36484 Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Proposed Rules 

1 5 U.S.C. 552. 

2 17 CFR 145.9 (2017). Commission regulations 

referred to herein are found at 17 CFR chapter I, and 

can be accessed through the Commission’s website, 

www.cftc.gov. 

3See 78 FR 66621 (Nov. 6, 2013). 

4 7 U.S.C. 6s(l) (2012 & Supp. 2015). Like the 

Commission’s regulations, the CEA can be accessed 

through the Commission’s website. 

Regulatory Notices and Analyses 

The FAA has determined that this 

proposed regulation only involves an 

established body of technical 

regulations for which frequent and 

routine amendments are necessary to 

keep them operationally current. It, 

therefore: (1) Is not a ‘‘significant 

regulatory action’’ under Executive 

Order 12866; (2) is not a ‘‘significant 

rule’’ under DOT Regulatory Policies 

and Procedures (44 FR 11034; February 

26, 1979); and (3) does not warrant 

preparation of a regulatory evaluation as 

the anticipated impact is so minimal. 

Since this is a routine matter that will 

only affect air traffic procedures and air 

navigation, it is certified that this 

proposed rule, when promulgated, will 

not have a significant economic impact 

on a substantial number of small entities 

under the criteria of the Regulatory 

Flexibility Act. 

Environmental Review 

This proposal would be subject to an 

environmental analysis in accordance 

with FAA Order 1050.1F, 

‘‘Environmental Impacts: Policies and 

Procedures’’ prior to any FAA final 

regulatory action. 

Lists of Subjects in 14 CFR Part 71 

Airspace, Incorporation by reference, 

Navigation (air). 

The Proposed Amendment 

In consideration of the foregoing, the 

Federal Aviation Administration 

proposes to amend 14 CFR part 71 as 

follows: 

PART 71—DESIGNATION OF CLASS A, 

B, C, D, AND E AIRSPACE AREAS; AIR 

TRAFFIC SERVICE ROUTES; AND 

REPORTING POINTS 

■ 1. The authority citation for part 71 

continues to read as follows: 

Authority: 49 U.S.C. 106(f), 106(g); 40103, 

40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 

1959–1963 Comp., p. 389. 

§ 71.1 [Amended] 

■ 2. The incorporation by reference in 

14 CFR 71.1 of Federal Aviation 

Administration Order 7400.11B, 

Airspace Designations and Reporting 

Points, dated August 3, 2017, and 

effective September 15, 2017, is 

amended as follows: 

Paragraph 6005 Class E Airspace Areas 

Extending Upward from 700 Feet or More 

Above the Surface of the Earth 

* * * * * 

ASO MS E5 Crystal Springs, MS [New] 

Copiah County Airport, MS 

(Lat. 31°54′09′′ N, long. 90°22′00′′ W) 

That airspace extending upward from 700 

feet above the surface within a 7-mile radius 

of Copiah County Airport. 

Issued in College Park, Georgia, on July 19, 

2018. 

Ryan W. Almasy, 

Manager, Operations Support Group, Eastern 

Service Center, Air Traffic Organization. 

[FR Doc. 2018–16134 Filed 7–27–18; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 23 

RIN 3038–AE78 

Segregation of Assets Held as 

Collateral in Uncleared Swap 

Transactions 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Proposed rule. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) is proposing to amend selected 

provisions of its regulations in order to 

simplify certain requirements for swap 

dealers (‘‘SDs’’) and major swap 

participants (‘‘MSPs’’) concerning 

notification of counterparties of their 

right to segregate initial margin for 

uncleared swaps, and to modify 

requirements for the handling of 

segregated initial margin (the 

‘‘Proposal’’). 

DATES: Comments must be received on 

or before September 28, 2018. 

ADDRESSES: You may submit comments, 

identified by RIN 3038–AE78, by any of 

the following methods: 

• CFTC Comments Portal: https://

comments.cftc.gov. Select the ‘‘Submit 

Comments’’ link for this rulemaking and 

follow the instructions on the Public 

Comment Form. 

• Mail: Send to Christopher 

Kirkpatrick, Secretary of the 

Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW, 

Washington, DC 20581. 

• Hand Delivery/Courier: Follow the 

same instructions as for Mail, above. 

Please submit your comments using 

only one of these methods. To avoid 

possible delays with mail or in-person 

deliveries, submissions through the 

CFTC Comments Portal are encouraged. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to https://

comments.cftc.gov. You should submit 

only information that you wish to make 

available publicly. If you wish the 

Commission to consider information 

that you believe is exempt from 

disclosure under the Freedom of 

Information Act (‘‘FOIA’’),1 a petition 

for confidential treatment of the exempt 

information may be submitted according 

to the procedures set forth in § 145.9 of 

the Commission’s regulations.2

The Commission reserves the right, 

but shall have no obligation, to review, 

pre-screen, filter, redact, refuse or 

remove any or all of your submission 

from https://comments.cftc.gov that it 

may deem to be inappropriate for 

publication, such as obscene language. 

All submissions that have been redacted 

or removed that contain comments on 

the merits of the rulemaking will be 

retained in the public comment file and 

will be considered as required under the 

Administrative Procedure Act and other 

applicable laws, and may be accessible 

under the FOIA. 

FOR FURTHER INFORMATION CONTACT: 

Matthew Kulkin, Director, (202) 418– 

5213, mkulkin@cftc.gov; Erik Remmler, 

Deputy Director, (202) 418–7630, 

eremmler@cftc.gov; or Christopher 

Cummings, Special Counsel, (202) 418– 

5445, ccummings@cftc.gov, Division of 

Swap Dealer and Intermediary 

Oversight, Commodity Futures Trading 

Commission, 1155 21st Street NW, 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

A. Existing Requirements 

Subpart L of the Commission’s 

regulations (‘‘Segregation of Assets Held 

as Collateral in Uncleared Swap 

Transactions’’ consisting of Regulations 

23.700 through 23.704) was published 

in the Federal Register on November 6, 

2013 and became effective January 6, 

2014.3 Subpart L implements the 

requirements for segregation of initial 

margin for uncleared swap transactions 

set forth in section 4s(l) of the 

Commodity Exchange Act (‘‘CEA’’ or the 

‘‘Act’’).4

CEA section 4s(l) addresses 

segregation of initial margin held as 

collateral in certain uncleared swap 

transactions. The section applies only to 

swaps between a counterparty and an 

SD or MSP that are not submitted for 

clearing to a derivatives clearing 


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Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Proposed Rules 36485 

5Margin Requirements for Uncleared Swaps for 

Swap Dealers and Major Swap Participants, 81 FR 

636 (Jan. 6, 2016). The CFTC Margin Rule, which 

became effective April 1, 2016, is codified in part 

23 of the Commission’s regulations. 17 CFR 23.150 

through 23.159, 23.161. 

6 7 U.S.C. 1a(39). 

7See Margin and Capital Requirements for 

Covered Swap Entities, 80 FR 74840 (Nov. 30, 

2015). 

8See 17 CFR 23.151. 

9 81 FR 704 (Jan. 6, 2016). The amendment did 

not address the application of subpart L to swaps 

subject to mandatory segregation under the 

Prudential Regulator Margin Rules. As described 

below, this Proposal would clarify that the swaps 

subject to the Prudential Regulator Margin Rules are 

to be addressed in the same manner as swaps 

subject to the CFTC Margin Rule. 

10See CFTC Staff Letter No. 14–132 (October 31, 

2014), available at https://www.cftc.gov/sites/ 

default/files/idc/groups/public/@lrlettergeneral/ 

documents/letter/14-132.pdf. 

11The Proposal would address generally some of 

the confusion that prompted the issuance of Staff 

Letter 14–132 in the context of other changes to 

subpart L that are proposed. 

12For example, issues regarding compliance with 

these regulations have been raised with the 

National Futures Association as recently as January 

2018, indicating ongoing uncertainty. See pp. 6–7 

of the transcript of the NFA Swap Dealer 

Examination Webinar, January 18, 2018, available at 

https://www.nfa.futures.org/members/memberContinued 

organization (‘‘DCO’’). It requires that an 

SD or MSP notify a counterparty that 

the counterparty has the right to require 

that any funds or property the 

counterparty provides as initial margin 

be segregated in a separate account from 

the SD’s or MSP’s assets. The separate 

account must be held by an 

independent third-party custodian and 

designated as a segregated account for 

the counterparty. CEA section 4s(l) does 

not preclude the counterparty and the 

SD or MSP from agreeing to their own 

terms regarding investment of initial 

margin (subject to any regulations 

adopted by the Commission) or 

allocation of gains or losses from such 

investment. If the counterparty elects 

not to require segregation of margin, the 

SD or MSP is required to report 

quarterly to the counterparty that the 

SD’s or MSP’s back office procedures 

relating to margin and collateral are in 

compliance with the agreement between 

the counterparty and the SD or MSP. 

