[Federal Register Volume 89, Number 217 (Friday, November 8, 2024)]
[Notices]
[Pages 88829-88838]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25961]



[[Page 88829]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101511; File No. SBSDR-2023-01]


Security-Based Swap Data Repositories; KOR Reporting, Inc.; Order 
Approving Application for Registration as a Security-Based Swap Data 
Repository

November 4, 2024.

I. Introduction

    On January 26, 2023, KOR Reporting, Inc. (``KOR'') filed with the 
Securities and Exchange Commission (``Commission'') an application (the 
``KOR Application'') on Form SDR to register as a security-based swap 
data repository (``SDR'') pursuant to section 13(n)(1) of the 
Securities Exchange Act of 1934 (``Exchange Act'') and 17 CFR 240.13n-1 
(``Rule 13n-1'') thereunder,\1\ and as a securities information 
processor (``SIP'') under section 11A(b) of the Exchange Act.\2\ KOR 
intends to operate as a registered SDR for security-based swap 
(``SBS'') transactions in the equity, credit, and interest rate 
derivatives asset classes. KOR subsequently filed amendments to its 
application on the following dates: August 11, 2023, and February 23, 
2024.\3\
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    \1\ 15 U.S.C. 78m(n)(1); 17 CFR 240.13n-1. A copy of KOR's 
application on Form SDR and non-confidential exhibits thereto are 
available for public viewing on the Commission's website.
    \2\ 15 U.S.C. 78k-1(b).
    \3\ The amendments to KOR's application were filed to update 
certain exhibits, including those addressing the disclosure 
document, financial statements, and fee schedule. Any reference to 
the KOR Application in this order means the January 26, 2023 
application, as amended by the amendments received on August 11, 
2023 and February 23, 2024.
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    Notice of the KOR Application was published in the Federal Register 
for public comment on August 7, 2024,\4\ and the Commission received no 
comment letters in response. As discussed in Parts III and IV below, 
the Commission has carefully reviewed the KOR Application. This order 
grants KOR's application to register as an SDR in the asset classes 
noted above and as a SIP.
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    \4\ Release No. 34-100638 (Aug. 2, 2024), 89 FR 64526 (Aug. 7, 
2024) (``KOR Notice'').
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II. Background

A. SDR Registration, Duties, and Core Principles

    Section 13(n) of the Exchange Act makes it unlawful for any person, 
unless registered with the Commission, directly or indirectly, to make 
use of the mails or any means or instrumentality of interstate commerce 
to perform the functions of an SDR.\5\ To be registered and maintain 
registration, an SDR must comply with certain requirements and core 
principles described in section 13(n), as well as any requirements that 
the Commission may impose by rule or regulation.\6\ In 2015, the 
Commission adopted 17 CFR 240.13n-1 to 13n-12 under the Exchange Act to 
establish Form SDR, the procedures for registration as an SDR, and the 
duties and core principles applicable to an SDR (``SDR Rules'').\7\ The 
Commission provided a temporary exemption from compliance with the SDR 
Rules and also extended exemptions from the provisions of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (``Dodd-Frank 
Act'') \8\ set forth in a Commission order providing temporary 
exemptions and other temporary relief from compliance with certain 
provisions of the Exchange Act concerning security-based swaps, and 
these temporary exemptions expired in 2017.\9\
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    \5\ 15 U.S.C. 78m(n).
    \6\ See id.
    \7\ See Release No. 34-74246 (Feb. 11, 2015), 80 FR 14438, 14438 
(Mar. 19, 2015) (``SDR Adopting Release''). In 2016, the Commission 
subsequently amended 17 CFR 240.13n-4 to address third-party 
regulatory access to SBS data obtained by an SDR. See Release No. 
34-78716 (Aug. 29, 2016), 81 FR 60585 (Sept. 2, 2016).
    \8\ 12 U.S.C. 5301.
    \9\ See Release No. 34-80359 (Mar. 31, 2017), 82 FR 16867 (Apr. 
6, 2017).
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    The Commission also has adopted 17 CFR 242.900 to 909 under the 
Exchange Act (collectively, ``Regulation SBSR''), which governs 
regulatory reporting and public dissemination of security-based swap 
transactions.\10\ Among other things, Regulation SBSR requires each 
registered SDR to register with the Commission as a SIP,\11\ and the 
Form SDR constitutes an application for registration as a SIP, as well 
as an SDR.\12\
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    \10\ Release No. 34-74244 (Feb. 11, 2015), 80 FR 14563 (Mar. 19, 
2015); Release No. 34-78321 (July 14, 2016), 81 FR 53546 (Aug. 12, 
2016). Regulation SBSR and the SDR Rules are referred to 
collectively as the ``SBS Reporting Rules.''
    \11\ See 17 CFR 242.909.
    \12\ See Form SDR, Instruction 2.
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    In 2019, the Commission stated that implementation of the SBS 
Reporting Rules can and should be done in a manner that carries out the 
fundamental policy goals of the SBS Reporting Rules while minimizing 
burdens as much as practicable.\13\ Noting ongoing concerns among 
market participants about incurring unnecessary burdens and the 
Commission's efforts to promote harmonization between the SBS Reporting 
Rules and swap reporting rules, the Commission took the position that, 
for four years following Regulation SBSR's Compliance Date 1 in each 
asset class,\14\ certain actions with respect to the SBS Reporting 
Rules would not provide a basis for a Commission enforcement 
action.\15\ The no-action statement's relevance to KOR's application 
for registration as an SDR and SIP is discussed further below.
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    \13\ Release No. 34-87780 (Dec. 18, 2019), 85 FR 6270, 6347 
(Feb. 4, 2020) (``ANE Adopting Release'').
    \14\ See id. Under Regulation SBSR, the first compliance date 
(``Compliance Date 1'') for affected persons with respect to an SBS 
asset class is the first Monday that is the later of: (i) six months 
after the date on which the first SDR that can accept transaction 
reports in that asset class registers with the Commission; or (ii) 
one month after the compliance date for registration of SBS dealers 
and major SBS participants (``SBS entities''). Id. at 6346. The 
compliance date for registration of SBS entities is Oct. 6, 2021. 
See id. at 6270, 6345.
    \15\ See id. The specific rule provisions of the SBS Reporting 
Rules affected by the no-action statement are discussed in Part 
II.B.
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B. Standard for Registration

    As stated above, to be registered with the Commission as an SDR and 
maintain such registration, an SDR is required to comply with the 
requirements and core principles described in section 13(n) of the 
Exchange Act, as well as with any requirement that the Commission may 
impose by rule or regulation.\16\ In addition, Rule 13n-1(c)(3) under 
the Exchange Act provides that the Commission shall grant the 
registration of an SDR if it finds that the SDR is so organized, and 
has the capacity, to be able to: (i) assure the prompt, accurate, and 
reliable performance of its functions as an SDR; (ii) comply with any 
applicable provisions of the securities laws and the rules and 
regulations thereunder; and (iii) carry out its functions in a manner 
consistent with the purposes of section 13(n) of the Exchange Act and 
the rules and regulations thereunder.\17\ The Commission shall deny the 
registration of an SDR if it does not make any such finding.\18\ 
Similarly, to be registered with the Commission as a SIP, the 
Commission must find that such applicant is so organized, and has the 
capacity, to be able to assure the prompt, accurate, and reliable 
performance of its functions as a SIP, comply with the provisions of 
the Exchange Act and the rules and regulations thereunder, carry out 
its functions in a manner consistent with the purposes of the Exchange 
Act, and, insofar as it is acting as an exclusive

