14438 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 232, 240, and 249 

[Release No. 34–74246; File No. S7–35–10] 

RIN 3235–AK79 

Security-Based Swap Data Repository 

Registration, Duties, and Core 

Principles 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rule. 

SUMMARY: Pursuant to Section 763(i) of 

Title VII (‘‘Title VII’’) of the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act of 2010 (‘‘Dodd-Frank 

Act’’), the Securities and Exchange 

Commission (‘‘Commission’’) is 

adopting new rules under the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’) 

governing the security-based swap data 

repository (‘‘SDR’’) registration process, 

duties, and core principles. The 

Commission is also adopting a new 

registration form. Additionally, the 

Commission is amending several of its 

existing rules and regulations in order to 

accommodate SDRs. First, the 

Commission is amending Regulation 

S–T and Exchange Act Rule 24b–2 to 

clarify that all filings by SDRs, 

including any confidential portion, and 

their requests for confidential treatment 

must be filed electronically. Second, the 

Commission is amending Regulation 

S–T by, among other things, adding a 

new rule that specifically applies to the 

electronic filing of SDRs’ financial 

reports. 

DATES: Effective Date: May 18, 2015. 

Compliance Date: March 18, 2016. 

FOR FURTHER INFORMATION CONTACT: 

Paula Jenson, Acting Chief Counsel; Jo 

Anne Swindler, Assistant Director; 

Richard Vorosmarti, Branch Chief; 

Angie Le, Special Counsel; or Kevin 

Schopp, Special Counsel, Division of 

Trading and Markets, at (202) 551–5750, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549. For questions regarding the SDR 

registration process, please contact 

Jeffrey Mooney, Assistant Director, 

Stephanie Park, Senior Special Counsel, 

Andrew Shanbrom, Special Counsel, or 

Elizabeth Fitzgerald, Special Counsel, 

Division of Trading and Markets, at 

(202) 551–5710. 

SUPPLEMENTARY INFORMATION: The 

Commission is taking several actions. 

First, the Commission is adopting Rules 

13n–1 to 13n–12 (‘‘SDR Rules’’) under 

the Exchange Act governing SDRs and a 

new form for registration as a securitybased swap data repository (‘‘Form 

SDR’’). Second, the Commission is 

adopting technical amendments to 

Regulation S–T and Exchange Act Rule 

24b–2 to clarify that all filings by SDRs, 

including any confidential portion, and 

their requests for confidential treatment 

must be filed electronically. Third, the 

Commission is amending Regulation 

S–T, including adopting new Rule 407, 

as a technical amendment related to 

Rule 13n–11, which is applicable to the 

electronic filing of SDRs’ financial 

reports. 

Table of Contents 

I. Introduction 

A. Proposed Rules Governing the SDR 

Registration Process, Duties, and Core 

Principles, and Form SDR 

B. Related Commission Actions 

C. Public Comment 

D. Other Initiatives Considered in This 

Rulemaking 

II. Broad Economic Considerations and 

Baseline 

A. Broad Economic Considerations 

B. Baseline 

1. Transparency in the SBS Market 

2. Current Security-Based Swap Market 

a. Security-Based Swap Market 

Participants 

b. Security-Based Swap Data Repositories 

III. Definition, Scope of Registration, 

Services, and Business Models of SDRs 

A. Definition of SDR: Core Services 

B. SDRs Required to Register With the 

Commission 

C. Ancillary Services 

D. Business Models of SDRs 

IV. Number of SDRs and Consolidation of 

SBS Data 

V. Implementation of the SDR Rules 

A. Prior Commission Action 

1. Effective Date Order 

2. Implementation Policy Statement 

B. Summary of Comments 

C. Sequenced Effective Date and 

Compliance Date for the SDR Rules 

VI. Discussion of Rules Governing SDRs 

A. Registration of SDRs (Rule 13n–1 and 

Form SDR) 

1. New Form SDR; Electronic Filing 

a. Proposed Form SDR 

b. Comments on Proposed Form SDR 

c. Final Form SDR 

2. Factors for Approval of Registration and 

Procedural Process for Review (Rule 

13n–1(c)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

3. Temporary Registration (Rule 13n–1(d)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

4. Amendment on Form SDR (Proposed 

Rule 13n–1(e)/Final Rule 13n–1(d)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

5. Service of Process and Non–Resident 

SDRs (Proposed Rules 13n–1(f) and 13n– 

1(g)/Final Rules 13n–1(e) and 13n–1(f)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

6. Definition of ‘‘Report’’ (Proposed Rule 

13n–1(h)/Final Rule 13n–1(g)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

B. Withdrawal From Registration; 

Revocation and Cancellation (Rule 13n– 

2) 

1. Proposed Rule 

2. Comments on the Proposed Rule 

3. Final Rule 

C. Registration of Successor to Registered 

SDR (Rule 13n–3) 

1. Proposed Rule 

2. Comments on the Proposed Rule 

3. Final Rule 

a. Succession by Application 

b. Succession by Amendment 

c. Scope and Applicability of Rule 13n–3 

D. Enumerated Duties and Core Principles 

(Rule 13n–4) 

1. Definitions (Rule 13n–4(a)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

2. Enumerated Duties (Rule 13n–4(b)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

i. Inspection and Examination 

ii. Direct Electronic Access 

iii. Monitoring, Screening, and Analysis 

iv. Other Enumerated Duties 

c. Final Rule 

i. Inspection and Examination 

ii. Direct Electronic Access 

iii. Monitoring, Screening, and Analysis 

3. Implementation of Core Principles (Rule 

13n–4(c)) 

a. First Core Principle: Market Access to 

Services and Data (Rule 13n–4(c)(1)) 

i. Proposed Rule 

ii. Comments on the Proposed Rule 

(1) Rule 13n–4(c)(1)(i): Fair, Reasonable, 

and Not Unreasonably Discriminatory 

Dues, Fees, Other Charges, Discounts, 

and Rebates 

(2) Rule 13n–4(c)(1)(ii): Offering Services 

Separately 

(3) Rule 13n–4(c)(1)(iii): Fair, Open, and 

Not Unreasonably Discriminatory Access 

(4) Rule 13n–4(c)(1)(iv): Prohibited or 

Limited Access 

iii. Final Rule 

(1) Rule 13n–4(c)(1)(i): Fair, Reasonable, 

and Not Unreasonably Discriminatory 

Dues, Fees, Other Charges, Discounts, 

and Rebates 

(2) Rule 13n–4(c)(1)(ii): Offering Services 

Separately 

(3) Rule 13n–4(c)(1)(iii): Fair, Open, and 

Not Unreasonably Discriminatory Access 

(4) Rule 13n–4(c)(1)(iv): Prohibited or 

Limited Access 

b. Second Core Principle: Governance 

Arrangements (Rule 13n–4(c)(2)) 

i. Proposed Rule 

ii. Comments on the Proposed Rule 

iii. Final Rule 

c. Third Core Principle: Rules and 

Procedures for Minimizing and 

Resolving Conflicts of Interest (Rule 

13n–4(c)(3)) 

i. Proposed Rule 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14439 

ii. Comments on the Proposed Rule 

iii. Final Rule 

4. Indemnification Exemption (Rule 13n– 

4(d)) 

E. Data Collection and Maintenance (Rule 

13n–5) 

1. Transaction Data (Rule 13n–5(b)(1)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

2. Positions (Rule 13n–5(b)(2)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

3. Maintain Accurate Data (Rule 13n– 

5(b)(3)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

4. Data Retention (Rule 13n–5(b)(4)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

5. Controls to Prevent Invalidation (Rule 

13n–5(b)(5)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

6. Dispute Resolution Procedures (Rule 

13n–5(b)(6)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

7. Data Preservation After an SDR Ceases 

To Do Business (Rule 13n–5(b)(7)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

8. Plan for Data Preservation (Rule 13n– 

5(b)(8)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

F. Automated Systems (Rule 13n–6) 

1. Proposed Rule 

2. Comments on the Proposed Rule 

3. Final Rule 

G. SDR Recordkeeping (Rule 13n–7) 

1. Records To Be Made by SDRs (Rule 13n– 

7(a)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

2. Records To Be Preserved by SDRs (Rule 

13n–7(b)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

3. Recordkeeping After an SDR Ceases To 

Do Business (Rule 13n–7(c)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

4. Applicability (Rule 13n–7(d)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

H. Reports To Be Provided to the 

Commission (Rule 13n–8) 

1. Proposed Rule 

2. Comments on the Proposed Rule 

3. Final Rule 

I. Privacy of SBS Transaction Information 

and Disclosure to Market Participants 

(Rules 13n–9 and 13n–10) 

1. Privacy Requirements (Rule 13n–9) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

2. Disclosure Requirements (Rule 13n–10) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

J. Chief Compliance Officer of Each SDR; 

Compliance Reports and Financial 

Reports (Rule 13n–11) 

1. In General (Rule 13n–11(a)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

2. Definitions (Rule 13n–11(b)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

3. Enumerated Duties of Chief Compliance 

Officer (Rule 13n–11(c)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

4. Compliance Reports (Rules 13n–11(d) 

and 13n–11(e)) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rule 

5. Financial Reports and Filing of Reports 

(Exchange Act Rules 13n–11(f) and (g)/ 

Rules 11, 305, and 407 of Regulation S– 

T) 

a. Proposed Rule 

b. Comments on the Proposed Rule 

c. Final Rules 

6. Additional Rule Regarding Chief 

Compliance Officer (Rule 13n–11(h)) 

K. Exemption from Requirements 

Governing SDRs for Certain Non–U.S. 

Persons (Rule 13n–12) 

1. Proposed Rule 

2. Comments on the Proposed Rule 

3. Final Rule 

VII. Paperwork Reduction Act 

A. Summary of Collection of Information 

1. Registration Requirements, Form SDR, 

and Withdrawal From Registration SDR 

Duties, Data Collection and 

Maintenance, and Direct Electronic 

Access 

2. Recordkeeping 

3. Reports 

4. Disclosure 

5. Chief Compliance Officer; Compliance 

Reports and Financial Reports 

6. Other Provisions Relevant to the 

Collection of Information 

B. Use of Information 

1. Registration Requirements, Form SDR, 

and Withdrawal From Registration 

2. SDR Duties, Data Collection and 

Maintenance, and Direct Electronic 

Access 

3. Recordkeeping 

4. Reports 

5. Disclosure 

6. Chief Compliance Officer; Compliance 

Reports and Financial Reports 

7. Other Provisions Relevant to the 

Collection of Information 

C. Respondents 

1. Registration Requirements, Form SDR, 

and Withdrawal From Registration 

2. SDR Duties, Data Collection and 

Maintenance, and Direct Electronic 

Access 

3. Recordkeeping 

4. Reports 

5. Disclosure 

6. Chief Compliance Officer; Compliance 

Reports and Financial Reports 

7. Other Provisions Relevant to the 

Collection of Information 

D. Total Annual Reporting and 

Recordkeeping Burden 

1. Registration Requirements, Form SDR, 

and Withdrawal From Registration 2. 

SDR Duties, Data Collection and 

Maintenance, and Direct Electronic 

Access 

3. Recordkeeping 

4. Reports 

5. Disclosure 

6. Chief Compliance Officer; Compliance 

Reports and Financial Reports 

7. Other Provisions Relevant to the 

Collection of Information 

E. Collection of Information is Mandatory 

1. Registration Requirements, Form SDR, 

and Withdrawal From Registration 

2. SDR Duties, Data Collection and 

Maintenance, and Direct Electronic 

Access 

3. Recordkeeping 

4. Reports 

5. Disclosure 

6. Chief Compliance Officer; Compliance 

Reports and Financial Reports 

7. Other Provisions Relevant to the 

Collection of Information 

F. Confidentiality 

G. Retention Period of Recordkeeping 

Requirements 

VIII. Economic Analysis 

A. Introduction 

B. General Comments on the Costs and 

Benefits of the SDR Rules 

C. Consideration of Benefits, Costs, and the 

Effect on Efficiency, Competition, and 

Capital Formation 

1. Assessment Costs 

2. Programmatic Costs and Benefits 

a. SDR Registration, Duties, and Core 

Principles 

b. Registration Requirements in the CrossBorder Context 

3. Consideration of Burden on Competition 

and Promotion of Efficiency, 

Competition, and Capital Formation 

a. Potential Effects on Efficiency 

b. Potential Effects on Competition 

c. Potential Effects on Capital Formation 

D. Costs and Benefits of Specific Rules 

1. Registration Requirements, Form SDR, 

and Withdrawal From Registration 

a. Benefits 

b. Costs 

c. Alternatives 

2. SDR Duties, Data Collection and 

Maintenance, and Direct Electronic 

Access 

a. Benefits 

b. Costs 

c. Alternatives 

3. Recordkeeping 

a. Benefits 

b. Costs 

4. Reports 

a. Benefits 

b. Costs 

5. Disclosure 

a. Benefits 

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14440 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1Public Law 111–203, section 761(a) (adding 

Exchange Act Section 3(a)(75) (defining SDR)) and 

section 763(i) (adding Exchange Act Section 13(n) 

(establishing a regulatory regime for SDRs)). 2See Security-Based Swap Data Repository 

Registration, Duties, and Core Principles, Exchange 

Act Release No. 63347 (Nov. 19, 2010), 75 FR 77306 

(Dec. 10, 2010), corrected at 75 FR 79320 (Dec. 20, 

2010) and 76 FR 2287 (Jan. 13, 2011) (‘‘Proposing 

Release’’). 

3Cross-Border Security-Based Swap Activities; 

Re-Proposal of Regulation SBSR and Certain Rules 

and Forms Relating to the Registration of SecurityBased Swap Dealers and Major Security-Based 

Swap Participants, Exchange Act Release No. 69490 

(May 1, 2013), 78 FR 30968 (May 23, 2013) (‘‘CrossBorder Proposing Release’’). 

4Cross-Border Proposing Release, 78 FR at 

31041–44, supra note 3. 

5Cross-Border Proposing Release, 78 FR at 31209, 

supra note 3. 

6Cross-Border Proposing Release, 78 FR at 

31046–48, supra note 3. 

7Cross-Border Proposing Release, 78 FR at 31209, 

supra note 3 (proposing Rule 13n–4(d)). 

8Regulation SBSR-Reporting and Dissemination 

of Security-Based Swap Information, Exchange Act 

Release No. 63346 (Nov. 19, 2010), 75 FR 75208 

(Dec. 2, 2010) (‘‘Regulation SBSR Proposing 

Release’’). 

9See Temporary Exemptions and Other 

Temporary Relief, Together With Information on 

Compliance Dates for New Provisions of the 

Securities Exchange Act of 1934 Applicable to 

Security-Based Swaps, Exchange Act Release No. 

64678 (June 15, 2011), 76 FR 36287 (June 22, 2011) 

(‘‘Effective Date Order’’). The Effective Date Order 

included temporary exemptions from Exchange Act 

Sections 13(n)(5)(D)(i), 13(n)(5)(F), 13(n)(5)(G), 

13(n)(5)(H), 13(n)(7)(A), 13(n)(7)(B), and 13(n)(7)(C), 

each of which will expire on the earlier of (1) the 

date the Commission grants registration to the SDR 

and (2) the earliest compliance date set forth in any 

of the final rules regarding the registration of SDRs. 

Id. at 36306. In addition, the Commission granted 

temporary exemptions from Exchange Act Section 

29(b) in connection with the above listed provisions 

of the Exchange Act until such date as the 

Commission specifies. Id. at 36307. Section 29(b) 

generally provides that contracts made in violation 

of any provision of the Exchange Act, or the rules 

thereunder, shall be void ‘‘(1) as regards the rights 

of any person who, in violation of any such 

provision . . . shall have made or engaged in the 

performance of any such contract, and (2) as regards 

the rights of any person who, not being a party to 

such contract, shall have acquired any right 

thereunder with actual knowledge of the facts by 

reason of which the making or performance of such 

contract was in violation of any such 

provision. . . .’’ 15 U.S.C. 78cc(b). 

10See Statement of General Policy on the 

Sequencing of the Compliance Dates for Final Rules 

Applicable to Security-Based Swaps Adopted 

Pursuant to the Securities Exchange Act of 1934 

and the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Exchange Act Release No. 

67177 (June 11, 2012), 77 FR 35625 (June 14, 2012) 

(‘‘Implementation Policy Statement’’). 

11Cross-Border Proposing Release, 78 FR at 

31210–31216, supra note 3. The Commission 

subsequently adopted certain aspects of the CrossBorder Proposing Release, which, as discussed 

below, has implications on this release. See 

Application of ‘‘Security-Based Swap Dealer’’ and 

‘‘Major Security-Based Swap Participant’’ 

Definitions to Cross-Border Security-Based Swap 

Activities, Exchange Act Release No. 72472 (June 

25, 2014), 79 FR 39068 (July 9, 2014) republished 

at 79 FR 47278 (Aug. 12, 2014) (‘‘Cross-Border 

Adopting Release’’). 

12Reopening of Comment Periods for Certain 

Rulemaking Releases and Policy Statement 

Applicable to Security-Based Swaps Proposed 

Pursuant to the Securities Exchange Act of 1934 

and the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Exchange Act Release No. 

69491 (May 1, 2013), 78 FR 30800 (May 23, 2013) 

(‘‘Reopening Release’’). 

13Regulation SBSR-Reporting and Dissemination 

of Security-Based Swap Information, Exchange Act 

Release No. 74244 (Feb. 11, 2015) (‘‘Regulation 

SBSR Adopting Release’’). The Commission is also 

concurrently proposing certain new rules and 

amendments to Regulation SBSR. See Regulation 

SBSR-Reporting and Dissemination of SecurityBased Swap Information, Exchange Act Release No. 

74245 (Feb. 11, 2015) (‘‘Regulation SBSR Proposed 

Amendments Release’’). 

14Exchange Act Section 13(m)(1), 15 U.S.C. 

78m(m)(1), as added by Dodd-Frank Act Section 

763(i). 

15See Regulation SBSR Adopting Release, supra 

note 13. In a separate proposal relating to 

implementation of Dodd-Frank Act Section 763(i) 

(adding Exchange Act Section 13(n)(5)(E)), the 

Commission proposed rules that would require 

SDRs to collect data related to monitoring the 

compliance and frequency of end-user clearing 

exemption claims. See End-User Exception to 

Mandatory Clearing of Security-Based Swaps, 

Exchange Act Release No. 63556 (Dec. 15, 2010), 75 

FR 79992 (Dec. 21, 2010) (‘‘End-User Exception 

Proposing Release’’). 

b. Costs 

6. Chief Compliance Officer and 

Compliance Functions; Compliance 

Reports and Financial Reports 

a. Benefits 

b. Costs 

c. Alternatives 

7. Other Policies and Procedures Relating 

to an SDR’s Business 

a. Benefits 

b. Costs 

c. Alternatives 

8. Total Costs 

IX. Regulatory Flexibility Act Certification 

X. Statutory Authority 

I. Introduction 

A. Proposed Rules Governing the SDR 

Registration Process, Duties, and Core 

Principles, and Form SDR 

Title VII of the Dodd-Frank Act 

provides for a comprehensive new 

regulatory framework for security-based 

swaps (‘‘SBSs’’), including the 

regulation of SDRs.1 SDRs are required 

to collect and maintain accurate SBS 

transaction data so that relevant 

authorities can access and analyze the 

data from secure, central locations, 

thereby putting them in a better position 

to monitor for potential market abuse 

and risks to financial stability. On 

November 19, 2010, the Commission 

proposed new Rules 13n–1 to 13n–11 

under the Exchange Act governing the 

SDR registration process, duties, and 

core principles, and new Form SDR, 

through which applicants would seek to 

register as SDRs.2

Subsequently, on May 1, 2013, the 

Commission issued a proposing release 

discussing cross-border SBS activities, 

including activities involving SDRs.3 In 

that release, the Commission proposed 

guidance regarding the application of 

certain SDR requirements in the crossborder context; 4 new Rule 13n–12 

under the Exchange Act, which would 

provide certain SDRs with an exemption 

from Exchange Act Section 13(n) and 

the rules and regulations thereunder; 5

and guidance to specify how SDRs may 

comply with the notification 

requirement in the Exchange Act and 

how the Commission proposes to 

determine whether a relevant authority 

is appropriate for purposes of receiving 

SBS data from an SDR.6 In addition, the 

Commission proposed an exemption 

from the indemnification requirement in 

the Exchange Act.7

B. Related Commission Actions 

In conjunction with issuing the 

Proposing Release on November 19, 

2010, the Commission also proposed 

Regulation SBSR to implement the 

Dodd-Frank Act’s provisions relating to 

reporting SBS information to SDRs, 

including standards for the data 

elements that must be provided to 

SDRs.8 Subsequently, on June 15, 2011, 

the Commission issued an exemptive 

order, which provided guidance and 

certain exemptions with respect to the 

requirements under Title VII, including 

requirements governing SDRs, which 

would have had to be complied with as 

of July 16, 2011 (i.e., the effective date 

of Title VII).9 Later, on June 11, 2012, 

the Commission issued a statement of 

general policy on the anticipated 

sequencing of compliance dates of final 

rules to be adopted under Title VII.10 On 

May 1, 2013, the Commission reproposed Regulation SBSR in the CrossBorder Proposing Release.11 At the same 

time, the Commission reopened the 

comment period for certain rules 

proposed under Title VII, including the 

SDR Rules and Form SDR, and the 

Implementation Policy Statement.12

The Commission is concurrently 

adopting Regulation SBSR in a separate 

release.13 The Dodd-Frank Act requires 

the Commission to engage in 

rulemaking for the public dissemination 

of SBS transaction, volume, and pricing 

data,14 and provides the Commission 

with discretion to determine an 

appropriate approach to implement this 

important function. Regulation SBSR 

requires SDRs to undertake this role.15

As discussed in the Proposing 

Release, when considered in 

conjunction with Regulation SBSR, the 

rules that the Commission adopts in this 

release seek to provide improved 

transparency to regulators and the 

markets through comprehensive 

regulations for SBS transaction data and 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14441 

16Proposing Release, 75 FR at 77307, supra note 

2. 

