2136 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

1See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Pub. L. 111–203, 124 

Stat. 1376 (2010). The text of the Dodd-Frank Act 

may be accessed at http://www.cftc.gov./

LawRegulation/OTCDERIVATIVES/index.htm. 

2Pursuant to Section 701 of the Dodd-Frank Act, 

Title VII may be cited as the ‘‘Wall Street 

Transparency and Accountability Act of 2010.’’ 

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

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 45 

RIN 3038–AD19 

Swap Data Recordkeeping and 

Reporting Requirements 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final rule. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) is adopting rules to implement 

the Commodity Exchange Act (‘‘CEA’’ or 

‘‘Act’’) relating to swap data 

recordkeeping and reporting 

requirements. These sections of the CEA 

were added by the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (‘‘Dodd-Frank Act’’). The rules 

being adopted apply to swap data 

recordkeeping and reporting 

requirements for swap data repositories, 

derivatives clearing organizations, 

designated contract markets, swap 

execution facilities, swap dealers, major 

swap participants, and swap 

counterparties who are neither swap 

dealers nor major swap participants. 

The recordkeeping and reporting 

requirements of this rule further the 

goals of the Dodd-Frank Act to reduce 

systemic risk, increase transparency and 

promote market integrity within the 

financial system. 

DATES: The effective date of this rule is 

March 13, 2012. Compliance dates: (1) 

Swap execution facilities, designated 

contract markets, derivatives clearing 

organizations, swap data repositories, 

swap dealers, and major swap 

participants shall commence full 

compliance with this part with respect 

to credit swaps and interest rate swaps 

on the later of: July 16, 2012; or 60 

calendar days after the publication in 

the Federal Register of the later of the 

Commission’s final rule defining the 

term ‘‘swap’’ or the Commission’s final 

rule defining the terms ‘‘swap dealer’’ 

and ‘‘major swap participant. ’’ (2) Swap 

execution facilities, designated contract 

markets, derivatives clearing 

organizations, swap data repositories, 

swap dealers, and major swap 

participants shall commence full 

compliance with this part with respect 

to equity swaps, foreign exchange 

swaps, and other commodity swaps on 

or before 90 days after the compliance 

date for credit swaps and interest rate 

swaps. (3) Non-SD/MSP counterparties 

shall commence full compliance with 

this part with respect to all swaps on or 

before 90 days after the compliance date 

applicable to swap execution facilities, 

designated contract markets, derivatives 

clearing organizations, swap data 

repositories, swap dealers, and major 

swap participants with respect to equity 

swaps, foreign exchange swaps, and 

other commodity swaps. 

FOR FURTHER INFORMATION CONTACT: 

David Taylor, Associate Director, 

Division of Market Oversight, (202) 418– 

5488, dtaylor@cftc.gov, or Anne 

Schubert, Economist, Division of Market 

Oversight, (202) 418–5436, 

aschubert@cftc.gov; Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW., 

Washington, DC 20851. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

A. Introduction 

B. Swap Data Provisions of the Dodd-Frank 

Act 

C. International Considerations 

D. Consultations With Other U.S. Financial 

Regulators 

E. Summary of the Proposed Part 45 Rule 

1. Fundamental Goal 

2. Swap Recordkeeping 

3. Swap Data Reporting: Creation Data and 

Continuation Data 

4. Unique Identifiers 

6. Third-Party Facilitation of Reporting 

7. Reporting a Swap to a Single SDR 

8. Reporting Swaps in an Asset Class Not 

Accepted by Any SDR 

9. Data Standards 

10. Reporting Errors and Omissions in 

Previously Reported Data 

F. Overview of Comments Received 

II. Part 45 of the Commission’s Regulations: 

The Final Rules 

A. Recordkeeping Requirements—§ 45.2 

1. Proposed Rule 

2. Comments Received 

3. Final Rule: § 45.2 

B. Swap Data Reporting: Creation Data— 

§ 45.3 

1. Proposed Rule 

2. Comments Received 

3. Final Rule: § 45.3 

C. Swap Data Reporting: Continuation 

Data—§ 45.4 

1. Proposed Rule 

2. Comments Received 

3. Final Rule: § 45.4 

D. Summary of Creation Data and 

Continuation Data Reporting—§§ 45.3 

and 45.4 

F. Unique Swap Identifiers—§ 45.5 

1. Proposed Rule 

2. Comments Received 

3. Final Rule: § 45.5 

G. Legal Entity Identifiers—§ 45.6 

1. Proposed Rule 

2. Comments Received 

3. Final Rule: § 45.6 

H. Unique Product Identifiers—§ 45.7 

1. Proposed Rule 

2. Comments Received 

3. Final Rule: § 45.7 

I. Determination of Which Counterparty 

Must Report—§ 45.8 

1. Proposed Rule 

2. Comments Received 

3. Final Rule: § 45.8 

J. Third-Party Facilitation of Swap Data 

Reporting—§ 45.9 

1. Proposed Rule 

2. Comments Received 

3. Final Rule: § 45.9 

K. Reporting to a Single Swap Data 

Repository—§ 45.10 

1. Proposed Rule 

2. Comments Received 

3. Final Rule: § 45.10 

L. Data Reporting for Swaps in a Swap 

Asset Class Not Accepted by Any Swap 

Data Repository—§ 45.11 

1. Proposed Rule 

2. Comments Received 

3. Final Rule: § 45.11 

M. Voluntary Supplemental Reporting— 

§ 45.12 

1. Proposed Rule 

2. Comments Received 

3. Final Rule: § 45.12 

N. Required Data Standards—§ 45.13 

1. Proposed Rule 

2. Comments Received 

3. Final Rule: § 45.13 

O. Reporting of Errors and Omissions in 

Previously Reported Data—§ 45.14 

1. Proposed Rule 

2. Comments Received 

3. Final Rule: § 45.14 

III. Related Matters 

A. Regulatory Flexibility Act 

B. Paperwork Reduction Act 

1. Introduction 

2. Proposed Information Collection 

3. Comments on Proposed Information 

Collection 

4. Revised Information Collection 

Estimates 

C. Consideration of Costs and Benefits 

1. Introduction 

2. General Cost-Benefit Comments 

Received 

3. Recordkeeping 

4. Swap Data Reporting 

5. Unique Identifiers 

IV. Compliance Dates 

A. Proposed Rule 

B. Comments Received 

1. Initial Compliance Date 

2. Phasing in the Start of Reporting 

C. Determination of Compliance Dates 

1. Initial Compliance Dates 

2. Phasing in the Start of Reporting 

3. Compliance Dates 

Final Rules 

I. Background 

A. Introduction 

On July 21, 2010, President Obama signed 

into law the Dodd-Frank Act.1 Title VII of the 

Dodd-Frank Act 2 amended the CEA 3 to 

establish a comprehensive new regulatory 

framework for swaps and security-based 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2137 

4See also CEA section 1a(40)(E). 

5Regulations governing core principles and 

registration requirements for, and the duties of, 

SDRs are the subject of part 49 of this chapter. 

6CEA section 2(a)(13)(G). 

7Senator Blanche Lincoln, ‘‘Wall Street 

Transparency and Accountability Act,’’ 

Congressional Record, July 15, 2010, at S5905. 

8See CEA section 4r(a)(3). 

9CEA section 4r(c)(2) requires individuals or 

entities that enter into a swap transaction that is 

neither cleared nor accepted by an SDR to make 

required books and records open to inspection by 

any representative of the Commission; an 

appropriate prudential regulator; the Securities and 

Exchange Commission; the Financial Stability 

Oversight Council; and the Department of Justice. 

10CEA sections 4r(a)(1)(B) and 4r(c). 

11CEA section 4r(d). 

swaps. The legislation was enacted to reduce 

systemic risk, increase transparency, and 

promote market integrity within the financial 

system by, among other things: Providing for 

the registration and comprehensive 

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

swap participants (‘‘MSPs’’); imposing 

clearing and trade execution requirements on 

standardized derivative products; creating 

rigorous recordkeeping and data reporting 

regimes with respect to swaps, including real 

time reporting; and enhancing the 

Commission’s rulemaking and enforcement 

authorities with respect to, among others, all 

registered entities, intermediaries, and swap 

counterparties subject to the Commission’s 

oversight. 

B. Swap Data Provisions of the Dodd-Frank 

Act 

To enhance transparency, promote 

standardization, and reduce systemic risk, 

Section 727 of the Dodd-Frank Act added to 

the CEA new section 2(a)(13)(G), which 

requires all swaps, whether cleared or 

uncleared, to be reported to swap data 

repositories (‘‘SDRs’’),4 which are new 

registered entities created by section 728 of 

the Dodd-Frank Act to collect and maintain 

data related to swap transactions as 

prescribed by the Commission, and to make 

such data electronically available to 

regulators.5 New section 21(b) of the CEA, 

added by section 728 of the Dodd-Frank Act, 

directs the Commission to prescribe 

standards for swap data recordkeeping and 

reporting. Specifically, CEA section 

21(b)(1)(A) provides that: 

The Commission shall prescribe standards 

that specify the data elements for each swap 

that shall be collected and maintained by 

each registered swap data repository. 

These standards are to apply to both 

registered entities and counterparties 

involved with swaps. 

CEA section 21(b)(1)(B) provides that: 

In carrying out [the duty to prescribe data 

element standards], the Commission shall 

prescribe consistent data element standards 

applicable to registered entities and reporting 

counterparties. 

CEA section 21 also directs the 

Commission to prescribe data standards 

for SDRs. Specifically, CEA section 

21(b)(2) provides that: 

The Commission shall prescribe data 

collection and data maintenance standards 

for swap data repositories. 

These standards are to be comparable 

to those for clearing organizations. CEA 

section 21(b)(3) provides that: 

The [data] standards prescribed by the 

Commission under this subsection shall be 

comparable to the data standards imposed by 

the Commission on derivatives clearing 

organizations in connection with their 

clearing of swaps. 

In addition, CEA section 21(c)(3) 

provides that, once the data elements 

prescribed by the Commission are 

reported to an SDR, the SDR shall: 

Maintain the data [prescribed by the 

Commission for each swap] in such form, in 

such manner, and for such period as may be 

required by the Commission. 

Section 727 of the Dodd Frank Act, 

which added to the CEA new section 

2(a)(13), provides that ‘‘Each swap 

(whether cleared or uncleared) shall be 

reported to a registered swap data 

repository.’’ 6 Section 729 of the DoddFrank Act added to the CEA new section 

4r, which addresses reporting and 

recordkeeping requirements for 

uncleared swaps. Pursuant to this 

section, each swap not accepted for 

clearing by any derivatives clearing 

organization (‘‘DCO’’) must be reported 

to an SDR (or to the Commission if no 

repository will accept the swap). In a 

July 15, 2010 floor statement concerning 

swap data reporting as well as other 

aspects of the Dodd-Frank Act, Senator 

Blanche Lincoln emphasized that these 

provisions should be interpreted as 

complementary to one another to assure 

consistency between them, stating that: 

‘‘All swap trades, even those which are 

not cleared, would still be reported to 

regulators, a swap data repository, and 

subject to the public reporting 

requirements under the legislation.’’ 7

CEA section 4r ensures that at least 

one counterparty to a swap has an 

obligation to report data concerning that 

swap. The determination of this 

reporting counterparty depends on the 

status of the counterparties involved. If 

only one counterparty is an SD, the SD 

is required to report the swap. If one 

counterparty is an MSP, and the other 

counterparty is neither an SD nor an 

MSP (‘‘non-SD/MSP counterparty’’), the 

MSP must report. Where the 

counterparties have the same status— 

two SDs, two MSPs, or two non-SD/ 

MSP counterparties—the counterparties 

must select a counterparty to report the 

swap.8

In addition, CEA section 4r provides 

for reporting to the Commission of 

swaps neither cleared nor accepted by 

any SDR. Under this provision, 

counterparties to such swaps must 

maintain books and records pertaining 

to their swaps in the manner and for the 

time required by the Commission, and 

must make these books and records 

available for inspection by the 

Commission or other specified 

regulators if requested to do so.9 It also 

requires counterparties to such swaps to 

provide reports concerning such swaps 

to the Commission upon its request, in 

the form and manner specified by the 

Commission.10 Such reports must be as 

comprehensive as the data required to 

be collected by SDRs.11

C. International Considerations 

Section 752 of the Dodd-Frank Act 

directs the Commission to consult and 

coordinate with foreign regulatory 

authorities regarding establishment of 

consistent international standards for 

the regulation of swaps and swap 

entities. The Commission is committed 

to a cooperative international approach 

to swap recordkeeping and swap data 

reporting, and has consulted extensively 

with various foreign regulatory 

authorities in the process of 

promulgating both its proposed and 

final part 45 rules. During this process, 

the Commission has served as Co-Chair 

of the Committee on Payment and 

Settlement Systems (‘‘CPSS’’) and the 

International Organization of Securities 

Commissions (‘‘IOSCO’’) Task Force 

that has prepared a Report on OTC 

Derivatives Data Reporting and 

Aggregation Requirement for 

presentation to the Financial Stability 

Board (‘‘FSB’’) in December 2011. The 

Commission also served as a member of 

the organizing committee for the FSB 

Legal Entity Identifier Workshop held in 

Basel, Switzerland in September 2011. 

In the course of preparing the proposed 

and final part 45 rules, Commission staff 

met with financial regulatory authorities 

from Argentina, Australia, Brazil, 

Canada, China, Dubai (United Arab 

Emirates), France, Germany, Hong Kong, 

Indonesia, India, Italy, Japan, Korea, 

Mexico, the Netherlands, Portugal, 

Russia, Saudi Arabia, Singapore, Spain, 

Sweden, Switzerland, Turkey, and the 

United Kingdom. Staff also met with 

representatives of FSB, IOSCO, CPSS, 

the International Monetary Fund, the 

FSB Data Gaps and Systemic Linkages 

Group, the Bank for International 

Settlements, the Committee on the 

Global Financial System, the OTC 

Derivatives Regulatory Forum, the OTC 

Derivatives Supervisors Group, the 

European Central Bank, the European 

Commission, the European Union, the 

mstockstill on DSK4VPTVN1PROD with RULES2

2138 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

12The G–20 include leaders and representatives 

of the core members of the G–20 major economies, 

which comprises 19 countries and the European 

Union which is represented by its two governing 

bodies, the European Council and the European 

Commission. 

13 Leaders’ Statement, Pittsburgh Summit, 

September 25, 2009, at 9; available at http:// 

www.g20.org/Documents/ 

pittsburgh_summit_leaders_statement_250909.pdf. 

14The proposed rule also cross-referenced the 

detailed recordkeeping requirements specific to 

DCMs, SEFs, DCOs, SDs, and MSPs included in 

rulemakings specific to those entities and 

counterparties. 

Commission of European Securities 

Regulators, the European Systemic Risk 

Board, the International Organisation for 

Standardisation (‘‘ISO’’), and the 

Association of National Numbering 

Agencies (‘‘ANNA’’). 

In September 2009, the G–20 12

leaders made a number of commitments 

regarding OTC derivatives, including 

the statement that: 

All standardized OTC derivative contracts 

should be traded on exchanges or electronic 

trading platforms, where appropriate, and 

cleared through central counterparties by 

end-2012 at the latest. OTC derivative 

contracts should be reported to trade 

repositories.13

The Commission’s part 45 rules, if 

adopted by the Commission, which 

requires reporting of swap data to SDRs 

to begin in mid-2012, may be the first 

set of regulatory requirements in the 

world to fulfill this commitment. 

D. Consultations With Other U.S. 

Financial Regulators 

In developing the swap data 

recordkeeping and reporting rule, 

Commission staff has also engaged in 

extensive consultations with U.S. 

domestic financial regulators. The 

agencies and institutions consulted 

include the Federal Reserve Board of 

Governors (‘‘Federal Reserve’’) 

(including the Federal Reserve Bank of 

New York), the Federal Deposit 

Insurance Corporation (‘‘FDIC’’), the 

Office of Financial Research (‘‘OFR’’), 

the Office of the Comptroller of 

Currency (‘‘OCC’’), the Securities and 

Exchange Commission (‘‘SEC’’), and the 

Department of the Treasury. 

E. Summary of the Proposed Part 45 

Rule 

1. Fundamental Goal 

The fundamental goal of the part 45 

Notice of Proposed Rulemaking 

(‘‘NOPR’’) was to ensure that complete 

data concerning all swaps subject to the 

Commission’s jurisdiction is maintained 

in SDRs, where it would be available to 

the Commission and other financial 

regulators for fulfillment of their various 

regulatory mandates, including systemic 

risk mitigation, market monitoring, and 

market abuse prevention. 

2. Swap Recordkeeping 

The NOPR called for registered 

entities and swap counterparties to keep 

records relating to swaps throughout the 

existence of each swap and for five 

years following final termination or 

expiration of the swap. These records 

would be required to be readily 

accessible during the life of the swap 

and for two years thereafter, and 

retrievable from storage within three 

business days during the remaining 

three years of the retention period. The 

NOPR would require that data in SDRs 

be readily accessible to the Commission 

throughout the retention period as 

required by the Dodd-Frank Act.14

3. Swap Data Reporting: Creation Data 

and Continuation Data 

In order to ensure that complete data 

concerning swaps is maintained in 

SDRs and available to the Commission 

and other regulators, the NOPR called 

for reporting of swap data from each of 

two important stages of the existence of 

a swap: the creation of the swap, and 

the continuation of the swap over its 

existence until its final termination or 

expiration. 

a. Creation data reporting. To ensure 

timeliness, accuracy, and completeness 

with respect to data, the NOPR required 

reporting of two types of data relating to 

the creation of a swap: the primary 

economic terms of the swap verified or 

matched by the counterparties at or 

shortly after the time of execution; and 

all of the terms of the swap included in 

the legal confirmation of the swap. To 

ensure inclusion of primary economic 

terms necessary for regulatory purposes, 

the rule specified minimum data 

elements that must be reported for 

swaps in each asset class. 

b. Continuation data reporting. The 

NOPR provided that continuation data 

reporting for credit and equity swaps 

would follow the life cycle approach, 

and required reporting of all life cycle 

events affecting the terms of a swap. The 

NOPR directed reporting of 

continuation data for interest rate, 

currency, and other commodity swaps 

to follow the state or snapshot approach, 

and required reporting of a daily 

snapshot of all primary economic terms 

of a swap including any changes to such 

terms occurring since the previous 

snapshot. For all asset classes, the 

NOPR called for continuation data 

reporting to include specified valuation 

data. 

4. Unique Identifiers 

The NOPR called for use of three 

unique identifiers in connection with 

swap data reporting: a unique swap 

identifier (USI), a unique counterparty 

identifier (UCI), and a unique product 

identifier (UPI). The Commission 

proposed requiring use of these unique 

identifiers because they would be 

crucial regulatory tools for linking data 

together and enabling data aggregation 

by regulators across counterparties, 

transactions, and asset classes, to fulfill 

the systemic risk mitigation, market 

manipulation prevention, and other 

important purposes of the Dodd-Frank 

Act. The Commission also noted that 

such identifiers would have great 

benefits for financial transaction 

processing, internal recordkeeping, 

compliance, due diligence, and risk 

management by financial entities. 

The NOPR called for the USI to be 

created at the time a swap is executed, 

shared with all registered entities and 

counterparties involved with the swap, 

and used to track that particular swap 

over its life. The UCI would identify the 

legal entity that is a counterparty to a 

swap. Pursuant to the NOPR, the 

Commission would require use of UCIs 

in all swap data reporting, selecting an 

internationally-developed legal entity 

identifier system for this purpose if one 

meeting the Commission’s requirements 

is available prior to the compliance date 

when swap data reporting begins, or 

imposing a system created by the 

Commission if that were needed. 

Confidential reference data concerning 

the corporate or company affiliations of 

the legal entity involved would allow 

regulators to monitor swap exposures. 

The UPI would categorize or describe 

swaps with respect to the underlying 

products referenced in them, allowing 

regulators to aggregate, analyze, and 

report swap transactions by product 

type, and also enhancing position limit 

enforcement and real time reporting. 

5. Who Reports 

In general, the NOPR called for 

reporting by the registered entity or 

counterparty having the easiest, fastest, 

and cheapest access to the data in 

question, and most likely to have 

automated systems suitable for 

reporting. Swap execution facilities 

(‘‘SEFs’’) or designated contract markets 

(‘‘DCMs’’) would report primary 

economic terms data (‘‘PET data’’) for 

swaps executed on a trading facility, 

and DCOs would report confirmation 

data for cleared swaps. Counterparty 

reporting would follow the hierarchy 

outlined in the statute, giving SDs or 

MSPs the duty to report when possible, 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2139 

15All comment letters are available on the 

Commission Web site at http://comments.cftc.gov/ 

PublicComments/CommentList.aspx?id=920. 

Specific comment letters are identified by CL and 

the submitter. Comments addressing the NOPR 

were received from: (1) ACM Capital Management 

(‘‘ACM’’) June 15, 2011 (‘‘CL–ACM’’); (2) Alice 

Corporation (‘‘Alice’’) June 1, 2011 (‘‘CL–Alice’’); 

(3) American Bankers Association and the ABA 

Securities Association (‘‘ABA/ABASA’’) June 3, 

2011 (‘‘CL–ABA/ABASA’’); (4) American Benefits 

Council (‘‘ABC’’) February 7, 2011 (‘‘CL–ABC’’); (5) 

American Benefits Council (‘‘ABC’’) and Committee 

on Investment of Employee Benefit Assets 

(‘‘CIEBA’’) February 7, 2011 (‘‘CL–ABC/CIEBA I’’); 

(6) ABC and CIEBA March 25, 2011 (‘‘CL–ABC/ 

CIEBA II’’); (7) American Gas Association (‘‘AGA’’) 

February 3, 2011 (‘‘CL–AGA I’’); (8) AGA June 3, 

2011 (‘‘CL–AGA II’’); (9) Asset Management Group 

(‘‘AMG’’) and Securities Industry and Financial 

Markets Association (‘‘SIFMA’’) February 7, 2011 

(‘‘CL–AMG/SIFMA’’); (10) Japanese Banking 

Organizations—Bank of Tokyo-Mitsubishi UFJ, Ltd. 

(‘‘BTMU’’), Mizuho Corporate Bank (‘‘MHCB’’), and 

Sumitomo Mitsui Banking Corporation (‘‘SMBC’’) 

May 5, 2011 (‘‘CL–Japanese Banks’’); (11) Better 

Markets, Inc. (‘‘Better Markets’’) February 7, 2011 

(‘‘CL–Better Markets I’’); (12) Better Markets June 3, 

2011 (‘‘CL–Better Markets II’’); (13) BlackRock, Inc. 

(‘‘BlackRock’’) June 3, 2011 (‘‘CL–BlackRock I’’); 

(14) BlackRock June 3, 2011 (‘‘CL–BlackRock II’’); 

(15) Bloomberg, LP (‘‘Bloomberg’’) June 3, 2011 

(‘‘CL–Bloomberg’’); (16) Chatham Financial 

Corporation (‘‘Chatham Financial’’) February 7, 

2011 (‘‘CL–Chatham Financial’’); (17) Chris Barnard 

(‘‘Barnard’’) May 17, 2011 (‘‘CL–Barnard’’); (18) 

Citadel, LLC (‘‘Citadel’’) June 3, 2011 (‘‘CL– 

Citadel’’); (19) CME Group, Inc. (‘‘CME’’) February 

7, 2011 (‘‘CL–CME I’’); (20) CME June 3, 2011 (‘‘CL– 

CME II’’); (21) Coalition of Derivatives End-Users 

(‘‘CDEU’’) February 25, 2011 (‘‘CL–CDEU’’); (22) 

Coalition of Physical Energy Companies (‘‘COPE’’) 

February 7, 2011 (‘‘CL–COPE I’’); (23) COPE June 

3, 2011 (‘‘CL–COPE II’’); (24) Committee on Capital 

Markets Regulation June 13, 2011 (‘‘CL–Committee 

on Capital Markets Regulation I’’); (25) Committee 

on Capital Markets Regulation June 24, 2011 (‘‘CL– 

Committee on Capital Markets Regulation II’’); (26) 

Committee on Futures and Derivatives Regulation, 

Bar Association of the City of New York June 13, 

2011 (‘‘CL–Committee on Futures and Derivatives 

Regulation’’); (27) Committee on the Investment of 

Employee Benefit Assets (‘‘CIEBA’’) June 3, 2011 

(‘‘CL–CIEBA’’); (28) Commodity Markets Council 

(‘‘CMC’’) February 6, 2011 (‘‘CL–CMC I’’); (29) 

Commodity Markets Council (‘‘CMC’’) February 7, 

2011 (‘‘CL–CMC II’’); (30) Congressman James 

Renacci (‘‘Renacci’’) June 10, 2011 (‘‘CL–Renacci’’); 

(31) CUSIP Global Services (‘‘CUSIP’’) February 7, 

2011 (‘‘CL–CUSIP’’); (32) Customer Data 

Management Group (‘‘CDMG’’) April 1, 2011 (‘‘CL– 

CDMG’’); (33) DC Energy, LLC (‘‘DC Energy’’) June 

3, 2011 (‘‘CL–DC Energy’’); (34) Dominion 

Resources, Inc. (‘‘Dominion Resources’’) February 7, 

2011 (‘‘CL–Dominion Resources’’); (35) The 

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

February 7, 2011 (‘‘CL–DTCC I’’); (36) DTCCC June 

3, 2011 (‘‘CL–DTCC II’’); (37) Edison Electric 

Institute (‘‘EEI’’) June 3, 2011 (‘‘CL–EEI’’); (38) 

Edison Electric Institute Electric Power Supply 

Association (‘‘EPSA’’) February 7, 2011 (‘‘CL– 

EPSA’’); (39) Encana Marketing (USA), Inc. 

(‘‘Encana’’) February 7, 2011 (‘‘CL–Encana’’); (40) 

Eris Exchange, LLC (‘‘Eris Exchange’’) June 3, 2011 

(‘‘CL–Eris’’); (41) Futures Industry Association 

(‘‘FIA’’), The Financial Services Roundtable 

(‘‘FSR’’), Institute of International Bankers (‘‘IIB’’), 

Insured Retirement Institute (‘‘IRI’’), International 

Swaps and Derivatives Association (‘‘ISDA’’), 

Securities Industry and Financial Markets 

Association (‘‘SIFMA’’), and U.S. Chamber of 

Commerce, (‘‘Chamber of Commerce’’) June 1, 2011 

(‘‘CL–Chamber of Commerce’’); (42) Foreign 

Banking Organizations—Barclays, BNP Paribas, 

Deutsche Bank, Royal Bank of Canada, The Royal 

Bank of Scotland Group, Societe Generale, Credit 

Suisse, HSBC, UBS, Nomura Securities 

International, Inc., Rabobank Nederland (‘‘Foreign 

Banks’’) January 11, 2011 (‘‘CL–Foreign Banks I’’); 

(43) Foreign Banks February 17, 2011 (‘‘CL–Foreign 

Banks II’’); (44) Freddie Mac February 7, 2011 (‘‘CL– 

Freddie Mac’’); (45) The Federal Home Loan Banks 

(‘‘FHLB’’) February 7, 2011 (‘‘CL–FHLB’’); (46) 

Global Foreign Exchange Division (‘‘Global Forex’’) 

February 7, 2011 (‘‘CL–Global Forex’’); (47) Green 

Exchange, LLC (‘‘GreenEx’’) June 3, 2011 (‘‘CL– 

GreenEx’’); (48) GS1 US (‘‘GS1’’) February 7, 2011 

(‘‘CL–GS1’’); (49) Intercontinental Exchange, Inc. 

(‘‘ICE’’) February 7, 2011 (‘‘CL–ICE’’); (50) 

International Energy Credit Association (‘‘IECA’’) 

February 7, 2011 (‘‘CL–IECA’’); (51) International 

Swaps and Derivatives Association, Inc. (‘‘ISDA’’) 

June 2, 2011 (‘‘CL–ISDA’’); (52) ISDA SIFMA 

February 7, 2011 (‘‘CL–ISDA SIFMA’’); (53) Kansas 

City Board of Trade Clearing Corporation (‘‘KCBT’’) 

February 7, 2011 (‘‘CL–KCBT’’); (54) Managed 

Funds Association (‘‘MFA’’) February 7, 2011 (‘‘CL– 

MFA’’); (55) Markit June 3, 2011 (‘‘CL–Markit’’); 

(56) MarkitSERV June 3, 2011 (‘‘CL–MarkitSERV I); 

(57) MarkitSERV June 3, 2011 (‘‘CL–MarkitSERV 

II’’); (58) Minneapolis Grain Exchange (‘‘MGEX’’) 

June 3, 2011 (‘‘CL–MGEX’’); (59) Not-For-Profit 

Electric End User Coalition consisting of the 

National Rural Electric Cooperative Association, 

American Public Power Association, Large Public 

Power Council, Edison Electric Institute Electric 

Power Supply Association, (‘‘Electric Coalition’’) 

February 7, 2011 (‘‘CL–Electric Coalition I’’); (60) 

Electric Coalition June 3, 2011 (‘‘CL–Electric 

Coalition II’’); (61) Noble Energy, Inc. (‘‘Noble 

Energy’’) July 7, 2011 (‘‘CL–Noble Energy’’); (62) 

Office of the Comptroller of the Currency July 1, 

2011 (‘‘CL–Office of the Comptroller of the 

Currency’’); (63) REGIS–TR February 7, 2011 (‘‘CL– 

REGIS–TR’’); (64) Reval.com, Inc. (‘‘Reval’’) January 

24, 2011 (‘‘CL–Reval’’); (65) Shell Energy North 

America (US), L.P. (‘‘Shell Energy’’) June 3, 2011 

(‘‘CL–Shell Energy I’’); (66) Shell Energy June 21, 

2011 (‘‘CL–Shell Energy II’’); (67) Society for 

Worldwide Interbank Financial Telecommunication 

SCRL (‘‘SWIFT’’) February 14, 2011 (‘‘CL–SWIFT’’); 

(68) SunGard Energy & Commodities (‘‘SunGard’’) 

February 7, 2011 (‘‘CL–Sungard’’); (69) Thomson 

Reuters February 7, 2011 (‘‘CL–Thomson Reuters’’); 

(70) TradeWeb Markets, LLC (‘‘TradeWeb’’) June 3, 

2011 (‘‘CL–TradeWeb’’); (71) TriOptima February 7, 

2011 (‘‘CL–TriOptima’’); (72) Senator Sherrod 

Brown (‘‘Brown’’) June 13, 2011 (‘‘CL–Brown’’); (73) 

Vanguard February 7, 2011 (‘‘CL–Vanguard’’); (74) 

Working Group of Commercial Energy Firms 

(‘‘WGCEF’’) February 7, 2011 (‘‘CL–WGCEF I’’); (75) 

WGCEF June 3, 2011 (‘‘CL–WGCEF II’’). 

and limiting reporting by non-SD/MSP 

counterparties to situations where there 

is no SD or MSP counterparty. Where 

both counterparties have the same 

hierarchical status, the proposed rule 

would require them to agree as one term 

of their swap which of them is to report, 

in order to avoid reporting delays. 

6. Third-Party Facilitation of Reporting 

The NOPR would explicitly permit 

third-party facilitation of data reporting, 

without removing the reporting 

responsibility from the appropriate 

registered entity or counterparty. 

7. Reporting a Swap to a Single SDR 

To avoid fragmentation of data for a 

given swap across multiple SDRs, the 

NOPR would require that all data for a 

particular swap must be reported to the 

same SDR. 

8. Reporting Swaps in an Asset Class 

Not Accepted by Any SDR 

As required by the section 729 of the 

Dodd-Frank Act, the NOPR provided 

that if there were an asset class for 

which no SDR currently accepted data, 

registered entities or counterparties 

required to report concerning swaps in 

such an asset class would be required to 

report the same data to the Commission 

at a time and in a form and manner 

determined by the Commission. 

9. Data Standards 

The NOPR would require SDRs to 

maintain data and transmit it to the 

Commission in the format required by 

the Commission. It would permit an 

SDR to allow those reporting data to it 

to use any data standard acceptable to 

the SDR, so long as the SDR remains 

able to provide data to the Commission 

in the Commission’s required format. 

10. Reporting Errors and Omissions in 

Previously Reported Data 

Finally, the NOPR provided that 

registered entities and counterparties 

required to report swap data must also 

report to the SDR any errors or 

omissions in data previously reported, 

using the same format used in the 

previous report. Non-reporting 

counterparties discovering an error or 

omission would be required to notify 

the reporting counterparty, for reporting 

to the SDR by the reporting 

counterparty. 

F. Overview of Comments Received 

The comment period for the NOPR 

closed on February 7, 2011, but was 

reopened pursuant to the Commission’s 

Order Reopening and Extension of 

Comment Periods for Rulemakings 

Implementing the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act, dated May 4, 2011. The reopened 

comment period closed on June 3, 2011. 

Seventy-five comment letters submitted 

to the Commission addressed the 

proposed part 45 swap data 

recordkeeping and reporting rule.15

Comments were provided by a broad 

range of interested persons, including: 

Existing trade repositories, DCMs, and 

DCOs; providers of various third party 

services related to swaps; financial data 

and data management services and 

providers of various types of identifiers; 

both buy side and sell side swap 

counterparties of various types and 

sizes; trade associations involving 

securities, futures, and foreign exchange 

markets and firms; banks and mortgage 

lenders; managed funds and investment 

advisors; swap dealers; swap ‘‘end 

users’’; energy producers; and non-profit 

mstockstill on DSK4VPTVN1PROD with RULES2

2140 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

16CEA section 21(c)(4)(A). 

associations. Commission staff also held 

three public roundtables relating to 

swap data reporting, on September 14, 

2010, January 28, 2011, and June 6, 

2011, which provided input from a 

broad cross-section of industry and 

private sector experts concerning the 

issues addressed in the NOPR. While 

many commenters expressed support for 

the proposed part 45 rules, many also 

offered suggestions regarding swap data 

recordkeeping and reporting, as well as 

recommendations for clarification or 

modification of specific provisions of 

the proposed rule. Comments are 

addressed as appropriate in connection 

with the discussion below of the final 

rule provision or provisions to which 

they relate. Some comments received by 

the Commission requested further 

clarification relating to definitions 

provided in the NOPR, or regarding the 

application of NOPR provisions in 

various contexts. Definitions included 

in the final rule are provided for 

clarification and do not impose new 

substantive obligations. 

II. Part 45 of the Commission’s 

Regulations: The Final Rules 

New part 45 contains provisions 

governing swap data recordkeeping and 

reporting. Definitions are set forth in 

§ 45.1. Section 45.2 establishes swap 

recordkeeping requirements for 

registered entities and swap 

counterparties. Sections 45.3 and 45.4 

establish swap data reporting 

requirements. Reporting of required 

swap creation data (the data association 

with the creation or execution of a 

swap) is addressed in § 45.3, while 

reporting of required swap continuation 

data (the data associated with the 

continued existence of a swap until its 

final termination) is addressed in § 45.4. 

Required use of unique identifiers in 

swap data recordkeeping and reporting 

is addressed in § 45.5, which sets forth 

requirements regarding unique swap 

identifiers (‘‘USIs’’); § 45.6, which sets 

forth requirements regarding legal entity 

identifiers (‘‘LEIs’’); and 45.7, which 

sets forth requirements regarding unique 

product identifiers (‘‘UPIs’’). 

Determination of which counterparty 

must report swap data for each swap is 

established by § 45.8. Third-party 

facilitation of swap data reporting is 

addressed by § 45.9. Section 45.11 

establishes requirements for reporting 

all data concerning a swap to a single 

SDR. Section 45.11 addresses data 

reporting for swaps in a swap asset class 

not accepted by any SDR. Section 45.12 

sets forth requirements concerning 

voluntary supplemental reporting of 

swap data to SDRs. Section 45.13 

establishes required data standards for 

swap data reporting. Finally, § 45.14 

sets forth requirements for reporting 

concerning errors and omissions in 

previously reported swap data. 

A. Recordkeeping Requirements—§ 45.2 

1. Proposed Rule 

The NOPR provided that all SEFS, 

DCMs, DCOs, SDs, and MSPs must keep 

full, complete, and systematic records, 

together with all pertinent data and 

memoranda, of all activities relating to 

the business of such entities or persons 

with respect to swaps, including, 

without limitation, records of all data 

required to be reported in connection 

with any swap. All such records would 

be required to be kept throughout the 

existence of the swap and for five years 

following final termination of the swap. 

Records would be required to be readily 

accessible by the registered entity or 

counterparty in question via real time 

electronic access throughout the life of 

the swap and for two years following 

the final termination of the swap, and 

retrievable within three business days 

through the remainder of the required 

retention period. 

The NOPR proposed lesser 

recordkeeping requirements for non-SD/ 

MSP counterparties, calling for them to 

keep full, complete, and systematic 

records, including all pertinent data and 

memoranda, with respect to each swap 

in which they are a counterparty (as 

opposed to all activities relating to the 

business of such entities with respect to 

swaps), in a way that makes the records 

retrievable by the counterparty within 

three business days during the required 

retention period. 

The NOPR provided that all records 

required to be kept by SDRs must be 

kept by the SDR both: (a) throughout the 

existence of the swap and for five years 

following final termination or expiration 

of the swap, during which time the 

records must be readily accessible by 

the SDR and available to the 

Commission via real time electronic 

access; and (b) thereafter, for a period 

determined by the Commission, in 

archival storage from which they are 

retrievable by the SDR within three 

business days. This provision was 

intended to make effective the statutory 

mandate that SDRs must ‘‘provide direct 

electronic access to the Commission (or 

any designee of the Commission 

including another registered entity).’’ 16

As proposed, part 45 would also 

require that all records required to be 

kept pursuant to the regulations must be 

open to inspection upon request by any 

representative of the Commission, the 

Department of Justice, or the SEC, or by 

any representative of a prudential 

regulator as authorized by the 

Commission. 

2. Comments Received 

The Commission received comments 

concerning the proposed recordkeeping 

provisions from both market 

participants who anticipated that they 

could be SDs and MSPs and market 

participants who anticipated that they 

could be non-SD/MSP counterparties. 

Many commenters asked that non-SD/ 

MSP counterparties be allowed to keep 

fewer records and to keep records in 

paper form. Commenters suggested that 

required record retention periods 

should be shortened, and that 

retrievability requirements should be 

somewhat relaxed. Other commenters 

suggested that recordkeeping 

requirements for non-SD/MSP 

counterparties should be phased in. 

a. Records required. American Gas 

Association (‘‘AGA’’) and Edison 

Electric Institute (‘‘EEI’’) asked the 

Commission to specify more precisely 

the information that non-SD/MSP 

counterparties will be required to retain, 

defining in particular the meaning of 

‘‘all pertinent data and memoranda,’’ 

with examples. Arguing that non-SD/ 

MSP counterparties should not be 

required to keep records of swap terms 

other than the final terms of the swap, 

EEI suggested that non-SD/MSP 

counterparties be required to retain only 

‘‘master or bespoke agreements, long or 

short-form confirmations, amendments 

and associated swap transaction data 

stored in an end-user’s trade capture 

system.’’ The Committee on the 

Investment of Employee Benefit Assets 

(‘‘CIEBA’’) suggested that a non-SD/MSP 

counterparty should only be required to 

retain the final confirmation of any 

swap where the other counterparty is an 

SD or MSP, and (presumably where no 

SD or MSP is involved) should only be 

required to retain swap creation or 

continuation data that the non-SD/MSP 

is required to report. The Working 

Group of Commercial Energy Firms 

(‘‘WGCEF’’) asked that non-SD/MSP 

counterparties to physical commodity 

swaps (or at least energy swaps) be 

excused from recordkeeping 

requirements altogether, arguing that the 

final rule should recognize ‘‘the unique 

operational characteristics and abilities 

of different participants in swap markets 

for physical commodities,’’ since such 

counterparties may not presently have 

the necessary technology, and the 

benefits of implementing it would not 

justify the costs imposed. The Not-forProfit Electric End User Coalition 

(‘‘Electric Coalition’’) contended that the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2141 

17WGCEF asked the Commission to confirm that 

real time accessibility refers to access by the 

counterparty, not the Commission, and asked that 

the requirement be changed to require record 

retrieval by the close of business the day following 

a request. 

18Recordkeeping requirements relating to futures 

and options are found in CEA sections 5(b) and 

5(d); §§ 1.31 and 1.35 of this chapter; Appendix B 

to Part 38 of the Commission’s Regulations, Core 

Principle 17, Recordkeeping; and Appendix A to 

Part 39 of the Commission’s Regulations, Core 

Principle K, Recordkeeping. 

19The need for such records is also recognized 

internationally. As CPSS has noted: ‘‘it should be 

clear that the data recorded in a TR [trade 

repository] cannot be a substitute for the records of 

transactions at original counterparties. Therefore, it 

is important that even where TRs have been 

established and used, market participants maintain 

their own records of the transactions that they are 

a counterparty to and reconcile them with their 

counterparties or TRs on an ongoing basis 

(including for their own risk management 

purposes).’’ Committee on Payment and Settlement 

Systems, Considerations for Trade Repositories in 

OTC Derivatives Markets, May 2010, at 1. 

20Although the final rule requires data reporting 

in electronic form, a non-SD/MSP counterparty 

could achieve this by entering information from 

paper records into a web interface provided by an 

SDR. 

rule should allow non-SD/MSP 

counterparties to keep records in paper 

form. 

b. Record retention periods. The 

International Swap Dealers Association 

(‘‘ISDA’’) and the Securities Industry 

and Financial Markets Association 

(‘‘SIFMA’’) suggested that the 

Commission should analyze this 

requirement further before it is 

implemented. AGA argued that record 

retention for the life of the swap plus 

five years would impose substantial 

costs on non-SD/MSP counterparties 

such as gas utilities, and asked that the 

record retention period for non-SD/MSP 

counterparties be reduced to the life of 

the swap plus three years. WGCEF 

commented that there would be no 

benefit to record retention beyond five 

years following termination of a swap. 

Taking an opposite view, Chris Barnard 

recommended that all registered entities 

and swap counterparties should be 

required to keep records indefinitely. 

c. Record retrievability. ISDA and 

SIFMA commented that current 

recordkeeping practice for their 

members would normally mean 

accessibility within a reasonable period 

of time, such as two working days, and 

argued that instant access is 

impracticable to achieve.17 The Global 

Foreign Exchange Division of SIFMA 

(‘‘Global Forex’’) suggested that after 

termination of the swap, real time 

access should only be required for an 

additional 30 days. With respect to 

retrieval by non-SD/MSP counterparties, 

AGA argued that the three-business-day 

retrievability requirement is too 

onerous, and would preclude off-site 

storage of business records, forcing end 

users to maintain on-site record storage. 

The Electric Coalition suggested that the 

retrieval period for non-SD/MSP 

counterparties be extended to 20 

business days. 

d. Phasing in recordkeeping 

requirements for non-SD/MSP 

counterparties. The Electric Coalition 

suggested that recordkeeping 

requirements for non-SD/MSP 

counterparties be phased in. The 

Electric Coalition also suggested that the 

Commission define two sub-categories 

of non-SD/MSPs, namely financial and 

non-financial non-SD/MSPs, and that it 

delay the beginning of compliance with 

recordkeeping requirements even 

further for non-financial non-SD/MSP 

counterparties. Dominion Resources 

commented that recordkeeping should 

focus first on swaps involving platform 

execution or clearing, or involving SDs 

and MSPs. 

3. Final Rule: § 45.2 

a. Records required. The Commission 

believes that the final rule should 

largely maintain the NOPR provisions 

regarding required records. Those 

provisions call for recordkeeping with 

respect to swaps that parallels the 

Commission’s existing recordkeeping 

requirements with respect to futures and 

options.18 Under those existing 

requirements, all DCMs, DCOs, futures 

commission merchants (‘‘FCMs’’), 

introducing brokers (‘‘IBs’’), and 

members of contract markets are 

generally required to keep full and 

complete records, together with all 

pertinent data and memoranda, of all 

activities relating to the business of the 

entity or person that is subject to the 

Commission’s authority. The 

Commission believes that the rationale 

for requiring futures registrants and 

counterparties subject to its jurisdiction 

to keep full and complete records must 

also govern recordkeeping with respect 

to swaps. Such records are essential to 

carrying out the regulatory functions of 

not only the Commission but all other 

financial regulators, and for appropriate 

risk management by registered entities 

and swap counterparties themselves.19

The Commission notes that the NOPR 

placed narrower recordkeeping 

obligations on non-SD/MSP 

counterparties subject to the 

Commission’s jurisdiction, requiring 

them to keep full, complete, and 

systematic records, including all 

pertinent data and memoranda, with 

respect to each swap to which they are 

a counterparty, rather than with respect 

to their entire business relating to 

swaps. This narrower requirement was 

designed to effectuate a policy choice 

made by the Commission to place lesser 

burdens on non-SD/MSP counterparties 

to swaps, where this can be done 

without damage to the fundamental 

systemic risk mitigation, transparency, 

standardization, and market integrity 

purposes of the legislation. 

The Commission does not believe that 

it should further define or reduce the 

records required to be kept. The 

Commission’s existing recordkeeping 

regulations in the futures context call 

for maintenance of ‘‘full and complete 

records.’’ Complete records regarding 

each swap should be required from all 

counterparties, including non-SD/MSP 

counterparties to physical commodity 

swaps and other swaps, because such 

records are essential for effective market 

oversight and prosecution of violations 

by the Commission and other regulators. 

Experience with recordkeeping 

requirements in the context of futures 

suggests that all market participants are 

able to retain such records. The 

Commission also does not believe that 

it should specifically delineate the 

meaning of ‘‘all pertinent data and 

memoranda.’’ This phrase is not further 

defined in the Commission’s existing 

futures regulations. 

With respect to paper recordkeeping, 

the Commission agrees with the 

comment suggesting that non-SD/MSP 

counterparties should be permitted to 

keep required records in paper form, 

since this could serve to reduce burdens 

on some such counterparties while still 

ensuring that essential records are 

available.20 The final rule provides that 

non-SD/MSP counterparties may keep 

records in either electronic or paper 

form, so long as they are retrievable, and 

information in them is reportable, as 

required by part 45. Because SEFS, 

DCMs, DCOs, SDs, and MSPs are more 

likely to have automated systems 

suitable for electronic recordkeeping, 

and because electronic production of 

records is important to the 

Commission’s enforcement functions, 

the final rule will permit such 

registrants to keep records in paper form 

only if they are originally created and 

exclusively maintained in paper form. 

b. Record retention periods. The 

Commission has determined that the 

final rule should maintain the NOPR 

provision calling for required records to 

be retained for the life of the swap plus 

five years. A swap can continue to exist 

for a substantial period of time prior to 

its final termination or expiration. 

During this time, which in some cases 

can extend for many years, the key 

economic terms of the swap can change. 

Thus, recordkeeping requirements with 

mstockstill on DSK4VPTVN1PROD with RULES2

2142 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

21See § 1.31 of this chapter. 22CEA section 21(c)(2). 

respect to a swap must necessarily cover 

the entire period of time during which 

the swap exists, as well as an 

appropriate period following final 

termination or expiration of the swap. A 

five-year retention period following 

termination of the swap will ensure 

document retention consistent with the 

information that the Commission and 

other regulators need to carry out their 

oversight and enforcement 

responsibilities. It will also parallel the 

Commission’s existing five-year record 

retention requirement in the context of 

futures. Finally, this five-year period is 

consistent with the Commission’s final 

part 49 rules regarding SDR registration. 

With respect to record retention by 

SDRs, the Commission has determined 

that SDRs must retain all required 

records both: (a) Throughout the 

existence of the swap and for five years 

following final termination or expiration 

of the swap, during which time the 

records must be readily accessible by 

the SDR and available to the 

Commission via real time electronic 

access, as provided in the NOPR; and (b) 

thereafter, for an archival storage period 

of ten additional years, during which 

they must be retrievable by the SDR 

within three business days. The 

Commission believes that extended 

retention of SDR records will assist 

regulators in discharging their systemic 

risk and market monitoring 

responsibilities, and aid market 

analysis. However, after a substantial 

period of time has passed following 

final termination of a swap, the data 

storage burden of retaining SDR records 

concerning the swap could outweigh the 

remaining benefit involved, and 

accordingly the Commission does not 

agree with the comment suggesting 

indefinite record retention. The 

Commission may review the ten-year 

archival storage requirement for SDRs at 

a future time, after experience with its 

operation is available. 

c. Record retrievability. The 

Commission does not believe that it 

should reduce record retrievability 

requirements for SEFS, DCMs, DCOs, 

SDs, and MSPs. The requirement that 

records be readily accessible for the life 

of the swap plus two years parallels the 

Commission’s retrievability requirement 

during the first two years of the fiveyear retention period for futures-related 

records.21 The Commission has 

routinely interpreted ‘‘readily 

accessible’’ to mean retrievable in real 

time or at least on the same day as the 

records are requested. Moreover, 

Commission Regulation 1.31 requires 

records maintained electronically to be 

produced immediately upon request. 

FCMs routinely comply with this 

requirement, and the Commission does 

not believe that SDs and MSPs should 

be unable to do so as well. 

With respect to record retrievability 

for non-SD/MSP counterparties, the 

Commission accepts the comments 

suggesting that retrieval from off-site 

storage within three business days could 

possibly involve additional costs or 

limit off-site storage options for some 

smaller non-SD/MSP counterparties. In 

order to lessen any burden on non-SD/ 

MSP counterparties while maintaining 

necessary accessibility of pertinent 

records, the final rule will only require 

retrievability of non-SD/MSP 

counterparty records within five 

business days throughout the record 

retention period. The Commission 

believes that this will not unduly 

compromise its ability to conduct 

investigations and carry out its 

enforcement responsibilities. 

d. Phasing in recordkeeping 

requirements for non-SD/MSP 

counterparties. The Commission does 

not believe that it is necessary to 

provide any phasing treatment with 

respect to recordkeeping requirements 

for non-SD/MSP counterparties beyond 

the phasing by counterparty type 

provided in the final rule with respect 

to compliance dates. As noted above, 

the final rule provides less onerous 

recordkeeping requirements and less 

onerous retrievability requirements for 

non-SD/MSP counterparties, in order to 

ameliorate recordkeeping burdens for 

them. Excusing non-SD/MSP 

counterparties from all recordkeeping 

for an extended period could interfere 

with the ability of the Commission and 

other regulators to carry out their 

oversight and enforcement 

responsibilities. As previously noted, 

experience with recordkeeping 

requirements in the context of futures 

suggests that all market participants do 

retain records and that such 

recordkeeping is essential for effective 

oversight and prosecution of violations. 

B. Swap Data Reporting: Creation 

Data—§ 45.3 

1. Proposed Rule 

a. What creation data should be 

reported. In order to ensure timeliness, 

accuracy, and completeness with 

respect to the swap data available to 

regulators, the proposed rule called for 

reporting of swap data from each of two 

important stages of the existence of a 

swap: the creation of the swap, and the 

continuation of the swap over its 

existence until its final termination or 

expiration. The NOPR required 

reporting of two sets of data generated 

in connection with the swap’s creation: 

primary economic terms data, and 

confirmation data. 

The NOPR defined primary economic 

terms as including all of the terms of the 

swap verified or matched by the 

counterparties at or shortly after the 

execution of the swap. In order to 

ensure that the array of primary 

economic terms reported to an SDR for 

a swap is sufficient in each case for 

regulatory purposes and is comparable 

enough to permit data aggregation, the 

NOPR required that the primary 

economic terms reported for each swap 

must include, at a minimum, all of the 

data elements listed by the Commission 

in the asset class-specific tables of 

minimum data elements appended to 

the NOPR. The tables were designed to 

include data elements reflecting the 

basic nature and essential economic 

terms of the product involved. 

The NOPR defined confirmation as 

the full, signed, legal confirmation by 

the counterparties of all of the terms of 

a swap, and defined confirmation data 

as all of the terms of a swap matched 

and agreed upon by the counterparties 

in confirming the swap. The NOPR 

required reporting of confirmation data, 

in addition to the earlier reporting of 

primary economic terms data, in order 

to help ensure the completeness and 

accuracy of the data maintained in an 

SDR with respect to a swap. Reporting 

of the terms of the confirmation, which 

has the assent of both counterparties, 

also provides a means of fulfilling the 

statutory directive that an SDR ‘‘shall 

confirm with both counterparties to the 

swap the accuracy of the data that was 

submitted.’’ 22

b. Who should report creation data. 

The NOPR’s swap data reporting 

provisions were designed to streamline 

and simplify the data reporting 

approach, by calling for reporting by the 

registered entity or counterparty that the 

Commission believes has the easiest, 

fastest, and cheapest access to the data 

in question. As recognized in the NOPR, 

such entities and counterparties are also 

the most likely to have automated 

systems suitable for reporting. 

Because the Commission anticipated 

that swap contract certification process 

for swaps listed by SEFs and DCMs 

would define all or most of the primary 

economic terms of a swap, the NOPR 

called for SEFs or DCMs to report PET 

data for swaps executed on a trading 

platform, as soon as technologically 

practicable after execution, with 

reporting counterparties reporting only 

PET data that for any reason was not 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2143 

23This requirement received universal 

approbation in both comments and roundtables as 

appropriate and necessary. 

available to the SEF or DCM. For offfacility swaps, where PET data is 

created by the counterparties’ 

verification of the primary economic 

terms of the swap, the NOPR provided 

for the reporting counterparty (as 

defined) to report the required PET data 

for the swap. The NOPR called for this 

report to be made promptly, but in no 

event later than: 15 minutes after 

execution of a swap for which execution 

and verification of primary economic 

terms occur electronically; 30 minutes 

after execution of a swap which is not 

executed electronically but for which 

verification of primary economic terms 

occurs electronically; or, in the case of 

a swap for which neither execution nor 

verification of primary economic terms 

occurs electronically, within a time after 

execution to be determined by the 

Commission. 

For cleared swaps, where 

confirmation data will be generated by 

DCOs in the course of the normal 

clearing process, the NOPR called for 

DCOs to report confirmation data, doing 

so as soon as technologically practicable 

following clearing. For non-cleared 

swaps, where confirmation will be done 

by the counterparties, the NOPR 

required the reporting counterparty to 

report confirmation data, making this 

report promptly following confirmation, 

but in no event later than: 15 minutes 

after confirmation of a swap for which 

confirmation occurs electronically; or, 

in the case of a swap for which 

confirmation was done manually rather 

than electronically, within a time after 

confirmation to be determined by the 

Commission. 

The NOPR did not explicitly assign 

the right to select the SDR to which a 

swap is reported, but it effectively 

determined who will make this choice, 

through the interaction of two key 

aspects of the rule. First, in order to 

prevent fragmentation of data for a 

single swap across multiple SDRs, 

which would seriously impair the 

ability of the Commission and other 

regulators to view or aggregate all of the 

data concerning the swap, the proposed 

rule provided that, once an initial data 

report concerning a swap is made to an 

SDR, all data reported for that swap 

thereafter must be reported to that same 

SDR.23 Second, in order to ensure that 

PET data concerning the swap is 

reported as soon as technologically 

practicable following execution—in part 

to facilitate real time reporting—the 

proposed rule required the SEF or DCM 

to make the initial PET data report for 

swap executed on such a facility, and 

required the reporting counterparty (in 

the majority of cases, an SD or MSP) to 

make the initial report for an off-facility 

swap. Because subsequent reports must 

go to the SDR that received the initial 

report, in practice this meant that the 

SEF or DCM would select the SDR for 

platform-executed swaps, and the 

reporting counterparty would choose 

the SDR for off-facility swaps. 

c. Deadlines for creation data 

reporting. The NOPR established 

reporting deadlines for creation data 

reporting, including both PET data 

reporting and confirmation data 

reporting, determined by whether the 

swap is platform-executed and/or 

cleared, whether verification (matching) 

of primary economic terms by the 

counterparties occurs electronically, 

and whether the reporting counterparty 

is an SD or MSP on the one hand or a 

non-SD/MSP counterparty on the other. 

The resulting deadlines were as shown 

in the following tables. 

PROPOSED RULE—REPORTING COUNTERPARTY: SD OR MSP 

Execution and clearing Report Reporter Reporting time 

SEF or DCM, DCO ...... PET data .......................................... SEF or DCM ... As soon as technologically practicable following execution. 

Any PET data not reported by SEF 

or DCM.

SD or MSP ..... After execution: 

* 15 minutes if execution and verification electronic. 

* 30 minutes if execution non-electronic but verification 

electronic. 

* 24 hours if neither execution nor verification electronic. 

Confirmation data ............................ DCO ................ As soon as technologically practicable following clearing. 

SEF, Not cleared ......... PET data .......................................... SEF ................. As soon as technologically practicable following execution. 

Any PET data not reported by SEF SD or MSP ..... After execution: 

* 15 minutes if execution and verification electronic. 

* 30 minutes if execution non-electronic but verification 

electronic. 

* 24 hours if neither execution nor verification electronic. 

Confirmation data ............................ SD or MSP ..... After confirmation: 

* 15 minutes if confirmation electronic. 

* 24 hours if confirmation non-electronic. 

No platform, DCO ........ PET data .......................................... SD or MSP ..... After execution: 

* 30 minutes if verification electronic. 

* 24 hours if verification non-electronic. 

Confirmation data ............................ DCO ................ As soon as technologically practicable following clearing. 

No platform, Not 

cleared.

PET data .......................................... SD or MSP ..... After execution: 

* 30 minutes if verification electronic. 

* 24 hours if verification non-electronic. 

Confirmation data ............................ SD or MSP ..... After confirmation: 

* 15 minutes if confirmation electronic. 

* 24 hours if confirmation non-electronic. 

PROPOSED RULE—REPORTING COUNTERPARTY: NON-SD/MSP 

Execution and clearing Report Reporter Reporting time 

SEF or DCM, DCO ...... PET data .......................................... SEF or DCM ... As soon as technologically practicable following execution. 

mstockstill on DSK4VPTVN1PROD with RULES2

2144 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

24The Dodd-Frank Act defines ‘‘mixed swap’’ as 

follows: ‘‘The term ‘security-based swap’ includes 

any agreement, contract, or transaction that is as 

described in section 3(a)(68)(A) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78c(a)(68)(A)) and 

is also based on the value of 1 [sic] or more interest 

or other rates, currencies, commodities, instruments 

of indebtedness, indices, quantitative measures, 

other financial or economic interest or property of 

any kind (other than a single security or a narrowbased security index), or the occurrence, nonoccurrence, or the extent of the occurrence of an 

event or contingency associated with a potential 

financial, economic, or commercial consequence 

(other than an event described in subparagraph 

(A)(iii).’’ Dodd-Frank § 721(21), CEA section 

1a(47)(D). 

PROPOSED RULE—REPORTING COUNTERPARTY: NON-SD/MSP—Continued 

Execution and clearing Report Reporter Reporting time 

Any PET data not reported by SEF 

or DCM.

Non-SD/MSP .. After execution: 

* 15 minutes if execution and verification electronic. 