[[Page 88830]]

processor, operate fairly and efficiently.\19\
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    \16\ See 15 U.S.C. 78m(n)(3).
    \17\ 17 CFR 240.13n-1(c)(3).
    \18\ See id.
    \19\ See 15 U.S.C. 78k-1(b)(3).
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    In determining whether an applicant meets the criteria set forth in 
Rule 13n-1(c), the Commission will consider the information reflected 
by the applicant on its Form SDR, as well as any additional information 
obtained from the applicant. For example, Form SDR requires an 
applicant to provide a list of the asset classes for which the 
applicant is collecting and maintaining data or for which it proposes 
to collect and maintain data, a description of the functions that it 
performs or proposes to perform, general information regarding its 
business organization, and contact information.\20\ Obtaining this 
information and other information reflected on Form SDR and the 
exhibits thereto--including the applicant's overall business structure, 
financial condition, track record in providing access to its services 
and data, technological reliability, and policies and procedures to 
comply with its statutory and regulatory obligations--will enable the 
Commission to determine whether to grant or deny an application for 
registration.\21\ Furthermore, the information requested in Form SDR 
will enable the Commission to assess whether the applicant is so 
organized and has the capacity to comply and carry out its functions in 
a manner consistent with the Federal securities laws and the rules and 
regulations thereunder, including the SBS Reporting Rules.\22\
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    \20\ See SDR Adopting Release, supra note 7, at 14459.
    \21\ See id. at 14458.
    \22\ See id. at 14458-59.
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    Consistent with the Commission's no-action statement in the ANE 
Adopting Release,\23\ an entity wishing to register with the Commission 
as an SDR must still submit an application on Form SDR but can address 
the rule provisions included in the no-action statement by discussing 
how the SDR complies with comparable Commodity Futures Trading 
Commission (``CFTC'') requirements.\24\ Accordingly, in such instances 
the Commission will not assess an SDR application for consistency or 
compliance with the rule provisions included in the Commission's no-
action statement. Specifically, the Commission identified the following 
provisions as not providing a basis for an enforcement action against a 
registered SDR for the duration of the relief provided in the 
Commission statement: under Regulation SBSR, aspects of 17 CFR 
242.901(a), 901(c)(2) through (7), 901(d), 901(e), 902, 903(b), 906(a) 
and (b), and 907(a)(1), (a)(3), and (a)(4) through (6); under the SDR 
Rules, aspects of section 13(n)(5)(B) of the Exchange Act and 17 CFR 
240.13n-4(b)(3) thereunder, and aspects of 17 CFR 240.13n-5(b)(1)(iii); 
and under section 11A(b) of the Exchange Act, any provision pertaining 
to SIPs.\25\ Thus, an SDR applicant will not need to include materials 
in its application explaining how it would comply with the provisions 
stated above, and could instead rely on its discussion about how it 
complies with comparable CFTC requirements.\26\ The applicant may 
instead represent in its application that it: (i) is registered with 
the CFTC as a swap data repository; (ii) is in compliance with 
applicable requirements under the swap reporting rules; (iii) satisfies 
the standard for Commission registration of an SDR under Rule 13n-1(c); 
and (iv) intends to rely on the no-action statement included in the ANE 
Adopting Release for the period set forth in the ANE Adopting Release 
with respect to any SBS asset class or classes for which it intends to 
accept transaction reports.\27\
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    \23\ See supra notes 12-14 and accompanying text.
    \24\ See supra note 14.
    \25\ The ANE Adopting Release provides additional discussion of 
the particular aspects of the affected rules that would not provide 
a basis for an enforcement action. See ANE Adopting Release, supra 
note 12, at 6347-48.
    \26\ See id. at 6348.
    \27\ See id. For example, an applicant need not describe in 
Exhibit S its functions as a SIP.
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III. Review of the KOR Application Under SBS Reporting Rules

    As stated above, KOR intends to operate as a registered SDR for the 
equity, credit, and interest rate derivatives asset classes.\28\ In its 
application, KOR represents that it is provisionally registered with 
the CFTC as a swap data repository,\29\ is in compliance with 
applicable requirements under the CFTC reporting rules applicable to a 
registered swap data repository, and intends to rely on the 
Commission's position outlined in the ANE Adopting Release for 
applicable reporting rules and SDR duties for the period set forth 
therein.\30\ Below is a review of the representations made in the 
application materials for the KOR security-based swap data repository 
(``KOR SBSDR'') under the SBS Reporting Rules, taking into account 
KOR's reliance on the Commission's position outlined in the ANE 
Adopting Release.\31\
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    \28\ See Rulebook, Ex. HH, sec. 0.1; see also Form SDR.
    \29\ See 17 CFR 49.3(b) (providing that the CFTC may grant 
provisional registration of a swap data repository if such applicant 
is in substantial compliance with the standards set forth in 17 CFR 
49.3(a)(4) and is able to demonstrate operational capability, real-
time processing, multiple redundancy and robust security controls); 
17 CFR 49.3(a)(4) (setting forth the standard for approval for 
granting registration to a swap data repository).
    \30\ See Form SDR, cover letter from Tara Collier Manuel, Chief 
Compliance Officer and Head of Regulatory Products, KOR Reporting, 
Inc.
    \31\ Capitalized terms not defined in this order are defined in 
the KOR Application.
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A. Organization and Governance

1. Summary of KOR's Application
    KOR is a Delaware corporation and along with its affiliate, KOR 
Financial Inc. (``KOR Financial''), is a wholly owned subsidiary of KOR 
US Holdings, Inc. (``KOR Holdings'').\32\ KOR is governed by a board of 
directors (``KOR Board'').\33\ The KOR Board is composed of at least 
three Directors with a majority being independent Directors and at 
least one director being a ``Public Director'' as defined in applicable 
CFTC regulations.\34\ According to the KOR Rulebook, KOR Board members 
should have the characteristics essential for effectiveness as a member 
of the Board, including but not limited to: (a) integrity, objectivity, 
sound judgment and leadership; (b) the relevant expertise and 
experience required to offer advice and guidance to the Chief Executive 
Officer and other members of senior management; (c) the ability to make 
independent analytical inquiries; (d) the ability to collaborate 
effectively and contribute productively to the Board's discussions and 
deliberations; (e) an understanding of the company's business, strategy 
and challenges; (f) the willingness and ability to devote adequate time 
and effort to Board responsibilities and to serve on Committees at the 
request of the Board; and (g) not being a disqualified person.\35\ The 
KOR Board is composed of individuals selected from the following 
groups: employees of KOR, clients with derivatives industry experience, 
independents, and members of senior management.\36\ According to the 
KOR Application, representatives of market participants, including end-
users, are provided the opportunity to participate in the process for 
nominating directors with the right to petition for alternative 
candidates.\37\

[[Page 88831]]