In January 2016, the Commission 

adopted margin requirements for certain 

uncleared swaps applicable to SDs and 

MSPs for which there is no prudential 

regulator (‘‘CFTC Margin Rule’’).5 The 

prudential regulators (‘‘Prudential 

Regulators’’) include the Federal 

Reserve Board, the Office of the 

Comptroller of the Currency, the Federal 

Deposit Insurance Corporation, the 

Farm Credit Administration, and the 

Federal Housing Finance Agency.6 The 

Prudential Regulators adopted margin 

requirements similar to the CFTC 

Margin Rule for swaps entered into by 

SDs and MSPs that they regulate 

(‘‘Prudential Regulator Margin Rules’’) 

in November 2015.7 The CFTC Margin 

Rule and the Prudential Regulator 

Margin Rules establish initial and 

variation margin requirements for SDs 

and MSPs.8

Prior to the CFTC Margin Rule 

effective date of April 1, 2016, if initial 

margin was to be exchanged by 

counterparties to uncleared swaps 

involving an SD or MSP, the 

requirements of subpart L applied. The 

CFTC Margin Rule amended Regulation 

23.701 to clarify that from and after the 

effective date of the CFTC Margin Rule, 

the requirements of Regulations 23.702 

and 23.703 did not apply in those 

circumstances where segregation is 

mandatory under the CFTC Margin 

Rule.9 As a result, Regulations 23.702 

and 23.703 generally only apply when 

initial margin is to be exchanged 

between an SD or MSP and (i) a 

nonfinancial end-user, or (ii) a financial 

end-user without ‘‘material swaps 

exposure,’’ as defined in the CFTC 

Margin Rule. 

Regulation 23.700 defines certain 

terms used in subpart L. Regulation 

23.701 requires an SD or MSP: (1) To 

notify each counterparty to a swap that 

is not submitted for clearing, that the 

counterparty has the right to require that 

any initial margin it provides be 

segregated; (2) to identify a creditworthy 

custodian that is a non-affiliated legal 

entity, independent of the SD or MSP 

and the counterparty, to act as 

depository for segregated margin assets; 

and (3) to provide information regarding 

the costs of such segregation. The 

regulation specifies that the notification 

is to be made (with receipt confirmed in 

writing) to an officer (of the 

counterparty) responsible for 

management of collateral (or to 

specified alternative person(s)), and that 

it need only be made once in any 

calendar year. Finally, the regulation 

provides that a counterparty can change 

its election to require (or not to require) 

segregation of initial margin by written 

notice to the SD or MSP. 

Regulation 23.702 reiterates the 

requirement that the custodian be a 

legal entity independent of the SD or 

MSP and the counterparty. It also 

requires that segregated initial margin 

be held in an account segregated for, 

and on behalf of, the counterparty and 

designated as such. Finally, the 

regulation specifies that the segregation 

agreement is to provide that: (1) 

Withdrawals from the segregated 

account be made pursuant to agreement 

of both the counterparty and the SD or 

MSP, with notification to the nonwithdrawing party; and (2) the 

custodian can turn over segregated 

assets upon presentation of a sworn 

statement that the presenting party is 

entitled to control of the assets pursuant 

to agreement among the parties. 

Regulation 23.703 restricts investment 

of segregated assets to investments 

permitted under Regulation 1.25, and 

(subject to that restriction) permits the 

SD or MSP and the counterparty to 

agree in writing as to investment of 

margin and allocation of gains and 

losses. 

Regulation 23.704 requires the SD’s or 

MSP’s chief compliance officer (‘‘CCO’’) 

to report quarterly to any counterparty 

that does not elect to segregate initial 

margin whether or not the SD’s or 

MSP’s back office procedures regarding 

margin and collateral requirements 

were, at any point in the previous 

calendar quarter, not in compliance 

with the agreement of the 

counterparties. 

B. Factors Considered by the 

Commission 

After more than four years of 

administering subpart L of part 23, the 

Commission has observed that the 

detailed requirements of those 

regulations have proven difficult for SDs 

and MSPs to implement and to satisfy 

in a reasonably efficient manner. These 

observations have been buttressed by 

suggestions submitted in response to the 

Commission’s Project KISS initiative as 

described below. In addition, the 

Commission understands that very few 

swap counterparties have exercised 

their rights to elect to segregate initial 

margin collateral pursuant to subpart L 

during the four years the regulations 

have been effective. 

Early in the implementation period, 

in response to multiple inquiries, 

Commission staff issued Staff Letter 14– 

132 (October 31, 2014) 10 providing 

interpretative guidance to SDs and 

MSPs regarding application of certain of 

the segregated margin requirements. In 

particular, the letter noted concerns 

expressed by SDs and MSPs that despite 

their earnest efforts to obtain 

confirmation of receipt of notification 

and election regarding segregation, 

failure by a counterparty to respond to 

the SD or MSP could bar any further 

swap transactions with the counterparty 

until a response was received.11

However, notwithstanding the issuance 

of Staff Letter 14–132, issues regarding 

compliance with subpart L continue to 

be raised.12


daltland on DSKBBV9HB2PROD with PROPOSALS
36486 Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Proposed Rules 

resources/files/transcripts/sdexamswebinar

transcriptjan2018.pdf. 

13See 82 FR 21494 (May 6, 2017) and 82 FR 

23765 (May 24, 2017). 

14See, e.g. letter from the Financial Services 

Roundtable (‘‘FSR Letter’’), dated September 30, 

2017 at 55 (noting that ‘‘compliance with these 

regulations has proven to be unduly burdensome 

for swap dealers when weighed against the 

protections afforded to swap counterparties 

thereunder’’), https://comments.cftc.gov/ 

PublicComments/ViewComment.aspx?

id=61427&SearchText=. 

15 Id. See also letter from the Securities Industry 

and Financial Markets Association (‘‘SIFMA 

Letter’’) dated September 29, 2017 at 2 (‘‘These 

requirements create unnecessarily burdensome 

obligations, which in many instances are 

duplicative or create confusion due to parallel 

mandatory collateral segregation requirements 

found within the CFTC and [prudential regulator] 

rules on margin requirements for non-centrally 

cleared swaps, and similar requirements in foreign 

jurisdictions.’’). 

16See SIFMA Letter at 2. See also letter from the 

Global Foreign Exchange Division of the Global 

Financial Markets Association, dated September 29, 

2017. 

17See FSR Letter at 55 (‘‘Our members have 

advised that counterparties (i) rarely, if ever, elect 

to segregate [initial margin] and (ii) have found 

little use for receiving the notices.’’). 18See 17 CFR 23.700. 

19A grammatical change is also proposed for the 

definition of the term ‘‘segregate.’’ 

20Some confusion has been caused by the 

requirement in paragraph (d) to provide the notice 

‘‘prior to confirming the terms of any such swap,’’ 

and the requirement in paragraph (e) to provide the 

notice once in any calendar year. 

On May 9, 2017, the Commission 

published in the Federal Register a 

request for information 13 pursuant to 

the Commission’s Project KISS initiative 

seeking suggestions from the public for 

simplifying the Commission’s 

regulations and practices, removing 

unnecessary burdens, and reducing 

costs. A number of suggestions received 

addressed various provisions of subpart 

L. In general, the suggestions echoed 

Commission staff concerns that the 

requirements in subpart L may be more 

burdensome than is necessary to 

achieve the purposes of the statute and 

that the requirements may be 

counterproductive by discouraging the 

use of individual segregation 

accounts.14 Persons responding to 

Project KISS also noted that some 

requirements cause confusion because 

they overlap with segregation 

requirements in the margin regulations 

more recently adopted by the CFTC and 

Prudential Regulators.15 Furthermore, 

responders noted that the requirements 

in subpart L are overly prescriptive 

eliminating the possibility for 

reasonable bilateral negotiation of 

certain terms that takes place in the 

normal course to determine appropriate 

collateral arrangements based on the 

circumstances of the broader 

counterparty relationship.16

Responders also asserted that 

counterparties to uncleared swaps rarely 

elect to require segregation of margin 

pursuant to the existing provisions of 

subpart L.17 Commission staff has 

observed evidence of minimal uptake of 

the election to segregate. In addition, 

Commission staff has discussed this 

issue with the National Futures 

Association (‘‘NFA’’) to ascertain NFA’s 

observations from examining a 

substantial number of SDs in connection 

with the implementation of subpart L. 

Based on this experience, it appears that 

for nearly every SD examined, fewer 

than five counterparties elected 

segregation pursuant to subpart L since 

registration. For some SDs, not a single 

counterparty has elected to segregate 

pursuant to subpart L. 

In light of these considerations, the 

Commission is proposing to amend the 

regulations governing segregation of 

margin for uncleared swaps. The 

Commission believes that the 

amendments proposed today will 

reduce unnecessary burdens on 

registrants and market participants by 

simplifying some overly detailed 

provisions, thereby reducing the 

intricate and prescriptive requirements 

that have been found during 

implementation to provide little or no 

benefit. These changes will also 

facilitate more efficient swap execution 

by eliminating complexity and 

confusion that slows down 

documentation and negotiation of 

hedging and other swap transactions. 

Finally, the amendments, by reducing 

the prescriptive elements of the rule, 

potentially could encourage more 

segregation (as was intended by the 

statute) by providing flexibility for the 

parties to establish segregation 

arrangements that better suit their 

specific needs. 

At the same time that the Commission 

is proposing specific changes, it is 

seeking comment from the public on the 

appropriateness of these changes, as 

well as suggestions for other 

amendments that can streamline, 

simplify, and reduce the costs of these 

regulations without sacrificing the 

protections called for by CEA section 

4s(l). 