* 30 minutes if execution non-electronic but verification 

electronic. 

* 24 hours if neither execution nor verification electronic. 

Confirmation data ............................ DCO ................ As soon as technologically practicable following clearing. 

SEF, Not cleared ......... PET data .......................................... SEF ................. As soon as technologically practicable following execution. 

Any PET data not reported by SEF SD or MSP ..... After execution: 

* 15 minutes if execution and verification electronic. 

* 30 minutes if execution non-electronic but verification 

electronic. 

* 24 hours if neither execution nor verification electronic. 

Confirmation data ............................ Non-SD/MSP .. After confirmation: 

* To be determined by the Commission prior to final rule. 

No platform, DCO ........ PET data .......................................... Non-SD/MSP .. After execution: 

* 30 minutes if verification electronic. 

* 24 hours if verification non-electronic. 

Confirmation data ............................ DCO ................ As soon as technologically practicable following clearing. 

No platform, Not 

cleared.

PET data .......................................... Non-SD/MSP .. After execution: 

* 30 minutes if verification electronic. 

* 24 hours if verification non-electronic. 

Confirmation data ............................ Non-SD/MSP .. After confirmation: 

* To be determined by the Commission prior to final rule. 

d. Reporting for multi-asset swaps 

and mixed swaps. As noted in the 

NOPR, a mixed swap is in part a 

security-based swap subject to SEC 

jurisdiction, and in part a swap subject 

to CFTC jurisdiction.24 Multi-asset 

swaps are those that do not have one 

easily identifiable primary underlying 

asset, but instead involve multiple 

underlying assets belonging to different 

asset classes that are all within CFTC’s 

jurisdiction. One way of stating the 

distinction between these two types of 

swaps is that SEC and CFTC will each 

have jurisdiction over part of a mixed 

swap, but only CFTC will have 

jurisdiction over the different parts of a 

multi-asset swap. The NOPR requested 

comment on how multi-asset and mixed 

swaps should be reported. 

2. Comments Received 

The Commission received numerous 

comments from a variety of commenters 

concerning the proposed rule’s 

provisions addressing creation data 

reporting. The broad themes of these 

comments addressed what should be 

included in required primary economic 

terms data, who should make the initial 

creation data report, what deadlines 

should be set for making creation data 

reports, and how creation data should 

be reported with respect to multi-asset 

swaps, mixed swaps, and international 

swaps. 

a. What should be included in 

required PET data. Comments 

concerning various aspects of required 

minimum PET data are discussed 

below. 

Clarification of the catch-all PET data 

category. The tables of minimum PET 

data for each asset class appended to the 

NOPR included a field for reporting 

‘‘any other primary economic terms of 

the swap matched by the counterparties 

in verifying the swap.’’ ISDA and 

SIFMA commented that the 

Commission should clarify or provide 

examples of what this requirement 

means. 

Clarification of particular PET data 

terms for other commodity swaps. 

Electric energy providers including EEI, 

the Electric Power Supply Association 

(‘‘EPSA’’), the Coalition of Physical 

Energy Companies (‘‘COPE’’), and 

Dominion Resources suggested that the 

terms ‘‘timestamp,’’ ‘‘settlement 

method,’’ ‘‘grade,’’ and ‘‘total quantity’’ 

should be clarified or else should not be 

included in the minimum PET data for 

other commodity swaps. They asserted 

that timestamps are not typically 

recorded under current energy market 

practice. They argued that the 

settlement method field implies a swap 

potentially involving physical delivery, 

whereas they believe that swaps are not 

agreements intended to be physically 

settled. They also argued that the ‘‘total 

quantity’’ of a commodity in a swap is 

not a term typically captured by swap 

counterparties, who instead typically 

express the size of a swap in terms of 

the quantity aligned with a settlement 

period. 

Elimination or clarification of 

calculation and reporting of futures 

equivalents. The NOPR called for 

minimum PET data reporting to include 

futures contract equivalents and futures 

contract equivalent units of measure. 

Better Markets expressed support for 

required reporting of futures 

equivalents. However, the Depository 

Trust & Clearing Corporation (‘‘DTCC’’) 

commented that OTC derivatives cannot 

be mapped readily to futures contracts, 

and thus this data will not necessarily 

be able to be aggregated in a meaningful 

fashion. Global Forex asked the 

Commission to provide guidance on 

how to report futures equivalents for 

swaps whose tenor sits between two 

futures contracts dates; guidance on the 

case where multiple futures contracts 

exist for the same underlying product; 

and guidance on products for which no 

corresponding futures contracts exist. 

Clarification of creation data 

reporting in the context of structured 

transactions. ISDA and SIFMA 

commented that ‘‘execution,’’ 

‘‘affirmation,’’ and ‘‘confirmation’’ may 

have somewhat different meanings in 

different asset classes, and requested 

clarification of the application of these 

terms with respect to creation data 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2145 

25 KCBT also suggests that DCOs should be 

allowed to report a day’s cleared swaps in a single 

daily data file, rather than individually. 

26The NOPR takes this approach, calling for SEFs 

and DCMs to report all creation data in their 

possession for on-facility swaps, and making SDs 

and MSPs the reporting counterparties when they 

are involved. 

27SunGard suggested that such position reports 

could be accompanied by a reference to the primary 

economic terms of the contract, rather than by data 

reflecting all primary economic terms. 

28This requirement received universal 

approbation in both comments and roundtables as 

appropriate and necessary. 

reporting. More specifically, Global 

Forex requested clarification of creation 

data in the context of structured 

transactions, noting that the meaning 

given these terms under prevalent 

foreign exchange market conventions, 

which frequently involve structured 

transactions, may differ from their 

application in other contexts. 

Clarifications regarding foreign 

exchange transactions. Contending that 

cross-currency swaps should be 

classified as interest rate swaps rather 

than foreign exchange swaps, Global 

Forex argues that cross-currency swaps 

in fact are interest rate products with 

multi-payment schedules, that they are 

most often traded by interest rate desks 

with interest rate participants, and that 

they are captured and managed in 

interest rate systems and infrastructure 

using interest rate conventions. Global 

Forex notes that foreign exchange swaps 

are products traded by distinct foreign 

exchange desks with market 

participants and internal and external 

systems infrastructure that are different 

from the participants and infrastructure 

involved in cross-currency swaps. 

Existing trade repositories including 

TriOptima and DTCC also suggest that 

the Commission classify cross-currency 

swaps as interest rate swaps. 

Global Forex notes that foreign 

exchange swaps consist of a near and a 

far leg, and that the foreign exchange 

swap market currently lacks market 

conventions that suggest how to select 

a reporting counterparty responsible for 

reporting both legs, in situations where 

both parties have the same hierarchical 

level (e.g., two SDs). Global Forex also 

notes that current trade capture systems 

differ in how they handle foreign 

exchange swaps, and that some may 

book a foreign exchange swap as a 

single trade, but split it in back-office 

systems into two trades with separate 

trade identifiers. Global Forex does not 

advocate reporting both legs separately; 

it simply points out this potential issue 

in light of current, differing market 

practices. 

Combining all PET data and 

confirmation data reporting in a single 

report. Several comments suggest 

consolidating the requirements to report 

both PET data and confirmation data. 

Dominion Resources and Global Forex 

suggest a single report providing PET 

data plus confirmation status (rather 

than all terms confirmed). ISDA and 

SIFMA suggest replacing all creation 

data reporting with end-of-day snapshot 

reporting (including the first-day 

report). The Kansas City Board of Trade 

(‘‘KCBT’’) suggests that for swaps that 

are platform-executed and cleared, the 

DCO’s clearing report should replace 

confirmation reporting. 25 DTCC 

suggests creation data reporting for 

fully-electronic trades should be limited 

to confirmation reporting, in the belief 

that fully electronic trades can be 

confirmed within 15 minutes. Thomson 

Reuters believes that creation data 

reporting should be limited to 

confirmation reporting for all swaps 

whether platform executed or voice 

executed. The Managed Funds 

Association (‘‘MFA’’) suggests defining 

‘‘time of execution’’ to mean 24 hours 

after manual confirmation of the swap, 

arguing that the benefits of data 

reporting within minutes of execution 

as presently defined do not outweigh 

either the infrastructure costs or error 

risks involved. 

Harmonizing the data fields require 

for real time and regulatory reporting. 

ISDA, SIFMA, WGCEF, and Dominion 

Resources recommended harmonizing 

the Commission’s required PET data 

fields and real time reporting data 

fields. The Electric Coalition suggested 

a need to coordinate these two types of 

reporting with respect to reporting 

triggers and the words used to define 

them (e.g. verification or confirmation), 

and requested clarification concerning 

the data elements required by the real 

time reporting rule and the swap data 

reporting rule. 

Allowing non-SD/MSP counterparties 

to report less data. The NOPR requires 

the same minimum PET data fields to be 

reported for each swap in an asset class, 

regardless of the nature of the reporting 

entity or counterparty. Various energy 

producers commented concerning 

potential burdens for non-SD/MSP 

counterparties in this regard. AGA 

suggested the rule should minimize the 

burdens of reporting for non-SD/MSP 

counterparties, and EEI supported the 

principle that responsibility for 

reporting should rest with those having 

the best technology, such as SEFs, 

DCMs, SDs and MSPs.26 EEI, EPSA, and 

COPE suggested limiting data reporting 

for non-SD/MSP counterparties in 

physical energy to data they already 

maintain under current data capture 

practices, limiting their reporting of 

confirmation data to the confirmation 

information currently captured in their 

systems, rather than requiring them to 

report all confirmation terms. The 

International Energy Credit Association 

(‘‘IECA’’) suggested exempting physical 

energy counterparties from reporting 

requirements entirely, or at least 

imposing ‘‘lesser’’ reporting 

requirements for them. The Electric 

Coalition suggested that non-SD/MSP 

counterparties be subject only to a 

‘‘CFTC Lite’’ reporting regime. 

Miscellaneous aspects of PET data. 

The NOPR specifies minimum PET data 

fields for each asset class. The SEC’s 

proposed data reporting rule for swaps 

under the SEC’s jurisdiction, i.e., 

security-based swaps in the credit and 

equity asset classes, sets out categories 

of required data rather than specific data 

fields. ISDA and SIFMA suggested that 

the Commission should adopt the SEC’s 

approach, and expressed concern that 

the Commission’s approach could 

negatively affect FpML development 

and result in some products not being 

adequately described. Eris Exchange 

suggested that the Commission 

determine where prescriptive rules are 

absolutely necessary to address systemic 

risk, and the Commodity Markets 

Council suggested that the Commission 

avoid a prescriptive regulatory model 

which would create detailed reporting 

requirements and thus require different 

reporting methods. 

SunGard Energy & Commodities 

(‘‘SunGard’’) suggested that for swaps 

executed on SEFs and DCMs, having the 

SEF or DCM report position changes to 

each account, instead of reporting 

individual swap transactions, would be 

more efficient and more advantageous 

for monitoring of positions and of risk.27

b. Who makes the initial creation data 

report and selects the SDR. The NOPR 

did not explicitly assign the right to 

select the SDR to which a swap is 

reported, but it effectively determined 

who will make this choice, through the 

interaction of two key aspects of the 

proposed rule. First, in order to prevent 

fragmentation of data for a single swap 

across multiple SDRs, which would 

seriously impair regulators’ ability to 

view or aggregate all of the data 

concerning the swap, the NOPR 

provided that, once an initial data report 

concerning a swap is made to an SDR, 

all data reported for that swap thereafter 

must be reported to that same SDR.28

Second, in order to ensure that PET data 

concerning the swap is reported as soon 

as practicable following execution—in 

part to facilitate real time reporting—the 

NOPR required the SEF or DCM to make 

the initial PET data report for swap 

mstockstill on DSK4VPTVN1PROD with RULES2

2146 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

29The Dodd-Frank Act defines ‘‘mixed swap’’ as 

follows: ‘‘The term ‘security-based swap’ includes 

any agreement, contract, or transaction that is as 

described in section 3(a)(68)(A) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78c(a)(68)(A)) and 

is also based on the value of 1 [sic] or more interest 

or other rates, currencies, commodities, instruments 

of indebtedness, indices, quantitative measures, 

other financial or economic interest or property of 

any kind (other than a single security or a narrowbased security index), or the occurrence, nonoccurrence, or the extent of the occurrence of an 

event or contingency associated with a potential 

financial, economic, or commercial consequence 

(other than an event described in subparagraph 

(A)(iii).’’ Dodd-Frank § 721(21), CEA section 

1a(47)(D). 

executed on such a facility, and 

required the reporting counterparty (in 

the majority of cases, an SD or MSP) to 

make the initial report for an off-facility 

swap. Because subsequent reports must 

go to the SDR that received the initial 

report, in practice this meant that the 

SEF or DCM would select the SDR for 

platform-executed swaps, and the 

reporting counterparty would choose 

the SDR for off-facility swaps. 

The Commission received a number 

of comments concerning who should 

select the SDR to which a swap is 

reported. WGCEF, COPE, EEI, and EPSA 

supported the NOPR approach of giving 

reporting obligations to SEFs, DCMs, 

and DCOs, arguing that this approach 

simplifies reporting and eases burdens 

on counterparties, which is especially 

important in the case of non-SD/MSP 

counterparties. EEI and EPSA 

emphasized that the rules should ensure 

that SDR selection by a SEF, DCM, SD, 

or MSP does not result in costs or 

burdens for non-SD/MSP 

counterparties. WGCEF also suggested 

that DCOs should make the initial report 

for cleared swaps executed off-platform, 

since (in WGCEF’s view) execution 

technically will not occur until such a 

swap is accepted for clearing. Global 

Forex observed that if a platform makes 

the initial report and thus selects the 

SDR, other entities or counterparties 

with reporting obligations during the 

life of the swap would need to ensure 

that they can connect to the chosen 

SDR. ABC and CIEBA suggested that for 

swaps involving a benefit plan as a 

counterparty, the SDR selection should 

always be made by the plan. ISDA and 

SIFMA suggested that the reporting 

counterparty should always select the 

SDR, arguing that this would permit the 

market to determine and follow the 

most efficient manner of reporting. 

REGIS–TR opposed having reporting 

obligations assigned based on platform 

execution or clearing. 

DTCC and ICE recommended that the 

reporting counterparty—an SD or MSP 

in the majority of cases—should always 

select the SDR, even for platformexecuted swaps. ICE also suggested that 

if a SEF or DCM makes the first report 

and thus selects the SDR for a swap that 

is to be cleared, the SEF or DCM should 

be permitted to select a DCO that is also 

registered as an SDR as both the DCO 

that will clear the swap and the SDR to 

which the swap is reported. Going 

further in this direction, CME 

contended that the final rule should 

require the initial report for each cleared 

swap to be made to a DCO that is also 

registered as an SDR or an SDR chosen 

by such a DCO. CME argued that the 

structure and wording of the DoddFrank Act demonstrate that this was 

Congress’s intent, and that limiting 

reporting for cleared swaps to DCOs that 

are dually registered as SDRs or to SDRs 

chosen by a DCO would involve the 

lowest cost and least burden. The 

Commodity Markets Council echoed 

CME’s cost-benefit argument, asserting 

that DCOs are the ‘‘natural choice’’ to 

act as SDRs for cleared trades, and that 

it would be costly, inefficient and 

unnecessary to require industry to 

establish a redundant set of expensive 

connections with non-DCO SDRs for the 

purpose of making regulatory reports for 

cleared trades. 

c. Creation data reporting deadlines 

and deadline phasing. 

Extended creation data reporting 

deadlines. The Commission received a 

number of comments recommending 

extended deadlines for both PET data 

reporting and confirmation data 

reporting. The Electric Coalition 

commented that the NOPR reporting 

deadlines are far too short if the 

reporting party is a non-financial entity, 

because such an entity would need to 

manually extract reportable data 

elements from a customized swap. 

Several commenters urged the 

Commission to extend deadlines for 

PET data reporting, particularly in the 

case of non-SD/MSP counterparties. EEI 

suggested a PET data report deadline of 

T+1 (i.e., by the close of business on the 

business day following the day of 

execution) in the case of either 

electronic or manual verification. CIEBA 

asked that the 24-hour deadline for PET 

data reporting where both execution and 

verification are non-electronic include 

only business days. COPE concurred 

that the 24-hour deadline where 

verification is non-electronic is too short 

for non-SD/MSP counterparties, and 

asked the Commission not to set a 

deadline in the final rule, but to 

determine the deadline through ongoing 

consultations with industry following 

issuance of the final rule. 

Commenters also urged extension of 

the deadlines for confirmation data 

reporting. AGA asked that the 

confirmation data reporting deadline for 

non-SD/MSP counterparties be set at 

T+1 for swaps electronically confirmed, 

and at T+2 (i.e., by the close of business 

on the second business day following 

the day of execution) for swaps not 

electronically confirmed. The Federal 

Home Loan Banks (‘‘FHLB’’) suggested a 

deadline of 24 hours following 

confirmation for reporting confirmation 

of a swap electronically confirmed, and 

a deadline of five business days 

following confirmation for a swap 

manually confirmed. DTCC suggested 

that a 15-minute deadline for reporting 

confirmation of an electronically 

executed swap would require a level of 

straight-through processing not yet 

available, and that for similar reasons a 

somewhat longer deadline would be 

needed where the swap was not 

electronically executed but 

electronically cleared. DTCC 

recommended setting the initial 

deadline for confirmation data reporting 

for electronically executed swaps at 30 

minutes, setting the deadline for swaps 

not electronically executed but 

electronically cleared at two hours, and 

phasing in confirmation data reporting 

deadlines. For manually confirmed 

swaps, DTCC advocated a confirmation 

data reporting deadline of five days after 

execution. 

Streamlined regulatory and real time 

reporting. The Commission also 

received comments from DTCC and 

from roundtable participants suggesting 

that it consider minimizing the number 

of swap creation data reports to be 

required of any given registered entity 

or swap counterparty, either by 

combining PET data reporting and 

confirmation data reporting in a single 

report, or by allowing a single PET data 

report to fulfill both regulatory reporting 

requirements under part 45 and real 

time reporting requirements under 

part 43. 

Phasing in reporting deadlines. DTCC 

suggested that the Commission consider 

phasing in creation data reporting 

deadlines where possible. 

d. Reporting of multi-asset swaps and 

mixed swaps. As noted in the preamble 

of the NOPR, generally, a mixed swap 

is in part a security-based swap subject 

to SEC jurisdiction, and in part a swap 

belonging to an asset class subject to 

CFTC jurisdiction.29 Multi-asset swaps 

are those that do not have one easily 

identifiable primary underlying notional 

item, but instead involve multiple 

underlying notional items belonging to 

different asset classes that are all within 

CFTC’s jurisdiction. One way of stating 

the distinction between these two types 

of swaps is that SEC and CFTC will each 

have jurisdiction over part of a mixed 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2147 

swap, but only CFTC will have 

jurisdiction over the different parts of a 

multi-asset swap. The NOPR requested 

comment on how multi-asset and mixed 

swaps should be reported, but did not 

directly address such reporting in the 

text of the proposed rule. 

Commenters provided differing views 

concerning reporting of mixed swaps 

and multi-asset swaps. Better Markets 

suggested that the different legs of 

mixed swaps and multi-asset swaps 

should be reported separately. ISDA and 

SIFMA suggested that multi-asset swaps 

should not be decomposed into their 

underlying asset classes but should be 

reported to an SDR that accepts swaps 

in the most significant asset class 

component of the swap, as determined 

by the reporting counterparty (in 

practice, usually the asset class of the 

desk that trades the swap). DTCC 

suggested that swaps in asset classes 

subject to joint SEC–CFTC regulation 

could be reported to an SDR registered 

with both Commissions (except in cases 

where no such SDR is available), or that 

a practicable reporting regime for mixed 

swaps and multi-asset swaps may be to 

have the reporting counterparty for a 

mixed swap or multi-asset swap report 

the swap to an SDR serving each asset 

class, including the USI assigned in the 

context of the report to the first SDR in 

the report made to the second SDR. 

i. Reporting of international swaps. As 

noted above, the Dodd-Frank Act directs 

the Commission to consult and 

coordinate with foreign regulatory 

authorities regarding establishment of 

consistent international standards for 

the regulation of swaps and swap 

entities. The Commission is committed 

to a cooperative international approach 

to swap recordkeeping and swap data 

reporting, and has consulted extensively 

with various foreign regulatory 

authorities in the process of preparing 

this final rule. International regulators 

consulted by the Commission have 

urged the Commission to include 

provisions in its final swap data 

reporting rules concerning 

‘‘international swaps,’’ i.e., those swaps 

that may be required by U.S. law and 

the law of another jurisdiction to be 

reported both to an SDR registered with 

the Commission and to a different trade 

repository registered with the other 

jurisdiction. 

3. Final Rule: § 45.3 

a. What should be included in 

required PET data. 

Clarification of the catch-all PET data 

category. The Commission’s purpose in 

including in the tables of minimum PET 

data a field for reporting ‘‘any other 

primary economic terms of the swap 

matched by the counterparties in 

verifying the swap’’ is to provide a 

‘‘catch all’’ category necessary to (1) 

ensure reporting of all price-forming 

terms agreed on at the time of swap 

verification, including any such terms 

not listed in the minimum PET data 

tables for the asset class in question, and 

(2) keep pace with market innovation 

and new varieties of swaps for which 

the Commission has not enumerated all 

relevant data fields. To clarify that this 

field is intended to include all terms 

agreed on at the time of swap 

verification, the final rule eliminates the 

words ‘‘primary economic’’ from the 

field description, specifies reporting of 

‘‘any other terms of the swap matched 

by the counterparties in verifying the 

swap,’’ and adds some possible 

examples of such terms. This aligns the 

field description with the NOPR and 

final rule definition of ‘‘primary 

economic terms’’ as meaning ‘‘all of the 

terms of a swap matched or affirmed by 

the counterparties in verifying the 

swap.’’ 

Clarification of particular PET data 

terms for other commodity swaps. 

The Commission disagrees with 

comments suggesting that execution 

date and time should not be required to 

be reported for certain types of other 

commodity swaps. The Commission 

believes that the date and time of the 

execution of a swap constitute a basic 

primary economic term and a 

fundamental audit trail component for 

all swaps. This information is essential 

to the ability of the Commission and 

other regulators to fulfill their 

obligations to supervise swap markets 

and prosecute abuses. For swaps 

executed on a SEF or DCM, and for offfacility swaps executed via an 

automated system, a timestamp will be 

created automatically by the system 

involved. For off-facility swaps 

executed manually, counterparties can 

and must manually record and report 

the date and time of execution. Where 

current market practice does not include 

recording the date and time of execution 

of a swap, adjustment will be necessary. 

While the Commission notes that the 

parameters of what constitutes a swap 

will be provided by the final definition 

of ‘‘swap’’ issued jointly by the 

Commission and the SEC, the 

Commission believes that ‘‘settlement 

method’’ should be retained as a PET 

data field. The definition of a swap in 

CEA section 1a(47) could include 

options that potentially could require 

physical delivery of a commodity. Thus, 

while certain transactions that require 

delivery of a commodity, e.g., forward 

contracts or spot transactions that are 

excluded from the definition of a swap, 

may not constitute swaps (as 

commenters argue), other derivative 

transactions involving delivery would 

be required to be reported as swaps. 

The Commission believes that 

‘‘grade’’ should also be retained as a 

PET data field for other commodity 

swaps. ‘‘Grade’’ would typically be 

applicable as a defining characteristic of 

the swap for both physically delivered 

and cash settled transactions, in that 

this term is intended to identify the 

quality and other characteristics of the 

commodity that underlies the swap. For 

a cash settled swap, the Commission 

believes that separately accounting for 

grade in the terms reported is also 

necessary as a means of classifying and 

identifying the quality characteristics of 

the commodity underlying the swap. 

The Commission recognizes that in 

certain cases—electricity being one 

example—a grade may not exist. The 

final rule will indicate that where a 

particular PET data field does not apply 

to a given swap, the reporting entity or 

counterparty should report ‘‘Not 

applicable’’ for that field. 

As noted in the comments, some 

commodity swap counterparties use the 

convention of identifying the notional 

amount of a swap by specifying the 

quantity in terms of dollars or units of 

the commodity, whichever is used to 

calculate settlement period payment 

obligations. However, other 

counterparties account for the size of a 

swap by referring to the total quantity 

involved in a swap over its entire 

existence. Because a single convention 

does not apply in all cases, the final 

minimum PET data tables will retain the 

terms ‘‘Quantity’’ and ‘‘Total quantity, ’’ 

but will also add the terms ‘‘Quantity 

units’’ and ‘‘Notional quantity.’’ 

Notional quantity will be defined as the 

amount of the underlying commodity 

that is used to calculate periodic 

settlement payments during the life of 

the swap. Quantity units will be defined 

as the units in which the notional 

quantity is expressed, e.g., bushels, 

gallons, barrels, pounds, or tons. 

Elimination or clarification of 

calculation and reporting of futures 

equivalents. The NOPR provision for 

reporting of futures contract equivalents 

was intended to assist the Commission 

in monitoring the positions of traders 

for the purpose of enforcing position 

limits mandated by the Dodd-Frank Act. 

However, in July 2011, subsequent to 

publication of the NOPR, the 

Commission adopted new reporting 

requirements for physical commodity 

swaps and swaptions. Part 150 of this 

chapter now requires routine position 

reports from clearing organizations, 

clearing members and swap dealers, and 

mstockstill on DSK4VPTVN1PROD with RULES2

2148 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

30An SDR would be able to report position data 

to the Commission only if it were the single SDR 

for an entire asset class. 

31The final rule will further provide that if an offfacility swap is accepted for clearing within the 

applicable deadline for PET data reporting by the 

reporting counterparty, and before the reporting 

counterparty reports any primary economic terms 

data, then the reporting counterparty will be 

excused from reporting creation data, and the DCO 

will report all required creation data in a single 

report that includes both confirmation data and PET 

data. The final rule will also define ‘‘confirmation’’ 

as the consummation of legally binding 

documentation memorializing the agreement of the 

parties to all terms of the swap. 

32The Commission also notes that the final rule 

addresses the reporting of ‘‘foreign exchange 

instruments,’’ defined as instruments that are both 

defined as a swap in part 1 of this chapter and 

included in the foreign exchange asset class. The 

definition specifies that instruments in the foreign 

exchange asset class include: any currency option, 

foreign currency option, foreign exchange option, or 

foreign exchange rate option; any foreign exchange 

forward as defined in CEA section 1a(24); any 

foreign exchange swap as defined in CEA section 

1a(25); and any non-deliverable forward involving 

foreign exchange. This definition and this approach 

to reporting are required by the fact that the DoddFrank Act defines the term ‘‘foreign exchange 

swap,’’ and the fact that foreign exchange swaps as 

so defined are only a subset of the foreign exchange 

instruments that will be defined as swaps. 

33The Commission notes that it is working to 

align the timeframes for regulatory swap data 

reporting pursuant to this part and the 

dissemination delays for real time swap data 

reporting pursuant to part 43, in order to permit a 

reporting entity or counterparty to fulfill both 

obligations by making a single report, should the 

reporting entity or counterparty choose to do so. 

also applies to reportable swap trader 

positions. It also provides guidelines on 

how swaps should be converted into 

futures equivalents. The new 

regulations were issued in part to cover 

the period between the present, when 

the date by which SDRs registered with 

the Commission will be operational in 

all asset classes is not yet certain, and 

a future time when the Commission may 

be able to obtain swap position data by 

aggregating data across SDRs.30

Accordingly, the final part 45 rule will 

drop ‘‘futures contract equivalent’’ and 

‘‘futures contract equivalent unit of 

measure’’ from its minimum PET data 

tables. The Commission may revisit 

possible reporting of futures equivalents 

at a later time, after Commission staff 

has had an opportunity to evaluate the 

Commission’s experience in collecting 

futures equivalent data under the new 

part 150 regulations. 

Clarification of creation data 

reporting in the context of structured 

transactions. In response to comments 

requesting clarification of creation data 

reporting in the context of structured 

transactions, the Commission provides 

the following explanation. 

As discussed below in the context of 

who reports creation data, for swaps 

executed on a SEF or DCM, the final 

rule requires the SEF or DCM to report 

all required swap creation data, as soon 

as technologically practicable after 

execution, in a single report that 

includes all primary economic terms 

data and all confirmation data for the 

swap. This will address some of the 

concerns raised in these comments for 

swaps executed on a SEF or DCM. 

For off-facility swaps, the final rule 

requires the reporting counterparty to 

report both (1) all primary economic 

terms data, within specified times 

following execution, and (2) all 

confirmation data, within specified 

times following confirmation by the 

counterparties.31 The final rule requires 

both a PET data report and a 

confirmation data report in recognition 

that the elapsed time between execution 

and verification of primary economic 

terms on the one hand, and 

confirmation of all terms of the swap on 

the other, may differ for a given swap 

depending on context. 

The Commission understands that a 

major concern underlying these 

comments reflects uncertainty as to 

what reporting the final rule requires 

(a) in situations where give-up 

arrangements or block trade details may 

not be entirely finalized as of the time 

the counterparties verify primary 

economic terms, or (b) in the case of 

structured transactions, where the 

counterparties may negotiate primary 

economic terms in stages over a period 

of time before reaching agreement on 

their entire deal. The Commission 

therefore wishes to clarify that for offfacility swaps where execution and 

confirmation are not simultaneous, the 

final rule requires PET data reporting 

when execution has occurred and 

verification of primary economic terms 

is completed, even though details such 

as give-ups may still be in process. It 

also wishes to clarify that PET data 

reporting is to follow agreement on all 

primary economic terms of the complete 

transaction, and is not required or 

desired after each stage of negotiating a 

structured transaction or after agreement 

on some but not all of the primary 

economic terms of the swap. 

Clarifications regarding foreign 

exchange transactions. The Commission 

has considered and agrees with 

comments suggesting that crosscurrency swaps should be classified and 

reported as interest rate swaps, in line 

with prevailing market practice 

concerning the trading of such swaps. 

The final rule provides for reporting of 

cross-currency swaps as interest rate 

swaps. The Commission has also 

considered comments noting differences 

in current foreign exchange market 

practice concerning the booking of the 

near and far legs of some foreign 

exchange transactions. The Commission 

understands that a firm’s financial 

statements will address both legs of a 

foreign exchange swap, and that 

confirmation is performed with respect 

to the whole swap rather than separately 

for each leg. The final rule provides for 

reporting of foreign exchange swaps as 

a single transaction by a single reporting 

counterparty selected as provided in 

§ 45.8. The Commission notes that 

foreign exchange market conventions 

may need to adjust to this 

requirement.32

Combining all PET data and 

confirmation data reporting in a single 

report. The Commission has considered 

the numerous comments suggesting that 

the final rule should provide for PET 

data and confirmation data reporting to 

be combined in a single report. The 

Commission agrees with these 

comments with respect to swaps 

executed on a SEF or DCM. As noted 

above, the final rule provides that for 

swaps executed on a SEF or DCM, a 

single report by the SEF or DCM, made 

as soon as technologically practicable 

after execution, will fulfill all creation 

data reporting that would otherwise be 

required of reporting counterparties. 

The Commission disagrees with these 

comments as they apply to off-facility 

swaps. The NOPR requirements for both 

PET data reporting and confirmation 

data reporting are designed to ensure 

both (a) timeliness of reporting, served 

by the initial PET data report, and (b) 

data accuracy and completeness, served 

by confirmation data reporting.33 In 

addition, as noted above, the NOPR 

requirement for both a PET data report 

and a confirmation data report 

recognizes that the elapsed time 

between verification of primary 

economic terms and confirmation of all 

terms may differ in different contexts, 

and in some cases may be substantial. 

In a number of cases, delaying the initial 

data report for a swap until 

confirmation has occurred could 

prevent regulators from seeing a current 

picture of the entire swap market in the 

data present in SDRs. As provided in 

the NOPR and the final rule, reporting 

counterparties for off-facility swaps will 

be free to contract with third-party 

services providers to fulfill either or 

both of these reporting obligations, 

which could reduce costs associated 

with making these reports. The 

Commission notes that, for off-facility 

swaps not accepted for clearing within 

the applicable deadline for the reporting 

counterparty to report PET data, the 

reporting counterparty can avoid the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2149 

need for a separate confirmation data 

reporting by confirming the swap within 

the applicable deadline for PET data 

reporting, and reporting both PET data 

and confirmation data in a single report. 

Harmonizing the data fields required 

for real time and regulatory reporting. 

The Commission agrees in principle 

with comments suggesting 

harmonization of the data fields 

required for real time reporting pursuant 

to part 43 and those required for 

regulatory reporting pursuant to this 

part. While registered entities and 

reporting counterparties subject to the 

Commission’s jurisdiction will remain 

responsible for complying with both 

part 43 and part 45, the Commission is 

working to substantially align the 

minimum PET data fields required by 

this part and the real time reporting data 

fields required by part 43, in order to 

reduce reporting burdens to the extent 

possible. 

Allowing non-SD/MSP counterparties 

to report less data. The Commission 

disagrees with comments suggesting 

that it should require less data to be 

reported for a swap with respect to 

which a non-SD/MSP counterparty is 

the reporting counterparty. The 

Commission believes that fulfilling the 

purposes of the Dodd-Frank Act 

requires that regulators have access to 

the same information for all swaps 

reported to SDRs. To address 

commenters’ concerns to the extent 

possible, the final rule will lessen 

burdens on non-SD/MSP counterparties 

by phasing in their reporting—which 

will begin as of a compliance date later 

than the compliance dates for other 

registered entities and counterparties— 

and by providing extended deadlines for 

their reporting once it begins. 

Miscellaneous aspects of PET data. 

The Commission disagrees with 

comments suggesting that the final rule 

should only provide categories of data 

to be reported, rather than minimum 

PET data fields. The Commission 

believes the approach taken by the 

NOPR in this respect is appropriate. It 

is designed to ensure uniformity of 

essential data concerning swaps across 

all of the asset classes over which the 

Commission has jurisdiction, and across 

different SDRs, and to ensure that the 

Commission has the necessary 

information to characterize and 

understand the nature of reported 

swaps. Commission staff have consulted 

with SEC staff regarding data reporting 

for swaps in the credit and equity asset 

classes where the Commission and the 

SEC share jurisdiction, and the 

Commission has substantially aligned 

its data requirements in those asset 

classes with the data sought by the SEC. 

As a result, the Commission does not 

believe that SDRs and security-based 

SDRs will have difficulty in collecting 

the data needed by the two 

Commissions. The inclusion in 

minimum PET data of all terms of the 

swap matched by the counterparties in 

verifying the swap provides an avenue 

for reporting for newly-developed swap 

products. The Commission will also 

have the ability to amend its tables of 

required minimum PET data at futures 

times when this is desirable. 

The Commission disagrees with the 

comment suggesting that SEFs and 

DCMs should report positions rather 

than swap transactions. The Dodd-Frank 

Act requires ‘‘each swap’’ to be reported 

to an SDR, and does not address 

position reporting to an SDR. In 

addition, unlike most current futures 

exchanges, SEFs and DCMs will not 

necessarily have access to all of the 

transactions of a given counterparty in 

a particular product, and thus would be 

unable to report positions. 

b. Who makes the initial creation data 

report and selects the SDR. The 

Commission has considered the various 

comments received concerning who 

should make the initial creation data 

report for a swap, and by operation of 

the various parts of the rule thus select 

the SDR to which the swap is reported. 

The Commission has determined that 

the final rule should maintain the 

NOPR’s approach, calling for initial 

creation data reporting by the registered 

entity or reporting counterparty that the 

Commission believes has the easiest and 

fastest access to the data required, and 

requiring that, once an initial data 

report concerning a swap is made to an 

SDR, all data reported for that swap 

thereafter must be reported to that same 

SDR. Cumulatively, these provisions 

prevent fragmentation of swap data that 

would impair the ability of the 

Commission and other regulators to use 

the swap data in SDRs for the purposes 

of the Dodd-Frank Act. Under this 

approach, competition may lead SEFs 

and DCMs to establish connections to 

multiple SDRs, and result in lower SDR 

fees charged, not only to SEFs and 

DCMs for swaps executed on such 

facilities, but also to reporting 

counterparties for off-facility swaps. The 

Commission believes that requiring that 

all cleared swaps be reported only to 

DCOs registered as SDRs or to SDRs 

chosen by a DCO would create a nonlevel playing field for competition 

between DCO–SDRs and non-DCO 

SDRs. The Commission also believes 

that it would make DCOs collectively, 

and could in time make a single DCO– 

SDR, the sole recipient of data reported 

concerning cleared swaps. On the other 

hand, the Commission believes that 

giving the choice of the SDR to the 

reporting counterparty in all cases could 

in practice give an SDR substantially 

owned by SDs a dominant market 

position with respect to swap data 

reporting within an asset class or even 

with respect to all swaps. The 

Commission believes that the rule as 

proposed favors market competition, 

avoids injecting the Commission into a 

market decision, and leaves the choice 

of SDR to be influenced by market 

forces and possible market innovations. 

The rule as proposed also addresses the 

major substance of the concerns 

expressed by non-SD/MSP 

counterparties, since it calls for the 

initial data report to be made by a nonSD/MSP counterparty only in the case 

of an off-facility swap between two nonSD/MSP counterparties. 

c. Creation data reporting deadlines 

and deadline phasing. 

Extended creation data reporting 

deadlines. The Commission continues 

to believe, as it stated in the NOPR, that 

in order to fulfill the purposes of the 

Dodd-Frank Act while minimizing 

burdens for registered entities and swap 

counterparties, particularly including 

non-SD/MSP counterparties, the final 

rule should establish a swap data 

reporting regime calling for reporting by 

the registered entity or counterparty that 

has the easiest, fastest, and cheapest 

access to the set of data in question. The 

Commission has also considered and 

evaluated the comments it has received 

regarding ways that reporting burdens 

could be reduced, either by allowing a 

single report to serve different required 

functions or by extending and phasing 

in reporting deadlines. The Commission 

has determined that the reporting 

regime established by the final rule 

should maintain many fundamental 

aspects of the reporting called for in the 

NOPR, while adjusting other aspects of 

that regime to streamline reporting and 

minimize reporting burdens where 

possible, while continuing to ensure 

that swap data for all swaps is reported 

to SDRs in a manner that ensures the 

ability of the Commission and other 

regulators to fulfill the systemic risk 

mitigation, market transparency, 

position limit monitoring and market 

surveillance objectives of the DoddFrank Act. 

Streamlined regulatory and real time 

reporting. The Commission agrees with 

comments suggesting that, where 

possible, the number of swap creation 

data reports should be minimized and 

streamlined by combining PET data 

reporting and confirmation data 

reporting in a single report. 

mstockstill on DSK4VPTVN1PROD with RULES2

2150 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

The Dodd-Frank Act does not specify 

the timeframes for reporting of swap 

data to SDRs for regulatory purposes. 

However, to further the objectives of the 

Dodd-Frank Act, the Commission 

believes it is important that swap data 

be reported to SDRs either immediately 

following execution of the swap or 

within a short but reasonable time 

following execution. The Commission 

does not believe that PET data reporting 

can wait until it is possible to report 

confirmation data in all cases, because 

in an appreciable number of instances 

confirmation of a swap can occur days, 

weeks, or even months after execution. 

Where execution and confirmation are 

simultaneous or nearly so, however, the 

Commission agrees with commenters’ 

suggestion that reporting both PET data 

and confirmation data in a single report 

would reduce reporting burdens 

without impairing regulatory purposes. 

The Commission is working to adopt 

final rules for SEFs and DCMs, and final 

rules with respect to straight-through 

processing, providing that execution of 

a swap on a SEF or DCM will constitute 

confirmation of all of the terms of the 

swap. This final part 45 rule requires 

that the terms of such contracts must 

include all of the minimum PET data 

required by part 45 for a swap in the 

asset class in question. The final rule 

therefore provides for a single creation 

data report, including both PET data 

and confirmation data, in the case of 

swaps executed on or pursuant to the 

rules of a SEF or DCM. Accordingly, no 

counterparty will be required to report 

creation data for a swap executed on or 

pursuant to the rules of a SEF or DCM. 

The Commission agrees with 

commenters that a reporting regime that, 

to the extent possible and practicable, 

permits reporting entities and 

counterparties to comply with the 

regulatory data reporting requirements 

of part 45 and the real time reporting 

requirements of part 43 by making a 

single report can reduce reporting 

burdens while still ensuring fulfillment 

of the purposes for which the DoddFrank Act requires such reporting. The 

Commission is working to align the 

reporting deadlines in this final rule 

with the public dissemination delays 

provided in the final part 43 real time 

reporting rule, to the extent possible and 

practicable, in order to achieve this goal. 

The Commission’s final clearing rules 

in part 39 of this chapter provide that 

acceptance of the swap for clearing by 

a DCO constitutes confirmation of all of 

the terms of the swap. This final part 45 

rule provides that the terms of such 

contracts must include all of the 

minimum PET data required by part 45 

for a swap in the asset class in question. 

Because acceptance for clearing 

constitutes confirmation, the final rule 

provides that if an off-facility swap is 

accepted for clearing within the 

reporting deadlines applicable to the 

reporting counterparty, the reporting 

counterparty shall be excused for 

creation data reporting for the swap, and 

the DCO shall report all creation data 

report, including both PET data and 

confirmation data, in a single report 

made as technologically practicable 

after clearing. In such cases, reporting 

will be further streamlined, and burdens 

for counterparties will be further 

reduced. 

Phasing in and extending reporting 

deadlines. As noted above, 

counterparties will not be required to 

report creation data for swaps executed 

on a SEF or DCM, or for swaps accepted 

for clearing by a DCO within the 

applicable reporting deadlines. After 

considering comments advocating the 

extension and phasing in of 

counterparty reporting deadlines, the 

Commission has decided to extend and 

phase in such deadlines in the final rule 

with respect to off-facility swaps not 

accepted for clearing within such 

deadlines. 

• PET data reporting deadlines for SD 

or MSP reporting counterparties will be 

phased in over two years. 

• PET data reporting deadlines for 

non-SD/MSP reporting counterparties 

will be extended and phased in over 

three years, and will exclude weekend 

days and legal holidays. For example, 

while the NOPR set the non-SD/MSP 

reporting counterparty PET data 

reporting deadline for an uncleared 

swap at 24 hours, the final rule calls for 

reporting no later than 48 business 

hours after execution (during the first 

year of reporting), 36 business hours 

after execution (during the second year 

of reporting), or 24 business hours after 

execution (thereafter). 

• To reduce possible burdens on 

small non-SD/MSP counterparties 

entering into a swap with an SD or MSP, 

if the non-reporting counterparty is a 

non-SD/MSP counterparty that is not a 

financial entity, and if primary 

economic terms are not verified 

electronically, PET data reporting 

deadlines for the SD or MSP reporting 

counterparty will be further extended 

and phased in over three years, and will 

exclude weekend days and legal 

holidays. 

• Confirmation data reporting 

deadlines for SD or MSP reporting 

counterparties where confirmation is 

non-electronic will be extended, and 

will exclude weekend days and legal 

holidays. 

• Confirmation data reporting 

deadlines for non-SD/MSP reporting 

counterparties will be extended and 

phased in over three years, and will 

exclude weekend days and legal 

holidays. The final rule calls for such 

counterparties to report confirmation 

data no later than 48 business hours 

after confirmation (during the first year 

of reporting), 36 business hours after 

confirmation (during the second year of 

reporting), or 24 business hours after 

confirmation (thereafter). 

• For off-facility, uncleared swaps, 

during the first six months following the 

applicable compliance date, while PET 

data will have to be reported 

electronically with data normalized in 

data fields, reporting counterparties for 

whom reporting confirmation data 

normalized in data fields is not yet 

technologically practicable may report 

required confirmation data by 

transmitting an image of all documents 

recording the confirmation. This will 

allow needed additional time for 

development of schemas for data 

reporting and implementation by nonSD/MSP counterparties. Electronic 

reporting of all confirmation data 

normalized in data fields will be 

required after this six month period. 

Charts showing the final rule 

reporting requirements with respect to 

both creation data reporting and 

continuation data reporting can be seen 

below at pages 70 and71. 

Reporting burden reductions for nonSD/MSP reporting counterparties. As a 

result of the streamlined reporting 

regime and extended, phased-in 

reporting deadlines noted above, the 

final rule eliminates all reporting 

obligations for non-SD/MSP reporting 

counterparties in many cases, and 

phases in or reduces them in virtually 

all other cases. Non-SD/MSP reporting 

counterparties must report data only for 

the small minority of swaps in which 

both counterparties are non-SD/MSP 

counterparties. Even within this small 

minority of swaps, a non-SD/MSP 

reporting counterparty will have no 

reporting obligations for on-facility, 

cleared swaps, or for off-facility swaps 

accepted for clearing within the 

applicable deadline for PET data 

reporting. If an off-facility swap is 

accepted for clearing after the PET data 

reporting deadline, the non-SD/MSP 

reporting counterparty is excused from 

reporting confirmation data and 

continuation data, which instead will be 

reported by the DCO. For on-facility, 

uncleared swaps, a non-SD/MSP 

reporting counterparty’s reporting 

obligations are limited to reporting 

continuation data during the existence 

of the swap. For off-facility, uncleared 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2151 

34Such dual reporting would avoid any need for 

an SDR accepting swaps only in a CFTC-regulated 

asset class to dual-register with the SEC merely 

because it might receive a report for a mixed swap 

in part subject to SEC jurisdiction. 

35This definition does not add a new requirement 

for the reporting of swaps not otherwise required 

to be reported. 

36Under the final rule provisions in § 45.6 of this 

part concerning unique swap identifiers, the nonreporting counterparty will receive the USI for the 

swap from the SDR, and thus will be able to provide 

it to the non-U.S. trade repository on request. 

swaps, creation data reporting deadlines 

for a non-SD/MSP reporting 

counterparty have been extended and 

phased in as noted above, and no longer 

include weekend days or holidays. The 

deadline for a non-SD/MSP reporting 

counterparty to report changes to 

primary economic terms over the life of 

the swap has been lengthened from 

reporting on the day such a change 

occurs to reporting by the end of the 

second business day following the date 

of such a change; and a non-SD/MSP 

reporting counterparty will be required 

to report valuation data on only a 

quarterly rather than a daily basis. 

d. Allocations. As set forth more fully 

below in the discussion of USIs, the 

Commission received and has 

considered comments and industry 

requests for clarification concerning USI 

creation and swap creation data 

reporting in the case of swaps involving 

allocation by an agent to its clients who 

are the actual counterparties on one side 

of the swap. In response to these 

requests, the final rule will address both 

USI creation and creation data reporting 

for swaps involving allocation, as set 

forth in the discussion of USIs below. 

e. Reporting of multi-asset swaps and 

mixed swaps. After considering 

comments concerning how multi-asset 

swaps and mixed swaps should be 

reported, the Commission has 

determined that the final rule should 

provide for mixed swaps to be reported 

to both an SDR registered with CFTC 

and an SDR registered with SEC.34

Reporting to a dual-registered SDR 

would satisfy this requirement, but 

would not be required. To ensure 

regulatory ability to track mixed swaps 

and aggregate data concerning them, the 

final rule will add a ‘‘mixed swap’’ 

checkbox field to the tables of minimum 

primary economic terms. To avoid 

double-counting of mixed swaps, the 

final rule requires the reporting entity or 

counterparty to obtain a USI for the 

swap from the first SDR to which the 

swap is reported, and to include that 

USI in the data concerning the swap 

reported to the second SDR to which the 

swap is reported. 

For multi-asset swaps, the final rule 

requires reporting to a single SDR 

accepting swaps in the asset class 

determined by the registered entity or 

counterparty reporting the swap to be 

the first or primary asset class involved 

in the swap. To ensure regulatory ability 

to track the swap in all asset classes 

involved, the final rule will add two 

data fields to the tables of minimum 

primary economic terms, one for 

indication of the first or primary asset 

class involved in the swap (which must 

be an asset class accepted by the SDR), 

and the second for indication of the 

other asset class or classes involved in 

the swap. 

f. Reporting of international swaps. 

The Commission agrees with 

international regulators with whom the 

Commission has consulted who have 

suggested that it is important for the 

final rule to include a mechanism that 

enables the Commission and other 

regulators to identify international 

swaps reported to multiple repositories, 

so that such swaps are not doublecounted by regulators. The Commission 

is mindful of the fact that the DoddFrank Act directs the Commission to 

consult and coordinate with foreign 

regulatory authorities regarding 

establishment of consistent 

international standards for the 

regulation of swaps and swap entities. 

The Commission also believes that 

providing an accurate picture of the 

swap market to regulators is one of the 

fundamental purposes of the DoddFrank Act. For these reasons, and in 

order to clarify its intent concerning 

swap data reporting in this context, the 

Commission has determined that the 

final rule will address the reporting of 

‘‘international swaps,’’ defined for 

clarity as those swaps that may be 

required by U.S. law and the law of 

another jurisdiction to be reported both 

to an SDR registered with the 

Commission and to a different trade 

repository registered with the other 

jurisdiction.35 In order to help provide 

for international swaps the consistent 

international standards sought by the 

Dodd-Frank Act, the final rule provides 

that for each international swap that is 

reported to both a U.S.-registered SDR 

and a foreign trade repository, the 

reporting counterparty shall report to 

the U.S.-registered SDR, as soon as 

practicable, the identity of the foreign 

trade repository, and the swap identifier 

used by that foreign trade repository to 

identify that swap.36 If necessary, the 

reporting counterparty shall obtain this 

information from the non-reporting 

counterparty. The Commission believes 

that these provisions are a logical 

outgrowth of the swap data reporting 

provisions of the NOPR and of the 

statutory call for international 

consultation and consistent 

international standards. 

C. Swap Data Reporting: Continuation 

Data—§ 45.4 

1. Proposed Rule 

As noted above, in order to ensure 

timeliness, accuracy, and completeness 

with respect to the swap data available 

to regulators, the proposed rule called 

for reporting of swap data from each of 

two important stages of the existence of 

a swap: The creation of the swap, and 

the continuation of the swap over its 

existence until its final termination or 

expiration. During the continued 

existence of the swap, the NOPR 

required reporting of three types of 

continuation data: (a) Either life cycle 

event data or state data (depending on 

the reporting method involved) that 

reflects all changes to the swap; (b) 

contract-intrinsic data, meaning 

scheduled, anticipated events that do 

not change the contractual terms of the 

swap, such as an anticipated rate 

adjustment; and (c) valuation data that 

reflects the current value of the swap, 

such as the daily mark-to-market. 

As proposed, the rule specified the 

reporting method to be used in each 

asset class for reporting all changes to 

the swap. For credit swaps and equity 

swaps, the NOPR called for reporting 

life-cycle events—meaning any event 

resulting in a change to data previously 

reported in connection with the swap, 

such as an assignment or novation, a 

partial or full termination of the swap, 

or a change in the cash flows originally 

reported—on the day that such an event 

occurs. For foreign exchange 

transactions, interest rate swaps, and 

other commodity swaps, the NOPR 

called for a daily report of state data— 

meaning all data necessary to provide a 

daily snapshot view of the primary 

economic terms of the swap, including 

any changes since the last snapshot. 

For cleared swaps, the NOPR required 

daily valuation data reporting by the 

DCO, daily valuation data reporting by 

SD or MSP reporting counterparties, and 

valuation data reporting by non-SD/ 

MSP reporting counterparties at 

intervals to be determined prior to 

issuance of the final rule. 

2. Comments Received 

The Commission received several 

comments from a variety of commenters 

concerning the proposed rule’s 

continuation data reporting provisions. 

These comments addressed reporting 

with respect to changes to the terms of 

the swap, contract intrinsic events, 

mstockstill on DSK4VPTVN1PROD with RULES2

2152 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

37These commenters argued that valuation of 

swaps between non-SD/MSP counterparties did not 

cause the financial crisis and was not the target of 

the Dodd Frank Act, and contended that the DoddFrank Act does not authorize requiring non-SD/ 

MSP counterparties (especially those that are not 

financial entities) to report valuation data. They 

also contended that the value of standardized swaps 

is transparent from market data, while the value of 

illiquid, non-standard swaps is merely based on a 

business judgment. 

valuation, and master agreements and 

collateral. 

a. Reporting changes to a swap. The 

broad themes of the comments received 

concerning reporting changes to a swap 

addressed the reporting method—life 

cycle or snapshot—to be used, the 

timing and frequency of reports, and the 

choice of who should make the required 

reports. 

Reporting method. As noted above, 

the NOPR prescribed the data reporting 

method to be used in each asset class to 

report changes to the primary economic 

terms of the swap. TriOptima and the 

Electric Coalition agreed that the rule 

should specify the method used in each 

asset class, and supported the NOPR’s 

choices in that respect. ICE 

recommended adopting the lifecycle 

method rather than the snapshot 

method for the other commodity asset 

class. ISDA, SIFMA, REGIS–TR, and 

DTCC recommended having the rule not 

make the choice between the lifecycle 

and the snapshot reporting method for 

each asset class, but rather allowing 

SDRs to decide whether to accept data 

by either or both methods. SunGard 

recommended that the Commission 

delegate the choice to a self-regulatory 

organization or standards board. 

Timing for reporting changes. Various 

non-SD/MSPs involved in energy 

markets, including AGA, COPE, EEI, 

EPSA, and the Electric Coalition, argued 

that daily snapshot reporting would be 

unduly burdensome for non-SD/MSP 

reporting counterparties. COPE, EEI, 

and EPSA advocated requiring a 

snapshot only when a change to primary 

economic terms has occurred. AGA 

suggested reporting a monthly snapshot, 

while the Electric Coalition advocated a 

quarterly snapshot. 

Change reporting for cleared swaps. 

ICE, a number of non-SD/MSPs 

involved in energy markets including 

WGCEF, EEI, EPSA, and Chris Barnard 

recommended having continuation data 

reporting for cleared swaps done solely 

by DCOs. WGCEF noted that 

counterparties to swaps that are both 

platform-executed and cleared, the 

counterparties may not know each 

other’s identity, which could make 

determination of the reporting 

counterparty difficult. 

Reporting of contract-intrinsic events. 

ISDA and SIFMA suggested that the 

Commission should not require 

reporting of contract-intrinsic events, 

i.e., events that do not result in any 

change to the contractual terms of the 

swap. These commenters noted that the 

SEC’s proposed data reporting rule for 

security-based swaps does not include 

such a requirement, and argued that 

reporting of such events is unnecessary 

if they are in the public domain. At a 

minimum, ISDA and SIFMA suggested 

limiting reporting of such events to 

reporting along with the next required 

life cycle event report. 

Reporting corporate events of the nonreporting counterparty. For non-cleared 

swaps, ISDA and SIFMA requested that 

the final rule allow additional time for 

the reporting counterparty to report 

corporate events of the non-reporting 

counterparty, arguing that the reporting 

counterparty may not know of such 

events on the same day that they 

happen. 

b. Valuation data reporting. The 

themes of the comments received 

regarding valuation data reporting 

included: Who should report valuation 

data for cleared swaps; valuation data 

reporting by non-SD/MSP reporting 

counterparties; what valuation data 

should be reported; requiring 

independent valuations; and acceptable 

valuation methods. 

Who should report valuation data for 

cleared swaps. A number of 

commenters, including ICE, WGCEF, 

EEI, EPSA, and Chris Barnard, 

recommended that all valuation data 

reporting for cleared swaps should be 

done by the DCO. COPE, EEI, EPSA, and 

the Electric Coalition suggested that 

non-SD/MSP reporting counterparties 

should not have to report valuation data 

for either cleared or uncleared swaps. 

Valuation data reporting by non-SD/ 

MSP reporting counterparties. The 

NOPR required non-SD/MSP reporting 

counterparties to report valuation data 

for both cleared and non-cleared swaps, 

at intervals to be determined by the 

Commission prior to issuance of the 

final rule. FHLB and a number of 

commenters in the energy sector 

suggested that valuation reporting 

requirements for non-SD/MSP 

counterparties be either loosened or 

eliminated. FHLB recommended weekly 

valuation reporting by non-SD/MSP 

reporting counterparties, arguing that 

this should be sufficient for regulatory 

purposes and would avoid forcing end 

users to implement the costly 

infrastructure needed to generate daily 

valuation reports. AGA suggested 

monthly valuation reporting by nonSDs/MSPs, since daily reporting would 

be unduly burdensome for them. The 

Electric Coalition recommended 

quarterly reporting. Chatham Financial 

supported valuation reporting only 

when swap portfolios are reconciled, 

since (in their view) non-SD/MSP 

counterparties will lack the systems and 

staff necessary to produce valuations 

and thus would have to pay third-party 

service providers for them. As noted 

above, COPE, EEI, EPSA, and the 

Electric Coalition urged that non-SD/ 

MSP reporting counterparties should 

not have to report valuation data at all.37

What valuation data should be 

reported. ISDA and SIFMA asked the 

Commission to note that valuation data 

for uncleared swaps will not be ‘‘same 

day,’’ but will refer to portfolio 

valuation on the close of the preceding 

day, since these valuations are typically 

performed overnight. Reval urged 

required reporting of all data elements 

necessary to determine the market value 

of the swap, and suggested that 

independent valuation calculations by 

third parties such as SDRs should be 

required. Reval also suggested requiring 

that valuation data be reported on a 

portfolio basis rather than a transaction 

basis. ICE suggested that DCO valuation 

data reports should consist solely of 

daily price marks, and that SDRs should 

be required to calculate valuation 

amounts for each open trade. SunGard 

asked the Commission to provide 

guidance on acceptable methods of 

valuation for uncleared swaps, either in 

the final rule or by industry consensus. 

c. Possible reporting of master 

agreements or collateral. The NOPR 

required registered entities and swap 

counterparties to keep full and complete 

records concerning swaps, which would 

include records of master agreements. 

The NOPR did not require reporting the 

terms of such agreements to SDRs, but 

requested comment on whether a 

separate master agreement library 

system should be established as part of 

an SDR. 

Should a master agreement library 

system be established? Commenters 

disagreed on whether master agreement 

reporting should be required. Chatham 

Financial and the Coalition of 

Derivatives End-Users (‘‘CDEU’’) 

recommended that the Commission 

carefully consider the costs and benefits 

of master agreement reporting prior to 

instituting such a requirement. They 

noted that if such reporting went 

beyond submission of PDF copies of 

master agreements, market participants 

(especially end users) would find it 

labor intensive and tedious to extract 

legal terms from the documents. The 

Electric Coalition, American Benefits 

Council (‘‘ABC’’), and CIEBA also 

emphasized the need to minimize 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2153 

38The flexibility of this approach should also 

ensure harmonization of the final rule with SEC 

rules in this respect: even if the SEC rules specify 

a reporting method for reporting to security-based 

swap data repositories, SDRs that accept mixed 

swaps will be free to accept reporting by any 

reporting method mandated by the SEC. 

burdens involved in any required 

master agreement reporting. ISDA and 

SIFMA recommended against a master 

agreement library, stating that a 

centralized effort to capture 

documentation would need to be much 

wider than master agreements; would be 

duplicative of existing industry 

investments; would not provide 

regulators with particularly meaningful 

data given the slow rate of change of 

these documents; and would not 

provide information above and beyond 

that which would be readily obtained 

from regulated firms. Reval suggested 

establishment of a separate SDR for 

master agreements and related credit 

support agreements, in order to enhance 

regulators’ ability to measure systemic 

risk. ABC and CIEBA suggested that 

master agreements be reported once to 

a separate library at an SDR, with 

amendments reported to the same SDR. 