The KOR Board will review annually the relationships that each Director 
has with KOR (either directly or as a partner, equity holder or officer 
of an organization that has a relationship with KOR).\38\ According to 
KOR, following such annual review, only those Directors who the KOR 
Board affirmatively determines have no material relationship with KOR 
(either directly or as a partner, equity holder or officer of an 
organization that has a relationship with KOR) will be considered 
Independent Directors, subject to additional qualifications prescribed 
by applicable law.\39\
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    \32\ See Rulebook, Ex, HH, sec 0.1; see also Form SDR; KOR 
Reporting Inc. Certificate of Incorporation, Ex. E-1, sec. 1.0.
    \33\ See KOR SEC SBSDR Disclosure Document v1.2, Ex. GG-2, sec. 
9.0.
    \34\ See Rulebook, Ex. HH, sec. 3.2.2; see also Bylaws for KOR 
Reporting, Inc., Ex. E-2, sec. 1.6.
    \35\ See Rulebook, Ex. HH, sec. 3.2.3; see also Governance 
Principles, Ex. D-1, sec. 3.4.1; KOR SEC SBSDR Disclosure Document 
v1.2, Ex. GG-2, sec. 9.1.2.3.
    \36\ See Rulebook, Ex. HH, sec. 3.2.2; see also Governance 
Principles, Ex. D-1, sec. 3.2.
    \37\ See Rulebook, Ex. HH, sec. 3.2.2.
    \38\ See Rulebook, Ex. HH, sec. 3.2.4; see also Governance 
Principles, Ex. D-1, sec. 3.5; KOR SEC SBSDR Disclosure Document 
v1.2, Ex. GG-2, sec. 9.1.2.4.
    \39\ See Rulebook, Ex. HH, sec. 3.2.4; see also Governance 
Principles, Ex. D-1, sec. 3.5; Narrative explaining fitness 
standards of the Board, Ex. D-3, sec. 3.0; KOR SEC SBSDR Disclosure 
Document v1.2, Ex. GG-2, sec. 9.1.2.4.
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    According to KOR, the KOR Board's principal oversight functions are 
to: (a) review, approve, and monitor KOR's major strategic financial 
business activities and opportunities, including declarations of 
dividends and major transactions; (b) review, approve and monitor the 
KOR's annual budget; (c) review, monitor and take reasonable actions 
with respect to KOR's financial performance; (d) review, assess, and 
provide oversight of KOR's risk management practices, the integrity and 
adequacy of its enterprise risk management program, which is designed 
to identify, manage, and plan for the KOR SBSDR, compliance, financial, 
operational, reputational, and strategic and commercial risks; (e) 
select, evaluate and compensate the Chief Compliance Officer and, if 
necessary, appoint a replacement; and (f) review and monitor plans for 
the succession of the Chief Executive Officer (``CEO'') and other 
members of senior management.\40\
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    \40\ See Rulebook, Ex. HH, sec. 3.1.1; see also Governance 
Principles, Ex. D-1, sec. 2.0; KOR SEC SBSDR Disclosure Document 
v1.2, Ex. GG-2, sec. 9.1.1.1.
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    In addition, the application provides that the KOR Board is 
responsible for the appointment and removal of the Chief Compliance 
Officer (``CCO'') and approval of CCO compensation, which is at the 
discretion of the Board and effected by a majority vote.\41\ The CCO is 
responsible for overseeing the KOR SBSDR Compliance Department and 
ensuring compliance with the applicable rules.\42\ The CCO consults 
with the CEO on the adequacy of resources and makes recommendations 
where needed.\43\ The CCO has supervisory authority to inspect books 
and records and interview KOR SBSDR employees. Upon identification of a 
potential violation of any regulatory requirement or internal policy or 
procedure, the CCO is responsible for taking steps to investigate and 
remediate any such matter.\44\
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    \41\ See Rulebook, Ex. HH, sec. 12.1; see also Governance 
Principles, Ex. D-1, sec. 14.2.
    \42\ See Rulebook, Ex. HH, sec. 12.2; see also Personnel 
Qualification, Ex. P, sec. 2.2.
    \43\ See Rulebook, Ex. HH, sec. 12.2.
    \44\ See id.
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    According to KOR, the KOR Board has adopted a Conflict of Interest 
Policy that incorporates various provisions of applicable corporate law 
and other standards adopted by KOR to ensure that KOR Board and 
committee decisions are not impacted by conflicts of interests.\45\ 
With regard to director conflicts of interest, the application provides 
that a director conflict is present whenever the interests of KOR 
compete with the interests of a director or any party associated with a 
director and interfere with the director's ability to impartially vote 
on the matter pending before the KOR Board.\46\ A director's interest 
may be direct or indirect through business investment or on ``immediate 
family member'' (defined as a person's spouse, domestic partner, 
parents, stepparents, children, stepchildren, siblings, mothers and 
fathers-in-law, sons and daughters-in-law and brothers and sisters-in-
law and anyone residing in such person's home (other than a tenant or 
employee)).\47\ The application also provides that any director who 
believes he or she may have a conflict of interest relating to a matter 
pending before the KOR Board or any committee must provide written 
notification to the CCO, General Counsel, the Board Chairman, and the 
CEO prior to consideration of the matter by the KOR Board or 
committee.\48\ The notice should include all relevant material facts to 
enable the KOR Board or Board committee, in consultation with the CCO, 
General Counsel and outside legal counsel, if necessary, to determine 
whether a conflict of interest exists.\49\
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    \45\ See Rulebook, Ex. HH, sec 3.2.5; see also Board of 
Directors Conflicts of Interest Policy, Ex. J-2, sec. 1.0; 
Governance Principles, Ex. D-1, sec. 4.0; KOR SEC SBSDR Disclosure 
Document v1.2, Ex. GG-2, sec. 9.1.2.5.
    \46\ See Rulebook, Ex. HH, sec. 11.2; see also Board of 
Directors Conflicts of Interest Policy, Ex. J-2, sec. 2.0.
    \47\ See Board of Directors Conflicts of Interest Policy, Ex. J-
2, sec. 3.0.
    \48\ See id.
    \49\ See id.
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    The application further provides that in the event the KOR Board or 
committee determines the director has a conflict of interest or the 
appearance of a conflict of interest, the KOR Board or committee, after 
consultation with the General Counsel and outside legal counsel, if 
necessary, shall determine the appropriate action to be taken.\50\ As a 
general matter, KOR believes it is appropriate for a director to 
abstain from voting on a matter in which he or she has an actual 
conflict of interest or the appearance of a conflict of interest.\51\ 
The recusal from voting shall be mandatory when it is deemed 
appropriate.\52\ In the event a director abstains because of a conflict 
of interest, the abstention shall be noted in the minutes of the 
meeting.\53\ In addition to this policy, directors who serve on any 
committee established under KOR's rules must also follow the procedure 
set forth in the applicable Rulebook.\54\
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    \50\ See id.
    \51\ See id.
    \52\ See id.
    \53\ See id.
    \54\ See id.
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2. Discussion
    Section 13(n)(7)(B) of the Exchange Act and Rule 13n-4(c)(2) 
thereunder require an SDR to establish governance arrangements that are 
transparent to fulfill public interest requirements and to support the 
objectives of the Federal Government, owners, and participants.\55\ In 
addition, Rule 13n-4(c)(2) requires an SDR to (i) establish well-
defined governance arrangements that include a clear organizational 
structure with effective internal controls; (ii) establish governance 
arrangements that provide for fair representation of market 
participants; (iii) provide representatives of market participants, 
including end-users, with the opportunity to participate in the process 
for nominating directors and with the right to petition for alternative 
candidates; and (iv) establish, maintain, and enforce written policies 
and procedures reasonably designed to ensure that senior management and 
each member of the board or committee that has authority to act on 
behalf of the board possess requisite skills and expertise to fulfill 
their responsibilities in the management and governance of the SDR, 
have a clear understanding of their responsibilities, and exercise 
sound judgment about the SDR's affairs.\56\
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    \55\ 15 U.S.C 78m(n)(7)(B); 17 CFR 240.13n-4(c)(2).
    \56\ 17 CFR 240.13n-4(c)(2)(i)-(iv).
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    Furthermore, Rule 13n-4(b)(11) requires an SDR to designate an 
individual to serve as CCO, and Rule 13n-11(a) requires the SDR to 
identify on Form SDR the person so

[[Page 88832]]

designated.\57\ Rule 13n-11(a) also requires that the compensation, 
appointment, and removal of the CCO shall require approval of a 
majority of the SDR's board of directors.\58\ Rule 13n-11(c) requires 
the CCO to: (i) report directly to the board of directors or to the 
senior officer; (ii) review compliance with section 13(n) of the 
Exchange Act and the rules thereunder; (iii) in consultation with the 
board or the senior officer, take reasonable steps to resolve any 
material conflicts of interest; (iv) be responsible for administering 
the policies and procedures required by section 13(n) of the Exchange 
Act and the rules thereunder; (v) take reasonable steps to ensure 
compliance with the Exchange Act and the SDR Rules thereunder; (vi) 
establish procedures for the remediation of noncompliance; and (vii) 
establish and follow appropriate procedures for the handling, 
management response, remediation, retesting, and closing of 
noncompliance issues.\59\
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    \57\ 17 CFR 240.13n-4(b), 13n-11(a).
    \58\ 17 CFR 240.13n-11(a).
    \59\ 17 CFR 240.13n-11(c)(1)-(7).
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    Additionally, section 13(n)(7)(C) of the Exchange Act requires an 
SDR to establish and enforce rules to minimize conflicts of interest in 
the decision-making process of the SDR and establish a process for 
resolving any such conflicts of interest.\60\ Rule 13n-4(c)(3) under 
the Exchange Act provides that an SDR must: (i) establish, maintain, 
and enforce written policies and procedures reasonably designed to 
identify and mitigate potential and existing conflicts of interest in 
the SDR's decision-making process on an ongoing basis; (ii) with 
respect to the decision-making process for resolving any conflicts of 
interest, require the recusal of any person involved in such conflict 
from such decision-making; and (iii) establish, maintain, and enforce 
written policies and procedures regarding the SDR's non-commercial and/
or commercial use of the SBS transaction information that it 
receives.\61\
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    \60\ 15 U.S.C. 78m(n)(7)(C)(i), (ii).
    \61\ 17 CFR 240.13n-4(c)(3)(i)-(iii).
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    The Commission received no comments on the KOR Notice. As described 
above, the KOR Application includes provisions for the representation 
of market participants in the governance arrangements, as well as 
procedures providing an opportunity to participate in the process for 
nominating directors and the right to petition for alternative 
candidates. In addition, the KOR Application includes policies and 
procedures that set standards for the skills and expertise possessed by 
the KOR Board.
    More generally, the KOR Application sets forth an organizational 
structure that is clear and includes provisions for internal controls. 
The KOR Application includes provisions for a CCO that has been 
designated by the KOR Board and whose compensation, appointment, and 
removal is set by the KOR Board. In addition, the KOR Application 
includes policies and procedures that require the CCO to report to the 
senior officer and be responsible for maintaining compliance with 
applicable Commission rules, investigating any suspected violations 
thereof, and overseeing any necessary remediation. The KOR Application 
includes policies and procedures that identify and mitigate conflicts 
of interest, require the recusal from decision-making of members of the 
KOR Board when involved in a conflict, and delineate the commercial and 
non-commercial use of SBS transaction information received.