II. The Proposal 

A. Regulation 23.700—Definitions 

Section 23.700 defines ‘‘Margin’’ as 

‘‘both Initial Margin and Variation 

Margin.’’ 18 As proposed to be amended, 

subpart L would no longer refer 

collectively to initial margin and 

variation margin, since the right to 

require segregation applies only to 

initial margin, and not to variation 

margin. Thus, there is no need for the 

separate defined term ‘‘Margin.’’ The 

Commission therefore proposes to 

eliminate the definition of Margin from 

Regulation 23.700, and to make 

conforming changes to subpart L by 

replacing the term ‘‘Margin’’ with 

‘‘Initial Margin’’ in Regulations 23.701, 

23.702, and 23.703.19

B. Regulation 23.701—Notification of 

the Right To Require Segregation 

Paragraphs (a) and (b) of Regulation 

23.701 direct an SD or MSP to notify 

each counterparty of the right to require 

segregation of initial margin. The 

language used is consistent with CEA 

section 4s(l). Paragraphs (c), (d) and (e) 

add specific requirements not expressly 

established in the statute. Paragraph (c) 

requires the SD or MSP to furnish the 

required notification to an officer of the 

counterparty responsible for 

management of collateral, or if no such 

person is identified by the counterparty, 

then to the chief risk officer, or if there 

is no such officer, to the chief executive 

officer, or if none, the highest-level 

decision-maker for the counterparty. 

Paragraph (d) requires the SD or MSP, 

‘‘prior to confirming the terms of any 

such swap,’’ to obtain confirmation of 

receipt of the notification, and the 

counterparty’s election to require or not 

require segregation of initial margin 

(such confirmation to be retained in 

accordance with Regulation 1.31). 

Paragraph (e) provides that the 

notification need be made only once in 

any calendar year.20 Finally, paragraph 

(f) provides that the counterparty may 

change the segregation election at its 

discretion by providing a written notice 

to the SD or MSP. Paragraph (f) is not 

being amended in this Proposal except 

to redesignate it as paragraph (d). 

Based on staff’s implementation 

experience and on suggestions received 

in connection with Project KISS, the 

Commission believes that these 

requirements are unnecessarily 

prescriptive and that they do not reflect 

the practical realities of how over-thecounter swap transactions are 

negotiated and managed by the parties. 

Accordingly, the Commission is 

proposing to modify the notification 

requirement in paragraph (a) and to 

remove the requirements in existing 

paragraphs (c), (d) and (e). 

Under the Proposal, paragraph (a) 

would be revised to require that the 

notification to a counterparty be made 

prior to execution of the first uncleared 

swap transaction that provides for the 


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Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Proposed Rules 36487 

21This revision is consistent with guidance 

provided in Staff Letter 14–132, cited above. 

22Thus, under the Proposal paragraph (e) of 

Regulation 23.701 (providing that the notification 

need only be made once in any calendar year) 

would become unnecessary, and is proposed to be 

deleted. 

23 78 FR 66625. 

24 Id. 

25For existing master netting agreements for 

which the SD has already sent a segregation notice, 

the Commission is of the view that such notice 

would be sufficient for purposes of complying with 

the amended regulations, if adopted, and therefore 

the SD would not be required to send a new notice. 26See Staff Letter 14–132, cited above. 

exchange of initial margin,21 not prior to 

each transaction or annually as 

currently prescribed by paragraphs (d) 

and (e).22 CEA section 4s(l) requires 

notification of the right to segregate ‘‘at 

the beginning of a swap transaction.’’ 

The Commission is interpreting that 

phrase to mean at the beginning of an 

SD’s or MSP’s swap transaction 

relationship with each counterparty. 

This interpretation is consistent with 

the Commission’s stated view when it 

originally proposed and adopted 

Regulation 23.701(e), which only 

requires notice once a year. With respect 

to the phrase in the statute ‘‘at the 

beginning of a swap transaction,’’ the 

Commission noted that ‘‘[w]hile this 

language could be read to require 

transaction-by-transaction notification, 

where the parties have a pre-existing or 

on-going relationship, such repetitive 

notification could be redundant, costly 

and needlessly burdensome.’’ 23

When adopting final Regulation 

23.701(e), the Commission considered 

comments requesting a loosening of the 

once-per-year notice requirement and 

rejected the requests in the belief that 

requiring notification once each year 

would balance the burden of providing 

notices and getting responses with the 

importance of the right to segregate 

initial margin.24 At this time, based on 

implementation experience, the 

Commission is proposing to require 

notification at the beginning of a swap 

trading relationship that provides for 

exchange of initial margin. The 

importance of the notification informing 

the counterparty of the right to segregate 

is paramount at the beginning of the SD/ 

MSP—counterparty relationship. It is at 

the time the parties initiate the first 

transaction that the decision to segregate 

initial margin will typically be made.25

Subsequent notifications are repetitive 

to the initial notification and risk 

adding confusion over the duration of 

the contractual relationship of the 

parties. In this regard, the Commission 

understands that counterparties rarely 

change their election, once made. 

Accordingly, in addition to modifying 

the notification requirement in 

paragraph (a), the Commission proposes 

to eliminate paragraph (e)’s annual 

notification requirement in lieu of the 

proposed notification at the beginning 

of the first uncleared swap transaction 

that provides for exchange of initial 

margin. 

Paragraph (a) would also be revised to 

eliminate the notification requirement 

where segregation is mandatory under 

Regulation 23.157 and where it is 

mandated under applicable rules 

adopted by a Prudential Regulator under 

CEA section 4s(e)(3). Paragraph (a)(2) 

(the requirement that the notification 

identify one or more creditworthy, 

independent custodians) would be 

deleted because selection of a custodian 

can be made when and if the 

counterparty elects to require 

segregation. Because very few 

counterparties elect to require 

segregation, it is unnecessarily 

burdensome to require an SD or MSP to 

confirm which custodians are available 

and continually update its notification 

form with the name of the custodian(s) 

available. Moreover, the Commission 

understands that a counterparty’s initial 

decision to consider requiring (or not 

requiring) segregation is driven 

principally by whether the counterparty 

is concerned about protecting its initial 

margin and the terms of the segregation 

agreement, and not by the identity of the 

custodian. Similarly, paragraph (a)(3) 

(information regarding the price for 

segregation for each custodian) would 

be deleted because such pricing may 

vary for each segregation arrangement 

and would normally be subject to 

negotiation. To the extent pricing would 

be a factor in the decision to segregate, 

counterparties can and do discuss 

pricing as a term of the custodial 

arrangement when the counterparty 

indicates an interest in segregation. 

Moreover, the requirements in 

paragraphs (a)(2) and (a)(3) are not 

found in CEA section 4s(l). 

Similarly, the Proposal would 

eliminate the requirement in current 

paragraph (c) that the SD or MSP 

provide the notification to a person at 

the counterparty with a specific job title. 

Based on implementation experience, 

the Commission is of the view that the 

regulation as initially adopted is 

unnecessarily prescriptive in dictating 

who must receive the notification. For 

example, in many cases, the person at 

the counterparty best situated to 

evaluate the notification and the 

decision to segregate will be a person 

directly involved in negotiating the 

swap regardless of that person’s title. 

The Commission notes that in removing 

the specific designation of officers to 

receive the notification it is not 

eliminating the expectation that each 

registrant will use reasonable judgment 

in identifying an appropriate person at 

the counterparty who can evaluate the 

right to elect segregation (and either act 

on it or bring it to the attention of 

someone in a position to act on it). The 

Commission continues to believe that, 

to be effective, the notification must be 

made to a person at the counterparty 

who understands its meaning and, to 

the extent necessary, can direct it to the 

appropriate personnel at the 

counterparty. The proposed change 

seeks to advance the same underlying 

policy objective as the current 

requirement (namely that the 

notification be given to appropriate 

personnel at the counterparty), but 

would recognize that dictating how 

counterparties communicate the 

information in question creates 

unnecessary burdens and potentially 

hinders the ability of the parties to 

direct the information to the person(s) 

best situated to evaluate it. 

As proposed, new paragraph (c) 

would simplify requirements in existing 

Regulation 23.701 by providing that ‘‘[i]f 

the counterparty elects to segregate 

initial margin, the terms of segregation 

shall be established by written 

agreement.’’ 

As noted above, the Commission is 

proposing to eliminate the additional 

requirements in existing paragraph (d), 

which are more extensive than the 

notification requirements set forth in 

CEA section 4s(l). Subsequent to 

adoption of subpart L, experience with 

implementation of the requirements of 

Regulation 23.701 has made the 

Commission aware of problems 

experienced by registrants in complying 

with these additional requirements. For 

example, persons seeking guidance have 

noted that paragraph (d)’s current 

requirement that the SD not execute a 

swap with the counterparty until it 

receives confirmation of the 

counterparty’s receipt of the notification 

has the potential to block swap trading 

in some circumstances.26 Instances of 

forestalled trading caused by this 

requirement could be particularly 

harmful for nonfinancial end-users that 

have ongoing, dynamic hedging 

programs (to hedge, for example, 

commodity price risk or foreign 

exchange risk). 

Based on implementation experience, 

compliance with the existing 

segregation notification requirements in 

the regulation necessitates lengthy 

explanations and instructions from SDs 

and MSPs to their counterparties and 

imposes additional administrative 


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27See 75 FR 75432, 75434 (Dec. 3, 2010). 

28See SIFMA Letter at 4. 

processes requiring counterparties to 

take steps that are outside of the normal 

course of transacting in swaps. Some of 

these steps cause transaction delays and 

deviations from established business 

procedures for collateral custodial 

arrangements and disclosure of 

counterparty rights generally, and do 

not advance the counterparty’s right to 

segregate initial margin. For 

nonfinancial end-user counterparties 

who tend to use swaps primarily for 

hedging purposes, these added 

compliance steps often cause confusion 

and uncertainty that can inhibit 

opportune, timely hedging. For 

counterparties that execute swaps 

frequently and have determined that 

they wish to segregate, the additional 

requirements merely add unnecessary 

hurdles to the transaction process. 