The Electric Coalition recommended 

limiting master agreement-related 

reporting to the reporting of master 

agreement identifiers rather than of 

agreements themselves, in order to 

lessen reporting burdens. 

Should a collateral warehouse system 

be established? The NOPR required 

registered entities and swap 

counterparties to keep full and complete 

records concerning swaps, which would 

include records concerning collateral. It 

did not require reporting concerning 

collateral, but requested comment on 

whether a separate collateral warehouse 

system should be established as part of 

an SDR, to enable prudential regulators 

to monitor collateral management and 

gross exposure on a portfolio level. 

SunGard, ISDA, SIFMA, DTCC, and 

TriOptima recommended establishing a 

separate collateral repository, noting 

that collateral information is important 

for systemic risk management, but not 

possible in transaction-based reporting 

since collateral is dealt with at a 

portfolio level. They suggested that this 

would also provide a superior form of 

valuation information. Chatham 

Financial suggested that the benefits of 

a collateral warehouse and reporting 

concerning collateral may not outweigh 

the costs involved, due to the potential 

for highly customized terms and the 

complexity and difficulty of 

representing the terms of relevant 

agreements electronically. 

3. Final Rule: § 45.4 

The Commission has considered and 

evaluated these comments, and has 

made a number of changes in the final 

rule. Accordingly, the continuation data 

provisions of the final rule will include 

the following changes from the NOPR. 

a. Reporting changes to a swap. 

Reporting method. The Commission 

believes the general principle applicable 

to continuation data reporting should be 

that current information concerning all 

swaps must be available to regulators in 

SDRs in order to fulfill the purposes of 

the Dodd-Frank Act. Based on 

comments, meetings with market 

participants, roundtable discussions, 

and consultation with other regulators, 

the Commission has determined that the 

final rule can serve this principle 

without mandating one particular 

reporting method, whether life cycle or 

snapshot, for continuation data 

reporting. Accordingly, the final rule 

requires registered entities and reporting 

counterparties to report continuation 

data in a manner sufficient to ensure 

that the information in the SDR 

concerning the swap is current and 

accurate, and includes all changes to 

any of the primary economic terms of 

the swap. The final rule will leave to the 

SDR and registered entity and reporting 

counterparty marketplace the choice of 

the method, whether life cycle or 

snapshot, for reporting continuation 

data that is sufficient to meet this 

requirement. This approach could also 

help to address reporting time concerns 

raised by commenters, since reporting 

counterparties would not be required to 

report on a daily basis if the SDR in 

question accepts life cycle reporting.38

Timing for reporting changes. Given 

the regulatory importance of ensuring 

that information in SDRs is current, and, 

in the Commission’s view, the 

availability of automated systems and 

staff to DCOs, SDs, and MSPs, the 

Commission believes it is necessary to 

require DCOs and SD or MSP reporting 

counterparties to make continuation 

data reports, by either reporting method, 

no later than the same day a relevant 

change occurs. The Commission has 

considered comments suggesting that 

same-day reporting could impose 

greater burdens on non-SD/MSP 

reporting counterparties than on SDs or 

MSPs, due to comparative differences in 

automated systems and staff, and the 

Commission is aware that swaps 

between non-SD/MSP counterparties are 

likely to constitute only a minority of all 

swaps. Accordingly, the final rule will 

call for non-SD/MSP reporting 

counterparties to report continuation 

data no later than the end of the second 

business day following the date of a 

relevant change during the first year of 

reporting, and no later than the end of 

the first business day following the date 

of a relevant change thereafter. The 

Commission has determined that this 

approach will lighten burdens on nonSD/MSP reporting counterparties 

without unduly degrading the currency 

of the information available to 

regulators in SDRs. 

Change reporting for cleared swaps. 

The Commission has considered, and 

agrees with, commenters’ suggestion 

that continuation data reporting will be 

best done by DCOs. For cleared swaps 

in all asset classes, the final rule will 

make DCOs the sole reporters of 

continuation data other than valuation 

data. 

Reporting of contract-intrinsic events. 

The Commission has considered the 

comments addressing reporting of 

contract-intrinsic events. In light of the 

fact that contract-intrinsic events do not 

involve changes to the primary 

economic terms of a swap, and that 

most such events are in the public 

domain, and in order to reduce 

reporting burdens to the extent this can 

be done without impairing the purposes 

for which the Dodd-Frank Act requires 

swap data reporting, the Commission 

has determined that the final rule will 

not require reporting of contractintrinsic events. 

Reporting corporate events of the nonreporting counterparty. The 

Commission has considered the 

comments relating to the time when 

corporate events of the non-reporting 

counterparty must be reported, and has 

made a number of changes in the final 

rule. As noted above, the final rule 

requires reporting of changes to primary 

economic terms by SDs or MSPs on the 

day they occur, and (after a one-year 

phase in period) by non-SDs/MSPs by 

the end of the business day after they 

occur. With respect to reporting 

corporate events of the non-reporting 

counterparty, the final rule provides 

that SD and MSP reporting 

counterparties must report their own 

corporate events on the day they occur, 

and must report corporate events of the 

non-reporting counterparty by the end 

of the business day following the date 

when they occur. In order to further 

reduce related burdens for non-SD/MSP 

reporting counterparties, the rule 

requires non-SD/MSP reporting 

counterparties to report their own 

corporate events by the end of the 

business day after the date on which 

they occur, and to report corporate 

events of the non-reporting counterparty 

by the end of the second business day 

following the date on which they occur. 

In complying with the final rule, 

reporting counterparties should use due 

mstockstill on DSK4VPTVN1PROD with RULES2

2154 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

39Such due diligence could consist of requiring 

as one term of the swap agreement that the nonreporting counterparty notify the reporting 

counterparty promptly of corporate events of the 

non-reporting counterparty. 

40The Commission notes that SDs and MSPs may 

choose, though they are not required, to provide to 

SDRs and to counterparties, in addition to the daily 

mark, methodologies and assumptions suffcient to 

validate the output from a model used to generate 

the daily mark, collectively referred to as the 

‘‘reference model.’’ Non-SD/MSP counterparties 

may also choose, thought they are not required, to 

provide a ‘‘reference model’’ in connection with 

valuation data reporting. Provision of a ‘‘reference 

model’’ does not require an SD, MSP, or non-SD/ 

MSP counterparty to disclose proprietary 

information. 

41Commodity Futures Trading Commission and 

Securities and Exchange Commission, Joint Study 

on the Feasibility of Mandating Algorithmic 

Descriptions for Derivatives, April 7, 2011, available 

at http://www.sec.gov/news/studies/2011/719bstudy.pdf. 

diligence to ensure that the nonreporting counterparty notifies the 

reporting counterparty promptly of the 

non-reporting counterparty’s corporate 

events affecting any primary economic 

term of the swap.39

b. Valuation data reporting for 

cleared swaps. 

Who should report valuation data for 

cleared swaps. After considering 

comments received, the Commission 

has determined that for cleared swaps 

where the reporting counterparty is a 

non-SD/MSP, a DCO’s valuation is 

sufficient for regulatory purposes. The 

final rule therefore will not require nonSD/MSP reporting counterparties to 

report valuation data for cleared swaps. 

Because prudential regulators have 

informed the Commission that 

counterparty valuations are useful for 

systemic risk monitoring even where 

valuations differ, the final rule requires 

SD and MSP reporting counterparties to 

report the daily mark for each of their 

swaps, on a daily basis.40 The 

Commission notes that SDs and MSPs 

may choose, though they are not 

required, to provide to SDRs and to 

counterparties, in addition to the daily 

mark, methodologies and assumptions 

sufficient to independently validate the 

output from a model generating the 

daily mark, collectively referred to as 

the ‘‘reference model. Provision of a 

‘‘reference model’’ does not require an 

SD or MSP to disclose proprietary 

information. 

Valuation data reporting by non-SD/ 

MSP reporting counterparties. The 

Commission has considered the 

comments concerning valuation data 

reporting by non-SD/MSP 

counterparties. As noted above, the final 

rule will lessen valuation data reporting 

burdens for non-SD/MSP counterparties 

by eliminating the requirement that they 

report valuation data for cleared swaps. 

With respect to uncleared swaps 

between non-SD/MSP counterparties, 

the Commission has determined that the 

final rule should lessen valuation data 

reporting burdens for the non-SD/MSP 

reporting counterparty by requiring 

such reports less frequently than 

proposed, but should not eliminate such 

reporting entirely. While this category 

represents a minority of all swaps, the 

Commission believes that some 

valuation information should be present 

in SDRs for all swaps for regulatory 

purposes. The final rule requires nonSD/MSP reporting counterparties to 

report valuation data consisting of the 

current daily mark of the transaction as 

of the last day of each fiscal quarter, 

transmitting this report to the SDR 

within 30 calendar days of the end of 

each fiscal quarter. The Commission 

notes that non-SD/MSP reporting 

counterparties may choose, though they 

are not required, to provide to SDRs and 

to counterparties, in addition to the 

daily mark, methodologies and 

assumptions sufficient to independently 

validate the output from a model 

generating the daily mark, collectively 

referred to as the ‘‘reference model. 

Provision of a ‘‘reference model’’ does 

not require a non-SD/MSP reporting 

counterparty to disclose proprietary 

information. The final rule will further 

provide that if a daily mark of the 

transaction is not available, the 

reporting counterparty satisfies the 

valuation data reporting requirement by 

reporting the current valuation of the 

swap recorded on its books in 

accordance with applicable accounting 

standards. The Commission believes 

that requiring valuation data reporting 

by non-SD/MSP reporting 

counterparties on a quarterly basis, 

when applicable law and accounting 

standards may require them to value 

their swaps for purposes of their own 

accounting, will minimize reporting 

burdens for such counterparties to the 

greatest extent commensurable with 

ensuring that valuation data essential 

for regulatory purposes is reported for 

such swaps. 

What valuation data should be 

reported. The Commission is aware, as 

comments noted, that valuations of 

swaps are typically performed 

overnight. Accordingly, the final rule 

provides that the appropriate daily mark 

to report when a valuation data report 

is required is the most current daily 

mark available. The Commission 

disagrees with comments suggesting 

required reporting of all data necessary 

for an independent valuation of each 

swap and required performance of such 

valuations by SDRs or other third 

parties, calling for portfolio-level 

valuation data reporting, or suggesting 

that the final swap data reporting rule 

should determine the acceptable 

methods for valuing uncleared swaps. 

The Commission believes valuation is 

fundamentally in the purview of the 

market. Prudential regulators have 

informed the Commission that 

counterparty valuations are useful for 

systemic risk monitoring even where 

such valuations represent the view of 

one party, and even where such 

valuations may differ. The Commission 

believes that daily mark to market, the 

valuation required by the final rule, is 

the valuation appropriate for reporting 

on a transaction basis. 

c. Possible reporting of master 

agreements or collateral. 

Should a master agreement library 

system be established? After considering 

relevant comments, the Commission has 

determined that it should not require 

master agreement reporting in its first 

swap data reporting final rule. As noted 

in the Joint Study on the Feasibility of 

Mandating Algorithmic Descriptions for 

Derivatives released by the CFTC and 

SEC in April 2011, at present the terms 

of such agreements are not readily 

reportable in an electronic format, as the 

industry has not developed electronic 

fields representing terms of a master 

agreement.41 The Commission also 

understands that reporting of master 

agreements could be initiated by the 

other regulators pursuant to separate 

and different regulatory authority. The 

Commission may choose to revisit this 

issue at some point in the future, if and 

when industry and SDRs develop ways 

to represent the terms of such 

agreements electronically. 

Should a collateral warehouse system 

be established? After considering 

relevant comments, the Commission has 

determined that it should not require 

establishment of a collateral warehouse 

or reporting concerning collateral in its 

first swap data reporting final rule. As 

is the case with respect to the terms of 

master agreements, the industry has not 

yet developed electronic fields suitable 

for representing the terms required to 

report collateral. The Commission also 

understands that reporting with respect 

to collateral could be initiated by other 

regulators pursuant to separate and 

different regulatory authority. The 

Commission may choose to revisit this 

issue at some point in the future, if and 

when industry and SDRs develop ways 

to represent electronically the terms 

required for reporting concerning 

collateral. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2155 

D. Summary of Creation Data and 

Continuation Data Reporting—§§ 45.3 

and 45.4 

As discussed above, the Commission 

is responding to comments concerning 

creation data reporting by creating a 

streamlined reporting regime that 

requires reporting by the registered 

entities or swap counterparties that the 

Commission believes have the easiest, 

fastest, and cheapest data access and 

those most likely to have the necessary 

automated systems; that minimizes 

burdens and costs for counterparties to 

the extent possible; and that provides 

certainty to the market. The final rule 

provisions regarding creation data 

reporting obligations and deadlines for 

SD or MSP reporting counterparties, and 

for non-SD/MSP reporting 

counterparties, are summarized in the 

charts on the following two pages, 

respectively. 

BILLING CODE 6351–01–P 

mstockstill on DSK4VPTVN1PROD with RULES2

2156 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.000</GPH>
Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2157 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.001</GPH>
2158 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

42 Global Forex still preferred USI creation at the 

time of execution over creation at the point of order 

submission, since the latter would create a risk of 

cancelled and non-sequential USIs in the event a 

trade is cancelled. 

43The Commission disagrees with TriOptima’s 

suggestion that reporting entities should always use 

their own identifiers in reporting to SDRs during 

the life of a swap. This would require the SDR to 

match the entity’s internal ID with the USI every 

time data is submitted, and is not the more efficient 

approach. 

44The registration paperwork established 

pursuant to the SEF, DCM, SD, MSP, and SDR 

registration rules will include provision of such a 

code to the registrant. 

BILLING CODE 6351–01–C 

F. Unique Swap Identifiers—§ 45.5 

1. Proposed Rule 

The NOPR required that each swap 

subject to the Commission’s jurisdiction 

be identified in all swap recordkeeping 

and data reporting by a unique swap 

identifier (‘‘USI’’). The NOPR provided 

for a ‘‘first-touch’’ approach to USI 

creation, with the USI created by SEFs 

and DCMs for facility-executed swaps, 

by SDs and MSPs for off-facility swaps 

in which they are the reporting 

counterparty, and by SDRs for offfacility swaps between non-SD/MSP 

counterparties (who may lack the 

requisite systems for USI creation). 

2. Comments Received 

a. First-touch creation of USIs. Most 

comments concerning the USI received 

by the Commission via comment letters, 

roundtables, and meetings with industry 

and other regulators supported use of a 

USI that will enable regulators to track 

and aggregate all information 

concerning a single swap throughout its 

existence, and supported the NOPR’s 

first-touch approach to USI creation. 

DTCC supported the first-touch 

approach, while noting that SDRs could 

also create USIs and transmit them to 

the counterparties to the swap (as the 

NOPR provides for swaps between nonSD/MSP counterparties). WGCEF 

approved having USIs assigned when a 

swap is executed. Global Forex 

supported USI creation at the time the 

swap is executed, while pointing out 

that in the foreign exchange context, 

where some pre-trade allocation occurs 

and some firms book the trade upon 

receipt of a message that their price has 

been hit, it could be necessary in some 

cases to append the USI to an alreadycreated record in a firm’s automated 

systems.42 CME suggested that USIs 

should not be created and issued by a 

single coordinating registry, but should 

be created by market participants as 

provided in the NOPR, using common 

standards that can be applied free of 

charge. TriOptima indicated a 

preference for having SDRs create the 

USI, with reporting entities or 

counterparties using their own local 

trade identifiers in reporting to the SDR, 

which can map the local identifiers to 

the USI. ISDA, SIFMA, and CME asked 

the Commission to clarify further the 

purpose and intended use of USIs. Some 

roundtable participants suggested that 

one way to ensure the uniqueness of 

USI codes created by different registered 

entities would be for the registered 

entity creating a USI to use an 

appropriate random number generator. 

b. Impact of allocation on USIs. 

TriOptima suggested that the 

Commission should clarify the creation 

and use of USIs in the context of 

allocation, observing that where 

allocation follows execution, it may not 

be obvious whether or not a new USI 

should be assigned. TriOptima 

suggested that rules addressing this 

issue are needed. Other market 

participants also requested clarification 

concerning USI creation and swap 

creation data reporting in the context of 

allocation. 

c. Impact of post-execution events on 

USIs. Thomson Reuters, TriOptima, and 

the WGCEF requested clarification 

regarding the impact on USI codes of 

events such as compression, 

assignments, partial terminations, 

changes to counterparty names, 

purchases, acquisitions, or deactivation. 

Thomson Reuters suggested that when 

multiple swaps are combined during 

their existence, the unique swap 

identifier should have alternative 

tracking numbers externally linked to 

the original USI. 

d. USIs for historical swaps. Although 

this issue pertains to part 46 rather than 

part 45, TriOptima suggested in its part 

45 comment that USIs should be 

assigned to historical swaps when they 

are first reported to an SDR. TriOptima 

noted that giving USIs only to swaps 

entered into after the applicable 

compliance date would create a long 

transition period during which there are 

live contracts with and without USIs, 

which TriOptima believed would be 

technologically problematic. TriOptima 

recognized that introducing USIs for 

existing transactions would be a large 

undertaking. It suggested that reporting 

entities create USIs for historical swaps 

using the name-space method 

(combining a code for the assigning 

entity and a USI code unique within 

that entity). 

3. Final Rule: § 45.5 

a. First-touch creation of USIs. After 

considering the comments received, the 

Commission has determined that, as 

provided in the NOPR, the final rule 

requires each swap subject to the 

Commission’s jurisdiction to be 

identified in all recordkeeping and swap 

data reporting pursuant to this part by 

a USI, created through a first-touch 

approach. The Commission believes that 

USIs will benefit both regulators and 

counterparties, by facilitating 

aggregation of all data concerning a 

given swap (including creation data, 

continuation data, and error corrections, 

reported by execution platforms, 

clearing houses, and counterparties) 

into a single, accurate data record that 

tracks the swap over its duration. USIs 

are essential to giving regulators the 

ability to track swap transactions 

throughout their lives. In addition, USIs 

provide an efficient means of assuring 

that transactions are not double counted 

when producing summary reports. This 

is particularly important where 

transactions may be reported to multiple 

SDRs, for example where a counterparty 

may be required to report a transaction 

to a foreign SDR. 

Having the USI created when the 

swap is executed, i.e., at the earliest 

possible point, will best ensure that all 

market participants involved with the 

swap, from counterparties to platforms 

to clearinghouses to SDRS, will have the 

same USI for the swap, and have it as 

soon as possible. This will avoid 

confusion and potential errors.43 It will 

avoid delays in submitting an executed 

swap for clearing while waiting for 

receipt of a USI from creation at a later 

time, and will minimize to the extent 

possible the need to alter pre-existing 

records concerning the swap in various 

automated systems to add the USI. As 

the sole exception to first-touch USI 

creation, designed to reduce burdens on 

non-SD/MSP reporting counterparties 

who may lack the technical 

sophistication or automated systems 

needed for USI creation, the final rule 

will maintain the NOPR provision 

calling for the USI for each swap 

between non-SD/MSP counterparties to 

be created by the SDR to which the 

swap is reported. 

To ensure the uniqueness of USIs 

created by registered entities as 

provided in the final rule, the final rule 

will follow the NOPR in prescribing USI 

creation through what is known as the 

‘‘name space’’ method. Under this 

method, the first characters of each USI 

will consist of a unique code that 

identifies the registered entity creating 

the USI, given to the registered entity by 

the Commission during the registration 

process.44 The remaining characters of 

the USI will consist of a code created by 

the registered entity that must be unique 

with respect to all other USIs created by 

that registered entity. While the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2159 

45 In the case of cleared swaps, allocation 

precedes submission to the DCO for clearing. 

46This situation is distinct from cases where, for 

example, a hedge fund enters into a swap as a 

principal, and later enters into separate swaps with 

its own clients (who often are funds) to offset its 

risk from the first swap in which it was a principal. 

47The allocation provisions of the final rule do 

not create reporting requirements additional to 

those included in the NOPR, since the NOPR 

required, as mandated by CEA section 2(a)(13)(G), 

that all swaps must be reported. 

Commission will not prescribe the 

means for ensuring the uniqueness of 

each USI created by a registered entity, 

Commission staff may work with 

registered entities to identify random 

number generators sufficiently capable 

for this purpose. 

b. Impact of allocation on USIs. The 

Commission has considered the 

comments and industry requests for 

clarification it received concerning USI 

creation and swap creation data 

reporting in the case of swaps involving 

allocation by an agent to its clients who 

are the actual counterparties on one side 

of the swap. In response to these 

requests, the final rule will address both 

USI creation and creation data reporting 

for swaps involving allocation. 

The Commission understands that in 

the allocation context, a firm acting as 

an agent enters into a swap, typically 

with an SD (or possibly an MSP), and 

then allocates its side of the swap to its 

clients on whose behalf it arranged the 

swap. The clients of the agent, who are 

the actual counterparties to the SD, 

must have pre-existing ISDA agreements 

or similar agreements with the SD in 

order for the transaction to take place. 

At the time of execution, the SD knows 

that the firm acting as agent as only an 

agent and is not the SD’s actual 

counterparty for the swap, and it knows 

that the agent’s clients are its actual 

counterparties; but it does not yet know 

for this particular swap the identity of 

the agent’s clients that are its 

counterparties. The agent firm allocates 

its side of the swap within a relatively 

short time after execution, and the agent 

(or a third party service provider acting 

on its behalf) then informs the SD of the 

identities of its counterparties.45 Market 

participants have informed the 

Commission that allocation is not 

algorithmic, due to particular 

requirements of the agent’s clients, and 

that it typically requires two or more 

hours but is always completed by the 

end of the business day on which the 

swap was executed. The result of 

allocation is that a single swap 

transaction created at the moment of 

execution is replaced by several swaps, 

for each of which the counterparties are 

the SD and one of the agent’s clients.46

To provide the clarification requested 

by commenters as noted above, the 

Commission has determined that the 

final rule should specifically address 

the creation of USIs and the reporting of 

required swap creation data in the 

context of allocation.47 Because real 

time reporting must occur as soon as 

technologically practicable after 

execution of a swap, and because it is 

important for the exposure of the 

reporting counterparty to be available to 

regulators in an SDR as soon as 

technologically practicable after 

execution, the Commission believes it is 

necessary for the original transaction 

between the SD and the agent to be 

reported. However, because the SD’s 

actual counterparties are the clients of 

the agent and not the agent, the 

Commission believes it is also necessary 

for each individual swap between the 

SD and one of the agent’s clients to also 

be reported. To avoid double-counting 

of swaps in the allocation context, it is 

necessary to be able to map together the 

original transaction and the postallocation swaps. 

Accordingly, the final rule provides 

that, in the context of allocation, the 

reporting counterparty must create a 

USI for the swap arranged between it 

and the agent, and report that swap to 

an SDR as soon as technologically 

practicable after execution. The PET 

data for such a swap will include an 

indication that the swap will be 

allocated, and include the LEI (or 

substitute identifier) of the agent, but 

not the LEIs of the clients who are the 

non-reporting counterparties, since they 

will not yet be known to the reporting 

counterparty. 

The final rule will also allow the 

agent to inform the reporting 

counterparty of the identities of its 

actual counterparties as soon as 

technologically practicable after 

execution, but not later than eight 

business hours after execution. The 

Commission understands that major 

firms acting as agents in the allocation 

context can allocate in a shorter time, 

but that smaller firms acting as agents 

typically allocate by the end of the 

business day. The Commission believes 

that a deadline of eight business hours 

will appropriately take into account the 

needs of such smaller firms. 

Finally, the final rule requires the 

reporting counterparty to create a USI 

for each of the individual swaps 

resulting from allocation, and to report 

each such swap as soon as 

technologically practicable after it is 

informed by the agent of the identities 

of its actual counterparties, the clients 

of the agent (which must occur as soon 

as technologically practicable after 

execution or at least within eight 

business hours of execution, as 

provided above). To prevent confusion 

or errors with respect to the data 

reported, and to avoid double-counting, 

the final rule requires that the report to 

the SDR for each post-allocation swap 

must include: An indication that the 

swap is a post-allocation swap; the USI 

of the original transaction; the USI of 

the post-allocation swap; the LEI of the 

actual counterparty; and the LEI of the 

agent. The final rule will also require 

the SDR to which the swaps are 

reported—which must be the same SDR 

to which the original transaction is 

reported—to map together the USIs of 

the original swap and of each of the 

post-allocation swaps. 

The Commission is adopting these 

USI and creation data reporting 

requirements in the context of allocation 

in response to comments seeking 

clarification on reporting in this context, 

as noted above, and in order to ensure 

that the Commission and other 

regulators can track the entire history of 

swaps in the context of allocation. 

c. Impact of post-execution events on 

USIs. The Commission has noted 

comments requesting that the final 

address the impact of post-execution 

events on USIs. In response to these 

comments, the final rule provides that 

USI codes created at the time of 

execution using the first-touch approach 

will only be replaced where a new swap 

takes the place of an old swap, such as 

where a compression or full novation 

has occurred. Under the final rule, in 

such cases a new USI will be assigned 

to the new swap, and the SDR to which 

the swap has been reported will be 

required to map the new USI back to the 

USIs of the swaps from which the new 

swap originated, in a manner sufficient 

to allow the Commission and other 

regulators to follow the entire history 

and audit trail of each affected swap. In 

the case of events that do not result in 

the creation of a new swap, such as 

partial terminations or changes to 

counterparty names, the swap in 

question will retain the USI code 

originally assigned to it. 

d. USIs for historical swaps. The 

Commission agrees with the comment 

suggesting that it would undesirable and 

possibly technologically problematic to 

have live swaps both with and without 

USIs recorded in SDRs for an extended 

period. The Commission believes that 

for historical swaps, SDRs will be the 

best creators of USIs. The Commission 

will address this issue in its final part 

46 rule for historical swaps. 

mstockstill on DSK4VPTVN1PROD with RULES2

2160 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

48 In this summary of the principles that were 

discussed in the NOPR preamble concerning 

Unique Counterparty Identifiers and set forth in 

§ 45.4(b) of the NOPR, paragraph headings that have 

come into common use in international discussions 

of principles for the LEI, but that do not change the 

substance of the principles stated in the NOPR, 

have been added for clarity. 

49As noted, the NOPR called for reference data 

including both (1) information sufficient to verify 

the identity of the counterparty receiving an LEI, 

both initially and on an ongoing basis, as set forth 

in section 45.4(b)(3)(iv) of the NOPR, and (2) 

information concerning the corporate affiliations 

and ownership group of the counterparty, as set 

forth in section 45.4(b)(2) of the NOPR. For clarity, 

the final rule uses the terms ‘‘level one’’ and ‘‘level 

two’’ reference data, which have come into common 

international use in discussions of the LEI and LEI 

reference data, to refer to these two types of 

reference information addressed in the NOPR. 

These terms do not represent new data 

requirements beyond those proposed in the NOPR, 

but instead provide a succinct way to refer to the 

two types of reference data required in the NOPR. 

50The NOPR called for the Commission to make 

this determination at least 100 days prior to the 

initial compliance date, and to publish notice no 

later than 90 days prior to the initial compliance 

date, in order to give registered entities and swap 

counterparties subject to the final rule reasonable 

time in which to obtain LEIs for use as prescribed 

by the final rule. 

51Committee on Payment and Settlement 

Systems and Technical Committee of the 

International Organization of Securities 

Commissions, Report on OTC Derivatives Data 

Reporting and Aggregation Requirements. Issuance 

G. Legal Entity Identifiers—§ 45.6 

1. Proposed Rule 

The NOPR required that each 

counterparty to any swap subject to the 

Commission’s jurisdiction be identified 

in all swap recordkeeping and data 

reporting by a legal entity identifier 

(‘‘LEI’’) (referred to in the NOPR as a 

unique counterparty identifier or ‘‘UCI’’) 

approved by the Commission. The 

NOPR established principles that an LEI 

must follow for it to be designated by 

the Commission as the LEI to be used in 

swap data recordkeeping and reporting 

pursuant to the Commission’s 

Regulations.48 These principles 

included: 

• Uniqueness (one LEI per legal entity, 

never re-used). 

• Neutrality (a single-field identifier 

format containing no embedded intelligence). 

• Verifiability (a reliable method of 

verifying the identity of holders of LEIs, 

avoiding assignment of duplicate identifiers, 

and maintaining accurate reference data). 

• Reliability (data protection and system 

safeguards). 

• Open source (an open data standard and 

format capable of broad use, that enables data 

aggregation by regulators). 

• Extensibility (capability of becoming the 

single international standard for unique 

identification of legal entities in the financial 

sector on a global basis). 

• Persistence (each LEI remains 

permanently in the record, regardless of 

corporate events, while a new entity resulting 

from a corporate event receives a new LEI). 

• Development and issuance acceptable to 

the Commission (development via an 

international voluntary consensus standards 

body such as the International Organisation 

for Standardisation, and issuance through 

such a body and an associated registration 

authority). 

• Governance and funding acceptable to 

the Commission (ensuring LEI availability to 

all, on a royalty-free or reasonable royalty 

basis, through an LEI issuance system 

operated on a non-profit basis). 

The NOPR also called for 

establishment of a confidential, nonpublic LEI reference database, to which 

each swap counterparty receiving an LEI 

would be required to report reference 

data that would be associated with its 

LEI. Such reference data would include 

information sufficient to verify the 

identity of the counterparty receiving an 

LEI, both initially and at appropriate 

intervals thereafter (commonly called 

validation data or level one reference 

data).49 It would also include 

information concerning the corporate 

affiliations of the counterparty, in order 

to enable the Commission and other 

financial regulators to aggregate data 

concerning all swap transactions within 

the same ownership group (commonly 

called hierarchy data or level two 

reference data). As provided in the 

NOPR, data in the reference database 

would be available only to the 

Commission, and to other regulators via 

the same data access procedures 

applicable to data in SDRs. 

The NOPR stated the Commission’s 

belief that optimum effectiveness of 

LEIs for achieving the systemic risk 

protection and transparency goals of the 

Dodd-Frank Act—goals shared by 

financial regulators world-wide, and 

repeatedly endorsed by the G–20 

Leaders—would come from a global LEI 

created on an international basis 

through an international voluntaryconsensus standards body such as ISO. 

The NOPR also announced the 

Commission’s intention to have the final 

part 45 rule prescribe use of such an 

international LEI in complying with the 

final rule, if an LEI meeting the 

principles established in the NOPR is 

available sufficiently prior to the 

compliance date on which swap data 

reporting will first begin pursuant to the 

final rule. 

Accordingly, the NOPR provided that 

the Commission would determine, prior 

to the initial compliance date, whether 

such an LEI is available. If it were, the 

NOPR called for the Commission to 

designate that LEI as the LEI approved 

by the Commission for use in complying 

with the final rule, and to publish notice 

of that designation to inform registered 

entities and swap counterparties where 

they can obtain LEIs for use pursuant to 

the final rule.50

In the event that the Commission 

were to find when it makes this 

determination that an LEI meeting the 

criteria set forth in the NOPR is not then 

available, the NOPR provided that until 

such time as the Commission 

determines that such an LEI is available, 

registered entities and swap 

counterparties should comply with the 

final rule by using a unique 

counterparty identifier created and 

assigned by an SDR as described in the 

NOPR. 

2. Comments Received 

a. Endorsement of the LEI. The great 

majority of comments concerning the 

LEI received by the Commission via 

comment letters, roundtables, and 

meetings with both industry and other 

regulators strongly supported 

establishing an LEI to identify 

derivatives transaction counterparties 

and other financial firms involved in the 

world financial sector. Commenters 

supporting the LEI in comment letters 

included ISDA, SIFMA, Global Forex, 

GS1, Thomson Reuters, CME, ABC, 

Customer Data Management Group, 

CIEBA, and the Committee on Capital 

Markets Regulation. 

The Commission also received input 

from both U.S. and international 

financial regulators, international 

regulatory organizations, and world 

leaders endorsing creation of the LEI 

addressed in the NOPR. The CPSS– 

IOSCO Report on OTC Derivatives Data 

Reporting and Aggregation 

Requirements recommends expeditious 

development of a global LEI, stating 

that: 

[A] standard system of LEIs is an essential 

tool for aggregation of OTC derivatives data. 

An LEI would contribute to the ability of 

authorities to fulfill the systemic risk 

mitigation, transparency, and market abuse 

protection goals established by the G20 

commitments related to OTC derivatives, and 

would benefit efficiency and transparency in 

many other areas. As a universally available 

system for uniquely identifying legal entities 

in multiple financial data applications, LEIs 

would constitute a global public good. The 

Task Force recommends the expeditious 

development and implementation of a 

standard LEI that is capable of achieving the 

data aggregation purposes discussed in this 

report, suitable for aggregation of OTC 

derivatives data in and across TRs [trade 

repositories] on a global basis, and capable of 

eventual extension to identification of legal 

entities involved in various other aspects of 

the financial system across the world 

financial sector.51

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2161 

of this report by CPSS and IOSCO is anticipated 

during December 2012. 

52 Department of the Treasury, Office of Financial 

Research, Statement on Legal Entity Identification 

for Financial Contracts, November 23, 2010, 

available at http://www.treasury.gov/initiatives/

Documents/OFR_LEI_Policy_Statement-FINAL.PDF. 

53See Securities and Exchange Commission, 

Proposed Regulation SBSR—Reporting and 

Dissemination of Security-Based Swap Information, 

17 CFT part 240 (November 19, 2010). 

54At its July 2011 meeting, the FSB Plenary 

‘‘welcomed the progress of financial regulators and 

industry to establish a single global system for 

uniquely identifying parties to financial 

transactions.’’ FSB Press Release, July 18, 2011, 

available at https:// 

www.financialstabilityboard.org/press/ 

pr_110718.pdf. In their Communique ́ at the 

conclusion of their October 2011 meeting, the 

Finance Ministers and Central Bank Governors of 

the G–20 said, ‘‘We underscored our support for a 

global legal entity identifier system which uniquely 

identifies parties to financial transactions with an 

appropriate governance structure representing 

public interest.’’ Communique ́ of Finance Ministers 

and Central Bank Governors of the G–20, Paris, 

France, October 14–15, 2011, available at http://

www.g20.org/Documents2011/10/G20%20

communique ́%2014-15%20October%202011-

EN.pdf. 

55Cannes Summit Final Declaration, November 4, 

2011, at 7, paragraph 31, available at http://www.

g20.org/Documents2011/11/Cannes%20Declaration

%204%20November%202011.pdf. 

56The White House, G–20: Fact Sheet on U.S. 

Financial Reform and the G–20 Leaders’ Agenda, 

November 4, 2011, available at http://www.white

house.gov/the-press-office/2011/11/04/g-20-factsheet-us-financial-reform-and-g-20-leaders-agenda. 

57 During the process of developing ISO 17442, 

ISO determined that existing codes for other 

financial sector purposes, such as BIC codes and 

ISIN codes, were not suited by design to provide 

unique identification of legal entities across the 

world financial sector, and that a new standard was 

needed for this purpose. 

58TC 68 will address comments received during 

the approval process in January 2012. 

59The global coalition included twelve trade 

association who endorsed the industry’s 

Requirements for a Global Legal Entity Identifier 

(LEI) Solution, available at http://www.sifma.org/

LEI-Industry-Requirements/. The included trade 

associations were the Association for Financial 

Markets in Europe, Asia Securities Industry and 

Financial Markets Association, British Bankers 

Association, Customer Data Management Group, 

The Clearing House Association L.L.C., Enterprise 

Data Management Council, Financial Services 

Roundtable, Futures Industry Association, Global 

Regulatory Identifier Steering Group, International 

Swaps and Derivatives Association, Investment 

Company Institute, and Securities Industry and 

Financial Markets Association. In addition, the 

following firms were party to the discussions 

leading to creation of Requirements for a Global 

Legal Entity Identifier (LEI) Solution: 

AllianceBernstein, Bank of America Merrill Lynch, 

Bank of New York Mellon-Pershing, Barclays 

Capital, Branch Banking & Trust Company, 

BlackRock, BNP Paribas, CIBC Wholesale Banking, 

Citi, Credit Suisse, Deutsche Bank, E*Trade 

Financial, Edward Jones, Federated Investments, 

Fidelity, GE Asset Management, GE Capital, 

Goldman Sachs, HSBC, Janney Montgomery Scott 

LLC, Jefferies, JP Morgan Chase, JWG, KeyBank, 

Loomis Sayles, Morgan Stanley, New York Life, 

Continued 

The LEI technical principles 

recommended in the Report, and the 

Report’s statements concerning 

governance and funding for the LEI 

issuance system, closely parallel the LEI 

principles set forth in the NOPR, as do 

the principles set forth by the OFR in its 

Statement of Policy concerning the 

LEI,52 and those discussed in the SEC’s 

proposed rule on data reporting for 

security-based swaps.53 Both the FSB 

Plenary and the G–20 Finance Ministers 

and Central Bank Governors have 

endorsed and supported creation and 

implementation of a global LEI.54 At the 

conclusion of their November 2011 

meeting in Cannes, France, the G20 

Leaders announced their strong support 

for the LEI, stating in the Cannes 

Summit Final Declaration that: ‘‘We 

support the creation of a global legal 

entity identifier (LEI) which uniquely 

identifies parties to financial 

transactions.’’ 55 Following the meeting, 

the White House underscored President 

Obama’s support for the LEI, stating 

that: 

The Legal Entity Identifier (LEI) initiative 

will support better understanding of true 

exposures and interconnectedness among 

and across financial institutions. We need 

such understanding to assess and reduce 

risks to the financial system.56

b. LEI suggestions. Several comment 

letters received by the Commission also 

made specific suggestions and requests 

for clarification relating to the LEI. ISDA 

and SIFMA, Thomson Reuters, and 

AMG suggested that the unique 

counterparty identifier required by the 

final rule should be the same identifier 

as the legal entity identifier being 

developed under principles stated in the 

OFR policy statement concerning LEIs. 

Roundtable participants also suggested 

referring to the identifier as the LEI 

rather than the UCI, to avoid confusion. 

CME, Thomson Reuters, and most 

roundtable participants supported the 

NOPR principle calling for a neutral LEI 

with no embedded intelligence. WGCEF 

and TriOptima asked for guidance on 

how the LEI would relate to corporate 

events such as mergers and acquisitions. 

The Asset Management Group 

advocated assigning LEIs at the 

individual fund or account level rather 

than the legal entity level. ISDA, SIFMA 

and CME suggested that the LEI should 

be administered by a not-for-profit 

industry utility, and that an 

international directory of LEI holders 

should be available at no cost. CUSIP 

and GS1 suggested that they might be 

potential providers of a future LEI. 

c. LEI reference data. With respect to 

level two or hierarchical reference data 

for the LEI, CME suggested clarifying 

whether the LEI is intended to simply 

identify a specific counterparty or to 

establish a counterparty’s relationship 

with other entities. Global Forex noted 

that data confidentiality law in different 

jurisdictions could raise issues 

regarding access to level two reference 

data. The Asset Management Group 

recommended that the definition of 

control for purposes of reporting level 

two reference data should require at 

least majority ownership. DTCC 

recommended that SDRs should have 

access to the non-public LEI reference 

database for use in the construction of 

reports to regulators, such as reports 

based on net or aggregated positions. 

d. Progress toward a global LEI. Since 

the Commission issued the proposed 

rule requiring use of LEIs in swap data 

reporting under CFTC jurisdiction, both 

international financial regulators and 

industry have made significant progress 

toward creation of the global LEI called 

for in the NOPR. 

Voluntary consensus body standard. 

In response to the Commission’s 

preference, set forth in the NOPR as 

noted above, to have swap 

counterparties identified by a 

universally-available LEI created on an 

international basis through an 

international ‘‘voluntary consensus 

standards body,’’ the International 

Organisation for Standardisation has 

developed a new international technical 

standard for the LEI, ISO 17442 Legal 

Entity Identifier (LEI). ISO is the world’s 

principal voluntary consensus standards 

body, which includes 162 member 

countries. Through its Technical 

Committee 68 (‘‘TC 68’’), the expert 

committee for standardization in the 

field of banking, securities, and other 

financial services, ISO has published 48 

key standards for the financial sector, 

ranging the international securities 

identification numbering (‘‘ISIN’’) code 

for securities, and the business 

identification code (‘‘BIC’’) for banking 

telecommunication messages to the 

codes for exchange and market 

identification (‘‘MIC’’), and for 

classification of financial instruments 

(‘‘CFI’’).57 The ISO 17442 LEI standard 

received unanimous approval from TC 

68 in June 2011, and it received 

unanimous support in the second round 

of voting by member countries in the 

ISO approval process that concluded on 

December 14, 2011.58

Industry recommendations. Also in 

response to the NOPR’s call for an 

international, universally-adopted LEI, 

in January 2011 a global coalition of 

financial sector trade associations and 

organizations came together to develop 

an industry consensus on requirements 

and standards for the LEI, and make a 

recommendation concerning formation 

of an LEI utility to issue LEIs and 

validate the identity of their holders.59

mstockstill on DSK4VPTVN1PROD with RULES2

2162 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

Nomura, Northern Trust, Prudential, Royal Bank of 

Canada, Royal Bank of Scotland, R-Cube, 

Renaissance Technologies, Socie ́te ́ Ge ́ne ́rale, State 

Street, T Rowe Price, Tradeweb, UBS, and Wells 

Fargo. 

60Cannes Summit Final Declaration, November 4, 

2011, at 7, paragraph 31, available at http://www.

g20.org/Documents2011/11/Cannes%20Declaration

%204%20November%202011.pdf. 

After extended discussions involving a 

broad cross-section of financial trade 

associations and both buy-side and sellside firms from a wide range of 

countries, during the spring and 

summer of 2011 the global coalition 

issued a comprehensive set of 

requirements for a viable, international 

LEI; initiated a Solicitation of Interest 

process to identify one or more solution 

providers able to build, manage, and run 

an LEI utility to issue LEIs; evaluated 

formal responses from more than 10 

potential providers; and issued three 

recommendations concerning 

implementation of the global LEI 

system. First, the global coalition 

recommended that the international 

technical standard for the LEI code itself 

be the new international standard 

developed by ISO, ISO 17442 Legal 

Entity Identifier (LEI). Second, the 

coalition recommended that the LEI 

utility that conducts LEI reference data 

collection and maintenance, LEI 

assignment, and quality assurance be 

operated as a joint venture including 

SWIFT (the Registration Authority 

selected by ISO for the ISO 17442 

standard) and DTCC and its subsidiary 

AVOX Limited (to be the facilities 

manager for the LEI utility). Finally, the 

coalition recommended that the 

Association of National Numbering 

Agencies (‘‘ANNA’’), through its global 

network of national numbering 

agencies, be a partner in federated LEI 

issuance in the home countries of legal 

entities receiving LEIs. At the FSB LEI 

Workshop (discussed below) and 

elsewhere, the global coalition has 

stated its willingness to have the 

structure of the joint venture created to 

serve as the LEI utility include a 

governing board controlled by 

international financial regulators 

including the Commission, with 

authority over the operations of the joint 

venture sufficient to ensure that the LEI 

utility maintains compliance with the 

principles established for the LEI by 

international financial regulators, 

including the principles established by 

the Commission. 

The Commission understands that, in 

order to ensure as far as possible that 

LEIs can in fact be issued to swap 

counterparties subject to the 

Commission’s jurisdiction prior to the 

initial compliance date for swap data 

reporting pursuant to this final rule, 

SWIFT, DTCC, AVOX, and ANNA are 

moving forward to cleanse alreadyavailable data sufficient to validate the 

identity of legal entities to receive an 

LEI; to collect and cleanse such 

validation data for other swap 

counterparties; and to issue temporary 

identifiers readily convertible into LEIs 

if their joint venture is designated by the 

Commission as the provider of LEIs to 

be used pursuant to this rule. They have 

also informed Commission staff that 

they anticipate being able to provide 

LEIs to swap counterparties by the 

summer of 2012 if they are so 

designated. 

International developments. In 

September 2011, the FSB convened an 

international LEI Workshop including 

over 50 private sector experts and over 

60 representatives from the 

international financial regulatory 

community, including the Commission, 

to further educate participants and elicit 

their input concerning the LEI, and to 

guide preparation of a roadmap leading 

to recommendations concerning 

implementation of a global LEI system. 

Workshop participants discussed 

possible technical and governance 

principles for the LEI drawn from the 

CPSS–IOSCO Report on OTC 

Derivatives Data Reporting and 

Aggregation Requirements, which as 

noted above closely parallel those 

included in the NOPR. The Workshop 

revealed strong support for the LEI 

initiative from both private sector and 

official sector participants. Industry 

representatives emphasized the vital 

importance of support and leadership 

from the global regulatory community, 

and the many potential benefits of a 

global LEI that would only be realized 

if regulators support the LEI initiative. 

Presenters at the Workshop also 

supported the timely phasing of LEI 

implementation, likely to begin with use 

of the LEI in reporting OTC derivatives 

data to trade repositories. 

When the G–20 Leaders endorsed the 

LEI initiative following the Workshop, 

they stated that: 

We call on the FSB to take the lead in 

helping coordinate work among the 

regulatory community to prepare 

recommendations for the appropriate 

governance framework, representing the 

public interest, for such a global LEI by our 

next Summit.60

Following the request from the G20, 

the FSB decided in December to create 

a time-limited, ad-hoc expert group of 

authorities, including the Commission, 

to carry forward work on key 

outstanding issues relevant to 

implementation of a global LEI, in order 

to fulfill the G–20 mandate. The group 

held its first meeting on December 13 

and 14, 2011. The issues to be addressed 

by the expert group include: (1) The 

governance framework for the global 

LEI; (2) the operational model for the 

LEI system; (3) the scope of LEI 

reference data; (4) reference data access 

and confidentiality; (5) the funding 

model for the LEI system; and (6) global 

implementation and phasing of the LEI. 

It is anticipated that the expert group 

will deliver clear recommendations 

with respect to implementation of a 

global LEI system to the FSB Plenary for 

endorsement in April or May 2012. This 

process is designed to allow first-phase 

implementation of the LEI in OTC 

derivatives data reporting to trade 

repositories, including swap data 

reporting to SDRs pursuant to this final 

rule, to proceed, if possible, on the basis 

of globally agreed principles concerning 

governance, funding, and access to 

reference data. 

3. Final Rule: § 45.6 

a. Important factors in the 

Commission’s decision. The 

Commission has considered and 

evaluated the comments and 

international input it has received 

concerning the LEI and the principles 

which should govern the LEI system, 

and has taken such comments and input 

into account in the LEI provisions of the 

final rule. It has also considered the 

progress made by the international 

financial regulatory community and 

industry toward creation of a global LEI, 

created on an international basis 

through an international voluntary 

consensus standards body, that meets 

the requirements provided in the NOPR, 

and is suitable for designation by the 

Commission for use in recordkeeping 

and swap data reporting pursuant to this 

final rule as set forth in the NOPR. 

Broad endorsement of the LEI. The 

Commission agrees with the 

recommendation of commenters, 

roundtable participants, industry, U.S. 

and international financial regulators, 

international regulatory organizations, 

and world leaders calling for creation of 

a global LEI. It also believes, as 

recommended by roundtable 

participants, the CPSS–IOSCO Report 

on OTC Derivatives Data Reporting and 

Aggregation Requirements, and many 

FSB LEI Workshop participants, that the 

LEI should first be used for 

identification of swap counterparties in 

data reported to SDRs. 

LEI suggestions by commenters. The 

Commission accepts the suggestion of 

various commenters and roundtable 

participants that the unique 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2163 

61 In determining whether a new entity requiring 

a new LEI has resulted from a corporate event, the 

LEI utility may consider whether the primary 

regulator (if any) of the entity or entities involved 

in the corporate event considers the result to be a 

new entity; whether market data vendors consider 

the result to be a new entity; or whether ownership 

has changed as a result of the corporate event. 

62The Commission has considered comments 

concerning the definition of control it should 

employ in connection with level two reference data, 

and concerning SDR access to level two reference 

data for the purpose of constructing reports for 

regulators. 

63This is particularly true in light of the fact that, 

once industry builds or adapts automated systems 

for use in swap data reporting to include the LEI, 

it could be inadvisable to require registered entities 

and swap counterparties to incur the additional 

burden and cost that could come from changing the 

LEI system in ways that were not compatible with 

first-phase implementation of the LEI. 

counterparty identifier required by the 

final rule should be the same identifier 

as the legal entity identifier (‘‘LEI’’) 

being developed by industry and 

international regulators as described 

above, and should be referred to as the 

LEI (rather than the UCI as in the NOPR) 

in order to avoid confusion. The 

Commission agrees with commenters 

that the neutrality principle set forth in 

the NOPR and elsewhere, calling for a 

neutral LEI with no embedded 

intelligence should be maintained. The 

persistence principle in the final rule 

addresses commenters’ requests for 

guidance on how the LEI will relate to 

corporate events such as mergers and 

acquisitions.61 The Commission 

disagrees with the suggestion of one 

commenter that LEIs should be assigned 

at the individual fund or account level 

rather than the legal entity level, since 

LEIs by nature are legal entity 

identifiers. The Commission agrees with 

comments calling for the LEI to be 

administered by a not-for-profit industry 

utility, and for an international 

directory of LEI holders to publicly 

available free of charge. The criteria for 

the Commission’s designation of the LEI 

utility that will provide LEIs to be used 

in compliance with the rule are 

discussed below. 

LEI reference data considerations. The 

Commission believes that level one LEI 

reference data is essential to the ability 

of the issuer of LEIs to validate the 

identity of a legal entity receiving an 

LEI. As recognized by the participants 

in the FSB LEI Workshop, the 

Commission understands that such data 

by its nature is public, and presents no 

confidentiality or access issues. The 

Commission also believes, as also 

recognized by participants in the 

Workshop and in the CPSS–IOSCO 

Report on OTC Derivatives Data 

Reporting and Aggregation 

Requirements, that level two LEI 

reference data concerning the 

hierarchical relationships or company 

affiliations of legal entities is needed by 

regulators for use of the LEI as a tool to 

aggregate the data in trade repositories 

in order to enhance systemic risk 

mitigation and market supervision. The 

Commission understands, as recognized 

by Workshop participants, that some 

level two reference data is public and 

does not pose confidentiality concerns. 

However, the Commission is also aware, 

as pointed out by commenters and 

Workshop participants, that financial 

data confidentiality law in different 

jurisdictions could raise issues 

regarding access by regulators outside 

those jurisdictions, or by the public, to 

some level two reference data.62

LEI standard. The Commission 

recognizes that ISO, the international 

voluntary consensus standards body 

cited in the NOPR, has developed an 

international standard for a global LEI, 

ISO 17442 Legal Entity Identifier (LEI). 

Industry recommendations. The 

Commission also recognizes that a 

global coalition of financial sector trade 

associations and organizations has 

developed a broad-based industry 

consensus on requirements and 

standards for the LEI, and has 

recommended that (1) the international 

standard for the LEI code itself should 

be ISO standard 17442; and (2) the LEI 

utility for LEI issuance, reference data 

collection and maintenance, and quality 

assurance should be operated as a joint 

venture including SWIFT, DTCC, 

AVOX, and ANNA. The Commission 

notes that the coalition has publicly 

stated its willingness for this joint 

venture to include a governing board 

controlled by international financial 

regulators including the Commission, 

with power to ensure that the LEI utility 

maintains compliance with the 

principles established for the LEI by 

international financial regulators, 

including the principles established by 

the Commission in this final rule. 

Timely availability of LEIs. The 

Commission understands that the 

recommended joint venture partners are 

moving forward to obtain and process 

the reference data necessary to validate 

the identity of legal entities to be 

identified by LEIs, so that if the joint 

venture is designated by the 

Commission as the issuer of LEIs to be 

used in swap data reporting, it can in 

fact be able to issue LEIs to swap 

counterparties subject to the 

Commission’s jurisdiction prior to the 

commencement of swap data reporting 

pursuant to this final rule. At this time, 

the Commission is not aware of any 

other candidate to be the LEI utility 

designated to provide LEIs for use in 

compliance with this final rule that 

would in fact be able to provide the 

required LEIs on a timely basis. 

The Commission is aware that the 

ability of any LEI utility designated by 

the Commission to provide the LEIs to 

be used in compliance with this final 

rule to provide such LEIs when swap 

data reporting commences pursuant to 

this rule will depend in part on the 

Commission making such a designation, 

as called for in the NOPR, sufficiently 

prior to the commencement of swap 

data reporting to enable the LEI utility 

to issue the LEIs needed for compliance 

with this rule on a timely basis. 

Need for an internationallyestablished LEI. As stated in the NOPR, 

the Commission recognizes that 

optimum effectiveness of LEIs as a tool 

for achieving the systemic risk 

mitigation, transparency, and market 

protection goals of the Dodd-Frank 

Act—goals shared by financial 

regulators world-wide—would come 

from creation of a global LEI, on an 

international basis, that is capable of 

becoming the single international 

standard for unique identification of 

legal entities across the world financial 

sector. The Commission has 

participated in all of the work of the 

global financial regulatory community 

to date concerning implementation of a 

global LEI, and has carefully considered 

the results of this work. One reason the 

Commission has done so is that it 

recognizes the importance of having 

first-phase implementation of a global 

LEI follow principles that are forwardcompatible with later phases of LEI 

implementation.63 The Commission 

welcomes, and is participating in, the 

work of the FSB-coordinated, ad-hoc 

expert group of authorities working to 

deliver clear recommendations on 

implementation of a global LEI system 

to the FSB Plenary for endorsement in 

April or May 2012. The Commission 

understands that an important purpose 

of FSB endorsement of these 

recommendations would be to allow 

first-phase implementation of the LEI, 

including its use in swap data reporting 

to SDRs pursuant to this final rule, to 

proceed, if possible, on the basis of 

globally agreed principles concerning 

governance and funding of the LEI and 

access to LEI reference data. 

b. Final rule LEI provisions. In light of 

these considerations, the Commission 

has determined that § 45.6 will include 

the following provisions. 

Standard for the LEI code. The LEI to 

be used in all recordkeeping and all 

swap data reporting required by this 

part, once the Commission has 

mstockstill on DSK4VPTVN1PROD with RULES2

2164 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

64As noted above, all of these principles closely 

parallel those set forth by the OFR in its Statement 

of Policy concerning the LEI, see footnote 52 above, 

and those discussed in the SEC’s proposed rule on 

data reporting for security-based swaps, see 

footnote 53 above. 

65The Commission disagrees with the 50% 

ownership threshold suggested by one commenter. 

The Commission believes that a 50% threshold 

would result in no ultimate parent being reported 

in a notable number of cases, and believes that the 

25% threshold used by the SEC is more 

appropriate. 

designated the LEI utility that will 

provide the LEI to be used in complying 

with this part, as set forth below, must 

be issued under, and conform to, ISO 

Standard 17442, Legal Entity Identifier 

(LEI). This standard is the sole existing 

LEI standard created by a voluntary 

consensus standards body, and is the 

standard created by ISO, the voluntary 

consensus standards body cited in the 

NOPR as the optimum source for the LEI 

standard. 

LEI principles. The final rule includes 

both technical and governance 

principles that must be followed by the 

LEI used for compliance with the rule. 

These principles are based on those set 

forth in the NOPR, as complemented by 

the closely-parallel principles and 

governance considerations 

recommended in the CPSS–IOSCO 

Report on OTC Derivatives Data 

Reporting and Aggregation 

Requirements and the principles 

discussed at the FSB LEI Workshop.64

The final rule principles, set forth in 

detail in the text of section 45.6, are 

summarized below. 

Technical Principles 

• Uniqueness (one LEI per legal entity, 

never re-used). 

• Neutrality (a single-field identifier 

format containing no embedded intelligence). 

• Reliability (a reliable method of verifying 

the identity of holders of LEIs, based on 

reference data necessary for this purpose; as 

well as robust quality assurance practices 

and system safeguards, including the system 

safeguards applicable to SDRs under part 49 

of this chapter). 

• Open source (an open data standard and 

format capable of broad use, that enables data 

aggregation by regulators). 

• Extensibility (capability of becoming the 

single international standard for unique 

identification of legal entities in the financial 

sector on a global basis). 

• Persistence (each LEI remains 

permanently in the record, regardless of 

corporate events, while a new entity resulting 

from a corporate event receives a new LEI). 

Governance Principles 

• International governance (for operations, 

a governance structure for the LEI utility 

giving the Commission and other financial 

regulators requiring use of the LEI power to 

ensure that the LEI system adheres to these 

principles) (for compliance with ISO 17442, 

governance by ISO). 

• Reference data access (access to LEI 

reference data must enable use of the LEI as 

a public good, while respecting applicable 

law regarding data confidentiality). 

• Non-profit operation and funding 

(funding and operation on a non-profit, 

reasonable cost-recovery basis, subject to 

international governance). 

• Unbundling and non-restricted use (LEI 

issuance not tied to other services; no 

restrictions on use of the LEI; intellectual 

property consistent with open source 

principles). 

• Commercial advantage prohibition (no 

commercial use by the utility of LEI reference 

data that is not available to the public free 

of charge). 

Designation of the LEI utility. As 

called for in the NOPR, the final rule 

provides for the Commission to 

designate the LEI utility that will 

provide the LEI to be used in complying 

with this rule, once the Commission 

determines that an LEI system satisfying 

the requirements of the rule is available, 

making this designation in a 

Commission order. In determining 

whether an LEI system satisfying the 

Commission’s requirements is available, 

the Commission will consider, without 

limitation, the following factors: 

• Whether the LEI provided by the utility 

is issued under, and conforms to, ISO 

Standard 17442, Legal Entity Identifier (LEI). 

• Whether the LEI provided by the utility 

complies with all of the technical principles 

set forth in this rule. 

• Whether the LEI utility complies with all 

of the governance principles set forth in this 

rule. 

• Whether the LEI utility has demonstrated 

that it in fact can provide LEIs for 

identification of swap counterparties in swap 

data reporting commencing as of the 

compliance dates set forth in this rule. 

• The acceptability of the LEI utility to 

industry participants required to use the LEI 

in complying with the rule. 

In making its determination, the 

Commission will consider all 

candidates meeting these criteria, but it 

will not consider any candidate that 

does not demonstrate that it in fact can 

provide LEIs for identification of swap 

counterparties in swap data reporting 

pursuant to this rule as of the 

compliance dates set forth in this rule. 

The Commission will make this 

determination and designate the LEI 

utility at a time sufficiently prior to the 

commencement of swap data reporting 

to enable the designated utility to issue 

LEIs far enough in advance of the 

compliance dates set forth in the rule to 

enable compliance with the rule. 