B. Access and Information Security

1. Summary of KOR's Application
    According to KOR, access to and usage of its SDR service will be 
available to all market participants on a fair, open, and equal 
basis.\62\ The application provides that KOR does not and will not 
bundle or tie the offering of mandated regulatory services with 
ancillary services offered by KOR or a KOR affiliate.\63\ Further, KOR 
imposes the following qualification on clients of its services: (i) a 
valid Legal Entity Identifier (``LEI''), (ii) execution of membership 
documents, such as the KOR Universal Services Agreement (``KOR SA'') 
\64\ and applicable Addendums, (iii) compliance with the KOR SBSDR 
Rulebook and KOR Technical Specifications as published by KOR, and (iv) 
successful passing of KOR Know Your Customer (KYC) procedures, which 
include compliance with Applicable Law, specifically those related to 
sanctions administered and enforced by the Office of Foreign Assets 
Control of the U.S. Department of the Treasury (``OFAC'').\65\
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    \62\ See Rulebook, Ex. HH, sec. 4.1; see also Access Limiting 
Criteria, Ex. V, sec. 1.0; Client Access Requirements, Ex. W, sec. 
2.1; Client Onboarding and Access Guide, Ex. X, sec. 1.0.
    \63\ See Rulebook, Ex. HH, sec. 4.1; see also Access Limiting 
Criteria, Ex. V, sec. 1.0; Client Access Requirements, Ex. W, sec. 
2.1; Client Onboarding and Access Guide, Ex. X, sec. 1.0.
    \64\ See KOR Universal Services Agreement, Ex. I-2.
    \65\ See Rulebook, Ex. HH, sec. 4.1; see also Access Limiting 
Criteria, Ex. V, sec. 1.0; Client Access Requirements, Ex. W, sec. 
2.1; Client Onboarding and Access Guide, Ex. X, sec. 1.0; KOR SEC 
SBSDR Disclosure Document v1.2, Ex. GG-2, sec. 1.1.
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    To be granted access to the KOR system, receive trade information, 
confirm or verify transactions, submit messages, or receive reports, a 
market participant must be an onboarded user.\66\ Users are required to 
maintain at least two Administrative Users on the KOR System; 
Administrative Users are responsible for creating, managing, and 
removing access to their company's users and to other clients who are 
eligible to access the KOR System on behalf of the client including 
firms that have Third-Party Client access.\67\
---------------------------------------------------------------------------

    \66\ See Rulebook, Ex. HH, sec. 4.0; see also Client Onboarding 
and Access Guide, Ex. X, sec. 2.0.
    \67\ See Rulebook, Ex. HH, sec. 4.5.1; see also Client 
Onboarding and Access Guide, Ex. X, sec. 3.1; KOR SEC SBSDR 
Disclosure Document v1.2, Ex. GG-2, sec. 1.5.1.
---------------------------------------------------------------------------

    To participate in the SDR services offered by KOR, each client will 
be required to enter into a KOR SA; by entering into the KOR SA each 
client agrees to be bound by the terms of the KOR SA, the KOR Rulebook, 
and any published policies and guides.\68\ In addition, the KOR 
Rulebook provides that where a client has authorized (i) a Delegated 
Reporter (a Third-Party Reporter or Related Entity Client under the 
same Parent) to submit on its behalf and access its data or (ii) a 
Third-Party Client to access its data, but not submit on its behalf, 
KOR will provide access to the Delegated Reporter or Third-Party Client 
so long as it has executed the appropriate KOR SA and applicable 
addendums and the client has granted permission through the Client 
Portal.\69\ Any market participant that has executed a Client Agreement 
may access SBSDR Data to which they are a party or for which they have 
been granted access on behalf of a client.\70\ Access to the KOR System 
is strictly limited to active users with valid permissions created by 
their client's Administrative User.\71\ Once set up, users will be 
provided logins and the ability to access data in the KOR System.\72\ 
Access is driven off the client's LEIs for which the user has been 
associated.\73\ Users may be granted access to multiple LEIs under the 
same Parent as related entities.\74\ A client's designated 
Administrative Users

[[Page 88833]]

are expected to maintain correct user access at all times.\75\ In 
addition, following the end of each calendar quarter, all clients will 
have access to a report on current user access levels and a list of all 
clients to which they have granted access to their data.\76\ At least 
one of the designated Administrative Users assigned to each client must 
review the listing of users and other party access and confirm whether 
access should be maintained, removed or changed and make the 
appropriate updates.\77\ The KOR Rulebook also states that records of 
all user access are maintained and available for review by the client 
and KOR Compliance at all time.\78\
---------------------------------------------------------------------------

    \68\ See Rulebook, Ex. HH, sec. 4.2; see also Client Access 
Requirements, Ex. W, sec. 2.2; Client Onboarding and Access Guide, 
Ex. X, sec. 3.0.
    \69\ See Rulebook, Ex. HH, sec. 4.3, 4.4; see also Client Access 
Requirements, Ex. W, sec. 2.3, 2.4.
    \70\ See Rulebook, Ex. HH, sec. 4.5.2; see also Access Limiting 
Criteria, Ex. V, sec. 1.0.
    \71\ See Rulebook, Ex. HH, sec. 4.5.2; see also Access Limiting 
Criteria, Ex. V, sec. 1.0.
    \72\ See Rulebook, Ex. HH, sec. 4.5.2; see also Access Limiting 
Criteria, Ex. V, sec. 1.0.
    \73\ See Rulebook, Ex. HH, sec. 4.5.2; see also Access Limiting 
Criteria, Ex. V, sec. 1.0.
    \74\ See Rulebook, Ex. HH, sec. 4.5.2; see also Access Limiting 
Criteria, Ex. V, sec. 1.0.
    \75\ See Rulebook, Ex. HH, sec. 4.5.4; see also Client 
Onboarding and Access Guide, Ex. X, sec. 3.1.
    \76\ See Rulebook, Ex. HH, sec. 4.5.4.
    \77\ See id.
    \78\ See id.
---------------------------------------------------------------------------

    With respect to prohibiting or limiting a person's access to SDR 
services, the KOR Rulebook outlines the process required for KOR to 
decline, revoke, or suspend a user of SDR services.\79\ For example, 
KOR's CCO may deny a client's access to the KOR system if required 
pursuant to applicable law (e.g., related to sanctions administered and 
enforced by OFAC or the direction of an applicable regulator), 
violation of KOR SBSDR Rules, or improper use of the system.\80\ The 
KOR Rulebook provides that KOR will notify the applicable regulator of 
such action.\81\ In addition, any such clients would receive written 
notice containing the grounds for determination and an opportunity to 
appeal the decision to the CCO and KOR Board by written request.\82\ 
KOR may restore access to a client following approval from the CCO and/
or KOR Board.\83\ The CCO will consider the applicable law, regulatory 
requirements, and the Market Participant's response to the cause of 
denial, revocation, or suspension.\84\ In addition, all decisions will 
be documented when determining whether to restore client's access.\85\
---------------------------------------------------------------------------

    \79\ See Rulebook, Ex. HH, sec. 14.2; see also Denial, 
Revocation, or Suspension of Client Access Policy, Ex. Y, sec. 2.2.
    \80\ See Rulebook, Ex. HH, sec. 14.2; see also Denial, 
Revocation, or Suspension of Client Access Policy, Ex. Y, sec. 2.2.
    \81\ See Rulebook, Ex. HH, sec. 14.2; see also Denial, 
Revocation, or Suspension of Client Access Policy, Ex. Y, sec. 2.2.
    \82\ See Rulebook, Ex. HH, sec. 14.2; see also Denial, 
Revocation, or Suspension of Client Access Policy, Ex. Y, sec. 2.2.
    \83\ See Denial, Revocation, or Suspension of Client Access 
Policy, Ex. Y, sec. 2.3.
    \84\ See id.
    \85\ See id.
---------------------------------------------------------------------------

    The KOR Rulebook provides that KOR SBSDR will conduct regular, 
periodic, objective testing and review of its automated systems to 
ensure that they are reliable, secure, and have adequate scalable 
capacity.\86\ It also provides that KOR will conduct regular, periodic 
testing and review of its business continuity-disaster recovery 
capabilities.\87\ It also provides that KOR will, to the extent 
practicable: (a) coordinate with clients and service providers to 
participate in synchronized testing in a manner adequate to enable 
effective resumption of KOR SBSDR's fulfillment of its duties and 
obligations following a disruption causing activation of KOR SBSDR's 
Business Continuity and Disaster Recovery (BCDR) plan; (b) participate 
in periodic, synchronized testing of its BCDR Plan and the BCDR plans 
of its clients, and the BCDR plans required, as applicable, by each 
appropriate prudential regulator, the Financial Stability Oversight 
Council, the SEC, the Department of Justice or any other person deemed 
appropriate by the SEC; and (c) ensure that its BCDR plan take into 
account the BCDR plans of its telecommunications, power, water, and 
other essential service providers.\88\
---------------------------------------------------------------------------

    \86\ See Rulebook, Ex. HH, sec. 13.3.1.
    \87\ See id.
    \88\ See Rulebook, Ex. HH, sec. 13.3.2.
---------------------------------------------------------------------------