Accordingly, the Commission does not 

believe that the burdens imposed by 

these prescriptive requirements provide 

meaningful regulatory benefits beyond 

those provided by the provisions in 

proposed amended Regulation 23.701. 

C. Regulation 23.702—Requirements for 

Segregated Margin 

Existing Regulation 23.702 sets forth 

requirements for the custody of initial 

margin segregated pursuant to a 

counterparty’s election under 

Regulation 23.701. Paragraph (c)(2) of 

Regulation 23.702 provides specific 

requirements for the withdrawal and 

turnover of control of initial margin. In 

particular, paragraph (c)(2) requires the 

custodian to turn over control of initial 

margin upon presentation of a written 

statement made by an authorized 

representative under oath or under 

penalty of perjury as specified in 28 

U.S.C. 1746. The Statement must state 

that the counterparty, SD or MSP, as the 

case may be, is entitled to assume 

control of the initial margin pursuant to 

the parties’ agreement. The other party 

must be immediately notified of the 

turnover of control. 

The Commission believes that, while 

paragraph (c)(2) may generally be 

consistent with the manner in which 

custodial arrangements work, the 

prescriptive requirements of the 

regulation, including requiring a 

specific form, the language used, and 

the certification needed, do not account 

for change in control arrangements in 

custodial agreements that are sometimes 

customized to reflect the unique 

business facts and circumstances that 

may exist between any two parties and 

the custodian. For example, the unique 

nature of the collateral posted or the 

specific terms of change in control 

triggers may warrant different notice 

procedures than those specified by 

paragraph (c)(2). Alternative notice 

procedures may allow for more timely 

and effective change in control under 

real-world circumstances and better 

protect each party’s interests. 

Accordingly, the Commission believes 

that more flexibility is warranted, and 

that it is more appropriate to leave these 

matters up to negotiation by the parties. 

D. Regulation 23.703—Investment of 

Segregated Margin 

Regulation 23.703 requires initial 

margin segregated pursuant to subpart L 

to be invested consistent with 

Commission Regulation 1.25. Regulation 

1.25 sets forth standards for investment 

of customer funds by a futures 

commission merchant or derivatives 

clearing organization in the context of 

exchange-traded futures and cleared 

swaps. When proposing Regulation 

23.703, the Commission expressed its 

view that Regulation 1.25 ‘‘has been 

designed to permit an appropriate 

degree of flexibility in making 

investments with segregated property, 

while safeguarding such property for the 

parties who have posted it, and 

decreasing the credit, market, and 

liquidity risk exposures of the parties 

who are relying on that margin.’’ 27

A suggestion in response to the 

Project KISS initiative noted that 

Regulation 1.25 is designed to protect 

exchange customers for which margin 

investment decisions are outside of their 

control.28 Regulation 1.25 includes 

fairly extensive and specific 

requirements as to the mechanisms for 

holding and investing margin and the 

qualitative aspects of the investments 

held. With respect to initial margin for 

uncleared swaps that is not held in 

accordance with Regulation 23.157 or 

with the Prudential Regulator Margin 

Rules, the margin investment decisions 

are typically a matter of contract subject 

to negotiation between the parties. As 

such, each counterparty has a voice in 

how the initial margin may be invested. 

In addition, the terms of most 

exchange-traded and cleared products 

are standardized and the customer’s 

primary relationship with the FCM or 

DCO centers upon the trading and 

clearing of those standardized products. 

Conversely, over-the-counter swaps, by 

their nature, tend to be more customized 

and are often part of a broader financial 

relationship. For example: Interest rate 

swaps with end-users are often designed 

to match maturities of loans or bonds, 

with the rate of the swap tied to the rate 

on the loan or bond; commodity swaps 

often hedge the counterparty’s physical 

commodity production or consumption 

risks that arise from a particular 

commercial enterprise; and foreign 

exchange swaps often hedge an entity’s 

exposure to cross-border commercial 

transactions. In each case, the SD or 

MSP sometimes plays additional 

financial roles, such as providing a loan 

or other credit or liquidity support, 

brokering physical commodity 

purchases or sales, or acting as a 

correspondent bank. Accordingly, each 

counterparty, particularly nonfinancial 

end-user counterparties, may find better 

transactional efficiencies and may be 

better served and protected in related 

credit transactions if the types of 

collateral and the investment 

procedures and mechanisms used are 

determined through bilateral negotiation 

of the terms thereof by the parties. 

Given the greater breadth and 

variability, both in the terms and 

purposes of uncleared swaps and in the 

nature of the relationship between the 

counterparty and the SD or MSP, the 

Commission believes a regulation that 

provides greater flexibility for the 

parties to negotiate appropriate initial 

margin investment terms will, in most 

cases, better serve the interests of the 

parties. For the same reasons, allowing 

greater flexibility may also encourage 

more counterparties to elect to segregate 

pursuant to subpart L. 

The Commission recognizes that in 

some circumstances, nonfinancial enduser counterparties might have less 

negotiating leverage with a 

sophisticated SD or MSP. However, the 

regulations as originally adopted give 

little or no flexibility for counterparties 

and SDs or MSPs to negotiate mutually 

beneficial terms and to consider other 

factors such as the broader financial 

relationship between the parties. For 

nonfinancial end-user counterparties 

the segregation of initial margin is at 

their discretion. If these counterparties 

have a voice in how segregated initial 

margin is invested, the returns of which 

they will often receive, they may be 

more likely to elect to require 

segregation. 

E. Regulation 23.704—Requirements for 

Non-Segregated Margin 

Existing Regulation 23.704(a) requires 

the CCO of each SD or MSP to report 

quarterly to each counterparty that does 

not elect segregation of initial margin on 

whether or not the SD’s or MSP’s back 

office procedures relating to margin and 

collateral requirements failed at any 

time during the previous calendar 

quarter to comply with the agreement of 


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29Consistent with Staff Letter 14–132, the 

Commission confirms that the reporting 

requirement under Regulation 23.704 does not 

apply if no initial margin will be required as part 

of the swap transaction. 

30The Commission notes that the CCO continues 

to be responsible, under Commission regulation 3.3, 

to report in the CCO annual report any material 

non-compliance issues involving back office 

procedure relating to margin and collateral 

requirements. 

31 5 U.S.C. 601 et seq. 

32 5 U.S.C. 553. The Administrative Procedure 

Act is found at 5 U.S.C. 500 et seq. 

33See 5 U.S.C. 601(2), 603, 604, and 605. 

34See Registration of Swap Dealers and Major 

Swap Participants, 77 FR 2613 (Jan. 19, 2012). 

35Eligible contract participants, as defined in 

CEA section 1a(18), 7 U.S.C. 1a(18). 

36See Further Definition of ‘‘Swap Dealer,’’ 

‘‘Security-Based Swap Dealer,’’ ‘‘Major Swap 

Participant,’’ ‘‘Major Security-Based Swap 

Participant’’ and ‘‘Eligible Contract Participant,’’ 77 

FR 30596, 30701 (May 23, 2012). 

37 44 U.S.C. 3501 et seq. 

38See OMB Control No. 3038-0075, https://

www.reginfo.gov/public/do/PRAOMBHistory?omb

ControlNumber=3038-0075# (last visited June 29, 

2017). 

the counterparties.29 The Commission 

believes it is unnecessary to specify that 

the CCO be the individual that makes 

such reports, so long as the information 

is provided to counterparties. For many 

firms, middle or back office staff, not the 

CCO, implement collateral management 

pursuant to the terms of each collateral 

management agreement. Those staff 

people are therefore better situated to 

assess compliance with agreements and 

to provide the quarterly report. 

Accordingly, there are likely personnel 

at each SD other than the CCO who are 

better situated to more accurately and 

efficiently provide the report.30 The 

Commission therefore proposes to 

require that the SD or MSP make the 

reports without specifying any 

particular person to perform that 

requirement. The Commission further 

proposes to simplify the language 

regarding timing of the required reports 

to eliminate uncertainty as to the 

regulation’s meaning. With respect to 

paragraph (b) of the regulation, the 

Commission is proposing to specify that 

the reports required under paragraph (a) 

need be delivered only to counterparties 

who choose not to require segregation 

(as opposed to the current wording that 

simply says ‘‘with respect to each 

counterparty’’) to more closely follow 

the statutory language underlying this 

requirement. 

III. Request for Comment 

The Commission requests comments, 

generally, regarding the proposed 

changes to Regulations 23.700, 23.701, 

23.702, 23.703, and 23.704. The 

Commission also specifically requests 

comment on the following questions: 

• Are the proposed amendments to 

subpart L appropriate in light of the 

requirements of CEA section 4s(l) and in 

light of the commercial realities 

encountered by SDs, MSPs, and 

counterparties engaging in uncleared 

swap transactions? 

• Should the Commission revise or 

eliminate any other provisions of 

subpart L? Are there additional ways in 

which the Commission can simplify, 

streamline, and reduce the costs of these 

regulations without impairing the rights 

and safeguards intended by CEA section 

4s(l)? 

• Do the proposed amendments 

appropriately preserve the rights of 

counterparties articulated in CEA 

section 4s(l)? Is the Commission’s 

proposed interpretation of CEA section 

4s(l)(1)(A) reasonable given the 

commercial realities of uncleared swaps 

transactions and relationships between 

SDs and MSPs and their counterparties? 

• As proposed, Regulation 23.701(a) 

provides that ‘‘[a]t the beginning of the 

first swap transaction that provides for 

the exchange of Initial Margin’’ an SD or 

MSP must notify the counterparty of its 

right to require segregation of initial 

margin. Should the Commission provide 

specific benchmark events that call for 

delivery of a segregation notification? If 

so, would entering into a master netting 

agreement or other contractual 

relationship be appropriate? What other 

events may be relevant for marking ‘‘the 

beginning of the first swap transaction’’? 