17See Joint Public Roundtable on Issues Related 

to the Schedule for Implementing Final Rules for 

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

Act, Exchange Act Release No. 64314 (Apr. 20, 

2011), 76 FR 23221 (Apr. 26, 2011). Transcripts for 

the public roundtable are available on the 

Commission’s Web site at http://www.sec.gov/news/ 

press/2011/2011-90-transcript.pdf. 

18See Joint Public Roundtable on International 

Issues Relating to the Implementation of Title VII 

of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Exchange Act Release No. 

64939 (July 21, 2011); 76 FR 44507 (July 26, 2011). 

The transcript for the public roundtable is available 

on the Commission’s Web site at: http://

www.sec.gov/news/press/2011/2011-151- 

transcript.pdf. 

19See letters from The Bank of New York Mellon 

Corporation (‘‘BNY Mellon’’); Better Markets, Inc. 

dated January 24, 2011 (‘‘Better Markets 1’’); Better 

Markets, Inc. dated July 22, 2013 (‘‘Better Markets 

2’’); Better Markets, Inc. dated October 18, 2013 

(‘‘Better Markets 3’’); Chris Barnard (‘‘Barnard’’); 

Depository Trust & Clearing Corporation dated 

January 24, 2011 (‘‘DTCC 2’’); Depository Trust & 

Clearing Corporation dated June 3, 2011 (‘‘DTCC 

3’’); Depository Trust & Clearing Corporation dated 

July 21, 2011 (‘‘DTCC 4’’); Depository Trust & 

Clearing Corporation dated July 22, 2013 (‘‘DTCC 

5’’); Ethics Metrics (‘‘Ethics Metrics’’); European 

Securities and Markets Authority (‘‘ESMA’’); 

International Swaps and Derivatives Association 

dated June 28, 2013 (‘‘ISDA’’); Managed Funds 

Association dated January 24, 2011 (‘‘MFA 1’’); 

Managed Funds Association dated March 24, 2011 

(‘‘MFA 2’’); Markit North America Inc. (‘‘Markit’’); 

MarkitSERV LLC (‘‘MarkitSERV’’); Ralph S. Saul 

(‘‘Saul’’); and TriOptima AB (‘‘TriOptima’’). Two of 

these comment letters did not raise issues relating 

to the SDR Rules. See letters from the Chicago 

Mercantile Exchange, Inc. and ICE Trade Vault, LLC 

dated November 19, 2013 (relating to Regulation 

SBSR) and Financial Services Roundtable, Futures 

Industry Association, Institute of International 

Bankers, International Swaps and Derivatives 

Association, Investment Company Institute, 

Securities Industry and Financial Markets 

Association dated May 21, 2013 (requesting 90-day 

extension of the comment period for the CrossBorder Proposing Release). The comments that the 

Commission received on the Proposing Release and 

the Reopening Release are available on the 

Commission’s Web site at http://www.sec.gov/

comments/s7-35-10/s73510.shtml. 

20See letters from Benchmark Solutions 

(‘‘Benchmark*’’); Coalition for Derivatives EndUsers (‘‘CDEU*’’); Depository Trust & Clearing 

Corporation dated November 15, 2010 (‘‘DTCC 1*’’); 

Morgan Stanley (‘‘Morgan Stanley*’’); Robin 

McLeish (‘‘McLeish*’’); and Securities Industry and 

Financial Markets Association (‘‘SIFMA*’’), 

available on the Commission’s Web site at http:// 

www.sec.gov/comments/df-title-vii/swap-datarepositories/swap-data-repositories.shtml. To 

facilitate public input on the Dodd-Frank Act, the 

Commission provided a series of email links, 

organized by topic, on its Web site at http://

www.sec.gov/spotlight/regreformcomments.shtml. 

21See letters from Barclays Capital Inc. 

(‘‘Barclays*’’); Financial Services Forum, Futures 

Industry Association, International Swaps and 

Derivatives Association, and Securities Industry 

and Financial Markets Association (‘‘FSF*’’); and 

Futures Industry Association, The Financial 

Services Roundtable, Institute of International 

Bankers, Insured Retirement Institute, International 

Swaps and Derivatives Association, Securities 

Industry and Financial Markets Association, and 

U.S. Chamber of Commerce (‘‘FIA*’’), available on 

the Commission’s Web site at http://www.sec.gov/ 

comments/df-title-vii/swap-data-repositories/swapdata-repositories.shtml. 

22See letter from Securities Industry and 

Financial Markets Association (‘‘SIFMA 

Implementation’’), available on the Commission’s 

Web site at http://www.sec.gov/comments/s7-05-12/ 

s70512-11.pdf. 

23See letters from The Financial Services 

Roundtable (‘‘FSR Implementation’’), available on 

the Commission’s Web site at http://www.sec.gov/ 

comments/4-625/4625-1.pdf; and Association of 

Institutional Investors (‘‘AII Implementation’’), 

available on the Commission’s Web site at http:// 

www.sec.gov/comments/4-625/4625-5.pdf. 

24See letter from Bank of America Merrill Lynch, 

Barclays Capital, BNP Paribas, Citi, Cre ́dit Agricole 

Corporate and Investment Bank, Credit Suisse 

Securities (USA), Deutsche Bank AG, HSBC, 

Morgan Stanley, Nomura Securities International, 

Inc., Socie ́te ́ Ge ́ne ́rale, and UBS Securities LLC 

(‘‘US & Foreign Banks’’), available on the 

Commission’s Web site at http://www.sec.gov/

comments/4-636/4636-4.pdf; Joint Public 

Roundtable on International Issues Relating to the 

Implementation of Title VII of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act, 

Exchange Act Release No. 64939 (July 21, 2011); 76 

FR 44507 (July 26, 2011). 

25One commenter recommended that the 

Commission ‘‘encourage the formation of a 

planning group composed of market participants’’ 

to address the questions in the Proposing Release. 

Saul, supra note 19. The Commission believes that 

market participants have had sufficient 

opportunities to comment on the Proposing Release 

and market participants have taken advantage of 

these opportunities. Therefore, the Commission 

does not believe that a planning group composed 

of market participants is necessary. 

26See letters from Better Markets, Inc. dated 

August 21, 2013 (‘‘Better Markets CB’’); Depository 

Trust & Clearing Corporation dated August 21, 2013 

(‘‘DTCC CB’’); ICE Trade Vault, LLC (‘‘ICE CB’’); and 

Institute of International Bankers (‘‘IIB CB’’). The 

comments that the Commission received on the 

Cross-Border Proposing Release are available on the 

Commission’s Web site at http://sec.gov/comments/ 

s7-02-13/s70213.shtml. The Commission addressed 

comment letters in response to the Cross-Border 

Proposing Release that address Title VII generally 

and do not relate directly to the proposed SDR 

Rules in the Cross-Border Adopting Release. See 

Cross-Border Adopting Release, 79 FR at 47281–2, 

supra note 11. 

27Regulation SBSR Proposing Release, supra note 

8. See letters from Bank of America, Merrill Lynch 

et al. (‘‘BofA SBSR’’); Barclays Bank PLC, BNP 

Paribas S.A., Deutsche Bank AG, Royal Bank of 

Canada, The Royal Bank of Scotland Group PLC, 

Socie ́te ́ Ge ́ne ́rale, and UBS AG (‘‘Foreign Banks 

SBSR’’); Depository Trust & Clearing Corporation 

(‘‘DTCC SBSR’’); Financial Industry Regulatory 

Authority (‘‘FINRA SBSR’’); International Swaps 

and Derivatives Association & Securities Industry 

and Financial Markets Association (‘‘ISDA SIFMA 

SBSR’’); Managed Funds Association (‘‘MFA 

SBSR’’); Socie ́te ́ Ge ́ne ́rale (‘‘Socie ́te ́ Ge ́ne ́rale 

SBSR’’); The Bank of Tokyo-Mitsubishi UFJ, Ltd., 

Mizuho Corporate Bank, Ltd., and Sumitomo Mitsui 

Banking Corporation (‘‘Bank of Tokyo SBSR’’); 

Tradeweb (‘‘Tradeweb SBSR’’); and Wholesale 

Markets Brokers’ Association, Americas (‘‘WMBAA 

SBSR’’). The comments that the Commission 

received on the Regulation SBSR Proposing Release 

are available on the Commission’s Web site at 

http://www.sec.gov/comments/s7-34-10/

s73410.shtml. See also Cross-Border Proposing 

Release, 78 FR at 31210–6, supra note 3 (reproposing Regulation SBSR). 

28Reporting of Security-Based Swap Transaction 

Data, Exchange Act Release No. 63094 (Oct. 13, 

2010), 75 FR 64643 (Oct. 20, 2010) (‘‘Temporary 

Rule Release’’). See letters from International Swaps 

and Derivatives Association (‘‘ISDA Temp Rule’’) 

and Deutsche Bank AG (‘‘Deutsche Temp Rule’’). 

The comments that the Commission received on the 

Temporary Rule Release are available on the 

Commission’s Web site at http://www.sec.gov/

comments/s7-28-10/s72810.shtml. 

29Registration and Regulation of Security-Based 

Swap Execution Facilities, Exchange Act Release 

No. 63825 (Feb. 2, 2011), 76 FR 10948 (Feb. 28, 

2011) (‘‘SB SEF Proposing Release’’). See letter from 

Tradeweb Markets LLC (‘‘Tradeweb SB SEF’’). The 

comments that the Commission received on the SB 

SEF Proposing Release are available on the 

Continued 

SDRs.16 In combination, these rules 

represent a significant step forward in 

providing a regulatory framework that 

promotes transparency and efficiency in 

the OTC derivatives markets and creates 

important infrastructure to assist 

relevant authorities in performing their 

market oversight functions. 

C. Public Comment 

In each of the releases discussed 

above, the Commission requested 

comment on a number of issues related 

to the proposed SDR Rules. In addition, 

Commission staff and Commodity 

Futures Trading Commission (‘‘CFTC’’) 

staff conducted joint public roundtables, 

including, for example, a joint public 

roundtable on implementation issues 

raised by Title VII (‘‘Implementation 

Joint Roundtable’’) 17 and a joint public 

roundtable on international issues 

relating to the implementation of Title 

VII (‘‘International Joint Roundtable’’).18

The Commission received twenty 

comment letters in response to the 

Proposing Release and the Reopening 

Release 19 as well as six letters 

submitted with respect to SDRs prior to 

the Proposing Release.20 The 

Commission also received three 

comment letters that address issues 

related to SDRs, among others, after the 

Proposing Release through the 

Commission’s solicitation for 

comments,21 which will be addressed in 

this release. In addition, the 

Commission received one letter in 

response to the Implementation Policy 

Statement,22 two letters in response to 

the Implementation Joint Roundtable 23

and a letter in response to the 

International Joint Roundtable,24 all of 

which are relevant to the Proposing 

Release and are addressed in this 

release.25 The Commission also received 

four comment letters in response to the 

Cross-Border Proposing Release relating 

directly to the proposed SDR Rules.26

The Commission also considered 

relevant comments submitted with 

respect to proposed Regulation SBSR,27

the interim temporary final rule for 

reporting of SBS transaction data,28 and 

proposed rules for the registration and 

regulation of security-based swap 

execution facilities (‘‘SB SEFs’’).29

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14442 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

Commission’s Web site at http://www.sec.gov/

comments/s7-06-11/s70611.shtml. 30See, e.g., Barnard, supra note 19 (generally 

supporting the proposed SDR Rules and agreeing 

that establishing SDRs will enhance transparency 

and promote standardization in the SBS market); 

MFA 1, supra note 19 (fully supporting the 

objectives of the Dodd-Frank Act and the proposed 

rules to enhance transparency in the SBS market); 

Markit, supra note 19 (supporting the Commission’s 

objectives of increasing transparency and efficiency 

in the OTC derivatives markets and of reducing 

both systemic and counterparty risk); DTCC 2, 

supra note 19 (supporting the Commission’s efforts 

to establish a comprehensive new framework for the 

regulation of SDRs and noting that ‘‘[i]mposing 

requirements on [SDRs] would promote safety and 

soundness for all U.S. markets by bringing 

increased transparency and oversight to [the SBS 

market]’’); IIB CB, supra note 26 (believing that ‘‘the 

Commission has appropriately sought to take into 

account the greater extent to which the SBS markets 

are globally interconnected, as well as the role that 

foreign regulators therefore must play as the 

primary supervisors of SBS market participants 

based abroad’’). 

31The Commission also considered certain 

comments submitted with respect to other proposed 

Commission rulemakings, related CFTC 

rulemakings, and international initiatives. See 

Sections I.C and I.D discussing other comments and 

initiatives considered in this rulemaking. 

32As discussed below, comments relating to 

relevant authorities’ access to SBS data will be 

addressed in a separate release. 

33Proposing Release, 75 FR at 77313, supra note 

2. 

34See Section VI.A.1.c of this release discussing 

the combination of Form SDR and Form SIP. 

35See Section VI.F of this release discussing Rule 

13n–6. 

36See Swap Data Repositories: Registration 

Standards, Duties and Core Principles, 76 FR 54538 

(Sept. 1, 2011) (‘‘CFTC Part 49 Adopting Release’’). 

See also Swap Data Repositories—Access to SDR 

Data by Market Participants, 79 FR 16672 (Mar. 26, 

2014) (CFTC adopting interim final rule regarding 

access to swap data repositories’ data). 

37See Swap Data Recordkeeping and Reporting 

Requirements, 77 FR 2136 (Jan. 13, 2012) (‘‘CFTC 

Part 45 Adopting Release’’). See also Review of 

Swap Data Recordkeeping and Reporting 

Requirements, 79 FR 16689 (Mar. 26, 2014) (CFTC 

requesting comment on specific swap data reporting 

and recordkeeping rules). 

38See Dodd-Frank Act Section 712(a)(2) 

(requiring the Commission to consult and 

coordinate to the extent possible with the CFTC and 

prudential regulators for ‘‘the purposes of assuring 

regulatory consistency and comparability, to the 

extent possible’’). 

39See DTCC 2, supra note 19 (recommending that 

to the extent that there are any differences, ‘‘the 

Commission and the CFTC should harmonize the 

regimes that oversee SDRs’’ and noting that 

‘‘harmonization is a more important priority than 

the exact nature of the consistent standard, as SDRs 

can adjust to meet a single standard but not 

multiple, inconsistent standards’’); DTCC 5, supra 

note 19 (urging the Commission to harmonize its 

rules with the CFTC’s rules by working, to the 

extent possible, with the CFTC to minimize the 

number of regulatory inconsistencies between the 

two agencies); DTCC CB, supra note 26 (‘‘Given the 

significant number of registered entities (execution 

platforms, clearinghouses, SDRs, dealers, and major 

swap participants) that will face dual oversight, 

unnecessary distinctions in the registration and 

regulation of these entities risk jeopardizing 

regulatory compliance, add confusion to DoddFrank Act implementation, and ultimately impose 

unnecessary costs.’’); Better Markets CB, supra note 

26 (recommending that the Commission ‘‘promote 

harmony with the CFTC’s cross-border guidance, 

subject to its primary duty and recognizing that its 

statutory authority and jurisdiction is distinct from 

that of the CFTC’’ and that the Commission ‘‘adopt 

rules that are at least as strong as the CFTC’s 

guidance, consistent with its statutory authority, 

but should go further than the CFTC wherever 

necessary, and again consistent with its statutory 

authority, to better fulfill the goals of the DoddFrank Act’’). But see Better Markets 2, supra note 

19 (recommending that ‘‘all of the substantive rule 

provisions proposed [as of July 22, 2013] must 

remain as strong as possible, irrespective of . . . the 

CFTC’s approach to the implementation of Title 

VII’’). 

40See DTCC 2, supra note 19 (observing that, 

with respect to the Commission’s proposed rules 

and the CFTC’s proposed rules for swap data 

repositories, ‘‘[t]here appear to be relatively narrow 

differences between the Commission’s and the 

CFTC’s approaches to the regulation of SDRs’’). 

41FSR Implementation, supra note 23 (supporting 

a Title VII-wide harmonization process and 

recommending adopting joint SEC–CFTC rules in 

areas, such as SDRs, where they are not required 

to do so). The commenter stated that the ‘‘process 

of jointly adopting final rules would ensure 

consistency on the most critical points. It would 

also ensure that final rules are adopted at the same 

time, so that market participants do not have to bear 

the cost of complying with one set of rules before 

they know whether their actions will be consistent 

with the other rules to which they will be subject.’’ 

Id. 

42Cf., e.g., Dodd-Frank Act Section 712(d) 

(requiring joint rulemaking regarding certain 

definitions). 

43CFTC Part 49 Adopting Release, supra note 36; 

CFTC Part 45 Adopting Release, supra note 37. 

While commenters generally 

supported the Commission’s approach 

set forth in the Proposing Release and 

the Cross-Border Proposing Release with 

respect to the proposed SDR Rules,30

they set forth a range of opinions 

addressing issues raised by the 

proposed rules and provided 

information regarding industry 

practices. In particular, commenters 

discussed SDRs’ registration, 

enumerated duties, market access to 

services and data, governance 

arrangements, conflicts of interest, data 

collection and maintenance, privacy 

and disclosure requirements, and chief 

compliance officers (‘‘CCOs’’). The 

Commission has carefully reviewed and 

considered all of the comments that it 

received relating to the proposed 

rules.31 As adopted, the SDR Rules and 

new Form SDR have been modified 

from the proposal, in part to respond to 

these comments.32 The revisions to each 

proposed rule are described in more 

detail throughout this release. The 

following are among the most 

significant changes from the 

Commission’s proposed rules: 

• Form SDR: In the Proposing 

Release, the Commission asked whether 

it should combine Form SDR and Form 

SIP such that an SDR would register as 

an SDR and a securities information 

processer (‘‘SIP’’) using only one form.33

After further consideration and in 

response to comments received, the 

Commission has determined that Form 

SDR should be modified from the 

proposal to allow an SDR to register as 

both an SDR and SIP on one form.34

• Access by Relevant Authorities: The 

Commission proposed Rules 13n–4(b)(9) 

and (10) and Rule 13n–4(d) relating to 

relevant authorities’ access to SBS data 

maintained by SDRs. The Commission 

has determined not to adopt these rules 

at this time and anticipates soliciting 

additional public comment regarding 

such relevant authorities’ access. 

• Automated Systems: The 

Commission proposed Rule 13n–6 to 

provide standards for SDRs with regard 

to their automated systems’ capacity, 

resiliency, and security. After further 

consideration, and as explained more 

fully below, the Commission has 

determined to adopt an abbreviated 

version of proposed Rule 13n–6.35

• CCO: In the Proposing Release, the 

Commission asked whether it should 

prohibit officers, directors, or employees 

of an SDR from, directly or indirectly, 

taking any action to coerce, manipulate, 

mislead, or fraudulently influence the 

SDR’s CCO in the performance of his 

responsibilities. The Commission has 

decided to adopt new Rule 13n–11(h). 

D. Other Initiatives Considered in This 

Rulemaking 

The Commission also recognizes the 

CFTC’s companion efforts in 

promulgating rules governing swap data 

repositories pursuant to Dodd-Frank Act 

Section 728. The CFTC adopted final 

rules on swap data repositories on 

August 4, 2011.36 The CFTC also 

adopted rules regarding swap data 

recordkeeping and reporting 

requirements, some of which pertain to 

subjects covered in this release.37

Commission staff consulted with CFTC 

staff with respect to the rules applicable 

to swap data repositories and SDRs, as 

well as with prudential regulators,38 and 

the Commission has taken into 

consideration comments received 

supporting harmonization of the CFTC’s 

rules for swap data repositories with the 

SDR Rules.39 The Commission believes 

that the final SDR Rules are largely 

consistent with the rules adopted by the 

CFTC.40 While one commenter 

recommended adopting joint rules with 

the CFTC,41 the Commission has not 

done so. Congress did not require the 

two agencies to engage in joint 

rulemakings on this topic.42 In addition, 

the CFTC has already adopted its final 

rules for swap data repositories.43 The 

Commission does not believe that the 

differences between the rules adopted 

herein and the CFTC’s rules regarding 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14443 

44See Section VIII of this release discussing 

economic analysis. 

45See Dodd-Frank Act Section 752 (relating to 

international harmonization); DTCC 3, supra note 

19 (‘‘The global SDR framework emerging from the 

Dodd-Frank Act and European regulatory processes 

must provide comprehensive data for all derivatives 

markets globally. If the global regulatory process is 

not harmonized, both the published and regulatoronly accessible data will be fragmented, resulting in 

misleading reporting of exposures, uncertain risk 

concentration reports and a decreased ability to 

identify systemic risk.’’). 