2. Discussion
    Rule 13n-4(c)(1)(ii) under the Exchange Act requires an SDR to 
permit market participants to access specific services offered by the 
SDR separately.\89\ Rule 13n-4(c)(1)(iii) requires an SDR to establish, 
monitor on an ongoing basis, and enforce clearly stated objective 
criteria that would permit fair, open, and not unreasonably 
discriminatory access to services offered and data maintained by the 
SDR.\90\ Rule 13n-4(c)(1)(iv) requires an SDR to establish, maintain, 
and enforce written policies and procedures reasonably designed to 
review any prohibition or limitation of any person with respect to 
access to services offered, directly or indirectly, or data maintained 
by the SDR and to grant such person access to such services or data if 
such person has been discriminated against unfairly.\91\ In addition, 
Rule 13n-6 requires an SDR, with respect to those systems that support 
or are integrally related to the performance of its activities, to 
establish, maintain, and enforce written policies and procedures 
reasonably designed to ensure that its systems provide adequate levels 
of capacity, integrity, resiliency, availability, and security.\92\
---------------------------------------------------------------------------

    \89\ 17 CFR 240.13n-4(c)(1)(ii).
    \90\ 17 CFR 240.13n-4(c)(1)(iii).
    \91\ 17 CFR 240.13n-4(c)(1)(iv).
    \92\ 17 CFR 240.13n-6.
---------------------------------------------------------------------------

    The Commission received no comments on the KOR Notice. As described 
above, the KOR Application includes procedures for onboarding and 
maintaining ongoing access to users that are fair, open, reasonable and 
not unreasonably discriminatory. These procedures include user 
agreements that reflect clear and specific minimum standards for users 
to follow in seeking to access SBS data held at the SDR. The KOR 
Application also includes reasonable provisions for limiting, denying, 
and revoking access to SDR systems that include procedures for review 
and reconsideration of any determination related to limiting, denying, 
or revoking a user's access. The procedures described above further 
help ensure that the access requirements are fair, open, and not 
unreasonably discriminatory. In addition, the KOR Application includes 
policies and procedures designed to ensure that the SDR's automated 
systems maintain adequate levels of capacity, integrity, resiliency, 
availability, and security that protect against loss of data, employ 
geographic diversity in their site selection, and account for service 
disruptions.

C. Acceptance and Use of SBS Data

1. Summary of KOR's Application
    According to KOR, data accepted and maintained by the SBSDR may not 
be used for commercial or business purposes by the SBSDR or any of its 
affiliated entities absent express written consent by the client 
providing that data.\93\ KOR SBSDR has implemented adequate 
``firewalls'' or controls to protect the reported SBSDR data required 
to be maintained under SEC regulations from any improper commercial 
use.\94\ The application provides that a client that submits SBSDR data 
maintained by the SBSDR may permit the commercial use by providing 
express written consent not required to be reported to the SBSDR.\95\ 
If such client consent is given, KOR may not make such consented data 
available for commercial use prior to its public dissemination.\96\ KOR 
states that, in accordance with Exchange Act Rule 13n-5(b)(5), it has 
established systems and user access restrictions reasonably designed to 
prevent any provision in a valid swap from being invalidated or

[[Page 88834]]

modified through its verification or recording process.\97\
---------------------------------------------------------------------------

    \93\ See KOR SEC SBSDR Disclosure Document v1.2, Ex. GG-2, sec. 
5.0.
    \94\ See id.
    \95\ See id.
    \96\ See id.
    \97\ See Rulebook, Ex. HH, sec. 9.2; see also Data Invalidation 
Policy, Ex. EE, sec. 1.0.
---------------------------------------------------------------------------

    KOR SBSDR uses the LEI and the Unique Trade Identifier 
(``UTI'').\98\ Pursuant to KOR's rulebook, individuals not eligible for 
an LEI should be reported using a Natural Person Identifier.\99\ KOR 
states that if a security-based swap counterparty is not eligible to 
receive an LEI as determined by the Global Legal Entity Identifier 
System, such counterparty will be identified in all recordkeeping and 
all Security-Based Swap Data reporting with a Natural Person 
Identifier.\100\ KOR further provides that it is the duty of the 
Reporting Side to always submit a unique and consistent Natural Person 
Identifier.\101\ Pursuant to KOR's rulebook, to ensure that the 
Reporting Side consistently submits a unique value for the identifier, 
the Reporting Side must combine the LEI of the Reporting Side with the 
natural person's email address associated with the National Person 
Identifier.\102\ Each client must maintain and renew its LEI in 
accordance with the standards set by the Global Legal Entity Identifier 
System.\103\
---------------------------------------------------------------------------

    \98\ See Rulebook, Ex. HH, sec. 5.1.1, 5.1.2.
    \99\ See Rulebook, Ex. HH, sec. 5.1.1.
    \100\ See Rulebook, Ex. HH, sec. 5.3.1.
    \101\ See id.
    \102\ See id.
    \103\ See id.
---------------------------------------------------------------------------

    The application provides that each swap will be identified in all 
recordkeeping and all Security-Based Swap Data reporting by the use of 
a UTI, which will be created, transmitted, and used for each swap.\104\ 
Each registered entity and swap counterparty will include the UTI for a 
swap in all of its records and all of its Security-Based Swap Data 
reporting concerning that swap, from the time it creates or receives 
the UTI throughout the existence of the security-based swap and for as 
long as any records are required by applicable law or regulation.\105\ 
Every submission to KOR SBSDR must contain the appropriate UTI, 
otherwise the submission will be rejected. KOR SBSDR will validate the 
format and uniqueness of every UTI.\106\ If a party submits the 
incorrect UTI, pursuant to KOR's rulebook, they must ``error'' that UTI 
and resubmit the swap as a new message with the correct UTI.\107\ When 
the correct UTI is submitted it will be considered a new trade and, if 
it is submitted after the required reporting timelines, it will be 
classified as a late report.\108\
---------------------------------------------------------------------------

    \104\ See Rulebook, Ex. HH, sec. 5.2.
    \105\ See id.
    \106\ See id.
    \107\ See id.
    \108\ See id.
---------------------------------------------------------------------------

    The application provides that KOR has established procedures and 
provides facilities for effectively resolving disputes over the 
accuracy of the SBSDR Transaction Data and positions that are recorded 
in the KOR SBSDR.\109\ When the Reporting Side does not agree with the 
accuracy of the reporting of a swap in KOR Trade Repository, but is 
prevented from amending the swap to what they believe to accurate, the 
client must (a) enter a ticket with KOR SBSDR support with the details 
of the issue and (b) submit an allowed value per the KOR Technical 
Specifications for the KOR SBSDR field that reflects the dispute.\110\
---------------------------------------------------------------------------

    \109\ See Rulebook, Ex. HH, sec. 11.0; see also Dispute Policy, 
Ex. CC, sec. 2.0.
    \110\ See id.
---------------------------------------------------------------------------

2. Discussion
    Rule 13n-5(b)(1)(i) under the Exchange Act requires an SDR to 
establish, maintain, and enforce written policies and procedures 
reasonably designed for the reporting of complete and accurate 
transaction data to the SDR and to accept all transaction data that is 
reported in accordance with such policies and procedures.\111\ 
Additionally, Rule 13n-5(b)(1)(ii) requires that if an SDR accepts any 
SBS transaction in a particular asset class, the SDR must accept all 
SBS transactions in that asset class that are reported to it in 
accordance with its policies and procedures.\112\ In addition, Rule 
13n-5(b)(3) requires an SDR to establish, maintain, and enforce written 
policies and procedures reasonably designed to ensure that the 
transaction data and positions that it maintains are complete and 
accurate.\113\ Rule 13n-5(b)(5) requires an SDR to establish, maintain, 
and enforce written policies and procedures reasonably designed to 
prevent any provision in a valid SBS transaction from being invalidated 
or modified through the procedures or operations of the SDR.\114\ Rule 
13n-5(b)(6) requires an SDR to establish procedures and provide 
facilities reasonably designed to effectively resolve disputes over the 
accuracy of the transaction data and positions that are recorded in the 
SDR.\115\
---------------------------------------------------------------------------

    \111\ 17 CFR 240.13n-5(b)(1)(i).
    \112\ 17 CFR 240.13n-5(b)(1)(ii).
    \113\ 17 CFR 240.13n-5(b)(3).
    \114\ 17 CFR 240.13n-5(b)(5).
    \115\ 17 CFR 240.13n-5(b)(6).
---------------------------------------------------------------------------