Should the Commission provide that the 

counterparty may request or opt to 

continue to receive an annual or some 

other periodic notification? Should the 

Commission provide that the 

counterparty may request or opt to 

receive notification at the beginning of 

each swap transaction? 

• The Commission notes that the 

proposed deletion of paragraph (a)(2) of 

Regulation 23.701 (requirement to 

identify one or more custodians as an 

acceptable depository for segregated 

initial margin) also removes language 

specifying that one of the identified 

custodians ‘‘be a creditworthy nonaffiliate.’’ Under the Proposal, 

Regulation 23.702(a) would continue to 

require that the custodian ‘‘must be a 

legal entity independent of both the 

swap dealer or major swap participant 

and the counterparty.’’ Should the 

Commission adopt more specific 

financial or affiliation qualifications for 

the custodian that an SD or MSP uses 

as a depository for segregated initial 

margin, and if so, what should those 

qualifications be? 

• Under Regulation 23.703(a), margin 

that is segregated pursuant to an 

election under Regulation 23.701 may 

only be invested consistent with 

Regulation 1.25. How has the limitation 

impacted counterparties’ decisions to 

make an election under Regulation 

23.701? 

IV. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) requires Federal agencies to 

consider whether the regulations they 

propose will have a significant 

economic impact on a substantial 

number of small entities and, if so, 

provide a regulatory flexibility analysis 

respecting the impact.31 Whenever an 

agency publishes a general notice of 

proposed rulemaking for any regulation, 

pursuant to the notice-and-comment 

provisions of the Administrative 

Procedure Act,32 a regulatory flexibility 

analysis or certification typically is 

required.33 The Commission previously 

has established certain definitions of 

‘‘small entities’’ to be used in evaluating 

the impact of its regulations on small 

entities in accordance with the RFA.34

The Commission has previously 

established that SDs, and MSPs and 

ECPs 35 are not small entities for 

purposes of the RFA.36

Accordingly, the Chairman, on behalf 

of the Commission, hereby certifies 

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

Proposal will not have a significant 

economic impact on a substantial 

number of small entities. 

B. Paperwork Reduction Act 

1. Background 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) 37 imposes certain 

requirements on Federal agencies 

(including the Commission) in 

connection with their conducting or 

sponsoring a collection of information 

as defined by the PRA. The Proposal 

would result in such a collection, as 

discussed below. A person is not 

required to respond to a collection of 

information unless it displays a 

currently valid control number issued 

by the Office of Management and 

Budget (‘‘OMB’’). The Proposal contains 

a collection of information for which the 

Commission has previously received a 

control number from OMB. The title for 

this collection of information is 

‘‘Disclosure and Retention of Certain 

Information Relating to Swaps Customer 

Collateral, OMB control number 3038– 

0075.’’ 38 Collection 3038–0075 is 

currently in force with its control 

number having been provided by OMB. 

The Commission is proposing to 

revise collection 3038–0075 to 


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39See 78 FR at 66631. 

40 7 U.S.C. 19(a). 

41See 78 FR at 66632–36 (discussing the costbenefit considerations with regard to the 

segregation regulation). 

incorporate proposed changes to reduce 

the number of notices a SD or MSP must 

provide to its counterparties with 

respect to the rights of such 

counterparties to segregate initial 

margin for uncleared swaps. The 

Commission does not believe the 

Proposal would impose any other new 

collections of information that require 

approval of OMB under the PRA. 

2. Modification of Collection 3038–0075 

The Proposal would modify collection 

3038–0075 by eliminating the 

requirement that the notification of the 

right to segregate be provided on an 

annual basis to a specified officer of the 

counterparty such that the notice would 

only need to be provided once to each 

counterparty at the beginning of the first 

non-cleared swap transaction that 

provides for the exchange of initial 

margin. The Commission originally 

estimated that each SD and MSP would, 

on average, provide the segregation 

notice to approximately 1,300 

counterparties each year and that the 

burden for preparing and furnishing the 

notice would be 2 hours, for an annual 

burden of 2,600 hours.39 The 

Commission is estimating that each SD 

and MSP would, on average, have 

approximately 300 new counterparties 

each year for a total burden of 600 hours 

per registrant. Accordingly, the 

Commission is proposing to revise its 

overall burden estimate associated with 

Regulation 23.701 for this collection by 

reducing the per registrant annual 

burden by 2,000 hours. 

C. Cost-Benefit Considerations 

1. Background 

Section 15(a) of the CEA requires the 

Commission to consider the costs and 

benefits of its actions before 

promulgating a regulation under the 

CEA or issuing certain orders.40 Section 

15(a) further specifies that the costs and 

benefits shall be evaluated in light of 

five broad areas of market and public 

concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. With 

respect to the proposed regulation 

changes discussed above, the 

Commission considers the costs and 

benefits resulting from its discretionary 

determinations with respect to the 

section 15(a) factors, and seeks 

comments from interested persons 

regarding the nature and extent of such 

costs and benefits. 

2. Regulations 23.700, 23.701, 23.702 

and 23.703—Notification of Right to 

Initial Margin Segregation 

The baseline for these cost and benefit 

considerations is the status quo, which 

is existing market conditions and 

practice in response to the requirements 

of current §§ 23.700, 23.701, 23.702, and 

23.703.41 Subpart L: (1) Requires SDs or 

MSPs to notify counterparties of the 

right to segregate initial margin; (2) 

establishes certain procedures regarding 

the notification; and (3) establishes 

certain requirements for the initial 

margin segregation arrangements. 

The Commission is proposing a more 

flexible approach that reduces some 

regulatory burdens that provide little or 

no corresponding benefit. The Proposal 

would eliminate the definition of 

‘‘Margin’’ because it would no longer be 

needed. The Proposal would also revise 

when the segregation notice is required. 

Additionally, the Proposal would 

eliminate the requirements that (1) the 

SD or MSP provide the segregation 

notice to an officer of the counterparty 

with specific qualifications, and (2) the 

SD or MSP obtain the counterparty’s 

confirmation of receipt of the 

segregation notice. Finally, the Proposal 

would allow the parties to establish the 

notice of change of control provisions 

and the commercial arrangements for 

investment of segregated collateral by 

contract instead of imposing specific 

requirements. 

(i) Cost and Benefit Considerations 

The general purpose of the changes 

proposed is to reduce burdens and 

improve the benefits intended by 

subpart L. The Commission 

preliminarily believes the proposed 

changes to subpart L would not impose 

any new requirements on registrants 

and instead would reduce or make the 

regulations more flexible allowing 

market participants to use standard 

market practices regarding the 

implementation of the initial margin 

segregation requirements. The 

simplification of the notification 

requirements would likely reduce the 

time needed to complete the notification 

process and may facilitate more efficient 

and timely trading for new customer 

relationships. The proposed changes 

would also reduce costs by eliminating 

the requirements for those swaps that 

must comply with the Prudential 

Regulator Margin Rules mandatory 

margin requirements. In addition, the 

changes will provide benefits to the 

parties to swaps by allowing the parties 

to establish by contract the terms for 

collateral management and for change in 

control and investment of segregated 

initial margin in a manner that better 

suits their business needs. To the extent 

the parties would be able to negotiate 

more efficient segregation agreements 

and agree to investment arrangements 

that generate higher returns that are 

passed on to the counterparty, as is most 

often the case for uncleared swaps, the 

parties would benefit. The Commission 

believes that the simplification of the 

requirements and greater flexibility will 

therefore encourage more counterparties 

to elect to segregate initial margin. 

As noted above, in some 

circumstances, nonfinancial end-user 

counterparties might have less 

negotiating leverage when negotiating 

the terms of segregation agreements 

with experienced SDs or MSPs. 

Reducing the prescriptive requirements 

in the current rule could therefore 

reduce protections for the 

counterparties. However, it is not clear 

how incentives or disincentives may 

impact the negotiating choices of SDs 

and MSPs as well as the counterparties 

and therefore the extent to which the 

requirements provide protections. For 

example, regarding the choice of 

investments, the SD or MSP may seek to 

restrict investments to the most liquid 

investments that would be easily 

liquidated if the counterparty defaults. 

Those liquid investments, which would 

likely be similar to the investments 

permitted under Regulation 1.25, may in 

turn generate lower returns passed on to 

the SD/MSP’s counterparties. 

Conversely, the current regulations give 

little or no flexibility for counterparties 

and SDs or MSPs to negotiate mutually 

beneficial terms and consider other 

factors such as the broader financial 

relationship between the parties. 

Furthermore, for nonfinancial end-user 

counterparties, the segregation of initial 

margin is discretionary. If the 

counterparties have no voice in how 

segregated initial margin is invested, 

there may be less incentive for the 

counterparty to elect to require 

segregation. 

The Commission believes that the 

proposed changes to subpart L might 

lead to reduced costs for registrants, 

because they would no longer have to 

comply with some of the more 

prescriptive requirements imposed by 

the regulations. The Commission is, 

however, unable to quantify the 

potential cost savings because the cost 

savings depend on numerous factors 

that are particular to each SD or MSP 


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42See 7 U.S.C. 19(b). 

and each counterparty relationship. For 

example, the factors affecting the costs 

involved could include: The size and 

complexity of an SD’s dealing activities, 

the complexity of the swap transactions, 

the level of sophistication of each 

counterparty, the degree to which 

automated notice technologies may be 

used to satisfy these requirements, and 

the nature of the custodial and 

investment documents in particular 

segregation arrangements. 

