) ........................... 26 

Greater than 350 .................................... Six years (2,207 days) ........................... Eight years and six months (3,120 

days).

13 

Greater than 350 .................................... Eight years and six months (3,120 

days).

Twelve years and six months (4,581 

days).

13 

Greater than 350 .................................... Twelve years and six months (4,581 

days).

................................................................ 41 

FOREIGN EXCHANGE SWAPS

Super-major currencies 

EUR (Euro) GBP (British 

pound) 

JPY (Japanese 

yen) USD (U.S. dollar) 

Super-major currencies .............................................. EUR ......... 6,250,000 6,250,000 18,750,000 

GBP ......... 6,250,000* 6,250,000 6,250,000 

JPY .......... 6,250,000* 6,250,000* 1,875,000,000 

USD ......... 18,750,000* 6,250,000* 1,875,000,000* 

Major currencies ........................................................ AUD ......... 6,250,000* 0 10,000,000 10,000,000 

CAD ......... 6,250,000* 0 10,000,000 10,000,000 

CHF ......... 6,250,000* 6,250,000* 12,500,000 12,500,000 

DKK ......... 0 0 0 0 

KRW ........ 0 0 0 6,250,000,000 

SEK ......... 6,250,000* 0 0 10,000,000 

NOK ......... 6,250,000* 0 0 10,000,000 

NZD ......... 0 0 0 5,000,000 

ZAR ......... 0 0 0 25,000,000 

Non-major currencies ................................................. BRL .......... 0 0 0 5,000,000 

CZK ......... 200,000,000 0 0 200,000,000 

HUF ......... 1,500,000,000 0 0 1,500,000,000 

ILS ........... 0 0 0 50,000,000 

MXN ......... 0 0 0 50,000,000 

PLN .......... 25,000,000 0 0 25,000,000 

RMB ......... 50,000,000 0 50,000,000 50,000,000 

RUB ......... 0 0 0 125,000,000 

TRY ......... 6,250,000* 0 0 10,000,000* 

All values that do not have an asterisk are denominated in the currency of the left hand side. 

All values that have an asterisk (*) are denominated in the currency indicated on the top of the table. 

OTHER COMMODITY SWAPS

Related futures contract Initial appropriate minimum block size Units 

............................................................................................................................... ...............................................................

AB NIT Basis (ICE) .............................................................................................. 62,500 ................................................... MMBtu 

Brent Crude (ICE and NYMEX) ........................................................................... 25,000 ................................................... bbl. 

Cheese (CME) ...................................................................................................... 400,000 ................................................. lbs. 

Class III Milk (CME) ............................................................................................. NO BLOCKS .........................................

Cocoa (ICE and NYSE LIFFE and NYMEX) ....................................................... 1,000 ..................................................... metric tons 

Coffee (ICE and NYMEX) .................................................................................... 3,750,000 .............................................. lbs. 

Copper (COMEX) ................................................................................................. 625,000 ................................................. lbs. 

Corn (CBOT) ........................................................................................................ NO BLOCKS ......................................... bushels 

Cotton No. 2 (ICE and NYMEX) .......................................................................... 5,000,000 .............................................. lbs. 

Distillers’ Dried Grain (CBOT) .............................................................................. 1,000 ..................................................... short tons 

Dow Jones-UBS Commodity Index (CBOT) ........................................................ 30,000 times index ............................... dollars 

Ethanol (CBOT) .................................................................................................... 290,000 ................................................. gallons 

Feeder Cattle (CME) ............................................................................................ NO BLOCKS .........................................

Frost Index (CME) ................................................................................................ 200,000 times index ............................. euros 

Frozen Concentrated Orange Juice (ICE) ........................................................... NO BLOCKS .........................................

Gold (COMEX and NYSE Liffe) ........................................................................... 2,500 ..................................................... troy oz. 

Goldman Sachs Commodity Index (GSCI), GSCI Excess Return Index (CME) 5,000 times index ................................. dollars 

Gulf Coast Sour Crude Oil (NYMEX) ................................................................... 5,000 ..................................................... bbl. 

Hard Red Spring Wheat (MGEX) ......................................................................... NO BLOCKS .........................................

Hard Winter Wheat (KCBT) ................................................................................. NO BLOCKS .........................................

Henry Hub Natural Gas (NYMEX) ....................................................................... 500,000 ................................................. MMBtu 

HSC Basis (ICE and NYMEX) ............................................................................. 62,500 ................................................... MMBtu 

Hurricane Index (CME) ........................................................................................ 20,000 times index ............................... dollars 

Chicago Basis (ICE and NYMEX) ........................................................................ 62,500 ................................................... MMBtu 


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32944 Federal Register / Vol. 78, No. 105 / Friday, May 31, 2013 / Rules and Regulations 

OTHER COMMODITY SWAPS—Continued 

Related futures contract Initial appropriate minimum block size Units 

............................................................................................................................... ...............................................................

Lean Hogs (CME) ................................................................................................ NO BLOCKS .........................................