Reference data reporting. When an 

LEI utility has been designated by the 

Commission, the final rule requires 

reporting of both level one and level two 

reference data concerning the legal 

entity identified by an LEI. Level one 

reference data means the minimum 

information needed to identify, on a 

verifiable basis, the legal entity to which 

an LEI is assigned. Level two reference 

data means information concerning the 

corporate affiliations or company 

hierarchy relationships of the legal 

entity receiving an LEI. As provided in 

the NOPR, the final rule requires 

reporting of both types of reference data 

for each counterparty to any swap 

subject to the Commission’s 

jurisdiction. 

The rule provides that level one 

reference data must be reported into a 

publicly-available level one reference 

database maintained by the issuer of the 

LEI designated by the Commission, at a 

time sufficient to ensure that the 

counterparty’s legal entity identifier is 

available for inclusion in recordkeeping 

and swap data reporting as required by 

the rule. Such reference data is essential 

to verifying the identity of the legal 

entity receiving an LEI. Level one 

reference data can be reported into the 

database by the entity itself (selfregistration), or by another entity or 

organization such as a swap dealer 

reporting on behalf of its counterparties 

or a national number agency or data 

service provider reporting on behalf of 

its clients (third-party registration). 

Subsequent changes and corrections to 

level one reference data must also be 

reported. 

While the NOPR required reporting of 

level two reference data concerning all 

of a counterparty’s corporate or 

company affiliation relationships, the 

Commission has determined that the 

final rule will reduce this requirement, 

and call for reporting of only a single 

piece of level two reference data, the 

identity of the counterparty’s ‘‘ultimate 

parent’’ as defined in the final rule. In 

making this determination, the 

Commission has taken into account 

comments suggesting that the 

Commission should coordinate with the 

SEC and international regulators to 

ensure where possible against material, 

substantive difference in reporting 

requirements, as well as comments 

suggesting that it should establish an 

ownership threshold for affiliations 

required to be reported, in order to 

reduce burdens for counterparties. The 

definitions of ‘‘control,’’ ‘‘parent,’’ and 

‘‘ultimate parent’’ adopted in the final 

rule are closely aligned with the SEC’s 

definitions, including a 25% ownership 

threshold.65 These definitions are 

provided both to reduce burdens for 

counterparties, in relation to the full 

affiliation reporting proposed in the 

NOPR, and to provide clarity as to the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2165 

66The final rule provides a grace period until 

October 15, 2012, for reporting counterparties 

whose systems are not yet prepared to include LEIs. 

67The Commission believes that the provisions of 

such an interim final rule must not impair the 

availability of LEIs for use in swap data reporting 

when such reporting commences pursuant to this 

rule. Accordingly, the Commission does not intend 

that such an interim final rule would alter the 

requirement for the LEI to be issued pursuant to ISO 

Standard 17442, or would alter the Commission’s 

designation of the LEI utility once that designation 

has been made. 

single affiliation required to be reported. 

The Commission believes that reporting 

of level two reference data consisting of 

the identity of a counterparty’s ultimate 

parent is essential to the ability of the 

Commission and other regulators to 

aggregate swap data in order to fulfill 

the purposes of the Dodd-Frank Act. 

The Commission may revisit the issue of 

what additional level two reference data 

should be reported at a later time, when 

an international consensus concerning 

the reporting of additional level two 

reference data has had time to be 

developed. 

Accordingly, the final rule also 

requires reporting of level two reference 

data, consisting of the identity of the 

counterparty’s ultimate parent. Level 

two reference data must be reported to 

a level two reference database. All nonpublic level two reference data reported 

to the level two reference database will 

be available only to the Commission and 

other financial regulators in any 

jurisdiction requiring LEI use. Where 

applicable law forbids such reporting, 

the rule requires reporting that fact, and 

the citation of the law in question, in 

place of the data to which such law 

applies. The rule provides that the 

location of the level two database will 

be determined at a future time by a 

Commission order, and that the 

obligation to report level two reference 

data will not apply until that order is 

issued. The rule also provides that, once 

the order is issued, level two reference 

data must be reported at a time 

sufficient to ensure that it is included in 

the database when the counterparty’s 

LEI is included in recordkeeping and 

swap data reporting as required by the 

rule. Level two reference data may also 

be reported via either self-registration or 

third-party registration. Changes and 

corrections must also be reported. 

Use of the LEI by registered entities 

and swap counterparties. The final rule 

provides that, when an LEI utility has 

been designated by the Commission, 

each registered entity and swap 

counterparty subject to the 

Commission’s jurisdiction must use the 

LEI provided by the designated LEI 

utility in all recordkeeping and swap 

data reporting pursuant to this part.66

Swap counterparty identification 

prior to LEI availability. Finally, the 

final rule provides that, before the LEI 

utility has been designated by the 

Commission, registered entities and 

swap counterparties subject to the 

Commission’s jurisdiction shall use a 

substitute counterparty identifier 

created and assigned by an SDR, as 

provided in the final rule. 

c. Incorporation of international 

principles and recommendations. 

Because this final rule is being issued 

prior to completion of the work of the 

FSB-coordinated, ad-hoc expert group of 

authorities that will make 

recommendations to the FSB Plenary in 

April 2012 concerning LEI governance, 

funding, and reference data, it has been 

written, of necessity, to provide the 

principles and requirements that will 

apply to the LEI, when its use pursuant 

to this rule begins, in the absence of 

globally agreed principles for these 

aspects of the LEI system. As noted 

above, the Commission shares the goal 

of a global LEI capable of becoming the 

single international standard for unique 

identification of legal entities across the 

world financial sector. Therefore, if LEI 

principles that the Commission 

determines are forward-compatible with 

the principles set forth in this rule, or 

recommendations concerning LEI 

governance and funding and access to 

LEI reference data that are acceptable to 

the Commission, are endorsed by the 

FSB in April or May 2012, the 

Commission may issue an interim final 

rule addressing LEI governance, 

funding, and reference data, that 

includes such principles and 

recommendations. Such an interim final 

rule, if issued, would replace affected 

provisions of this final rule, pending 

notice and comment and possible later 

adoption of the interim final rule by the 

Commission as a final rule.67

H. Unique Product Identifiers—§ 45.7 

1. Proposed Rule 

The NOPR required that each swap 

subject to CFTC jurisdiction be 

identified in all swap recordkeeping and 

data reporting by a unique product 

identifier (‘‘UPI’’) and a product 

classification system, as determined by 

the Commission, for the purpose of 

categorizing swaps with respect to the 

underlying products referenced in them. 

The NOPR called for the UPI and 

product classification system to identify 

both the swap asset class and the 

subtype within that asset class to which 

the swap belongs, with sufficient 

specificity and distinctiveness (as 

determined separately for each asset 

class) to enable regulators to fulfill their 

regulatory responsibilities and to 

enhance real time reporting. As 

provided in the NOPR, UPIs would be 

assigned to swaps at a particular, asset 

class-specific level of the robust swap 

taxonomy used by the product 

classification system, and the use of 

UPIs and the classification system 

would enable regulators to aggregate 

and report swap activity at a variety of 

product type levels, and to prepare 

reports required by the Dodd-Frank Act 

regarding swap market activity. 

2. Comments Received 

The majority of comments concerning 

the UPI received via comment letters, 

roundtables, and meetings with both 

industry and other regulators supported 

creation of a product classification 

system that provides a universallyaccepted means of describing all swaps, 

whether standardized or bespoke, and 

permits creation of UPIs for sufficiently 

standardized swaps. As noted in the 

CPSS–IOSCO Report on OTC 

Derivatives Data Reporting and 

Aggregation Requirements, development 

of a standard product classification 

system is needed as a first step toward 

both a system of product identifiers for 

standardized derivatives products and 

an internationally-accepted semantic for 

describing non-standardized 

instruments. DTCC and Thomson 

Reuters pointed out that creation of a 

product taxonomy is a significant 

undertaking, and Thomson Reuters 

suggested that a pilot program for 

developing UPIs could be useful. 

An industry initiative to create a 

product classification system is being 

led by the creators of FpML, in 

cooperation with experts in FIX. The 

data subcommittee of the CFTC 

Technology Advisory Committee 

(‘‘TAC’’) has taken up this subject as 

well. Industry experts involved in the 

industry initiative and the TAC data 

subcommittee anticipate that it may be 

possible, once a product classification 

system is developed, to assign a UPI to 

approximately 80 to 95 percent of swaps 

(depending on the asset class involved), 

while approximately 5 to 20 percent of 

swaps may be sufficiently bespoke that 

they can only be described rather than 

identified by a UPI. The CPSS–IOSCO 

Report on OTC Derivatives Data 

Reporting and Aggregation 

Requirements recommends CPSS– 

IOSCO and FSB support for timely 

development of a standard product 

classification system that can be used as 

a common basis for classifying and 

describing OTC derivatives products, 

and recommends that the FSB direct 

further international consultation and 

mstockstill on DSK4VPTVN1PROD with RULES2

2166 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

68As stated in the NOPR, the Commission 

believes that, while CEA section 4r(a) applies 

explicitly to swaps not accepted for clearing by a 

DCO, the duty to report should be borne by the 

same counterparty regardless of whether the swap 

is cleared or uncleared, for the sake of uniformity 

and ease of applicability. This approach also 

effectuates a policy choice made by Congress in the 

Dodd-Frank Act to place lesser burdens on non-SD/ 

MSP counterparties to swaps, where this can be 

done without damage to the fundamental systemic 

risk mitigation, transparency, standardization, and 

market integrity purposes of the legislation. The 

Commission believes it is appropriate for SDs and 

MSPs to have the responsibility of reporting with 

respect to the majority of swaps, because they are 

more likely than non-SD/MSP counterparties to 

have automated systems in place that can facilitate 

reporting. The Commission notes that the SEC 

followed the same approach in its proposed 

regulations for security-based swap data reporting. 

69ABC and CIEBA argued that making a U.S. nonSD/MSP counterparty the reporting counterparty 

where the other counterparty is a foreign SD or MSP 

is contrary to § 729 of the Dodd-Frank Act. 

coordination by financial and data 

experts from both regulators and 

industry concerning this work. 

3. Final Rule: § 45.7 

After considering the comments and 

input received concerning the UPI and 

product classification system, the 

Commission has determined that, as 

called for in the NOPR, the final rule 

provides that each swap subject to the 

Commission’s jurisdiction must be 

identified in recordkeeping and swap 

data reporting pursuant to this part by 

means of a unique product identifier 

and product classification system 

acceptable to the Commission, when 

such an identifier and classification 

system are designated by the 

Commission for this purpose. The 

unique product identifier and product 

classification system will be required to 

identify and describe the swap asset 

class and the sub-type within that asset 

class to which the swap belongs, and 

the underlying product for the swap, 

with sufficient distinctiveness and 

specificity to enable the Commission 

and other financial regulators to fulfill 

their regulatory responsibilities. 

The final rule provides that the 

Commission will determine when a 

unique product identifier and product 

classification acceptable to the 

Commission and satisfying these 

requirements is available, and when it 

so determines will designate the unique 

product identifier and product 

classification system for use in 

compliance with this part, making this 

designation in a Commission order. The 

final rule requires registered entities and 

swap counterparties subject to the 

Commission’s jurisdiction to use the 

unique product identifier and product 

classification system in compliance 

with this part when this designation is 

made. Prior to this designation, each 

registered entity and swap counterparty 

must use the internal product identifier 

or product description used by the SDR 

in all recordkeeping and swap data 

reporting pursuant to this part. 

I. Determination of Which Counterparty 

Must Report—§ 45.8 

1. Proposed Rule 

The NOPR followed the reporting 

counterparty hierarchy outlined in 

§ 4r(a)(3) of the CEA, which provides 

that where only one counterparty is an 

SD or MSP, the SD or MSP is the 

reporting counterparty, and where one 

counterparty is an SD and the other is 

an MSP, the SD is the reporting 

counterparty.68 The effect of this 

provision is to establish a hierarchy of 

counterparty types for reporting 

obligation purposes, in which SDs 

outrank MSPs, who outrank non-SD/ 

MSP counterparties. Where both 

counterparties are at the same 

hierarchical level, the NOPR followed 

the statute in calling for them to select 

the counterparty obligated to report. In 

order to prevent confusion and delay 

concerning this choice, the NOPR 

provided a mechanism for 

counterparties to use in making this 

selection, by requiring counterparties at 

the same hierarchical level to agree as 

one term of their swap which 

counterparty will fulfill reporting 

obligations for that swap. In cases where 

only one counterparty is a U.S. person, 

the NOPR requires the U.S. person to be 

the reporting counterparty, in order to 

ensure compliance with reporting 

obligations in such situations. 

2. Comments Received 

The Commission received several 

comments concerning determination of 

the reporting counterparty. The two 

themes addressed in these comments 

were the need for a selection 

mechanism or deciding factor for cases 

where both counterparties are at the 

same hierarchical level, and who should 

be the reporting counterparty when only 

one counterparty is a U.S. person. 

a. Deciding factor between two 

counterparties at the same hierarchical 

level. Commenters asked the 

Commission to provide in the final rule 

a mechanism for determining which 

counterparty is the reporting 

counterparty in cases where both 

counterparties are at the same 

hierarchical level, and suggested various 

deciding factors for use in such cases. 

The Electric Coalition recommended 

that for swaps between two non-SD/ 

MSP counterparties where only one 

counterparty is a ‘‘financial entity,’’ the 

final rule should make the financial 

entity the reporting counterparty. AGA 

suggested that, between counterparties 

at the same hierarchical level, the entity 

that is the ‘‘calculation agent’’ under the 

applicable ISDA documentation should 

be the reporting counterparty, unless the 

parties agree otherwise. ICE suggested 

that the seller of the swap should be the 

reporting counterparty in such 

situations, arguing that there is too 

much uncertainty when parties are 

required to select the reporting 

counterparty, particularly for platformexecuted swaps where counterparties 

are unknown to each other at the time 

of execution. WGCEF raised the issue of 

whether entities designated as SDs or 

MSPs for some but not all swaps should 

be treated as non-SDs/MSPs with 

respect to reporting counterparty 

determinations regarding swaps for 

which they are not designated as SDs or 

MSPs. WGCEF suggested that a 

‘‘limited’’ SD or ‘‘limited’’ MSP should 

only be required to be the reporting 

counterparty for swaps within the 

particular asset class for which it is 

designated an SD or MSP. FHLB 

recommended that when an SD is 

transacting with a limited SD, the SD 

should be designated the reporting 

counterparty, because it would be 

burdensome for a limited SD to comply 

with requirements meant for entities for 

which swap dealing is a primary 

business. Where a limited SD is the 

reporting counterparty, FHLB asked that 

it be treated as a non-SD/MSP with 

respect to reporting deadlines. 

b. Non-U.S. counterparties. The 

Commission received a number of 

comments on which counterparty 

should be the reporting counterparty 

when only one counterparty is a U.S. 

person. The Foreign Banks, ISDA, 

SIFMA, DTCC, MarkitServ, Freddie 

Mac, Vanguard, EEI, Chatham Financial, 

ABC, CIEBA, and the Electric Coalition 

recommended requiring non-U.S. SDs or 

MSPs to be the reporting counterparty 

for swaps with U.S. non-SD/MSP 

counterparties.69 The commenters 

pointed to the superior technology and 

technical expertise of SDs and MSPs, 

the benefits of a consistent approach to 

reporting, and concerns regarding 

whether U.S. non-SD/MSP 

counterparties would be discouraged 

from transacting with foreign SDs and 

MSPs if they were required to bear the 

burden of reporting. EEI and Vanguard 

suggested allowing the counterparties in 

this situation to agree on which of them 

will be the reporting counterparty, and 

MarkitServ suggested allowing non-SD/ 

MSP counterparties to delegate the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2167 

70The SEF or DCM will know that both 

counterparties are at the same hierarchical level 

because the final rule requires the terms of the 

contract on the SEF or DCM to include all 

minimum PET data, and the tables of minimum 

PET data include an indication of whether a 

counterparty is an SD, an MSP, or a non-SD/MSP 

counterparty. 

reporting obligation to the non-U.S. SD 

counterparty. 

3. Final Rule: § 45.8 

a. Deciding factor between two 

counterparties at the same hierarchical 

level. The Commission has considered 

comments calling for the final rule to 

provide a mechanism for determining 

which counterparty is the reporting 

counterparty in cases where both 

counterparties are at the same 

hierarchical level, and agrees that this 

would be beneficial where a deciding 

factor can be applicable for all swaps. 

The Commission has determined that 

the final rule provides that for swaps 

between non-SD/MSP counterparties 

where only one counterparty is a 

‘‘financial entity’’ as defined in CEA 

section 2(h)(7)(C), the financial entity 

shall be the reporting counterparty. The 

Commission believes it is appropriate 

for financial entities, as defined by the 

Dodd-Frank Act, to have the 

responsibility of reporting in such cases, 

because, in the Commission’s view, they 

are more likely than non-SD/MSP 

counterparties who are not financial 

entities to have automated systems in 

place that can facilitate reporting. The 

Commission has not found any other 

factor usable for automatic choice of the 

reporting counterparty between two 

counterparties at the same hierarchical 

level that applies across all markets and 

all asset classes. 

For off-platform swaps, the final rule 

retains the NOPR requirement that 

counterparties at the same hierarchical 

level agree, as one term of the swap, 

which of them is the reporting 

counterparty. 

For swaps executed on a SEF or DCM, 

determination of the reporting 

counterparty is necessary for purposes 

of continuation data reporting, despite 

the fact that the SEF or DCM will report 

all creation data for the swap under the 

streamlined reporting schema adopted 

in the final rule as discussed above. For 

on-facility swaps where counterparties 

at the same hierarchical level know the 

identity of the other counterparty, the 

final rule adopts the NOPR requirement 

that the counterparties agree as one term 

of the swap which of them is the 

reporting counterparty. For on-facility 

swaps where counterparties at the same 

hierarchical level do not know the 

identity of the other counterparty, the 

final rule provides that: (a) the SEF or 

DCM must transmit to each 

counterparty the LEI (or substitute 

identifier as provided in § 45.6) of the 

other counterparty that is at the same 

hierarchical level;70 (b) the 

counterparties must agree which 

counterparty will be the reporting 

counterparty, after receiving such notice 

from the SEF or the DCM and before the 

end of the next business day following 

the date of execution of the swap; and 

(c) the reporting counterparty must 

report to the SDR to which the SEF or 

DCM has reported the swap that it is the 

reporting counterparty. 

b. Non-U.S. counterparties. The 

Commission has considered the large 

number of comments recommending 

that a non-U.S. SD or MSP in a swap 

with a U.S. counterparty at a lower 

hierarchical level should be the 

reporting counterparty despite its status 

as a non-U.S. person. The Commission 

has determined that, because non-U.S. 

SDs and MSPs will be required to 

register with the Commission in this 

connection, the Commission will have 

sufficient oversight and enforcement 

authority with respect to such 

counterparties. The Commission 

understands that the SEC has made a 

similar determination in the context of 

security-based swap data reporting. 

Accordingly, the final rule provides 

that, with a single exception, the 

determination of the reporting 

counterparty in situations where only 

one counterparty is a U.S. person must 

be made by applying the normal 

counterparty determination procedure 

set forth in § 45.8. The Commission 

believes this is appropriate because it 

places the burden of reporting on the 

counterparty that in the Commission’s 

view is more likely to have automated 

systems suitable for reporting. In cases 

where both counterparties are non-SD/ 

MSP counterparties and only one 

counterparty is a U.S. person, the final 

rule will adopt the NOPR provision 

requiring the U.S. person to be the 

reporting counterparty. This is 

necessary in such situations because the 

non-U.S. non-SD/MSP counterparty will 

not be required to register with the 

Commission. Where neither 

counterparty to a swap executed on a 

SEF or DCM, otherwise executed in the 

U.S., or cleared on a DCO is a U.S. 

person, the final rule applies the same 

hierarchical selection criteria as for 

other swaps. 

c. Reporting counterparty 

determination after a change of 

counterparty. In light of the various 

comments calling for clear direction 

from the Commission regarding 

determination of the reporting 

counterparty, and calling for the 

statutory preference for SD or MSP 

reporting counterparties where this is 

possible, the Commission has 

determined that the final rule provides 

for determination of the reporting 

counterparty in cases where, during the 

life of a swap, the reporting 

counterparty ceases to be a counterparty 

due to an assignment or novation. In 

such cases, the final rule provides for 

the reporting counterparty to be selected 

from the two current counterparties to 

the swap, as follows: If only one 

counterparty is an SD, the SD is the 

reporting counterparty; if neither 

counterparty is an SD and only one is 

an MSP, the MSP is the reporting 

counterparty; if both counterparties are 

non-SD/MSP counterparties and only 

one is a U.S. person, the U.S. person is 

the reporting counterparty; and in all 

other cases, the counterparty replacing 

the previous reporting counterparty is 

the reporting counterparty, unless 

otherwise agreed by the counterparties. 

J. Third-Party Facilitation of Swap Data 

Reporting—§ 45.9 

1. Proposed Rule. The NOPR provided 

that registered entities and 

counterparties required to report 

pursuant to this part may contract with 

third-party service providers to facilitate 

reporting, but, nonetheless, remain fully 

responsible for reporting as required. 

2. Comments Received. Roundtable 

participants generally endorsed the 

NOPR provision permitting third-party 

facilitation of swap data reporting, and 

no comment letters suggested any 

changes to this provision. 

3. Final Rule: § 45.9. The Commission 

recognizes, as stated in the NOPR, that 

while the various reporting obligations 

established in the final rule fall 

explicitly on registered entities and 

swap counterparties, efficiencies and 

decreased cost may in some 

circumstances be gained by engaging 

third parties to facilitate the actual 

reporting of information. The 

Commission believes that the use of 

such third-party facilitators, however, 

should not allow the registered entity or 

counterparty with the obligation to 

report to avoid its responsibility to 

report swap data in a timely and 

accurate manner. Accordingly, the 

Commission has adopted the regulation 

on third-party facilitation of swap data 

reporting as proposed. 

mstockstill on DSK4VPTVN1PROD with RULES2

2168 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

K. Reporting to a Single Swap Data 

Repository—§ 45.10 

1. Proposed Rule. The NOPR required 

that all swap data for a given swap must 

be reported to a single SDR, which must 

be the SDR to which required primary 

economic terms data for that swap is 

first reported. 

2. Comments Received. Roundtable 

participants generally endorsed the 

NOPR provision requiring that all swap 

data for a given swap must be reported 

to a single SDR, and no comment letters 

suggested changing this requirement. 

Comments addressing who should make 

the first swap data report for a swap, 

and thus in effect choose the SDR, are 

discussed above in the section 

concerning creation data reporting. 

3. Final Rule: § 45.10. The 

Commission believes that important 

regulatory purposes of the Dodd-Frank 

Act would be frustrated, and that 

regulators’ ability to see necessary 

information concerning swaps could be 

impeded, if data concerning a given 

swap was spread over multiple SDRs. 

Accordingly, the final rule adopts the 

NOPR provision requiring that all swap 

data for a given swap must be reported 

to a single SDR, which shall be the SDR 

to which creation data for that swap is 

first reported. 

As discussed above, the Commission 

is responding to comments concerning 

creation data reporting by adopting in 

the final rule a streamlined reporting 

regime that requires reporting by the 

registered entities or swap 

counterparties with the easiest, fastest, 

and cheapest data access and those most 

likely to have the necessary automated 

systems; that minimizes burdens and 

costs for counterparties to the extent 

possible; and that provides certainty to 

the market. To effectuate this 

streamlined reporting regime, § 45.3 and 

§ 45.10 of the final rule provides that the 

initial report of creation data for a swap 

will be made as follows: 

• For swaps executed on a SEF or DCM, 

the SEF or DCM reports all creation data to 

a single SDR, as soon as technologically 

practicable after execution. 

• For off-facility swaps, the reporting 

counterparty reports all PET data to a single 

SDR, within the deadlines provided in the 

final rule. 

• For off-facility swaps, if the reporting 

counterparty is excused from reporting, as 

provided in the final rule, because the swap 

is accepted for clearing before the reporting 

deadline and before any report made by the 

reporting counterparty, the DCO reports all 

creation data to a single SDR, as soon as 

technologically practicable after execution. 

L. Data Reporting for Swaps in a Swap 

Asset Class Not Accepted by Any Swap 

Data Repository—§ 45.11 

1. Proposed Rule. As noted in the 

NOPR, CEA section 4r(a)(1)(B) 

recognizes that in some circumstances 

there may be no SDR that will accept 

swap data for certain swap transactions. 

This category of swaps should be 

limited, since the Commission’s final 

part 49 regulations require an SDR that 

accepts swap data for any swap in an 

asset class to accept data for all swaps 

in that asset class. However, situations 

could arise where a novel product does 

not fit into any existing asset class, or 

where no SDR yet accepts swap data for 

any swap in an existing asset class. The 

NOPR provided that in such cases, the 

reporting counterparty must report to 

the Commission all swap data 

concerning that swap required by this 

part to be reported to an SDR, making 

this report at a time and in a form 

determined by the Commission. 

2. Comments Received. The 

Commission received no comments 

concerning this provision. 

3. Final Rule: § 45.11. The 

Commission has determined to adopt 

the NOPR provision requiring that, 

should there be a swap asset class for 

which no SDR currently accepts swap 

data, each registered entity or swap 

counterparty required to report swap 

data for such a swap must report to the 

Commission all swap data required by 

this part to be reported to an SDR, 

making this report at times announced 

by the Commission and in an electronic 

file in a format acceptable to the 

Commission. The Commission has 

recently reorganized its divisional 

structure to facilitate discharge of its 

responsibilities under the Dodd Frank 

Act, and as part of that reorganization, 

the Commission’s Chief Information 

Officer is responsible for all matters 

concerning data received by the 

Commission. Accordingly, the 

Commission has determined that the 

final rule will delegate to the Chief 

Information Officer the authority to 

determine the format, data standards, 

and electronic transmission standards 

and procedures acceptable to the 

Commission for such reporting, and the 

dates and times at which data for such 

swaps shall be reported to the 

Commission. The determinations made 

by the Commission through the Chief 

Information Officer in these respects 

will be published in the Federal 

Register and on the Commission’s Web 

site. 

M. Voluntary Supplemental Reporting— 

§ 45.12 

1. Proposed Rule. As discussed above, 

the Dodd-Frank Act provides for 

designation of one counterparty to a 

swap as the reporting counterparty for 

that swap. Neither the Dodd-Frank act 

nor the NOPR addresses additional, 

voluntary reporting of swap data to an 

SDR by the other counterparty to the 

swap. Nothing in the Dodd-Frank Act 

prohibits such additional, voluntary 

reporting. 

2. Comments Received. The 

Commission received several comments 

recommending that the final rule should 

confirm that voluntary data reporting by 

market participants not required to 

report is permitted, and should provide 

for such voluntary supplemental 

reporting. WGCEF asked the 

Commission to clarify that a market 

participant has the option to report any 

and all transaction data even where it is 

not required to report by Commission 

rules. REGIS–TR recommended that 

both counterparties be allowed to report 

a swap and confirm their PET data and 

confirmation data, via SDR systems that 

allow regulators to see which 

counterparty entered the information, 

and argued this would lower overall 

compliance costs. DTCC stated that 

voluntary reporting by participants not 

required to report is technologically 

feasible and would ensure greater data 

accuracy. ISDA and SIFMA observed 

that reporting by both counterparties is 

not essential to the accuracy of data in 

SDRs, since confirmations require the 

consent of both counterparties and the 

NOPR required confirmation data 

reporting. TriOptima suggested that 

both parties should be required to report 

some types of transaction data, such as 

that relating to systemic risk monitoring, 

arguing that one-party reporting can 

raise risks of inaccurate data. Most of 

the international regulators consulted by 

the Commission concerning the final 

rule have informed the Commission that 

they believe reporting by both 

counterparties is desirable, and that 

reporting regimes outside the U.S. are 

likely to require such dual reporting. 

Roundtable participants noted that some 

counterparties may prefer to report 

whether or not they are the reporting 

counterparty, in order to simplify their 

business processes, and have data 

concerning all their swaps present in a 

single SDR. 

3. Final Rule: § 45.12. The 

Commission has considered these 

comments, and agrees that voluntary 

supplemental reporting by 

counterparties not designated as the 

reporting counterparty is 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2169 

71CEA section 21(c)(3) and (4). 

72CEA section 21(f)(4)(B) explicitly permits the 

Commission to ‘‘take into consideration any 

evolving standard of the United States or the 

international community.’’ 

technologically feasible and may have 

benefits for both data accuracy and 

counterparty business processes. While 

the Dodd-Frank Act requires swap data 

reporting by only one counterparty and 

establishes a hierarchy for choosing the 

reporting counterparty, it does not 

prohibit voluntary swap data reporting 

to an SDR that supplements required 

reporting. The Commission also notes 

that its final part 49 rules permit 

counterparties to access to information 

in SDRs concerning their own swaps, 

and notes that nothing forbids swap 

counterparties to use an SDR as a 

provider of third-party services going 

beyond acceptance of required swap 

data reports for regulatory purposes. For 

these reasons, the Commission has 

determined that the final rule provides 

for voluntary supplemental reporting to 

any SDR by either counterparty of swap 

data that this part does not require that 

counterparty to report. 

The Commission has also determined 

that, to avoid double-counting of the 

same swap due to voluntary 

supplemental reports, and to ensure that 

data reported via a voluntary 

supplemental report (‘‘VSR’’) to the 

same SDR to which required data is 

reported is integrated into that SDR’s 

record for the swap, each VSR must 

include minimum VSR information that 

ensures achievement of these purposes. 

This required VSR information 

includes: an indication that the report is 

a VSR; the USI for the swap that has 

been created as required by this part; the 

identity of the SDR to which all 

required creation data and continuation 

data is reported for the swap, if the VSR 

is made to a different SDR; the LEI (or 

substitute identifier) of the counterparty 

making the VSR; and if applicable, an 

indication that the VSR is made 

pursuant to the law of a jurisdiction 

outside the U.S. To avoid confusion and 

double-counting, and to ensure that 

each VSR includes the USI for the swap, 

the rule will also provide that a VSR 

may not be made until after the USI for 

the swap has been created as provided 

in § 45.5 and transmitted to the 

counterparty making the VSR. 

N. Required Data Standards—§ 45.13 

1. Proposed Rule. CEA section 

21(b)(2) directs the Commission to 

prescribe data collection and data 

maintenance standards for swap data 

repositories. The CEA also provides that 

SDRs shall maintain swap data reported 

to them ‘‘in such form, in such manner, 

and for such period as may be required 

by the Commission,’’ and directs SDRs 

to ‘‘provide direct electronic access to 

the Commission.’’ 71 These requirements 

are designed to effectuate the 

fundamental purpose for the 

legislation’s swap data reporting 

requirements: making swap data 

available to the Commission and other 

financial regulators so as to enable them 

to better fulfill their market oversight 

and other regulatory functions, increase 

market transparency, and mitigate 

systemic risk. Pursuant to these 

provisions, the NOPR required SDRs to 

be able to transmit data to the 

Commission using the data standards 

and formats required by Commission. 

The NOPR did not mandate use of a 

specific data standard for reporting to 

SDRs, but left SDRs free to make their 

own business decisions in this regard, 

so long as they remain able to transmit 

data to the Commission as required. 

2. Comments Received. DTCC and 

WGCEF both suggested that using 

existing standards and formats would 

facilitate implementation of DoddFrank. DTCC also noted that SDRs will 

need to adapt to a changing 

marketplace, and therefore will need the 

flexibility to specify acceptable data 

formats, connectivity, and protocols for 

reporting to them. DTCC recommended 

that SDRs make their data formats 

publicly available, and develop 

application programming interfaces 

(‘‘APIs’’) to enable direct submission of 

data by participants. WGCEF argued 

that SDRs should be required to develop 

and use a common standard for data 

reporting, suggesting that this will 

reduce costs and opportunities for 

inaccuracy. 

3. Final Rule: § 45.13. The 

Commission considered whether it 

would be preferable, as suggested by 

one commenter, to require that all swap 

data reporting to SDRs use a uniform 

reporting format or single data standard, 

but has decided not to impose such a 

requirement. Doing so would be likely 

to require changes to the existing 

automated systems of some entities and 

counterparties, which in some cases 

could impose additional burdens and 

costs. The Commission agrees with the 

comment suggesting that SDRs will 

need flexibility with respect to data 

standards used by them in receiving 

data. The Commission has been advised 

by existing trade repositories that they 

are able to accept data in multiple 

formats or data standards from different 

counterparties, and to map the data they 

receive into a common data standard 

within the repository, without undue 

difficulty, delay, or cost. The 

Commission notes that automated 

systems and data standards evolve over 

time, and that it may be desirable for 

regulations concerning data standards to 

avoid locking reporting entities, 

reporting counterparties, and SDRs into 

particular data standards that could 

become less appropriate in the future.72

In addition, the Commission anticipates 

that the degree of flexibility offered by 

SDRs concerning data standards for 

swap data reporting could become an 

element of marketplace competition 

with respect to SDRs. Accordingly, the 

final rule gives SDRs flexibility to use a 

variety of data standards to receive data 

reported to them, provided that they are 

able to transmit data to the Commission 

in a manner that meets the 

Commission’s needs. This flexibility is 

designed to allow the most cost-effective 

application of both existing and 

evolving data standards. 

The Commission also agrees with the 

comment suggesting that it would be 

beneficial for the data formats used by 

SDRs to be publicly available. The 

Commission encourages SDRs to make 

public the documentation of their data 

formats and any APIs or service 

interfaces they develop for reporting 

data. 

For the reasons discussed above, the 

Commission has determined to adopt 

the NOPR provisions regarding data 

standards in the final rule. The final 

rule requires an SDR to maintain all 

swap data reported to it in a format 

acceptable to the Commission, and to 

transmit all swap data requested by the 

Commission to the Commission in an 

electronic file in a format acceptable to 

the Commission. It requires reporting 

entities and counterparties to use the 

facilities, methods, or data standards 

provided or required by an SDR to 

which they report data, but also allows 

an SDR to permit reporting via various 

facilities, methods, or data standards, 

provided that its requirements in this 

regard enable it to maintain swap data 

and transmit it to the Commission as the 

Commission requires. 

As noted above, the Commission has 

recently reorganized its divisional 

structure to facilitate discharge of its 

responsibilities under the Dodd-Frank 

Act, and as part of that reorganization, 

the Commission’s Chief Information 

Officer is responsible for all matters 

concerning data received by the 

Commission. Accordingly, the 

Commission has determined that the 

final rule will delegate to the Chief 

Information Officer (a) the authority to 

determine the format, data standards, 

mstockstill on DSK4VPTVN1PROD with RULES2

2170 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

73The Commission does not believe it is 

necessary or appropriate for the final rule to further 

address potential disputes between reporting and 

non-reporting counterparties, which could involve 

legal disputes between counterparties affecting the 

validity or terms of a swap. 

74Because daily snapshot reports of state data by 

reporting counterparties by their nature can correct 

errors or omissions in previous snapshot reports, 

the final rule provides that for swaps reported via 

the snapshot reporting method, reporting 

counterparties fulfill the requirement to report 

errors or omissions in state data previously reported 

by making corrections in their next daily report of 

state data. 

and electronic transmission standards 

and procedures acceptable to the 

Commission for provision of data to the 

Commission by SDRs; and (b) the 

authority to determine whether the 

Commission may permit or require use 

of one or more particular data standards 

by SDRs or reporting entities and 

counterparties in order to ensure that 

SDRs can provide data to the 

Commission as required. The 

determinations made by the 

Commission through the Chief 

Information Officer in these respects 

will be published in the Federal 

Register and on the Commission’s Web 

site. 

O. Reporting of Errors and Omissions in 

Previously Reported Data—§ 45.14 

1. Proposed Rule 

The NOPR directed all entities and 

counterparties required to report data to 

SDRs to report any errors and omissions 

in the data so reported, as soon as 

technologically practicable after 

discovery of any such error or omission. 

It also required non-reporting 

counterparties discovering a data error 

or omission to notify the reporting 

counterparty promptly, and required the 

reporting counterparty to then report it. 

The NOPR required reports of errors and 

omissions to be made using the same 

format used to report the erroneous or 

omitted data. 

2. Comments Received 

a. Error reporting. WGCEF and MFA 

suggested that the final rule should 

permit (but not require) non-reporting 

counterparties to report errors they 

discover to the SDR. MFA argued this is 

needed in the event of a dispute 

between the reporting and non-reporting 

counterparties. ISDA and SIFMA 

recommended the reasons for an error 

correction should not be reported, on 

the basis that recording the reason for an 

adjustment is not current market 

practice. Encana requested clarification 

of the interaction of error reporting 

under this section and the part 49 

provisions requiring an SDR to confirm 

with the counterparties the accuracy of 

the data submitted. 

b. Liability for errors. WGCEF, AGA, 

ISDA, and SIFMA suggested that safe 

harbors should be created for good-faith 

mistakes made by either counterparty in 

reporting swap data, and for errors of 

which the counterparties are not aware. 

AGA asked the Commission to state 

explicitly that it will not penalize 

parties for inadvertent errors in 

reporting, and that good faith efforts to 

comply with new requirements will not 

result in exposure to enforcement 

actions. ISDA and SIFMA asked the 

Commission to clarify that a party has 

no obligation to correct errors of which 

it is not aware, and suggested having the 

final rule provide that reporting parties 

are not responsible for data errors that 

occur after submission to an SDR. 

3. Final Rule: § 45.14 

The Commission has considered the 

above comments, and has determined to 

adopt the NOPR provisions concerning 

error reporting substantially as 

proposed. Accurate swap data is 

essential to effective fulfillment of the 

various regulatory functions of financial 

regulators, and the final rule provisions 

are designed to ensure data accuracy to 

the extent possible. 

a. Error reporting. As noted above, the 

Commission agrees that voluntary 

supplemental reporting may have 

benefits for data accuracy, and has 

added § 45.12 to the final rule expressly 

permitting voluntary supplemental 

reporting, which is not limited in scope 

and can include error reporting. The 

Commission believes that it is a 

business decision of an SDR whether it 

should require reporting the reasons for 

an error correction, and has decided not 

to address that issue by rule. Records 

required to be kept pursuant to this part 

should provide sufficient information 

when necessary regarding the reasons 

for an error correction.73 The 

Commission intends § 45.14 to work 

together in a complementary fashion 

with the provisions of part 49 directing 

SDRs to obtain acknowledgment from 

counterparties of the accuracy of 

reported data within a short time after 

it is submitted. Both provisions are 

intended to protect the integrity and 

accuracy of the data in SDRs. 

To help ensure data accuracy, the 

final rule requires registered entities and 

swap counterparties that report swap 

data to an SDR or to any other registered 

entity or swap counterparty to report 

any errors or omissions in the data they 

report, as soon as technologically 

practicable after discovery of any error 

or omission.74 The final rule requires a 

non-reporting swap counterparty that 

discovers any error or omission with 

respect to any swap data reported to an 

SDR for its swaps to notify the reporting 

counterparty promptly of each such 

error or omission, and requires the 

reporting counterparty, upon receiving 

such notice, to report a correction of 

each such error or omission to the SDR, 

as soon as technologically practicable 

after receiving notice of it from the nonreporting counterparty. The 

Commission believes that this provision 

is an appropriate measure to ensure data 

accuracy. 

To ensure consistency of data within 

an SDR with respect to error corrections, 

the final rule requires an entity or 

counterparty correcting an error or 

omission to do so in the same data 

format it used in making the erroneous 

report. To similarly ensure consistency 

of data transmitted to the Commission 

with respect to error corrections, the 

final rule imposes the same requirement 

on SDRs with respect to transmission of 

error corrections. 

b. Liability for errors. The 

Commission has determined that the 

final rule should not provide a safe 

harbor for good-faith mistakes made in 

reporting data. It is the reporting party’s 

responsibility to report data accurately 

and develop processes to achieve this 

goal. The Commission will continue to 

carry out its oversight and enforcement 

responsibilities in a reasonable and 

appropriate manner. The final rule does 

not require swap counterparties to 

monitor data in an SDR, but does 

require them to report all data errors of 

which they become aware. As noted 

above, the Commission believes this is 

an appropriate measure to ensure data 

accuracy. 

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’), 5 U.S.C. 601 et seq., requires 

that agencies consider the impact of 

their rules on ‘‘small entities.’’ As 

provided in the NOPR, this part will 

have a direct effect on SDRs, DCOs, 

SEFs, DCMs, SDs, MSPs, and non-SD/ 

MSP counterparties who are 

counterparties to one or more swaps and 

subject to the Commission’s 

jurisdiction. 

As stated in the NOPR, the 

Commission has previously established 

that DCMs are not small entities for 

purposes of the RFA. The Commission 

also proposed that certain entities for 

which the Commission had not 

previously made a determination for 

RFA purposes—namely SDRs, DCOs, 

SEFs, SDs, and MSPs—should not be 

considered to be small entities, for 

reasons set forth in the NOPR. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2171 

75CEA section 2(e) provides that ‘‘It 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 [SEF or DCM].’’ Congress created the ECP category 

in the Commodity Futures Modernization Act in 

2000, to include individuals and entities that 

Congress determined to be sufficiently 

sophisticated in financial matters that they should 

be permitted to trade over-the-counter swaps 

without the protection of federal regulation. See, 

e.g., ‘‘Report of the President’s Working Group on 

Financial Markets’’ (Nov. 1999) at 16 

(recommending that ‘‘sophisticated counterparties 

that use OTC derivatives simply do not require the 

same protections under the CEA as those required 

by retail investors’’). In the Dodd-Frank Act, 

Congress made two changes to the statutory ECP 

definition, both of which increased the thresholds 

to qualify as an ECP, making it harder for some 

entities and individuals to qualify. Compare CEA 

section 1a(12), 7 U.S.C. 1a(12) (2009), with 

§§ 721(a)(1) and (9) of the Dodd-Frank Act, 

respectively redesignating section 1a(12) as section 

1a(18) and increasing thresholds for certain 

categories of ECP. 

76 66 FR 20740, 20743, Apr. 25, 2001. 

77 44 U.S.C. 3301 et seq. 

78Because SDRs, MSPs, SDs, DCOs, and SEFs are 

new entities, the following estimates were made in 

the NOPR: 15 SDRs, 50 MSPs, 250 SDs, 12 DCOs, 

and 40 SEFs. The number of DCMs was estimated 

to be 17 DCMs based on the current (as of October 

18, 2010) number of designated DCMs. 

Additionally, for purposes of the Paperwork 

Reduction Act, the Commission estimated that there 

Continued 

As noted in the NOPR, this part 

requires swap data reporting by a nonSD/MSP counterparty only with respect 

to swaps in which neither counterparty 

is an SD or MSP. With respect to such 

swaps, which represent a minority of 

swap transactions, only one of the swap 

non-SD/MSP counterparties will be 

required to report—the counterparty 

designated as the reporting 

counterparty. In addition, the 

Commission has determined that the 

final rule provides that for swaps 

between non-SD/MSP counterparties 

where only one counterparty is a 

‘‘financial entity’’ as defined in CEA 

section 2(h)(7)(C), the financial entity 

shall be the reporting counterparty. The 

Commission believes these provisions of 

the final rule reduce the economic 

impact on any non-SD/MSP 

counterparties that may be considered 

to be small entities under the RFA. 

Due to the operation of certain 

provisions of the CEA and the final rule, 

non-SD/MSP counterparties who may 

be considered small entities for RFA 

purposes are never required to report 

any swap creation data. Under the CEA, 

a non-SD/MSP counterparty is required 

to transact on a SEF or DCM unless that 

non-SD/MSP is an Eligible Contract 

Participant (‘‘ECP’’).75 The Commission 

has previously determined that ECPs are 

not ‘‘small entities’’ for RFA purposes.76

For all swaps executed on a SEF or 

DCM, the final rule requires the SEF or 

DCM to report all required swap 

creation data. Therefore, no ‘‘small 

entities’’ for RFA purposes are required 

to report any swap creation data under 

the final rule. 

With respect to reporting of swap 

continuation data, the Commission has 

attempted to minimize the burden on 

non-SD/MSP counterparties who may 

be considered small entities for 

purposes of the RFA. As noted above, in 

the final rule the Commission is 

responding to comments concerning 

swap data reporting by creating a 

streamlined reporting regime that 

requires reporting by the registered 

entities or swap counterparties that the 

Commission believes will have the 

easiest, fastest, and cheapest data access 

and will be most likely to have the 

necessary automated systems, in order 

to minimize burdens and costs, to the 

extent possible, for swap counterparties 

and particularly for non-SD/MSP 

counterparties. Under the final rule 

reporting regime, non-SD/MSP reporting 

counterparties will not have to report 

either creation data or continuation data 

for any swap executed on a SEF or DCM 

and cleared on a DCO. In addition, nonSD/MSP counterparties will not have to 

report either creation data or 

continuation data for any off-facility 

swap accepted by a DCO for clearing 

within the deadline for the initial data 

report for the swap, as the DCO is then 

required to report all swap data for the 

swap. The Commission believes that 

these provisions of the final rule further 

reduce the economic impact on any 

non-SD/MSP counterparties that may be 

considered to be small entities under 

the RFA. 

In the NOPR, 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. Nonetheless, the 

Commission specifically requested 

comment on the impact these proposed 

rules may have on small entities. The 

Commission received one comment on 

its RFA statement, from the Electric 

Coalition, stating that the vast majority 

of members of the National Rural 

Electric Cooperative Association and the 

American Public Power Association are 

considered small entities for purposes of 

the RFA. The Electric Coalition 

suggested that the Commission should 

consider the overall impact of its DoddFrank Act rules on nonfinancial entities, 

including small entities, and conduct a 

comprehensive analysis under the RFA. 

In response to this comment, and to 

other comments by non-SD/MSP 

counterparties, the Commission has 

adjusted the final reporting regime to 

reduce burdens and costs for non-SD/ 

MSP counterparties in a variety of ways, 

as set forth in detail in the discussion 

above concerning §§ 45.3 and 45.4 of the 

final rule. The Commission notes that 

the commenter did not dispute the 

reasons for the Commission’s 

conclusion that this part does not have 

a significant impact on a substantial 

number of small entities. For these 

reasons, and for the reasons stated above 

and in the NOPR, the Commission 

continues to believe that this part 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 this 

part as finally adopted will not have a 

significant economic impact on a 

substantial number of small entities. 

B. Paperwork Reduction Act 

1. Introduction 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a currently valid 

control number issued by the Office of 

Management and Budget (‘‘OMB’’). 

Provisions of Commission Regulations 

45.2, 45.3, 45.4, 45.5, 45.6, 45.7, and 

45.14 result in information collection 

requirements within the meaning of the 

Paperwork Reduction Act (‘‘PRA’’).77

The Commission submitted the NOPR 

and supporting documentation to OMB 

for review in accordance with 44 U.S.C. 

3507(d) and 5 CFR 1320.11. The 

Commission requested that OMB 

approve, and assign a new control 

number for, the collections of 

information covered by the NOPR. 

The title for the proposed collection 

of information under part 45 is ‘‘Swap 

Data Recordkeeping and Reporting 

Requirements.’’ To the extent that the 

recordkeeping and reporting 

requirements in this rulemaking overlap 

with the requirements of other 

rulemakings for which the Commission 

prepared and submitted an information 

collection request to OMB, the burdens 

associated with the requirements are not 

being accounted for in the information 

collection request for this rulemaking, to 

avoid unnecessary duplication of 

information collection burdens. 

2. Proposed Information Collection 

In its proposed rulemaking, the 

Commission provided burden estimates 

for the new collections of information 

contained in proposed §§ 45.2, 45.3, and 

45.4. 

In the NOPR, it was estimated that 

30,384 SDRs, SEFs, DCMs, DCOs, SDs, 

MSPs, and non-SD/MSP 

counterparties 78 would be required to 

mstockstill on DSK4VPTVN1PROD with RULES2

2172 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

would be 30,000 non-SD/MSP counterparties who 

would be subject annually to the recordkeeping 

requirements of proposed Regulation 45.1. 79The Commission estimated that ‘‘high activity’’ 

entities or persons would be those persons who 

would process or enter into hundreds or thousands 

of swaps per week that would be subject to the 

jurisdiction of the Commission. Low activity users 

were estimated to be those who would process or 

enter into substantially fewer than the high activity 

users. 

80Estimated burden hours were obtained through 

consultation with the Commission’s information 

technology staff. 

81The Commission estimated 2,080 hours by 

assuming that a significant number of SEFs, DCMs, 

DCOs, MSPs, and SDs would dedicate the 

equivalent of at least one full-time employee to 

ensuring compliance with the reporting obligations 

of Regulation 45.3 (2,080 hours = 52 weeks × 5 days 

× 8 hours). The Commission believed that this was 

a reasonable assumption due to the volume of swap 

transactions that would be processed by these 

entities, the varied nature of the information 

required to be reported by Regulation 45.3, and the 

frequency (daily) with which some reports would 

be required to be made. 

82This is the estimated number of non-SD/MSP 

counterparties who would be required to report in 

a given year. Only one counterparty to a swap 

would be required to report, most frequently 

anticipated to be an SD or a MSP. 

83Estimated burden hours were obtained through 

consultation with the Commission’s information 

technology staff. 

keep records of all activities relating to 

swaps. Specifically, the NOPR required 

SDRs, SEFs, DCMs, DCOs, SDs, and 

MSPs to keep complete records of all 

activities relating to their business with 

respect to swaps. The NOPR required 

non-SD/MSP counterparties to keep 

complete records with respect to each 

swap in which they would be a 

counterparty. For SDs and MSPs, the 

Commission determined that the 

proposed recordkeeping requirements 

would not impose any new 

recordkeeping or information collection 

requirements, or other collections of 

information, as requirements for 

maintaining and recording swap 

transaction data by SDs and MSPs 

would be addressed in related 

rulemakings associated with business 

conduct standards for SDs and MSPs. 

For SDRs, SEFs, DCMs, DCOs (an 

estimated 84 entities or persons), which 

were anticipated to have higher levels of 

swap recording activity 79 than non-SD/ 

MSP counterparties, the Commission 

estimates that there may be 

approximately 40 annual burden hours 

per entity, excluding customary and 

usual business practices. And for nonSD/MSP reporting counterparties (an 

estimated 30,000 entities or persons), 

who were anticipated to have lower 

levels of swap recording activity, the 

Commission estimated that there would 

be approximately 10 annual burden 

hours per entity, excluding customary 

and usual business practices. 

Accordingly, 303,360 estimated 

aggregate annual burden hours were 

estimated. 

Under the NOPR’s swap data 

reporting provisions, SEFs, DCMs, 

DCOs, MSPs, SDs, and non-SD/MSP 

counterparties were required to provide 

reports to SDRs regarding swap 

transactions. SEFs and DCMs were 

required to report certain information 

once at the time of swap execution. 

DCOs, SDs, MSPs, and non-SD/MSP 

counterparties were required to report 

certain information once, as well as 

other information on a daily basis. With 

respect to proposed reporting by SDs, 

MSPs, and non-SD/MSP counterparties, 

only one counterparty was required to 

report, typically an SD or an MSP. The 

Commission anticipated that the 

reporting would to a significant extent 

be automatically completed by 

electronic computer systems, and 

calculated burden hours based on the 

annual burden hours necessary to 

oversee and maintain the reporting 

functionality.80 SEFs, DCMs, DCOs, 

MSPs, and SDs (an estimated 369 

entities or persons) were anticipated to 

have high levels of reporting activity, 

with the Commission estimating that the 

average annual burden would be 

approximately 2,080 hours.81 Non-SD/ 

MSP counterparties required to report 

under the proposed rules—estimated at 

1,500 entities 82—were anticipated to 

have lower levels of activity with 

respect to reporting. For such entities, 

the Commission estimated that the 

annual burden would be approximately 

75 hours. In sum, the Commission 

estimated 880,020 aggregate annual 

burden hours for proposed regulation 

45.3. 

Under the NOPR’s unique identifier 

provisions, SDRs, SEFs, DCMs, SDs, and 

MSPs were required to report a unique 

swap identifier to other registered 

entities and swap participants. SEFs and 

DCMs were expected to have higher 

levels of activity than SDRs, SDs, and 

MSPs with respect to unique swap 

identifier reporting. The Commission 

anticipated that the reporting of the 

unique swap identifier would be 

automatically completed by electronic 

computer systems. Accordingly, the 

burden hours estimates in the proposal 

were based on the estimated burden 

hours necessary to oversee and maintain 

the electronic functionality of unique 

swap ID reporting.83 In accord, the 

Commission estimated that SEFs and 

DCMs (an estimated 57 entities or 

persons) would expend approximately 

22 annual burden hours per entity. The 

Commission estimated that SDRs, SDs, 

and MSPs (an estimated 315 entities or 

persons) would expend approximately 6 

annual burden hours per entity. 

Therefore, 3,144 estimated aggregated 

annual burden hours were estimated. 

The NOPR’s unique identifier 

provisions also required SDs, MSPs, and 

non-SD/MSP counterparties (an 

estimated 30,300 entities and persons) 

to report into a confidential database 

their ownership and affiliations 

information (as well as changes to 

ownership and affiliations). The report 

would be made once at the time of the 

first swap reported to an SDR, and 

would be made anytime thereafter that 

the entity’s legal affiliations change. The 

burden hours per report were estimated 

to be approximately two hours per 

entity, excluding customary and usual 

business practices. The number of 

reports required to be made per year 

was estimated to vary between zero and 

four, depending on the number of 

changes an entity would have in its 

legal affiliations in that year. The 

estimated annual burden per entity 

therefore was estimated to vary between 

zero and eight burden hours, with 

aggregate annual burden hours 

estimated to be between 0 and 242,400 

hours. 

3. Comments on Proposed Information 

Collection 

Swap data reporting is required by the 

CEA as amended by Title VII of the 

Dodd-Frank Act. The Commission 

received numerous comments 

supporting the overall goals of swap 

data reporting, including systemic risk 

protection, market integrity, and 

transparency goals. The Commission 

also received general comments and 

suggestions regarding the information 

collections set forth in the NOPR. The 

comments concerned, among other 

things, the type of information that 

should be collected; the entity or 

entities that should be responsible for 

reporting the information; the manner in 

which the data should be required to be 

reported (snapshot or lifecycle method 

of reporting); and the timeframe in 

which such data should be required to 

be reported. The comments received by 

the Commission are set forth in detail 

above in the discussions of each section 

of the final rule as well as the 

discussion below on the consideration 

of the costs and benefits of the final 

rule. 

In response, the Commission 

amended the information collection 

requirements set forth in the NOPR in 

a variety of ways in order to address 

concerns of the commenters and reduce 

the burden of the information 

collections on registered entities and 

counterparties. The Commission 

amended the information collection 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2173 

84These 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 each type of professional using the 

following calculations: 

(1) [(2009 salary + bonus) * (salary growth per 

professional type, 2009–2010)] = Estimated 2010 

total annual compensation. The most recent data 

provided by the SIFMA report describe the 2009 

total compensation (salary + bonus) by professional 

type, the growth in base salary from 2009 to 2010 

for each professional type, and the 2010 base salary 

for each professional type; thus, the Commission 

estimated the 2010 total compensation for each 

professional type, but, in the absence of similarly 

granular data on salary growth or compensation 

from 2010 to 2011 and beyond, did not estimate 

dollar costs beyond 2010. 

(2) [(Estimated 2010 total annual compensation)/ 

(1,800 annual work hours)] = Hourly wage per 

professional type.] 

(3) [Hourly wage) * (Adjustment factor for 

overhead and other benefits, which the Commission 

has estimated to be 1.3)] = Adjusted hourly wage 

per professional type.] 

(4) [(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 final rule represents the total 

cost for each counterparty, reporting counterparty, 

SD, MSP, SEF, DCM, or SDR, as applicable to that 

element of the final rule. 

85Because SDRs, MSPs, SDs, DCOs, and SEFs are 

new entities, estimates were made by the 

Commission: 15 SDRs, 50 MSPs, 250 SDs, 12 DCOs, 

and 40 SEFs. The number of DCMs was estimated 

to be 17 DCMs based on the current (as of October 

18, 2010) number of designated DCMs. 

Additionally, for purposes of the Paperwork 

Reduction Act, the Commission estimates that there 

would be 30,000 non-SD/MSP counterparties who 

would annually be subject to the recordkeeping 

requirements of proposed Regulation 45.1. The 

Commission is revising its estimate of SDs and 

MSPs from a total of 300 in the proposed rule to 

125 for this final rule, and is revising its DCM 

estimate from 17 to 18 to account for the 

designation of a new DCM. 

requirements of the NOPR by, among 

other things, reducing the types of 

information to be collected (e.g., the 

final rule does not require reporting of 

contract intrinsic data, master 

agreements, certain collateral 

information, or certain valuation 

information); streamlining the entity or 

entities responsible for reporting the 

information in order to assign reporting 

responsibilities to the entity or entities 

with the easiest, fastest, and cheapest 

access to the data in question (e.g., the 

final rule does not require non-SD/MSP 

counterparties to report any additional 

swap data for swaps that are both 

executed on a platform and cleared, as 

the SEF/DCM reports all creation data 

and the DCO reports all continuation 

data); providing greater flexibility in the 

manner in which information is to be 

reported (the final rule permits either 

the snapshot or lifecycle method of 

reporting may be used for any asset 

class); and modifying the timeframe in 

which information is to be collected 

(e.g., the final rule requires non-SD/MSP 

counterparties to report valuation data 

for uncleared swaps only on a quarterly 

basis, and provides phasing to all SDs, 

MSPs, and non-SD/MSP counterparties 

with respect to the timeframe in which 

information must be reported). 

The Commission is also clarifying in 

the final rule that non-SD/MSP 

counterparties are permitted to fulfill 

their part 45 recordkeeping 

responsibilities by keeping records in 

paper, rather than electronic, form. The 

final rule also provides that other 

counterparties and registered entities 

are also permitted to keep paper, rather 

than electronic, records, if such records 

were originally created and exclusively 

maintained in paper form. These 

provisions concerning the 

recordkeeping information collection 

provisions are intended to address 

concerns raised by several commenters 

4. Revised Information Collection 

Estimates 

Under the final rules, reporting 

entities and persons will provide 

information under sections 45.2, 45.3, 

45.4, 45.5, 45.6, 45.7, and 45.14 of this 

part. The information provided under 

each regulation is set forth below, 

together with burden estimates that 

were calculated, through research and 

through consultation with the 

Commission’s technology staff, using 

wage rate estimates based on salary 

information for the securities industry 

compiled by the Securities Industry and 

Financial Markets Association 

(‘‘SIFMA’’).84

a. Section 45.2. Under § 45.2, SDRs, 

SEFs, DCMs, DCOs, SDs, MSPs, and 

non-SD/MSP counterparties—which 

presently would include an estimated 

30,210 entities or persons 85—are 

required to keep records of all activities 

relating to swaps. Specifically, § 45.2 

requires SDRs, SEFs, DCMs, DCOs, SDs, 

and MSPs to keep complete records of 

all activities relating to their business 

with respect to swaps. The rule requires 

non-SD/MSP counterparties to keep 

complete records with respect to each 

swap in which they are a counterparty. 