46CPMI is an international standard setting body 

for payment, clearing, and securities settlement 

systems. It serves as a forum for central banks to 

monitor and analyze developments in domestic 

payment, clearing, and settlement systems as well 

as in cross-border and multicurrency settlement 

schemes. See http://www.bis.org/cpmi/. 

47 IOSCO is an international standard setting body 

for securities regulation. It serves as a forum to 

review regulatory issues related to international 

securities and futures transactions. See http://

www.iosco.org. 

48See Considerations for Trade Repositories in 

OTC Derivatives Markets, CPSS–IOSCO (May 2010), 

available at http://www.iosco.org/library/pubdocs/

pdf/IOSCOPD321.pdf. 

49See Report on OTC Derivatives Data Reporting 

and Aggregation Requirements, CPSS–IOSCO (Jan. 

2012), available at http://www.iosco.org/library/

pubdocs/pdf/IOSCOPD366.pdf. 

50See Principles for Financial Market 

Infrastructures, CPSS–IOSCO (Apr. 2012), available 

at http://www.iosco.org/library/pubdocs/pdf/

IOSCOPD377.pdf. The PFMI Report incorporated 

feedback received on the CPSS–IOSCO Trade 

Repository Report. Commission representatives 

participated in the development and drafting of the 

PFMI Report. In particular, Commission staff cochaired the Editorial Team, a working group within 

CPSS–IOSCO that drafted both the consultative and 

final versions of the PFMI Report. The Commission 

believes that the standards applicable to trade 

repositories set forth in the PFMI Report are 

generally consistent with the final SDR Rules. 

51See Authorities’ Access to Trade Repository 

Data, CPSS–IOSCO (Aug. 2013), available at 

http://www.iosco.org/library/pubdocs/pdf/

IOSCOPD417.pdf. 52 If any provision of these rules, or the 

application thereof to any person or circumstance, 

is held to be invalid, such invalidity shall not affect 

other provisions or application of such provisions 

to other persons or circumstances that can be given 

effect without the invalid provision or application. 53With respect to one type of SBS, credit default 

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

Office found that ‘‘comprehensive and consistent 

data on the overall market have not been readily 

available,’’ ‘‘authoritative information about the 

actual size of the [CDS] market is generally not 

available,’’ and regulators currently are unable ‘‘to 

monitor activities across the market.’’ Government 

Accountability Office, GAO–09–397T, Systemic 

Risk: Regulatory Oversight and Recent Initiatives to 

Address Risk Posed by Credit Default Swaps, at 2, 

5, 27, (2009) available at http://www.gao.gov/

new.items/d09397t.pdf; see also Robert E. Litan, 

The Derivatives Dealers’ Club and Derivatives 

Market Reform: A Guide for Policy Makers, Citizens 

and Other Interested Parties, Brookings Institution 

(Apr. 7, 2010), http://www.brookings.edu/∼/media/ 

research/files/papers/2010/4/

07%20derivatives%20litan/0407_derivatives_

litan.pdf; Michael Mackenzie, Era of an Opaque 

Swaps Market Ends, Financial Times, June 25, 

2010, http://www.ft.com/intl/cms/s/0/f49f635c8081-11df-be5a00144feabdc0.html#axzz3HLUjYNI7. 

54 In this situation, economic rents are the profits 

that SBS dealers earn by trading with counterparties 

who are less informed. In a market with competitive 

access to information, there is no informational 

premium; SBS dealers only earn a liquidity 

premium. The difference between the competitive 

liquidity premium and the actual profits that SBS 

dealers earn is the economic rent. 

55See Regulation SBSR Adopting Release, supra 

note 13. 

swap data repositories will place undue 

burdens on persons that register as both 

SDRs and swap data repositories.44

Finally, Commission staff has 

consulted and coordinated with foreign 

regulators through bilateral and 

multilateral discussions, including in 

groups that have prepared reports 

related to SDRs.45 For example, the 

Committee on Payments and Market 

Infrastructures (‘‘CPMI’’), formerly 

known as the Committee on Payment 

and Settlement Systems (‘‘CPSS’’),46

and the International Organization of 

Securities Commissions (‘‘IOSCO,’’ 47

jointly, ‘‘CPSS–IOSCO’’) have issued 

several reports applicable to SDRs. First, 

in May 2010, CPSS and the Technical 

Committee of IOSCO issued a 

consultative report that presented a set 

of factors for trade repositories in the 

OTC derivatives markets to consider in 

designing and operating their services 

and for relevant authorities to consider 

in regulating and overseeing trade 

repositories (‘‘CPSS–IOSCO Trade 

Repository Report’’).48 Second, in 

January 2012, CPSS and the Technical 

Committee of IOSCO issued a final 

report on OTC derivatives data reporting 

and aggregation requirements.49 Third, 

in April 2012, CPSS–IOSCO issued a 

final report that sets forth risk 

management and related standards 

applicable to financial market 

infrastructures, including trade 

repositories (‘‘PFMI Report’’).50 Fourth, 

in August 2013, CPSS and the Board of 

IOSCO issued a report on authorities’ 

access to trade repository data (‘‘CPSS– 

IOSCO Access Report’’).51 The 

Commission has taken these discussions 

and reports into consideration in 

developing the final SDR Rules and 

Form SDR.52

II. Broad Economic Considerations and 

Baseline 

This section describes the most 

significant economic considerations that 

the Commission has taken into account 

in adopting Form SDR and the SDR 

Rules, as well as the baseline for 

evaluating the economic effects of the 

final SDR Rules. The Commission is 

sensitive to the economic consequences 

and effects, including the costs and 

benefits, of Form SDR and the SDR 

Rules. A detailed analysis of the 

particular economic effects—including 

the costs and benefits and the impact on 

efficiency, competition, and capital 

formation—that may result from Form 

SDR and the final SDR Rules is 

discussed in Section VIII of this release. 

A. Broad Economic Considerations 

The SBS market prior to the passage 

of the Dodd-Frank Act has been 

described as being opaque,53 in part 

because price and volume data for SBS 

transactions were not publicly available. 

In opaque markets, price and volume 

information is difficult or impossible to 

obtain, and access to price and volume 

information confers a competitive 

advantage on market participants with 

such access. In the SBS market, for 

example, SBS dealers currently gain 

access to proprietary transaction-level 

price and volume information by 

observing order flow. Large SBS dealers 

and other large market participants with 

a large share of order flow have an 

informational advantage over smaller 

SBS dealers and non-dealers who, in the 

absence of pre-trade transparency, 

observe a smaller subset of the market. 

As the Commission highlights in 

Section II.B below, the majority of SBS 

market activity, and therefore 

information about market activity, is 

concentrated in a small number of SBS 

dealers and widely dispersed among 

other market participants. Greater access 

by SBS dealers to non-public 

information about order flow enables 

better assessment of current market 

values by SBS dealers, permitting them 

to extract economic rents from 

counterparties who are less informed.54

Non-dealers are aware of this 

information asymmetry, and certain 

non-dealers—particularly larger entities 

who transact with many dealers—may 

be able to obtain access to competitive 

pricing or otherwise demand a price 

discount that reflects the information 

asymmetry. Typically, however, the 

market participants with an information 

advantage will earn economic rents 

from their non-public information. In 

the SBS market, it is predominantly SBS 

dealers who observe the greatest order 

flow and benefit from market opacity. 

The Commission expects that SDRs 

will play a critical role in enhancing 

transparency and competitive access to 

information in the SBS market. In order 

to increase the transparency of the OTC 

derivatives market, Title VII requires the 

Commission to undertake a number of 

rulemakings, including the SDR Rules 

and Regulation SBSR,55 to establish a 

framework for the regulatory reporting 

of SBS transaction information to SDRs, 

public dissemination of transactionlevel information, and a framework for 

SDRs to provide access to the 

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14444 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

56Price discovery refers to the process by which 

buyers seek the lowest available prices and sellers 

seek the highest available prices. This process 

reveals the prices that best match buyers to sellers. 

See Larry Harris, Trading & Exchanges: Market 

Microstructure for Practitioners 94 (2003). Price 

discovery may be hindered by such things as a 

scarcity of buyers or sellers or an asymmetry of 

information between potential buyers and sellers. 

For example, when traders are asymmetrically 

informed, liquidity suppliers set their prices far 

from the market to recover from uninformed traders 

what they lose to well-informed traders. See id. at 

312. 

57Regulation SBSR requires that the economic 

terms of the transaction, with the exception of the 

identities of the counterparties, be publicly 

disseminated. These terms include the product ID, 

date and time of execution, price, and notional 

amount of an SBS. See Regulation SBSR Adopting 

Release, supra note 13 (Rules 901(c) and 902). 

58 Implicit trading cost is the difference between 

the price at which a market participant can enter 

into an SBS and the theoretical fundamental value 

of that SBS. Post-trade transparency has been 

shown to lower implicit trading costs in US 

corporate bond markets, which, prior to the 

introduction of FINRA’s Trade Reporting and 

Compliance Engine (TRACE), was a dealer-centric 

over-the-counter (‘‘OTC’’) market characterized by 

limited transparency, similar to the SBS market. 

See, e.g., Amy K. Edwards, Lawrence Harris, & 

Michael S. Piwowar, Corporate Bond Market 

Transparency and Transaction Costs, 62 Journal of 

Finance 1421 (2007); Hendrik Bessembinder, 

William F. Maxwell, & Kumar Venkataraman, 

Market Transparency, Liquidity, Externalities and 

Institutional Trading Costs in Corporate Bonds, 82 

Journal of Financial Economics 251 (2006). 

59Transaction cost analysis refers to an 

evaluation of the price received by a market 

participant relative to prevailing market prices at 

the time the decision to transact was made as well 

as transaction prices received by other market 

participants just before and just after the 

transaction. 

60See Exchange Act Section 13(n)(5)(D), 15 

U.S.C. 78m(n)(5)(D), and Rule 13n-4(b)(5) (requiring 

SDRs to provide direct electronic access to the 

Commission). See also 156 Cong. Rec. S5920 (daily 

ed. July 15, 2010) (statement of Sen. Lincoln) 

(‘‘These new ‘data repositories’ will be required to 

register with the CFTC and the SEC and be subject 

to the statutory duties and core principles which 

will assist the CFTC and the SEC in their oversight 

and market regulation responsibilities.’’). 

61See, e.g., Markus K. Brunnermeier and Lasse 

Heje Pedersen, Market Liquidity and Funding 

Liquidity, 22 Review of Financial Studies 2201 

(2009); Denis Gromb and Dimitri Vayanos, A Model 

of Financial Market Liquidity Based on 

Intermediary Capital, 8 Journal of the European 

Economic Association 456 (2010). 

62The CFTC’s experience with collecting swap 

data suggests that the benefits of receiving 

information from trade repositories may be reduced 

by inaccuracies or inconsistencies in information 

maintained by trade repositories. See, e.g., Andrew 

Ackerman, CFTC Seeks Comment on Improving 

Swaps Data Stream; Data Problems Have Hobbled 

Efforts to See More Clearly Into Swaps Market, Wall 

Street Journal Mar. 19, 2014, http://online.wsj.com/ 

news/articles/SB100014240527023040263

04579449552899867592 (noting that ‘‘a series of 

data problems . . . have hobbled efforts to see more 

clearly into the multitrillion-dollar swaps market’’). 

The CFTC has published a request for comment on 

specific swap data reporting and recordkeeping 

rules to determine how these rules were being 

applied and whether or what clarifications, 

enhancements, or guidance may be appropriate. See 

Review of Swap Data Recordkeeping and Reporting 

Requirements, 79 FR 16689 (Mar. 26, 2014). 

63See, e.g., Rule 13n–5(b)(3) (requiring 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). 

64See, e.g., Rule 13n–5(b)(4) (requiring an SDR to 

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); Rule 13n–5(b)(5) (requiring 

an SDR to establish, maintain, and enforce written 

policies and procedures reasonably designed to 

prevent any provision in a valid SBS from being 

invalidated or modified through the procedures or 

operations of the SDR). 

65See Section IV of this release discussing 

number of SDRs and consolidation of SBS data. 

information to the Commission. Persons 

that meet the definition of an SDR will 

be required, absent an exemption, to 

comply with all SDR obligations, 

including the SDR Rules requiring SDRs 

to collect and maintain accurate data 

and the requirements under Regulation 

SBSR to publicly disseminate 

transaction-level information. Reporting 

of SBS transaction information and 

public dissemination of accurate 

transaction price and volume 

information should promote price 

discovery and lessen the informational 

advantage enjoyed by SBS dealers with 

access to order flow.56 By requiring 

SDRs to collect SBS transaction, 

volume, and pricing information and 

publicly disseminate information, the 

SDR Rules and Regulation SBSR may 

promote transparency in the SBS 

market.57

In addition to lessening the 

informational advantage currently 

available to SBS dealers, increased 

transparency of the SBS market could 

have other widespread benefits. Public 

availability of SBS price and volume 

information could lower the costs of 

SBS trading by reducing implicit trading 

costs.58 To the extent that implicit costs 

of SBS trading are reduced and the 

availability of the data necessary to 

evaluate the performance of a market 

participant’s SBS dealer using 

transaction cost analysis, more market 

participants may be inclined to trade in 

the SBS market.59

Allowing competitive, impartial 

access to the most recent transaction 

price and volume information may 

promote the efficiency of SBS trading 

and increase opportunities for risksharing in other ways. In particular, as 

in other securities markets, quoted bids 

and offers should form and adjust 

according to the reporting of executed 

trades, attracting liquidity from hedgers 

and other market participants that do 

not observe customer order flow and do 

not benefit from opacity. 

Separately, the SDR Rules are 

designed to, among other things, make 

available to the Commission SBS data 

that will provide a broad view of the 

SBS market and help monitor for 

pockets of risk that might not otherwise 

be observed by financial market 

regulators.60 Unlike most other 

securities transactions, SBSs involve 

ongoing financial obligations between 

counterparties during the life of 

transactions that typically span several 

years. Counterparties to an SBS rely on 

each other’s creditworthiness and bear 

this credit risk and market risk until the 

SBS terminates or expires. This can lead 

to market instability when a large 

market participant, such as an SBS 

dealer, major SBS market participant, or 

central counterparty (‘‘CCP’’), becomes 

financially distressed. The default of a 

large market participant could introduce 

the potential for sequential counterparty 

failure; the resulting uncertainty could 

reduce the willingness of market 

participants to extend credit, and 

substantially reduce liquidity and 

valuations for particular types of 

financial instruments.61 A broad view of 

the SBS market, including aggregate 

market exposures to referenced entities 

(instruments), positions taken by 

individual entities or groups, and data 

elements necessary for a person to 

determine the market value of the 

transaction could provide the 

Commission with a better 

understanding of the actual and 

potential risks in the SBS market and 

promote better risk monitoring efforts. 

The information provided by SDRs 

could also help the Commission detect 

market manipulation, fraud, and other 

market abuses. 

The extent of the benefits discussed 

above may be limited by the inaccuracy 

or incompleteness of SBS data 

maintained by SDRs.62 The Commission 

believes, however, that the SDR Rules 

relating to data accuracy 63 and 

maintenance 64 will help minimize the 

inaccuracy or incompleteness of SBS 

data maintained by SDRs. The benefits 

discussed above may have associated 

costs for compliance with the SDR Rules 

and Regulation SBSR. Persons that meet 

the definition of an SDR will be 

required to invest in infrastructure 

necessary to comply with rules for 

collecting, maintaining, and 

disseminating accurate data. Such 

infrastructure costs may ultimately be 

reflected in the prices that SBS dealers 

charge to customers, mitigating the 

reduction in indirect trading costs that 

may accrue from reducing SBS dealers’ 

information advantage. 

The SDR Rules permit the possibility 

of multiple SDRs within an asset class.65

If there are multiple SDRs in any given 

asset class, then differences in how each 

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66See Section VI.D.2.c.ii of this release. 

67See https://www.theice.com/cds/

MarkitSingleNames.shtml. End-of-Day (‘‘EOD’’) 

prices are established for all cleared CDS single 

name and index instruments using a price 

discovery process developed for the CDS market. 

Clearing participants are required to submit prices 

every business day, and the clearing house 

conducts a daily auction-like process resulting in 

periodic trade executions among clearing 

participants. This process determines the clearing 

house EOD prices, which are used for daily markto-market purposes. 

68According to data published by BIS, the global 

notional amount outstanding in equity forwards 

and swaps as of December 2013 was $2.28 trillion. 

The notional amount outstanding was 

approximately $11.32 trillion for single-name CDSs, 

approximately $9.70 trillion for multi-name index 

CDSs, and approximately $0.95 trillion for multiname, non-index CDSs. See Bank of International 

Settlement, BIS Quarterly Review, Statistical 

Annex, Table 19 (June 2014), available at http://

www.bis.org/publ/qtrpdf/r_qt1406.htm. For 

purposes of this analysis, the Commission assumes 

that multi-name index CDSs are not narrow-based 

index CDSs, and therefore do not fall within the 

definition of SBS. See Exchange Act Section 

3(a)(68)(A), 15 U.S.C. 78c(a)(68)(A); see also Further 

Definition of ‘‘Swap,’’ ‘‘Security-Based Swap,’’ and 

‘‘Security-Based Swap Agreement’’; Mixed Swaps; 

Security-Based Swap Agreement Recordkeeping, 

Exchange Act Release No. 67453 (July 18, 2012), 77 

FR 48207 (Aug. 13, 2012). The Commission also 

assumes that instruments reported as equity 

forwards and swaps include instruments such as 

total return swaps on individual equities that fall 

with the definition of SBS, potentially resulting in 

underestimation of the proportion of the SBS 

market represented by single-name CDSs. Although 

the BIS data reflects the global OTC derivatives 

market, and not only the U.S. market, the 

Commission is not aware of any reason to believe 

that these ratios differ significantly in the U.S. 

market. 

69See ISDA, CDS Marketplace, Exposures & 

Activity, http://www.isdacdsmarketplace.com/

exposures_and_activity (‘‘DTCC Deriv/SERV’s 

Trade Information Warehouse is the only 

comprehensive trade repository and post-trade 

processing infrastructure for OTC credit derivatives 

in the world. Its Deriv/SERV matching and 

confirmation service electronically matches and 

confirms more than 98% of credit default swaps 

transactions globally.’’). 

70The Commission notes that DTCC–TIW’s entity 

domicile determinations may not reflect the 

Commission’s definition of ‘‘U.S. person’’ in all 

cases. 

71 In 2013, DTCC–TIW reported on its Web site 

new trades in single-name CDSs with gross notional 

of $12.0 trillion. DTCC–TIW provided to the 

Commission data that included only transactions 

with a U.S. counterparty or a U.S. reference entity. 

During the same period, this data included new 

trades with gross notional equaling $9.3 trillion, or 

77% of the total reported by DTCC–TIW. 

SDR accepts, stores, and disseminates 

SBS data may cause fragmentation in 

the SBS data, thereby making it more 

difficult for the Commission and the 

public to compile, compare, and analyze 

market information. As discussed 

below, the Commission anticipates that 

it will propose for public comment 

detailed specifications of acceptable 

formats and taxonomies that would 

facilitate an accurate interpretation, 

aggregation, and analysis of SBS data by 

the Commission.66 The Commission 

believes that these specifications may 

help reduce any difficulties resulting 

from the fragmentation of data among 

multiple SDRs by facilitating the clear, 

uniform reporting of SBS data to the 

Commission. 

B. Baseline 

To assess the economic impact of the 

SDR Rules described in this release, the 

Commission is using as a baseline the 

SBS market as it exists today, including 

applicable rules that have already been 

adopted and excluding rules that have 

been proposed, but not yet finalized. 

The Commission acknowledges 

limitations in the degree to which the 

Commission can quantitatively 

characterize the current state of the SBS 

market. As described in more detail 

below, because the available data on 

SBS transactions do not cover the entire 

market, the Commission has developed 

an understanding of market activity 

using a sample that includes only 

certain portions of the market. 

1. Transparency in the SBS Market 

There currently is no robust, widely 

accessible source of information about 

individual SBS transactions. 

Nevertheless, market participants can 

gather certain limited information for 

the single-name CDS market from a 

variety of sources. For example, some 

vendors provide indicative quotes. 

Indicative quotes are not based on 

actual transactions and, as such, they 

may not reflect the true value. 

Moreover, these quotes do not represent 

firm commitments to buy or sell 

protection on particular reference 

entities. However, market participants 

can gather information from indicative 

quotes that may inform their trading. In 

addition, one entity as part of its singlename CDS clearing, makes its daily 

settlement prices on 5 year single-name 

CDSs available to the public on its Web 

site.67 A more complete database of 

current and historical settlement prices 

is available by subscription. 

In addition to the pricing data 

discussed above, there is limited, 

publicly-disseminated information 

about aggregate SBS market activity. 

The Depository Trust and Clearing 

Corporation—Trade Information 

Warehouse (‘‘DTCC–TIW’’) publishes 

weekly transaction and position reports 

for single-name CDSs. ICE Clear Credit 

also provides aggregated volumes of 

clearing activity. Additionally, large 

multilateral organizations periodically 

report measures of market activity. For 

example, the Bank for International 

Settlements (‘‘BIS’’) reports gross 

notional outstanding for single-name 

CDSs and equity forwards and swaps 

semiannually. 