(ii) Section 15(a) Considerations 

a. Protection of Market Participants and 

the Public 

Subpart L is intended to provide 

counterparties to SDs and MSPs with 

notice of the right to elect to segregate 

initial margin. The Commission 

recognizes that the proposed changes to 

make the regulations less prescriptive 

might potentially negatively impact the 

goal of protecting market participants by 

removing specific requirements for the 

segregation agreements. However, the 

Commission is of the view that the 

intended purpose and benefits of 

subpart L remain in place because the 

Proposal continues to implement the 

statutory requirements. In addition, the 

parties and the selected custodian 

would now have the flexibility to 

establish requirements for margin 

segregation through negotiated contracts 

that meet their respective needs, thereby 

providing market participants with the 

flexibility and opportunity to protect 

themselves better by contract. Finally, 

the greater flexibility provided by the 

amended regulations may increase the 

voluntary use of initial margin 

segregation by counterparties, a process 

that was intended to provide better 

protection for the counterparty in the 

event of default by the SD or MSP. 

b. Efficiency, Competitiveness, and 

Financial Integrity of Markets 

Subpart L promotes the financial 

integrity of markets by providing for the 

protection of counterparty collateral and 

by mitigating systemic risk that may 

result from the loss of access to the 

collateral in the event of a counterparty 

default. As discussed above, given that 

registrants would still be expected to 

enter into segregation arrangements 

with counterparties that elect to 

segregate, and, with the amendments, 

registrants would now be able to 

develop segregation arrangements 

tailored to their businesses and swap 

transactions, the Commission is of the 

view that the proposed changes likely 

would have a positive impact on market 

integrity. 

The Commission preliminarily 

believes that the proposed amendments 

will not have a significant impact on the 

competiveness or efficiency of markets 

because this rulemaking only affects 

how collateral is protected and 

segregated but not how market 

participants elect to trade. 

c. Price Discovery 

The Commission believes the 

proposed amendments to subpart L will 

not have a significant effect on price 

discovery. 

d. Sound Risk Management 

Subpart L provides for the 

management and protection of 

counterparty collateral and therefore 

mitigates the risk of loss of access to the 

collateral, which loss can have an 

adverse impact on registrants, 

counterparties and the U.S. financial 

markets. As discussed, the proposed 

changes remove certain prescriptive 

requirements, but do not alter the 

overall principles of the existing 

requirements of subpart L. Therefore, 

the Commission is of the view that 

sound risk management practices will 

not be adversely impacted by the 

proposed changes. 

e. Other Public Interest Considerations 

The Commission has not identified 

any other public purpose considerations 

for the proposed changes to subpart L. 

(iii) Request for Comment 

The Commission invites comment on 

its preliminary consideration of the 

costs and benefits associated with the 

proposed changes to subpart L, 

especially with respect to the five 

factors the Commission is required to 

consider under CEA section 15(a). In 

addressing these areas and any other 

aspect of the Commission’s preliminary 

cost-benefit considerations, the 

Commission encourages commenters to 

submit any data or other information 

they may have quantifying and/or 

qualifying the costs and benefits of the 

proposal. The Commission also 

specifically requests comment on the 

following questions: 

• To what extent do the proposed 

amendments reduce or increase burdens 

and costs for SDs or MSPs or their 

counterparties? 

• To what extent do the proposed 

amendments impact collateral 

management risk considerations? 

• Will there be any effects on the 

financial system if initial margin is not 

invested pursuant to Regulation 1.25? If 

yes, please explain. 

• Are counterparties to SDs or MSPs 

at a substantial disadvantage when 

negotiating the terms for segregation 

arrangements that would no longer be 

required if the proposed amendments 

are adopted? Would that disadvantage 

cause them to receive unfair terms on 

those segregation arrangements? Are 

there mitigating factors? 

• Would the elimination of the 

requirement to list at least one nonaffiliated custodian and the cost of the 

custodial services have an effect on the 

selection of an independent custodian 

and the cost of the services to the nonSD/MSP counterparty? If yes, please 

explain. 

D. Antitrust Considerations 

Section 15(b) of the CEA requires the 

Commission to take into consideration 

the public interest to be protected by 

antitrust laws and endeavor to take the 

least anticompetitive means of 

achieving the purposes of the CEA, in 

issuing any order or adopting any 

Commission rule or regulation 

(including any exemption under section 

4(c) or 4c(b)), or in requiring or 

approving any bylaw, rule, or regulation 

of a contract market or registered futures 

association established pursuant to 

section 17 of the CEA.42

The Commission believes that the 

public interest to be protected by the 

antitrust laws is generally to protect 

competition. The Commission requests 

comment on whether the proposed rule 

implicates any other specific public 

interest to be protected by the antitrust 

laws. 

The Commission has considered the 

proposed rule to determine whether it is 

anticompetitive and has preliminarily 

identified no anticompetitive effects. 

The Commission requests comment on 

whether the proposed rule is 

anticompetitive and, if it is, what the 

anticompetitive effects are. 

Because the Commission has 

preliminarily determined that the 

proposed rule is not anticompetitive 

and has no anticompetitive effects, the 

Commission has not identified any less 

anticompetitive means of achieving the 

purposes of the Act. The Commission 

requests comment on whether there are 

less anticompetitive means of achieving 

the relevant purposes of the Act that 

would otherwise be served by adopting 

the proposed rule. 

List of Subjects in 17 CFR Part 23 

Custodians, Major swap participants, 

Margin, Segregation, Swap dealers, 

Swaps, Uncleared swaps. 

For the reasons stated in the 

preamble, the Commodity Futures 


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Trading Commission proposes to amend 

17 CFR part 23 as follows: 

PART 23—SWAP DEALERS AND 

MAJOR SWAP PARTICIPANTS 

■ 1. The authority citation for part 23 

continues to read as follows: 

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

6c, 6p, 6r, 6s, 6t, 9, 9a, 12, 12a, 13b, 13c, 16a, 

18, 19, 21. 

Section 23.160 also issued under 7 U.S.C. 

2(i); Sec. 721(b), Pub. L. 111–203, 124 Stat. 

1641 (2010). 

■ 2. Revise subpart L to read as follows: 

Subpart L—Segregation of Assets Held as 

Collateral in Uncleared Swap Transactions 

Sec. 

23.700 Definitions. 

23.701 Notification of right to segregation. 

23.702 Requirements for segregated initial 

margin. 

23.703 Investment of segregated initial 

margin. 

23.704 Requirements for non-segregated 

margin. 

Subpart L—Segregation of Assets Held 

as Collateral in Uncleared Swap 

Transactions 

§ 23.700 Definitions. 

As used in this subpart: 

Initial Margin means money, 

securities, or property posted by a party 

to a swap as performance bond to cover 

potential future exposures arising from 

changes in the market value of the 

position. 

Segregate means to keep two or more 

items in separate accounts, and to avoid 

combining them in the same transfer 

between two accounts. 

Variation Margin means a payment 

made by or collateral posted by a party 

to a swap to cover the current exposure 

arising from changes in the market value 

of the position since the trade was 

executed or the previous time the 

position was marked to market. 

§ 23.701 Notification of right to 

segregation. 

(a) At the beginning of the first swap 

transaction that provides for the 

exchange of Initial Margin, a swap 

dealer or major swap participant must 

notify the counterparty that the 

counterparty has the right to require that 

any Initial Margin the counterparty 

provides in connection with such 

transaction be segregated in accordance 

with §§ 23.702 and 23.703, except in 

those circumstances where segregation 

is mandatory pursuant to § 23.157 or 

rules adopted by the prudential 

regulators pursuant to section 

4s(e)(2)(A) of the Act. 

(b) The right referred to in paragraph 

(a) of this section does not extend to 

Variation Margin. 

(c) If the counterparty elects to 

segregate Initial Margin, the terms of 

segregation shall be established by 

written agreement. 

(d) A counterparty’s election, if 

applicable, to require segregation of 

Initial Margin or not to require such 

segregation, may be changed at the 

discretion of the counterparty upon 

written notice delivered to the swap 

dealer or major swap participant, which 

changed election shall be applicable to 

all swaps entered into between the 

parties after such delivery. 

§ 23.702 Requirements for segregated 

initial margin. 

(a) The custodian of Initial Margin, 

segregated pursuant to an election under 

§ 23.701, must be a legal entity 

independent of both the swap dealer or 

major swap participant and the 

counterparty. 

(b) Initial Margin that is segregated 

pursuant to an election under § 23.701 

must be held in an account segregated 

for, and on behalf of, the counterparty, 

and designated as such. Such an 

account may, if the swap dealer or major 

swap participant and the counterparty 

agree, also hold Variation Margin. 

(c) Any agreement for the segregation 

of Initial Margin pursuant to this section 

shall be in writing, shall include the 

custodian as a party, and shall provide 

that any instruction to withdraw Initial 

Margin shall be in writing and that 

notification of the withdrawal shall be 

given immediately to the nonwithdrawing party. 

§ 23.703 Investment of segregated initial 

margin. 

The swap dealer or major swap 

participant and the counterparty may 

enter into any commercial arrangement, 

in writing, regarding the investment of 

Initial Margin segregated pursuant to 

§ 23.701 and the related allocation of 

gains and losses resulting from such 

investment. 

§ 23.704 Requirements for non-segregated 

margin. 