With respect to SDs and MSPs, the 

Commission has determined that § 45.2 

will not impose any new recordkeeping 

or information collection requirements, 

or other collections of information that 

require approval of the Office of 

Management and Budget under the 

Paperwork Reduction Act. The burden 

associated with the requirements for 

maintaining and recording swap 

transaction data by SDs and MSPs are 

also contained in separate rulemakings 

proposed by the Commission 

concerning business conduct standards 

for SDs and MSPs, for which the 

Commission has prepared an 

information collection request for 

review and approval by OMB. 

The Commission believes that some 

percentage of the estimated 30,000 nonSD/MSP counterparties who would be 

subject to the recordkeeping 

requirements of section 45.2 would 

contract with third-party service 

providers to fulfill these requirements, 

and would therefore pay some fee to 

such providers in lieu of incurring the 

Commission’s estimated costs of 

reporting. The identity of such third 

parties, the composition of the 

marketplace for third party services, and 

the costs to third parties to provide 

recordkeeping services given the 

economies of scale and scope they may 

realize in providing those services are 

all presently unknowable. Therefore, the 

Commission does not believe it is 

feasible to quantify the fees charged by 

third parties to non-SD/MSPs at the 

present time, but believes that they will 

likely vary with the volume of records 

to be retained. The remaining non-SD/ 

MSP counterparties would elect to 

perform these functions themselves and 

incur the costs enumerated below. The 

Commission notes that this final rule 

allows non-SD/MSP counterparties to 

retain records in either an electronic or 

paper form, which could facilitate 

recordkeeping for less technologically 

resourced counterparties, and thus 

encourage a greater percentage of nonSD/MSP counterparties to retain records 

themselves. 

For purposes of calculating 

recordkeeping burdens with respect to 

the PRA, the Commission is assuming 

that all 30,000 non-SD/MSP 

counterparties required to keep records 

will incur the cost of doing so 

themselves. The Commission estimates 

that this requirement would impose an 

initial non-recurring burden of 480 

hours per reporting counterparty at a 

cost of $32,820, and investments in 

technological infrastructure of $50,000, 

and a recurring annual burden of 165 

hours per reporting counterparty at a 

cost of $12,125 and a technological 

infrastructure maintenance cost of 

$25,000. This would present an 

aggregate non-recurring burden of 

$2,484,600,000 for all non-SD/MSP 

counterparties, and an aggregate 

recurring annual burden of 

$1,113,750,000 for all non-SD/MSP 

counterparties. 

mstockstill on DSK4VPTVN1PROD with RULES2

2174 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

86For purposes of this Paperwork Reduction Act 

analysis, the Commission estimates that ‘‘high 

activity’’ entities or persons are those who process 

or enter into hundreds or thousands of swaps per 

week that are subject to the jurisdiction of the 

Commission. Low activity users would be those 

who process or enter into substantially fewer than 

the high activity users. 

87The Commission obtained this estimate in 

consultation with the Commission’s information 

technology staff. 

88The estimated burden hours were obtained in 

consultation with the Commission’s information 

technology staff. 

89The Commission notes that DCOs are not 

dicussed in Part 43. The costs to DCOs for 

compliance with this final rule are thus unique to 

this rule, but identical to the costs addressed in Part 

43. 

90This is the estimated number of non-SD/MSP 

counterparties who will be required to report in a 

given year. Only one counterparty to a swap is 

required to report, typically an SD or a MSP as 

determined by § 45.8. Therefore, a non-SD/MSP 

counterparty that is in a swap with an SD or MSP 

counterparty will not be subject to the reporting 

obligations of §§ 45.3 and 45.4. 

With respect to SEFs, DCMs, DCOs, 

SDs, and MSPs (an estimated 195 

entities or persons), which will have 

higher levels of swap recording 

activity 86 than non-SD/MSP 

counterparties, the Commission 

estimates that this requirement would 

impose an initial non-recurring burden 

of 1,560 hours per SEF, DCO, or DCM 

at a cost of $111,917, and investments 

in technological infrastructure of 

$100,000, and a recurring annual 

burden of 700 hours per SEF, DCO, 

DCM, SD, or MSP at a cost of $49,798, 

and a technological infrastructure 

maintenance cost of $50,000. 

The Commission also estimates that 

§ 45.2 will result in retrieval costs for 

registered entities and swap 

counterparties that do not currently 

have the ability to retrieve records 

within the required timeframe. The 

Commission expects that this 

requirement will present costs to 

registered entities and swap 

counterparties in the form of nonrecurring investments in technological 

systems and personnel associated with 

establishing data retrieval processes, 

and recurring expenses associated with 

the actual retrieval of swap data records. 

With respect to non-SD/MSP 

reporting counterparties that do not 

contract with a third party, the 

Commission estimates that this 

requirement would impose an initial 

non-recurring burden of 310 hours per 

reporting counterparty at a cost of 

$25,534 and a recurring annual burden 

of 115 hours per reporting counterparty 

at a cost of $9,510. With respect to SEFs, 

DCOs, DCMs, SDs, and MSPs, the 

Commission estimates that this 

requirement would impose an initial 

non-recurring burden of 350 hours per 

SEF, DCO, DCM, SD, or MSP at a cost 

of $28,745, and a recurring annual 

burden of 175 hours per SEF, DCO, 

DCM, SD, or MSP at a cost of $14,373. 

b. Sections 45.3 and 45.4. Pursuant to 

§§ 45.3 and 45.4, SEFs, DCMs, DCOs, 

MSPs, SDs, and non-SD/MSP 

counterparties are required to provide 

reports to SDRs regarding swap 

transactions. SEFs and DCMs are 

required to report certain information 

(swap creation data) once at the time of 

swap execution. DCOs, SDs, MSPs, and 

non-SD/MSP counterparties are 

required to report certain information 

(swap creation data) once, as well as 

other information (swap continuation 

data) throughout the life of a swap— 

whenever a reportable event or a 

reportable change occurs. With respect 

to reporting by SDs, MSPs, and non-SD/ 

MSP counterparties, only one 

counterparty to a swap is required to 

report information concerning that 

swap, typically an SD or an MSP, as 

determined by § 45.8. 

The Commission anticipates that the 

reporting required by §§ 45.3 and 45.4 

will to a significant extent be 

automatically completed by electronic 

computer systems; the following burden 

hours are calculated based on the 

annual burden hours necessary to 

oversee, maintain, and utilize the 

reporting functionality. SEFs, DCMs, 

DCOs, MSPs, and SDs (an estimated 195 

entities or persons) are anticipated to 

have high levels of reporting activity; 

the Commission estimates that their 

average annual burden may be 

approximately 2,080 hours per SEF, 

DCO, DCM, MSP, or SD.87 The 

Commission estimated 2,080 hours by 

assuming that a significant number of 

SEFs, DCMs, DCOs, MSPs, and SDs will 

dedicate the equivalent of least one fulltime employee to ensuring compliance 

with the reporting obligations of §§ 45.3 

and 45.4 (2,080 hours = 52 weeks × 5 

days × 8 hours). The Commission 

believes that this is a reasonable 

assumption due to the volume of swap 

transactions that will be processed or 

entered into by these entities, the varied 

nature of the information required to be 

reported, and the frequency with which 

information may be required to be 

reported.88 The Commission notes, 

however, that these burdens should not 

be considered additional to the costs of 

compliance with Part 43, because the 

basic data reporting technology, 

processes, and personnel hours and 

expertise necessary to fulfill the 

requirements of Part 43 encompass both 

the data stream necessary for real-time 

public reporting and the creation data 

stream necessary for regulatory 

reporting.89

Non-SD/MSP counterparties who 

would be required to report—which 

presently would include an estimated 

1,000 entities 90—are anticipated to have 

lower levels of activity with respect to 

reporting. Of those 1,000 non-SD/MSPs, 

the Commission believes that a majority, 

estimated now at 75%, or 750 entities, 

will contract with third parties to satisfy 

their reporting obligations. The identity 

of such third parties, the composition of 

the marketplace for third party services, 

and the costs to third parties to provide 

reporting services given the economies 

of scale and scope they may realize in 

providing those services are all 

presently unknowable. Therefore, the 

Commission does not believe it is 

feasibly to quantify the fees charged by 

third parties to non-SD/MSPs at the 

present time, but believes that they will 

likely vary with the volume of reports 

to be made. For those non-SDs/nonMSPs who are required to report swap 

transaction and pricing data to an SDR 

and contract with a third party, the 

Commission estimates that such nonSD/MSP counterparties will incur a 

recurring burden for reporting errors 

and omissions should errors or 

omissions be noticed by the 

counterparty or the SDR; however, the 

Commission has already considered 

these burdens in Part 43, and thus has 

not reapplied them to this rule. The 

costs of reporting to the remaining 250 

non-SD/MSP counterparties that do not 

contract with a third party are addressed 

below. 

The Commission estimates that costs 

applicable to reporting counterparties 

will include maintenance of an internal 

order management system (‘‘OMS’’) and 

the personnel hours needed to maintain 

a compliance program in support of that 

system. With respect to all reporting 

counterparties, including SEFs, DCOs, 

DCMs, SDs, MSPs, and non-SD/MSP 

counterparties that do not contract with 

a third party for reporting, the 

Commission estimates that the 

additional implementation of the OMS 

and the associated compliance and 

support program for the reporting of 

swap continuation data would impose 

an initial non-recurring burden of 350 

hours per reporting counterparty at a 

cost of $28,745, and a recurring annual 

burden of 175 hours per reporting 

counterparty at a cost of $14,373. 

In addition to the burden estimates 

presented here, reporting counterparties 

will incur costs associates with 

establishing and maintaining 

connectivity to an SDR for the purposes 

of effecting reporting. Connectivity costs 

have been accounted for in the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2175 

91The Commission estimated the annual 

recurring technology-related burden of maintaining 

connectivity to an SDR at approximately $100,000 

per reporting entity. The Commission also 

estimated the non-recurring personnel hour burden 

of establishing connectivity to an SDR from the 

perspective of a non-financial end-user 

counterparty with no initial infrastructure or 

personnel training to leverage to be approximately 

172 burden hours at a cost of approximately 

$12,824 for each non-financial end-user. This 

estimate represents the costs of developing 

information capture and transmission systems, 

correspondence testing and operational support. 

The Commission notes that with respect to both 

part 43 and part 45, the cost to a non-financial enduser with no initial infrastructure or personnel 

training represents a high-end estimate, and that the 

costs of establishing and maintaining connectivity 

to an SDR will likely be considerably lower for 

SEFs, DCMs, SDs, and MSPs that likely have greater 

levels of technological sophistication and existing 

personnel training to leverage. 

92This estimate is calculated as follows: 

[($100,000 in hardware- and software-related 

expenses, including necessary back-up and 

redundancy, per SDR connection) × (1 SDR 

connections per reporting counterparty)] = $100,000 

per non-financial end-user. The Commission notes 

that there are circumstances under which a nonfinancial end-user serving as a reporting 

counterparty would be required to incur additional 

costs to maintain connectivity to both the 

Commission and one or more SDRs. Specifically, if 

a reporting counterparty engages in swap 

transactions in multiple asset classes, and an SDR 

exists that accepts data for at least one of those asset 

classes, but no SDR exists that accepts data for one 

or more of these asset classes, the reporting 

counterparty would then incur the costs of 

establishing and maintaining connectivity to both 

an SDR and the Commission. The Commission 

believes that the costs of establishing and 

maintaining connectivity to a second data 

repository would be some percentage of, but not 

equal to, the costs of establishing and maintaining 

connectivity to the first data repository, because the 

reporting counterparty would likely be able to 

leverage existing technology and expertise in the 

process. The Commission does not believe that the 

percentage of the initial costs that this additional 

cost represents is readily quantifiable, because it 

will likely vary with the volume of swaps, and thus 

the volume of data to be reported, that the reporting 

counterparty transacts in the secondary asset 

classes. 

93The estimated burden hours were obtained in 

consultation with the Commission’s information 

technology staff. 

94The estimated burden hours and the estimated 

number of reports were obtained in consultation 

with the Commission’s information technology 

staff. 

information collection prepared by the 

Commission with respect to its 

proposed part 43 rules, in which the 

information collection costs applicable 

to SDRs also have been estimated.91 To 

avoid creating duplicative PRA 

estimates, the Commission is not 

accounting again for those costs with 

respect to this rulemaking. And in the 

event that there is a swap asset class for 

which no SDR accepts swap data, swap 

data for a swap in that class must be 

reported to the Commission. With 

respect to all reporting counterparties, 

including SEFs, DCOs, DCMs, SDs, 

MSPs, and non-SD/MSP reporting 

counterparties that do not contract with 

a third party for reporting, the 

Commission estimates that the annual 

cost to maintain connectivity to the 

Commission would be approximately 

$100,000 for each reporting 

counterparty or registered entity that 

transacts in swap asset classes that are 

not accepted by any registered SDR.92

c. Section 45.5. Pursuant to § 45.5, 

SDRs, SEFs, DCMs, SDs, and MSPs will 

be required to report a unique swap 

identifier to other registered entities and 

swap participants. SEFs and DCMs are 

anticipated to have higher levels of 

activity than SDRs, SDs, and MSPs with 

respect to unique swap identifier 

reporting. The Commission anticipates 

that the reporting of the unique swap 

identifier will be automatically 

completed by electronic computer 

systems. The following burden hours 

are based on the estimated burden hours 

necessary to oversee, maintain, and 

utilize the electronic functionality of 

unique swap ID reporting.93

The Commission estimates that USIrelated costs will be highest for SEFs, 

DCOs, and DCMs, because they will 

have to create the greatest number of 

USIs. The Commission estimates the 

requirement for SEFs, DCOs, and DCMs 

to create and transmit USIs to 

counterparties and other registered 

entities to present a total marginal nonrecurring burden of 1,000 personnel 

hours at a total cost of $81,869 per 

entity, and a recurring annual burden of 

470 personnel hours at a total cost of 

$37,741 per entity. 

For off-facility swaps with an SD or 

MSP reporting counterparty, the 

Commission estimates the requirement 

for SDs and MSPs to create and transmit 

USIs to counterparties and other 

registered entities to present a total 

marginal non-recurring burden of 750 

personnel hours at a cost of $61,402 per 

entity, and a recurring annual burden of 

353 hours of annual personnel hours at 

a total cost of $28,386 per entity. 

For off-facility swaps between nonSD/MSP counterparties, the 

Commission estimates the requirement 

for SDRs to create and transmit USIs to 

counterparties and other registered 

entities to present a total marginal nonrecurring burden of 500 annual 

personnel hours at a cost of $40,935 per 

entity, and a recurring annual burden of 

235 annual personnel hours for a total 

cost of $18,871 per entity. 

d. Section 45.6. Pursuant to § 45.6, 

each SD, MSP, and non-SD/MSP 

counterparty (an estimated 30,125 

entities and persons), will be required to 

report both level one and level two 

reference data concerning itself to a 

public level one reference database and 

a confidential level two reference 

database, respectively. The report will 

be made once at the time of the first 

swap data report to an SDR involving 

the SD, MSP, or non-SD/MSP 

counterparty. A similar report will be 

required whenever an update or 

correction to the previously reported 

reference data is required. For any such 

report, the estimated number of burden 

hours is approximately two hours per 

entity, excluding customary and usual 

business practices. The number of 

reports required to be made per year is 

estimated to vary between zero and four, 

depending on when the SD, MSP or 

non-SD/MSP counterparty is required to 

make either the initial report or a report 

of an update or correction.94 Thus, the 

estimated annual burden per entity 

varies between zero and eight burden 

hours. Therefore, there are between 0 

and 241,000 estimated aggregate annual 

burden hours. 

Additionally, the Commission 

anticipates that an LEI meeting the 

requirement of the final rule will be 

available before the commencement of 

swap data reporting. However, the 

Commission has also considered the 

potential burden that will be imposed 

on SDRs for creating, assigning and 

transmitting substitute identifiers if they 

should be required. The Commission 

estimates the cost to SDRs to create, 

assign and transmit substitute 

identifiers to counterparties and other 

registered entities to present a total 

marginal non-recurring burden of 500 

annual personnel hours at a cost of 

$40,935 and a recurring annual burden 

of 235 annual personnel hours for a total 

cost of $18,871. 

e. Section 45.7. Pursuant to § 45.7, 

each swap subject to the Commission’s 

jurisdiction will need to be identified in 

all recordkeeping and swap data 

reporting by means of a unique product 

identifier and product classification 

system, which shall be designated at a 

later date by the Commission. The 

Commission expects that this will result 

in a one-time retrieval burden for each 

SEF and DCM for each swap product 

traded on its platform, either at the time 

the Commission designates the system 

for currently listed products or at the 

time a product is listed for trading. SDs, 

MSPs, and non-SD/MSP reporting 

counterparties also will be subject to a 

one-time retrieval burden for each swap 

product that they are required to report 

to an SDR or the Commission. As with 

unique swap identifiers, the 

Commission anticipates that the 

reporting of the unique swap identifier 

will be automatically completed by 

mstockstill on DSK4VPTVN1PROD with RULES2

2176 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

95As the U.S. Senate Committee on Banking, 

Housing, and Urban Affairs explained concerning 

the 2008 financial crisis: 

Information on prices and quantities [in ‘‘overthe-counter’’, or ‘‘OTC’’, derivatives contracts] is 

opaque. This can lead to inefficient pricing and risk 

assessment for derivatives users and leave 

regulators ill-informed about risks building up 

throughout the financial system. Lack of 

transparency in the massive OTC market intensified 

systemic fears during the crisis about interrelated 

derivatives exposures from counterparty risk. These 

counterparty risk concerns played an important role 

in freezing up credit markets around the failures of 

Bear Stearns, AIG, and Lehman Brothers. 

S. Rep. No. 111–176, at 30 (2010). More 

specifically with respect to credit default swaps 

(‘‘CDSs’’), the Government Accountability Office 

found that ‘‘comprehensive and consistent data on 

the overall market have not been readily available,’’ 

that ‘‘authoritative information about the actual size 

of the CDS market is generally not available,’’ and 

that regulators currently are unable ‘‘to monitor 

activities across the market.’’ Government 

Accountability Office, ‘‘Systemic Risk: Regulatory 

Oversight and Recent Initiatives to Address Risk 

Posed by Credit Default Swaps,’’ GAO–09–397T 

(March 2009), at 2, 5, 27. 

96See Mark Jickling and Kathleen Ann Ruane, 

Cong. Research Serv., The Dodd-Frank Wall Street 

Reform and Consumer Protection Act: Title VII, 

Derivatives 1 (2010); Financial Regulatory Reform— 

A New Foundation: Rebuilding Financial 

Supervision and Regulation, U.S. Department of the 

Treasury, at 47–48 (June 17, 2009). 

97CEA section 2(a)(13)(G). 

98Regulations governing core principles, 

registration requirements, and duties of SDRs are 

contained in part 49 of this chapter. 

99CEA section 4r(a)(1)(B), added by section 729 

of the Dodd-Frank Act, requires that each swap not 

accepted for clearing by any DCO must be reported 

to a registered SDR or, in the case in which there 

is no SDR that would accept the swap, to the 

Commission. 

electronic computer systems. Until such 

time as a system is designated, however, 

the Commission cannot estimate the 

aggregate annual burden hours 

associated with the retrieval necessary 

to populate the records and reports. The 

Commission therefore will establish a 

burden estimate associated with the 

collection of information resulting from 

§ 45.7 on the designation of a system. 

f. § 45.14. Pursuant to § 45.14, a 

registered SDR is required to develop 

protocols regarding the reporting and 

correction of erroneous information. 

The Commission anticipates that this 

requirement will result in costs to SDRs 

associated with the reporting of both 

creation and continuation data in the 

form of non-recurring investments in 

technological systems and personnel 

during the development of the 

formatting procedure, and recurring 

expenses associated with data 

processing, systems maintenance, and 

personnel hours to format new data. 

However, the burden associated with 

§ 45.14 are contained in the real time 

public reporting rules proposed by the 

Commission, for which the Commission 

has prepared an information collection 

request for review and approval by 

OMB. To avoid duplication of PRA 

burdens, those costs are not being 

accounted for in the information 

collection request associated with this 

rulemaking. 

C. Consideration of Costs and Benefits 

1. Introduction 

The swap markets, which have grown 

exponentially in recent years, are now 

an integral part of the nation’s financial 

system. As the financial crisis of 2008 

demonstrated, the absence of 

transparency in the swap markets can 

pose significant risk to this system.95

The Dodd-Frank Act seeks in part to 

promote the financial stability of the 

United States by improving financial 

system accountability and transparency. 

More specifically, Title VII of the DoddFrank Act directs the Commission to 

oversee the swap markets and to 

develop and promulgate regulations to 

increase swap market transparency and 

thereby reduce the potential for 

counterparty and systemic risk.96

Transaction reporting is a 

fundamental component of the 

legislation’s objective to reduce risk, 

increase transparency, and promote 

market integrity within the financial 

system generally, and the swap market 

in particular. Specifically, the DoddFrank Act requires that ‘‘each swap 

(whether cleared or uncleared) * * * be 

reported to a registered swap data 

repository.’’ 97 The Dodd-Frank Act also 

requires SDRs to collect and maintain 

swap transaction data as prescribed by 

the Commission, and to make such data 

electronically available to regulators.98

CEA section 21(b)(1)(A), added by 

section 728 of the Dodd-Frank Act, 

addresses the content of the swap 

transaction data that registered entities 

and reporting counterparties must 

report to a registered SDR and directs 

the Commission to ‘‘prescribe standards 

that specify the data elements for each 

swap that shall be collected and 

maintained by each registered swap data 

repository.’’ In fulfilling this statutory 

mandate, CEA section 21(b)(1)(B) also 

directs the Commission to ‘‘prescribe 

consistent data element standards 

applicable to registered entities and 

reporting counterparties.’’ In 

promulgating this part 45, the 

Commission implements Congress’s 

mandate that swap transaction and 

pricing data is reported to registered 

SDRs. Part 45 achieves the statutory 

objectives of transparency by, inter alia, 

requiring that market participants report 

swap transaction data to an SDR, 

possibly through intermediaries.99

As discussed in more detail below, 

the Commission anticipates that the 

requirements of part 45 will generate 

several overarching, if presently 

unquantifiable, benefits to swap market 

participants and the general public. 

These include (a) Increased 

transparency; (b) improved regulatory 

understanding of concentrations of risk 

within the market; (c) more effective 

monitoring of risk profiles by regulators 

and by regulated entities themselves 

through the use of unique identifiers; (d) 

improved regulatory oversight, and (e) 

more robust data management systems. 

The Commission believes these 

benefits, made possible by the timely 

reporting of comprehensive swap 

transaction data, consistent data 

standards for recordkeeping, and 

identification of products, entities and 

transactions through unique identifiers, 

will accrue to market participants in a 

number of ways: 

• Increased transparency of derivatives 

markets. 

• Improved risk management: a transfer of 

the costs associated with systemic risk from 

the public to private entities, particularly to 

those that are better positioned to realize 

economies of scale and scope in assuming 

those costs. 

• More robust risk monitoring and 

management capabilities for market 

participants as a result of the systems 

required under part 45. This will improve the 

monitoring of the participant’s current swap 

market position. 

• New tools to process transactions at a 

lower expense per transaction given the 

systems required under part 45. These tools 

will enable participants to handle the same 

or an increased volume of swaps at a lower 

marginal expense. 

• More robust standards for the financial 

services industry, such as utilizing UTC and 

unique identifiers. 

• Swap transaction reporting under the 

final rules provides a means for the 

Commission to gain a better understanding of 

the swap markets—including aggregate 

positions both in specific swap instruments 

and positions taken by individual entities or 

groups—by requiring transaction data for 

currently opaque markets, and then 

aggregating that data in useful ways. For 

example, having such data would help 

Commission staff monitor and analyze the 

swap market in a more comprehensive 

manner. In this way, the final rule would 

support Congress’ mandate that the 

Commission supervise the swap markets; in 

addition, transaction reporting aids the 

Commission in the development of the 

mandated semiannual reports on swap 

trading activity. 

In the NOPR, the Commission 

requested comment on whether a phasein approach should be used for the time 

of reporting of confirmation by non-SD/ 

MSP counterparties. The Commission 

also requested comment on whether 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2177 

100See, e.g., Fisherman’s Doc Co-op., Inc. v. 

Brown, 75 F.3d 164 (4th Cir. 1996); Center for Auto 

Safety v. Peck, 751 F.2d 1336 (DC Cir. 1985) (noting 

that an agency has discretion to weigh factors in 

undertaking cost-benefit analysis). 

there was sufficient infrastructure to 

support lifecycle or alternative 

approaches for data reporting. The 

Commission received a number of 

comments on the implementation of the 

proposed rules that included costbenefit considerations. 

Global Forex commented that the 

phase-in period should take into 

account the work needed for FX market 

participants to establish connectivity to 

the SDR and for the SDR to develop 

unique identifiers and become 

established. Similarly, CME added that 

the compliance date must take into 

account the scope of implementation, 

which could take in its view several 

years. The Electric Coalition 

recommended that the Commission 

clarify its regulatory needs before setting 

forth specific reporting rules. Thomson 

Reuters recommended that the 

Commission implement rules consistent 

with proposals by the European 

Commission in their Markets in 

Financial Instruments Directive 

(MiFID). DTCC recommended a nearly 

year-long phase-in with products with 

the greatest automation being required 

first. ISDA recommended that legal 

entity identifiers and unique product 

identifiers be implemented prior to 

reporting. 

The Electric Coalition presented a 

detailed three-step implementation 

proposal that it stated would reduce 

burdens for commercial energy firms. 

The Electric Coalition recommended 

that reporting be implemented in three 

phases: first for on-facility, cleared 

swaps; second for standardized but offfacility and uncleared swaps; and third 

for bespoke off-facility and uncleared 

swaps. Similarly, Chatham Financial 

presented a detailed implementation 

schedule in four stages by counterparty. 

Under Chatham Financial’s approach, 

DCMs, SEFs and DCOs would be 

required to report in the first stage; 

financial SDs would begin reporting in 

the second stage; non-financial SDs and 

MSPs would commence reporting in the 

third stage; and non-SD/MSP reporting 

counterparties would begin reporting in 

the fourth stage. CDEU agreed with 

Chatham Financial’s approach. 

Dominion Resources recommended a 

phase-in approach for non-SD/MSP 

counterparties. 

As discussed above, the Commission 

agrees with comments recommending 

phasing in reporting by asset class and 

by counterparty type, and has 

determined that the final rule provides 

for such a phase-in approach. The 

Commission anticipates that this 

approach will result in cost reductions 

for reporting counterparties relative to 

an immediate implementation of all of 

the reporting provisions of the rule. In 

particular, as discussed above, the 

phase-in approach adopted in the final 

rule will reduce costs for non-SD/MSP 

reporting counterparties by giving them 

six additional months to prepare for 

reporting. In response to comments, the 

Commission has also set forth a 

mechanism for voluntary supplemental 

reporting in § 45.12. As discussed in 

more detail above, the Commission 

believes § 45.12 may have benefits for 

both data accuracy and business 

processes. 

In the sections that follow, the 

Commission considers the costs and 

benefits of part 45 as required by CEA 

section 15(a). 

a. Background 

Pursuant to CEA section 15(a), before 

promulgating a regulation under the 

CEA the Commission generally must 

consider the costs and benefits of its 

actions in the context of five broad areas 

of market and public concern: (1) 

Protection of market participants and 

the public; (2) efficiency, 

competitiveness, and financial integrity 

of markets; (3) price discovery; (4) 

sound risk management practices; and 

(5) other public interest considerations. 

The Commission, in its discretion, may 

give greater weight to any one of the five 

enumerated factors and may determine 

that, notwithstanding costs, a particular 

rule protects the public interest.100

In the NOPR, the Commission stated 

that the proposed reporting and 

recordkeeping requirements could 

impose significant compliance costs on 

some SDRs, SEFs, DCMs, DCOs, SDs, 

MSPs, and non-SD/MSP counterparties. 

In particular, the Commission noted that 

the proposed recordkeeping and 

reporting requirements could require 

capital expenditures for some such 

entities that could affect their ability to 

compete in the global marketplace 

because of reductions in available 

resources. The Commission solicited 

comment on its consideration of costs 

and benefits and specifically invited 

commenters to submit any data or other 

information that they may have 

quantifying or qualifying the costs and 

benefits of the proposed requirements. 

The Commission also requested 

comments on the overall costs and 

benefits of the proposed rules 

implementing the Dodd-Frank Act. 

In considering the costs and benefits 

of this final rule as well as its other final 

rules implementing the Dodd-Frank Act, 

the Commission has, wherever feasible, 

endeavored to estimate or quantify the 

costs and benefits of the final rules. 

Where this is not feasible, the 

Commission provides a qualitative 

assessment of such costs and benefits. In 

this respect, the Commission notes that 

public comment letters did not provide 

quantitative data regarding the costs and 

benefits associated with the Proposed 

Rules. 

In the following discussion, the 

Commission addresses the costs and 

benefits of the final rule, considers 

comments regarding the costs and 

benefits of the final rule, and 

subsequently considers the five broad 

areas of market and public concern as 

required by section 15(a) of the CEA. 

Moreover, as this rulemaking contains 

numerous reporting and recordkeeping 

requirements, many of the costs of the 

rulemaking are associated with 

collections of information. The 

Commission is obligated to estimate the 

burden of and provide supporting 

statements for any collections of 

information it seeks to establish under 

considerations contained in the PRA, 44 

U.S.C. 3501 et seq., and to seek approval 

of those requirements from the OMB. 

Therefore, the estimated burden for the 

collections of information in this 

rulemaking, as well as the consideration 

of comments thereto, are discussed in 

the PRA section of this rulemaking and 

the information collection request filed 

with OMB as required by that statute. 

Otherwise, the costs and benefits of the 

Commission’s determinations are 

considered in light of the five factors set 

forth in CEA section 15(a). 

In this final rulemaking, the 

Commission is adopting regulations 

mandated by section 21(b) to specify 

‘‘consistent data element standards’’ for 

reporting swaps to registered SDRs. 

b. Cost-Estimation Methodology 

The Commission has chosen to use as 

the reference point for its cost estimates 

a non-SD/MSP counterparty that is not 

a financial entity as defined in CEA 

section (2)(h)(7)(C), and does not have 

the technical capability and other 

infrastructure to comply with the part 

45 requirements—in other words, a new 

market entrant with no prior swap 

market participation or infrastructure. 

However, the Commission expects 

that the actual costs to established 

market participants will often be lower 

than this reference point—perhaps 

significantly so, depending on the type, 

mstockstill on DSK4VPTVN1PROD with RULES2

2178 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

101 ‘‘The submission of information to trade 

repositories is an activity that takes place in many 

OTC markets today and will not unduly burden 

those who must comply with the requirement.’’ CL– 

WMBAA at 6. In contrast, as commenters 

highlighted, the costs of complying with part 43 can 

be expected to be higher for non-financial end-users 

and others currently lacking the resources and 

systems of large financial institutions that transact 

swaps more frequently. See, e.g., CL–COPE. ‘‘Swap 

Dealers have books of business that typically are 

much larger because they encompass a much 

broader universe of types of swaps and because it 

is the core of their regular business * * * of 

necessity, swap dealers have and will continue to 

develop sophisticated and highly complex 

computer systems powered by highly customized 

software to enable them to keep track of and 

manage their books of business. * * * End-users 

simply do not have these systems and capabilities.’’ 

CL–Coalition of Energy End-Users at 4. 

102 If an off-facility swap is accepted for clearing 

after the deadline for PET data reporting by the nonSD/MSP reporting counterparty, the non-SD/MSP 

counterparty is excused from reporting 

confirmation data, which will instead be reported 

by the DCO. 

103 In such cases, PET data must be reported 

within 48 hours after execution during the first year 

of reporting, within 36 business hours after 

execution during the second year of reporting, and 

within 24 business hours after execution thereafter. 

Confirmation data must be reported within 48 hours 

after confirmation during the first year of reporting, 

within 36 business hours after confirmation during 

the second year of reporting, and within 24 

business hours after confirmation thereafter. During 

the existence of the swap, changes to primary 

economic terms must be reported by the end of the 

second business day following the date of the 

change during the first year of reporting, and by the 

end of the first business day following the date of 

the change thereafter; and valuation data is only 

required to be reported on a quarterly basis. 

104See Commission, Swap Data Repositories: 

Registration Standards, Duties and Core Principles: 

Final Rule. 76 FR 54538 (Sep. 1, 2011) at 54572 

(SDR Final Rule). 

flexibility, and scalability of systems 

already in place.101

The Commission recognizes that the 

costs of complying with part 45 are 

largely attributable to the reporting and 

recordkeeping requirements of this rule. 

As discussed above, the Commission 

has determined that the final rule will 

adopt a streamlined reporting regime 

that requires reporting by the registered 

entities or swap counterparties with the 

easiest, fastest, and cheapest data access 

and those most likely to have the 

necessary automated systems. Under 

this reporting regime, reporting 

obligations for non-SD/MSP 

counterparties are entirely eliminated in 

many cases, and are phased in or 

reduced in all other cases. 

Non-SD/MSP counterparties can be 

required to report data only for the 

small minority of swaps in which both 

counterparties are non-SD/MSP 

counterparties. 

Even within this small minority of 

swaps, the non-SD/MSP reporting 

counterparty will have no reporting 

obligations for swaps executed on a SEF 

or DCM and cleared by a DCO, or for offfacility swaps accepted for clearing by a 

DCO within the extended deadline for 

PET data reporting by the non-SD/MSP 

reporting counterparty.102

For swaps executed on a SEF or DCM 

but not cleared, the non-SD/MSP 

reporting counterparty’s reporting 

obligations are limited to reporting 

required swap continuation data during 

the existence of the swap. Here the final 

rule provides reporting deadlines for 

non-SD/MSP reporting counterparties 

that are extended and phased in: a 

change to the primary economic terms 

of the swap must be reported by the end 

of the second business day following the 

date of the change during the first year 

of reporting, and by the end of the first 

business day following the date of the 

change thereafter; and valuation data is 

only required to be reported on a 

quarterly basis. 

A non-SD/MSP counterparty will be 

required to report both swap creation 

data and swap continuation data only 

for off-facility, uncleared swaps between 

non-SD/MSP counterparties; and this 

obligation can apply only if the non-SD/ 

MSP counterparty is an ECP, since CEA 

section 2(e) restricts swap trading by 

non-ECP counterparties to on-facility 

swaps. For the small number of offfacility, uncleared swaps for which a 

non-SD/MSP that is an ECP is the 

reporting counterparty, the final rule 

also provides reporting deadlines that 

are extended and phased in.103

Furthermore, costs for non-SD/MSP 

counterparties that are not a ‘‘financial 

entity’’ as defined in CEA section 

2(h)(7)(C) will be further reduced by the 

fact that the final rule provides that for 

swaps between non-SD/MSP 

counterparties where only one 

counterparty is a financial entity, the 

financial entity will be the reporting 

counterparty. Because financial non-SD/ 

MSP counterparties are more likely than 

non-SD/MSP counterparties that are not 

financial entities to have in place some 

or all of the personnel and technological 

infrastructure necessary to serve as the 

reporting counterparty, and to be able to 

realize economies of scale with respect 

to reporting, placing the burden of 

reporting in this context on the 

counterparty that is a financial entity is 

likely to provide a more cost-effective 

overall reporting process. 

These provisions of the final rule 

either eliminate or substantially reduce 

the cost and burden of reporting for 

non-SD/MSP counterparties. 

To address costs specific to SDRs, the 

Commission has estimated the 

incremental costs SDRs would incur to 

comply with the reporting and 

recordkeeping requirements of this 

rulemaking above the base operating 

costs for SDRs reflected in a separate 

rulemaking.104 These incremental costs 

include the creation and transmission of 

unique identifiers. 

2. General Cost-Benefit Comments 

Received 

This rulemaking has generated an 

extensive record, which is discussed at 

length throughout this notice as it 

relates to the substantive provisions in 

the final rules. A number of commenters 

suggested that implementing and 

complying with the proposed rules 

would incur significant costs. Because 

of its concern about the potential level 

of costs, the Minneapolis Grain 

Exchange (‘‘MGEX’’) requested an 

extensive and realistic cost-benefit 

analysis of each regulation before 

adoption. The Commission also 

received general comments from 

Chatham Financial, Vanguard, ABC, 

EEI, WGCEF, Dominion Resources, 

FHLB, DTCC, the Electric Coalition, and 

CDEU, recommending that the 

Commission consider the costs and 

burdens of the proposed rules on nonregistered, small entities. The Foreign 

Banks, Global Forex, CME, ISDA and 

SIFMA requested that the Commission 

consider the cost implications of the 

proposed regulations on all applicable 

entities and in some instances, 

recommended alternative approaches. 

The Commission has carefully 

considered alternatives suggested by 

commenters, and in a number of 

instances, has adopted alternatives or 

modifications to the proposed rules 

where, in the Commission’s judgment, 

the alternative or modified standard 

accomplishes the same regulatory 

objective in a more cost-effective 

manner. 

In response to the Commission’s 

invitation in the NOPR for comments on 

the overall costs and benefits of the 

proposed rules, Better Markets stated 

that the Commission’s cost-benefit 

analyses in the notices of proposed 

rulemaking may have understated the 

benefits of the proposed rules. Better 

Markets argued that adequate 

assessment of the costs and benefits of 

any single proposed rule or element of 

such a rule would be difficult or 

impossible without considering the 

integrated regulatory system of the 

Dodd-Frank Act as a whole. According 

to Better Markets: 

It is undeniable that the Proposed Rules are 

intended and designed to work as a system. 

Costing-out individual components of the 

Proposed Rules inevitably double counts 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2179 

105CL–Better Markets II, at 3. 

costs which are applicable to multiple 

individual rules. It also prevents the 

consideration of the full range of benefits that 

arise from the system as a whole that 

provides for greater stability, reduces 

systemic risk and protects taxpayers and the 

public treasury from future bailouts.105

Better Markets also stated that an 

accurate cost benefit assessment must 

include the avoided risk of a new 

financial crisis. One measure of this is 

the still accumulating cost of the 2008 

financial crisis. The comment letter 

cited a statement by Andrew G. 

Haldane, Executive Director for 

Financial Stability at the Bank of 

England, who estimated the worldwide 

cost of the crisis in terms of lost output 

at between $60 trillion and $200 trillion, 

depending primarily on the long term 

persistence of the effects. 

Notwithstanding that it must (and 

does) conduct a cost-benefit analysis 

with respect to this rulemaking, the 

Commission agrees with Better Markets 

that the proposed rules should operate 

in a coordinated manner to improve and 

protect financial markets. In that regard, 

the costs and benefits associated with 

this final rule are in some instances not 

readily separable from the costs and 

benefits associated with other 

Commission rulemakings implementing 

the Dodd-Frank Act, most notably those 

governing real-time public reporting of 

swap transaction and pricing data (part 

43) and registration and regulation of 

swap data repositories (part 49). Swap 

data recordkeeping and reporting, will, 

for instance, provide information to 

enable regulatory agencies to more fully 

understand the mechanisms and risks of 

the swap market. Access to previously 

unavailable data will allow these 

agencies to better model and analyze 

swap markets to mitigate systemic risk, 

detect potential market manipulation, 

and expand their capabilities in efficient 

market oversight. Acknowledging this, 

the Commission must conduct a costbenefit analysis with respect to specific 

rulemaking. 

In a broad sense, the costs presented 

to market participants by the 

requirements of this rule represent the 

internalization by financial market 

participants of a negative externality— 

the costs generated by systemically risky 

behavior on the part of market 

participants, which had previously been 

internalized by the taxpaying public in 

the form of government bailouts of 

failed financial firms that were brought 

down in part by this risky behavior. 

In analyzing the costs and benefits of 

this rulemaking, it is important to note 

that many elements of the rule are 

mandated by Dodd-Frank Act and are 

thus outside the Commission’s 

discretion. For example: 

• Information about all swaps, cleared or 

uncleared, must be reported to a registered 

SDR (or, in the event that a swap is not is 

not accepted by an SDR, to the Commission). 

• The Commission must prescribe 

consistent data element standards for SDRs, 

registered entities, and reporting 

counterparties. 

• The Commission must determine the 

hierarchy of reporting responsibility for 

uncleared swaps. 

3. Recordkeeping 

As discussed throughout this release, 

the CEA as amended by the Dodd-Frank 

Act establishes recordkeeping 

requirements for registered entities. 

a. Benefits of Recordkeeping 

The recordkeeping requirements of 

part 45 will allow the Commission and 

other regulatory agencies to develop an 

accurate picture of swap markets in a 

timely fashion. This serves the public 

interest. From an enforcement 

perspective, the recordkeeping 

requirements of part 45 enable 

investigators and attorneys to 

reconstruct a comprehensive, sequenced 

record of swap transactions that will be 

an essential tool in ensuring the fairness 

of swap markets. The recordkeeping 

requirements of part 45 will also 

facilitate examinations and 

investigations by the Commission and 

other regulators to ensure that registered 

entities are in compliance with core 

principles. 

The requirement to retain records for 

the life of the swap plus five years 

provides be of substantial benefit to the 

economists employed by the 

Commission and to other regulators. In 

general, economic analysis benefits from 

a broader body of data; in particular, 

time-series analysis (a fundamental 

element of economic and statistical 

analysis in which the value of a variable 

is charted over time) may benefit from 

a body of data that represents a longer 

time horizon. 

b. Costs of Recordkeeping 

The Commission received several 

comments related to the costs of swap 

recordkeeping. With respect to 

recordkeeping by non-SD/MSP 

counterparties, the Electric Coalition 

recommended that the Commission 

reduce recordkeeping requirements to 

the minimum necessary and phase 

requirements relative to the cost of 

implementation. Shell Energy requested 

clarification that non-SD/MSP 

counterparties are not subject to the 

recordkeeping requirements. WGCEF 

requested that the Commission consider 

participants who transact in nonfinancial markets when adopting its 

recordkeeping proposals, and further 

evaluate the actual costs, availability of 

technology, and ability of market 

participants to deploy the technology 

required to comply with such 

requirements. 

With respect to record retention, AGA 

contended that requiring records to be 

kept through the life of a swap plus five 

years would impose substantive costs 

on end-users such as gas utilities. AGA 

also stated that the proposed three-day 

accessibility requirement effectively 

would require an off-site storage 

provider, which if available at all, could 

be cost-prohibitive. Reasoning that 

transactions between non-SD/MSP 

counterparties would represent only a 

small portion of regulated activity, AGA 

recommended that the Commission 

reduce its recordkeeping requirements 

for non-SD/MSPs so that they would 

only have to maintain such records for 

three years following expiration of the 

swap. CIEBA and WGCEF supported the 

proposed five-year post-expiration 

retention period, but also recommended 

not extending it further. ISDA and 

SIFMA requested clarification that the 

phrase ‘‘via real-time electronic access’’ 

does not mean ‘‘instantly accessible’’ 

which it characterized as impracticable 

given the volume of day to day 

reporting. 

As discussed above, the Commission 

has determined that the final rule 

requires SEFS, DCMs, DCOs, SDs, and 

MSPs to keep full, complete, and 

systematic records, together with all 

pertinent data and memoranda, of all 

activities relating to the business of such 

entities or persons with respect to 

swaps. Such records must be kept in 

electronic rather than paper form unless 

they are originally created and 

exclusively maintained in paper form. 

The final rule limits the parallel 

requirement for non-SD/MSP 

counterparties to full, complete, and 

systematic records, together with all 

pertinent data and memoranda, with 

respect to each swap in which they are 

a counterparty. In response to 

comments, the Commission has 

determined that non-SD/MSP 

counterparties may keep records in 

either electronic or paper form. 

With respect to record retention, the 

final rule provides that all records 

required to be kept by SEFS, DCMs, 

DCOs, SDs, and MSPs must be kept with 

respect to each swap throughout the life 

of the swap and for at least five years 

following final termination of the swap, 

or for at least ten years following the 

date of creation of the swap, whichever 

is greater. Non-SD/MSP counterparties 

mstockstill on DSK4VPTVN1PROD with RULES2

2180 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

must keep required records throughout 

the existence of the swap and for five 

years following final termination of the 

swap. 

With respect to record retrieval, the 

final rule provides that required records 

maintained by SEFs, DCMs, DCOs, SDs, 

and MSPs must be readily accessible by 

the registered entity in question via real 

time electronic access throughout the 

life of the swap and for two years 

following the final termination of the 

swap, and must be retrievable within 

three business days throughout the 

remainder of the required retention 

period. Record retrieval requirements 

are lower in the case of non-SD/MSP 

counterparties: in response to 

comments, the Commission has 

determined that non-SD/MSP 

counterparties need only be able to 

retrieve records within five business 

days throughout the required retention 

period. 

As discussed above, the Commission 

has determined that the compliance 

date for non-SD/MSP counterparties 

will be six months after the compliance 

date for other registered entities and 

counterparties. The Commission has 

determined that compliance with the 

requirement to begin recordkeeping 

should not be further phased in for nonSD/MSP counterparties. As noted, the 

final rule provides lesser recordkeeping 

requirements and lesser retrieval 

requirements for non-SD/MSP 

counterparties, in order to reduce 

recordkeeping costs and burdens for 

them. The Commission believes that 

delaying the requirement to comply 

with recordkeeping requirements could 

interfere with the ability of the 

Commission and other regulators to 

carry out their oversight and 

enforcement responsibilities. As noted 

above, the Commission’s experience 

with recordkeeping requirements in the 

context of futures suggests that all 

market participants do retain records, 

and that such recordkeeping is essential 

for effective oversight and prosecution 

of violations. 

The Commission anticipates that the 

recordkeeping requirements in § 45.2 

will present additional costs to 

registered entities and swap 

counterparties that currently do not 

retain swap records for the required 

period of time. Costs for recordkeeping 

costs will include non-recurring 

investments in technological systems 

and personnel associated with 

establishing data capture and storage 

systems, and recurring expenses 

associated with personnel, data storage 

and maintenance of data storage 

systems. The Commission has not 

identified any quantifiable costs of 

recordkeeping that are not associated 

with an information collection subject 

to the PRA. Quantifiable costs 

associated with the same are reflected in 

the PRA. The Commission believes that 

this cost will be substantially reduced or 

effectively eliminated for registered 

entities and swap counterparties that 

already engage in the recordkeeping as 

required by the final rule. 

The Commission anticipates that the 

retrieval requirements set forth in part 

45.2 will result in additional costs to 

registered entities and swap 

counterparties that do not currently 

have the ability to retrieve records 

within the required timeframe. The 

Commission expects that this 

requirement will present costs to 

registered entities and swap 

counterparties in the form of nonrecurring investments in technological 

systems and personnel associated with 

establishing data retrieval processes, 

and recurring expenses associated with 

the actual retrieval of swap data records. 

Quantifiable costs associated with the 

same are reflected in the PRA. The 

Commission believes that these costs 

will be substantially reduced or 

effectively eliminated for registered 

entities and swap counterparties with 

an existing infrastructure capable of 

record retrieval within the timeframe set 

forth in this requirement. 

The Commission also believes that its 

determination to allow non-SD/MSP 

counterparties to keep records in either 

electronic or paper form will generally 

reduce the cost and burden of 

recordkeeping for such counterparties. 

While many non-SD/MSP 

counterparties may choose to keep 

records in electronic form, some such 

counterparties that currently do not 

have electronic recordkeeping systems 

may prefer, as suggested by comments, 

to avoid the cost of acquiring such 

systems by continuing to maintain 

paper records. The Commission believes 

that the final rule provision lengthening 

the record retrieval period for non-SD/ 

MSP counterparties to five business 

days will give such counterparties 

adequate time to retrieve such paper 

records in the event that the records are 

requested by the Commission or another 

regulator in the course of an 

investigation. The Commission 

generally believes that the pre-DoddFrank rationale for requiring 

Commission registrants to keep all 

records relating to their business 

similarly applies to swaps by registered 

entities and swap counterparties. The 

Commission requires these records to 

perform its regulatory function. 

Retaining readily accessible records may 

also improve the risk management 

practices of complying entities that wish 

to consult or analyze swap transactions 

as part of their proprietary risk 

management strategies. 

c. Recordkeeping Requirements in Light 

of CEA Section 15(a) 

The Commission has evaluated the 

benefits of the recordkeeping provisions 

of § 45.2 in light of the specific 

considerations identified in section 

15(a) of the CEA as follows: 

Protection of market participants and 

the public. As discussed above, the 

Commission has endeavored to limit the 

costs attributable to discretionary 

implementation decisions to the 

maximum degree consistent with 

statutory requirements and their 

intended benefits. The Commission has 

endeavored to match the costs of the 

post-implementation marketplace with 

the sizes, levels of sophistication, and 

levels of systemic importance of the 

affected participants, so that the 

associated benefits may be realized by 

the public. 

With respect to recordkeeping, the 

Commission believes the benefits 

include the protection of market 

participants and the public. The 

Commission believes that the 

recordkeeping requirements in the final 

rule will enable the Commission and 

other regulatory agencies to fulfill their 

oversight and enforcement 

responsibilities. The record retention 

periods in the final rule are consistent 

with both the Commission’s existing 

retention requirement in the context of 

futures, pursuant to Commission 

Regulation 1.31, and with applicable 

statutes of limitation. Such record 

retention will give the Commission 

ready access to data essential to its 

mission to protect market participants 

and the public from violations of the 

CEA and Commission regulations. The 

build-up of systemic risk in the largely 

opaque swap market played a 

significant role in the financial crisis of 

2007–2008; accordingly, the 

Commission believes that the 

introduction of transparency to these 

markets will be critical to regulators’ 

efforts to inform and protect market 

participants and the public in the 

future. 

Efficiency, competiveness, and 

financial integrity. As discussed above, 

the Commission has endeavored to limit 

the costs attributable to discretionary 

implementation decisions to the 

maximum degree consistent with 

statutory requirements and their 

intended benefits. The Commission has 

endeavored to match the costs of the 

post-implementation marketplace with 

the sizes, levels of sophistication, and 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2181 

106Mark Jickling and Kathleen Ann Ruane, Cong. 

Research Serv., The Dodd-Frank Wall Street Reform 

and Consumer Protection Act: Title VII, Derivatives 

1 (2010). 

levels of systemic importance of the 

affected participants, so that the 

associated benefits may be realized by 

the public. 

The Commission believes that the 

recordkeeping requirements provided in 

the final rule will serve to protect the 

financial integrity of swap markets, 

through increased transparency. This 

transparency will provide the 

Commission and other regulators 

enhanced enforcement abilities, aiding 

the prosecution and deterrence of 

market abuses. The Commission 

acknowledges the costs associated with 

the recordkeeping requirement 

(discussed above), and has attempted to 

minimize costs to the extent consistent 

with fulfillment of the purposes of the 

Dodd-Frank Act. The final rule adopts 

the NOPR provision for lesser 

recordkeeping requirements for non-SD/ 

MSP counterparties. While other 

registered entities and counterparties 

must keep records of all activities 

relating to their businesses with respect 

to swaps, non-SD/MSP counterparties 

are only required to keep records with 

respect to each swap in which they are 

a counterparty. Recordkeeping by all 

swap counterparties, including non-SD/ 

MSP counterparties, is essential to the 

Commission’s enforcement and market 

supervision functions. The Commission 

also notes that current lapses in 

recordkeeping by institutions may 

generate implicit integrity costs to 

financial transactions and the wider 

public; the final rule attempts to 

mitigate these current costs through 

various recordkeeping requirements 

(including universal identifiers), aiding 

financial integrity. 

The Commission believes that, by 

improving the integrity of the U.S. swap 

markets in the manner described above, 

this final rule may make participation in 

the U.S. swap markets more appealing 

to entities that currently do not 

participate, and thus could enhance 

demand for access to the U.S. swap 

market and its participants both 

domestically and internationally. This 

potential increase in swap market 

participation may improve the 

competitiveness of the swap 

marketplace as more parties demand 

sources of risk transference. 

Furthermore, the Commission does 

not anticipate that the recordkeeping 

requirements of this final rule present 

any costs that would impede the 

efficiency of swap markets. Required 

recordkeeping may aid internal audits 

and dispute resolution. Electronic 

recordkeeping, which will aid required 

electronic reporting, may improve 

efficiency and reduce initiation and 

maintenance costs over the long run. 

Price discovery. The Commission does 

not believe that this requirement has a 

material effect on the price discovery 

process. 

Sound risk management practices. 

The Commission believes that the final 

rule recordkeeping requirements may 

serve to improve the soundness of the 

risk management practices of market 

participants. The Commission is 

essentially requiring the maintenance of 

accurate records in a manner such that 

records are readily available for 

reproduction to regulators, but the 

Commission anticipates an ancillary 

risk management benefit. That is, 

market participants will now have 

access to a highly organized and 

streamlined internal records system 

when analyzing or otherwise developing 

their risk management practices. The 

Commission does not believe that the 

costs associated with its discretionary 

implementation decisions are of a 

magnitude to impede sound risk 

management. Moreover, the cost of 

implementation of the recordkeeping 

rule may be partially compensated by 

error avoidance and the mitigation of 

internal risk. 

Other public interest considerations. 

As discussed throughout the preamble, 

the Commission believes that the greater 

market transparency, enhanced market 

monitoring, and increased systemic risk 

mitigation that will be enabled by the 

swap recordkeeping required by the 

final rule are in the public interest. 

4. Swap Data Reporting 

a. Benefits of Swap Data Reporting 

The Commission anticipates that the 

part 45 reporting requirements will 

generate several overarching, if 

presently unquantifiable, benefits to 

swap market participants and the 

general public. These include(i) 

Improved risk management; (ii) a 

transfer of the costs associated with 

systemic risk from the public to private 

entities, particularly to those that are 

better positioned to realize economies of 

scale and scope in assuming those costs; 

and (iii) improved regulatory oversight. 

The Commission believes these 

benefits, made possible by the timely 

reporting of comprehensive swap 

transaction data, will accrue to market 

participants in a number of ways: 

• More robust risk monitoring and 

management capabilities for market 

participants as a result of the systems 

required under part 45. This will improve the 

monitoring of the participant’s current swap 

market position. 

• New tools to process transactions at a 

lower expense per transaction given the 

systems required under part 45. These tools 

will enable participants to handle the same 

or an increased volume of swaps at a lower 

marginal expense both at trade inception and 

during its life. 

• More robust standards for the financial 

services industry, such as utilizing UTC and 

unique identifiers for products and legal 

entities. 

Transaction reporting under part 45 

also benefits the general public by 

supporting the Commission’s 

supervision of the swap market, as well 

as the broader supervisory 

responsibilities of U.S. financial 

regulators to protect against financial 

market systemic risk. The reporting and 

recordkeeping requirements provide a 

means for the Commission to gain a 

better understanding of the swap 

market—including the pricing patterns 

of certain commodities. As bespoke 

swaps move onto more standardized, 

and in some cases, electronic platforms, 

more numerous trade participants will 

likely enter these markets. Timely, 

comprehensive, and standardized 

regulatory reporting is especially crucial 

for successful oversight of these 

marketplaces. 

Transparency facilitated by 

transaction reporting to SDRs also will 

help 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 

derivatives 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.’’ 106 The ability to monitor and 

quantify these levels of risk assumption 

provides one additional line of defense 

against another occurrence of crippling 

financial costs. 

Pursuant to this final rule, reporting 

counterparties will be required to report 

allocation information when a swap is 

transacted by an agent on behalf of 

clients. The Commission believes that 

this requirement will enable regulators 

to better understand swaps in the 

context of allocation, and to more 

accurately assess their associated 

systemic risk, by enabling regulators to 

see the full record of each such swap all 

the way back to both the original 

transaction and the actual 

counterparties. 

The Commission believes requiring 

all data to be reported in the same SDR 

following the initial report from a SEF 

or DCM would reduce data 

fragmentation and improve regulatory 

mstockstill on DSK4VPTVN1PROD with RULES2

2182 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

107The phase-in and implementation of these 

requirements may differ. 

108As noted above, most data reporting pursuant 

to Part 45 will be performed by SDs, MSPs, SEFs, 

DCMs, or DCOs. However, when estimating costs to 

market participants for this final rule, the 

Commission anticipates that the technological 

infrastructure and personnel costs will likely be 

highest for an unsophisticated non-SD/MSP 

reporting counterparty that is not a financial entity, 

has no existing infrastructure for reporting, and 

does not contract with a third-party service 

provider to facilitate reporting. Accordingly the 

Commission considered costs from this perspective. 

The Commission anticipates that these costs will be 

lower, and in many cases significantly reduced or 

completely eliminated, for larger or more 

sophisticated entities that already have 

technological and personnel systems developed and 

operational. 

109Should a reporting entity elect to transmit 

these streams separately, its cost to transmit data to 

an SDR would likely increase; however, it is for 

precisely this reason that the Commission 

anticipates that reporting entities would, in fact, 

eliminate duplicative reporting of data streams for 

a given swap by transmitting both streams 

simultaneously. 

110For off-facility swaps that are not accepted for 

clearing within the applicable deadline for the 

reporting counterparty to report PET data, the 

reporting counterparty can combine required PET 

data reporting and required real time reporting in 

a single report, but would still have to report 

confirmation data separately if it is not reported 

along with PET data. Reporting counterparties can 

avoid the need for a separate confirmation data 

report by confirming their swaps within the 

applicable deadline for PET data reporting. 

oversight. The costs and benefits of the 

Commission’s approach are addressed 

in more detail below in the discussion 

of the section 15(a) factors. The 

Commission is harmonizing its initial 

PET data reporting with the part 43 realtime public reporting requirements to 

the extent possible and setting forth 

identical timeframes so that 

counterparties and registered entities 

may be able to, in most cases, submit 

data for both requirements in a single 

report.107

The Commission notes that there is a 

cost reduction associated with the 

improved harmonization between the 

approach to PET data reporting of this 

final rule and the part 43 real-time 

public reporting requirements that were 

made by the Commission between the 

issuance of the NOPR and this final 

rule. These requirements have been 

harmonized to the extent possible, 

including the imposition of identical 

timeframes, so that counterparties and 

registered entities will be able to make 

one initial report. The Commission 

anticipates that this harmonization will 

result in a significant reduction in cost 

to counterparties and registered entities. 

The Commission believes that part 45 

will yield significant benefits to the 

public and swap market participants. As 

discussed more fully below, however, 

the Commission is mindful of the costs 

of its rules and has carefully considered 

comments concerning the potential 

costs of its proposed recordkeeping and 

reporting rules. To the extent possible 

and consistent with the statutory and 

regulatory objectives of this rulemaking, 

the Commission has adopted costmitigating alternatives presented by 

commenters. In the following 

paragraphs, the Commission first 

estimates the costs of reporting and next 

considers those costs and the 

aforementioned benefits in light of the 

five public interest factors of CEA 

section 15(a). 

b. Costs of Swap Data Reporting 

As discussed in detail above, the 

Commission received a number of 

comments supporting the proposed 

reporting rules, and others suggesting 

alternatives or refinements. Commenters 

did not provide any quantitative data 

regarding the costs to registered entities, 

reporting counterparties and the public. 