Market participants that are SBS 

dealers can also draw inferences about 

SBS market activity by observing order 

flow. This source of proprietary 

information is most useful for SBS 

dealers with large market shares. 

Finally, DTCC–TIW voluntarily 

provides to the Commission data on 

individual CDS transactions. This 

information is made available to the 

Commission in accordance with an 

agreement between the DTCC–TIW and 

the OTC Derivatives Regulators’ Forum 

(‘‘ODRF’’), of which the Commission is 

a member. While DTCC–TIW generally 

provides this information to regulators 

that are members of the ODRF, DTCC– 

TIW does not make the information 

available to the public. 

2. Current Security-Based Swap Market 

The Commission’s analysis of the 

current state of the SBS market is based 

on data obtained from DTCC–TIW, 

particularly data regarding the activity 

of market participants for single-name 

CDSs from 2008 to 2013. While other 

repositories may collect data on 

transactions in total return swaps on 

equity and debt, the Commission does 

not currently have access to such data 

for these products (or other products 

that are SBSs). Although the 

Commission has previously noted that 

the definition of SBS is not limited to 

single-name CDSs, the Commission 

believes that the single-name CDS data 

is sufficiently representative of the SBS 

market and therefore can directly inform 

the analysis of the state of the current 

SBS market.68 The Commission believes 

that DTCC–TIW’s data for single-name 

CDSs is reasonably comprehensive 

because it includes data on almost all 

single-name CDS transactions and 

market participants trading in singlename CDSs.69 The Commission notes 

that the data that it receives from 

DTCC–TIW does not encompass CDS 

transactions that both: (i) Do not involve 

any U.S. counterparty,70 and (ii) are not 

based on a U.S. reference entity. 

Notwithstanding this limitation, the 

Commission believes that DTCC–TIW 

data provides sufficient information to 

identify the types of market participants 

active in the SBS market and the general 

pattern of dealing within that market.71

a. Security-Based Swap Market 

Participants 

A key characteristic of SBS activity is 

that it is concentrated among a 

relatively small number of entities that 

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72See Cross-Border Adopting Release, 79 FR at 

47293, supra note 11. All data in this section cites 

updated data from this release and the 

accompanying discussion. 

73These 1,800 transacting agents represent over 

10,000 accounts representing principal risk holders. 

See Regulation SBSR Adopting Release, supra note 

13 and Cross Border Adopting Release, 79 FR at 

47293–4, supra note 11 (discussing the number of 

transacting agents and accounts of principal risk 

holders). 

74For the purpose of this analysis, the ISDArecognized dealers are those identified by ISDA as 

a recognized dealer in any year during the relevant 

period. Dealers are only included in the ISDArecognized dealer category during the calendar year 

in which they are so identified. The complete list 

of ISDA recognized dealers is: JP Morgan Chase NA 

(and Bear Stearns), Morgan Stanley, Bank of 

America NA (and Merrill Lynch), Goldman Sachs, 

Deutsche Bank AG, Barclays Capital, Citigroup, 

UBS, Credit Suisse AG, RBS Group, BNP Paribas, 

HSBC Bank, Lehman Brothers, Socie ́te ́ Ge ́ne ́rale, 

Credit Agricole, Wells Fargo, and Nomura. See 

ISDA, Operations Benchmarking Surveys, available 

at http://www2.isda.org/functional-areas/research/

surveys/operations-benchmarking-surveys. 

75 ‘‘Accounts’’ as defined in the DTCC–TIW 

context are not equivalent to ‘‘accounts’’ in the 

definition of ‘‘U.S. person’’ provided by Exchange 

Act Rule 3a71–3(a)(4)(i)(C). They also do not 

necessarily represent separate legal persons. One 

entity or legal person may have multiple accounts. 

For example, a bank may have one DTCC account 

for its U.S. headquarters and one DTCC account for 

one of its foreign branches. 

76There remain over 4,600 DTCC ‘‘accounts’’ 

unclassified by type. Although unclassified, each 

was manually reviewed to verify that it was not 

likely to be a special entity within the meaning of 

the Dodd-Frank Act and instead was likely to be an 

entity such as a corporation, an insurance company, 

or a bank. 

77 ‘‘Private funds’’ encompass various 

unregistered pooled investment vehicles, including 

hedge funds, private equity funds, and venture 

capital funds. 

engage in dealing activities.72 Based on 

DTCC–TIW data that the Commission 

has received, thousands of other market 

participants appear as counterparties to 

SBS transactions, including, but not 

limited to, investment companies, 

pension funds, private (hedge) funds, 

sovereign entities, and industrial 

companies. The Commission observes 

that most end users of SBSs do not 

directly trade SBSs, but instead use 

dealers, banks, or investment advisers as 

agents to establish the end users’ 

positions. Based on the Commission’s 

analysis of DTCC–TIW data, there were 

1,800 entities engaged directly in 

trading CDSs between November 2006 

and December 2013.73 Table 1 below 

highlights that of these entities, there 

were 17, or approximately 0.9%, that 

were ISDA-recognized dealers.74 The 

vast majority of transactions (84.1%) 

measured by the number of 

counterparties (each transaction has two 

counterparties or transaction sides) were 

executed by ISDA-recognized dealers. 

Thus, a small set of dealers observe the 

largest share of the market and 

potentially benefit the most from 

opacity. 

TABLE 1—THE NUMBER OF TRANSACTING AGENTS IN THE CDS MARKET BY COUNTERPARTY TYPE AND THE FRACTION OF

TOTAL TRADING ACTIVITY, FROM NOVEMBER 2006 THROUGH DECEMBER 2013, REPRESENTED BY EACH

COUNTERPARTY TYPE. 

Transacting agents Number Percent 

Transaction 

share 

(%) 

Investment Advisers .................................................................................................................... 1,347 74.8 9.7 

—SEC registered ......................................................................................................................... 529 29.4 5.9 

Banks ........................................................................................................................................... 256 14.2 5.0 

Pension Funds ............................................................................................................................. 29 1.6 0.1 

Insurance Companies .................................................................................................................. 36 2.0 0.2 

ISDA-Recognized Dealers ........................................................................................................... 17 0.9 84.1 

Other ............................................................................................................................................ 115 6.4 1.0 

Total ...................................................................................................................................... 1,800 100.0 100.0 

Principal holders of CDS risk 

exposure are represented by accounts in 

DTCC–TIW.75 As highlighted in Table 2 

below, Commission staff’s analysis of 

these accounts in DTCC–TIW shows 

that the 1,800 transacting agents 

(entities directly engaged in trading) 

described above represented 10,054 

principal risk holders (entities bearing 

the risk of the CDS). In some cases, the 

principal risk holder may have been 

represented by an investment adviser 

that served as the transacting agent. In 

other cases, the principal risk holder 

may have participated directly as the 

transacting agent. Each account does not 

necessarily represent a separate legal 

person; one legal person may allocate 

transactions across multiple accounts. 

For example, the 17 ISDA-recognized 

dealers described above allocated 

transactions across 69 accounts. 

Among the accounts, there are 1,086 

Dodd-Frank Act-defined special entities 

and 636 investment companies 

registered under the Investment 

Company Act of 1940.76 Private funds 

comprise the largest type of account 

holders that the Commission was able to 

classify, and although not verified 

through a recognized database, most of 

the funds the Commission was not able 

to classify appear to be private funds.77

While the Commission anticipates that 

some of these accounts may prefer to 

operate in an opaque market (if, for 

example, they are relying on a 

proprietary trading strategy and wish to 

keep their transactions anonymous), the 

data suggest that the vast majority of 

principal risk holders in CDS may 

benefit from the Dodd-Frank Act’s 

transparency requirements. As 

discussed above and in Section VIII 

below, dealers are the category of 

market participants most likely to 

benefit from opaqueness. As shown in 

Table 1, of the 1,800 transacting agents 

in the 2006–2013 sample, 17 (or 0.9%) 

are ISDA-recognized dealers. Similarly, 

as shown in Table 2, of the 10,054 

accounts with CDS transactions, 69 (or 

0.7%) are accounts held by ISDArecognized dealers. As many as 99% of 

market participants may benefit from 

increasing transparency. 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14447 

78This column reflects the number of participants 

who are also trading for their own accounts. 

79The domicile classifications in DTCC–TIW are 

based on the market participants’ own reporting 

and have not been verified by Commission staff. 

Prior to enactment of the Dodd-Frank Act, account 

holders did not formally report their domicile to 

DTCC–TIW because there was no systematic 

requirement to do so. After enactment of the DoddFrank Act, the DTCC–TIW has collected the 

registered office location of the account. This 

information is self-reported on a voluntary basis. It 

is possible that some market participants may 

misclassify their domicile status because the 

databases in DTCC–TIW do not assign a unique 

legal entity identifier to each separate entity. It is 

Continued 

TABLE 2—THE NUMBER AND PERCENTAGE OF ACCOUNT HOLDERS—BY TYPE—WHO PARTICIPATE IN THE CDS MARKET

THROUGH A REGISTERED INVESTMENT ADVISER, AN UNREGISTERED INVESTMENT ADVISER, OR DIRECTLY AS A

TRANSACTING AGENT FROM NOVEMBER 2006 THROUGH DECEMBER 2013 

Account holders by type Number Represented by a Represented by an Participant is transacting 

registered investment unregistered investment agent 78

adviser adviser 

Private Funds ........................................... 2,914 1,395 48% 1,496 51% 23 1% 

Dodd-Frank Act Special Entities .............. 1,086 1,050 97% 12 1% 24 2% 

Registered Investment Companies .......... 636 620 97% 14 2% 2 0% 

Banks (non-ISDA-recognized dealers) .... 369 25 7% 5 1% 339 92% 

Insurance Companies .............................. 224 144 64% 21 9% 59 26% 

ISDA-Recognized Dealers ....................... 69 0 0% 0 0% 69 100% 

Foreign Sovereigns .................................. 63 45 71% 2 3% 16 25% 

Non-Financial Corporations ..................... 57 39 68% 3 5% 15 26% 

Finance Companies ................................. 10 5 50% 0 0% 5 50% 

Other/Unclassified .................................... 4,626 3,131 68% 1,295 28% 200 4% 

All ...................................................... 10,054 6,454 64% 2,848 28% 752 7% 

Although the SBS market is global in 

nature, 61% of the transaction volume 

in the 2008–2013 period included at 

least one U.S.-domiciled entity (see 

Figure 1). Moreover, 18% of the CDS 

transactions reflected in DTCC–TIW 

data that include at least one U.S.- 

domiciled counterparty or a U.S. 

reference entity were between U.S.- 

domiciled entities and foreigndomiciled counterparties. 

The cross-border nature of the SBS 

market is growing over time. Figure 2 

below is a chart of (1) the percentage of 

new accounts with a domicile in the 

United States,79 (2) the percentage of 

new accounts with a domicile outside 


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also possible that the domicile classifications may 

not correspond precisely to the definition of U.S. 

person under the rules defined in Exchange Act 

Rule 3a71–3(a)(4), 17 CFR 240.3a71–3(a)(4). 

Notwithstanding these limitations, the Commission 

believes that the cross-border and foreign activity 

demonstrates the nature of the single-name CDS 

market. 

the United States, and (3) the percentage 

of new accounts outside the United 

States, but managed by a U.S. entity, 

foreign accounts that include new 

accounts of a foreign branch of a U.S. 

bank, and new accounts of a foreign 

subsidiary of a U.S. entity. Over time, a 

greater share of accounts entering the 

DTCC–TIW data either have a foreign 

domicile or have a foreign domicile 

while being managed by a U.S. person. 

The increase in foreign accounts may 

reflect an increase in participation by 

foreign accountholders and the increase 

in foreign accounts managed by U.S. 

persons may reflect the flexibility with 

which market participants can 

restructure their market participation in 

response to regulatory intervention, 

competitive pressures, and other factors. 

There are, however, alternative 

explanations for the shifts in new 

account domicile in Figure 2. Changes 

in the domicile of new accounts through 

time may reflect improvements in 

reporting by market participants to 

DTCC–TIW. Additionally, because the 

data includes only accounts that are 

domiciled in the United States, transact 

with U.S.-domiciled counterparties, or 

transact in single-name CDSs with U.S. 

reference entities, changes in the 

domicile of new accounts may reflect 

increased transaction activity between 

U.S. and non-U.S. counterparties. 

b. Security-Based Swap Data 

Repositories 

No SDRs are currently registered with 

the Commission. The Commission is 

aware of one entity in the market (i.e., 

the DTCC–TIW) that has been accepting 

voluntary reporting of single-name and 

index CDS transactions. In 2013, DTCC– 

TIW received approximately 3.1 million 

records of CDS transactions, of which 


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80Price-forming CDS transactions include all new 

transactions, assignments, modifications to increase 

the notional amounts of previously executed 

transactions, and terminations of previously 

executed transactions. Transactions terminated or 

entered into in connection with a compression 

exercise, and expiration of contracts at maturity are 

not considered price-forming and are therefore 

excluded, as are replacement trades and all 

bookkeeping-related trades. 

81CFTC Rule 49.3(b) provides for provisional 

registration of a swap data repository. 17 CFR 

49.3(b). 

82See Leaders’ Statement, The Pittsburgh 

Summit, September 24–25, 2009, available at 

http://www.treasury.gov/resource-center/

international/g7-g20/Documents/pittsburgh_

summit_leaders_statement_250909.pdf. 

83See OTC Derivatives Market Reforms Eighth 

Progress Report on Implementation (Nov. 2014), 

available at http://www.financialstabilityboard.org/ 

wp-content/uploads/r_141107.pdf. 

84 Id. 

85See Proposing Release, 75 FR at 77307–77308, 

supra note 2. 

86 In the Cross-Border Proposing Release, the 

Commission discussed several examples of 

circumstances in which a person would be 

performing the functions of an SDR in the crossborder context. 78 FR at 31041–31043, supra note 

3. The Commission did not receive any comments 

on this aspect of the Cross-Border Proposing 

Release. 

87Exchange Act Section 3(a)(75), 15 U.S.C. 

78c(a)(75). 

88Exchange Act Section 3(a)(75), 15 U.S.C. 

78c(a)(75). 

89 DTCC 2, supra note 19. 

90 DTCC 2, supra note 19. 91MarkitSERV, supra note 19. 92See Exchange Act Section 3(a)(75), 15 U.S.C. 

78c(a)(75). 93See Exchange Act Section 3(a)(75), 15 U.S.C. 

78c(a)(75). 94See DTCC 2, supra note 19. 

approximately 800,000 were price 

forming.80

The CFTC has provisionally registered 

four swap data repositories.81 These 

swap data repositories are: BSDR LLC, 

Chicago Mercantile Exchange Inc., 

DTCC Data Repository LLC, and ICE 

Trade Vault, LLC. The Commission 

believes that most of these entities will 

likely register with the Commission as 

SDRs and that other persons may seek 

to register with both the CFTC and the 

Commission as swap data repositories 

and SDRs, respectively. As stated above, 

the Commission believes that the final 

SDR Rules are largely consistent with 

the CFTC’s rules governing swap data 

repositories. 

Efforts to regulate the swap and SBS 

market are underway not only in the 

United States, but also abroad. In 2009, 

leaders of the G20—whose members 

include the United States, 18 other 

countries, and the European Union— 

called for global improvements in the 

functioning, transparency, and 

regulatory oversight of OTC derivatives 

markets and agreed, among other things, 

that OTC derivatives contracts should 

be reported to trade repositories.82

Substantial progress has been made in 

establishing the trade repository 

infrastructure to support the reporting of 

all contracts.83 Currently, multiple trade 

repositories operate, or are undergoing 

approval processes to do so, in a 

number of different jurisdictions.84 The 

requirements for trade reporting differ 

across jurisdictions. The result is that 

trade repository data is fragmented 

across many locations, stored in a 

variety of formats, and subject to many 

different rules for authorities’ access. 

The data in these trade repositories will 

need to be aggregated in various ways if 

authorities are to obtain a 

comprehensive and accurate view of the 

global OTC derivatives markets and to 

meet the original financial stability 

objectives of the G20 in calling for 

comprehensive use of trade repositories. 

III. Definition, Scope of Registration, 

Services, and Business Models of SDRs 

The Proposing Release generally 

discussed the role, regulation, and 

business models of SDRs,85 but it did 

not specifically address the applicability 

of the statutory definition of an SDR.86

The Commission received several 

comments that addressed broad issues 

regarding what persons fall within the 

statutory definition of an SDR, what 

services can or must be provided by 

SDRs, and what business models are 

appropriate for SDRs. In light of these 

comments, the Commission believes 

that it is useful to provide clarity on the 

definition of an SDR and the services 

that are required or permitted to be 

provided by SDRs. For purposes of this 

release, the Commission will refer to 

services that are specifically included in 

the statutory definition of an SDR 87 as 

‘‘core’’ services. All other services—both 

those required by the Dodd-Frank Act 

and the rules and regulations 

thereunder, and those not required, but 

which the Commission believes are 

permissible for SDRs to perform—will 

be referred to as ‘‘ancillary’’ services. 

A. Definition of SDR: Core Services 

Exchange Act Section 3(a)(75), 

enacted by Dodd-Frank Act Section 761, 

defines a ‘‘security-based swap data 

repository’’ to mean ‘‘any person that 

collects and maintains information or 

records with respect to transactions or 

positions in, or the terms and conditions 

of, security-based swaps entered into by 

third parties for the purpose of 

providing a centralized recordkeeping 

facility for security-based swaps.’’ 88

One commenter requested that ‘‘the 

Commission provide clear guidance as 

to the scope of the entities covered 

within the [statutory] definition of SDR 

in the Dodd-Frank Act.’’ 89 The 

commenter stated as follows: ‘‘The 

statutory duties required of an SDR are 

extensive and can form a business in 

their own right. The requirements of an 

SDR should not be imposed upon 

service providers looking to provide 

targeted solutions to specific processes, 

as opposed to providers looking more 

broadly to fulfill the role of an SDR. All 

third party service providers have to 

perform a level of recordkeeping and 

often retain data previously submitted 

by customers to offer services 

efficiently. This should not transform 

them into an SDR unless there is a 

corresponding policy reason for doing 

so. In fact, there is a strong policy 

reason to exclude them, the goal of 

countering the risk of fragmentation in 

data collection and dissemination on a 

global basis.’’ 90 Another commenter 

described an SDR’s core functions as 

‘‘basic receipt and storage of [SBS] 

data.’’ 91

The Commission believes that the 

statutory definition in Exchange Act 

Section 3(a)(75) describes the core 

services or functions of an SDR. 

Whether a person falls within the 

statutory definition of an SDR is factspecific. An example of a person that 

would likely meet the statutory 

definition of an SDR is a person that 

provides the service of maintaining a 

centralized repository of records of SBSs 

for counterparties to SBS transactions 

that are intended to be relied on by 

counterparties for legal purposes. 

Providing this service would cause the 

person to meet the statutory definition 

of an SDR because the person is 

‘‘collect[ing] and maintain[ing] 

information or records with respect to 

transactions or positions in, or the terms 

and conditions of, [SBSs] entered into 

by third parties for the purpose of 

providing a centralized recordkeeping 

facility for [SBSs].’’ 92 In contrast, a law 

firm, trustee, custodian, or broker-dealer 

that holds SBS records likely would not 

meet the statutory definition of an SDR 

because those persons would not be 

doing so ‘‘for the purpose of providing 

a centralized recordkeeping facility for 

[SBSs].’’ 93

One commenter identified countering 

the risk of fragmentation in data 

collection and dissemination as a policy 

reason to exclude certain persons, such 

as certain third party service providers, 

from the definition of an SDR.94 The 

Commission believes that while third 

party service providers may collect and 

maintain SBS data, they generally do 

not do so ‘‘for the purpose of providing 

a centralized recordkeeping facility.’’ As 

such, third party service providers 

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95Exchange Act Section 3(a)(75), 15 U.S.C. 

78c(a)(75). 

96See Exchange Act Section 13(n)(1), 15 U.S.C. 

78m(n)(1). 

97See Section VI.K of this release discussing Rule 

13n-12. 

98Cross-Border Proposing Release, 78 FR at 

31042, supra note 3. 

99The term ‘‘U.S. person’’ is defined in Rule 13n– 

12(a), as discussed in Section VI.K.3 of this release, 

and cross-references to the definition of ‘‘U.S. 

person’’ in Exchange Act Rule 3a71–3(a)(4)(i), 17 

CFR 240.3a71–3(a)(4)(i). See Cross-Border Adopting 

Release, 79 FR at 47371, supra note 11. Rule 3a71– 

3(a)(4)(i) defines ‘‘U.S. person’’ to mean ‘‘any 

person that is: (A) A natural person resident in the 

United States; (B) A partnership, corporation, trust, 

investment vehicle, or other legal person organized, 

incorporated, or established under the laws of the 

United States or having its principal place of 

business in the United States; (C) An account 

(whether discretionary or non-discretionary) of a 

U.S. person; or (D) An estate of a decedent who was 

a resident of the United States at the time of death.’’ 

Id. at 47371. As the Commission noted in the CrossBorder Adopting Release, the definition of ‘‘U.S. 

person’’ in Rule 3a71–3(a)(4)(i) ‘‘reflect[s] a 

territorial approach to the application of Title VII.’’ 