    Furthermore, section 13(n)(5)(F) of the Exchange Act and Rule 13n-
4(b)(8) thereunder each require an SDR to maintain the privacy of any 
and all SBS transaction information that the SDR receives.\116\ In 
addition, Rule 13n-9(b)(1) requires an SDR to establish, maintain, and 
enforce written policies and procedures reasonably designed to protect 
the privacy of any and all SBS transaction information that the SDR 
receives and that include policies and procedures to protect the 
privacy of any and all SBS transaction information that the SDR shares 
with affiliates and non-affiliated third parties.\117\ Rule 13n-9(b)(2) 
also requires an SDR to establish, and maintain safeguards, policies, 
and procedures reasonably designed to prevent the misappropriation or 
misuse, directly or indirectly, of any confidential information 
received by the SDR, material non-public information, or intellectual 
property, such as trading strategies or portfolio positions, by: (i) 
limiting access to such information and intellectual property; (ii) 
having standards for trading by persons associated with the SDR for 
their personal benefit or the benefit of others; and (iii) having 
adequate oversight to ensure compliance with these safeguards, 
policies, and procedures.\118\
---------------------------------------------------------------------------

    \116\ See 15 U.S.C. 78m(n)(5)(F); 17 CFR 240.13n-4(b)(8), 
240.13n-9.
    \117\ 17 CFR 240.13n-9.
    \118\ See 17 CFR 240.13n-9(b)(2).
---------------------------------------------------------------------------

    The Commission received no comments on the KOR Notice. As described 
above, the KOR Application includes policies and procedures designed to 
protect transaction data and its systems by restricting access to 
users, who are obligated to comport with KOR's rules in a manner that 
facilitates KOR's compliance with its obligations under Commission 
rules. The Commission views this approach as reasonable. Access to 
KOR's systems to view trade data or verify information is conditioned 
such that KOR retains the ability to protect the data, its systems, and 
its users. KOR retains the responsibility, among other things, to 
ensure that its policies and procedures are reasonably designed to: (i) 
ensure trade data reported to it is complete and accurate, as required 
under Rule 13n-5(b)(1); (ii) ensure that its systems provide adequate 
levels of capacity, integrity, resiliency, availability and security, 
as required under Rule 13n-6; and (iii) ensure that it protects the 
privacy and confidentiality of transaction information, as required 
under Rule 13n-9(b). Additionally, the KOR Application includes 
procedures designed to ensure that any valid provisions of trade 
information are not modified or invalidated, and these procedures 
include controls that are regularly audited and processing

[[Page 88835]]

systems designed to prevent unauthorized changes to SBS information. 
Additionally, KOR provides procedures and facilities reasonably 
designed to effectively resolve disputes over the accuracy of the 
transaction data and positions that are recorded in the SDR.
    Furthermore, the KOR Application contains policies and procedures 
regarding both data security and the privacy of SBS data. This includes 
procedures limiting access to SBS data to employees with either direct 
or support responsibilities related to systems that maintain the data 
and procedures that limit the use of such data in all cases to the 
performance of job responsibilities. Such policies and procedures also 
establish a standard for the trading practices of personnel that 
prevents the use of the data for personal benefit or the benefit of 
others. In addition, KOR has policies and procedures that, when taken 
together with policies and procedures regarding the duties of the 
CCO,\119\ are reasonably designed to protect the privacy of SBS 
transaction information, including information shared with affiliates 
and third parties, through adequate oversight to ensure compliance with 
the policies and procedures described above.
---------------------------------------------------------------------------

    \119\ See supra Part III.A (describing policies and procedures 
regarding the CCO and conflicts of interest).
---------------------------------------------------------------------------

D. Fees

1. Summary of KOR's Application
    The application includes KOR's fee schedules.\120\ According to 
KOR, fees are assessed in a consistent, non-preferential manner and are 
not permitted to be used as a barrier to entry.\121\ KOR offers a 
subscription model fee schedule which treats all submissions equally 
regardless of reporting counterparty, asset class, clearing status or 
execution.\122\ The application provides that KOR will not offer 
preferential pricing arrangements to any client on any basis, including 
volume discounts or reductions, unless such discounts or reductions 
apply to all clients uniformly and are not otherwise established in a 
manner that would effectively limit the application of such discount or 
reduction to a select number of clients.\123\ In addition, KOR 
represents in its rulebook that it ensures any dues, fees, or other 
charges imposed by, and any discounts or rebates offered by, its SBSDR 
are fair and reasonable and not unreasonably discriminatory.\124\ KOR 
states that such dues, fees, other charges, discounts, or rebates will 
be applied consistently across all similarly-situated users of such 
SBSDR services, including, but not limited to, market participants, 
market infrastructures (including central counterparties), venues from 
which data can be submitted to the SBSDR (including exchanges, 
security-based swap execution facilities, electronic trading venues, 
and matching and confirmation platforms), and third party service 
providers.\125\ All fees are fully disclosed and available on the KOR 
SBSDR website.\126\ The fee schedule applies until such time as the KOR 
Board determines otherwise and provides clients at least one (1) 
month's notice for significant changes to existing pricing or 
policy.\127\
---------------------------------------------------------------------------

    \120\ See KOR SEC SBSDR Fee Schedule, Ex. M-1. Additionally, KOR 
provides a fee schedule for KOR Users on its website at https://www.korfinancial.com/pricing.
    \121\ See Rulebook, Ex. HH, sec. 13.4; see also KOR SEC SBSDR 
Disclosure Document v1.2, Ex. GG-2, sec. 8.0.
    \122\ See KOR SEC SBSDR Fee Schedule, Ex. M-1, sec. 1.0; see 
also Fee Schedule Rational and Differentiation, Ex. M-2, sec. 1.3.
    \123\ See Rulebook, Ex. HH, sec. 13.4; see also KOR SEC SBSDR 
Disclosure Document v1.2, Ex. GG-2, sec. 8.0.
    \124\ See id.; see also KOR SEC SBSDR Disclosure Document v1.2, 
Ex. GG-2, sec. 8.0.
    \125\ See Rulebook, Ex. HH, sec. 13.4.
    \126\ See id.; see also KOR SEC SBSDR Disclosure Document v1.2, 
Ex. GG-2, sec. 8.0.
    \127\ See KOR SEC SBSDR Fee Schedule, Ex. M-1, sec. 1.0.
---------------------------------------------------------------------------

    In the application, KOR states that, as a real-time messaging-based 
service, KOR assesses fees on a per message basis to align SBSDR 
services and the expense to offer such services.\128\ All Reporting 
Clients are assessed the same fee structure regardless of their pathway 
to KOR SBSDR to ensure a competitive and level playing field.\129\ A 
``Reporting Client'' means the reporting counterparty that has in place 
a fully executed agreement and is liable for the fees incurred for the 
use of KOR Services.\130\ The Reporting Client may delegate billing and 
payments to another client by authorizing either a Related Entity or 
their Third-Party Reporter.\131\ The ``Related Entity'' refers to other 
clients of KOR (i.e., KOR Counterparty Clients) within the same 
corporate structure as the Reporting Client, creating a Client 
Group.\132\ KOR will aggregate the fee liable activity for Related 
Entities under a Client Group and provide a single invoice.\133\ A 
``Third-Party Reporter'' refers to an entity that has a fully executed 
agreement with KOR and is facilitating reporting for a KOR Counterparty 
Client.\134\ A Third-Party Reporter is not charged fees for the 
activity of their customers, who are also KOR Counterparty Clients, but 
may be assigned billing (receipt of invoices and payment 
responsibilities) by KOR Counterparty Clients.\135\ When a Counterparty 
Client makes a billing assignment to a Third-Party Reporter it is for 
all billable activity related to use of KOR Services of that 
Counterparty Client (including activity beyond what is associated to 
the Third-Party Reporter), and Counterparty Clients may only assign 
billing to a single Third-Party Reporter.\136\ The application provides 
that reporting by Platforms which are Security-Based Swap Execution 
Facilities or National Securities Exchanges are treated as messages 
under a Third-Party Reporter whereby the Reporting Counterparty is 
assessed KOR reporting fees and the Platform, by default, is not.\137\ 
A Platform may elect to assume direct billing responsibility for any 
Reporting Counterparty that is a KOR Counterparty Client.\138\ If the 
Reporting Counterparty on a Platform reported transaction is not a KOR 
Counterparty Client, the Platform reporter will be billed for the 
message activity which will be aggregated with all other Platform 
billable message activity.\139\
---------------------------------------------------------------------------

    \128\ See id.
    \129\ See id.
    \130\ See KOR SEC SBSDR Fee Schedule, Ex. M-1, sec. 2.1.
    \131\ See KOR SEC SBSDR Fee Schedule, Ex. M-1, sec. 2.1, 2.2.
    \132\ See id.
    \133\ See id.
    \134\ See KOR SEC SBSDR Fee Schedule, Ex. M-1, sec. 2.3.
    \135\ See id.
    \136\ See id.
    \137\ See KOR SEC SBSDR Fee Schedule, Ex. M-1, sec. 2.4.
    \138\ See id.
    \139\ See id.
---------------------------------------------------------------------------