Light Sweet Crude Oil (NYMEX) .......................................................................... 50,000 ................................................... bbl. 

Live Cattle (CME) ................................................................................................. NO BLOCKS .........................................

Mid-Columbia Day-Ahead Off-Peak Fixed Price (ICE) ........................................ 250 ........................................................ MW/Hr. 

Mid-Columbia Day-Ahead Peak Fixed Price (ICE) .............................................. 4,000 ..................................................... MW/Hr. 

New York Harbor RBOB (Blendstock) Gasoline (NYMEX) ................................. 1,050,000 .............................................. gallons 

New York Harbor No. 2 Heating Oil (NYMEX) .................................................... 1,050,000 .............................................. bbl. 

NWP Rockies Basis (ICE and NYMEX) .............................................................. 62,500 ................................................... MMBtu 

Oats (CBOT) ........................................................................................................ NO BLOCKS .........................................

Palladium (NYMEX) ............................................................................................. 1,000 ..................................................... troy oz. 

PG&E Citygate Basis (ICE and NYMEX) ............................................................ 62,500 ................................................... MMBtu 

PJM Western Hub Real Time Off-Peak Fixed Price (ICE) .................................. 3,900 ..................................................... MW/Hr. 

PJM Western Hub Real Time Peak Fixed Price (ICE) ........................................ 8,000 ..................................................... MW/Hr. 

Platinum (NYMEX) ............................................................................................... 500 ........................................................ troy oz. 

Rainfall Index (CME) ............................................................................................ 10,000 times index ............................... dollars 

Rough Rice (CBOT) ............................................................................................. NO BLOCKS .........................................

Silver (COMEX and NYSE Liffe) .......................................................................... 125,000 ................................................. troy oz. 

Snowfall Index (CME) .......................................................................................... 10,000 times index ............................... dollars 

Socal Border Basis (ICE and NYMEX) ................................................................ 62,500 ................................................... MMBtu 

Soybean (CBOT) .................................................................................................. NO BLOCKS .........................................

Soybean Meal (CBOT) ......................................................................................... NO BLOCKS .........................................

Soybean Oil (CBOT) ............................................................................................ NO BLOCKS .........................................

SP–15 Day-Ahead Peak Fixed Price (ICE) ......................................................... 4,000 ..................................................... MW/Hr. 

SP–15 Day-Ahead Off-Peak Fixed Price (ICE) ................................................... 250 ........................................................ MW/Hr. 

Sugar #11 (ICE and NYMEX) (futures) ............................................................... 5,000 ..................................................... metric tons 

Sugar #16 (ICE) (futures) ..................................................................................... NO BLOCKS .........................................

Temperature Index (CME) ................................................................................... 400 times index .................................... currency units 

U.S. Dollar Cash Settled Crude Palm Oil (CME) ................................................ 250 ........................................................ metrics tons 

Waha Basis (ICE and NYMEX) ........................................................................... 62,500 ................................................... MMBtu 

Wheat (CBOT) ...................................................................................................... NO BLOCKS .........................................

Issued in Washington, DC, on May 16, 

2013, by the Commission. 

Christopher J. Kirkpatrick, 

Deputy Secretary of the Commission. 

Appendices to Procedures To Establish 

Appropriate Minimum Block Sizes for 

Large Notional Off-Facility Swaps and 

Block Trades—Commission Voting 

Summary and Statements of 

Commissioners 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Gensler and 

Commissioners Chilton and Wetjen voted in 

the affirmative; Commissioners Sommers and 

O’Malia voted in the negative. 

Appendix 2—Statement of Chairman 

Gary Gensler 

I support the final block rule for swaps, 

which is critical to promoting transparency 

in this once opaque market. With this rule, 

the public will benefit from seeing the price 

and volume of the majority of swaps 

transactions in real time—as soon as 

technologically practicable—after a trade is 

executed. Further, with this rule the public 

will benefit from the competition that will 

arise as buyers and sellers must transact on 

transparent trading platforms. 

The methodology for determining block 

sizes is appropriately tailored to vary by asset 

class and by underlying referenced product 

or rate. 

The Commission also has established a 

phased-in approach for setting and 

implementing appropriate minimum block 

sizes. During an initial one-year period, block 

sizes in the interest rate and credit asset 

classes will be set such that 50 percent of the 

notional amount of a particular swap 

category will benefit from pre-trade and posttrade transparency. Also during this initial 

period, the block sizes for foreign exchange 

and other commodity asset classes will be 

based upon the block sizes that designated 

contract markets have set for economically 

related futures contracts. 

After the initial period, the Commission 

will determine block sizes using a 

methodology that relies on the data collected 

by swap data repositories. Block sizes will be 

set such that 67 percent of the notional 

amount of a particular swap category will 

benefit from pre-trade transparency and 

enhanced post-trade transparency. 

The rule also includes measures to protect 

the identities, market positions and business 

transactions of swap counterparties when 

their swap transactions and pricing are 

reported to the public. 

[FR Doc. 2013–12133 Filed 5–30–13; 8:45 am] 

BILLING CODE 6351–01–P 


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