(a) Each swap dealer or major swap 

participant shall report to each 

counterparty that does not choose to 

require segregation of Initial Margin 

pursuant to § 23.701(a), on a quarterly 

basis, no later than the fifteenth 

business day after the end of the quarter, 

that the back office procedures of the 

swap dealer or major swap participant 

relating to margin and collateral 

requirements are in compliance with the 

agreement of the counterparties. 

(b) The obligation specified in 

paragraph (a) of this section shall apply 

no earlier than the 90th calendar day 

after the date on which the first swap is 

transacted between the counterparty 

and the swap dealer or major swap 

participant. 

Issued in Washington, DC, on July 24, 

2018, by the Commission. 

Christopher Kirkpatrick, 

Secretary of the Commission. 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendices to Segregation of Assets 

Held as Collateral in Uncleared Swap 

Transactions—Commission Voting 

Summary, Chairman’s Statement, and 

Commissioner’s Statement 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Giancarlo and 

Commissioners Quintenz and Behnam voted 

in the affirmative. No Commissioner voted in 

the negative. 

Appendix 2—Statement of Chairman J. 

Christopher Giancarlo 

After more than four years of administering 

the final rules in subpart L of part 23 

(Commission Regulations 23.700–23.704), 

CFTC staff have observed that the detailed 

requirements of these regulations have been 

difficult and burdensome for swap dealers to 

satisfy. The requirements have also caused 

some confusion by end user counterparties 

who rely on our markets to hedge 

commercial risk. These observations were 

supported by comments made in response to 

the Commission’s Project KISS initiative. 

Congress mandated that counterparties of 

swap dealers be given a choice regarding 

whether or not they elect the protections that 

come from segregation of initial margin 

collateral, which I support. Part of this 

important decision is protected by making 

sure the counterparty clearly, and easily, 

understands its rights. It appears that very 

few swap counterparties have exercised their 

right to make that choice. Part of the 

reluctance may be because that choice is 

accompanied by a range of overly 

complicated regulatory requirements and 

obligations. 

The swaps market is a marketplace of 

professional market participants. It is closed 

to retail participation. Public policy is not 

well served by imposing prescriptive 

consumer and investor protections in 

markets that exclusively serve professional 

market participants. 

This proposal looks to reduce the burdens, 

costs and confusion that have proved 

counterproductive and discouraged the 

election of segregation. This proposal will 

also make it more efficient for counterparties, 

such as pension funds, insurance companies, 

and community banks, to be able to elect 

segregation and receive those protections 

while hedging their risk in the swaps 

markets. 


daltland on DSKBBV9HB2PROD with PROPOSALS
Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Proposed Rules 36493 

1 17 CFR 23.150–23.159, 23.161. 

2Protection of Collateral of Counterparties to 

Uncleared Swaps; Treatment of Securities in a 

Portfolio Margining Account in a Commodity 

Broker Bankruptcy, 78 FR 66621, 66623 (Nov. 6, 

2013). 

3 Id. at 66623 and 66625. 

4 Id. at 66625. 

5 Id.; 17 CFR 23.701(e). 

6 7 U.S.C. 6s(l)(1)(A) (emphasis added). 

7 78 FR at 66635 (emphasis added); see also 78 

FR at 66633 (adding that annual notice offers this 

benefit ‘‘without requiring excessive or repetitive 

notification in cases where a counterparty engages 

in multiple swaps with a particular SD or MSP over 

the course of a year.’’). 

8 78 FR at 66633 (‘‘The Commission believes that 

the cost of requiring SDs and MSPs to deliver one 

notification per year to each counterparty is not 

overly burdensome, particularly when one 

considers the importance of the counterparty’s 

decision to require segregation and the large dollar 

volume of business that is typically done by SDs 

and MSPs.’’). 

9 17 CFR 23.701(a)(2) and (3). While Commission 

Regulation 23.701(d) requires the SD or MSP to 

obtain confirmation of receipt of the segregation 

notification, since 2014, the Commission has 

permitted SDs and MSPs to rely on negative 

consent for purposes of Regulation 23.701(d), 

provided that the notice under Regulation 23.701(a) 

includes a prominent and unambiguous statement 

to that effect. See CFTC Staff Letter No. 14–132 

(Oct. 31, 2014) at 7, available at https://

www.cftc.gov/sites/default/files/idc/groups/public/ 

@lrlettergeneral/documents/letter/14-132.pdf; See 

also Transcript of the NFA Swap Dealer 

Examinations Webinar at 6 (Jan. 18, 2018), available 

at https://www.nfa.futures.org/members/memberresources/files/transcripts/sdexamswebinar

transcriptjan2018.pdf. 

10See 78 FR at 66624. 

As part of the proposal, the Commission 

would permit more flexibility in custodial 

arrangements and margin investment. Rather 

than the current prescriptive requirements of 

the regulation, it would leave it up to 

commercial negotiation by professional 

trading counterparties. Another change is 

removing the overly prescriptive requirement 

that initial margin segregation be invested 

pursuant to Commission Regulation 1.25, in 

the anticipation that doing so could 

encourage more segregation elections. 

Enabling the election of segregation is a 

bipartisan goal, starting with a unanimous 

Commission rulemaking by a previous 

commission. Now with time and experience, 

we see that this goal could be more easily 

met, and changes to the rules are appropriate 

to better further these important public 

policy objectives. 

I support this proposed rule from the 

Division of Swap Dealer & Intermediary 

Oversight. I look forward to hearing 

comments on the proposal. 

Appendix 3—Concurring Statement of 

Commissioner Rostin Behnam 

I respectfully concur with the Commodity 

Futures Trading Commission’s (the 

‘‘Commission’’ or ‘‘CFTC’’) approval of its 

proposed rule (the ‘‘Proposal’’) regarding 

amendments to subpart L of the 

Commission’s Regulations (‘‘Segregation of 

Assets Held as Collateral in Uncleared Swap 

Transactions’’ consisting of Regulations 

23.700 through 23.704), which implement 

Section 4s(l) of the Commodity Exchange Act 

(‘‘CEA’’ or the ‘‘Act’’). While I have strong 

reservations about the Commission’s 

proposed interpretation of CEA section 4s(l) 

and its slash and burn approach to 

‘‘simplify’’ requirements for swap dealers 

(‘‘SDs’’) and major swap participants 

(‘‘MSPs’’) absent meaningful consideration of 

the impact on swap counterparties, I am 

hopeful that the Proposal’s solicitation of 

comments on these key points will produce 

a balanced record from which to adopt a final 

rule that more precisely simplifies the 

current requirements and provides tailored 

regulatory relief. 

Since joining the Commission, I have 

emphasized both my strong opposition to any 

rollbacks of Dodd-Frank initiatives and my 

belief that, while a more principles-based 

approach may be suitable in certain 

situations, any changes must be narrowly 

targeted to ensure that core reforms remain 

whole and intact. I am concerned that this 

Proposal forgoes a surgical approach in favor 

of a blunt, insensitive strike at the purpose 

of the statute and implementing regulations. 

While the preamble purports that the 

Proposal is supported by Commission 

experience, in reality the Commission 

heavily relies on a few comment letters from 

a limited segment of the market submitted in 

response to its ‘‘Project KISS’’ initiative. In 

the absence of corroborative evidence from 

those most impacted by the Proposal—nonfinancial end-users and financial end-users 

without ‘‘material swaps exposure,’’ as 

defined in the CFTC Margin Rule 1—I am 

concerned that the Commission’s proposed 

amendments take too much of a shoot first, 

ask questions later tactic. While I am 

supportive of the Project KISS initiative, I 

believe that the exercise requires a more 

diligent approach to evaluating the potential 

impact of proposing amendments to existing 

rules. 

My greatest concerns with the Proposal 

relate to the Commission’s proposed 

interpretation of the notice requirement in 

CEA section 4s(l)(1) and the proposed 

removal of all limitations on the investment 

of margin that is segregated pursuant to an 

election under Regulation 23.701. As I 

explain below, I am concerned that the 

Proposal’s focus on reducing burdens to SDs 

and MSPs through amending the rules in 

subpart L may obscure valid issues regarding 

implementation—matters which may be 

resolved through more precise amendments 

with less chance of negatively impacting 

market participants. 

The Commission previously interpreted 

the language in CEA section 4s(l)(1)(A) ‘‘as a 

segregation right that can be elected or 

renounced by the SD’s or MSP’s 

counterparty.’’ 2 Citing the plain language of 

the statute, the Commission noted Congress’s 

emphasis on the importance of the ability of 

a counterparty to elect to have its collateral 

segregated by describing segregation as a 

‘‘right.’’ 3 Regarding this ‘‘right,’’ the 

Commission understood that, ‘‘the statute 

does not merely grant counterparties the legal 

right to segregation; it specifically requires 

that the existence of this right be 

communicated to them.’’ 4 At a minimum, 

the Commission determined that this 

requirement is met when an SD or MSP 

provides notification to a counterparty at 

least once in each calendar year in which the 

SD or MSP enters a swap with the 

counterparty.5 At the time, the Commission 

recognized that requiring notification on a 

transaction-by-transaction basis—e.g., ‘‘at the 

beginning of a swap transaction,’’ 6 may be 

overly costly and burdensome, and that 

annual notification ‘‘ensures that the right to 

segregation is called to the attention of the 

counterparties reasonably close in time to the 

point at which they make decisions regarding 

the handling of collateral for particular 

swaps transactions.’’ 7 While the Commission 

considered requiring only an initial 

notification, it rejected that approach, noting 

the importance of the counterparty’s right to 

elect to have its collateral segregated, and the 

minimal administrative burden on SDs and 

MSPs.8

The Commission and subpart L are largely 

silent with regard to content and delivery 

manner and method of the notice required by 

CEA section 4s(l)(1)(A) other than provisions 

in Regulation 23.701(a)(1) and (2) requiring 

the notification to identify one or more 

creditworthy, independent custodians and to 

include information regarding the price of 

segregation for each custodian, to the extent 

the SD or MSP has such information.9

Though not specifically required by CEA 

section 4s(l)(1)(A), the Commission 

determined that this limited set of 

disclosures represents information material 

to a counterparty’s informed decision making 

process regarding exercise of the right to 

segregation and when considering a 

segregation package offered by an SD or 

MSP.10

The Proposal would amend subpart L, in 

part, to require a single, one-time notification 

to a counterparty of their right to require 

segregation of any initial margin the 

counterparty provides in connection with all 

transactions following the first transaction 

that provides for the exchange of initial 

margin. The Proposal would also entirely 

remove Regulations 23.701(a)(2) and (3), 

generally finding that, since very few 

counterparties elect to require segregation, 

the underlying activity of ‘‘confirming which 

custodians are available’’ is ‘‘unnecessarily 

burdensome’’ and that pricing for segregation 

may vary, is normally subject to negotiation, 

and can be discussed when the counterparty 

indicates an interest in segregation. 