Cross-Border Adopting Release, 79 FR at 47306, 

supra note 11. The Commission believes that the 

territorial focus of the definition is appropriate in 

the context of the SDR Rules because it will enable 

the Commission to identify those SDRs that should 

be required to register with the Commission by 

virtue of the location of a significant portion of their 

commercial and legal relationships within the 

United States. Cf. Cross-Border Adopting Release, 

79 FR at 47337, supra note 11. 

100 15 U.S.C. 78m(n). 

101 In addition to the SDR Rules, the Commission 

is adopting Regulation SBSR, which imposes 

certain obligations on SDRs registered with the 

Commission. See Regulation SBSR Adopting 

Release, supra note 13. In a separate proposal 

relating to implementation of Dodd-Frank Act 

Section 763(i) (adding Exchange Act Section 

13(n)(5)(E), 15 U.S.C. 78m(n)(5)(E)), the 

Commission proposed rules that would require 

SDRs registered with the Commission to collect 

data related to monitoring the compliance and 

frequency of end-user clearing exemption claims. 

See End-User Exception Proposing Release, supra 

note 15. 

102See Proposing Release, 75 FR at 77307, supra 

note 2 (‘‘The enhanced transparency provided by an 

SDR is important to help regulators and others 

monitor the build-up and concentration of risk 

exposures in the SBS market . . . . In addition, 

SDRs have the potential to reduce operational risk 

and enhance operational efficiency in the SBS 

market.’’). 

103See Proposing Release, 75 FR at 77307, supra 

note 2 (‘‘The inability of an SDR to protect the 

accuracy and integrity of the data that it maintains 

or the inability of an SDR to make such data 

available to regulators, market participants, and 

others in a timely manner could have a significant 

negative impact on the SBS market. Failure to 

maintain privacy of such data could lead to market 

abuse and subsequent loss of liquidity.’’). 

104Under this interpretation, the term ‘‘non-U.S. 

person’’ would have the same meaning as set forth 

in Rule 13n–12(a), as discussed in Section VI.K.3 

of this release. 

105Cross-Border Proposing Release, 78 FR at 

31042, supra note 3. See also Exchange Act Section 

13(n)(1), 15 U.S.C. 78m(n)(1) (requiring persons 

that, directly or indirectly, make use of the mails 

or any means or instrumentality of interstate 

commerce to perform the functions of an SDR to 

register with the Commission). The Commission 

recognizes that some non-U.S. persons that perform 

the functions of an SDR may do so entirely outside 

the United States, and thus, are not required to 

register with the Commission. See Cross-Border 

Proposing Release, 78 FR at 31042 n.721, supra 

note 3. 

106Cross-Border Adopting Release, 79 FR at 

47287, supra note 11. Accord IIB CB, supra note 26 

(believing that the Commission’s territorial 

approach to registration is appropriate for market 

infrastructures, including SDRs, and stating that 

‘‘[t]his approach will help [ ] achieve the 

Commission’s market oversight objectives while 

avoiding conflicts with foreign regulators, and it is 

consistent with the CFTC’s approach’’). 

107Cross-Border Adopting Release, 79 FR at 

47287, supra note 11. 

108See Cross-Border Adopting Release, 79 FR at 

47287, supra note 11. 

109Cross-Border Proposing Release, 78 FR at 

31042, supra note 3. 

110Cross-Border Proposing Release, 78 FR at 

31042, supra note 3. The Commission notes that if 

a person performing the functions of an SDR has 

operations in the United States to the extent that 

such operations constitute a principal place of 

business, then the person would fall within the 

definition of ‘‘U.S. person’’ in Rule 13n–12, which 

cross-references to Exchange Act Rule 3a71– 

3(a)(4)(i), 17 CFR 240.3a71–3(a)(4)(i). As adopted, 

the term ‘‘U.S. person’’ includes a partnership, 

corporation, trust, investment vehicle, or other legal 

person having its principal place of business in the 

United States. See Cross-Border Adopting Release, 

79 FR at 47371, supra note 11. As a result of being 

a ‘‘U.S. person,’’ the person with its principal place 

of business in the United States would be required 

to register as an SDR with the Commission. 

111See DTCC CB, supra note 26. 

generally would not fall within the 

statutory definition of an SDR. Thus, 

they do not need to be excluded from 

the definition of an SDR, as the 

commenter suggested. If, however, the 

third party service provider collects and 

maintains the SBS data ‘‘for the purpose 

of providing a centralized recordkeeping 

facility,’’ 95 it would likely fall within 

the definition of an SDR. The 

Commission does not believe that there 

are any policy reasons, including 

countering the risk of fragmentation, to 

warrant a broad-based exemption from 

registration for third party service 

providers that collect and maintain SBS 

data ‘‘for the purpose of providing a 

centralized recordkeeping facility.’’ 

B. SDRs Required To Register With the 

Commission 

To the extent that a person falls 

within the statutory definition of an 

SDR, and makes use of the mails or any 

means or instrumentality of interstate 

commerce to perform the functions of 

an SDR, then that person is required to 

register with the Commission,96 absent 

an exemption.97 As discussed in the 

Cross-Border Proposing Release,98 the 

Commission believes that U.S. 

persons 99 that perform the functions of 

an SDR are required to register with the 

Commission and comply with Exchange 

Act Section 13(n) 100 and the rules and 

regulations thereunder, as well as other 

requirements applicable to SDRs 

registered with the Commission.101

Requiring U.S. persons that perform the 

functions of an SDR to be operated in 

a manner consistent with the Title VII 

regulatory framework and subject to the 

Commission’s oversight, among other 

things, helps ensure that relevant 

authorities are able to monitor the buildup and concentration of risk exposure in 

the SBS market, reduce operational risk 

in that market, and increase operational 

efficiency.102 SDRs themselves are 

subject to certain operational risks that 

may impede the ability of SDRs to meet 

these goals,103 and the Title VII 

regulatory framework is intended to 

address these risks. 

Also, as stated in the Cross-Border 

Proposing Release, the Commission 

believes that a non-U.S. person 104 that 

performs the functions of an SDR within 

the United States would be required to 

register with the Commission, absent an 

exemption.105 The Commission’s 

interpretation of the scope of SDR 

registration is consistent with the 

Commission’s territorial approach to the 

application of Title VII, as discussed in 

the Cross-Border Adopting Release.106

As noted in that release, the 

Commission takes the view that a 

territorial approach to the application of 

Title VII is grounded in the text of the 

relevant statutory provisions and is 

designed to help ensure that the 

Commission’s application of the 

relevant provisions is consistent with 

the goals that the statute was intended 

to achieve.107 Once the focus of the 

statute has been identified using this 

analysis, determining whether a 

particular application of the statute is 

territorial turns on whether any relevant 

conduct that is the focus of the statute 

has a sufficient territorial nexus with 

the United States.108

As stated in the Cross-Border 

Proposing Release, the Commission 

believes that ‘‘a non-U.S. person would 

be performing ‘the functions of a 

security-based swap data repository 

within the United States’ if, for 

example, it enters into contracts, such as 

user or technical agreements, with a 

U.S. person to enable the U.S. person to 

report [SBS] data to such non-U.S. 

person.’’ 109 As another example, ‘‘a 

non-U.S. person would be performing 

‘the functions of a security-based swap 

data repository within the United States’ 

if it has operations in the United States, 

such as maintaining [SBS] data on 

servers physically located in the United 

States, even if its principal place of 

business is not in the United States.’’ 110

One commenter submitted a comment 

relating to the Commission’s guidance 

on SDR registration in the cross-border 

context.111 This commenter suggested 

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112 DTCC CB, supra note 26. 

113 DTCC CB, supra note 26. 

114 DTCC CB, supra note 26. 

115See Exchange Act Section 3(a)(75), 15 U.S.C. 

78c(a)(75). 

116Cross-Border Proposing Release, 78 FR at 

31042–3, supra note 3. 

117 15 U.S.C. 78m(n)(5). 

118See Barnard, supra note 19; BNY Mellon, 

supra note 19; DTCC 2, supra note 19; MarkitSERV, 

supra note 19; TriOptima, supra note 19; see also 

DTCC 1*, supra note 20; DTCC 3, supra note 19. 

These commenters generally did not define 

‘‘ancillary services.’’ But see MarkitSERV, supra 

note 19 (referring to ‘‘an array of services that are 

ancillary . . . to those narrowly outlined in the 

[SDR Rules] (i.e., basic receipt and storage of [SBS] 

data.)’’). 

119See MarkitSERV, supra note 19; DTCC 2, 

supra note 19; Barnard, supra note 19; see also 

TriOptima, supra note 19 (contemplating that an 

SDR would provide ancillary services and stressing 

the importance of equal access to SDR data when 

such services are provided). 

120MarkitSERV, supra note 19. 

121MarkitSERV, supra note 19. 

122MarkitSERV, supra note 19. 

123 DTCC 2, supra note 19. 

124 DTCC 1*, supra note 20. 

125MarkitSERV, supra note 19; DTCC 3, supra 

note 19; see also DTCC 4, supra note 19 (stating that 

providers offering services for one asset class 

should not be permitted to bundle or tie these 

services with services for other asset classes); 

TriOptima, supra note 19 (agreeing that ‘‘it is 

important that market participants have the ability 

to access specific services separately’’). See Section 

VI.D.3.a of this release discussing bundling of 

services. 

126Barnard, supra note 19. 

that ‘‘[t]he SDR registration requirement 

should apply to any entity, regardless of 

physical location of servers, that 

receives [SBS] transaction data from 

reporting sides who are U.S. persons for 

the purpose of complying with the 

Commission’s reporting regulations.’’ 112

The commenter also suggested that if an 

SDR ‘‘collects and maintains [SBS] 

transaction information or records in 

furtherance of these obligations, then it 

should be deemed to ‘function’ as an 

SDR in the United States and face the 

registration requirements.’’ 113 The 

Commission agrees generally with the 

commenter, but notes that 

determination of whether or not an SDR 

is required to register with the 

Commission is based on relevant facts 

and circumstances, including, for 

example, whether the SDR performs the 

functions of an SDR within the United 

States, such as having operations within 

the United States, as discussed above. 

Thus, an SDR’s registration 

requirements should be analyzed 

separately from the reporting 

requirements of Title VII and Regulation 

SBSR. 

The commenter stated that ‘‘an entity 

that (i) collects and maintains [non-SBS] 

transaction information, (ii) collects and 

maintains [SBS] transaction information 

from activity between non-U.S. persons, 

or (iii) collects and maintains [SBS] 

transaction information reported to the 

entity pursuant to regulatory 

requirements or commitments unrelated 

to those imposed by the Commission 

. . . should not be considered to 

function in the United States,’’ and 

‘‘[a]ccordingly, such an entity would not 

be required to register with the 

Commission as an SDR.’’ 114 The 

Commission believes that this position 

is overly broad. The Commission agrees 

that a person that collects and maintains 

only non-SBS transaction information 

would not have to register with the 

Commission because it would not fall 

within the statutory definition of an 

SDR.115 However, consistent with the 

Commission’s territorial approach to the 

application of Title VII, an SDR that 

collects and maintains data relating to 

SBS transactions between non-U.S. 

persons may still be required to register 

with the Commission if the SDR makes 

use of the mails or any means or 

instrumentality of interstate commerce 

to perform the functions of an SDR—for 

example by maintaining SBS data on 

servers physically located in the United 

States. Similarly, an SDR that collects 

and maintains SBS transaction 

information reported to the SDR 

pursuant to requirements or 

commitments unrelated to those 

imposed by the Commission may still be 

required to register with the 

Commission if the SDR makes use of the 

mails or any means or instrumentality of 

interstate commerce to perform the 

functions of an SDR. 

Determination of whether or not an 

SDR is required to register with the 

Commission is fact-specific. As stated in 

the Cross-Border Proposing Release, 

given the constant innovation in the 

market and the fact-specific nature of 

the determination, it is not possible to 

provide a comprehensive discussion of 

every activity that would constitute a 

non-U.S. person performing ‘‘the 

functions of a security-based swap data 

repository within the United States.’’ 116

In order to provide legal certainty to 

market participants and to address 

commenters’ concerns regarding the 

potential for duplicative regulatory 

requirements, the Commission is 

adopting Rule 13n–12, which exempts 

certain non-U.S. persons performing 

‘‘the functions of a security-based swap 

data repository within the United 

States’’ from the registration and other 

requirements set forth in Exchange Act 

Section 13(n) and the rules and 

regulations thereunder. Rule 13n–12 is 

discussed in Section VI.K of this release. 

C. Ancillary Services 

As stated above, the Commission 

believes that the statutory definition of 

an SDR describes the core services or 

functions of an SDR. This release will 

refer to all other services or functions 

provided by an SDR as ‘‘ancillary 

services.’’ SDRs are required to provide 

some ancillary services under the 

Exchange Act and the rules and 

regulations thereunder (‘‘required 

ancillary services’’). These required 

ancillary services include certain duties 

of SDRs that are set forth in Exchange 

Act Section 13(n)(5) 117 and the duties 

imposed by the SDR Rules. SDRs also 

may voluntarily choose to provide other 

ancillary services (‘‘voluntary ancillary 

services’’). 

Five commenters submitted 

comments relating to ‘‘ancillary 

services.’’ 118 Three commenters 

recommended that SDRs be allowed 

(but not be required) to offer ancillary 

services to SBS counterparties.119 One 

of these commenters recommended that 

SDRs be allowed (but not be required) 

to offer ‘‘ancillary services,’’ which, 

according to that commenter, ‘‘may 

include: Asset servicing, confirmation, 

verification and affirmation facilities, 

collateral management, settlement, trade 

compression and netting services, 

valuation, pricing and reconciliation 

functionalities, position limits 

management, dispute resolution, 

counterparty identity verification and 

others.’’ 120 The commenter noted that 

allowing SDRs to offer such services 

would ‘‘promote greater efficiencies and 

greater accuracy of data.’’ 121 The 

commenter also recommended allowing 

an SDR’s affiliates, which may not be 

registered with the Commission, to 

perform such ‘‘ancillary services.’’ 122

The second commenter recommended 

that life cycle event processing and legal 

recordkeeping services be treated as 

‘‘ancillary’’ services.123 The second 

commenter also recommended allowing 

SDRs to offer ‘‘an asset servicing 

function,’’ which would allow SDRs to 

‘‘assist in systemic risk monitoring by 

providing regulators with regular 

reports analyzing the data (such as 

position limit violations or certain 

identified manipulative trading 

practices).’’ 124 With respect to 

bundling, both commenters agreed that 

an SDR should not be allowed to require 

counterparties to use ‘‘ancillary 

services’’ in order to gain access to the 

SDR.125 The third commenter believed 

that SDRs should be able to offer 

‘‘ancillary services,’’ but did not support 

the bundling of such services with 

mandatory or regulatory services.126 The 

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127TriOptima, supra note 19. 

128TriOptima, supra note 19. 

129BNY Mellon, supra note 19. See also Exchange 

Act Section 3D(a)(1), 15 U.S.C. 78c–4(a)(1) (stating 

that ‘‘[n]o person may operate a facility for the 

trading or processing of security-based swaps, 

unless the facility is registered as a security-based 

swap execution facility or as a national securities 

exchange under this section’’). Subsequent to 

receiving this comment, the Commission issued a 

proposing release on the registration and regulation 

of SB SEFs, interpreting the Dodd-Frank Act to key 

the SB SEF registration obligation on the definition 

of an SB SEF in Exchange Act Section 3(a)(77). See 

15 U.S.C. 78c(a)(77), as added by Dodd-Frank Act 

Section 761(a). See SB SEF Proposing Release, 76 

FR at 10959 n.62, supra note 29. The Commission 

expects to address the scope of SB SEF registration 

when it adopts final rules relating to the registration 

and regulation of SB SEFs. 

130See MarkitSERV, supra note 19. 

131See Exchange Act Section 13(n)(5)(B), 15 

U.S.C. 78m(n)(5)(B); Rule 13n–4(b)(3) (requiring an 

SDR to ‘‘[c]onfirm, as prescribed in Rule 13n– 

5(§ 240.13n–5), with both counterparties to the 

[SBS] the accuracy of the data that was submitted’’); 

Rule 13n–5(b)(1)(iii) (requiring an SDR to establish, 

maintain, and enforce written policies and 

procedures reasonably designed to satisfy the SDR 

that the transaction data that has been submitted to 

the SDR is complete and accurate). 

132See Section VI.E.6.c of this release discussing 

Rule 13n–5(b)(6). 133See Exchange Act Section 13(n)(5)(B), 15 

U.S.C. 78m(n)(5)(B). In a separate release, the 

Commission proposed rules under Exchange Act 

Section 15F(i)(1), which provides that SBS dealers 

and major SBS participants must ‘‘conform with 

such standards as may be prescribed by the 

Commission, by rule or regulation, that relate to 

timely and accurate confirmation . . . of all 

security-based swaps.’’ See Trade Acknowledgment 

and Verification of Security-Based Swap 

Transactions, Exchange Act Release No. 63727 (Jan. 

14, 2011), 76 FR 3859 (Jan. 21, 2011) (‘‘Trade 

Acknowledgment Release’’). SDRs are not required 

to perform confirmations under Exchange Act 

Section 15F(i)(1) and the rules and regulations 

thereunder, but, in certain circumstances, SDRs 

may be able to rely on confirmations that are 

provided pursuant to Exchange Act Section 

15F(i)(1). See Section VI.E.1.c of this release 

discussing the circumstances where a single 

confirmation could fulfill both requirements. 

134An SDR that delegates required ancillary 

services to a third party service provider must have 

a reasonable basis for relying on the third party 

service provider. See Section VI.E.1.c of this release 

discussing reasonable reliance in the context of 

confirmations. Cf. Exchange Act Rule 17a–4(i), 71 

CFR 240.17a–4(i) (stating that an agreement with an 

outside entity to maintain and preserve records for 

a member, broker, or dealer will not relieve the 

member, broker, or dealer from its responsibilities 

under Exchange Act Rules 17a–3 or 17a–4). 

135See MarkitSERV, supra note 19; DTCC 2, 

supra note 19; Barnard, supra note 19. 

136See MarkitSERV, supra note 19 

(recommending allowing SDRs to offer ‘‘ancillary 

services’’ because it would ‘‘promote greater 

efficiencies and greater accuracy of data’’). 

137For example, counterparties might use the 

data maintained by the SDR as part of their risk 

management activities. See MarkitSERV, supra note 

19 (‘‘[O]ne of the critical components in ensuring 

the accuracy of swaps data is the degree to which 

such data is utilized by industry participants in 

other processes. The existence of a number of 

feedback loops and distribution channels through 

which data will flow will enable participants to 

identify, test and correct inaccuracies and errors.’’). 

138The performance of some of these services, 

such as clearing and settlement and netting 

services, may cause a person to be a ‘‘clearing 

agency,’’ as defined in Exchange Act Section 

3(a)(23), 15 U.S.C. 78c(a)(23); see also Clearing 

Agency Standards, Exchange Act Release No. 68080 

(Oct. 22, 2012), 77 FR 66220, 66227–28 (Nov. 2, 

2012) (‘‘Clearing Agency Standards Release’’) ([T]he 

definition of clearing agency in Section 3(a)(23)(A) 

of the Exchange Act covers any person who acts as 

an intermediary in making payments or deliveries 

or both in connection with transactions in securities 

and provides facilities for the comparison of data 

regarding the terms of settlement of securities 

transactions, to reduce the number of settlements of 

securities transactions, or for the allocation of 

securities settlement responsibilities. . . . The 

determination of whether particular activities meet 

the definition of a clearing agency depends on the 

totality of the facts and circumstances involved.’’). 

It is unlawful for a clearing agency to make use of 

the mails or any means or instrumentality of 

interstate commerce to perform the functions of a 

clearing agency with respect to any security (other 

than exempted securities) unless it is registered 

with the Commission, or exempted from 

registration, pursuant to Exchange Act Sections 

17A(b) and 19(a), and the rules and regulations 

thereunder. 