The Commission addressed those 

comments above and, where deemed 

appropriate, the final rules reflect 

commenters’ suggestions. 

Costs of Reporting Requirements 

The Commission anticipates that the 

direct, quantifiable costs of complying 

with the requirement for SEFs, DCMs, 

DCOs, and reporting counterparties to 

report creation data will take the forms 

of (i) nonrecurring expenditures in 

technology and personnel; and (ii) 

recurring expenses associated with 

systems maintenance, support, and 

compliance. Each of these quantifiable 

costs of swap data reporting is 

associated with an information 

collection subject to the PRA. These 

costs therefore have been accounted for 

in the information collection requests 

filed with OMB as required by the PRA. 

The Commission estimates that the 

initial costs for its reference point, a 

non-SD/MSP reporting counterparty 

that is not a ‘‘financial entity’’ as 

defined in CEA section 2(h)(7)(C), and 

does not contract with a third party to 

report swap data, will likely consist of 

(i) Developing an internal OMS capable 

of capturing all relevant swap data in 

real-time; (ii) establishing connectivity 

with an SDR that accepts data; (iii) 

developing written policies and 

procedures to ensure compliance with 

part 45; and (iv) compliance with error 

correction procedures.108

The Commission anticipates, 

however, that the costs of creation data 

reporting for the reporting entities and 

counterparties listed above are already 

largely addressed by the costs of 

reporting the real-time data stream for 

compliance with part 43. Accordingly, 

the costs of creation data reporting 

presented by part 45 should not be 

considered incremental to the costs of 

capturing and transmitting the real-time 

data stream pursuant to part 43 except 

in certain instances, which are 

addressed below. In general, the 

Commission estimates that the 

processes necessary for capturing and 

transmitting the real-time data stream 

pursuant to part 43 will encompass the 

costs of capturing and transmitting 

creation data pursuant to part 45. The 

Commission anticipates that a reporting 

entity or counterparty will use its OMS 

to capture all of the information that 

pertains to a given swap. This body of 

information will be used to produce the 

fields necessary for compliance with 

both part 43 and part 45. Therefore, the 

Commission believes that, in general, 

the costs of developing and maintaining 

an OMS necessary for compliance with 

part 45 should not be considered to be 

incremental to the costs of developing 

and maintaining an OMS for 

compliance with part 43. 

Similarly, under both part 43 and part 

45 the reporting entity will be required 

to establish and maintain connectivity 

with an SDR for the transmission of 

data. The Commission anticipates that, 

in order to streamline the data reporting 

process, reporting entities will transmit 

both the real-time data stream and the 

regulatory data stream simultaneously 

to the same SDR via the same 

connection.109 The Commission has 

aligned the reporting deadlines 

provided in part 45 and the public 

dissemination delays set forth in part 43 

in order to reduce costs and burdens by 

permitting registered entities and 

reporting counterparties to fulfill their 

swap data reporting obligations with 

respect to both part 45 and part 43 by 

transmitting a single report.110 Given 

simultaneous transmission of the data 

streams necessary for compliance with 

parts 43 and 45, the Commission 

believes that, in general, the costs of 

establishing and maintaining 

connectivity to an SDR in order to 

comply with part 45 should not be 

considered to be additional to the costs 

of establishing and maintaining 

connectivity to an SDR in order to 

comply with part 43. 

The Commission anticipates that the 

same logic may be applied to the costs 

of developing written compliance 

policies and procedures, as well as the 

costs of developing and implementing 

error correction procedures. Because the 

data streams necessary for compliance 

with parts 43 and 45 for a given swap 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2183 

111The costs to a DCO will be similar to those of 

a SEF or DCM in this instance because the initial 

report to the Commission by the registered entity 

will include the same data fields reported in the 

same timeframe; thus, the non-recurring and 

recurring costs to a DCO of processing and reporting 

those data should be similar, if not identical, to 

those incurred by a SEF or DCM. 

originate from the same set of 

information, the Commission 

anticipates that reporting entities will 

likely consider the management of both 

streams when developing compliance 

and error correction procedures. The 

Commission therefore believes that in 

general, the costs of developing and 

implementing compliance and error 

correction procedures presented by part 

45 should not be considered additional 

to the costs of developing and 

implementing compliance and error 

correction procedures presented by part 

43. 

The Commission acknowledges that 

part 43 does not address the costs of 

reporting by DCOs. The Commission 

estimates that the incremental costs to 

DCOs of compliance with this final rule 

would be comparable to the costs either 

(a) a SEF or DCM, if the DCO makes the 

creation data report for an off-facility, 

cleared swap,111 or (b) an SDR, if the 

DCO registers as such. In the event that 

a DCO registers as an SDR, it will also 

incur the costs of registering as such 

pursuant to part 49. 

Costs of Reporting Timelines 

The reporting timelines and 

requirements established in this part 

were designed to accommodate the 

needs of reporting counterparties and 

registered entities of varying size and 

sophistication. The Commission 

believes that these reporting timelines 

and requirements have been tailored 

appropriately to the sizes and levels of 

technological and personnel 

sophistication of the affected entities, 

and will not impose any additional 

costs to reporting counterparties or 

registered entities above the costs 

associated with their reporting 

obligations. Costs associated with 

reporting obligations are discussed 

below in the sections addressing the 

costs of creation data reporting and 

continuation data reporting. 

Several commenters addressed the 

timeframes allotted for reporting 

creation and continuation data. The 

AGA requested at least 24 hours for PET 

data reports by non-SD/MSP reporting 

counterparties, both initially and when 

required to supplement an incomplete 

SEF or DCM report. AGA also requested 

more than the 24 hour timeframe 

allotted for PET data reporting for swaps 

that are neither electronically executed 

nor verified, because in certain 

instances the reports could be required 

outside normal business hours, which 

would increase reporting costs. 

Similarly, ABC asked the Commission 

to clarify that the 24 hour timeframe did 

not include non-business days, such as 

a national or state holiday or a national 

or state period of emergency. 

MFA commented generally that it 

believed that the policy benefits of 

providing swap data within minutes of 

execution do not outweigh the costs in 

terms of the high likelihood of errors, or 

the infrastructure costs to establish a 

mechanism to report swaps information 

in these short timeframes. Specifically, 

MFA recommended that the 

Commission define ‘‘execution’’ as 

being coterminous with ‘‘confirmation’’ 

for on-facility swaps. It also urged that, 

for swaps not executed or confirmed 

electronically, the 24-hour timeframe in 

the NOPR should commence following 

manual confirmation. Similarly, COPE, 

EEI, and IECA commented that the 24 

hour timeframe was too short for nonSD/MSP counterparties. Specifically, 

IECA recommended weekly reports for 

all required creation data and weekly or 

biweekly for continuation data. 

Chatham Financial and CDEU 

recommended a timeline of the next 

business day following execution for 

electronically executed non-SD/MSP 

reportable swaps and second business 

day following execution for nonelectronically executed and confirmed 

non-SD/MSP reportable swaps. 

The Electric Coalition recommended 

that non-SD/MSP reporting 

counterparties be required to report no 

more than quarterly, and generally 

commented that the timelines were too 

short for non-financial entities. 

Similarly, CDEU commented that, for 

valuation data (a subset of continuation 

data reporting), non-SD/MSP end-users 

should not be required no more 

frequently than they are required to 

reconcile their portfolios. 

As discussed above, after considering 

these comments, the Commission has 

determined that the final rule will adopt 

a streamlined reporting regime that 

requires reporting by the registered 

entities or swap counterparties with the 

easiest, fastest, and cheapest data access 

and those most likely to have the 

necessary automated systems. 

Under this reporting regime, in the 

case of swaps executed on a SEF or 

DCM and cleared on a DCO, and in the 

case of off-facility swaps accepted for 

clearing by a DCO within the deadlines 

for reporting counterparties to report 

PET data, reporting obligations for nonSD/MSP reporting counterparties are 

entirely eliminated, and the only 

reporting obligation for SD or MSP 

reporting counterparties is the 

requirement to report valuation data 

during the existence of the swap. 

For on-facility swaps that are not 

cleared, reporting counterparties must 

report only required swap continuation 

data, including reports of changes to 

primary economic terms of the swap 

made after occurrence of such a change, 

and reports of valuation data. As noted 

above, the deadlines for such reports by 

non-SD/MSP reporting counterparties 

have been substantially extended. 

For off-facility swaps not accepted for 

clearing within the applicable 

counterparty reporting deadline, but 

eventually cleared, SD or MSP reporting 

counterparties are required to report 

only PET data and valuation data, and 

non-SD/MSP reporting counterparties 

are required to report only PET data. 

A non-SD/MSP counterparty will be 

required to report both swap creation 

data and swap continuation data only 

for off-facility, uncleared swaps between 

non-SD/MSP counterparties; and this 

obligation can apply only if the non-SD/ 

MSP counterparty is an ECP, since CEA 

section 2(e) restricts swap trading by 

non-ECP counterparties to on-facility 

swaps. For the extremely small number 

of off-facility, uncleared swaps for 

which a non-SD/MSP that is an ECP is 

the reporting counterparty, the final rule 

also provides reporting deadlines that 

are extended and phased in. In such 

cases, PET data must be reported by the 

non-SD/MSP reporting counterparty 

within 48 hours after execution during 

the first year of reporting, within 36 

business hours after execution during 

the second year of reporting, and within 

24 business hours after execution 

thereafter. Confirmation data must be 

reported within 48 hours after 

confirmation during the first year of 

reporting, within 36 business hours after 

confirmation during the second year of 

reporting, and within 24 business hours 

after confirmation thereafter. During the 

existence of the swap, changes to 

primary economic terms must be 

reported by the end of the second 

business day following the date of the 

change during the first year of reporting, 

and by the end of the first business day 

following the date of the change 

thereafter; and valuation data is only 

required to be reported on a quarterly 

basis. 

Finally, for off-facility, uncleared 

swaps, SD or MSP reporting 

counterparties must report both 

required swap creation data and 

required swap confirmation data. 

However, the reporting timeframes for 

these reports have been coordinated 

with the dissemination delays for real 

mstockstill on DSK4VPTVN1PROD with RULES2

2184 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

112The phase-in and implementation of these 

requirements may differ. 

113Should a DCO register as an SDR, 

counterparties that transacted through the DCO 

previously would have already established 

connectivity for processing those transactions, and 

would thus not have to incur new connectivity 

costs once the DCO began functioning as an SDR. 

time reporting, in order to permit 

counterparties to fulfill both real time 

and regulatory reporting obligations by 

making a single creation data report.112

Confirmation data reporting deadlines 

in this context have also been extended 

to 24 business hours in cases where 

confirmation occurs manually rather 

than through use of automated systems, 

due to the presence of a non-SD/MSP 

counterparty that lacks such systems. 

These provisions of the final rule 

either eliminate or substantially reduce 

the costs and burdens of swap data 

reporting for all reporting 

counterparties, and particularly for nonSD/MSP reporting counterparties, who 

are those least likely to have existing 

technological and personnel 

infrastructure for swap data reporting. 

Costs of Reporting Cleared Swaps 

The Commission notes that the final 

rule swap data reporting requirements 

could present costs to reporting 

counterparties and registered entities to 

the extent that a SEF, DCM, or reporting 

counterparty reports regulatory data to 

an SDR with which it does not have a 

presently existing connection, rather 

than to a DCO registered as an SDR, 

with which registered entity or 

reporting counterparty has a presently 

existing connection for clearing 

purposes.113 However, the Commission 

enumerated the costs of establishing 

connectivity to an SDR for swap data 

reporting in its final part 43 rules 

governing real-time reporting of swap 

transaction and pricing information. 

The costs of connectivity presented by 

this final rule are not additional to those 

costs considered in connection with 

part 43, and thus are not appropriate for 

evaluating costs relative to benefits in 

this rulemaking. Moreover, the 

Commission has not identified any 

quantifiable costs with respect to 

connectivity not associated with the 

part 43 information collection request, 

for which the Commission must account 

under the PRA. 

Two commenters addressed costbenefit considerations in regard to the 

reporting of cleared swaps to SDRs. 

CMC recommended that the 

Commission leverage existing DCOs for 

reporting cleared swaps, adding that 

requiring the industry to establish a 

redundant set of expensive connections 

with non-DCO SDRs for the purpose of 

making regulatory reports for cleared 

trades would be costly, inefficient and 

unnecessary. Similarly, CME 

recommended that the initial regulatory 

report for a cleared swap be reported to 

a DCO or an SDR chosen by the DCO, 

adding that this approach is the lowest 

cost and least burdensome method for 

implementing the regulatory reporting 

requirements. 

The Commission has determined to 

adopt the rules as they relate to 

reporting swap data for cleared trades to 

SDRs largely as proposed. While the 

Commission is cognizant of the costbenefit considerations, section 2(a) of 

the CEA requires each ‘‘swap (whether 

cleared or uncleared) * * * be reported 

to a registered swap data repository’’ 

(emphasis added). The Commission 

notes that section 21(a)(1)(B) allows 

DCOs to register as SDRs, and that the 

final rules do not preclude 

counterparties or registered entities 

from reporting swap data to existing 

DCOs registered as SDRs, or to SDRs 

chosen by DCOs, if they so choose for 

business or cost-benefit reasons. 

Costs Affected by Permitted Use of 

Third-Party Service Providers to 

Facilitate Reporting 

The Commission anticipates that the 

final rule reporting requirements for 

reporting counterparties and registered 

entities may result in costs to such 

counterparties and entities in the form 

of (i) personnel hours dedicated to the 

development and maintenance of 

reporting systems and connectivity to 

data repositories; and (ii) the 

development and ongoing 

administration of a compliance 

program. Such costs could include 

standardizing data or hiring new 

personnel to upgrade technology 

infrastructure. However, such costs 

could be affected or reduced where the 

reporting counterparty or registered 

entity required to report chooses to have 

a third-party service provider facilitate 

reporting. 

The Commission requested comment 

on the merits of allowing third-party 

facilitation of swap data reporting and 

on how it should be structured. Several 

commenters responded with comments 

regarding cost-benefit considerations. 

Global Forex, DTCC and WGCEF 

supported the NOPR provision allowing 

third-party facilitation of reporting 

because they believe it will reduce 

costs, particularly for non-SD/MSPs. 

As noted above, the Commission has 

considered these comments, and has 

determined to adopt in the final rule the 

NOPR provision permitting third-party 

facilitation of data reporting. The use of 

third-party service providers in the 

reporting phase of the regulatory data 

reporting process may also represent a 

likely cost reduction. Reporting 

counterparties and registered entities 

that elect to contract with third-party 

service providers can realize the cost 

savings associated with the comparative 

advantages of third-party providers 

specializing in swap data reporting 

services. 

Costs of Creation Data Reporting 

i. Costs to Counterparties and Registered 

Entities 

As discussed in more detail above, the 

NOPR called for two types of creation 

data reporting, namely PET data 

reporting and confirmation data 

reporting. The Commission anticipates 

that creation data reporting will 

represent costs to reporting 

counterparties and registered entities in 

the form of (a) significant non-recurring 

investments in technological systems 

and personnel; and (b) recurring 

expenses associated with systems usage 

and maintenance and personnel hours 

required for data reporting. 

The Commission estimates that the 

initial costs for its reference point, a 

non-SD/MSP reporting counterparty 

that is not a financial entity as defined 

in the Dodd-Frank Act and does not 

contract with a third party to report 

swap data, will likely consist of (i) 

Developing an internal OMS capable of 

capturing all relevant swap data in realtime; (ii) establishing connectivity with 

an SDR that accepts data; (iii) 

developing written policies and 

procedures to ensure compliance with 

part 43; and (iv) compliance with error 

correction procedures. 

The Commission estimates that the 

recurring costs for its reference point, a 

non-SD/MSP reporting counterparty 

that is not a financial entity and does 

not contract with a third party to report 

swap data, will likely consist of (i) 

Operational support for its OMS, 

including adaptation to new products, 

systems upgrades and ongoing 

maintenance; (ii) maintaining 

connectivity with an SDR that accepts 

data, including the demands on 

technological systems and the burden 

associated with the personnel hours 

necessary to facilitate transmission of 

data; and (iii) compliance with error 

correction procedures, including the 

burden associated with the personnel 

hours necessary to monitor and report 

errors. 

The Commission notes, however, 

these costs should not be added to the 

costs of reporting data for real-time 

public reporting enumerated in the 

Commission’s final rules in part 43 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2185 

114The NOPR also called for PET data to be 

reported promptly following execution of the swap. 

concerning real time reporting, insofar 

as they refer to PET data for regulatory 

reporting. 

Pursuant to the final rule, 

counterparties will be required to report 

allocation information when a swap is 

transacted by an agent on behalf of 

clients. The Commission does not 

believe that this requirement is likely to 

present a significant incremental burden 

to counterparties. Based on 

conversations with industry 

participants, the Commission believes 

that allocation reports are already 

transmitted from one counterparty to 

the other following a swap; therefore, 

transmitting that report to an SDR 

would present a negligible additional 

burden. 

The final rule provides that, should 

there be a swap asset class for which no 

SDR accepts swap data, swap data for a 

swap in that asset class must be 

reported to the Commission. This 

provision was set forth in the NOPR, 

and is required by CEA section 4r(b) and 

(c). The Commission anticipates that 

this requirement is unlikely to impose 

additional costs on registered entities 

and swap counterparties required to 

report swap data, since SDRs covering 

all existing swap asset classes have 

already applied for designation by the 

Commission. The Commission also 

notes that the requirements for such 

reporting differ from those for reporting 

to an SDR. The final rule calls for data 

for such swaps to be reported to the 

Commission at times announced by the 

Commission and in an electronic file in 

a format acceptable to the Commission, 

as determined by the Commission’s 

Chief Information Officer. 

The Commission has nonetheless 

considered possible costs associated 

with such reporting, which would apply 

only in the event that there is an asset 

class for which no SDR accepts data. In 

such circumstances, reporting 

counterparties and registered entities 

required to report swap data would be 

required to incur an initial one-time cost 

to establish and test connectivity to the 

Commission. The Commission notes, 

however, that because reporting 

counterparties will already be required 

to develop and test technological 

systems for establishing connectivity to 

an SDR pursuant to this final rule, there 

will not be an incremental nonrecurring cost presented by this 

requirement. Rather, because this cost 

will only be incurred by a reporting 

counterparty in the absence of an SDR 

that accepts data for any asset class, this 

cost should be considered to exist in the 

absence of, rather than together with, 

the cost of establishing connectivity to 

an SDR. 

In the event that a new asset class 

comes into existence for which no SDR 

immediately accepts regulatory swap 

data reports, the Commission will be 

required to receive data reports 

concerning swaps in that asset class 

until an SDR elects to receive swap data 

in that asset class. The Commission has 

accounted in the PRA for the cost of 

maintaining connectivity to the 

Commission which would be incurred 

by registered entities and reporting 

counterparties transacting in such an 

asset. The Commission does not believe 

it is feasible to estimate the likelihood 

that such an asset class will arise or the 

length of time for which the 

Commission will be required to receive 

the associated regulatory data. 

The Commission believes that this 

recurring burden of transmitting data to 

the Commission will represent a small 

percentage of the burden of transmitting 

data to a registered SDR or third-party 

service provider as required for real 

time reporting pursuant to part 43 and 

regulatory reporting to SDRs as required 

by this part. The Commission has 

determined that this percentage is not 

readily quantifiable, because the asset 

classes for which reporting to the 

Commission would be required, and 

thus the amount of data that would be 

required to be reported to the 

Commission, are currently unknown. 

The NOPR sought to mitigate the 

fragmentation of data for a single swap 

across multiple SDRs by requiring that 

once an initial data report concerning a 

swap is made to an SDR, all data 

reported for that swap thereafter must 

be reported to that same SDR.114

Roundtable participants agreed that the 

NOPR provision calling for all data for 

a given swap to be reported to a single 

SDR was essential to preventing 

fragmentation of data across multiple 

SDRs, something that would seriously 

impair both regulators’ ability to view or 

aggregate all of the data concerning a 

swap and the ability of reporting entities 

and counterparties to review data 

reported by them. WGCEF commented 

that all swap data for a given swap 

should be reported to the same SDR. 

The Commission received no comments 

opposing this requirement. 

Global Forex observed that, after the 

initial swap data report is made for a 

swap, market participants required to 

make further reports concerning that 

swap would need to ensure that they 

can connect to the chosen SDR. EEI, 

EPSA, and WGCEF suggested that the 

rules should ensure that SDR selection 

by a platform, SD, or MSP is equitable 

and does not result in unreasonable 

costs or burdens being imposed on nonSD/MSP counterparties. 

WGCEF also suggested that market 

participants should not be required to 

report all of their swaps to the same 

SDR, since SDR competition would tend 

to lower fees associated with reporting. 

DTCC, ICE, and WGCEF recommended 

that the reporting counterparty should 

always select the SDR. ICE argued that 

otherwise reporting counterparties 

could incur significant expenses to 

build and maintain connections to an 

SDR with which they are not already 

connected. ABC and CIEBA suggest that 

for swaps involving a benefit plan as a 

counterparty, the SDR selection should 

always be made by the plan. 

The CMC and CME both 

recommended that the initial regulatory 

report for a cleared trade be transmitted 

to either a DCO or an SDR that is 

affiliated with a DCO. CMC suggested 

that this would reduce unnecessary 

expenses and operational difficulties, 

whereas it would be costly, inefficient 

and unnecessary to require industry to 

establish a redundant set of expensive 

connections with non-DCO SDRs for the 

purpose of making regulatory reports for 

cleared trades. CME stated that having 

cleared swaps reported to a DCO also 

registered as an SDR or an SDR that is 

affiliated with a DCO would provide the 

lowest cost and least operationally 

burdensome path available to meet 

regulatory requirements. 

The Commission anticipates that, 

because the final rule does not require 

each cleared swap to be reported to an 

SDR affiliated with the DCO that clears 

the swap, in some circumstances DCOs 

may incur some increased costs, relative 

to an environment in which all cleared 

swaps must be reported to a DCO–SDR. 

• For a cleared swap executed on a SEF or 

DCM, and reported to an SDR by the SEF or 

DCM as required by the final rule, the DCO 

could incur incremental costs, if the SEF or 

DCM chooses to report to an SDR other than 

the DCO–SDR. In this circumstance, the DCO 

would be required to report confirmation 

data and continuation data to the SDR 

receiving the initial report, and thus to 

assume the costs necessary to establish 

connectivity to that SDR and transmit data to 

it. Such connectivity and transmission costs 

are addressed below. However, if the DCO 

chooses to register as an SDR, as explicitly 

permitted by the statute and anticipated by 

these commenters, the SEF or DCM would be 

able to reduce its costs by selecting the DCO– 

SDR as the SDR receiving the initial report, 

and thus avoid the need to send data 

separately to an SDR for regulatory reporting 

purposes and to a DCO for clearing purposes. 

In such an event, the DCO would not incur 

these incremental costs. 

• For an off-facility, cleared swap for 

which the reporting counterparty is excused 

mstockstill on DSK4VPTVN1PROD with RULES2

2186 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

115The Commission believes that a DCO 

registered as an SDR would choose to report to itself 

in its capacity as an SDR in this circumstance. 

by the final rule from reporting creation data, 

the DCO would not incur incremental costs. 

In this situation, the DCO would select the 

SDR to which all data is reported, by making 

the initial creation data report. The DCO 

could report to itself in its capacity as an SDR 

if it chooses to to register as an SDR, as 

explicitly permitted by the statute and 

anticipated by these commenters. 

• For an off-facility, cleared swap with 

respect to which the reporting counterparty 

makes the initial PET data report, the DCO 

would incur incremental costs if the 

reporting counterparty chooses to report to 

an SDR other than the DCO–SDR. In this 

circumstance the DCO would be required to 

report confirmation data and continuation 

data to the SDR receiving the initial report, 

and thus to assume the costs necessary to 

establish connectivity to that SDR and 

transmit data to it. These costs are addressed 

below. However, if the DCO chooses to 

register as an SDR, as explicitly permitted by 

the statute and anticipated by these 

commenters, the reporting counterparty 

would be able to reduce its costs by selecting 

the DCO–SDR as the SDR receiving the initial 

report, and thus avoid the need to send data 

separately to an SDR for regulatory reporting 

purposes and to a DCO for clearing purposes. 

In such an event, the DCO would not incur 

these incremental costs. 

The Commission also anticipates that, 

because the final rule does not require 

each cleared swap to be reported to an 

SDR affiliated with the DCO that clears 

the swap, in some circumstances 

reporting counterparties may incur 

some increased costs, but also some 

increased benefits, relative to an 

environment in which all cleared swaps 

must be reported to a DCO–SDR. 

• For swaps executed on a SEF or DCM, 

an SD or MSP reporting counterparty would 

incur the incremental costs if the SEF or 

DCM chooses to report to an SDR other than 

the DCO–SDR. In this circumstance, the SD 

or MSP would be required to report valuation 

data to the SDR, and thus to assume the costs 

necessary to establish connectivity to that 

SDR and transmit data to it. Such costs are 

addressed below. A non-SD/MSP reporting 

counterparty would not incur such 

incremental costs, because all continuation 

data would be reported by the DCO. 

However, if the DCO chooses to register as an 

SDR, as explicitly permitted by the statute 

and anticipated by these commenters, the 

SEF or DCM would be able to reduce its costs 

by selecting the DCO–SDR as the SDR 

receiving the initial report, and thus avoid 

the need to send data separately to an SDR 

for regulatory reporting purposes and to a 

DCO for clearing purposes. In such an event, 

the SD or MSP reporting counterparty would 

not incur these incremental costs. 

• For an off-facility, cleared swap with 

respect to which the reporting counterparty 

is excused by the final rule from reporting 

creation data, an SD or MSP reporting 

counterparty would incur incremental costs 

only if the DCO chooses not to register as an 

SDR.115 In this situation, the DCO would 

select the SDR to which all data is reported, 

by making the initial creation data report, 

and could report to itself in its capacity as 

an SDR if it chooses to to register as an SDR, 

as explicitly permitted by the statute and 

anticipated by these commenters. The 

incremental costs for the SD or MSP 

reporting counterparty would be the costs 

necessary to establish connectivity to, and 

transmit valuation data to, the SDR to which 

the initial creation data report was made. A 

non-SD/MSP reporting counterparty would 

not incur such incremental costs, because all 

continuation data would be reported by the 

DCO. 

• For an off-facility, cleared swap with 

respect to which the reporting counterparty 

makes the initial PET data report, the 

reporting counterparty would not incur 

incremental costs, but would receive the 

benefit of being able to choose either the 

DCO–SDR or any other SDR accepting swaps 

in the asset class in question. 

The Commission also anticipates that, 

because the final rule does not require 

each cleared swap to be reported to an 

SDR affiliated with the DCO that clears 

the swap, SEFs and DCMs would 

receive benefits relative to an 

environment in which all cleared swaps 

must be reported to a DCO–SDR. 

Specifically, for any swap executed on 

a SEF or DCM, the facility would be able 

to choose either the DCO–SDR or any 

other SDR accepting swaps in the asset 

class in question. 

The Commission notes that DCOs are 

eligible to register as SDRs and 

capitalize on these existing connections, 

and the Commission anticipates that the 

competitive market for SDR services 

will dictate such an outcome if it is 

indeed cost-effective. The Commission 

believes that a competitive marketplace 

for SDR services presents the 

opportunity for significant reductions to 

the cost of swap data reporting. 

WGCEF and Dominion recommended 

that the Commission harmonize its PET 

data requirements with the reporting 

required by the part 43 real-time public 

reporting regulations to reduce the 

reporting burdens on counterparties. 

After considering these comments, the 

Commission has determined, as noted 

above, that the final rule should require 

that all data for a given swap be 

reported to the same SDR to which the 

initial report of swap data is made as 

provided in the final rule. The wide 

variety of suggestions by commenters 

concerning who should choose the SDR 

suggests that no single approach 

produces the lowest cost for all market 

participants in all circumstances, and 

that this decision is best left to the 

market. The final rule as adopted avoids 

injecting the Commission unnecessarily 

into a market decision, and leaves the 

choice of SDR to be influenced by 

market forces and possible market 

innovations. Requiring that all cleared 

swaps be reported only to DCOs 

registered as SDRs would create a nonlevel playing field for competition 

between DCO–SDRs and non-DCO– 

SDRs. Conversely, giving the choice of 

the SDR to the reporting counterparty in 

all cases could in practice give an SDR 

substantially owned by SDs a dominant 

market position with respect to much 

swap data reporting. The final rule also 

addresses the major substance of the 

concerns expressed by non-SD/MSP 

counterparties, since it requires the 

initial data report to be made by a nonSD/MSP counterparty only in the case 

of a swap executed off-facility between 

two non-SD/MSP counterparties that are 

ECPs. Moreover, in this situation, the 

non-SD/MSP reporting counterparty 

will, by making the initial data report, 

be able to select the SDR as 

recommended by comments. 

ii. Costs to SDRs 

The Commission anticipates that 

creation data reporting will present 

additional costs to SDRs, both in the 

form of non-recurring investments in 

technological systems and personnel 

during the development of the 

formatting procedure, and in the form of 

recurring expenses associated with data 

processing, systems maintenance, and 

personnel hours. However, these costs 

should not be considered independent 

of the costs associated with real time 

reporting pursuant to part 43, which 

includes the burden estimate for the 

data formatting processes that an SDR 

will need to employ. The Commission 

anticipates that compliance with this 

requirement will primarily require SDRs 

to handle additional swap data required 

to be reported by this part but not 

required to be reported by part 43. This 

part will not require SDRs to fulfill any 

of the rounding, counterparty masking, 

or disseminating requirements of realtime public reporting. Therefore, in 

general, the Commission anticipates that 

the recurring burden to an SDR 

presented by creation data reporting 

will be negligibly incremental to the 

costs to SDRs associated with real-time 

public reporting. 

Pursuant to the final rule, in the 

context of allocations, as discussed 

above, reporting of both the original 

swap between the reporting 

counterparty and the agent and 

reporting of the swaps resulting from 

allocation will be required. The only 

additional duty for SDRs in this context 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2187 

is the need to map together these related 

swaps. SDRs will already be required to 

have automated systems and personnel 

capable of mapping together various 

data reports, such as mapping together 

different data reports for a single swap 

using the USI for the swap that is 

included in each such report. As a result 

of the requirement for mapping in the 

context of allocations, the Commission 

anticipates that SDRs will incur an 

incremental burden consisting of (a) 

one-time setup costs to program 

automated systems to do the required 

mapping in the allocation context, and 

(b) low ongoing maintenance costs 

associated with keeping such 

programming up to date. The 

Commission does not believe that this 

burden is readily quantifiable, both 

because the percentage of swaps 

involving allocations is currently 

unknown, and because the number of 

client allocations could vary greatly 

between swaps involving allocation. As 

noted above, SDRs must have the 

capacity to map together all data reports 

associated with any USI, and 

compliance with this requirement will 

facilitate the data mapping process in 

the context of allocations, which will 

also involve USIs. This should reduce 

the additional burden of linking 

allocation reports, or eliminate it in 

some cases. The Commission was 

informed by roundtable participants 

that existing trade repositories are able 

to accept data in multiple formats or 

data standards from different 

counterparties, and to map the data they 

receive into a common data standard 

within the repository, without undue 

difficulty, delay, or cost. Therefore, the 

Commission anticipates that SDRs will 

be able to perform the mapping required 

in the allocation context using existing 

technologies and processes. 

With regard to SDRs, the error 

reporting requirement of this final rule 

would require a registered SDR to 

develop protocols regarding the 

reporting and correction of erroneous 

information. This reporting requirement 

is associated with an information 

collection for which the Commission is 

obligated to account under the PRA. 

Accordingly, the burden estimates have 

been addressed in the information 

collection requests that the Commission 

has prepared and submitted to OMB for 

approval, as required under that statute 

Costs of Continuation Data Reporting 

The Commission received several 

comments on the cost-benefit 

implications of its proposed approach 

regarding continuation reporting. 

Several comments addressed the 

NOPR provisions prescribed the data 

reporting method—life cycle reporting 

or snapshot reporting—to be used in 

each asset class to report changes to the 

primary economic terms of the swap. 

TriOptima supported the NOPR’s 

approach. ICE commented with respect 

to the other commodity asset class that 

the snapshot approach would be 

inefficient, create burdens, and prove 

technologically challenging, and that 

therefore its drawbacks would outweigh 

its benefits. Reval commented that 

continuation data reporting by either 

method would require significant 

capabilities and investments, and stated 

that snapshot reporting for interest rate, 

currency, and other commodity swaps 

would not lessen the burdens of 

compliance. As noted above, ISDA, 

SIFMA, REGIS–TR, and DTCC 

recommended having the rule not make 

the choice between the lifecycle and the 

snapshot reporting method for each 

asset class, but rather allowing SDRs to 

decide whether to accept data by either 

or both methods. 

Other comments addressed the impact 

of required frequency of reporting. EEI, 

WGCEF, and CDEU contended that 

daily snapshot reporting would be 

burdensome and excessive for non-SD/ 

MSP counterparties, and recommended 

quarterly rather than daily reports. AGA 

stated that daily continuation data 

reporting would be unduly burdensome, 

and recommended monthly reporting 

instead. 

Additional comments addressed costs 

associated with valuation data 

reporting. Chatham Financial 

recommended that the Commission 

align the timing for valuation data 

reporting with the timing for the 

portfolio reconciliation requirements in 

the Commission’s portfolio and 

reconciliation rulemaking, in order to 

reduce the burden on non-SD/MSP 

reporting counterparties. ICE suggested 

that only DCOs be required to report 

valuation data for cleared swaps, since 

requiring both DCOs and counterparties 

to report this data would drastically 

increase the number of messages 

transmitted to SDRs on a daily basis and 

unnecessarily burden reporting 

counterparties. EEI and CDEU 

questioned the Commission’s regulatory 

authority and need for valuation data 

reporting from non-registered 

counterparties. ISDA and SIFMA 

commented that the implementation of 

any valuation methodology requires 

significant operational and 

infrastructure development, and called 

for further consultation before the 

Commission requires such a 

methodology. FHLB recommended 

weekly valuation reporting by non-SD/ 

MSP reporting counterparties, arguing 

that this should be sufficient for 

regulatory purposes and would avoid 

forcing such counterparties to 

implement the costly infrastructure 

needed to generate daily valuation 

reports. The Electric Coalition 

recommended quarterly valuation data 

reporting for the same reason. 

The Commission anticipates that the 

reporting of continuation data will 

present additional costs beyond the 

costs of reporting required swap 

creation data as discussed above, 

consisting of the additional 

maintenance of an internal OMS and the 

additional personnel hours needed to 

maintain a compliance program in 

support of the OMS. 

The Commission believes that 

promptly submitting amended 

transaction and pricing data to the 

appropriate registered SDR after 

discovery of an error would impose a 

burden on reporting counterparties and 

registered entities. Likewise, the 

Commission believes that promptly 

notifying the relevant reporting 

counterparty or registered entity after 

discovery of an error would impose a 

burden on non-reporting counterparties. 

The Commission believes that error 

reporting would impose an initial, nonrecurring burden associated with 

designing and building the reporting 

parties’ reporting system to be capable 

of submitting amended swap 

transactions to a registered SDR. In 

addition, reporting parties will be 

required to support and maintain the 

error reporting function and registered 

SDRs will be required to accept the error 

reporting. 

The Commission believes that 

designing and building appropriate 

reporting system functionality would be 

a component of, and represent an 

incremental add-on to, the cost of 

building a reporting system and 

developing a compliance function as 

required by § 43.3(a) (real-time reporting 

rule). With regard to non-reporting 

counterparties, the Commission believes 

that the error reporting requirement of 

this final rule would impose a minimal 

non-recurring and recurring burdens 

associated with promptly notifying the 

relevant reporting party after discovery 

of an error. The Commission believes, 

however, that swap counterparties 

already monitor their swap transactions 

in the ordinary course of business, and 

thus the error reporting requirement of 

this final rule would not result in any 

significant new burdens for these 

participants. 

Upon consideration of the comments, 

the Commission is adopting the NOPR 

continuation data provisions with a 

number of modifications that the 

mstockstill on DSK4VPTVN1PROD with RULES2

2188 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

116The flexibility of this approach should also 

ensure harmonization of the final rule with SEC 

rules in this respect: even if the SEC rules specify 

a reporting method for reporting to security-based 

swap data repositories, SDRs that accept mixed 

swaps will be free to accept reporting by any 

reporting method mandated by the SEC. 

Commission believes will further reduce 

costs and burdens for registered entities 

and reporting counterparties, and in 

particular for non-SD/MSP reporting 

counterparties. If a swap is cleared, the 

DCO will report all continuation data 

with the exception of valuation 

reporting by SDs and MSPs. Non-SD/ 

MSP reporting counterparties will not 

be required to report any continuation 

data for cleared swaps. For uncleared 

swaps, the deadlines for non-SD/MSP 

reporting counterparties to report 

changes to primary economic terms 

have been extended and phased in. 

While the NOPR required the reporting 

of all of the data elements necessary for 

a person to determine the current 

market value of the swap, the final rule 

requires only the reporting of the data 

elements necessary to describe the daily 

mark of the transaction. In addition, 

non-SD/MSP reporting counterparties 

will only be required to report valuation 

data on a quarterly basis. In part to 

further reduce continuation data 

reporting costs as discussed in the above 

comments, the final rule requires that 

continuation data be reported in a 

manner sufficient to ensure that the 

information in the SDR concerning the 

swap is current and accurate, and 

includes all changes to any of the 

primary economic terms of the swap, 

but will leave to the SDR and registered 

entity and reporting counterparty 

marketplace the choice of the reporting 

method used to meet this requirement. 

This approach will help to address 

commenters’ concerns about the cost of 

daily reporting, since reporting 

counterparties would not be required to 

report on a daily basis if the SDR in 

question accepts life cycle reporting.116

Additionally in order to reduce 

reporting burdens to the extent this can 

be done without impairing the purposes 

for which the Dodd-Frank Act requires 

swap data reporting, the Commission 

has determined that the final rule will 

not require reporting of contractintrinsic events. 

The Commission believes that the 

swap data reporting requirements of the 

final rule represent a reduced cost 

compared to the requirements of the 

NOPR. The Commission does not 

mandate which particular approach an 

SDR chooses, either snapshot approach 

or lifecycle, in the final rule, so long as 

the continuation data for a given swap 

are accurately reported. This approach 

will allow registered SDRs to select the 

method of continuation data reporting 

that is most cost-effective and most 

logical for the swap business of their 

reporting customers. As noted, costs 

have been reduced by elimination of 

required reporting of contract-intrinsic 

data. The Commission does not mandate 

the reporting of contract-intrinsic data 

in the final rule, a data stream that was 

required under the proposed rule. The 

Commission believes that this 

requirement would have presented a 

cost burden to reporting counterparties 

and registered entities and its 

elimination will present a cost 

reduction. Furthermore, allowing the 

clearing of a swap on a DCO to satisfy 

the continuation data reporting 

obligations of non-SD/MSP reporting 

counterparties represents a lowered 

overall cost. This approach eliminates 

duplication of the reporting 

requirement, capitalizes on the 

transmission pipeline from the DCO to 

the SDR, and will allow for more costeffective reporting than a regime in 

which reporting parties entering into a 

cleared swap would always be 

responsible for reporting regulatory 

data, as the DCO will likely realize 

economies of scale in the reporting 

process. 

Collateral and Master Agreement 

Reporting 

In the NOPR, the Commission 

requested comment as to whether 

separate warehouse and library systems 

should be developed for collateral and 

master agreements. Several commenters 

responded with cost-benefit 

considerations regarding establishing 

these separate reporting systems. ABC 

supported requiring master agreement 

reporting but recommended that they be 

reported only once if required. SunGard 

supported the establishment of a 

collateral SDR that could hold credit 

support agreements and related net 

margin and collateral positions between 

two counterparties, adding that this 

would eliminate unnecessary costs. 

Chatham Financial and CDEU 

recommended that the Commission not 

require master agreement or collateral 

reporting because the costs of reporting 

would outweigh the benefits. After 

consideration of these comments, the 

Commission has determined not to 

require master agreement or collateral 

reporting at this time. 

c. Reporting Requirements in Light of 

CEA Section 15(a) 

The Commission has evaluated the 

costs and benefits of the reporting 

provisions under § 45.3 in light of the 

specific considerations identified in 

Section 15(a) of the CEA as follows. 

Protection of market participants and 

the public. As discussed above, the 

Commission has endeavored to limit the 

costs attributable to discretionary 

implementation decisions to the 

maximum degree consistent with 

statutory requirements and their 

intended benefits. The Commission has 

endeavored to match the costs of the 

post-implementation marketplace with 

the sizes, levels of sophistication, and 

levels of systemic importance of the 

affected participants, so that the 

associated benefits may be realized by 

the public. 

With respect to swap data reporting, 

the Commission believes the benefits 

include the protection of market 

participants and the public. The 

Commission believes that the reporting 

requirement of § 45.3 will provide 

regulatory agencies with a wealth of 

previously unavailable data. This 

comprehensive data will be available in 

a unified format, greatly enhancing the 

ability of regulators in their oversight 

and enforcement functions. Systemic 

risk regulators need data that will 

enable them to monitor gross and net 

counterparty exposures wherever 

possible, not just notional volumes for 

each contract but also market values. 

Such data would make it possible to 

calculate the concentration of 

counterparty risk on both participant 

and market levels. Market regulators 

need data that helps them promote 

market fairness and competitiveness; 

protect market participants against 

fraud, manipulation, and abusive 

trading practices; enforce aggregate 

speculative position limits as adopted; 

and ensure the financial integrity of the 

clearing process. 

The Commission believes that 

important regulatory purposes of DoddFrank would be frustrated, and that 

regulators’ ability to see necessary 

information concerning swaps could be 

impeded, if data concerning a given 

swap was spread over multiple SDRs. 

Efficiency, competiveness, and 

financial integrity. As discussed above, 

the Commission has endeavored to limit 

the costs attributable to discretionary 

implementation decisions to the 

maximum degree consistent with 

statutory requirements and their 

intended benefits. The Commission has 

endeavored to match the costs of the 

post-implementation marketplace with 

the sizes, levels of sophistication, and 

levels of systemic importance of the 

affected participants, so that the 

associated benefits may be realized by 

the public. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2189 

117This authority could be used, for example, to 

require SDRs to accept swap data reports using a 

particular computer language already used by firms 

in a particular segment of the swap marketplace, so 

that they are not forced to incur additional cost by 

acquiring the capability needed to report using a 

different computer language. 

With respect to swap data reporting, 

the Commission believes the benefits 

include enhancing the financial 

integrity of swap markets. The 

Commission believes that final rule’s 

streamlined reporting regime, including 

the counterparty hierarchy used to 

select the reporting counterparty, can be 

considered efficient in that it assigns 

greater reporting responsibility to more 

sophisticated entities more likely to be 

able to realize economies of scale and 

scope in reporting costs. This reporting 

regime may also be an incentive for the 

platform execution of swaps that might 

have otherwise been executed 

bilaterally, since platform execution 

absolves the swap counterparties of the 

majority of the reporting burden 

discussed in this Consideration of Costs 

and Benefits section. The Commission 

anticipates that this will increase the 

role of the registered entities in the 

market that are able to report data to an 

SDR most efficiently. Similarly, a 

potential increase in the number of 

participants using platform execution, 

due to this efficiency, may aid in market 

competition. 

The Commission believes that, by 

improving the integrity of the U.S. swap 

markets in the manner described above, 

this final rule may make participation in 

the U.S. swap markets more appealing 

to entities that currently do not 

participate; therefore, this final rule 

presents the potential to enhance the 

demand for access to the U.S. swap 

market and its participants both 

domestically and in the global swap 

marketplace. This potential increase in 

swap market participation may improve 

the competitiveness of the swap 

marketplace as more parties demand 

sources of risk transference. 

The Commission believes that 

reporting parties may be able to realize 

lower costs by means of transmitting 

reporting and regulatory data through 

third-party service providers. These 

providers will likely have a comparative 

advantage in data processing costs 

relative to the capabilities of reporting 

parties; as in the case of the reporting 

hierarchy, the final rule allows for the 

use of reporting methods considered 

more efficient by market participants 

themselves. 

Because the accuracy of swap data is 

essential for market integrity and 

regulatory oversight, the final § 45.14 

requires the prompt correction of errors. 

As seen during the most recent financial 

crisis, market volatility may be such that 

a delay in error correction, even on the 

order of a day, may be too late for 

effective analysis and response. Because 

of this, the Commission has considered 

the cost of error correction on market 

participants with regard to the effects of 

market turmoil during critical events 

intensified by market opacity. 

The Commission believes that the 

data standards provisions of the final 

rule will serve to reduce costs and 

burdens for registered entities and swap 

counterparties by (a) allowing reporting 

entities and counterparties to use 

whatever facilities, methods, or data 

standards are provided or required by 

the SDR to which data is reported; and 

(b) allowing SDRs to use various 

facilities, methods, and data standards 

to receive data, so long as the SDR can 

provide data to the Commission in the 

format required by the Commission. The 

Commission believes this approach is 

preferable to having the Commission 

mandate that reporting entities or 

counterparties adopt a particular format 

or data standard for reporting swap data, 

which in some cases could impose the 

additional burden of acquiring new 

technological capability different or 

more extensive that what the entity or 

counterparty already possesses. The 

Commission believes that, in light of 

this provision of the final rule, market 

competition is likely to lead SDRs to 

allow reporting entities and 

counterparties to report using data 

formats or standards that are easiest and 

least costly for them. Costs for market 

participants may also be lowered by the 

final rule provision authorizing the 

Commission’s Chief Information Officer 

to require use of a particular data 

standard in order to accommodate the 

needs of different communities of 

users.117

Furthermore, the Commission does 

not anticipate that the recordkeeping 

requirements of this final rule present 

any costs that would impede the 

efficiency of swap markets. 

Price Discovery. The Commission 

does not believe that the data reporting 

requirements of this final rule have a 

material effect on the price discovery 

process. The Commission does not 

believe that the costs associated with its 

discretionary implementation decisions 

are of a magnitude to impede the normal 

functioning of swap market participants, 

and thereby disrupt the price discovery 

process. 

Sound risk management practices. 

The Commission does not believe that 

the data reporting requirements of this 

final rule have a material effect on 

sound risk management practices of 

market participants or that the costs 

associated with its discretionary 

implementation decisions are of a 

magnitude to impede sound risk 

management. However, as noted in the 

section on recordkeeping, data which 

will be reported may be of use for 

internal risk management. 

Other public interest considerations. 

The Commission believes that the data 

reporting requirements of this final rule 

will allow regulators to readily acquire 

and analyze market data, thus 

streamlining the surveillance process. 

5. Unique Identifiers 

As discussed more fully above, 

pursuant to its authority in CEA section 

21(b) (added by section 728(b) of the 

Dodd Frank Act), the Commission 

proposed requiring the use of three 

unique identifiers, which would serve 

as critical tools for data aggregation for 

the purposes of conducting market and 

financial risk surveillance, enforcing 

position limits, analyzing market data, 

enforcing Commission regulations, 

monitoring systemic risk, and 

improving market transparency. 

The NOPR required that each swap be 

identified in all swap recordkeeping and 

data reporting by a Unique Swap 

Identifier (‘‘USI’’). The NOPR took a 

‘‘first-touch’’ approach to USI creation, 

with the USI created by SEFs and DCMs 

for platform-executed swaps, by SDs 

and MSPs for off-platform swaps in 

which they are the reporting 

counterparty, and by SDRs for offplatform swaps between non-SD/MSP 

counterparties (who may lack the 

requisite systems for USI creation). This 

approach was designed to foster 

efficiency by taking advantage of the 

technological sophistication and 

capabilities of SEFs, DCMs, SDs, MSPs, 

and SDR, while ensuring that a swap is 

identified by a USI from its inception. 

The provision calling for SDRs to create 

USIs for off-facility swaps between nonSD/MSP counterparties was designed to 

reduce costs and burdens for such 

counterparties. Non-SD/MSP 

counterparties may lack the 

sophistication to assign unique 

identifiers, whereas SDRs will likely be 

large, sophisticated entities capable of 

realizing economies of scope and scale 

in processing varied swap data streams; 

thus, SDRs are better suited to assign 

unique identifiers for off-facility swaps 

between non-SD/MSP counterparties. 

The NOPR required that each swap 

counterparty be identified in all swap 

recordkeeping and data reporting by a 

legal entity identifier (‘‘LEI’’) (referred to 

in the NOPR as a unique counterparty 

identifier or ‘‘UCI’’) approved by the 

Commission. The NOPR established 

mstockstill on DSK4VPTVN1PROD with RULES2

2190 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

118CPSS–IOSCO Report on OTC Derivatives Data 

Reporting and Aggregation Requirement, August 

2011, p. 36. Publicly available at http:// 

www.bis.org/publ/cpss96.pdf. 

119CPSS–IOSCO Report on OTC Derivatives Data 

Reporting and Aggregation Requirement, August 

2011, p. 30. Publicly available at http:// 

www.bis.org/publ/cpss96.pdf. 

principles that an LEI must follow to be 

designated by the Commission as the 

LEI to be used in swap data 

recordkeeping and reporting pursuant to 

the Commission’s Regulations. 

The NOPR also called for 

establishment of a confidential, nonpublic LEI reference database, to which 

each swap counterparty receiving an LEI 

would be required to report reference 

data that would be associated with its 

LEI. The NOPR stated the Commission’s 

belief that optimum effectiveness of 

LEIs for achieving the systemic risk 

protection and transparency goals of the 

Dodd-Frank Act would come from a 

global LEI created on an international 

basis through an international 

voluntary-consensus standards body 

such as ISO. The NOPR provided that 

the Commission would determine, prior 

to the initial compliance date, whether 

such an LEI is available. If it were, the 

NOPR called for the Commission to 

designate that LEI as the LEI approved 

by the Commission for use in complying 

with the final rule. During such time as 

such an LEI is not available, the NOPR 

called swap counterparties to be 

identified by a substitute identifier 

created and assigned by an SDR as 

described in the NOPR. 

The NOPR required that each swap 

subject to CFTC jurisdiction be 

identified in all swap recordkeeping and 

data reporting by a unique product 

identifier (‘‘UPI’’) and a product 

classification system, as determined by 

the Commission, for the purpose of 

categorizing swaps with respect to the 

underlying products referenced in them. 

The NOPR called for the UPI and 

product classification system to identify 

both the swap asset class and the 

subtype within that asset class to which 

the swap belongs, with sufficient 

specificity and distinctiveness to enable 

regulators to fulfill their regulatory 

responsibilities and to facilitate real 

time reporting. As provided in the 

NOPR, UPIs would be assigned to swaps 

at a particular, asset class-specific level 

of the robust swap taxonomy used by 

the product classification system, and 

the use of UPIs and the classification 

system would enable regulators to 

aggregate and report swap activity at a 

variety of product type levels, and to 

prepare reports required by the DoddFrank Act regarding swap market 

activity. 

a. Benefits of the Unique Identifier 

Requirements 

The Commission anticipates that its 

approach regarding unique identifiers 

will generate several overarching, if 

presently unquantifiable, benefits to 

both swap market participants and the 

public generally, including both 

improved risk management and 

improved regulatory oversight. The 

Commission believes these benefits will 

accrue to market participants in a 

number of ways: 

• Improved policy analysis by financial 

regulators employing legal entity reference 

data as the basic infrastructure for 

identifying, describing, classifying, labeling, 

organizing, and using information about 

trades, counterparties and market 

instruments. 

• Improved identification and 

quantification of existing or altered 

interconnections between firms. 

• Improved real time analysis across 

multiple financial markets to identify 

systemic risk, market stresses and potential 

contagion effects across asset classes. 

• Improved financial transaction 

processing, internal recordkeeping, 

compliance, due diligence, and risk 

management by financial entities. 

Unique identifiers will benefit the 

general public by supporting the 

Commission’s supervisory function over 

the swap market, as well as the broader 

supervisory responsibilities of U.S. 

financial regulators to protect against 

financial market systemic risk, 

enhancing the Commission’s ability to 

detect anomalies in the market. 

USIs will assist fulfillment of the 

systemic risk mitigation, transparency, 

and market monitoring purposes of the 

Dodd-Frank Act, by enabling 

identification of the origins of each 

swap as well as events that affect the 

swap during its existence. USIs will be 

essential for collating various data 

reports concerning a swap into a single, 

accurate data record. They will also 

help to avoid double-counting of a swap 

reported to different SDRs or to foreign 

trade repositories, something that will 

improve data quality and accurate data 

aggregation. Substantial benefits of LEIs 

for the public are recognized in the 

CPSS–IOSCO Report on OTC 

Derivatives Data Reporting and 

Aggregation Requirement, which 

recommends expeditious development 

of a global LEI: 

[A] standard system of LEIs is an essential 

tool for aggregation of OTC derivatives data. 

An LEI would contribute to the ability of 

authorities to fulfill the systemic risk 

mitigation, transparency, and market abuse 

protection goals established by the G20 

commitments related to OTC derivatives, and 

would benefit efficiency and transparency in 

many other areas. As a universally available 

system for uniquely identifying legal entities 

in multiple financial data applications, LEIs 

would constitute a global public good.118

LEIs also offer benefits to market 

participants. The Commission notes that 

while requiring the use of LEIs will 

represent a new cost to market 

participants, LEIs may also reduce the 

costs of entity identification for market 

participants. As noted in the CPSS– 

IOSCO Data Report: 

The data aggregation experience of the 

private sector in past years suggests * * * 

that a universal LEI would have the added 

benefit of improving the operational 

efficiency of firms that are OTC derivatives 

counterparties. For financial firms, the 

current absence of an industry-wide LEI 

standard makes tracking counterparties and 

calculating exposures across multiple data 

systems complicated and expensive, and can 

lead to costly errors. Maintaining internal 

identifier databases and reconciling entity 

identification with counterparties is 

expensive for large firms and may be 

disproportionately so for small firms. In the 

worst case scenario, identification problems 

can lead to transactions that are broken or fail 

to settle. Entity identification touches so 

many aspects of critical business functions 

that many firms have created their own 

internal identifiers, sometimes doing so on a 

department-by-department or function-by 

function basis. Such stop-gap measures can 

provide a measure of local relief, but 

ultimately they further aggravate and 

complicate the discontinuity, inconsistency, 

and incompatibility of legal entity 

identification systems both for identifying 

OTC derivatives counterparties and across 

the international financial sector as a whole. 

This makes useful data aggregation and 

analysis substantially more difficult or even 

impracticable. In addition, complete 

automation of back-office activities and 

‘‘straight through processing’’ remain elusive, 

in part, because of the lack of a universal 

identifier for legal entities.119

UPIs may enable better assessment of 

systemic risk with respect to particular 

products, more effective monitoring of 

the positions and exposures of 

individual market participants, and 

greater transparency provided by real 

time reporting as well as by the 

availability to regulators of a clearer 

picture of the marketplace. They may 

also allow aggregation of swap data 

across multiple SDRs, and comparison 

of swap data with information 

concerning cash, equities, and futures 

markets. As noted in the CPSS–IOSCO 

Data Report, UPIs may also assist the 

back office and risk management 

processes of market participants. Much 

as LEIs may reduce the costs of entity 

identification in the fashion described 

above by the CPSS–IOSCO Data Report, 

the Commission believes that while 

requiring the use of UPIs will represent 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2191 

a new cost to market participants, UPIs 

may lower costs for market participants 

associated with the need to develop and 

maintain proprietary product data 

models and systems, which many firms 

are forced to do because of the absence 

of a universally-accepted standard for 

describing, classifying, and identifying 

swap products. 

b. Costs of Unique Identifier 

Requirements 

Costs of USI Requirements 

As noted above, for swaps executed 

on a SEF or DCM, the final rule requires 

SEFs and DCMs to generate a USI at the 

time of execution, and transmit it to 

both counterparties, the DCO (if 

applicable), and the SDR. For off-facility 

swaps with an SD or MSP reporting 

counterparty, the final rule requires the 

SD or MSP reporting counterparty to 

create the USI at the time of execution, 

and to transmit it to its counterparty, the 

DCO (if applicable) and the SDR. For 

off-facility swaps between two non-SD/ 

MSP counterparties, the SDR will assign 

and transmit the USI to both 

counterparties and to the DCO (if 

applicable). The Commission 

anticipates that this requirement will 

impose additional costs to SEFs, DCMs, 

SDs, MSPs and SDRs. The Commission 

has not identified any quantifiable costs 

of the USI requirements that are not 

associated with an information 

collection subject to the PRA. These 

costs therefore have been accounted for 

in the information collection requests 

filed with OMB as required by the PRA. 

Thomson Reuters stated that the USI 

proposal could impose a significant 

implementation burden on market 

participants because it requires the 

linkage of additional information such 

as tracking numbers. Thomson Reuters 

recommended a USI with no linked 

information such as embedded asset 

class or geographical identifiers. 

The Commission believes that, even 

in the absence of this requirement, the 

automated systems of SEFs, DCMs, 

DCOs, SDs, MSPs, and SDRs would in 

all cases create internal identifiers for 

swap transactions. Accordingly, for 

these entities, the cost of creating USIs 

will not constitute an incremental cost 

for such entities above costs they would 

already incur. Additionally, to reduce 

costs for off-facility bilateral swaps 

between two non-SD/MSP 

counterparties, the final rules have 

maintained the NOPR approach 

requiring SDRs to create and transmit 

USIs for such swaps. 

Costs of LEI Requirements 

The Commission anticipates that 

required use of LEIs will impose 

additional costs on market participants. 

The Commission received several 

comments regarding the cost-benefit 

implications of the NOPR’s LEI 

provisions. 

Three commenters presented LEI 

proposals or alternatives they believed 

would meet the Commission’s 

requirements in the most cost-effective 

manner. CME recommended that the 

Commission use its large trader system 

for futures, since this would be quicker, 

easier, less costly, and less risky than 

attempting to establish a new 

international method identifying legal 

entities. CUSIP presented its CABRE 

system as a viable and cost-effective 

alternative for LEIs, suggesting that it 

would help market participants realize 

significant cost savings much earlier 

than other options. GS1 presented itself 

as a potential LEI provider, suggesting 

that it could implement a LEI system at 

no additional cost to SDs and SEFs that 

would minimize the overall cost of the 

identification system. Two members of 

Congress asked that the Commission 

give full and fair consideration to GS1’s 

proposal because it could make 

implementation less costly and 

burdensome for a significant segment of 

the industry. 

TriOptima commented that the LEI 

would require significant adaptation 

costs and could possibly delay the 

implementation of SDRs. TriOptima 

suggested an interim period to allow 

reporting institutions to submit their 

own LEI and then map this identifier to 

the one used by the SDR. 