Consistent with CEA section 4s(l)(1)(B), the 

Proposal preserves the ability of a 

counterparty to change its election upon 

written notice. 

In proposing these amendments, the 

Commission appears to be taking the view 

that a counterparty’s decision with regard to 

segregation is made with respect to a trading 

relationship with a particular SD or MSP at 

the relationship’s inception, and that while 

these types of counterparties are 

sophisticated enough to elect segregation and 

negotiate the terms of segregation 

arrangements, the annual receipt of a notice 

reminding them that they may change their 

election at any time is confusing. It also 

assumes that evidence of minimal uptake of 


daltland on DSKBBV9HB2PROD with PROPOSALS
36494 Federal Register / Vol. 83, No. 146 / Monday, July 30, 2018 / Proposed Rules 

11 Id. at 66621 and 66632. 

12Protection of Collateral of Counterparties to 

Uncleared Swaps; Treatment of Securities in a 

Portfolio Margining Account in a Commodity 

Broker Bankruptcy, 75 FR 75432, 75437 (proposed 

Dec. 3, 2010). 

13 I also believe that the Commission can respond 

to specific burdens identified by SDs and MSPs by, 

for example, codifying staff interpretive guidance. 

See, e.g. Letter from the Financial Services 

Roundtable at 56 (Sept. 30, 2017) (urging the 

Commission to codify its interpretation in CFTC 

Staff Letter No. 14–132 with respect to SDs’ ability 

to rely on negative consent), https://

comments.cftc.gov/PublicComments/ 

ViewComment.aspx?id=61427&SearchText=. 

14For example, through the use of additional 

clauses in customer onboarding or relationship 

documentation as a means to append the required 

notification and disclosures to each new swap 

confirmation thereby ensuring and simultaneously 

documenting that the counterparty is notified of 

their right to require segregation at least at the 

beginning of each swap transaction. 

15See CFTC Staff Letter No. 14–132, supra note 

9. 

the election to segregate indicates that 

subpart L is largely superfluous. 

While it may be true that swap 

counterparties have not elected segregation 

in droves, CEA section 4s(l) and subpart L are 

not intended to advance any particular 

outcome. Rather they concern the rights of 

counterparties to SDs and MSPs and aim to 

increase the safety in the market for 

uncleared swaps by creating a selfeffectuating requirement for the segregation 

of counterparty initial margin in an entity 

legally separate from the SD or MSP.11 As 

previously noted by the Commission in 

proposing subpart L, a goal of the regulation 

was to ‘‘increase the likelihood that any lack 

of use of segregated collateral accounts by 

uncleared swaps counterparties is the result 

of genuine choices by counterparties and 

reduce the likelihood that it is the result of 

inertia, market power, or other market 

imperfections.’’ 12 Indeed, based on some of 

the preamble discussion, it may be that we 

should consider the possibility that swap 

counterparties are not electing segregation 

specifically because the current system of 

annual notification does not provide them 

adequate notice of their ongoing right to 

segregation. If that is the case, the 

appropriate Commission response may be 

more (or clearer) notification, rather than the 

reduction in notification proposed today. 

I am concerned that the Commission’s 

proposal could undermine the right to 

segregation as well as Congressional intent by 

removing the periodic notification and 

minimal disclosures currently required by 

subpart L. I believe there are prescriptive 

elements of subpart L that can be removed 

with little impact to counterparties.13

However, I am concerned by the Proposal’s 

reliance on representations by SDs and 

unverified assumptions regarding 

counterparty behavior to justify regulatory 

rollbacks in the absence of further 

examination of whether and how the manner 

in which the annual notice requirement is 

currently implemented has contributed to 

claims of confusion and burden. I am also 

concerned that the Proposal may discourage 

commenters from suggesting alternative 

means of complying with the current 

language in Regulation 23.701(a) which may 

better preserve Congressional intent.14

I am similarly concerned that the 

Proposal’s removal of the requirement in 

Regulation 23.703 that limits the investment 

of initial margin segregated pursuant to 

subpart L to be invested consistent with 

Commission Regulation 1.25 is a knee-jerk 

response to a single Project KISS comment 

letter that ignores current practice and 

presupposes that the rollback will encourage 

more counterparties to elect to segregate 

pursuant to subpart L, which, as stated 

above, is not the goal of the statute or 

implementing regulation. While I am not 

opposed to permitting greater flexibility with 

regard to the investment of initial margin, I 

would have preferred that the Commission 

seek additional information regarding 

whether and how the current limitations in 

Regulation 23.703 have impacted 

counterparties and their decision making 

under subpart L before proposing alternative 

regulatory language. 

I commend the Commission and its staff 

for engaging through Project KISS in efforts 

to identify and reduce unnecessary burdens 

in the Commission regulations. I appreciate 

staff’s consideration and inclusion of several 

of my suggested edits to this Proposal. To be 

clear, I believe the Proposal provides for 

many sound improvements to subpart L that 

respond to ongoing concerns and confusion 

created by the finalization of the CFTC and 

Prudential Regulator Margin Rules and CFTC 

interpretive guidance.15 However, where the 

Proposal aims to strip out regulatory 

provisions that the Commission previously 

determined were essential to effectuating the 

language and purpose of CEA section 4s(l), I 

believe the Commission may be engaging in 

shortsighted and unnecessary rollbacks to the 

detriment of the swap counterparties subpart 

L is intended to protect. 

[FR Doc. 2018–16176 Filed 7–27–18; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF LABOR 

Occupational Safety and Health 

Administration 

29 CFR Part 1904 

[Docket No. OSHA–2013–0023] 

RIN 1218–AD17 

Tracking of Workplace Injuries and 

Illnesses 

AGENCY: Occupational Safety and Health 

Administration (OSHA), Labor. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

amend OSHA’s recordkeeping 

regulation by rescinding the 

requirement for establishments with 250 

or more employees to electronically 

submit information from OSHA Forms 

300 and 301. These establishments will 

continue to be required to submit 

information from their Form 300A 

summaries. OSHA is amending its 

recordkeeping regulations to protect 

sensitive worker information from 

potential disclosure under the Freedom 

of Information Act (FOIA). OSHA has 

preliminarily determined that the risk of 

disclosure of this information, the costs 

to OSHA of collecting and using the 

information, and the reporting burden 

on employers are unjustified given the 

uncertain benefits of collecting the 

information. OSHA believes that this 

proposal maintains safety and health 

protections for workers while also 

reducing the burden to employers of 

complying with the current rule. OSHA 

seeks comment on this proposal, 

particularly on its impact on worker 

privacy, including the risks posed by 

exposing workers’ sensitive information 

to possible FOIA disclosure. In addition, 

OSHA is proposing to require covered 

employers to submit their Employer 

Identification Number (EIN) 

electronically along with their injury 

and illness data submission. 

DATES: Comments must be submitted by 

September 28, 2018. 

ADDRESSES: You may submit comments, 

identified by docket number OSHA– 

2013–0023, or regulatory information 

number (RIN) 1218–AD17, by any of the 

following methods: 

Electronically: You may submit 

comments electronically at https://

www.regulations.gov/, which is the 

federal e-rulemaking portal. Follow the 

instructions on the website for making 

electronic submissions; 

Fax: If your submission, including 

attachments, does not exceed 10 pages, 

you may fax it to the OSHA docket 

office at (202) 693–1648; 

Regular mail, express mail, hand 

delivery, or messenger/courier service 

(hard copy): You may submit your 

materials to the OSHA Docket Office, 

Docket No. OSHA–2013–0023, Room N– 

3653, U.S. Department of Labor, 200 

Constitution Avenue NW, Washington, 

DC 20210; telephone: (202) 693–2350 

(TTY (887) 889–5627). OSHA’s Docket 

Office accepts deliveries (hand 

deliveries, express mail, and messenger/ 

courier service) from 10 a.m. to 3 p.m. 

ET, weekdays. 

Instructions for submitting comments: 

All submissions must include the 

docket number (Docket No. OSHA– 

2013–0023) or the RIN (RIN 1218– 

AD17) for this rulemaking. Because of 

security-related procedures, submission 

by regular mail may result in significant 

delay. Please contact the OSHA docket 

office (telephone: (202) 693–2350; 

email: technicaldatacenter@dol.gov) for 


daltland on DSKBBV9HB2PROD with PROPOSALS