139See MarkitSERV, supra note 19; DTCC 2, 

supra note 19; Barnard, supra note 19. 

fourth commenter believed that if SDRs 

provide ‘‘ancillary services,’’ then the 

SDRs should not have advantages in 

providing these services over 

competitors offering the same 

services.127 This commenter noted, for 

example, that SDRs will maintain 

granular trade data that is valuable in 

providing post-trade services, and that 

other post-trade service providers 

should have the same access to the 

granular trade data as the SDR and its 

affiliates when providing post-trade 

services.128 The fifth commenter 

suggested that certain functions that an 

SDR may perform (e.g., confirmation of 

trades, reconciliation, valuation of 

transactions, life-cycle management, 

collateral management) should not be 

considered as ‘‘processing of [SBSs]’’ for 

the purposes of SB SEF registration.129

It appears that the commenters 

generally used the term ‘‘ancillary 

services’’ to mean voluntary ancillary 

services. The Commission, however, 

notes that at least two services 

identified by a commenter as ‘‘ancillary 

services’’ are considered by the 

Commission to be required ancillary 

services for an SDR. This commenter 

suggested that ‘‘confirmation’’ and 

‘‘dispute resolution’’ are ancillary to 

‘‘those [services] narrowly outlined in 

the SBS SDR Regulation (i.e., basic 

receipt and storage of swaps data).’’ 130

The Commission agrees with the 

commenter’s suggestion that these two 

services are not ‘‘core’’ SDR services, 

which would cause a person providing 

such core services to meet the definition 

of an SDR, and thus, require the person 

to register with the Commission as an 

SDR. However, SDRs are required to 

perform these two services or functions, 

and thus, they are required ancillary 

services; as discussed in Sections 

VI.E.1.c and VI.E.6.c of this release, the 

Exchange Act requires SDRs to 

‘‘confirm’’ the accuracy of the data 

submitted,131 and the final SDR Rules 

include a dispute resolution 

requirement.132

An SDR may delegate some of these 

required ancillary services to third party 

service providers, who do not need to 

register as SDRs to provide such 

services. The SDR will remain legally 

responsible for the third party service 

providers’ activities relating to the 

required ancillary services and their 

compliance with applicable rules under 

the Exchange Act. For example, as 

discussed above, the Exchange Act 

requires SDRs to ‘‘confirm’’ the accuracy 

of the data submitted.133 If an SDR 

delegates its confirmation obligation to 

a third party service provider, then the 

third party service provider that 

provides this required ancillary service 

would not need to register as an SDR, 

unless it otherwise falls within the 

definition of an SDR; however, the SDR 

that delegates its obligation to the third 

party service provider would remain 

responsible for compliance with the 

statutory requirement.134

The Commission agrees with the 

commenters’ view that SDRs should be 

allowed to offer voluntary ancillary 

services.135 The Commission believes 

that use of such services by market 

participants and market infrastructures 

will likely improve the quality of the 

data held by the SDRs.136 The 

Commission believes that when the data 

held at an SDR is used by counterparties 

for their own business purposes, rather 

than solely for regulatory purposes, the 

counterparties will have additional 

opportunities to identify errors in the 

data and will likely have incentives to 

ensure the accuracy of the data held by 

the SDR.137 Such voluntary ancillary 

services that an SDR could provide 

include, for example, collateral 

management, clearing and settlement, 

trade compression and netting services, 

and pricing and reconciliation 

functionalities. These services could 

also be provided by persons that are not 

SDRs and would not, in and of 

themselves, require the providers to 

register as SDRs.138

The Commission also agrees with the 

commenters’ view that market 

participants should not be required to 

use voluntary ancillary services offered 

by an SDR as a condition to use the 

SDR’s repository services,139 and that 

SDRs should not be permitted to use 

their repository function to gain 

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140See TriOptima, supra note 19. 

141See Section VI.D.3.a of this release discussing 

Rule 13n–4(c)(1). 

142See Proposing Release, 75 FR at 77308, supra 

note 2. 

143Proposing Release, 75 FR at 77308, supra note 

2. 

144See DTCC 2, supra note 19 (stating that ‘‘there 

is a significant advantage to the market if SDRs are 

required to provide basic services on an at-cost or 

utility model basis, as it avoids the potential abuse 

or conflict of interest related to a relatively small 

number of service providers in the SDR industry’’ 

and that ‘‘SDR fee structures should reflect an atcost operating budget’’); Benchmark*, supra note 20 

(stating that a non-profit utility structure ‘‘helps 

promote innovative uses’’ of SBS data ‘‘to maximize 

its value to market participants’’); Saul, supra note 

19 (stating that SDRs should ‘‘serve the entire 

industry as a utility’’ and that ‘‘[t]reating an SDR as 

a utility would also make it easier for the industry 

to provide the manpower and the capital to form 

an SDR’’); see also DTCC 3, supra note 19 (‘‘SDRs 

should serve an impartial, utility function.’’). 

145See Section VIII of this release discussing the 

costs and benefits of different business models. 

146See Section VIII of this release for further 

discussion. 

147See Section VI.D.3.c.iii of this release 

discussing Rule 13n–4(c)(3). 

148See Section VIII of this release discussing the 

costs and benefits of different business models. 

149See FINRA SBSR, supra note 27 (recognizing 

‘‘the Commission’s acknowledgement of ‘the 

possibility that there could emerge multiple 

registered SDRs in an asset class,’ and, in the event 

this should occur that ‘the Commission and the 

markets would be confronted with the possibility 

that different registered SDRs could adopt different 

dissemination protocols, potentially creating 

fragmentation in SBS market data’ ’’) (citations 

omitted); DTCC 3, supra note 19 (‘‘When there are 

multiple SDRs in any particular asset class, the 

[Commission] should take such action as is 

necessary to eliminate any overstatements of open 

interest or other inaccuracies that may result from 

having broader market data published from separate 

SDRs.’’). 

150See ISDA Temp Rule, supra note 28 (‘‘[T]he 

designation of a single [SDR] per class of securitybased swap would provide the Commission and 

market participants with valuable efficiencies. In 

particular, there would be no redundancy of 

platforms, no need for additional levels of data 

aggregation for each asset class and reduced risk of 

errors and greater transparency (because a single 

[SDR] per asset class would avoid the risk of errors 

associated with transmitting, aggregating and 

analyzing multiple sources of potentially 

incompatible and duplicative trade data).’’); see 

also Saul, supra note 19 (suggesting that the 

Commission should seek to have only one or two 

SDRs to service the SBS market). 

151See Section VIII.C.3.b of this release 

discussing the SDR Rules’ potential effects on 

competition (‘‘The Commission believes that by 

allowing multiple SDRs to provide data collection, 

maintenance, and recordkeeping services, the SDR 

Rules should promote competition among 

SDRs. . . . Increased competition may lower costs 

for users of SDR services.’’). Accord PFMI Report, 

supra note 50 (‘‘Competition can be an important 

mechanism for promoting efficiency. Where there is 

effective competition and participants have 

meaningful choices among FMIs[, including SDRs], 

such competition may help to ensure that FMIs are 

efficient.’’). 

152Proposing Release, 75 FR at 77309, supra note 

2. 

153See DTCC 1*, supra note 20; Better Markets 

1, supra note 19; see also FINRA SBSR, supra note 

27 (urging the Commission to mandate the 

consolidation of disseminated SBS data to the 

public). 

154 DTCC 1*, supra note 20; see also Better 

Markets 1, supra note 19 (making similar 

comments); see also DTCC 2, supra note 19 (‘‘The 

role of an aggregating SDR is significant in that it 

ensures regulators efficient, streamlined access to 

consolidated data, reducing the strain on limited 

agency resources.’’). 

advantages in providing voluntary 

ancillary services over competitors 

offering the same services.140 As 

discussed further below, the 

Commission is adopting Rule 13n– 

4(c)(1), which should address 

commenters’ concerns.141

D. Business Models of SDRs 

The Commission understands that 

SDRs might operate under a number of 

business models and did not intend for 

the proposed SDR Rules to mandate any 

particular business model.142 In the 

Proposing Release, the Commission 

solicited comments on whether the SDR 

Rules should favor or discourage one 

business model over another.143 Three 

commenters, including one comment 

submitted prior to the Proposing 

Release, suggested that SDRs should be 

required to operate on an at-cost utility 

model.144

Consistent with commenters’ views, 

the Commission understands that an 

SDR operating on a for-profit, nonutility model, or commercial basis, may 

be presented with more conflicts of 

interest, including economic selfinterest in pricing or bundling its 

services, than an SDR operating on an 

at-cost utility model, or non-profit 

basis.145 The Commission believes, 

however, that if an SDR operating on an 

at-cost utility model has an affiliate that 

provides ancillary services for SBSs for 

profit, then that SDR may be presented 

with conflicts of interest similar to 

conflicts at an SDR operating on a forprofit, non-utility model.146 For 

example, an SDR that has an affiliate 

that provides asset servicing for profit 

would most likely face similar conflicts 

as a for-profit SDR that provides asset 

servicing itself. 

The Commission believes that the 

final SDR Rules, including rules 

pertaining to conflicts of interest, are 

sufficiently broad to address the range 

of conflicts of interest inherent in 

different SDR business models. For 

instance, under Rule 13n–4(c)(3), each 

SDR is required to identify conflicts of 

interest applicable to it and establish, 

maintain, and enforce written policies 

and procedures to mitigate these 

conflicts.147 In addition, the 

Commission believes that allowing 

SDRs to pursue different business 

models will increase competition, 

efficiency, and innovation among SDRs. 

For example, by not prescribing one 

particular business model, new entrants 

may have an incentive to develop 

business models for SDRs that 

efficiently provide core services to the 

industry and effectively mitigate 

conflicts.148 Therefore, after considering 

the comments, the Commission 

continues to believe that it is not 

necessary to mandate any particular 

business model for SDRs. 

IV. Number of SDRs and Consolidation 

of SBS Data 

The Commission received several 

comments relating to the issue of data 

fragmentation among SDRs. The 

Commission believes that if there are 

multiple SDRs in any given asset class, 

then it may be more difficult for 

regulators to monitor the SBS market 

because of the challenges in aggregating 

SBS data from multiple SDRs.149 Some 

commenters suggested limiting the 

number of SDRs to one per asset class 

in order to address these concerns.150

While such a limitation would resolve 

many of the challenges involved in 

aggregating SBS data, the Commission 

believes that imposing such a limitation 

would stymie competition among SDRs, 

and, consequently, may lead to 

increased costs to market 

participants.151 The Commission 

believes that the better avenue at this 

point is to refrain from regulating the 

number of SDRs in an asset class to 

permit market forces to determine an 

efficient outcome. Therefore, the 

Commission is not adopting the 

commenters’ suggestions to limit the 

number of SDRs in each asset class. 

In the Proposing Release, the 

Commission requested comment on 

whether the Commission should 

designate one SDR as the recipient of 

the information from all other SDRs in 

order to provide the Commission and 

relevant authorities with a consolidated 

location from which to access SBS data 

for regulatory monitoring and oversight 

purposes.152 Some commenters 

suggested that an SDR’s duties should 

include reporting SBS data to a single 

SDR that would consolidate the data for 

relevant authorities or otherwise 

mandating the consolidation of SBS 

data.153 Specifically, one commenter 

recommended that the Commission 

‘‘designate one SDR as the recipient of 

the information of other SDRs to ensure 

the efficient consolidation of data.’’ 154

The commenter further stated that the 

designated SDR would need to have 

‘‘the organization and governance 

structure that is consistent with being a 

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14454 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

155 DTCC 1*, supra note 20. 

156 DTCC 3, supra note 19. 

157See Section VIII of this release for further 

discussion. 

158See Section VI.D.2.c.ii of this release 

discussing aggregation of data across multiple 

registered SDRs by the Commission. 

159Proposing Release, 75 FR at 77314, supra note 

2. 160See Sections I.C and I.D of this release 

discussing other comments and regulatory 

initiatives considered in this rulemaking. 161Effective Date Order, 76 FR at 36306, supra 

note 9. 

162Effective Date Order, 76 FR at 36307, supra 

note 9. 

163Effective Date Order, 76 FR at 36307, supra 

note 9. 

164 Implementation Policy Statement, 77 FR at 

35631, supra note 10. 

165 Implementation Policy Statement, 77 FR at 

35634, supra note 10. 

166See Barclays*, supra note 21; DTCC 2, supra 

note 19 (‘‘[T]he Commission [should] ensure that 

the registration process does not interrupt current 

operation of existing trade repositories who intend 

to register as SDRs. This can be achieved as a phasein for existing SDRs where services will need to be 

amended to conform with the final rules given the 

compressed time period between the publication of 

the final rules and the effective date of the DoddFrank Act.’’); FIA*, supra note 21 (‘‘[P]hase-in is 

critical for a smooth implementation of the changes 

required under the Dodd-Frank Act.’’); FSF*, supra 

note 21; FSR Implementation, supra note 23; MFA 

2, supra note 19; Morgan Stanley*, supra note 20 

(‘‘[G]iven the market disruption that could result 

from the simultaneous application of these 

requirements across products and markets, and the 

potentially severe consequences to the markets and 

the larger economy, we believe that a phase in 

approach is both permitted and contemplated by 

Dodd-Frank, and desirable in order to maintain 

orderly, efficient, liquid and inclusive markets.’’); 

SIFMA Implementation, supra note 22 (‘‘Once SDRs 

are registered and [SBS dealers] and [major SBS 

participants] have connected to them, data 

reporting can begin. [SBS dealers] and [major SBS 

participants] will not be able to provide, and [SDRs] 

will not be able to accept, all data on Dodd-Frank 

Act-compliant timelines on the first day of 

operation. Instead, there should be a phased process 

to develop the procedures and connections needed 

to ultimately report all Dodd-Frank Act-required 

data in the appropriate time frame.’’); see also DTCC 

3, supra note 19; DTCC 5, supra note 19 (‘‘[T]he 

final rules should include implementation and 

compliance dates that are unambiguous. . . . 

Appropriate time must be afforded to ensure that 

implementation can take place smoothly for all 

market participants.’’). 

financial market utility serving a vital 

function to the entire marketplace.’’ 155

The Commission does not dispute the 

commenter’s assertion that 

fragmentation of data among SDRs 

would ‘‘leave to regulators the time 

consuming, complicated and expensive 

task of rebuilding complex data 

aggregation and reporting 

mechanisms.’’ 156 However, if the 

Commission were to designate one SDR 

as the data consolidator, such an action 

could be deemed as the Commission’s 

endorsement of one regulated person 

over another, discourage new market 

entrants, and interfere with competition, 

resulting in a perceived governmentsponsored monopoly.157 In addition, 

such a requirement would likely impose 

an additional cost on market 

participants to cover the SDR’s cost for 

acting as the data consolidator. 

In addition, any consolidation 

required by the Commission would be 

limited to SBS data and may not 

necessarily include data not required to 

be reported under Title VII and 

Regulation SBSR, such as swap data. 

For example, consolidated SBS data 

may show that a person entered into 

several SBSs based on individual equity 

securities. If the person also entered into 

swaps based on a broad-based security 

index made up of the individual equity 

securities, then the consolidated data 

would not necessarily include that 

information. Therefore, commenters’ 

suggestion to designate one SDR as the 

data consolidator may not fully address 

their data fragmentation concerns unless 

the same SDR also consolidates swap 

data, which the CFTC regulates. 

Therefore, after considering the 

comments, the Commission is not 

designating, at this time, one SDR as the 

recipient of information from other 

SDRs in order to provide relevant 

authorities with consolidated data. The 

Commission may revisit this issue if 

there is data fragmentation among SDRs 

that is creating substantial difficulties 

for relevant authorities to get a complete 

and accurate view of the market.158

V. Implementation of the SDR Rules 

A. Prior Commission Action 

The Commission solicited comment 

in the Proposing Release on whether it 

should adopt an incremental, phase-in 

approach with respect to Exchange Act 

Section 13(n) and the rules 

thereunder.159 The Commission further 

sought and received comments on 

similar implementation issues relating 

to Title VII in other rulemakings and 

through solicitations for comments.160

1. Effective Date Order 

In addition, as discussed above, on 

June 15, 2011, the Commission issued 

the Effective Date Order, which 

provided guidance on the provisions of 

the Exchange Act added by Title VII 

with which compliance would have 

been required as of July 16, 2011 (i.e., 

the effective date of the provisions of 

Title VII). The Effective Date Order 

provided exemptions to SDRs from 

Exchange Act Sections 13(n)(5)(D)(i), 

13(n)(5)(F), 13(n)(5)(G), 13(n)(5)(H), 

13(n)(7)(A), 13(n)(7)(B), and 13(n)(7)(C), 

each of which will expire on the earlier 

of (1) the date the Commission grants 

registration to the SDR and (2) the 

earliest compliance date set forth in any 

of the final rules regarding the 

registration of SDRs.161 Absent further 

Commission action, these exemptions 

will expire as of the Compliance Date 

(as defined below), unless the 

Commission has granted an SDR’s 

registration before the Compliance Date, 

in which case these exemptions will 

expire, with respect to that SDR, as of 

the date the Commission grants the 

SDR’s registration. 

In addition, the Effective Date Order 

also provided exemptive relief from the 

rescission provisions of Exchange Act 

Section 29(b) in connection with 

Exchange Act Sections 13(n)(5)(D)(i), 

13(n)(5)(F), 13(n)(5)(G), 13(n)(5)(H), 

13(n)(7)(A), 13(n)(7)(B), and 

13(n)(7)(C).162 That relief does not 

expire automatically, but rather when 

the Commission specifies.163 The 

Commission is now specifying that this 

exemption from Section 29(b) will 

expire on the Compliance Date, or for 

those SDRs that are registered prior to 

the Compliance Date, the date that the 

Commission grants each SDR’s 

registration. 

2. Implementation Policy Statement 

As discussed above, on June 11, 2012, 

the Commission issued a statement of 

general policy on the anticipated 

sequencing of compliance dates of final 

rules to be adopted under Title VII. The 

Implementation Policy Statement stated 

that compliance with the SDR Rules 

‘‘earlier in the implementation process 

should facilitate the development and 

utilization of SDRs in a regulated 

manner.’’ 164 Among other things, the 

Implementation Policy Statement 

requested comment on whether the 

Commission should adopt a phase-in of 

the SDR Rules and whether SDRs 

should be able to secure a grace period 

to defer compliance with some or all of 

the requirements of Exchange Act 

Section 13(n) and the SDR Rules.165

B. Summary of Comments 

While only two commenters on 

implementation referred specifically to 

the SDR Rules, the Commission believes 

that other comments, particularly those 

related to timing with respect to 

implementing rules on SBS reporting, 

are relevant to the implementation of 

the SDR Rules as well. Eight 

commenters suggested that a phase-in 

approach to the SDR Rules or SBS 

reporting generally may be 

appropriate.166 The commenters 

generally indicated that a phase-in 

would be necessary to enable existing 

SDRs and other market participants to 

make the necessary changes to their 

operations to comply with the new 

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167See, e.g., Barclays*, supra note 21 (‘‘Changes 

envisioned by Title VII require very significant 

investment into operational, IT and other 

infrastructure—infrastructure that will take time 

and resources to build, test and optimize. The 

ability to fund and execute the necessary 

infrastructure build, as well as put in place the risk 

management and operational processes needed to 

conduct business under the new regulatory regime, 

will vary significantly by asset class and type of 

market participant.’’); DTCC 2, supra note 19 

(stating that ‘‘the final rules [should] be subject to 

a phase-in period to allow an adequate period for 

existing service providers . . . to make necessary 

changes to their service offerings,’’ requesting that 

the Commission alternatively ‘‘provide specific 

transitional arrangements for existing 

infrastructures,’’ and noting that the continuation of 

counterparty reporting and the ability of SDRs to 

receive and maintain current trade information on 

an ongoing basis is ‘‘imperative for effective 

oversight of systemic risk and the continuance of 

the operational services to market participants’’); 

FSF*, supra note 21 (‘‘New market infrastructure 

and technologies, including central clearing 

services, data reporting services and trading 

platforms, will be required to give effect to the new 

Swap regulatory regime. Unless sufficient time is 

allotted for these components of market 

infrastructure and technologies to adequately 

develop, all market participants (and particularly 

end users) will face interruptions in their ability to 

enter into Swaps to hedge their business risks or 

manage investments to meet client objectives.’’). 

168See MFA 2, supra note 19 (‘‘[W]e believe the 

first two priorities should be: (i) Expanding the use 

of central clearing for liquid (‘clearable’) contracts; 

and (ii) having trade repositories receive data on 

both cleared and bilateral swaps. These changes 

would provide substantial benefits to the markets 

by enhancing price transparency and competition 

for the most liquid swap transactions. . . . 

Comprehensive reporting to SDRs and regulators 

. . . will allow regulators to monitor systemic risk 

and individual risk concentrations much more 

effectively, and intervene specifically as 

necessary.’’); see also FSF*, supra note 21 (The 

Commission ‘‘should prioritize implementation of 

data reporting, including registration of [SDRs], to 

regulators ahead of real-time reporting and other 

requirements, including public reporting. The 

[Commission] will learn much about the full range 

of Swap markets from the data collected by SDRs. 

This knowledge will be essential in developing 

rules that meet Dodd-Frank’s requirements while 

still allowing for active and liquid Swap markets.’’). 

169See Barclays*, supra note 21 (‘‘[W]e 

recommend that the [Commission] phase in the 

clearing, execution and reporting requirements 

gradually over time, staggered by asset class.’’); 

DTCC 3, supra note 19 (‘‘[P]hasing should focus 

first on the products with the greatest automation 

and then on products with less automation. The 

more widespread the automated processing, the 

higher quality the data reported to SDRs. As 

automated processing is most widely prevalent in 

credit derivatives . . . it should be the first asset 

class implemented. Interest rate derivatives, being 

the next most widely automated asset class, would 

be next, followed by FX derivatives, then 

commodity and equity derivatives last.’’); FSF*, 

supra note 21 (‘‘The [Commission] should phase in 

requirements based on the state of readiness of each 

particular asset class (including, where applicable, 

by specific products within an asset class) and 

market participant type.’’); FSR Implementation, 

supra note 23 (‘‘[I]mplementing regulations on a 

product-by-product basis would reduce the risk of 

significant market dislocation during a transition 

period. For example, certain credit default swaps 

that are already reported to a trade information 

warehouse, are highly standardized, and are being 

regularly submitted for central clearing . . . may be 

a natural choice with which to confirm that systems 

are operating appropriately before expanding 

regulatory requirements to other [asset] classes.’’); 

AII Implementation, supra note 23 (‘‘[C]learing and 

other requirements should come first for highly 

liquid, standardized instruments, such as credit 

default swaps’’ and ‘‘[l]ess liquid products, such as 

certain physical commodity instruments, should 

come afterward.’’); SIFMA Implementation, supra 

note 22 (‘‘Reporting should also be phased in by 

asset class, based on whether reporting 

infrastructure and data exist.’’). 