With respect to the NOPR 

requirement for reporting of level two 

LEI reference data concerning the 

affiliations of a counterparty, AMG 

suggested that the Commission should 

establish a 50 percent majority 

ownership threshold, because requiring 

corporate affiliation information from 

companies that have less than majority 

ownership may be burdensome, and in 

many cases, impracticable. 

As discussed above, three 

commenters presented alternatives to 

the Commission’s proposals regarding 

LEIs. The Commission has evaluated 

these proposals and will continue to 

weigh the cost and benefits of each as 

it prepares to implement an 

international industry initiative and 

designate an LEI for use in swap data 

reporting as provided in the final rule. 

The Commission has determined that 

costs for market participants are not 

readily quantifiable. However, the 

Commission understands that start-up 

costs for the LEI system may be borne 

at least in part by data service providers, 

SDs, and other major market 

participants that are involved in the 

international industry initiative now 

underway to develop LEIs. Because this 

process is ongoing, the Commission has 

determined that it cannot readily 

estimate the remaining costs to market 

participants that will be imposed by its 

completion, or what portion of the 

impetus for the LEI initiative can be 

attributed to this final rule rather than 

to a general pre-implementation 

industry initiative for a better system of 

legal entity identification. 

The final rule calls for the 

Commission to determine prior to the 

start of swap data reporting whether an 

LEI system meeting the requirements of 

the final rule is available. If the 

Commission determines that such a 

system is available, its use will be 

required in all swap data recordkeeping 

and reporting. If the Commission 

determines that such a system is not yet 

available, until such time as the 

Commission designates such a system 

for use in complying with the final rule, 

swap counterparties will be identified 

by means of a substitute identifier 

created by SDRs as specified in the final 

rule. Although the Commission 

anticipates that an LEI meeting the 

requirement of the final rule will be 

available before the commencement of 

swap data reporting, the Commission 

has also considered the potential costs 

and benefits to SDRs for creating, 

assigning and transmitting such 

substitute identifiers if they should be 

required. The Commission anticipates 

that if SDRs are required to create 

substitute identifiers, such requirements 

will impose additional costs for SDRs. 

Pursuant to this final rule, the 

reporting of Level Two LEI reference 

data will be limited to the identity of a 

swap counterparty’s ultimate parent. 

This represents a reduction to the 

burden presented in the NOPR, which 

called for the reporting of all affiliations 

of each swap counterparty identified by 

an LEI. The Commission believes that 

this approach is practical and costeffective, because it reduces the burden 

on swap counterparties, while capturing 

the essential level two LEI reference 

data for a given swap that will allow the 

Commission and other regulators to 

aggregate swap data in a way that 

enables effective monitoring of systemic 

risk. 

Costs of UPI requirements 

Thomson Reuters recommended that 

the Commission establish a pilot 

program for the development of UPI 

codes. 

mstockstill on DSK4VPTVN1PROD with RULES2

2192 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

120 GFMA, Creating a Global Legal Entity 

Identifier (LEI) Standard, September 21, 2001, p. 10. 

Publicly available at http://www.sifma.org/ 

uploadedfiles/issues/technology_and_operations/ 

legal_entity_identifier/lei-project-summaryslides.pdf. 

121CPSS-IOSCO Report on OTC Derivatives Data 

Reporting and Aggregation Requirement, August 

2011, p.36. Publicly available at http://www.bis.org/ 

publ/cpss96.pdf. 

The Commission anticipates that this 

requirement will ultimately impose 

additional costs to market participants. 

The final rule provides that when the 

Commission determines that a UPI and 

product classification system acceptable 

to the Commission is available, the 

Commission will designate that system 

for use in all swap data recordkeeping 

and reporting. Until the Commission 

designates such a system, the final rule 

calls for swaps to be identified by the 

internal product identifier or product 

description used by the SDR to which 

a swap is reported. As the Commission 

has not set forth requirements for a UPI 

system in the final rules, and has not yet 

designated such a system for use by 

market participants, the Commission 

has not identified any quantifiable costs 

of the LEI requirements that are not 

associated with an information 

collection subject to the PRA. These 

costs therefore have been accounted for 

in the information collection requests 

filed with OMB as required by the PRA. 

c. Unique Identifiers in Light of CEA 

Section 15(a) 

The Commission has evaluated the 

benefits of the required use of USIs, 

LEIs, and UPIs in light of the specific 

considerations identified in Section 

15(a) of the CEA, as follows. 

Protection of market participants and 

the public. As discussed above, the 

Commission has endeavored to limit the 

costs attributable to discretionary 

implementation decisions to the 

maximum degree consistent with 

statutory requirements and their 

intended benefits. The Commission has 

endeavored to match the costs of the 

post-implementation marketplace with 

the sizes, levels of sophistication, and 

levels of systemic importance of the 

affected participants, so that the 

associated benefits may be realized by 

the public. 

With respect to unique identifiers, the 

Commission believes the benefits 

include the protection of market 

participants and the public. 

USIs. The Commission believes that 

USIs will be a vital tool for regulatory 

agencies in analyzing swap market data 

for the purposes of identifying the 

positions of systemically important 

market participants and the 

accumulation of systemic risk, thus 

protecting market participants and the 

public. USIs will allow for the creation 

of a clear and unified data stream by 

allowing for the aggregation of 

transaction information without doublecounting swaps reported to different 

SDRs or to foreign trade repositories, or 

reported in VSRs. 

LEIs. The Commission believes that 

requiring the use of LEIs will greatly 

enhance the ability of the Commission 

and other regulatory agencies to oversee 

swap markets by providing necessary 

clarity and cohesion to the data used for 

regulatory analyses. Among the benefits 

to regulators of an LEI regime, the 

Global Financial Markets Association 

(‘‘GFMA’’) identified more efficient data 

aggregation; more powerful modeling 

and risk analysis; facilitation of 

information sharing and reconciliation 

between regulators; better supervision of 

cross-border firms and firms whose 

business lines are overseen by multiple 

regulators; and facilitating identification 

of affiliates and parent companies. 

GFMA also called the LEI regime ‘‘a 

powerful tool for regulators in 

monitoring and managing systemic 

risks.’’ 120 The CPSS–IOSCO Report on 

OTC Derivatives Data Reporting and 

Aggregation Requirement, which 

recommends expeditious development 

of a global LEI, states that: 

[A] standard system of LEIs is an essential 

tool for aggregation of OTC derivatives data. 

An LEI would contribute to the ability of 

authorities to fulfill the systemic risk 

mitigation, transparency, and market abuse 

protection goals established by the G20 

commitments related to OTC derivatives, and 

would benefit efficiency and transparency in 

many other areas. As a universally available 

system for uniquely identifying legal entities 

in multiple financial data applications, LEIs 

would constitute a global public good.121

UPIs. The Commission believes that 

UPIs will work in conjunction with 

USIs to create an accurate, clear, and 

unified data record free of doublecounting. The use of UPIs will also 

allow regulatory agencies to compare 

swap market data with data from the 

cash, equities, and futures markets for a 

given product, thus enhancing 

regulators’ understanding of the roles of 

different financial instruments in the 

marketplace for that product. 

Efficiency, competitiveness, and 

financial integrity. As discussed above, 

the Commission has endeavored to limit 

the costs attributable to discretionary 

implementation decisions to the 

maximum degree consistent with 

statutory requirements and their 

intended benefits. The Commission has 

endeavored to match the costs of the 

post-implementation marketplace with 

the sizes, levels of sophistication, and 

levels of systemic importance of the 

affected participants, so that the 

associated benefits may be realized by 

the public. With respect to unique 

identifiers, the Commission believes the 

benefits include enhancements to the 

financial integrity of the swap market. 

The Commission believes that, by 

improving the integrity of the U.S. swap 

markets in the manner described above, 

this final rule may make participation in 

the U.S. swap markets more appealing 

to entities that currently do not 

participate. Therefore, this final rule 

presents the potential to enhance the 

demand for access to the U.S. swap 

market and its participants both 

domestically and in the global swap 

marketplace. This potential increase in 

swap market participation may improve 

the competitiveness of the swap 

marketplace as more parties demand 

sources of risk transference. 

Furthermore, the Commission does 

not anticipate that the unique identifier 

requirements of this final rule present 

any costs that would impede the 

efficiency of swap markets. 

USIs. The Commission believes that 

the benefits of USIs include greater 

transparency, improved data aggregation 

and cross-border supervision. This will 

improve regulatory oversight and 

responsiveness, and promote a more 

thorough understanding of the 

exposures of swap counterparties, 

which will provide more financial 

integrity for the swap market. 

The Commission believes that USIs, 

as well as LEIs and UPIs, will enable 

greater automation of back-office 

processes for reporting counterparties, 

thereby promoting efficiency and a 

potential source of cost reduction for 

swap market participants. 

LEIs. As stated above, the Commission 

believes that LEIs, along with USIs and 

UPIs, will promote greater automation 

of back-office processes for reporting 

counterparties, thereby improving 

operational efficiency. 

UPIs. The Commission believes that 

UPIs will serve to work in conjunction 

with USIs in creating an accurate, clear, 

and unified data record. UPIs will 

therefore promote the same benefits of 

greater transparency, data aggregation, 

and cross-border supervision, and 

therefore enhance the financial integrity 

of swap markets. 

Price discovery. The Commission does 

not believe that the unique identifier 

requirements will have a material 

impact on price discovery, or that the 

costs associated with its discretionary 

implementation decisions are of a 

magnitude to impede the normal 

functioning of swap market participants 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2193 

122 GFMA, Creating a Global Legal Entity 

Identifier (LEI) Standard, September 21, 2001, p. 11. 

Publicly available at http://www.sifma.org/

uploadedfiles/issues/technology_and_operations/

legal_entity_identifier/lei-project-summaryslides.pdf. 

123 GFMA, Creating a Global Legal Entity 

Identifier (LEI) Standard, September 21, 2001, p. 11. 

Publicly available at http://www.sifma.org/

uploadedfiles/issues/technology_and_operations/

legal_entity_identifier/lei-project-summaryslides.pdf. 

124Counterparty Risk Management Policy Group 

II, Toward Greater Financial Stability: A Private 

Sector Perspective, July 27, 2005, p. 84. Publicly 

available at http://fcic-static.law.stanford.edu/cdn_

media/fcic-docs/2005-07-25%20Counterparty%20

Risk%20Management%20Policy%20Group-%20

Toward%20Greater%20Financial%20Stability.pdf. 

125See Heckler v. Chaney, 470 U.S. 821 (1985). 

and thereby disrupt the price discovery 

process. 

Sound risk management practices. 

The Commission believes that requiring 

the use of USIs, UPIs, and LEIs will also 

facilitate risk management for market 

participants. 

USIs. The Commission believes that 

the use of USIs will likely create a more 

clearly organized, readily accessible 

database of swap information for each 

reporting counterparty, including 

accurate information related to crossborder transactions, which may 

facilitate the internal risk management 

operations of the counterparty. 

LEIs. The Commission believes that 

LEIs will provide a number of benefits 

in the area of risk management to 

reporting counterparties. These include 

the benefits identified by GFMA, which 

are enumerated below. 

GFMA stated that the risk 

management benefits of LEIs included 

improved response times for crisis 

reporting and the potential for improved 

response times for sanctions monitoring; 

a holistic view of counterparty and 

issuer risks; and the facilitation of data 

aggregation, modeling, and analysis.122

GFMA also listed a number of other 

operational benefits to market 

participants of implementing LEIs. 

These include an integrated view of 

entities across divisions and 

subsidiaries; support for the 

development of hierarchy information; 

processing and settlement efficiency; an 

improved vendor feed and improved 

corporate actions management; support 

for new client on-boarding; and the 

facilitation of post-merger 

integrations.123

The Commission believes that the 

benefits of LEIs also include the 

facilitation of straight-through 

processing, which will promote risk 

mitigation for counterparties. As the 

Counterparty Risk Management Policy 

Group II (CPRMG II) noted: 

CRMPG II recommends that trade 

associations and market participants must 

pursue and develop straight through 

processing of OTC transactions, a critical risk 

mitigant in today’s high volume markets. As 

a fundamental matter, disputes over the 

existence or the terms of a transaction have 

the potential for enormously increasing risk, 

since each party to the disputed transaction 

hedges and risk manages the disputed trade 

based on certain economic assumptions. 

[Straight through processing] reduces the 

number and frequency of trade disputes and 

maximizes market efficiency, opportunity 

and access. [Straight through processing] 

therefore fosters legal, credit, market and 

operational certainty.124

UPIs. The Commission believes that 

UPIs will serve to work in conjunction 

with USIs in creating an accurate and 

unified internal data record for each 

reporting counterparty. The use of UPIs 

will allow a reporting counterparty to 

monitor its swap market exposures and 

compare them to its positions and to the 

broader market variables in analogous 

cash, equities, and futures instruments. 

The Commission believes that this will 

greatly enhance the ability of the 

reporting counterparty to assess the risk 

associated with its swap market 

exposures. 

Other public interest considerations. 

The Commission anticipates that unique 

identifiers will facilitate the efforts of 

academics and analysts employed by 

regulatory agencies in the course of their 

investigations by providing a clear 

framework for data aggregation and 

comparison across financial 

instruments. 

IV. Compliance Dates 

A. Proposed Rule 

Section 754 of the Dodd-Frank Act 

requires Title VII to be effective within 

360 days of enactment (i.e., by July 16, 

2011) or, to the extent a provision of 

Title VII requires rulemaking, not less 

than 60 days after publication of final 

rules or regulations implementing such 

a provision of Title VII. While the final 

rules become effective sixty (60) days 

after Federal Register publication, the 

Commission has discretion to set forth 

dates to begin enforcement of regulatory 

provisions.125 In setting forth 

compliance dates the Commission has 

taken into consideration comment 

received and factors such as available 

resources and the Dodd-Frank Act’s 

goals. In May 2011, the Commission and 

the SEC held a joint public roundtable 

to elicit comment concerning what 

implementation schedule should be set 

for the Commission’s Dodd-Frank Act 

rules, including comment concerning 

the amount of time registered entities 

and counterparties will need, after 

issuance of the final rule, to prepare for 

the commencement of swap data 

reporting pursuant to this part. The 

NOPR requested comment regarding the 

nature and length of the implementation 

and preparation period which the 

Commission should provide prior to the 

start of swap data reporting, and 

concerning how the beginning of such 

reporting should be phased in. 

B. Comments Received 

The Commission received numerous 

comments from comment letters and 

roundtable participants concerning 

when swap data reporting should begin, 

and how the commencement of 

reporting should be phased in. 

1. Initial Compliance Date 

A variety of comments addressed the 

setting of the initial compliance date for 

reporting. 

a. Definite compliance dates. Better 

Markets called on the Commission to 

provide the industry with clear 

compliance dates for the start of 

reporting. 

b. Period for infrastructure 

development and testing. Roundtable 

participants, DTCC, ISDA, SIFMA, 

Global Forex, MFA, WGCEF, and 

Dominion Resources emphasized that 

reporting should not be required to 

begin until the industry has time to 

implement or modify and to test 

automated systems to be used for 

reporting. In order to allow for such 

infrastructure development and testing, 

commenters urged that the initial 

compliance date for reporting should be 

set at least six to nine months following 

issuance of the final rule. 

c. Conditions precedent to reporting. 

EEI, the Electric Coalition, and 

roundtable participants commented that 

reporting should not be required to 

begin until after issuance of all the 

Commission’s Dodd-Frank Act rules, or 

at least of certain key rules including 

definitions of ‘‘swap,’’ ‘‘swap dealer,’’ 

and ‘‘major swap participant.’’ ISDA, 

SIFMA, Global Forex, MFA, and 

WGCEF argued that reporting should 

not be required to begin until at least 

one SDR accepting swaps in the asset 

class in question is fully functional, and 

DTCC and WGCEF suggested that 

reporting should begin only after both 

unique identifiers and data formats for 

reporting are finalized. MFA noted that 

beginning reporting after SDR 

registration and infrastructure are 

finalized could avoid giving current 

service providers an advantage over new 

entrants. 

d. Other initial reporting suggestions. 

ISDA and SIFMA suggested that the 

CFTC and the SEC should harmonize 

mstockstill on DSK4VPTVN1PROD with RULES2

2194 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

126The obligations of swap counterparties with 

respect to historical swaps, i.e., swaps executed 

prior to the applicable compliance date and in 

existence on or after July 15, 2010, the date of 

enactment of the Dodd-Frank Act, will be as 

provided in part 46 of this chapter. 

when reporting will commence. Global 

Forex, DTCC, and Thomson Reuters 

suggested consideration of a partially 

voluntary, benchmark approach to 

implementation of reporting, similar to 

the ODSG commitment letter approach 

used to initiate existing reporting to 

trade repositories. 

2. Phasing in the Start of Reporting 

A number of commenters also 

advocated phasing in the start of 

reporting. 

a. Phasing by asset class. DTCC, 

Global Forex, and roundtable 

participants urged phasing in the start of 

reporting by asset class. They noted that 

that different swap asset classes are at 

different levels of automation and data 

normalization, with the credit and 

interest rate asset classes at a more 

advanced stage of development than the 

equity, foreign exchange, and other 

commodity asset classes. 

b. Phasing by counterparty type. The 

Electric Coalition and Chatham 

Financial advocated phasing in the start 

of reporting according to the type and 

sophistication of the counterparty, with 

end users being phased in last as they 

have the least technological 

sophistication. Global Forex suggested 

that the phase-in design should include 

a gradual reduction of target reporting 

times to allow participants to improve 

their systems over time. 

c. Phasing by product type. WGCEF 

and Thomson Reuters suggested that 

reporting for swaps executed on 

electronic platforms should be phased 

in more quickly than reporting for offplatform, bespoke transactions, and that 

the Commission should focus on the 

more liquid contracts which represent 

the bulk of the OTC market. 

d. Other phasing suggestions. DTCC, 

Global Forex, and roundtable 

participants suggested that phasing in 

reporting of confirmation data to begin 

several months later than the reporting 

of PET data would take into account the 

need for additional time to prepare for 

reporting of the relative larger amount of 

data involved in confirmation data 

reporting, to develop ways to represent 

confirmation terms in machine-readable 

form, and to normalize and create data 

fields for confirmation data. Eris 

Exchange suggested that voluntary 

reporting should precede mandatory 

reporting. MGEX called for a carefully 

thought out, staggered, and reasonable 

implementation schedule. 

C. Determination of Compliance Dates 

The Commission has considered the 

above comments, and has determined to 

provide an implementation schedule 

and compliance dates for swap data 

reporting incorporating many of 

commenters’ suggestions, as set forth 

below. 

1. Initial Compliance Dates 

a. Clear compliance dates. The 

Commission agrees with comments 

calling for clear compliance dates for 

the beginning of full compliance with 

this part. The Commission has 

determined that each SEF, DCM, DCO, 

SDR, SD, MSP, and non-SD/MSP 

counterparty subject to the jurisdiction 

of the Commission must commence full 

compliance with this part on the 

applicable compliance date set forth 

below.126

b. Period for infrastructure 

development and testing. The 

Commission agrees with commenters 

and roundtable participants that it is 

important to provide a period of at least 

six months following issuance of the 

final data recordkeeping and reporting 

rule, in order to allow necessary 

infrastructure development and testing 

in light of the requirements of the final 

rule to occur before reporting is required 

to begin. The initial compliance date for 

swap data reporting set by the final rule 

provides such an infrastructure 

development and testing period. The 

Commission believes that a six month 

period should be sufficient for this 

purpose, and also believes that timely 

fulfillment of the important purposes of 

the Dodd-Frank Act would be frustrated 

if the start of swap data reporting were 

further delayed. In order to minimize 

confusion concerning the 

commencement of both regulatory 

reporting and real time reporting, and to 

reduce burdens on registered entities 

and swap counterparties required to 

report under both part 45 and part 43, 

the Commission has determined to set 

the same date as the initial compliance 

date for reporting under both part 45 

and part 43. 

c. Conditions precedent to reporting. 

The Commission recognizes that 

adequate preparation by registered 

entities and swap counterparties for the 

beginning of swap data reporting would 

be difficult in the absence of final 

Commission rules defining ‘‘swap,’’ 

‘‘swap dealer,’’ and ‘‘major swap 

participant.’’ The definition of ‘‘swap’’ 

is relevant to determining what 

transactions must be reported, while the 

definitions of SD and MSP are relevant 

to determining which counterparty is 

the reporting counterparty pursuant to 

this part. Accordingly, the Commission 

has determined that the initial 

compliance date provided in the final 

rule will be the later of (1) the date 

certain listed below, or (2) 60 days 

following issuance of the later of the 

Commission’s final rules defining swap 

and defining SD and MSP. The 

Commission disagrees with comments 

calling for swap data reporting to be 

delayed until after all Commission rules 

under the Dodd-Frank Act are issued, 

because it believes that important 

purposes of the Dodd-Frank Act would 

be frustrated by additional delay. 

d. Other initial reporting suggestions. 

The Commission has consulted 

extensively with the SEC concerning the 

Commission’s swap data reporting rule 

and the SEC’s security-based swap data 

reporting rule. Both Commissions have 

worked to coordinate and harmonize 

those rules to the extent practicable. 

Since the Dodd-Frank Act provides 

clear delineation of the jurisdiction of 

each Commission with respect to swaps, 

the Commission does not believe that it 

is necessary to delay the 

commencement of reporting pursuant to 

this part until issuance of the SEC’s 

final security-based swap data reporting 

rule. The Commission disagrees with 

comments calling for swap data 

reporting pursuant to this part to follow 

the voluntary, benchmark approach to 

implementation of reporting followed 

previously under the ODSG 

commitment letter approach used to 

initiate reporting to trade repositories, 

or to have voluntary reporting precede 

mandatory reporting. The Commission 

has consulted with ODSG and ODRF 

concerning experience gained from 

prior voluntary reporting. The 

Commission believes, however, that a 

‘‘benchmark’’ approach involving 

flexible timetables is not appropriate for 

implementation of reporting under the 

Dodd-Frank Act. The uncertainty in 

such a reporting regime could burden 

the industry, and make effective 

oversight and enforcement more 

difficult. 

2. Phasing in the Start of Reporting 

a. Phasing by asset class. The 

Commission accepts the view of many 

market participants that differences 

between asset classes with respect to 

both existing automation and existing 

data normalization are significant and 

should be taken into account in order to 

ensure that data reporting required by 

the final rule is practicable to achieve by 

the applicable compliance dates. The 

Commission also believes that 

establishing deadlines for the 

commencement of reporting in all asset 

classes will serve as an important 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2195 

127The Commission notes that one consequence 

of this approach is that continuation data reporting 

by a non-SD/MSP reporting counterparty for an onfacility swap in some cases may begin as much as 

six months after the creation data report for that 

swap by the SEF or DCM on which the swap was 

executed. The Commission believes this is 

acceptable in light of the burden reduction 

provided to non-SD/MSP reporting counterparties 

by phasing in their swap data reporting. 

incentive for continued progress by the 

industry in these regards. Accordingly, 

the Commission has determined that 

swap data reporting should be phased in 

by asset class, with reporting for credit 

swaps and interest rate swaps beginning 

earlier than reporting for equity swaps, 

foreign exchange transactions, and other 

commodity swaps. 

b. Phasing by counterparty type. The 

Commission agrees with comments 

suggesting that the initial compliance 

date for non-SD/MSP reporting 

counterparties should take into account 

the fact that such counterparties are less 

likely than SEFs, DCMs, DCOs, SDs, and 

MSPs, to have sophisticated automated 

systems for reporting, and the possible 

need of non-SD/MSP reporting 

counterparties for additional time to 

prepare for reporting. The Commission 

has determined that swap data reporting 

should be phased in by counterparty 

type, with reporting by non-SD/MSP 

reporting counterparties in each asset 

class commencing 180 days after the 

start of reporting in that asset class by 

SEFs, DCMs, DCOs, SDs, and MSPs.127

The Commission does not believe that 

reporting should be further phased in by 

registered entity or counterparty type. 

The Commission believes that SEFs, 

DCMs, DCOs, SDs, and MSPs have 

sufficient technological expertise to 

enable them to meet a compliance date 

which provides an appropriate, sixmonth preparation period, without 

further phase-in. 

c. Phasing by product type. In light of 

the phasing by asset class and by 

counterparty type to be provided in the 

final rule as noted above, the 

Commission does not believe that 

additional phasing by product type is 

necessary. The Commission does not 

believe that it is technologically 

necessary to delay reporting for offfacility, uncleared swaps. Where an SD 

or MSP is the reporting counterparty for 

a bespoke swap, reporting systems 

should be available. In the relatively few 

instances where a non-SD/MSP 

counterparty is the reporting 

counterparty for a bespoke swap, the 

final rule already provides an additional 

six-month phase-in period and extended 

reporting deadlines. 

d. Other phasing suggestions. As 

discussed above, the Commission 

believes that confirmation data is 

essential to fulfilling the purposes of the 

Dodd-Frank Act, and should be reported 

starting with the applicable compliance 

date. However, the Commission also 

recognizes that for some swap 

counterparties, and particularly for nonSD/MSP reporting counterparties, 

reporting confirmation data normalized 

in data fields may not yet be 

technologically practicable when 

reporting begins. These considerations 

are less applicable in the case of swaps 

executed on a SEF or DCM or cleared by 

a DCO, since in such cases, as discussed 

above, execution on the SEF or DCM or 

clearing on the DCO will be required to 

include all terms of the confirmation of 

the swap. Therefore, as discussed above 

in the section addressing creation data 

reporting, the final rule provides as 

follows. For off-facility, uncleared 

swaps, during the first six months 

following the applicable compliance 

date, while PET data will have to be 

reported electronically with data 

normalized in data fields, reporting 

counterparties for whom reporting 

confirmation data normalized in data 

fields is not yet technologically 

practicable may report required 

confirmation data by transmitting an 

image of all documents recording the 

confirmation. This will allow needed 

additional time for development of 

schemas for data reporting and 

implementation by non-SD/MSP 

counterparties. Electronic reporting of 

all confirmation data normalized in data 

fields will be required after this six 

month period. 

3. Compliance Dates 

For the reasons set forth above, the 

Commission has determined that each 

swap execution facility, designated 

contract market, derivatives clearing 

organization, swap data repository, 

swap dealer, major swap participant, 

and non-SD/MSP counterparty subject 

to the jurisdiction of the Commission 

shall commence full compliance with 

all provisions of this part on the 

applicable compliance dates set forth 

below. The obligations of swap 

counterparties with respect to swaps 

executed prior to the applicable 

compliance date as provided in this 

section and in existence on or after July 

21, 2010, the date of enactment of the 

Dodd-Frank Act, are set forth in part 46 

of this chapter. 

a. Compliance Dates for Swap Execution 

Facilities, Designated Contract Markets, 

Derivatives Clearing Organizations, 

Swap Data Repositories, Swap Dealers, 

and Major Swap Participants. 

Swap execution facilities, designated 

contract markets, derivatives clearing 

organizations, swap data repositories, 

swap dealers, and major swap 

participants shall commence full 

compliance with all provisions of this 

part as follows: 

Credit swaps and interest rate swaps. 

Compliance date 1, the compliance date 

with respect to credit swaps and interest 

rate swaps, shall be the later of: July 16, 

2012; or 60 calendar days after the 

publication in the Federal Register of 

the later of the Commission’s final rule 

defining the term ‘‘swap’’ or the 

Commission’s final rule defining the 

terms ‘‘swap dealer’’ and ‘‘major swap 

participant.’’ 

Equity swaps, foreign exchange 

swaps, and other commodity swaps. 

Compliance date 2, the compliance date 

with respect to equity swaps, foreign 

exchange swaps, and other commodity 

swaps, shall be 90 calendar days after 

compliance date 1. 

Compliance date for non-SD/MSP 

counterparties. Non-SD/MSP 

counterparties shall commence full 

compliance with all provisions of this 

part for all swaps on compliance date 3, 

which shall be 90 calendar days after 

compliance date 2. 

The phasing in of swap data reporting 

under the final rule is shown 

graphically in the following table. 

BILLING CODE 6351–01–P 

mstockstill on DSK4VPTVN1PROD with RULES2

2196 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.002</GPH>
Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2197 

BILLING CODE 6351–01–C 

Final Rules 

List of Subjects in 17 CFR Part 45 

Swaps, Data recordkeeping 

requirements and data reporting 

requirements. 

■ In consideration of the foregoing, and 

pursuant to the authority of the 

Commodity Exchange Act as amended, 

and in particular sections 8a(5) and 21 

of the Act, the Commission hereby 

adopts an amendment to Chapter 1 of 

Title 17 of the Code of Federal 

Regulation by adding a part 45 to read 

as follows: 

PART 45—SWAP DATA 

RECORDKEEPING AND REPORTING 

REQUIREMENTS 

Sec. 

45.1 Definitions. 

45.2 Swap recordkeeping. 

45.3 Swap data reporting: Creation data. 

45.4 Swap data reporting: Continuation 

data. 

45.5 Unique swap identifiers. 

45.6 Legal entity identifiers. 

48.7 Unique product identifiers. 

45.8 Determination of which counterparty 

must report. 

45.9 Third-party facilitation of data 

reporting. 

45.10 Reporting to a single swap data 

repository. 

45.11 Data reporting for swaps in a swap 

asset class not accepted by any swap 

data repository. 

45.12 Voluntary supplemental reporting. 

45.13 Required data standards. 

45.14 Reporting of errors and omissions in 

previously reported data. 

Appendix 1 to Part 45—Tables of minimum 

primary economic terms data. 

Authority: 7 U.S.C. 6r, 7, 7a–1, 7b–3, 12a 

and 24, as amended by Title VII of the Wall 

Street Reform and Consumer Protection Act 

of 2010, Pub. L. 111–203, 124 Stat. 1376 

(2010), unless otherwise noted. 

§ 45.1 Definitions. 

As used in this part: 

Asset class means the broad category 

of goods, services or commodities, 

including any ‘‘excluded commodity’’ 

as defined in CEA section 1a(19), with 

common characteristics underlying a 

swap. The asset classes include credit, 

equity, foreign exchange (excluding 

cross-currency), interest rate (including 

cross-currency), other commodity, and 

such other asset classes as may be 

determined by the Commission. 

Business day means the twenty-four 

hour day, on all days except Saturdays, 

Sundays, and legal holidays, in the 

location of the reporting counterparty or 

registered entity reporting data for the 

swap. 

Business hours means consecutive 

hours during one or more consecutive 

business days. 

Compliance date means the 

applicable date on which a registered 

entity or swap counterparty subject to 

the jurisdiction of the Commission is 

required to commence full compliance 

with all provisions of this part, as set 

forth in the preamble to this part. 

Confirmation (‘‘confirming’’) means 

the consummation (electronically or 

otherwise) of legally binding 

documentation (electronic or otherwise) 

that memorializes the agreement of the 

parties to all terms of a swap. A 

confirmation must be in writing 

(whether electronic or otherwise) and 

must legally supersede any previous 

agreement (electronically or otherwise). 

Confirmation data means all of the 

terms of a swap matched and agreed 

upon by the counterparties in 

confirming the swap. For cleared swaps, 

confirmation data also includes the 

internal identifiers assigned by the 

automated systems of the derivatives 

clearing organization to the two 

transactions resulting from novation to 

the clearing house. 

Credit swap means any swap that is 

primarily based on instruments of 

indebtedness, including, without 

limitation: Any swap primarily based on 

one or more broad-based indices related 

to instruments of indebtedness; and any 

swap that is an index credit swap or 

total return swap on one or more indices 

of debt instruments. 

Derivatives clearing organization has 

the meaning set forth in CEA section 

1a(9), and any Commission regulation 

implementing that Section, including, 

without limitation, § 39.5 of this 

chapter. 

Designated contract market has the 

meaning set forth in CEA section 5, and 

any Commission regulation 

implementing that Section. 

Electronic confirmation (confirmation 

‘‘occurs electronically’’) means 

confirmation that is done by means of 

automated electronic systems. 

Electronic reporting (‘‘report 

electronically’’) means the reporting of 

data normalized in data fields as 

required by the data standard or 

standards used by the swap data 

repository to which the data is reported. 

Except where specifically otherwise 

provided in this chapter, electronic 

reporting does not include submission 

of an image of a document or text file. 

Electronic verification (verification 

‘‘occurs electronically’’) means 

verification that is done by means of 

automated electronic systems. 

Financial entity has the meaning set 

forth in CEA section 2(h)(7)(C). 

Foreign exchange forward has the 

meaning set forth in CEA section 1a(24). 

Foreign exchange instrument means 

an instrument that is both defined as a 

swap in part 1 of this chapter and 

included in the foreign exchange asset 

class. Instruments in the foreign 

exchange asset class include: Any 

currency option, foreign currency 

option, foreign exchange option, or 

foreign exchange rate option; any 

foreign exchange forward as defined in 

CEA section 1a(24); any foreign 

exchange swap as defined in CEA 

section 1a(25); and any non-deliverable 

forward involving foreign exchange. 

Foreign exchange swap has the 

meaning set forth in CEA section 1a(25). 

It does not include swaps primarily 

based on rates of exchange between 

different currencies, changes in such 

rates, or other aspects of such rates 

(sometimes known as ‘‘cross-currency 

swaps’’). 

Interest rate swap means any swap 

which is primarily based on one or more 

interest rates, such as swaps of 

payments determined by fixed and 

floating interest rates; or any swap 

which is primarily based on rates of 

exchange between different currencies, 

changes in such rates, or other aspects 

of such rates (sometimes known as 

‘‘cross-currency swaps’’). 

International swap means a swap 

required by U.S. law and the law of 

another jurisdiction to be reported both 

to a swap data repository and to a 

different trade repository registered with 

the other jurisdiction. 

Life cycle event means any event that 

would result in either a change to a 

primary economic term of a swap or to 

any primary economic terms data 

previously reported to a swap data 

repository in connection with a swap. 

Examples of such events include, 

without limitation, a counterparty 

change resulting from an assignment or 

novation; a partial or full termination of 

the swap; a change to the end date for 

the swap; a change in the cash flows or 

rates originally reported; availability of 

a legal entity identifier for a swap 

counterparty previously identified by 

name or by some other identifier; or a 

corporate action affecting a security or 

securities on which the swap is based 

(e.g., a merger, dividend, stock split, or 

bankruptcy). 

Life cycle event data means all of the 

data elements necessary to fully report 

any life cycle event. 

Major swap participant has the 

meaning set forth in CEA section 1a(33) 

and in part 1 of this chapter. 

Mixed swap has the meaning set forth 

in CEA section 1a(47)(D), and refers to 

an instrument that is in part a swap 

mstockstill on DSK4VPTVN1PROD with RULES2

2198 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

subject to the jurisdiction of the 

Commission, and in part a securitybased swap subject to the jurisdiction of 

the SEC. 

Multi-asset swap means a swap that 

does not have one easily identifiable 

primary underlying notional item, but 

instead involves multiple underlying 

notional items within the Commission’s 

jurisdiction that belong to different asset 

classes. 

Non-electronic confirmation 

(confirmation ‘‘does not occur 

electronically’’) means confirmation that 

is done manually rather than by means 

of automated electronic systems. 

Non-electronic verification 

(verification ‘‘does not occur 

electronically’’) means verification that 

is done manually rather than by means 

of automated electronic systems. 

Non-SD/MSP counterparty means a 

swap counterparty that is neither a swap 

dealer nor a major swap participant. 

Off-facility swap means a swap not 

executed on or pursuant to the rules of 

a swap execution facility or designated 

contract market. 

Other commodity swap means any 

swap not included in the credit, equity, 

foreign exchange, or interest rate asset 

classes, including, without limitation, 

any swap for which the primary 

underlying item is a physical 

commodity or the price or any other 

aspect of a physical commodity. 

Primary economic terms means all of 

the terms of a swap matched or affirmed 

by the counterparties in verifying the 

swap, including at a minimum each of 

the terms included in the most recent 

Federal Register release by the 

Commission listing minimum primary 

economic terms for swaps in the swap 

asset class in question. The 

Commission’s current lists of minimum 

primary economic terms for swaps in 

each swap asset class are found in 

Appendix 1 to Part 45. 

Primary economic terms data means 

all of the data elements necessary to 

fully report all of the primary economic 

terms of a swap in the swap asset class 

of the swap in question. 

Quarterly reporting (‘‘reported 

quarterly’’) means reporting four times 

each fiscal year, following the end of 

each fiscal year quarter, making each 

quarterly report within 30 calendar days 

of the end of the fiscal year quarter. 

Reporting counterparty means the 

counterparty required to report swap 

data pursuant to this part, selected as 

provided in § 45.8. 

Required swap continuation data 

means all of the data elements that must 

be reported during the existence of a 

swap to ensure that all data concerning 

the swap in the swap data repository 

remains current and accurate, and 

includes all changes to the primary 

economic terms of the swap occurring 

during the existence of the swap. For 

this purpose, required swap 

continuation data includes: 

(1) All life cycle event data for the 

swap if the swap is reported using the 

life cycle reporting method, or all state 

data for the swap if the swap is reported 

using the snapshot reporting method; 

and 

(2) All valuation data for the swap. 

Required swap creation data means 

all primary economic terms data for a 

swap in the swap asset class in 

question, and all confirmation data for 

the swap. 

State data means all of the data 

elements necessary to provide a 

snapshot view, on a daily basis, of all 

of the primary economic terms of a 

swap in the swap asset class of the swap 

in question, including any change to 

any primary economic term or to any 

previously-reported primary economic 

terms data since the last snapshot. At a 

minimum, state data must include each 

of the terms included in the most recent 

Federal Register release by the 

Commission listing minimum primary 

economic terms for swaps in the swap 

asset class in question. The 

Commission’s current lists of minimum 

primary economic terms for swaps in 

each swap asset class are found in 

Appendix 1 to Part 45. 

Swap data repository has the meaning 

set forth in CEA section 1a(48), and in 

part 49 of this chapter. 

Swap dealer has the meaning set forth 

in CEA section 1a(49), and in part 1 of 

this chapter. 

Swap execution facility has the 

meaning set forth in CEA section 1a(50) 

and in part 37 of this chapter. 

Valuation data means all of the data 

elements necessary to fully describe the 

daily mark of the transaction, pursuant 

to CEA section 4s(h)(3)(B)(iii), and to 

§ 23.431 of this chapter if applicable. 

Verification (‘‘verify,’’ ‘‘verified,’’ or 

‘‘verifying’’) means the matching by the 

counterparties to a swap of each of the 

primary economic terms of a swap, at or 

shortly after the time the swap is 

executed. 

§ 45.2 Swap recordkeeping. 

(a) Recordkeeping by swap execution 

facilities, designated contract markets, 

derivatives clearing organizations, swap 

dealers, and major swap participants. 

Each swap execution facility, designated 

contract market, derivatives clearing 

organization, swap dealer, and major 

swap participant subject to the 

jurisdiction of the Commission shall 

keep full, complete, and systematic 

records, together with all pertinent data 

and memoranda, of all activities relating 

to the business of such entity or person 

with respect to swaps, as prescribed by 

the Commission. Such records shall 

include, without limitation, the 

following: 

(1) For swap execution facilities, all 

records required by part 37 of this 

chapter. 

(2) For designated contract markets, 

all records required by part 38 of this 

chapter. 

(3) For derivatives clearing 

organizations, all records required by 

part 39 of this chapter. 

(4) For swap dealers and major swap 

participants, all records required by part 

23 of this chapter, and all records 

demonstrating that they are entitled, 

with respect to any swap, to elect the 

clearing requirement exception 

pursuant to CEA section 2(h)(7). 

(b) Recordkeeping by non-SD/MSP 

counterparties. All non-SD/MSP 

counterparties subject to the jurisdiction 

of the Commission shall keep full, 

complete, and systematic records, 

together with all pertinent data and 

memoranda, with respect to each swap 

in which they are a counterparty, 

including, without limitation, all 

records demonstrating that they are 

entitled, with respect to any swap, to 

elect the clearing requirement exception 

in CEA section 2(h)(7). 

(c) Record retention. All records 

required to be kept pursuant to this 

section shall be retained with respect to 

each swap throughout the life of the 

swap and for a period of at least five 

years following the final termination of 

the swap. 

(d) Retention form. Records required 

to be kept pursuant to this section must 

be kept as required by paragraph (d)(1) 

or (2) of this section, as applicable. 

(1) Records required to be kept by 

swap execution facilities, designated 

contract markets, derivatives clearing 

organizations, swap dealers, or major 

swap participants may be kept in 

electronic form, or kept in paper form if 

originally created and exclusively 

maintained in paper form, so long as 

they are retrievable, and information in 

them is reportable, as required by this 

section. 

(2) Records required to be kept by 

non-SD/MSP counterparties may be 

kept in either electronic or paper form, 

so long as they are retrievable, and 

information in them is reportable, as 

required by this section. 

(e) Record retrievability. Records 

required to be kept by swap execution 

facilities, designated contract markets, 

derivatives clearing organizations, or 

swap counterparties pursuant to this 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2199 

section shall be retrievable as provided 

in paragraphs (e)(1) and (2) of this 

section, as applicable. 

(1) Each record required by this 

section or any other section of the CEA 

to be kept by a swap execution facility, 

designated contract market, derivatives 

clearing organization, swap dealer, or 

major swap participant shall be readily 

accessible via real time electronic access 

by the registrant throughout the life of 

the swap and for two years following 

the final termination of the swap, and 

shall be retrievable by the registrant 

within three business days through the 

remainder of the period following final 

termination of the swap during which it 

is required to be kept. 

(2) Each record required by this 

section or any other section of the CEA 

to be kept by a non-SD/MSP 

counterparty shall be retrievable by that 

counterparty within five business days 

throughout the period during which it is 

required to be kept. 

(f) Recordkeeping by swap data 

repositories. Each swap data repository 

registered with the Commission shall 

keep full, complete, and systematic 

records, together with all pertinent data 

and memoranda, of all activities relating 

to the business of the swap data 

repository and all swap data reported to 

the swap data repository, as prescribed 

by the Commission. Such records shall 

include, without limitation, all records 

required by part 49 of this chapter. 

(g) Record retention and retrievability 

by swap data repositories. All records 

required to be kept by a swap data 

repository pursuant to this section must 

be kept by the swap data repository 

both: 

(1) Throughout the existence of the 

swap and for five years following final 

termination of the swap, during which 

time the records must be readily 

accessible by the swap data repository 

and available to the Commission via real 

time electronic access; and 

(2) Thereafter, for a period of at least 

ten additional years in archival storage 

from which they are retrievable by the 

swap data repository within three 

business days. 

(h) Record inspection. All records 

required to be kept pursuant to this 

section by any registrant or its affiliates 

or by any non-SD/MSP counterparty 

subject to the jurisdiction of the 

Commission shall be open to inspection 

upon request by any representative of 

the Commission, the United States 

Department of Justice, or the Securities 

and Exchange Commission, or by any 

representative of a prudential regulator 

as authorized by the Commission. 

Copies of all such records shall be 

provided, at the expense of the entity or 

person required to keep the record, to 

any representative of the Commission 

upon request. Copies of records required 

to be kept by any registrant shall be 

provided either by electronic means, in 

hard copy, or both, as requested by the 

Commission, with the sole exception 

that copies of records originally created 

and exclusively maintained in paper 

form may be provided in hard copy 

only. Copies of records required to be 

kept by any non-SD/MSP counterparty 

subject to the jurisdiction of the 

Commission that is not a Commission 

registrant shall be provided in the form, 

whether electronic or paper, in which 

the records are kept. 

§ 45.3 Swap data reporting: creation data. 

Registered entities and swap 

counterparties must report required 

swap creation data electronically to a 

swap data repository as set forth in this 

Section. This obligation commences on 

the applicable compliance date set forth 

in the preamble to this part. The 

reporting obligations of swap 

counterparties with respect to swaps 

executed prior to the applicable 

compliance date and in existence on or 

after July 21, 2010, the date of 

enactment of the Dodd-Frank Act, are 

set forth in part 46 of this chapter. This 

section and § 45.4 establish the general 

swap data reporting obligations of swap 

dealers, major swap participants, nonSD/MSP counterparties, swap execution 

facilities, designated contract markets, 

and derivatives clearing organizations to 

report swap data to a swap data 

repository. In addition to the reporting 

obligations set forth in this section and 

§ 45.4, registered entities and swap 

counterparties are subject to other 

reporting obligations set forth in this 

chapter, including, without limitation, 

the following: Swap dealers, major swap 

participants, and non-SD/MSP 

counterparties are also subject to the 

reporting obligations with respect to 

corporate affiliations reporting set forth 

in § 45.6; swap execution facilities, 

designated contract markets, swap 

dealers, major swap participants, and 

non-SD/MSP counterparties are subject 

to the reporting obligations with respect 

to real time reporting of swap data set 

forth in part 43 of this chapter; 

counterparties to a swap for which the 

clearing requirement exception in CEA 

section 2(h)(7) has been elected are 

subject to the reporting obligations set 

forth in part 39 of this chapter; and, 

where applicable, swap dealers, major 

swap participants, and non-SD/MSP 

counterparties are subject to the 

reporting obligations with respect to 

large traders set forth in parts 17 and 18 

of this chapter. 

(a) Swaps executed on or pursuant to 

the rules of a swap execution facility or 

designated contract market. (1) For each 

swap executed on or pursuant to the 

rules of a swap execution facility or 

designated contract market, the swap 

execution facility or designated contract 

market must report all required swap 

creation data, as soon as technologically 

practicable after execution of the swap. 

This report must include all 

confirmation data for the swap, as 

defined in part 23 and in § 45.1, and all 

primary economic terms data for the 

swap, as defined in § 45.1. 

(2) If such a swap is accepted for 

clearing by a derivatives clearing 

organization, the derivatives clearing 

organization must report all 

confirmation data for the swap, as 

defined in part 39 and in § 45.1, as soon 

as technologically practicable after 

clearing. The derivatives clearing 

organization shall fulfill this 

requirement by reporting all 

confirmation data for the swap, as 

defined in part 39 and in this § 45.1, 

which must include all primary 

economic terms data for the swap as 

defined in § 45.1, and must include the 

internal identifiers assigned by the 

automated systems of the derivatives 

clearing organization to the two 

transactions resulting from novation to 

the clearing house. 

(b) Off-facility swaps subject to 

mandatory clearing. For all off-facility 

swaps subject to the mandatory clearing 

requirement, except for those off-facility 

swaps excepted from that requirement 

pursuant to CEA section 2(h)(7) and 

those off-facility swaps covered by CEA 

section 2(a)(13)(C)(iv), required swap 

creation data must be reported as 

provided in paragraph (b) of this 

section. 

(1) The reporting counterparty, as 

determined pursuant to § 45.8, must 

report all primary economic terms data 

for the swap, within the applicable 

reporting deadline set forth in paragraph 

(b)(1)(i) or (ii) of this section. However, 

if the swap is voluntarily submitted for 

clearing and accepted for clearing by a 

derivatives clearing organization before 

the applicable reporting deadline set 

forth in paragraphs (b)(1)(i) or (ii) of this 

section, and if the swap is accepted for 

clearing before the reporting 

counterparty reports any primary 

economic terms data to a swap data 

repository, then the reporting 

counterparty is excused from reporting 

required swap creation data for the 

swap. 

(i) If the reporting counterparty is a 

swap dealer or a major swap participant, 

the reporting counterparty must report 

all primary economic terms data for the 

mstockstill on DSK4VPTVN1PROD with RULES2

2200 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

swap as soon as technologically 

practicable after execution, but no later 

than: 30 minutes after execution during 

the first year following the compliance 

date; and 15 minutes after execution 

thereafter. 

(ii) If the reporting counterparty is a 

non-SD/MSP counterparty, the reporting 

counterparty must report all primary 

economic terms data for the swap as 

soon as technologically practicable after 

execution, but no later than: four 

business hours after execution during 

the first year following the compliance 

date; two business hours after execution 

during the second year following the 

compliance date; and one business hour 

after execution thereafter. 

(2) If the swap is accepted for clearing 

by a derivatives clearing organization, 

the derivatives clearing organization 

must report all confirmation data for the 

swap, as defined in part 39 and in 

§ 45.1, as soon as technologically 

practicable after clearing. The 

derivatives clearing organization shall 

fulfill this requirement by reporting all 

confirmation data for the swap, as 

defined in part 39 and in this § 45.1, 

which must include all primary 

economic terms data for the swap as 

defined in § 45.1, and must include the 

internal identifiers assigned by the 

automated systems of the derivatives 

clearing organization to the two 

transactions resulting from novation to 

the clearing house. 

(3) If the swap is not accepted for 

clearing, the reporting counterparty 

must report all confirmation data for the 

swap, as defined in § 45.1, within the 

applicable reporting deadline set forth 

in paragraph (b)(3)(i) or (ii) of this 

section. During the first 180 calendar 

days following the compliance date, if 

reporting confirmation data normalized 

in data fields is not yet technologically 

practicable for the reporting 

counterparty, the reporting counterparty 

may report confirmation data to the 

swap data repository by transmitting to 

the swap data repository an image of the 

document or documents constituting the 

confirmation, until such time as 

electronic reporting of confirmation data 

is technologically practicable for the 

reporting counterparty. Beginning 180 

days after the compliance date, the 

reporting counterparty must report all 

confirmation data to the swap data 

repository electronically. 

(i) If the reporting counterparty is a 

swap dealer or major swap participant, 

the reporting counterparty must report 

all confirmation data as soon as 

technologically practicable following 

confirmation, but no later than: 30 

minutes after confirmation if 

confirmation occurs electronically; or 24 

business hours after confirmation if 

confirmation does not occur 

electronically. 

(ii) If the reporting counterparty is a 

non-SD/MSP counterparty, the reporting 

counterparty must report all 

confirmation data as soon as 

technologically practicable following 

confirmation, but no later than: the end 

of the second business day after the date 

of confirmation during the first year 

following the compliance date; and the 

end of the first business day after the 

date of confirmation thereafter. 

(c) Off-facility swaps not subject to 

mandatory clearing, with a swap dealer 

or major swap participant reporting 

counterparty. For all off-facility swaps 

not subject to the mandatory clearing 

requirement set forth in CEA section 

2(h), all off-facility swaps for which the 

clearing requirement exception in CEA 

section 2(h)(7) has been elected, and all 

off-facility swaps covered by CEA 

section 2(a)(13)(C)(iv), for which a swap 

dealer or major swap participant is the 

reporting counterparty, required swap 

creation data must be reported as 

provided in paragraph (c) of this 

section. 

(1) Credit, equity, foreign exchange, 

and interest rate swaps. For each such 

credit swap, equity swap, foreign 

exchange instrument, or interest rate 

swap: 

(i) The reporting counterparty, as 

determined pursuant to § 45.8, must 

report all primary economic terms data 

for the swap, within the applicable 

reporting deadline set forth in paragraph 

(c)(1)(i)(A) or (B) of this section. 

However, if the swap is voluntarily 

submitted for clearing and accepted for 

clearing by a derivatives clearing 

organization before the applicable 

reporting deadline set forth in 

paragraphs (c)(1)(i)(A) or (B) of this 

section, and if the swap is accepted for 

clearing before the reporting 

counterparty reports any primary 

economic terms data to a swap data 

repository, then the reporting 

counterparty is excused from reporting 

required swap creation data for the 

swap. 

(A) If the non-reporting counterparty 

is a swap dealer, a major swap 

participant, or a non-SD/MSP 

counterparty that is a financial entity as 

defined in CEA section 2(h)(7)(C), or if 

the non-reporting counterparty is a nonSD/MSP counterparty that is not a 

financial entity as defined in CEA 

section 2(h)(7)(C) and verification of 

primary economic terms occurs 

electronically, then the reporting 

counterparty must report all primary 

economic terms data for the swap as 

soon as technologically practicable after 

execution, but no later than: one hour 

after execution during the first year 

following the compliance date; and 30 

minutes after execution thereafter. 

(B) If the non-reporting counterparty 

is a non-SD/MSP counterparty that is 

not a financial entity as defined in CEA 

section 2(h)(7)(C), and if verification of 

primary economic terms does not occur 

electronically, then the reporting 

counterparty must report all primary 

economic terms data for the swap as 

soon as technologically practicable after 

execution, but no later than: 24 business 

hours after execution during the first 

year following the compliance date; 12 

business hours after execution during 

the second year following the 

compliance date; and 30 minutes after 

execution thereafter. 

(ii) If the swap is accepted for clearing 

by a derivatives clearing organization, 

the derivatives clearing organization 

must report all confirmation data for the 

swap, as defined in part 39 and in 

§ 45.1, as soon as technologically 

practicable after clearing. The 

derivatives clearing organization shall 

fulfill this requirement by reporting all 

confirmation data for the swap, as 

defined in part 39 and in this § 45.1, 

which must include all primary 

economic terms data for the swap as 

defined in § 45.1, and must include the 

internal identifiers assigned by the 

automated systems of the derivatives 

clearing organization to the two 

transactions resulting from novation to 

the clearing house. 

(iii) If the swap is not voluntarily 

submitted for clearing, the reporting 

counterparty must report all 

confirmation data for the swap, as 

defined in § 45.1, as soon as 

technologically practicable after 

confirmation, but no later than: 30 

minutes after confirmation if 

confirmation occurs electronically; or 24 

business hours after confirmation if 

confirmation does not occur 

electronically. During the first 180 

calendar days following the compliance 

date, if reporting confirmation data 

normalized in data fields is not yet 

technologically practicable for the 

reporting counterparty, the reporting 

counterparty may report confirmation 

data to the swap data repository by 

transmitting to the swap data repository 

an image of the document or documents 

constituting the confirmation, until such 

time as electronic reporting of 

confirmation data is technologically 

practicable for the reporting 

counterparty. Beginning 180 days after 

the compliance date, the reporting 

counterparty must report all 

confirmation data to the swap data 

repository electronically. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2201 

(2) Other commodity swaps. For each 

such other commodity swap: 

(i) The reporting counterparty, as 

determined pursuant to § 45.8, must 

report all primary economic terms data 

for the swap, within the applicable 

reporting deadline set forth in paragraph 

(c)(2)(i)(A) or (B) of this section. 

However, if the swap is voluntarily 

submitted for clearing and accepted for 

clearing by a derivatives clearing 

organization before the applicable 

reporting deadline set forth in 

paragraphs (c)(2)(i)(A) or (B) of this 

section, and if the swap is accepted for 

clearing before the reporting 

counterparty reports any primary 

economic terms data to a swap data 

repository, then the reporting 

counterparty is excused from reporting 

required swap creation data for the 

swap. 

(A) If the non-reporting counterparty 

is a swap dealer, a major swap 

participant, or a non-SD/MSP 

counterparty that is a financial entity as 

defined in CEA section 2(h)(7)(C), or if 

the non-reporting counterparty is a nonSD/MSP counterparty that is not a 

financial entity as defined in CEA 

section 2(h)(7)(C) and verification of 

primary economic terms occurs 

electronically, then the reporting 

counterparty must report all primary 

economic terms data for the swap as 

soon as technologically practicable after 

execution, but no later than: four hours 

after execution during the first year 

following the compliance date; and two 

hours after execution thereafter. 

(B) If the non-reporting counterparty 

is a non-SD/MSP counterparty that is 

not a financial entity as defined in CEA 

section 2(h)(7)(C), and if verification of 

primary economic terms does not occur 

electronically, then the reporting 

counterparty must report all primary 

economic terms data for the swap as 

soon as technologically practicable after 

execution, but no later than: 48 business 

hours after execution during the first 

year following the compliance date; 24 

business hours after execution during 

the second year following the 

compliance date; and two hours after 

execution thereafter. 

(ii) If the swap is accepted for clearing 

by a derivatives clearing organization, 

the derivatives clearing organization 

must report all confirmation data for the 

swap, as defined in part 39 and in 

§ 45.1, as soon as technologically 

practicable after clearing. The 

derivatives clearing organization shall 

fulfill this requirement by reporting all 

confirmation data for the swap, as 

defined in part 39 and in this § 45.1, 

which must include all primary 

economic terms data for the swap as 

defined in § 45.1, and must include the 

internal identifiers assigned by the 

automated systems of the derivatives 

clearing organization to the two 

transactions resulting from novation to 

the clearing house. 

(iii) If the swap is not voluntarily 

submitted for clearing, the reporting 

counterparty must report all 

confirmation data for the swap, as 

defined in § 45.1, as soon as 

technologically practicable after 

confirmation, but no later than: 30 

minutes after confirmation if 

confirmation occurs electronically; or 24 

business hours after confirmation if 

confirmation does not occur 

electronically. During the first 180 

calendar days following the compliance 

date, if reporting confirmation data 

normalized in data fields is not yet 

technologically practicable for the 

reporting counterparty, the reporting 

counterparty may report confirmation 

data to the swap data repository by 

transmitting to the swap data repository 

an image of the document or documents 

constituting the confirmation, until such 

time as electronic reporting of 

confirmation data is technologically 

practicable for the reporting 

counterparty. Beginning 180 days after 

the compliance date, the reporting 

counterparty must report all 

confirmation data to the swap data 

repository electronically. 

(d) Off-facility swaps not subject to 

mandatory clearing, with a non-SD/MSP 

reporting counterparty. For all offfacility swaps not subject to the 

mandatory clearing requirement set 

forth in CEA section 2(h), all off-facility 

swaps for which the clearing 

requirement exception in CEA section 

2(h)(7) has been elected, and all offfacility swaps covered by CEA section 

2(a)(13)(C)(iv), in all asset classes, for 

which a non-SD/MSP counterparty is 

the reporting counterparty, required 

swap creation data must be reported as 

provided in this paragraph (d). 

(1) The reporting counterparty, as 

determined pursuant to § 45.8, must 

report all primary economic terms data 

for the swap, as soon as technologically 

practicable after execution, but no later 

than: 48 business hours after execution 

during the first year following the 

compliance date; 36 business hours after 

execution during the second year 

following the compliance date; and 24 

business hours after execution 

thereafter. However, if the swap is 

voluntarily submitted for clearing and 

accepted for clearing by a derivatives 

clearing organization before the 

applicable reporting deadline set forth 

in this paragraph (d)(1), and if the swap 

is accepted for clearing before the 

reporting counterparty reports any 

primary economic terms data to a swap 

data repository, then the reporting 

counterparty is excused from reporting 

required swap creation data for the 

swap. 

(2) If the swap is accepted for clearing 

by a derivatives clearing organization, 

the derivatives clearing organization 

must report all confirmation data for the 

swap, as defined in part 39 and in 

§ 45.1, as soon as technologically 

practicable after clearing. The 

derivatives clearing organization shall 

fulfill this requirement by reporting all 

confirmation data for the swap, as 

defined in part 39 and in this § 45.1, 

which must include all primary 

economic terms data for the swap as 

defined in § 45.1, and must include the 

internal identifiers assigned by the 

automated systems of the derivatives 

clearing organization to the two 

transactions resulting from novation to 

the clearing house. 