    KOR SBSDR offers simplified subscription plans where each tier plan 
limits the maximum number of messages a Reporting Client may report per 
month.\140\ To calculate the calendar monthly fee, KOR totals all 
eligible messages submitted in the prior month for each Counterparty 
Client or Client Group. KOR provides a 10% monthly overage allowance 
across all tiers for any given month per Counterparty Client or Client 
Group.\141\ KOR's subscription plan is organized into ten (10) tiers. 
Tier 1 allows for 100 monthly messages produced with a monthly fee of 
$100; Tier 2 allows for 1,000 monthly messages produced with a monthly 
fee of $500; Tier 3 allows for 10,000 monthly messages produced with a 
monthly fee of $2,000; Tier 4 allows for

[[Page 88836]]

100,000 monthly messages produced with a monthly fee of $6,000; Tier 5 
allows for 1,000,000 monthly messages produced with a monthly fee of 
$15,000; Tier 6 allows for 4,000,000 monthly messages produced with a 
monthly fee of $36,000; Tier 7 allows for 9,000,000 monthly messages 
produced with a monthly fee of $60,000; Tier 8 allows for 14,000,000 
monthly messages produced with a monthly fee of $95,000; Tier 9 allows 
for 19,000,000 monthly messages produced with a monthly fee of 
$150,000; and Tier 10 allows for 24,000,000 monthly messages produced 
with a monthly fee of $220,000.\142\
---------------------------------------------------------------------------

    \140\ See KOR SEC SBSDR Fee Schedule, Ex. M-1, sec. 3.0.
    \141\ See id.
    \142\ See id.
---------------------------------------------------------------------------

    KOR SBSDR is a 100% cloud service leveraging the performance and 
scale available through the cloud infrastructure.\143\ KOR incurs costs 
through the accessing of its clients' data hosted and used to generate 
trade reports requested by clients.\144\ The application states that 
the KOR SBSDR Fee Schedule is designed for simplicity and flexibility, 
modeling an expected mix of scheduled access to standard reports in 
addition to reasonable use of ad-hoc reporting.\145\ KOR will monitor 
the generation of reports across each client and KOR will provide 
advice when it observes use that exceeds standard fair allowances.\146\ 
KOR states that should a client need continued reports at a sustained 
activity level higher than expected, a move to a higher fee tier may be 
deemed appropriate.\147\ KOR will generate invoices by the fifth (5th) 
day of every calendar month for the prior month's activity.\148\ The 
billing currency is USD ($) and invoices must be paid in USD.\149\ 
Invoices are payable within 45 days upon receipt.\150\ Accounts not 
paid within terms are subject to a 1.5% monthly finance charge.\151\ 
KOR SBSDR will accept and process billing adjustments up to 45 days 
after the invoice date.\152\ Adjustment requests received after the 45-
day period will not be accepted by KOR SBSDR.\153\ Approved adjustments 
will be applied as credits and appear on the next billing cycle as a 
separate line item.\154\
---------------------------------------------------------------------------

    \143\ See KOR SEC SBSDR Fee Schedule, Ex. M-1, sec. 3.2.
    \144\ See id.
    \145\ See id.
    \146\ See id.
    \147\ See id.
    \148\ See KOR SEC SBSDR Fee Schedule, Ex. M-1, sec. 5.0.
    \149\ See id.
    \150\ See id.
    \151\ See id.
    \152\ See id.
    \153\ See id.
    \154\ See id.
---------------------------------------------------------------------------

2. Discussion
    Section 13(n)(7)(A) of the Exchange Act prohibits an SDR (unless 
necessary or appropriate to achieve the purposes of the Exchange Act) 
from: (i) adopting any rule or taking any action that results in any 
unreasonable restraint of trade; or (ii) imposing any material anti-
competitive burden on the trading, clearing, or reporting of 
transactions.\155\ Rule 13n-4(c)(1)(i) under the Exchange Act also 
requires an SDR to ensure that any dues, fees, or other charges that it 
imposes, and any discounts or rebates that it offers, are fair and 
reasonable and not unreasonably discriminatory.\156\ It also requires 
that such dues, fees, other charges, discounts, or rebates be applied 
consistently across all similarly situated users of the SDR's 
services.\157\ In discussing the fee provisions of the SDR Rules, the 
Commission stated that it would take a flexible approach in evaluating 
the fairness and reasonableness of an SDR's fees and charges on a case-
by-case basis, recognizing that there may be instances in which an SDR 
could charge different users different prices for the same or similar 
services.\158\
---------------------------------------------------------------------------

    \155\ 15 U.S.C. 78m(n)(7)(A).
    \156\ 17 CFR 240.13n-4(c)(1)(i).
    \157\ See id.
    \158\ See SDR Adopting Release, supra note 8, at 14479. In 
making this statement, however, the Commission also stated that 
charging different users different prices for the same or similar 
services cannot be unreasonably discriminatory.
---------------------------------------------------------------------------

    The Commission received no comments on the KOR Notice. As described 
above, the KOR Application describes fees offered on a subscription 
model fee schedule treating all submissions equally with no 
preferential pricing arrangements to any client on any basis for usage 
of SDR services.\159\ The subscription component of KOR's fees is 
assessed on a per message basis to align SBSDR services and the expense 
to offer such services. The fee structure is consistent with the 
requirement of an SDR to ensure that any dues, fees, or other charges 
imposed are fair and reasonable and not unreasonably discriminatory.
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    \159\ See supra note 123.
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E. Recordkeeping

1. Summary of KOR's Application
    The KOR Rulebook provides that KOR will maintain transaction data 
and related identifying information for not less than five years after 
the applicable SBS expires and historical positions for not less than 
five years: (a) in a place and format that is readily accessible and 
usable to the Commission and other persons with authority to access or 
view such information, and (b) in an electronic format that is non-
rewriteable and non-erasable.\160\
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    \160\ See Rulebook, Ex. HH, sec. 9.4; see also KOR SEC SBSDR 
Disclosure Document v1.2, Ex. GG-2, sec. 7.4.4.
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2. Discussion
    Rule 13n-5(b)(4) of the Exchange Act requires an SDR to maintain 
transaction data and related identifying information for not less than 
five years after the SBS expires and historical positions for not less 
than five years in a place and format that is readily accessible and 
usable to the Commission and other persons with authority to access or 
view such information and in an electronic format that is non-
rewriteable and non-erasable.\161\ Rule 13n-7 requires an SDR to make 
and keep current books and records relating to its business for at 
least five years, and for the first two years, keep such records in a 
place that is immediately available to representatives of the 
Commission for inspection and examination.\162\ In addition, Rule 13n-
5(b)(8) requires an SDR to make and keep current a plan to ensure that 
the transaction data and positions that are recorded in the SDR 
continue to be maintained in accordance with Rule 13n-5(b)(7),\163\ 
including procedures for transferring the transaction data and 
positions to the Commission or its designee.\164\
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    \161\ 17 CFR 240.13n-5(b)(4).
    \162\ 17 CFR 240.13n-7.
    \163\ Rule 13n-5(b)(7) states that, if an SDR ceases doing 
business or ceases to be registered pursuant to section 13(n) of the 
Exchange Act, the SDR must continue to preserve, maintain, and make 
accessible the transaction data and historical positions required to 
be collected, maintained, and preserved by this section in the 
manner required by the Exchange Act and the rules and regulations 
thereunder and for the remainder of the period required by this 
section. 17 CFR 240.13n-5(b)(7).
    \164\ 17 CFR 240.13n-8.
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    The Commission received no comments on the KOR Notice. As described 
above, the KOR Application provides for the recordkeeping of SBS 
transaction data for not less than five years following the termination 
of the transaction,\165\ and will be readily accessible throughout the 
life of a security-based swap in an electronic format that is non-
rewriteable and non-erasable.\166\ In addition, KOR provides for the 
transferring of transaction data and positions to the Commission via 
reports designed to provide visibility into positions and the status of 
submitted trades and also provides for direct electronic access to data 
reported to KOR in satisfaction of the Commission's regulatory 
requirements both for the Commission and, where

[[Page 88837]]

such access is permitted by applicable law and any relevant Memorandum 
of Understanding or other arrangement, the Commission's designee.
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    \165\ See KOR Rulebook, Ex. HH, sec. 9.4.
    \166\ See id.
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F. Disclosure