170See Morgan Stanley*, supra note 20 (‘‘In 

addition to phase in based on asset class and 

reporting times, reporting could also be phased in 

based on how a product trades [e.g., whether the 

SBS is cleared].’’); FSR Implementation, supra note 

23 (stating that ‘‘it may be prudent to have different 

portions of a single rulemaking proposal take effect 

at different times and with due consideration of 

steps that are preconditions to other steps’’; 

suggesting, as an example, that a requirement to 

designate a CCO should be implemented quickly, 

but that the CCO be given time to design, 

implement, and test the compliance system before 

any requirement to certify as to the compliance 

system becomes effective; and supporting a phasein approach ‘‘that recognizes the varying levels of 

sophistication, resources and scale of operations 

within a particular category of market participant’’). 

But see Barclays*, supra note 21 (‘‘Phasing by type 

of market participant would not be useful for 

reporting obligations, in [the commenter’s] view, as 

the reported information needs to reflect the 

entirety of the market to be useful for the market 

participants and regulators.’’). 

171See, e.g., DTCC 2, supra note 19 

(‘‘[A]ppropriate transitional arrangements [should] 

be made to avoid market disruption by the 

implementation of the Proposed Rule. . . . 

Restrictions to [the commenter’s SDR] operation 

could introduce significant operational risks to 

market participants.’’); Barclays*, supra note 21 

(Phase-in by asset class would help ‘‘ensure that 

both the industry and SDRs have sufficient time to 

build and test the needed infrastructure in order to 

prevent any potential market disruptions that could 

result from the implementation of new rules.’’); see 

also FSR Implementation, supra note 23 

(recommending that the Commission consider 

resource constraints in evaluating transition 

deadlines and stating that ‘‘if there are a dozen rules 

that would each take about a month to implement 

in isolation under normal circumstances, it is 

unrealistic to expect all twelve rules to be 

implemented one month from passage of final 

rules’’). 

172 DTCC 3, supra note 19 (‘‘Connectivity between 

clearinghouses and [SB SEFs], as well as SDRs, is 

easy to establish (and, in many instances, already 

exists) and should not be the reason for delaying 

the implementation of real-time reporting rules.’’). 

173FSR Implementation, supra note 23 

(‘‘Although we recognize that central clearing, 

exchange trading and transparent reporting are core 

aspects of the new regulatory system, they require 

a web of interconnections that will take time to 

establish and test, and their use should not become 

obligatory until such establishment and testing is 

complete.’’). 

174But see Bank of Tokyo SBSR, supra note 27 

(requesting ‘‘that the [Commission] . . . defer 

compliance requirements under Title VII until 

December 31, 2012’’ to ‘‘facilitate coordination 

among national authorities in the United States, 

Japan and other relevant jurisdictions in order to 

avoid overlapping and inconsistent regulatory 

regimes’’). Because the timeframe suggested by this 

commenter has passed, this aspect of the comment 

is now moot. 

175See, e.g., statement of Ronald Levi, GFI Group, 

Inc., at Implementation Joint Roundtable 

(‘‘[D]epending on which asset classes go first or 

which asset classes are amongst the first phase will 

determine how long it takes us.’’); statement of 

Larry Thompson, The Depository Trust & Clearing 

Corporation, at Implementation Joint Roundtable 

(‘‘And right now, at least for a couple of classes, 

they’re in a much better position to be able to see 

transparent into the marketplace, especially the 

credit default swap [marketplace] . . . .’’); 

statement of Jamie Cawley, Javelin Capital Markets, 

LLC, at Implementation Joint Roundtable 

(‘‘Certainly from where we sit . . . interest rate 

swaps, vanilla swaps clearly qualify for a day one 

[implementation and] index [swaps] right behind 

that or on the same day. And the constituents of the 

indices certainly as well. And then it trails off from 

there over time. . . .’’). 

176See, e.g., statement of Chris Edmonds, ICE 

Trust, at Implementation Joint Roundtable 

(‘‘[I]nstead of looking at it necessarily by asset class, 

the commissions may want to look at it by the 

instruments that have the greatest amount of 

liquidity.’’). 

177See, e.g., statement of Sunil Cutinho, CME 

Group, at Implementation Joint Roundtable (‘‘[W]e 

don’t believe that . . . data should be in an SDR 

before clearing has to be done.’’). 

regulatory requirements.167 One of the 

commenters who advocated a phase-in 

approach also recognized the 

importance of reporting SBS data to 

SDRs as an early part of the Dodd-Frank 

Act implementation process.168

Six commenters supported a phase-in 

approach based on asset class.169 Some 

commenters supported a phase-in based 

on other criteria.170 Some commenters 

indicated that a phase-in period, which 

could be based on asset class or other 

SBS or market participant attributes, is 

important in order to avoid market 

disruption.171 While one commenter 

indicated that connectivity concerns 

should not delay implementation 

because it is easy for an SDR and other 

market infrastructures to establish 

connectivity,172 another commenter 

cautioned that market connectivity will 

take time to establish and test.173 None 

of the commenters provided specific 

timeframes for a phase-in approach.174

In addition to the comments received 

above, participants in the 

Implementation Joint Roundtable 

provided input regarding the 

appropriateness of a phase-in period for 

Title VII rulemakings. Many of the 

participants in the Implementation Joint 

Roundtable advocated for a phase-in 

period for the SDR Rules or SBS 

reporting generally; however, the 

participants’ specific approaches varied. 

While some participants at the 

Implementation Joint Roundtable 

advocated a phase-in by asset class,175

other participants suggested that a 

phase-in should be based on other 

product attributes, such as the liquidity 

of the product,176 or based on the 

development of other market 

infrastructures.177 Another participant 

suggested that SDRs’ obligations to 

provide reports of SBS transactions to 

regulators—which the Commission 

believes are relevant to the direct 

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14456 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

178See Section VI.D.2.c.ii of this release 

discussing direct electronic access. 

179Statement of Raf Pritchard, TriOptima— 

triResolve, at Implementation Joint Roundtable 

(‘‘[W]e would observe obviously that building realtime solutions is a lot more critical and sensitive 

than building daily batch solutions. And so in terms 

of getting that first cut, it might make sense to 

prioritize a daily batch snapshot of the market. . . . 

[T]hen you could sequence the real-time—the more 

real-time sensitive parts of the reporting 

requirements subsequent to that.’’). 

180Title VII provides the Commission with the 

flexibility to establish effective dates beyond the 

minimum 60 days specified therein for Title VII 

provisions that require a rulemaking. See DoddFrank Act Section 774 (specifying that the effective 

date for a provision requiring a rulemaking is ‘‘not 

less than 60 days after publication of the final rule 

or regulation implementing such provision’’). 

Furthermore, as with other rulemakings under the 

Exchange Act, the Commission may set compliance 

dates (which may be later than the effective dates) 

for rulemakings under the Title VII amendments to 

the Exchange Act. Together, this provides the 

Commission with the ability to sequence the 

implementation of the various Title VII 

requirements in a way that effectuates the policy 

goals of Title VII while minimizing unnecessary 

disruption or costs. See Effective Date Order, 76 FR 

at 36289, supra note 9. 

181See Section VI.A.2.c of this release discussing 

Rule 13n–1(c), which requires that the Commission 

make a finding that a ‘‘security-based swap data 

repository is so organized, and has the capacity, to 

be able to assure the prompt, accurate, and reliable 

performance of its functions as a security-based 

swap data repository, comply with any applicable 

provision of the federal 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.’’ 

182See, e.g., FSF*, supra note 21 (noting that the 

Commission ‘‘will be in a better position to adopt 

rules that achieve Dodd-Frank’s goals while 

maintaining active and viable [SBS] markets’’ if 

SDRs are required to register and data reporting is 

enabled). 

183See, e.g., FSF*, supra note 21 (‘‘The 

[Commission] should prioritize implementation of 

data reporting, including registration of Swap data 

repositories (‘SDRs’), to regulators ahead of realtime reporting and other requirements, including 

public reporting. The [Commission] will learn 

much about the full range of Swap markets from the 

data collected by SDRs. This knowledge will be 

essential in developing rules that meet DoddFrank’s requirements while still allowing for active 

and liquid Swap markets.’’). 

184See Effective Date Order, 76 FR at 36306, 

supra note 9. 

185 In a separate release, the Commission is 

proposing a compliance schedule for portions of 

Regulation SBSR in which the timeframes for 

compliance with the reporting and public 

dissemination requirements would key off of the 

registration of SDRs. See Regulation SBSR Proposed 

Amendments Release, supra note 13. 

186Any SDR that is registered with the 

Commission before the Compliance Date will be 

required, absent an exemption, to comply with 

Exchange Act Section 13(n); the SDR Rules; and 

Regulation SBSR, as applicable to registered SDRs, 

as of the date the Commission grants registration to 

the SDR. See Effective Date Order, 76 FR at 36306, 

supra note 9 (granting exemptions to certain 

provisions in Exchange Act Section 13(n) and 

indicated that the exemptions will expire on the 

earlier of (1) the date the Commission grants 

registration to an SDR and (2) the earliest 

compliance date set forth in any of the final rules 

regarding the registration of SDRs). 

187See Section VI.K of this release discussing 

Rule 13n–12, which provides an exemption for 

certain non-U.S. persons from the SDR 

requirements. 

188See, e.g., DTCC 2, supra note 19. 

189The Commission’s review of the application 

for registration could extend beyond 90 days. Rule 

13n–1(c) provides that the Commission will grant 

registration or institute proceedings to determine 

whether registration should be granted or denied 

within 90 days of the publication of notice of the 

electronic access requirement in Rule 

13n–4(b)(5) 178—should be implemented 

in a prioritized manner, with daily 

batch snapshots provided until more 

real-time solutions are developed.179

None of the Implementation Joint 

Roundtable participants provided 

specific timeframes for a phase-in 

approach. 

C. Sequenced Effective Date and 

Compliance Date for the SDR Rules 

After considering the issues raised by 

the commenters and Implementation 

Joint Roundtable participants, the 

Commission has determined to adopt, in 

lieu of a phase-in approach, a sequenced 

effective date and compliance date for 

the SDR Rules 180 that recognizes the 

practical constraints arising from the 

time necessary for persons to analyze 

and understand the final rules adopted 

by the Commission, to develop and test 

new systems required as a result of the 

Dodd-Frank Act’s regulation of SDRs 

and the SDR Rules, to prepare and file 

a completed Form SDR, to be in a 

position to demonstrate their ability to 

meet the criteria for registration set forth 

in Rule 13n–1(c)(3),181 and to register 

with the Commission. The Commission 

agrees with commenters who have 

suggested that the Commission require 

the reporting of SBS transaction 

information to registered SDRs early in 

the implementation process because the 

Commission will then be able to utilize 

the information reported to registered 

SDRs to inform other aspects of its Title 

VII rulemaking.182 Adopting and 

implementing a regulatory framework 

for SDRs will facilitate access by the 

Commission and market participants to 

SBS information collected by SDRs.183

All of the SDR Rules will become 

effective 60 days following publication 

of the rules in the Federal Register 

(‘‘Effective Date’’). However, the 

exemptions to provisions in Exchange 

Act Section 13(n) that the Commission 

provided in the Effective Date Order 

will continue to be in effect following 

the adoption of the SDR Rules. 

Consistent with the Effective Date 

Order, the exemptive relief remains in 

place and will expire: (1) Upon the 

compliance date for the SDR Rules, or 

(2) for those SDRs that are registered 

prior to such compliance date, the date 

that the Commission grants each SDR’s 

registration.184

SDRs must be in compliance with the 

SDR Rules by 365 days after publication 

of the rules in the Federal Register 

(‘‘Compliance Date’’).185 Absent an 

exemption, SDRs must be registered 

with the Commission and in compliance 

with the federal securities laws and the 

rules and regulations thereunder 

(including the applicable Dodd-Frank 

Act provisions and all of the SDR Rules) 

by the Compliance Date, and all 

exemptions that the Commission 

provided in the Effective Date Order 

will expire on the Compliance Date.186

After the Compliance Date, pursuant to 

Exchange Act Section 13(n)(1), it will be 

unlawful, absent exemptive relief,187 (1) 

for a person, unless registered with the 

Commission as an SDR, directly or 

indirectly, to make use of the mails or 

any means or instrumentality of 

interstate commerce to perform the 

functions of an SDR or (2) for an SDR 

to fail to comply with all applicable 

statutory provisions and the SDR Rules. 

The Commission believes that setting 

the Compliance Date for the SDR Rules 

at 365 days after publication of the rules 

in the Federal Register adequately 

addresses commenters’ concerns 188 by 

providing SDRs with sufficient time to 

become compliant with the Dodd-Frank 

Act and the SDR Rules and for the 

Commission to act on SDRs’ 

applications for registration, while also 

allowing SDRs to continue performing 

the functions of an SDR without 

interruption. 

The Commission notes that if an SDR 

files its Form SDR close to the 

Compliance Date, it is possible that the 

Commission will not have sufficient 

time to consider the Form SDR and the 

SDR may not be registered with the 

Commission by the Compliance Date. In 

this case, the SDR must cease any 

operations that cause it to meet the 

statutory definition of an SDR as of the 

Compliance Date and not begin or 

resume such operations until (and 

unless) the Commission grants the 

SDR’s registration or provides the SDR 

with an exemption. As discussed below, 

Rule 13n–1(c), as adopted, provides that 

the Commission will grant registration 

to an SDR or institute proceedings to 

determine whether registration should 

be granted or denied within 90 days of 

the date of the publication of notice of 

the filing of an application for 

registration. Accordingly, SDRs should 

consider that the Commission may take 

several months following the 

publication of notice of the filing of an 

application for registration 189 to review 

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filing of an application for registration ‘‘or within 

such longer period as to which the applicant 

consents.’’ 190As provided in Rule 13n–1(c)(3), in order to 

grant the registration of an SDR, the Commission 

must make a finding that ‘‘such security-based swap 

data repository is so organized, and has the 

capacity, to be able to assure the prompt, accurate, 

and reliable performance of its functions as a 

security-based swap data repository, comply with 

any applicable provision of the federal 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.’’ In 

addition to the application for registration on Form 

SDR, Rule 13n–1(b) provides that, ‘‘[a]s part of the 

application process, each [SDR] shall provide 

additional information to any representative of the 

Commission upon request.’’ In determining whether 

an applicant meets the criteria set forth in Rule 

13n–1(c), the Commission will consider the 

application and any additional information 

obtained from the SDR, which may include 

information obtained in connection with an 

inspection or examination of the SDR. If the 

Commission is unable to determine that the 

applicant meets the criteria for registration set forth 

in Rule 13n–1(c)(3), then the Commission may not 

grant registration to the applicant. See also Section 

VI.A.1 of this release discussing Form SDR and 

information required for registration as an SDR. 

191See Section V.B of this release discussing 

commenters’ and Implementation Joint Roundtable 

participants’ views with respect to phase-in 

approaches. 

192See Section V.A.1 of this release discussing 

the Effective Date Order. 

193CFTC Rule 49.3(b) provides for provisional 

registration of a swap data repository. 17 CFR 

49.3(b). 

194See CFTC Part 49 Adopting Release, supra 

note 36. 

195See CFTC Part 45 Adopting Release, supra 

note 37. 

196See CFTC Part 49 Adopting Release, supra 

note 36. 

197See CFTC Part 45 Adopting Release, supra 

note 37. 

198 15 U.S.C. 78m(n)(1); see also Section III.A of 

this release discussing definition of ‘‘security-based 

swap data repository.’’ Any person that is required 

to be registered as an SDR under Exchange Act 

Section 13(n) must register with the Commission 

(absent an exemption), regardless of whether that 

person is also registered under the Commodity 

Exchange Act (‘‘CEA’’) as a swap data repository. 

Exchange Act Section 13(n)(8), 15 U.S.C. 78m(n)(8); 

see also CEA Section 21, 7 U.S.C. 24a (regarding 

swap data repositories). Under the Exchange Act, a 

clearing agency may register as an SDR. Exchange 

Act Section 13(m)(1)(H), 15 U.S.C. 78m(m)(1)(H). In 

addition, any person that is required to register as 

an SDR pursuant to this section must register with 

the Commission (absent an exemption) regardless of 

whether that person is also registered as an SB SEF. 

See SB SEF Proposing Release, supra note 29. 

199See Exchange Act Section 13(n)(3), 15 U.S.C. 

78m(n)(3). 

200See Exchange Act Section 13(n)(6), 15 U.S.C. 

78m(n)(6). 

201See Exchange Act Sections 13(n)(2) and 

13(n)(4), 15 U.S.C. 78m(n)(2) and 78m(n)(4). In a 

separate release, the Commission proposed rules 

prescribing the data elements that an SDR would be 

required to accept for each SBS in association with 

requirements under Dodd-Frank Act Section 763(i), 

adding Exchange Act Section 13(n)(4)(A) relating to 

standard setting and data identification. See 

Regulation SBSR Proposing Release, 75 FR at 

75284–5, supra note 8 (proposed Rule 901); see also 

Cross-Border Proposing Release, 78 FR at 31212–3, 

supra note 3 (re-proposing Rule 901). The 

Commission is concurrently adopting Regulation 

SBSR, including rules prescribing the data elements 

that an SDR is required to accept. See Regulation 

SBSR Adopting Release, supra note 13 (Rule 901). 

202The Commission did not receive any 

comments on the definitions in proposed Rule 13n– 

1(a) and is adopting each of them as proposed, other 

than revising the definition of ‘‘tag’’ to have the 

same meaning as set forth in Rule 11 of Regulation 

S–T and deleting the definition of ‘‘EDGAR Filer 

Manual,’’ which is no longer referenced in the 

revised definition of ‘‘tag.’’ See Rule 13n–1(a)(2). 

The Commission is also revising the heading of 

paragraph (a) of the rule by changing ‘‘Definition’’ 

to ‘‘Definitions’’ to reflect that there is more than 

one definition in the paragraph. 

an SDR’s application for registration and 

assess whether the SDR meets the 

criteria for registration set forth in Rule 

13n–1(c)(3).190

After weighing the practical 

considerations with respect to SDRs’ 

preparations for compliance with the 

Dodd-Frank Act and the SDR Rules, as 

well as the benefits to investors and 

regulators of adopting the SDR Rules in 

order to facilitate the establishment and 

utilization of registered SDRs, the 

Commission has determined not to 

adopt a phase-in approach, as suggested 

by some commenters and 

Implementation Joint Roundtable 

participants.191 Specifically, the 

Commission does not believe that it is 

necessary or appropriate to tailor a 

phase-in period for the SDR Rules based 

on specific asset classes, type of market 

participant, or other SBS attributes. 

While a phase-in approach based on 

asset class, type of market participant, 

or other attributes may have been 

appropriate had the Commission 

adopted rules prior to the July 16, 2011 

effective date of the Dodd-Frank Act,192

the Commission believes that the 

passage of time has afforded ample time 

for the development of SDR 

infrastructure. This belief is based, in 

part, on the existence of four swap data 

repositories already provisionally 

registered with the CFTC.193 These 

swap data repositories, most of which 

will likely register as SDRs with the 

Commission, have had approximately 

three years to implement the final swap 

data repository rules adopted by the 

CFTC on August 4, 2011 (Part 49 swap 

data repository rules)194 and December 

20, 2011 (Part 45 swap data 

recordkeeping and reporting rules).195

The Commission believes that the 

CFTC’s Part 49 rules 196 and Part 45 

rules 197 applicable to swap data 

repositories are substantially similar to 

the final SDR Rules. Because of the 

substantial similarity between the 

Commissions’ rules, to the extent that 

the SDRs are in compliance with the 

CFTC’s rules, they are likely already in 

substantial compliance with the 

Commission’s SDR Rules. 

VI. Discussion of Rules Governing SDRs 

Exchange Act Section 13(n), enacted 

in Dodd-Frank Act Section 763(i), 

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 a security-based swap data 

repository.’’ 198 To be registered and 

maintain such registration, each SDR is 

required (absent an exemption) to 

comply with the requirements and core 

principles described in Exchange Act 

Section 13(n), as well as with any 

requirements that the Commission 

adopts by rule or regulation.199 The 

Exchange Act also requires each SDR to 

designate an individual to serve as a 

CCO and specifies the CCO’s duties.200

In addition, the Exchange Act grants the 

Commission authority to inspect and 

examine any registered SDR and to 

prescribe data standards for SDRs.201

A. Registration of SDRs (Rule 13n–1 and 

Form SDR) 

Proposed Rule 13n–1 and proposed 

Form SDR would establish the 

procedures by which a person may 

apply to the Commission for registration 

as an SDR. After considering the 

comments, the Commission is adopting 

Rule 13n–1 and Form SDR substantially 

as proposed, with certain 

modifications.202

1. New Form SDR; Electronic Filing 

a. Proposed Form SDR 

As proposed, Form SDR would 

require an applicant seeking to register 

as an SDR and a registered SDR filing an 

amendment (including an annual 

amendment) to indicate the purpose for 

which it is filing the form and then to 

provide several categories of 

information. As part of the application 

process, each SDR would be required to 

provide additional information to the 

Commission upon request. Applicants 

would be required to file Form SDR 

electronically in a tagged data format. 