(3) If the swap is not voluntarily 

submitted for clearing, the reporting 

counterparty must report all 

confirmation data for the swap, as 

defined in § 45.1, as soon as 

technologically practicable after 

confirmation, but no later than: 48 

business hours after confirmation 

during the first year following the 

compliance date; 36 business hours after 

confirmation during the second year 

following the compliance date; and 24 

business hours after confirmation 

thereafter. During the first 180 calendar 

days following the compliance date, if 

reporting confirmation data normalized 

in data fields is not yet technologically 

practicable for the reporting 

counterparty, the reporting counterparty 

may report confirmation data to the 

swap data repository by transmitting to 

the swap data repository an image of the 

document or documents constituting the 

confirmation, until such time as 

electronic reporting of confirmation data 

is technologically practicable for the 

reporting counterparty. Beginning 180 

days after the compliance date, the 

reporting counterparty must report all 

confirmation data to the swap data 

repository electronically. 

(e) Allocations. For swaps involving 

allocation, required swap creation data 

shall be reported to a single swap data 

repository as follows. 

(i) Initial swap between reporting 

counterparty and agent. The initial 

swap transaction between the reporting 

counterparty and the agent shall be 

reported as required by § 45.3(a) through 

(d) of this part. A unique swap identifier 

for the initial swap transaction must be 

created as provided in § 45.5 of this 

part. 

mstockstill on DSK4VPTVN1PROD with RULES2

2202 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

(ii) Post-allocation swaps. (A) Duties 

of the agent. In accordance with this 

section, the agent shall inform the 

reporting counterparty of the identities 

of the reporting counterparty’s actual 

counterparties resulting from allocation, 

as soon as technologically practicable 

after execution, but not later than eight 

business hours after execution. 

(B) Duties of the reporting 

counterparty. The reporting 

counterparty must report all required 

swap creation data for each swap 

resulting from allocation, to the same 

swap data repository to which the initial 

swap transaction is reported, as soon as 

technologically practicable after it is 

informed by the agent of the identities 

of its actual counterparties. The 

reporting counterparty must create a 

unique swap identifier for each such 

swap as required in § 45.5 of this part. 

(C) Duties of the swap data repository. 

The swap data repository to which the 

initial swap transaction and the postallocation swaps are reported must map 

together the unique swap identifiers of 

the original swap transaction and of 

each of the post-allocation swaps. 

(f) Multi-asset swaps. For each multiasset swap, required swap creation data 

and required swap continuation data 

shall be reported to a single swap data 

repository that accepts swaps in the 

asset class treated as the primary asset 

class involved in the swap by the swap 

execution facility, designated contract 

market, or reporting counterparty 

making the first report of required swap 

creation data pursuant to this section. 

The registered entity or reporting 

counterparty making the first report of 

required swap creation data pursuant to 

this section shall report all primary 

economic terms for each asset class 

involved in the swap. 

(g) Mixed swaps. (1) For each mixed 

swap, required swap creation data and 

required swap continuation data shall 

be reported to a swap data repository 

registered with the Commission and to 

a security-based swap data repository 

registered with the Securities and 

Exchange Commission. This 

requirement may be satisfied by 

reporting the mixed swap to a swap data 

repository or security-based swap data 

repository registered with both 

Commissions. 

(2) The registered entity or reporting 

counterparty making the first report of 

required swap creation data pursuant to 

this section shall ensure that the same 

unique swap identifier is recorded for 

the swap in both the swap data 

repository and the security-based swap 

data repository. 

(h) International swaps. For each 

international swap, the reporting 

counterparty shall report as soon as 

practicable to the swap data repository 

the identity of the non-U.S. trade 

repository not registered with the 

Commission to which the swap is also 

reported and the swap identifier used by 

the non-U.S. trade repository to identify 

the swap. If necessary, the reporting 

counterparty shall obtain this 

information from the non-reporting 

counterparty. 

§ 45.4 Swap data reporting: continuation 

data. 

Registered entities and swap 

counterparties must report required 

swap continuation data electronically to 

a swap data repository as set forth in 

this section. This obligation commences 

on the applicable compliance date set 

forth in the preamble to this part. The 

reporting obligations of registered 

entities and swap counterparties with 

respect to swaps executed prior to the 

applicable compliance date and in 

existence on or after July 21, 2010, the 

date of enactment of the Dodd-Frank 

Act, are set forth in part 46 of this 

chapter. This section and § 45.3 

establish the general swap data 

reporting obligations of swap dealers, 

major swap participants, non-SD/MSP 

counterparties, swap execution 

facilities, designated contract markets, 

and derivatives clearing organizations to 

report swap data to a swap data 

repository. In addition to the reporting 

obligations set forth in this section and 

§ 45.3, registered entities and swap 

counterparties are subject to other 

reporting obligations set forth in this 

chapter, including, without limitation, 

the following: Swap dealers, major swap 

participants, and non-SD/MSP 

counterparties are also subject to the 

reporting obligations with respect to 

corporate affiliations reporting set forth 

in § 45.6; swap execution facilities, 

designated contract markets, swap 

dealers, major swap participants, and 

non-SD/MSP counterparties are subject 

to the reporting obligations with respect 

to real time reporting of swap data set 

forth in part 43 of this chapter; and, 

where applicable, swap dealers, major 

swap participants, and non-SD/MSP 

counterparties are subject to the 

reporting obligations with respect to 

large traders set forth in parts 17 and 18 

of this chapter. 

(a) Continuation data reporting 

method. For each swap, regardless of 

asset class, reporting counterparties and 

derivatives clearing organizations 

required to report swap continuation 

data must do so in a manner sufficient 

to ensure that all data in the swap data 

repository concerning the swap remains 

current and accurate, and includes all 

changes to the primary economic terms 

of the swap occurring during the 

existence of the swap. Reporting entities 

and counterparties fulfill this obligation 

by reporting either life cycle event data 

or state data for the swap within the 

applicable deadlines set forth in this 

section. Reporting counterparties and 

derivatives clearing organizations 

required to report swap continuation 

data for a swap may fulfill their 

obligation to report either life cycle 

event data or state data by reporting: 

(1) Life cycle event data to a swap 

data repository that accepts only life 

cycle event data reporting; 

(2) State data to a swap data 

repository that accepts only state data 

reporting; or 

(3) Either life cycle event data or state 

data to a swap data repository that 

accepts both life cycle event data and 

state data reporting. 

(b) Continuation data reporting for 

cleared swaps. For all swaps cleared by 

a derivatives clearing organization, 

required continuation data must be 

reported as provided in this section. 

(1) Life cycle event data or state data 

reporting. The derivatives clearing 

organization must report to the swap 

data repository either: 

(i) All life cycle event data for the 

swap, reported on the same day that any 

life cycle event occurs with respect to 

the swap; or 

(ii) All state data for the swap, 

reported daily. 

(2) Valuation data reporting. 

Valuation data for the swap must be 

reported as follows: 

(i) By the derivatives clearing 

organization, daily; and 

(ii) If the reporting counterparty is a 

swap dealer or major swap participant, 

by the reporting counterparty, daily. 

Non-SD/MSP reporting counterparties 

are not required to report valuation data 

for cleared swaps. 

(c) Continuation data reporting for 

uncleared swaps. For all swaps that are 

not cleared by a derivatives clearing 

organization, the reporting counterparty 

must report all required swap 

continuation data as provided in this 

section. 

(1) Life cycle event data or state data 

reporting. The reporting counterparty 

for the swap must report to the swap 

data repository either all life cycle event 

data for the swap or all state data for the 

swap, within the applicable deadline set 

forth in paragraphs (c)(1)(i) or (ii) of this 

section. 

(i) If the reporting counterparty is a 

swap dealer or major swap participant: 

(A) Life cycle event data must be 

reported on the same day that any life 

cycle event occurs, with the sole 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2203 

exception that life cycle event data 

relating to a corporate event of the nonreporting counterparty must be reported 

no later than the second business day 

after the day on which such event 

occurs. 

(B) State data must be reported daily. 

(ii) If the reporting counterparty is a 

non-SD/MSP counterparty: 

(A) Life cycle event data must be 

reported no later than: the end of the 

second business day following the date 

of any life cycle event during the first 

year after the applicable compliance 

date; and the end of the first business 

day following the date of any life cycle 

event thereafter; with the sole exception 

that life cycle event data relating to a 

corporate event of the non-reporting 

counterparty must be reported no later 

than the end of the third business day 

following the date of such event during 

the first year after the compliance date, 

and no later than the end of the second 

business day following such event 

thereafter. 

(B) State data must be reported daily. 

(2) Valuation data reporting. 

Valuation data for the swap must be 

reported by the reporting counterparty 

for the swap as follows: 

(i) If the reporting counterparty is a 

swap dealer or major swap participant, 

the reporting counterparty must report 

all valuation data for the swap, daily. 

(ii) If the reporting counterparty is a 

non-SD/MSP counterparty, the reporting 

counterparty must report the current 

daily mark of the transaction as of the 

last day of each fiscal quarter. This 

report must be transmitted to the swap 

data repository within 30 calendar days 

of the end of each fiscal quarter. If a 

daily mark of the transaction is not 

available for the swap, the reporting 

counterparty satisfies this requirement 

by reporting the current valuation of the 

swap recorded on its books in 

accordance with applicable accounting 

standards. 

§ 45.5 Unique swap identifiers. 

Each swap subject to the jurisdiction 

of the Commission shall be identified in 

all recordkeeping and all swap data 

reporting pursuant to this part by the 

use of a unique swap identifier, which 

shall be created, transmitted, and used 

for each swap as provided in paragraphs 

(a) through (c) of this section. 

(a) Swaps executed on a swap 

execution facility or designated contract 

market. For each swap executed on a 

swap execution facility or designated 

contract market, the swap execution 

facility or designated contract market 

shall create and transmit a unique swap 

identifier as provided in paragraphs 

(a)(1) and (2) of this section. 

(1) Creation. The swap execution 

facility or designated contract market 

shall generate and assign a unique swap 

identifier at, or as soon as 

technologically practicable following, 

the time of execution of the swap, and 

prior to the reporting of required swap 

creation data. The unique swap 

identifier shall consist of a single data 

field that contains two components: 

(i) The unique alphanumeric code 

assigned to the swap execution facility 

or designated contract market by the 

Commission for the purpose of 

identifying the swap execution facility 

or designated contract market with 

respect to unique swap identifier 

creation; and 

(ii) An alphanumeric code generated 

and assigned to that swap by the 

automated systems of the swap 

execution facility or designated contract 

market, which shall be unique with 

respect to all such codes generated and 

assigned by that swap execution facility 

or designated contract market. 

(2) Transmission. The swap execution 

facility or designated contract market 

shall transmit the unique swap 

identifier electronically as follows: 

(i) To the swap data repository to 

which the swap execution facility or 

designated contract market reports 

required swap creation data for the 

swap, as part of that report; 

(ii) To each counterparty to the swap, 

as soon as technologically practicable 

after execution of the swap; 

(iii) To the derivatives clearing 

organization, if any, to which the swap 

is submitted for clearing, as part of the 

required swap creation data transmitted 

to the derivatives clearing organization 

for clearing purposes. 

(b) Off-facility swaps with a swap 

dealer or major swap participant 

reporting counterparty. For each offfacility swap where the reporting 

counterparty is a swap dealer or major 

swap participant, the reporting 

counterparty shall create and transmit a 

unique swap identifier as provided in 

paragraphs (b)(1) and (2) of this section. 

(1) Creation. The reporting 

counterparty shall generate and assign a 

unique swap identifier as soon as 

technologically practicable after 

execution of the swap and prior to both 

the reporting of required swap creation 

data and the transmission of data to a 

derivatives clearing organization if the 

swap is to be cleared. The unique swap 

identifier shall consist of a single data 

field that contains two components: 

(i) The unique alphanumeric code 

assigned to the swap dealer or major 

swap participant by the Commission at 

the time of its registration as such, for 

the purpose of identifying the swap 

dealer or major swap participant with 

respect to unique swap identifier 

creation; and 

(ii) An alphanumeric code generated 

and assigned to that swap by the 

automated systems of the swap dealer or 

major swap participant, which shall be 

unique with respect to all such codes 

generated and assigned by that swap 

dealer or major swap participant. 

(2) Transmission. The reporting 

counterparty shall transmit the unique 

swap identifier electronically as follows: 

(i) To the swap data repository to 

which the reporting counterparty 

reports required swap creation data for 

the swap, as part of that report; 

(ii) To the non-reporting counterparty 

to the swap, as soon as technologically 

practicable after execution of the swap; 

and 

(iii) To the derivatives clearing 

organization, if any, to which the swap 

is submitted for clearing, as part of the 

required swap creation data transmitted 

to the derivatives clearing organization 

for clearing purposes. 

(c) Off-facility swaps with a non-SD/ 

MSP reporting counterparty. For each 

off-facility swap for which the reporting 

counterparty is a non-SD/MSP 

counterparty, the swap data repository 

to which primary economic terms data 

is reported shall create and transmit a 

unique swap identifier as provided in 

paragraphs (c)(1) and (2) of this section. 

(1) Creation. The swap data repository 

shall generate and assign a unique swap 

identifier as soon as technologically 

practicable following receipt of the first 

report of required swap creation data 

concerning the swap. The unique swap 

identifier shall consist of a single data 

field that contains two components: 

(i) The unique alphanumeric code 

assigned to the swap data repository by 

the Commission at the time of its 

registration as such, for the purpose of 

identifying the swap data repository 

with respect to unique swap identifier 

creation; and 

(ii) An alphanumeric code generated 

and assigned to that swap by the 

automated systems of the swap data 

repository, which shall be unique with 

respect to all such codes generated and 

assigned by that swap data repository. 

(2) Transmission. The swap data 

repository shall transmit the unique 

swap identifier electronically as follows: 

(i) To the counterparties to the swap, 

as soon as technologically practicable 

following creation of the unique swap 

identifier; and 

(ii) To the derivatives clearing 

organization, if any, to which the swap 

is submitted for clearing, as soon as 

technologically practicable following 

creation of the unique swap identifier. 

mstockstill on DSK4VPTVN1PROD with RULES2

2204 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

(d) Allocations. For swaps involving 

allocation, unique swap identifiers shall 

be created and transmitted as follows. 

(1) Initial swap between reporting 

counterparty and agent. The unique 

swap identifier for the initial swap 

transaction between the reporting 

counterparty and the agent shall be 

created as required by paragraph (a) 

through (c) of this section, and shall be 

transmitted as follows: 

(i) If the unique swap identifier is 

created by a swap execution facility or 

designated contract market, the swap 

execution facility or designated contract 

market must include the unique swap 

identifier in its swap creation data 

report to the swap data repository, and 

must transmit the unique identifier to 

the reporting counterparty and to the 

agent. 

(ii) If the unique swap identifier is 

created by the reporting counterparty, 

the reporting counterparty must include 

the unique swap identifier in its swap 

creation data report to the swap data 

repository, and must transmit the 

unique identifier to the agent. 

(2) Post-allocation swaps. The 

reporting counterparty must create a 

unique swap identifier for each of the 

individual swaps resulting from 

allocation, as soon as technologically 

practicable after it is informed by the 

agent of the identities of its actual 

counterparties, and must transmit each 

such unique swap identifier to: 

(i) The non-reporting counterparty for 

the swap in question. 

(ii) The agent. 

(iii) The derivatives clearing 

organization, if any, to which the swap 

is submitted for clearing, as part of the 

required swap creation data transmitted 

to the derivatives clearing organization 

for clearing purposes. 

(iv) The same swap data repository to 

which the initial swap transaction is 

reported, as part of the report of 

required swap creation data to the swap 

data repository. 

(e) Use. Each registered entity or swap 

counterparty subject to the jurisdiction 

of the Commission shall include the 

unique swap identifier for a swap in all 

of its records and all of its swap data 

reporting concerning that swap, from 

the time it creates or receives the unique 

swap identifier as provided in this 

section, throughout the existence of the 

swap and for as long as any records are 

required by the CEA or Commission 

regulations to be kept by that registered 

entity or counterparty concerning the 

swap, regardless of any life cycle events 

or any changes to state data concerning 

the swap, including, without limitation, 

any changes with respect to the 

counterparties to or the ownership of 

the swap. This requirement shall not 

prohibit the use by a registered entity or 

swap counterparty in its own records of 

any additional identifier or identifiers 

internally generated by the automated 

systems of the registered entity or swap 

counterparty, or the reporting to a swap 

data repository, the Commission, or 

another regulator of such internally 

generated identifiers in addition to the 

reporting of the unique swap identifier. 

§ 45.6 Legal entity identifiers 

Each counterparty to any swap subject 

to the jurisdiction of the Commission 

shall be identified in all recordkeeping 

and all swap data reporting pursuant to 

this part by means of a single legal 

entity identifier as specified in this 

section. 

(a) Definitions. As used in this 

section: 

Control (‘‘controlling,’’ ‘‘controlled 

by,’’ ‘‘under common control with’’) 

means, for the purposes of § 45.6, the 

possession, direct or indirect, of the 

power to direct or cause the direction of 

the management and policies of a 

person, whether through the ownership 

of voting interest, by contract, or 

otherwise. A person is presumed to 

control another person if the person: is 

a director, general partner or officer 

exercising executive responsibility (or 

having similar status or functions); 

directly or indirectly has the right to 

vote 25 percent or more of a class of 

voting interest or has the power to sell 

or direct the sale of 25 percent or more 

of a class of voting interest; or, in the 

case of a partnership, has the right to 

receive upon dissolution, or has 

contributed, 25 percent or more of the 

capital. 

Legal identifier system means an LEI 

utility conforming with the 

requirements of this section that issues 

or is capable of issuing an LEI 

conforming with the requirements of 

this section, and is capable of 

maintaining LEI reference data as 

required by this section. 

Level one reference data means the 

minimum information needed to 

identify, on a verifiable basis, the legal 

entity to which a legal entity identifier 

is assigned. Level one reference data 

shall include, without limitation, all of 

the data elements included in ISO 

Standard 17442. Examples of level one 

reference data include, without 

limitation, a legal entity’s official legal 

name, its place of incorporation, and the 

address and contact information of its 

corporate headquarters. 

Level two reference data means 

information concerning the corporate 

affiliations or company hierarchy 

relationships of the legal entity to which 

a legal entity identifier is assigned. 

Examples of level two reference data 

include, without limitation, the identity 

of the legal entity’s ultimate parent. 

Parent means, for the purposes of 

§ 45.6, a legal person that controls a 

counterparty to a swap required to be 

reported pursuant to this section, or that 

controls a legal entity identified or to be 

identified by a legal entity identifier 

provided by the legal identifier system 

designated by the Commission pursuant 

to this section. 

Self-registration means submission by 

a legal entity of its own level one or 

level two reference data, as applicable. 

Third-party registration means 

submission of level one or level two 

reference data, as applicable, for a legal 

entity that is or may become a swap 

counterparty, made by an entity or 

organization other than the legal entity 

identified by the submitted reference 

data. Examples of third-party 

registration include, without limitation, 

submission by a swap dealer or major 

swap participant of level one or level 

two reference data for its swap 

counterparties, and submission by a 

national numbering agency, national 

registration agency, or data service 

provider of level one or level two 

reference data concerning legal entities 

with respect to which the agency or 

service provider maintains information. 

Ultimate parent means, for the 

purposes of § 45.6, a legal person that 

controls a counterparty to a swap 

required to be reported pursuant to this 

section, or that controls a legal entity 

identified or to be identified by a legal 

entity identifier provided by the legal 

identifier system designated by the 

Commission pursuant to this section, 

and that itself has no parent. 

(b) International standard for the legal 

entity identifier. The legal entity 

identifier used in all recordkeeping and 

all swap data reporting required by this 

part, following designation of the legal 

entity identifier system as provided in 

paragraph (c)(2) of this section, shall be 

issued under, and shall conform to, ISO 

Standard 17442, Legal Entity Identifier 

(LEI), issued by the International 

Organisation for Standardisation. 

(b) Technical principles for the legal 

entity identifier. The legal entity 

identifier used in all recordkeeping and 

all swap data reporting required by this 

part shall conform to the technical 

principles set forth in paragraphs (b)(1) 

through (6) of this section. 

(1) Uniqueness. Only one legal entity 

identifier shall be assigned to any legal 

entity, and no legal entity identifier 

shall ever be reused. Each entity within 

a corporate organization or group 

structure that acts as a counterparty in 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2205 

any swap shall have its own legal entity 

identifier. 

(2) Neutrality. To ensure the 

persistence of the legal entity identifier, 

it shall have a format consisting of a 

single data field, and shall contain 

either no embedded intelligence or as 

little embedded intelligence as 

practicable. Entity characteristics of 

swap counterparties identified by legal 

entity identifiers shall constitute 

separate elements within a reference 

data system as set forth in paragraphs 

(a), (c)(2), (d), and (e) of this section. 

(3) Reliability. The legal entity 

identifier shall be supported by a 

trusted and auditable method of 

verifying the identity of the legal entity 

to which it is assigned, both initially 

and at appropriate intervals thereafter. 

The issuer of legal entity identifiers 

shall maintain minimum reference or 

identification data sufficient to verify 

that a user has been correctly identified. 

Issuance and maintenance of the legal 

entity identifier, and storage and 

maintenance of all associated data, shall 

involve robust quality assurance 

practices and system safeguards. At a 

minimum, such system safeguards shall 

include the system safeguards applied 

to swap data repositories by part 49 of 

this chapter. 

(4) Open Source. The schema for the 

legal entity identifier shall have an open 

standard that ensures to the greatest 

extent practicable that the legal entity 

identifier is compatible with existing 

automated systems of financial market 

infrastructures, market participants, and 

regulators. 

(5) Extensibility. The legal entity 

identifier shall be capable of becoming 

the single international standard for 

unique identification of legal entities 

across the financial sector on a global 

basis. Therefore, it shall be sufficiently 

extensible to cover all existing and 

potential future legal entities of all types 

that may be counterparties to swap, 

OTC derivative, or other financial 

transactions; that may be involved in 

any aspect of the financial issuance and 

transactions process; or that may be 

subject to required due diligence by 

financial sector entities. 

(6) Persistence. The legal entity 

identifier assigned to an entity shall 

persist despite all corporate events. 

When a corporate event results in a new 

entity, the new entity shall receive a 

new legal entity identifier, while the 

previous legal entity identifier or 

identifiers continue to identify the 

predecessor entity or entities in the 

record. 

(c) Governance principles for the legal 

entity identifier. The legal entity 

identifier used in all recordkeeping and 

all swap data reporting required by this 

part shall conform to the governance 

principles set forth in paragraphs (c)(1) 

through (4) of this section. 

(1) International governance. The 

issuance of the legal entity identifier 

used pursuant to this section, and any 

legal entity identifier utility formed for 

the purpose of issuing legal entity 

identifiers that are used pursuant to this 

section, shall be subject to international 

supervision as follows: 

(i) With respect to operations, by a 

governance structure that includes the 

Commission and other financial 

regulators in any jurisdiction requiring 

use of the legal entity identifier 

pursuant to applicable law. The 

governance structure shall have 

authority sufficient to ensure, and shall 

ensure, that issuance and maintenance 

of the legal entity identifier system 

adheres on an ongoing basis to the 

principles set forth in this section. 

(ii) With respect to adherence to ISO 

Standard 17442, by the International 

Organisation for Standardisation. 

(2) Reference data access. Access to 

reference data associated with the legal 

entity identifier shall enable use of the 

legal entity identifier as a public good, 

while respecting applicable law 

regarding data confidentiality. 

Accordingly: 

(i) Reference data associated with the 

legal entity identifier that is public 

under applicable law shall be available 

publicly and free of charge. Such data 

shall include, without limitation, level 

one reference data (i.e., the minimum 

reference data needed to verify the 

identity of the legal entity receiving 

each legal entity identifier), and a 

current directory of all issued legal 

entity identifiers. 

(ii) Collection and maintenance of, 

and access to, reference data associated 

with the legal entity identifier shall 

comply with applicable laws on data 

protection and confidentiality. 

(3) Non-profit operation and funding. 

Funding of both start-up and ongoing 

operation of the legal entity identifier 

system, including, without limitation, 

any legal entity identifier utility formed 

for the purpose of issuing legal entity 

identifiers that are used pursuant to this 

section, shall be conducted on a nonprofit, reasonable cost-recovery basis, 

and shall be subject to international 

governance as provided in paragraph 

(c)(1) of this section. 

(4) Unbundling and non-restricted 

use. Issuance of the legal entity 

identifier shall not be tied to other 

services, if any, offered by the issuer, 

and information concerning the 

issuance process for new legal entity 

identifiers must be available publicly 

and free of charge. Restrictions shall not 

be imposed on use of the legal entity 

identifier by any person in its own 

products and services, or on use of the 

legal entity identifier and associated 

reference data by any financial 

regulator. Any intellectual property 

created as part of the legal entity 

identifier system shall be treated in a 

manner consistent with open source 

principles. 

(5) Commercial advantage 

prohibition. The legal entity identifier 

utility providing legal entity identifiers 

for use in compliance with this part 

shall not make any commercial or 

business use (other than the operation of 

the utility) of any reference data 

associated with the legal entity 

identifier that is not available to the 

public free of charge. This restriction 

shall also apply to any entity or person 

that participates in the utility, that is 

legally or otherwise affiliated or 

associated with the utility, or that 

provides third-party services to the 

utility or to any component, partner, 

affiliate, or associate thereof. 

(e) Designation of the legal entity 

identifier system. (1) The Commission 

shall determine, as provided in 

paragraphs (e)(1)(i) through (iii) of this 

section, whether a legal entity identifier 

system that satisfies the requirements 

set forth in this section is available to 

provide legal entity identifiers for 

registered entities and swap 

counterparties required to comply with 

this part. 

(i) In making this determination, the 

Commission shall consider, without 

limitation, the following factors: 

(A) Whether the LEI provided by the 

LEI utility is issued under, and 

conforms to, ISO Standard 17442, Legal 

Entity Identifier (LEI). 

(B) Whether the LEI provided by the 

LEI utility complies with all of the 

technical principles set forth in this 

rule. 

(C) Whether the LEI utility complies 

with all of the governance principles set 

forth in this rule. 

(D) Whether the LEI utility has 

demonstrated that it in fact can provide 

LEIs complying with this section for 

identification of swap counterparties in 

swap data reporting commencing as of 

the compliance dates set forth in § 45.5. 

(E) The acceptability of the LEI utility 

to industry participants required to use 

the LEI in complying with this part. 

(ii) In making this determination, the 

Commission shall consider all 

candidates meeting the criteria set forth 

in paragraph (e)(1)(i) of this section, but 

shall not consider any candidate that 

does not demonstrate that it in fact can 

provide LEIs for identification of swap 

mstockstill on DSK4VPTVN1PROD with RULES2

2206 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

counterparties in swap data reporting 

commencing as of the compliance dates 

set forth in this part. 

(iii) The Commission shall make this 

determination at a time it believes is 

sufficiently prior to the compliance 

dates set forth this part to enable 

issuance of LEIs far enough in advance 

of those compliance dates to enable 

compliance with this part. 

(2) If the Commission determines 

pursuant to paragraph (e)(1) of this 

section that such a legal entity identifier 

system is available, the Commission 

shall designate the legal entity identifier 

system as the provider of legal entity 

identifiers to be used in recordkeeping 

and swap data reporting pursuant to this 

part, by means of a Commission order 

that is published in the Federal Register 

and on the Web site of the Commission, 

as soon as practicable after such 

determination is made. The order shall 

include notice of this designation, the 

contact information of the LEI utility, 

and information concerning the 

procedure and requirements for 

obtaining legal entity identifiers. 

(3) If the Commission determines 

pursuant to paragraph (e)(1) of this 

section that such a legal entity identifier 

system is not yet available, the 

Commission shall publish notice of the 

determination in the Federal Register 

and on the Web site of the Commission, 

as soon as practicable after the 

determination is made. If the 

Commission later determines, pursuant 

to paragraphs (e)(1)(i) and (ii) of this 

section, that such a legal entity 

identifier system has become available, 

the Commission shall designate the 

legal entity identifier system as the 

provider of legal entity identifiers to be 

used in recordkeeping and swap data 

reporting pursuant to this part, by 

means of a Commission order that is 

published in the Federal Register and 

on the Web site of the Commission, as 

soon as practicable after such 

determination is made. The order shall 

include notice of this designation, the 

contact information of the LEI utility, 

and information concerning the 

procedure and requirements for 

obtaining legal entity identifiers. 

(e) Reference data reporting. (1) 

Reporting of level one reference data. 

Level one reference data for each 

counterparty to any swap subject to the 

jurisdiction of the Commission shall be 

reported, by means of self-registration, 

third-party registration, or both, into a 

public level one reference database 

maintained by the issuer of the legal 

entity identifier designated by the 

Commission pursuant to paragraph (d) 

of this section. Such level one reference 

data shall be reported at a time 

sufficient to ensure that the 

counterparty’s legal entity identifier is 

available for inclusion in recordkeeping 

and swap data reporting as required by 

this section. All subsequent changes and 

corrections to level one reference data 

previously reported shall be reported to 

the issuer, by means of self-registration, 

third-party registration, or both, as soon 

as technologically practicable following 

occurrence of any such change or 

discovery of the need for a correction. 

(2) Reporting of level two reference 

data. (i) Level two reference data for 

each counterparty to any swap subject 

to the jurisdiction of the Commission, 

consisting of the identity of the 

counterparty’s ultimate parent, shall be 

reported, by means of self-registration, 

third-party registration, or both, into a 

level two reference database. Where 

applicable law forbids such reporting, 

that fact and the citation of the law in 

question shall be reported in place of 

the data to which such law applies. 

(ii) All non-public level two reference 

data reported to the level two reference 

database shall be confidential, nonpublic, and available only to financial 

regulators in any jurisdiction requiring 

use of the legal entity identifier 

pursuant to applicable law. 

(iii) The Commission shall determine 

the location of the level two reference 

database by means of a Commission 

order that is published in the Federal 

Register and on the Web site of the 

Commission, as soon as practicable after 

such determination is made. The order 

shall include notice of the location of 

the level two reference database, and 

information concerning the procedure 

and requirements for reporting level two 

reference data to the database. 

(iv) The obligation to report level two 

reference data does not apply until the 

Commission has determined the 

location of the level two reference 

database as provided in paragraph 

(e)(2)(iii) of this section. 

(v) After the Commission determines 

the location of the level two reference 

database pursuant to paragraph 

(e)(2)(iii) of this section, required level 

two reference data shall be reported at 

a time sufficient to ensure that it is 

included in the database when the 

counterparty’s legal entity identifier is 

included in recordkeeping and swap 

data reporting as required by this 

section. 

(vi) All subsequent changes and 

corrections to required level two 

reference data previously reported shall 

be reported into the level two reference 

database, by means of self-registration, 

third-party registration, or both, as soon 

as technologically practicable following 

occurrence of any such change or 

discovery of the need for a correction. 

(f) Use of the legal entity identifier 

system by registered entities and swap 

counterparties. (1) When a legal entity 

identifier system has been designated by 

the Commission pursuant to paragraph 

(e) of this section, each registered entity 

and swap counterparty shall use the 

legal entity identifier provided by that 

system in all recordkeeping and swap 

data reporting pursuant to this part. 

(2) Before a legal entity identifier 

system has been designated by the 

Commission, each registered entity and 

swap counterparty shall use a substitute 

counterparty identifier created and 

assigned by a swap data repository in all 

recordkeeping and swap data reporting 

pursuant to this part, as follows: 

(i) When a swap involving one or 

more counterparties for which no 

substitute counterparty identifier has 

yet been created and assigned is 

reported to a swap data repository, the 

swap data repository shall create a 

substitute counterparty identifier for 

each such counterparty as provided in 

paragraph (f)(2)(ii) of this section, and 

assign the substitute counterparty 

identifier to that counterparty, as soon 

as technologically practicable after that 

swap is first reported to the swap data 

repository. In lieu of creating a 

substitute identifier as provided in 

paragraph (f)(2)(ii), the swap data 

repository may assign a unique 

substitute identifier provided by a third 

party service provider, if such identifier 

complies with all of the principles for 

LEIs set forth in this part. 

(ii) Each such substitute counterparty 

identifier created by a swap data 

repository shall consist of a single data 

field that contains two components, 

including: 

(A) The unique alphanumeric code 

assigned to the swap data repository by 

the Commission for the purpose of 

identifying the swap data repository; 

and 

(B) An alphanumeric code generated 

and assigned to that counterparty by the 

automated systems of the swap data 

repository, which shall be unique with 

respect to all such substitute 

counterparty identifier codes generated 

and assigned by that swap data 

repository. 

(iii) The swap data repository shall 

transmit each substitute counterparty 

identifier thus created to each 

counterparty to the swap, to each other 

registered entity associated with the 

swap, to each registered entity or swap 

counterparty who has made any report 

of any swap data to the swap data 

repository, and to each swap data 

repository registered with the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2207 

Commission, as soon as technologically 

practicable after creation and 

assignment of the substitute 

counterparty identifier. 

(iv) Once any swap data repository 

has created and assigned such a 

substitute counterparty identifier to a 

swap counterparty and has transmitted 

it as required by paragraph (f)(2)(iii) of 

this section, all registered entities and 

swap counterparties shall use that 

substitute counterparty identifier to 

identify that counterparty in all swap 

data recordkeeping and reporting, until 

such time as the Commission designates 

a legal entity identifier system pursuant 

to paragraph (e) of this section. 

(3) For swaps reported pursuant to 

this part prior to Commission 

designation of a legal entity identifier 

system, after such designation each 

swap data repository shall map the legal 

entity identifiers for the counterparties 

to the substitute counterparty identifiers 

in the record for each such swap. 

(4) Prior to October 15, 2012, if a legal 

entity identifier system has been 

designated by the Commission as 

provided in this section, but a reporting 

counterparty’s automated systems are 

not yet prepared to include legal entity 

identifiers in recordkeeping and swap 

data reporting pursuant to this part, the 

counterparty shall be excused from 

complying with paragraph (f)(1) of this 

section, and shall instead comply with 

paragraph (f)(2) of this section, until its 

automated systems are prepared with 

respect to legal entity identifiers, at 

which time it must commence 

compliance with paragraph (f)(1) of this 

section. This paragraph shall have no 

effect on or after October 15, 2012. 

§ 45.7 Unique product identifiers. 

Each swap subject to the jurisdiction 

of the Commission shall be identified in 

all recordkeeping and all swap data 

reporting pursuant to this part by means 

of a unique product identifier and 

product classification system as 

specified in this section. Each swap 

sufficiently standardized to receive a 

unique product identifier shall be 

identified by a unique product 

identifier. Each swap not sufficiently 

standardized for this purpose shall be 

identified by its description using the 

product classification system. 

(a) Requirements for the unique 

product identifier and product 

classification system. The unique 

product identifier and product 

classification system shall identify and 

describe the swap asset class and the 

sub-type within that asset class to which 

the swap belongs, and the underlying 

product for the swap, with sufficient 

distinctiveness and specificity to enable 

the Commission and other financial 

regulators to fulfill their regulatory 

responsibilities and to assist in real time 

reporting of swaps as provided in the 

Act and part 43 of this chapter. The 

level of distinctiveness and specificity 

which the unique product identifier will 

provide shall be determined separately 

for each swap asset class. 

(b) Designation of the unique product 

identifier and product classification 

system. (1) The Commission shall 

determine when a unique product 

identifier and product classification 

system that is acceptable to the 

Commission and satisfies the 

requirements set forth in this section is 

available for use in compliance with 

this section. 

(2) When the Commission determines 

that such a unique product identifier 

and product classification system is 

available, the Commission shall 

designate the unique product identifier 

and product classification system to be 

used in recordkeeping and swap data 

reporting pursuant to this part, by 

means of a Commission order that is 

published in the Federal Register and 

on the Web site of the Commission, as 

soon as practicable after such 

determination is made. The order shall 

include notice of this designation, the 

contact information of the issuer of such 

unique product identifiers, and 

information concerning the procedure 

and requirements for obtaining unique 

product identifiers and using the 

product classification system. 

(c) Use of the unique product 

identifier and product classification 

system by registered entities and swap 

counterparties. (1) When a unique 

product identifier and product 

classification system has been 

designated by the Commission pursuant 

to paragraph (b) of this section, each 

registered entity and swap counterparty 

shall use the unique product identifier 

and product classification system in all 

recordkeeping and swap data reporting 

pursuant to this part. 

(2) Before a unique product identifier 

and product classification system has 

been designated by the Commission, 

each registered entity and swap 

counterparty shall use the internal 

product identifier or product 

description used by the swap data 

repository to which a swap is reported 

in all recordkeeping and swap data 

reporting pursuant to this part. 

§ 45.8 Determination of which 

counterparty must report. 

The determination of which 

counterparty is the reporting 

counterparty for a swap shall be made 

as provided in this section. 

(a) If only one counterparty is a swap 

dealer, the swap dealer shall be the 

reporting counterparty. 

(b) If neither counterparty is a swap 

dealer, and only one counterparty is a 

major swap participant, the major swap 

participant shall be the reporting 

counterparty. 

(c) If both counterparties are non-SD/ 

MSP counterparties, and only one 

counterparty is a financial entity as 

defined in CEA section 2(h)(7)(C), the 

counterparty that is a financial entity 

shall be the reporting counterparty. 

(d) If both counterparties are swap 

dealers, or both counterparties are major 

swap participants, or both 

counterparties are non-SD/MSP 

counterparties that are financial entities 

as defined in CEA section 2(h)(7)(C), or 

both counterparties are non-SD/MSP 

counterparties and neither counterparty 

is a financial entity as defined in CEA 

section 2(h)(7)(C): 

(1) For a swap executed on or 

pursuant to the rules of a swap 

execution facility or designated contract 

market, the counterparties shall agree 

which counterparty shall be the 

reporting counterparty. The 

counterparties shall make this 

agreement after the swap execution 

facility or designated contract market 

notifies the counterparties, as provided 

in paragraph (h)(2) of this section, that 

paragraph (d) of this section applies to 

them, and not later than the end of the 

first business day following the date of 

execution of the swap. After this 

agreement is reached, the reporting 

counterparty shall report to the swap 

data repository that it is the reporting 

counterparty. 

(2) For an off-facility swap, the 

counterparties shall agree as one term of 

their swap which counterparty shall be 

the reporting counterparty. 

(e) Notwithstanding the provisions of 

paragraphs (a) through (d) of this 

section, if both counterparties to a swap 

are non-SD/MSP counterparties and 

only one counterparty is a U.S. person, 

that counterparty shall be the reporting 

counterparty. 

(f) Notwithstanding the provisions of 

paragraphs (a) through (e) of this 

section, if neither counterparty to a 

swap is a U.S. person, but the swap is 

executed on a swap execution facility or 

designated contract market or otherwise 

executed in the United States, or is 

cleared by a derivatives clearing 

organization: 

(1) For such a swap executed on or 

pursuant to the rules of a swap 

execution facility or designated contract 

market, the counterparties shall agree 

which counterparty shall be the 

reporting counterparty. The 

mstockstill on DSK4VPTVN1PROD with RULES2

2208 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

counterparties shall make this 

agreement after the swap execution 

facility or designated contract market 

notifies the counterparties, as provided 

in paragraph (h)(2) of this section, that 

neither counterparty is a U.S. person, 

and not later than the end of the first 

business day following the date of 

execution of the swap. After this 

agreement is reached, the reporting 

counterparty shall report to the swap 

data repository that it is the reporting 

counterparty. 

(2) For an off-facility swap, the 

counterparties shall agree as one term of 

their swap which counterparty shall be 

the reporting counterparty. 

(g) If a reporting counterparty selected 

pursuant to paragraphs (a) through (f) of 

this section ceases to be a counterparty 

to a swap due to an assignment or 

novation, the reporting counterparty for 

reporting of required swap continuation 

data following the assignment or 

novation shall be selected from the two 

current counterparties as provided in 

paragraphs (g)(1) through (4) of this 

section. 

(1) If only one counterparty is a swap 

dealer, the swap dealer shall be the 

reporting counterparty and shall fulfill 

all counterparty reporting obligations. 

(2) If neither counterparty is a swap 

dealer, and only one counterparty is a 

major swap participant, the major swap 

participant shall be the reporting 

counterparty and shall fulfill all 

counterparty reporting obligations. 

(3) If both counterparties are non-SD/ 

MSP counterparties, and only one 

counterparty is a U.S. person, that 

counterparty shall be the reporting 

counterparty and shall fulfill all 

counterparty reporting obligations. 

(4) In all other cases, the counterparty 

that replaced the previous reporting 

counterparty by reason of the 

assignment or novation shall be the 

reporting counterparty, unless otherwise 

agreed by the counterparties. 

(h) For all swaps executed on or 

pursuant to the rules of a swap 

execution facility or designated contract 

market, the rules of the swap execution 

facility or designated contract market 

must require each swap counterparty to 

provide sufficient information to the 

swap execution facility or designated 

contract market to enable the swap 

execution facility or designated contract 

market to report all swap creation data 

as provided in this part. 

(1) To achieve this, the rules of the 

swap execution facility or designated 

contract market must require each 

market participant placing an order with 

respect to any swap traded on the swap 

execution facility or designated contract 

market to include in the order, without 

limitation: 

(i) The legal entity identifier of the 

market participant placing the order, if 

available. 

(ii) A yes/no indication of whether the 

market participant is a swap dealer with 

respect to the product with respect to 

which the order is placed. 

(iii) A yes/no indication of whether 

the market participant is a major swap 

participant with respect to the product 

with respect to which the order is 

placed. 

(iv) A yes/no indication of whether 

the market participant is a financial 

entity as defined in CEA section 

(2)(h)(7)(C). 

(v) A yes/no indication of whether the 

market participant is a U.S. person. 

(vi) If applicable, an indication that 

the market participant will elect the 

clearing requirement exception in CEA 

section (2)(h)(7) for any swap resulting 

from the order. 

(vii) If the swap will be allocated: 

(A) An indication that the swap will 

be allocated. 

(B) The legal entity identifier of the 

agent. 

(C) An indication of whether the swap 

is a post-allocation swap. 

(D) If the swap is a post-allocation 

swap, the unique swap identifier of the 

original transaction between the 

reporting counterparty and the agent. 

(2) To achieve this, the swap 

execution facility or designated contract 

market must use the information 

obtained pursuant to paragraph (h)(1) of 

this section to identify the counterparty 

that is the reporting counterparty 

pursuant to the CEA and this section, 

wherever possible. If the swap 

execution facility or designated contract 

market cannot identify the reporting 

counterparty from the information 

available to it as specified in paragraph 

(h) of this section, the swap execution 

facility or designated contract market 

shall: 

(i) Notify each counterparty, as soon 

as technologically practicable after 

execution of the swap, that it cannot 

identify whether that counterparty is the 

reporting counterparty, and, if 

applicable, that neither counterparty is 

a U.S. person; and 

(ii) Transmit to each counterparty the 

LEI (or substitute identifier as provided 

in this section) of the other 

counterparty. 

§ 45.9 Third-party facilitation of data 

reporting. 

Registered entities and swap 

counterparties required by this part to 

report required swap creation data or 

required swap continuation data, while 

remaining fully responsible for 

reporting as required by this part, may 

contract with third-party service 

providers to facilitate reporting. 

§ 45.10 Reporting to a single swap data 

repository. 

All swap data for a given swap must 

be reported to a single swap data 

repository, which shall be the swap data 

repository to which the first report of 

required swap creation data is made 

pursuant to this part. 

(a) Swaps executed on a swap 

execution facility or designated contract 

market. To ensure that all swap data for 

a swap executed on or pursuant to the 

rules of a swap execution facility or 

designated contract market is reported 

to a single swap data repository: 

(1) The swap execution facility or 

designated contract market that reports 

required swap creation data as required 

by § 45.3 shall report all such data to a 

single swap data repository. As soon as 

technologically practicable after 

execution, the swap execution facility or 

designated contract market shall 

transmit to both counterparties to the 

swap, and to the derivatives clearing 

organization, if any, that will clear the 

swap, both: 

(i) The identity of the swap data 

repository to which required swap 

creation data is reported by the swap 

execution facility or designated contract 

market; and 

(ii) The unique swap identifier for the 

swap, created pursuant to § 45.5. 

(2) Thereafter, all required swap 

creation data and all required swap 

continuation data reported for the swap 

reported by any registered entity or 

counterparty shall be reported to that 

same swap data repository (or to its 

successor in the event that it ceases to 

operate, as provided in part 49 of this 

chapter). 

(b) Off-facility swaps with a swap 

dealer or major swap participant 

reporting counterparty. To ensure that 

all swap data for such swaps is reported 

to a single swap data repository: 

(1) If the reporting counterparty 

reports primary economic terms data to 

a swap data repository as required by 

§ 45.3: 

(i) The reporting counterparty shall 

report primary economic terms data to 

a single swap data repository. 

(ii) As soon as technologically 

practicable after execution, but no later 

than as required pursuant to § 45.3, the 

reporting counterparty shall transmit to 

the other counterparty to the swap both 

the identity of the swap data repository 

to which primary economic terms data 

is reported by the reporting 

counterparty, and the unique swap 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2209 

identifier for the swap created pursuant 

to § 45.5. 

(iii) If the swap will be cleared, the 

reporting counterparty shall transmit to 

the derivatives clearing organization at 

the time the swap is submitted for 

clearing both the identity of the swap 

data repository to which primary 

economic terms data is reported by the 

reporting counterparty, and the unique 

swap identifier for the swap created 

pursuant to § 45.5. 

(2) If the reporting counterparty is 

excused from reporting primary 

economic terms data as provided in 

§ 45.3(b) or (c): 

(i) Paragraph (b)(1) of this section 

shall not apply. 

(ii) At the time the swap is submitted 

for clearing, the reporting counterparty 

shall transmit to the derivatives clearing 

organization the unique swap identifier 

for the swap created pursuant to § 45.5, 

and notify the derivatives clearing 

organization that the reporting 

counterparty has not reported any 

required swap creation data for the 

swap to a swap data repository. 

(iii) The derivatives clearing 

organization shall report all required 

swap creation data for the swap to a 

single swap data repository. As soon as 

technologically practicable after 

clearing, the derivatives clearing 

organization shall transmit to both 

counterparties to the swap the identity 

of the swap data repository to which 

required swap creation data is reported 

by the derivatives clearing organization, 

and shall transmit to the non-reporting 

counterparty the unique swap identifier 

for the swap. 

(3) Thereafter, all required swap 

creation data and all required swap 

continuation data reported for the swap, 

by any registered entity or counterparty, 

shall be reported to the swap data 

repository to which swap data has been 

reported pursuant to paragraph (b)(1) or 

(b)(2) of this section (or to its successor 

in the event that it ceases to operate, as 

provided in part 49 of this chapter). 

(c) Off-facility swaps with a non-SD/ 

MSP reporting counterparty. To ensure 

that all swap data for such swaps is 

reported to a single swap data 

repository: 

(1) If the reporting counterparty 

reports primary economic terms data to 

a swap data repository as required by 

§ 45.3: 

(i) The reporting counterparty shall 

report primary economic terms data to 

a single swap data repository. 

(ii) As soon as technologically 

practicable after execution, but no later 

than as required pursuant to § 45.3, the 

reporting counterparty shall transmit to 

the other counterparty to the swap the 

identity of the swap data repository to 

which primary economic terms data was 

reported by the reporting counterparty. 

(iii) If the swap will be cleared, the 

reporting counterparty shall transmit to 

the derivatives clearing organization at 

the time the swap is submitted for 

clearing the identity of the swap data 

repository to which primary economic 

terms data was reported by the reporting 

counterparty. 

(2) If the reporting counterparty will 

be excused from reporting primary 

economic terms data as provided in 

§ 45.3(b) or (c): 

(i) Paragraph (c)(1) of this section 

shall not apply. 

(ii) At the time the swap is submitted 

for clearing, the reporting counterparty 

shall notify the derivatives clearing 

organization that the reporting 

counterparty has not reported any 

required swap creation data for the 

swap to a swap data repository. 

(iii) The derivatives clearing 

organization shall report all required 

swap creation data for the swap to a 

single swap data repository. As soon as 

technologically practicable after 

clearing, the derivatives clearing 

organization shall transmit to both 

counterparties to the swap the identity 

of the swap data repository to which 

required swap creation data is reported 

by the derivatives clearing organization. 

(3) The swap data repository to which 

the swap is reported as provided in 

paragraph (c) of this section shall 

transmit the unique swap identifier 

created pursuant to § 45.5 to both 

counterparties and to the derivatives 

clearing organization, if any, as soon as 

technologically practicable after 

creation of the unique swap identifier. 

(4) Thereafter, all required swap 

creation data and all required swap 

continuation data reported for the swap, 

by any registered entity or counterparty, 

shall be reported to the swap data 

repository to which swap data has been 

reported pursuant to paragraph (c)(1) or 

(2) of this section (or to its successor in 

the event that it ceases to operate, as 

provided in part 49 of this chapter). 

§ 45.11 Data reporting for swaps in a swap 

asset class not accepted by any swap data 

repository. 

(a) Should there be a swap asset class 

for which no swap data repository 

registered with the Commission 

currently accepts swap data, each 

registered entity or counterparty 

required by this part to report any 

required swap creation data or required 

swap continuation data with respect to 

a swap in that asset class must report 

that same data to the Commission. 

(b) Data reported to the Commission 

pursuant to this section shall be 

reported at times announced by the 

Commission and in an electronic file in 

a format acceptable to the Commission. 

(c) Delegation of authority to the Chief 

Information Officer: The Commission 

hereby delegates to its Chief Information 

Officer, until the Commission orders 

otherwise, the authority set forth in 

paragraph (c) of this section, to be 

exercised by the Chief Information 

Officer or by such other employee or 

employees of the Commission as may be 

designated from time to time by the 

Chief Information Officer. The Chief 

Information Officer may submit to the 

Commission for its consideration any 

matter which has been delegated in this 

paragraph. Nothing in this paragraph 

prohibits the Commission, at its 

election, from exercising the authority 

delegated in this paragraph. The 

authority delegated to the Chief 

Information Officer by paragraph (c) of 

this section shall include: 

(1) The authority to determine the 

manner, format, coding structure, and 

electronic data transmission standards 

and procedures acceptable to the 

Commission for the purposes of 

paragraphs (a) and (b) of this section. 

(2) The authority to determine 

whether the Commission may permit or 

require use by reporting entities or 

counterparties in reporting pursuant to 

this section of one or more particular 

data standards (such as FIX, FpML, ISO 

20022, or some other standard), in order 

to accommodate the needs of different 

communities of users. 

(3) The dates and times at which 

required swap creation data or required 

swap continuation data shall be 

reported pursuant to this section. 

(d) The Chief Information Officer 

shall publish from time to time in the 

Federal Register and on the Web site of 

the Commission the format, data 

schema, electronic data transmission 

methods and procedures, and dates and 

times for reporting acceptable to the 

Commission with respect to swap data 

reporting pursuant to this section. 

§ 45.12 Voluntary supplemental reporting 

(a) For purposes of this section, the 

term voluntary, supplemental report 

means any report of swap data to a swap 

data repository that is not required to be 

made pursuant to this part or any other 

part in this chapter. 

(b) A voluntary, supplemental report 

may be made only by a counterparty to 

the swap in connection with which the 

voluntary, supplemental report is made, 

or by a third-party service provider 

acting on behalf of a counterparty to the 

swap. 

mstockstill on DSK4VPTVN1PROD with RULES2

2210 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

(c) A voluntary, supplemental report 

may be made either to the swap data 

repository to which all required swap 

creation data and all required swap 

continuation data is reported for the 

swap pursuant to §§ 45.3 and 45.10, or 

to a different swap data repository. 

(d) A voluntary, supplemental report 

must contain: 

(1) An indication that the report is a 

voluntary, supplemental report. 

(2) The unique swap identifier created 

pursuant to §§ 45.5 and 45.9. Therefore, 

no voluntary, supplemental report may 

be made until after the unique swap 

identifier has been created pursuant to 

§§ 45.5 and 45.9 and has been 

transmitted to the counterparty making 

the voluntary, supplemental report. 

(3) The identity of the swap data 

repository to which all required swap 

creation data and all required swap 

continuation data is reported for the 

swap pursuant to §§ 45.3 and 45.10, if 

the voluntary supplemental report is 

made to a different swap data 

repository. 

(4) The legal entity identifier (or 

substitute identifier) required by § 45.6 

for the counterparty making the 

voluntary, supplemental report. 

(5) If applicable, an indication that the 

voluntary, supplemental report is made 

pursuant to the laws or regulations of 

any jurisdiction outside the United 

States. 

(e) If a counterparty that has made a 

voluntary, supplemental report 

discovers any errors in the swap data 

included in the voluntary, supplemental 

report, the counterparty must report a 

correction of each such error to the 

swap data repository to which the 

voluntary, supplemental report was 

made, as soon as technologically 

practicable after discovery of any such 

error. 

§ 45.13 Required data standards. 

(a) Data maintained and furnished to 

the commission by swap data 

repositories. A swap data repository 

shall maintain all swap data reported to 

it in a format acceptable to the 

Commission, and shall transmit all 

swap data requested by the Commission 

to the Commission in an electronic file 

in a format acceptable to the 

Commission. 

(b) Data reported to swap data 

repositories. In reporting swap data to a 

swap data repository as required by this 

part, each reporting entity or 

counterparty shall use the facilities, 

methods, or data standards provided or 

required by the swap data repository to 

which the entity or counterparty reports 

the data. A swap data repository may 

permit reporting entities and 

counterparties to use various facilities, 

methods, or data standards, provided 

that its requirements in this regard 

enable it to meet the requirements of 

paragraph (a) of this section with 

respect to maintenance and 

transmission of swap data. 

(c) Delegation of authority to the Chief 

Information Officer. The Commission 

hereby delegates to its Chief Information 

Officer, until the Commission orders 

otherwise, the authority set forth in this 

paragraph (c), to be exercised by the 

Chief Information Officer or by such 

other employee or employees of the 

Commission as may be designated from 

time to time by the Chief Information 

Officer. The Chief Information Officer 

may submit to the Commission for its 

consideration any matter which has 

been delegated in this paragraph (c). 

Nothing in this paragraph prohibits the 

Commission, at its election, from 

exercising the authority delegated in 

this paragraph. The authority delegated 

to the Chief Information Officer by this 

paragraph (c) shall include: 

(1) The authority to determine the 

manner, format, coding structure, and 

electronic data transmission standards 

and procedures acceptable to the 

Commission for the purposes of 

paragraph (a) of this section. 

(2) The authority to determine 

whether the Commission may permit or 

require use by reporting entities or 

counterparties, or by swap data 

repositories, of one or more particular 

data standards (such as FIX, FpML, ISO 

20022, or some other standard), in order 

to accommodate the needs of different 

communities of users, or to enable swap 

data repositories to comply with 

paragraph (a) of this section. 

(d) The Chief Information Officer 

shall publish from time to time in the 

Federal Register and on the Web site of 

the Commission the format, data 

schema, and electronic data 

transmission methods and procedures 

acceptable to the Commission. 

§ 45.14 Reporting of errors and omissions 

in previously reported data. 

(a) Each registered entity and swap 

counterparty required by this part to 

report swap data to a swap data 

repository, to any other registered entity 

or swap counterparty, or to the 

Commission shall report any errors and 

omissions in the data so reported. 

Corrections of errors or omissions shall 

be reported as soon as technologically 

practicable after discovery of any such 

error or omission. With respect to swaps 

for which required swap continuation 

data is reported using the snapshot 

reporting method, reporting 

counterparties fulfill the requirement to 

report errors or omissions in state data 

previously reported by making 

appropriate corrections in their next 

daily report of state data as required by 

this part. 

(b) Each counterparty to a swap that 

is not the reporting counterparty as 

determined pursuant to § 45.8, and that 

discovers any error or omission with 

respect to any swap data reported to a 

swap data repository for that swap, shall 

promptly notify the reporting 

counterparty of each such error or 

omission. Upon receiving such notice, 

the reporting counterparty shall report a 

correction of each such error or 

omission to the swap data repository as 

provided in paragraph (a) of this 

section. 

(c) Unless otherwise approved by the 

Commission, or by the Chief 

Information Officer pursuant to § 45.13, 

each registered entity or swap 

counterparty reporting corrections to 

errors or omissions in data previously 

reported as required by this section 

shall report such corrections in the same 

format as it reported the erroneous or 

omitted data. Unless otherwise 

approved by the Commission, or by the 

Chief Information Officer pursuant to 

§ 45.13, a swap data repository shall 

transmit corrections to errors or 

omission in data previously transmitted 

to the Commission in the same format 

as it transmitted the erroneous or 

omitted data. 

BILLING CODE 6351–01–P 

Appendix 1 to Part 45—Tables of 

Minimum Primary Economic Terms 

Data 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2211 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.003</GPH>
2212 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.004</GPH>
Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2213 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.005</GPH>
2214 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.006</GPH>
Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2215 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.007</GPH>
2216 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.008</GPH>
Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2217 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.009</GPH>
2218 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.010</GPH>
Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2219 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.011</GPH>
2220 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.012</GPH>
Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2221 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.013</GPH>
2222 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.014</GPH>
Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 2223 


mstockstill on DSK4VPTVN1PROD with RULES2ER13JA12.015</GPH>
2224 Federal Register / Vol. 77, No. 9 / Friday, January 13, 2012 / Rules and Regulations 

BILLING CODE 6351–01–C 

Issued in Washington, DC, on December 

20, 2011, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Appendices To Swap Data 

Recordkeeping and Reporting 

Requirements—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 Sommers, Chilton, O’Malia 

and Wetjen voted in the affirmative; no 

Commissioner voted in the negative. 

Appendix 2—Statement of Chairman Gary 

Gensler 

I support the final rule establishing swap 

data recordkeeping and reporting 

requirements for registered entities and 

counterparties involved in swaps 

transactions. The final rule will ensure that 

complete, timely, and accurate data on all 

swaps is available to the Commodity Futures 

Trading Commission and other regulators. 

The final rule requires that data be 

consistently maintained and reported to 

swap data repositories (SDRs) by swap 

execution facilities, designated contract 

markets, derivatives clearing organizations, 

swap dealers, major swap participants, and 

other swap counterparties. It requires 

reporting when the transaction is executed 

and over the lifetime of the swap. 

The rule has a streamlined data reporting 

regime—the entities with the easiest, fastest, 

and cheapest access to the data will report to 

SDRs. It also extends and phases in reporting 

deadlines, particularly for counterparties that 

are not swap dealers or major swap 

participants. 

The rule’s Legal Entity Identifier, Unique 

Swap Identifier and Unique Product 

Identifier regimes will be crucial regulatory 

tools for linking data together across 

counterparties, asset classes, repositories, 

and transactions. They also will improve risk 

management, operational efficiency, and data 

processing for market participants. The rule 

phases in the start of compliance by both 

asset class and counterparty type. 

[FR Doc. 2011–33199 Filed 1–12–12; 8:45 am] 

BILLING CODE 6351–01–P 

mstockstill on DSK4VPTVN1PROD with RULES2