1. Summary of KOR's Application
    KOR publishes a disclosure document (``KOR Disclosure Document'') 
to provide a summary of information regarding its service offerings and 
the SBS data it maintains.\167\ Specifically, the disclosure document 
sets forth a description of the following: (i) criteria for providing 
access to KOR SBSDR; (ii) criteria for market participants seeking to 
connect to the SBSDR; (iii) policies and procedures regarding the 
SBSDR's safeguarding of SBSDR data and operational reliability to 
protect the confidentiality and security of SBSDR data; (iv) policies 
and procedures to protect the privacy of SBSDR data; (v) policies and 
procedures regarding the SBSDR's non-commercial and/or commercial use 
of SBSDR data; (vi) dispute resolution procedures; (vii) description of 
SBSDR services; (viii) the SBSDR fee schedule; and (ix) the SBSDR's 
governance arrangements.\168\
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    \167\ See KOR SEC SBSDR Disclosure Document v1.2, Ex. GG-2.
    \168\ See id.
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2. Discussion
    Rule 13n-10 under the Exchange Act requires that, before accepting 
any SBS data from a market participant or upon a market participant's 
request, an SDR shall furnish to the market participant a disclosure 
document that contains certain written information, which must 
reasonably enable the market participant to identify and evaluate 
accurately the risks and costs associated with using the SDR's 
services.\169\ This written information must contain the following: (i) 
the SDR's criteria for providing others with access to the services 
offered and data it maintains; (ii) its criteria for those seeking to 
connect to or link with the SDR; (iii) a description of its policies 
and procedures regarding its safeguarding of data and operational 
reliability, as described in Rule 13n-6; (iv) a description of its 
policies and procedures reasonably designed to protect the privacy of 
SBS transaction information that it receives, as described in Rule 13n-
9(b)(1); (v) a description of its policies and procedures regarding its 
noncommercial and commercial use of SBS transaction information that it 
receives, as described in Rule 13n-5(b)(6); (vi) a description of its 
dispute resolution procedures, as described in Rule 13n-5(b)(6); (vii) 
a description of all the SDR's services, including any ancillary 
services; and (viii) the SDR's updated schedule of any dues; unbundled 
prices, rates or other fees for all of its services, including 
ancillary services; any discounts or rebates offered; and the criteria 
to benefit from such discounts or rebates; and (ix) a description of 
its governance arrangements.\170\
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    \169\ 17 CFR 240.13n-10.
    \170\ See id.
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    The Commission received no comments on the KOR Notice. As described 
throughout this order, the KOR Application includes extensive 
discussion of KOR's policies and procedures with respect to 
access,\171\ the use of SBS transaction information,\172\ service 
offerings, including ancillary services,\173\ and governance 
arrangements.\174\ The KOR Disclosure Document presents a reasonably 
comprehensive view of the applicant's overall service offering, from 
which a potential user could identify and evaluate accurately the risks 
and costs associated with using the SDR's services.\175\ In addition, 
regarding the requirement to furnish the document to market 
participants, the Commission understands that KOR publishes similar 
disclosure documents on its website,\176\ and anticipates the same for 
the KOR Disclosure Document relevant to this application.
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    \171\ See supra Part III.B (describing policies and procedures 
with respect to access and information security).
    \172\ See supra Part III.C (describing policies and procedures 
with respect to acceptance and use of SBS data).
    \173\ See supra Part III.D (describing policies and procedures 
with respect to fees).
    \174\ See supra Part III.A (describing policies and procedures 
with respect to governance arrangements, the duties of the CCO, and 
conflicts of interest).
    \175\ See KOR SEC SBSDR Disclosure Document v1.2, Ex. GG-2.
    \176\ See, e.g., https://www.korfinancial.com/documents/KOR-SDR-Disclosure-Document.pdf (publishing a disclosure document pursuant 
to CFTC requirements).
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G. Regulatory Reporting and Public Dissemination

    As a registered SDR, KOR would carry out an important role in the 
regulatory reporting and public dissemination of SBS transactions. As 
stated above, KOR has stated that it intends to rely on the no-action 
statement included in the ANE Adopting Release for the period set forth 
in the ANE Adopting Release with respect to any SBS asset class or 
classes for which it intends to accept transaction reports.\177\ 
Therefore, KOR does not need to include materials in its application 
explaining how it would comply with the provisions of the SBS Reporting 
Rules described in the no-action statement.\178\ Instead, KOR may rely 
on its discussion about how it complies with comparable CFTC 
requirements pertaining to regulatory reporting and public 
dissemination of swap transactions.
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    \177\ See supra note 25 and accompanying text.
    \178\ However, the KOR application includes provisions 
explaining how KOR would require users to identify SBS, as required 
by Rule 901(c)(1) of Regulation SBSR. See Exhibit HH2, sec. 4.4 
(regarding Unique Product Identifiers). The KOR Application also 
includes a provision explaining how KOR would comply with a 
condition to the no-action statement included in the ANE Adopting 
Release. See KOR Rulebook, Ex. HH, sec. 10.6.1 (providing, in the 
case of an SBS based on a single credit instrument or a narrow-based 
index of credit instruments, for dissemination of a capped notional 
size of $5 million if the true notional size of the transaction is 
$5 million or greater).
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    In the no-action statement in the ANE Adopting Release, the 
Commission stated that an applicant ``will not need to include 
materials in its application explaining how it would comply with the 
provisions [specifically noted as not providing a basis for a 
Commission enforcement action during the pendency of the statement].'' 
\179\ The applicant ``could instead rely on its discussion about how it 
complies with comparable CFTC requirements.'' \180\ In its application, 
KOR provided exhibits that adapted its policies and procedures for 
regulatory reporting and public dissemination of swaps for use in the 
SBS market. With respect to its role in the regulatory reporting and 
public dissemination of SBS transactions, KOR has satisfied the 
approach described by the Commission in the no-action statement 
regarding the information and representations sufficient to support its 
approval for registration as an SDR and SIP,\181\ and that registering 
KOR as an SDR may improve the quality of SBS data that is publicly 
disseminated by promoting competition among SDRs as to the collection 
and public dissemination of SBS data.\182\
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    \179\ ANE Adopting Release, supra note 13, at 6348.
    \180\ Id.
    \181\ Because KOR has elected to rely on the no-action 
statement, see supra note 29, the Commission has not evaluated the 
KOR Application against any provisions of Regulation SBSR 
specifically noted as not providing a basis for a Commission 
enforcement action during the pendency of the statement.
    \182\ See Report on Security-Based Swaps Pursuant to Section 
13(m)(2) of the Securities Exchange Act of 1934, at p. 13 (June 20, 
2024), https://www.sec.gov/files/report-security-based-swaps-062024.pdf (identifying non-exhaustive sample of potential security-
based swap data quality issues identified in security-based swap 
transactions reported to SDRs registered with the Commission).
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IV. Evaluation of KOR's Application and Commission Findings

    Consistent with the standard for registration previously described 
in Part

[[Page 88838]]

II.B,\183\ the Commission has considered whether KOR is so organized, 
and has the capacity, to be able to assure the prompt, accurate, and 
reliable performance of its functions as an SDR, comply with any 
applicable provisions of the securities laws and the rules and 
regulations thereunder, and carry out its functions in a manner 
consistent with the purposes of section 13(n) of the Exchange Act and 
the rules and regulations thereunder. The Commission finds that KOR 
meets these criteria for registration as an SDR for the reasons 
described throughout this order.
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    \183\ See supra notes 16-18 and accompanying text.
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    To evaluate KOR's application to register as a SIP, and consistent 
with the standard for registration previously described in Part 
II.B,\184\ the Commission has considered whether KOR is so organized, 
and has the capacity, to be able to assure the prompt, accurate, and 
reliable performance of its functions as a SIP, comply with the 
provisions of the Exchange Act and the rules and regulations 
thereunder, carry out its functions in a manner consistent with the 
purposes of the Exchange Act, and, insofar as it is acting as an 
exclusive processor, operate fairly and efficiently. The Commission 
finds that KOR meets these criteria for registration as a SIP for the 
reasons described throughout this order.
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    \184\ See supra note 19 and accompanying text.
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V. Conclusion

    For the reasons discussed above, the Commission finds that KOR 
meets the applicable requirements for registration as an SDR, including 
those standards set forth in section 13(n) of the Exchange Act and 
Commission rules and regulations thereunder,\185\ and the applicable 
requirements for registration as a SIP under section 11A(b) of the 
Exchange Act.\186\
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    \185\ 15 U.S.C. 78m(n).
    \186\ 15 U.S.C. 78k-1(b).
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    It is hereby ordered that the application for registration as a 
security-based swap data repository and a securities information 
processor filed by KOR Reporting, Inc. (File No. SBSDR-2023-01) 
pursuant to sections 13(n) and 11A(b) of the Exchange Act be, and 
hereby is, approved.

    By the Commission.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-25961 Filed 11-7-24; 8:45 am]
BILLING CODE 8011-01-P