As proposed, Form SDR would require 

all SDRs to provide the same 

information, with two related limited 

exceptions applicable to non-resident 

SDRs. First, if the applicant is a nonresident SDR, then Form SDR would 

require the applicant to attach as an 

exhibit to the form an opinion of 

counsel stating that the SDR can, as a 

matter of law, provide the Commission 

with prompt access to the SDR’s books 

and records and that the SDR can, as a 

matter of law, submit to onsite 

inspection and examination by the 

Commission. Second, Form SDR would 

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203See Items 12 and 46 of proposed Form SDR; 

see also Sections VI.A.1 and VI.A.5 of this release 

discussing legal opinion of counsel and certification 

by non-resident SDRs on Form SDR. 

204See DTCC 2, supra note 19; ESMA, supra note 

19; see also DTCC 3, supra note 19. Five 

commenters submitted comments to the 

Commission regarding registration of non-resident 

SDRs. See ESMA, supra note 19; DTCC 2, supra 

note 19; Foreign Banks SBSR, supra note 27; BofA 

SBSR, supra note 27; US & Foreign Banks, supra 

note 24. With the exception of the certification and 

legal opinion requirements discussed later in this 

section, the Commission discussed cross-border 

issues applicable to SDRs that were raised by Title 

VII in the Cross-Border Proposing Release, and is 

adopting an exemption from the SDR requirements 

for certain non-U.S. persons, as discussed in 

Section VI.K of this release. 

205 DTCC 2, supra note 19. 

206 DTCC 2, supra note 19 (‘‘[I]t is essential that 

proposed Form SDR request information related to 

the SDR’s operating schedule, real-time processing, 

existence of multiple redundant infrastructures for 

continuity, strong information security controls, 

and robust reporting operations (including direct 

electronic access by the Commission). Because an 

SDR provides important utility services to 

regulators and market participants, such resiliency 

and redundancy should be evaluated in light of the 

significant policies and procedures for establishing 

such redundancy, including several backup 

locations in different geographic regions.’’). 

207 DTCC 2, supra note 19; DTCC 3, supra note 

19 (‘‘Harmonization in the registration process for 

SDRs is necessary. Requiring one SDR to complete 

three sets of registration forms—an SDR application 

to the CFTC, an SDR application to the SEC and 

Form SIP to the SEC—demonstrates a specific 

instance where the regulatory agencies should come 

together, determine the information necessary for 

registration and jointly publish a common 

registration application.’’). 

208 DTCC 3, supra note 19 (‘‘The [Commission] 

should require rulebooks for SDRs prior to 

operation and as part of the registration process. 

SDRs will need to complete legal agreements with 

clearing-houses and among the users of an SDR. 

These agreements generally constitute the 

agreement of the user to abide by published rules 

and/or procedures of the SDR and generally have 

a notice of change to permit amendments without 

having to re-execute with all users. These 

agreements should be in place before SDRs operate 

under the new regulatory regime.’’). 

209ESMA, supra note 19 (‘‘[N]on-resident SDRs 

are actually subject to a stricter regime than the 

resident ones, as they need to provide a legal 

opinion certifying that they can provide the SEC 

with prompt access to their books and records and 

that they can be subject to onsite inspections and 

examinations by the SEC.’’). 

210See Section VI.A.4 of this release discussing 

amendments on Form SDR. 

211See Section VI.B of this release discussing 

withdrawal from registration as an SDR. 

212See Rule 13n–1(b). The Commission is 

revising the last sentence of proposed Rule 13n–1(b) 

to use the statutorily defined term ‘‘security-based 

swap data repository’’ rather than ‘‘SDR’’ to be 

consistent with the rest of the SDR Rules. The 

Commission is also revising the last sentence of 

proposed Rule 13n–1(b) to require SDRs to provide 

additional information upon request to ‘‘any 

representative of the Commission,’’ rather than ‘‘the 

Commission.’’ This revision is intended to clarify 

that such requests will be made by Commission 

staff. 

213Proposing Release, 75 FR at 77310, supra note 

2. 

214The Commission is revising Form SDR from 

proposed Form SDR to include disclosure relating 

to the Paperwork Reduction Act. See Section VII of 

this release regarding the Paperwork Reduction Act. 

215Today, the Commission is adopting Regulation 

SBSR, which includes a requirement for each 

registered SDR to register as a SIP, as defined in 

Exchange Act Section 3(a)(22), 15 U.S.C. 78c(a)(22). 

See Regulation SBSR Adopting Release, supra note 

13 (Rule 909). 

216Proposing Release, 75 FR at 77313, supra note 

2. See also Regulation SBSR Proposing Release, 75 

FR at 75287, supra note 8 (proposed Rule 909); 

Cross-Border Proposing Release, 78 FR at 31215–6, 

supra note 3 (re-proposing Rule 909). 

217 DTCC 2, supra note 19; see also DTCC 3, supra 

note 19. 

218Form SDR will be used only by SIPs that also 

register as SDRs; Form SIP will continue to be used 

by applicants for registration as SIPs not seeking to 

become dually-registered as an SDR and SIP, and 

for interim amendments or annual amendments by 

registered SIPs that are not dually-registered as an 

SDR and SIP. In discussing Form SDR as adopted 

require an applicant that is a nonresident SDR to certify to this (i.e., the 

SDR can, as a matter of law, provide the 

Commission with prompt access to the 

SDR’s books and records and the SDR 

can, as a matter of law, submit to onsite 

inspection and examination by the 

Commission).203

b. Comments on Proposed Form SDR 

Two commenters submitted 

comments relating to this proposal.204

One commenter urged the Commission 

to ensure that the registration process 

does not interfere with the ongoing 

operation of existing SDRs.205 This 

commenter also addressed the items to 

be provided on Form SDR and stressed 

the importance of gathering information 

regarding an applicant’s information 

technology systems, including its ability 

to provide direct electronic access to the 

Commission.206 In addition, the 

commenter supported combining new 

Form SDR with Form SIP and further 

suggested that the Commission and the 

CFTC publish a joint form for 

registration with the Commission as an 

SDR and SIP and with the CFTC as a 

swap data repository.207 The commenter 

also suggested that the Commission 

require applicants to submit their 

rulebooks as part of the registration 

process on Form SDR.208

One commenter expressed concern 

that non-resident SDRs would be subject 

to a stricter regulatory regime than that 

applicable to resident SDRs due to the 

proposed opinion of counsel 

requirement, which is applicable only to 

non-resident SDRs.209

c. Final Form SDR 

After considering the comments, the 

Commission is adopting Form SDR 

substantially as proposed with certain 

modifications. Form SDR includes a set 

of instructions for its completion and 

submission. These instructions are 

included in this release, together with 

Form SDR. The instructions require an 

SDR to indicate the purpose for which 

it is filing the form (i.e., application for 

registration, interim or annual 

amendment to an application or to an 

effective registration,210 or withdrawal 

from registration 211) and to provide 

information in seven categories: (1) 

General information, (2) business 

organization, (3) financial information, 

(4) operational capability, (5) access to 

services and data, (6) other policies and 

procedures, and (7) legal opinion. As 

part of the application process, each 

SDR will be required to provide 

additional information to any 

representative of the Commission upon 

request.212

As noted in the Proposing Release, the 

Commission believes that permitting an 

SDR to provide information in narrative 

form in Form SDR will allow the SDR 

greater flexibility and opportunity for 

meaningful disclosure of relevant 

information.213 The Commission 

believes that it is necessary to obtain the 

information requested in Form SDR to 

enable the Commission to determine 

whether to grant or deny an application 

for registration. Specifically, the 

information will assist the Commission 

in understanding the basis for 

registration as well as an SDR’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. The information 

will also be useful to the Commission in 

tailoring any requests for additional 

information that it may ask an SDR to 

provide. Furthermore, the required 

information will assist Commission 

representatives in the preparation of 

their inspection and examination of an 

SDR.214

Form SIP.215 In the Proposing Release, 

the Commission noted that proposed 

Regulation SBSR would require each 

registered SDR to register with the 

Commission as a SIP on Form SIP, and 

requested comment on whether the 

Commission should combine Form SDR 

and Form SIP, such that an SDR would 

register as an SDR and SIP using only 

one form.216 One commenter supported 

combining Form SDR with Form SIP.217

Taking into consideration this 

commenter’s view and in an effort to 

minimize the burden of filing multiple 

registration forms, the Commission has 

decided to amend proposed Form SDR 

to accommodate SIP registration; thus, 

an SDR will register and amend such 

registration as an SDR and as a SIP 

using one combined form.218 An 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14459 

in this release, references to SDRs may, where 

applicable, refer to SDRs and SIPs, collectively. 

219See General Instruction 2 to Form SDR. 

220See Item 32(a)(1) (adding ‘‘(or disseminate for 

display or other use)’’ and ‘‘(e.g., number of 

inquiries from remote terminals)’’), Item 32(a)(2) 

(adding ‘‘(or disseminate for display or other use)’’), 

new Item 33(c) (With respect to each of an 

applicant’s ‘‘services that involves the supply of 

information to a quotation board, ticker device, 

electronic information terminal, or other such 

device, [the applicant must] state the total number 

of devices to which information is, or will be 

supplied (‘serviced’) and any minimum and or 

maximum number of devices required or permitted 

by agreement or otherwise to be serviced by the 

applicant. In addition, [an applicant must] define 

the data elements for each service.’’); and Item 36 

of Form SDR (adding ‘‘processing, preparing for 

distribution, and publication’’); see also new 

General Instructions 2 and 3 and conforming 

revisions to General Instructions 7 and 9 to Form 

SDR and Items 16, 19, 20, 23, 25–35, and 39 of 

Form SDR. 

221See, e.g., Item 31 of Form SIP, 17 CFR 

249.1001 (requiring applicant to state whether 

certain specifications or qualifications are imposed 

at the direction of a national securities exchange or 

a registered securities association). 

222 15 U.S.C. 78k–1(b). 

223As discussed below, the Commission is 

revising Rule 13n–1(c) from the proposal to reflect 

this publication requirement with respect to the 

registration process for Form SDR. See Section 

VI.A.2.c of this release discussing revision to Rule 

13n–1(c) to provide that: (1) Within 90 days of the 

date of the publication of notice of the filing of an 

application for registration (or within such longer 

period as to which the SDR consents), the 

Commission shall either grant the registration by 

order or institute proceedings to determine whether 

registration should be granted or denied and (2) 

proceedings instituted pursuant to Rule 13n–1(c) 

shall be concluded not later than 180 days after the 

date of the publication of notice of the filing of the 

application for registration, absent an extension. 

224As discussed below, the Commission is 

adopting technical amendments to Exchange Act 

Rule 24b–2 to clarify that the confidential portion 

of electronic filings by SDRs must be filed 

electronically and to require SDRs to request 

confidential treatment electronically. The 

Commission is also adopting technical amendments 

to Rule 101 of Regulation S–T to provide that, 

except as otherwise provided, all filings by SDRs, 

including any information with respect to which 

confidential treatment is requested, must be filed 

electronically. 

225The instructions to Form SDR have been 

modified from the proposal to clarify that 

information supplied on the form may be made 

available on the Commission’s Web site. See 

General Instruction 7 to Form SDR (stating that 

‘‘[e]xcept in cases where confidential treatment is 

requested by the applicant and granted by the 

Commission pursuant to the Freedom of 

Information Act and the rules of the Commission 

thereunder, information supplied on this form may 

be made available on the Commission’s Web site, 

will be included routinely in the public files of the 

Commission, and will be available for inspection by 

any interested person’’). The Commission expects 

that non-confidential information supplied on an 

SDR’s completed application for registration will be 

made available on the Commission’s Web site; other 

filings on Form SDR may be made available on the 

Commission’s Web site. 

226See DTCC 3, supra note 19. 

227See CFTC Part 49 Adopting Release, supra 

note 36. 

228As noted above, CFTC Rule 49.3(b) provides 

for provisional registration of a swap data 

repository. 17 CFR 49.3(b). 

229 In the General Information section of Form 

SDR, the Commission is adding a new item (Item 

12) to implement the requirement in Rule 13n–2(b) 

for a registered SDR seeking to withdraw from 

registration to identify a custodian of its books and 

records, and the address(es) where the books and 

records will be located. See Section VI.B of this 

release discussing Rule 13n–2(b). 

230As proposed, Item 6 of Form SDR implicitly 

pertained to the data that an applicant is collecting 

and maintaining or proposes to collect and 

maintain. The Commission is revising Item 6 of 

Form SDR from the proposal to make this explicit 

by adding references to ‘‘data.’’ 

231See Items 1–10 of Form SDR. The Commission 

is revising Form SDR from the proposal to remove 

the heading ‘‘Business Organization’’ in the 

‘‘General Information’’ section because the heading 

is superfluous and may lead to confusion with 

another section entitled ‘‘Exhibits—Business 

Organization.’’ General information regarding 

business organization is requested in the ‘‘General 

Information’’ section, whereas detailed information 

regarding business organization is requested in the 

‘‘Exhibits—Business Organization’’ section. As 

proposed, Item 10 of Form SDR requested 

information regarding the filing date of 

‘‘partnership articles’’ and ‘‘place where 

partnership agreement was filed.’’ For consistency, 

the Commission is revising Item 10 of Form SDR 

from the proposal to request the filing date of the 

‘‘partnership agreement’’ rather than ‘‘partnership 

articles.’’ 

232See Item 11 of Form SDR. 

233See Item 13 of Form SDR. 

amendment or withdrawal on Form SDR 

will also constitute an amendment or 

withdrawal of SIP registration pursuant 

to Exchange Act Section 11A and the 

rules and regulations thereunder.219 The 

Commission has made certain changes 

to proposed Form SDR to incorporate 

the additional information requested on 

Form SIP of applicants for registration 

as a SIP.220 However, there are some 

disclosures required in Form SIP that 

have not been incorporated into Form 

SDR because they do not appear to be 

relevant to SDRs.221 The Commission 

notes that by requiring a registered SDR 

to register as a SIP, the requirements of 

SIP registration provided in Exchange 

Act Section 11A, including publication 

of notice of the filing of an application 

for registration, will apply to 

applications filed on Form SDR222 and, 

accordingly, the Commission will 

publish notice of the filing of 

applications for registration on Form 

SDR in the Federal Register.223 In 

addition, the Commission expects that it 

will make the filed applications 

available on its Web site, except for 

information where confidential 

treatment is requested by the 

applicant 224 and granted by the 

Commission.225

The Commission has determined not 

to adopt a joint form for registration 

with the Commission as an SDR and SIP 

and with the CFTC as a swap data 

repository, as suggested by one 

commenter.226 First, the CFTC has 

already adopted the final registration 

rules and form for swap data 

repositories to use.227 Adopting a joint 

form for registration would require the 

CFTC to amend its adopted Form SDR 

while the industry is still in the 

implementation phase and swap data 

repositories are already provisionally 

registered with the CFTC.228 Second, 

the CFTC’s registration form for swap 

data repositories is substantially similar 

to the Commission’s Form SDR. Thus, 

the Commission does not anticipate that 

filing with each Commission separately 

will entail a significant cost for dual 

registrants even though the Commission 

and the CFTC have tailored their 

respective forms in order to meet the 

specific needs of each agency and their 

respective statutory mandates. For 

example, the Commission is revising 

proposed Form SDR to require an SDR 

to provide certain information to 

address Exchange Act requirements 

applicable to SIPs. The CFTC’s Form 

SDR does not require information to 

address some of these requirements. 

General Information.229 Form SDR 

requires an applicant to provide contact 

information, information concerning 

any predecessor SDR (if applicable), a 

list of asset classes of SBSs for which 

the applicant is collecting and 

maintaining data or for which it 

proposes to collect and maintain 

data,230 a description of the functions 

that it performs or proposes to perform, 

and general information regarding its 

business organization.231 This 

information will assist the Commission 

and its staff in evaluating applications 

for registration and overseeing 

registered SDRs for purposes of 

determining whether the SDRs are able 

to comply with the federal securities 

laws and the rules and regulations 

thereunder. 

An applicant is required to 

acknowledge and consent that any 

notice or service of process, pleadings, 

or other documents in connection with 

any action or proceeding against the 

applicant may be effectuated by 

certified mail to an officer or person 

specified by the SDR at a given U.S. 

address.232 The Commission believes 

that such consent is important to 

minimize any logistical obstacles (e.g., 

locating defendants or respondents 

abroad) that the Commission may 

encounter when attempting to provide 

notice to an applicant or to effect 

service, including service overseas. 

Form SDR must be signed by a person 

who is duly authorized to act on behalf 

of the applicant.233 The signer is 

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14460 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

234See Item 13 of Form SDR. The Commission is 

revising the signature block from the proposal to be 

consistent with an SDR’s filing requirements for 

interim amendments on Form SDR. See note infra 

356 (discussing amendment of signature block). The 

Commission is also revising the signature block to 

state that ‘‘[i]ntentional misstatements or omissions 

of fact constitute federal criminal violations (see 18 

U.S.C. 1001 and 15 U.S.C. 78ff(a)).’’ This statement 

was included in Instruction 5 of proposed Form 

SDR, and is included in Instruction 7 of Form SDR, 

as adopted. This statement has been added to the 

signature block to remind the signer of the 

consequences of intentional misstatements or 

omissions of fact. See 18 U.S.C. 1001 (applying to 

‘‘whoever, in any matter within the jurisdiction of 

the executive, legislative, or judicial branch of the 

Government of the United States, knowingly and 

willfully — (1) falsifies, conceals, or covers up by 

any trick, scheme, or device a material fact; (2) 

makes any materially false, fictitious, or fraudulent 

statement or representation; or (3) makes or uses 

any false writing or document knowing the same to 

contain any materially false, fictitious, or fraudulent 

statement or entry’’); 15 U.S.C. 78ff(a) (applying to, 

among other persons, ‘‘any person who willfully 

and knowingly makes, or causes to be made, any 

statement in any application, report, or document 

required to be filed under [the Exchange Act] or any 

rule or regulation thereunder or any undertaking 

contained in a registration statement as provided in 

subsection (d) of section 78o of [Title 15 of the U.S. 

Code], or by any self-regulatory organization in 

connection with an application for membership or 

participation therein or to become associated with 

a member thereof, which statement was false or 

misleading with respect to any material fact’’). 

235Accord Registration of Municipal Advisors, 

Exchange Act Release No. 70462 (Sept. 20, 2013), 

78 FR 67468, 67568 (Nov. 12, 2013) (stating that the 

certification requirement in Form MA–W pertaining 

to the accuracy and completeness of information 

previously submitted in Form MA should serve as 

an effective means to assure that the information 

supplied is correct). 

236See Form SIP, 17 CFR 249.1001, available at 

http://www.sec.gov/about/forms/formsip.pdf; Form 

BD, 17 CFR 249.501, available at http://

www.sec.gov/about/forms/formbd.pdf; Form ADV, 

17 CFR 279.1, available at http://www.sec.gov/

about/forms/formadv.pdf. 

237See Item 13 of Form SDR. Under Exchange Act 

Section 13(n)(2), an SDR is subject to inspection 

and examination by any representative of the 

Commission. See 15 U.S.C. 78m(n)(2); see also 

Section VI.D.2 of this release discussing Rule 13n– 

4(b)(1). The Commission is revising ‘‘can, as a 

matter of law’’ (referring to the certification 

regarding access to the SDR’s books and records) 

and ‘‘can’’ (referring to the certification regarding 

inspection and examination) in the signature block 

of proposed Form SDR to ‘‘can, as a matter of law, 

and will’’ to track the language of Rule 13n–1(f), as 

discussed in Section VI.A.5 of this release. 

238See Item 13 of Form SDR; see also Rule 13n– 

1(a)(1) (defining ‘‘non-resident security-based swap 

data repository’’). This definition is substantially 

similar to the definition of ‘‘non-resident broker or 

dealer’’ in Exchange Act Rule 17a–7(d)(3). See 17 

CFR 240.17a–7(d)(3). Although there may be 

instances in which a non-resident SDR can fall 

within the definition of a ‘‘U.S. person,’’ the 

Commission believes that, as a practical matter, all 

non-resident SDRs would likely be non-U.S. 

persons given the similar distinguishing factors in 

the definitions of ‘‘non-resident security-based 

swap data repository’’ and ‘‘non-U.S. person.’’ See 

supra note 99 (discussing definition of ‘‘U.S. 

person’’) and Section VI.A.5 of this release 

discussing non-resident SDRs. 

239See, e.g., Dagong Global Credit Rating Agency, 

Exchange Act Release No. 62968 (Sept. 22, 2010) 

(denying application as an NRSRO due to 

applicant’s inability to comply with U.S. securities 

laws, in part because records requests would have 

to be approved by a Chinese regulator); Dominick 

& Dominick, Inc., Exchange Act Release No. 29243 

(May 29, 1991) (settled administrative proceeding 

involving a broker-dealer’s failure to furnish 

promptly to the Commission copies of certain 

records required to be kept pursuant to Exchange 

Act Section 17(a)(1) and Rule 17a–3 thereunder 

where the broker-dealer initially asserted that Swiss 

law prevented it from producing the required 

records). 

240See Section VI.D.2 of this release discussing 

inspection and examination by Commission 

representatives. 

241ESMA, supra note 19. 

242See Item 14 of Form SDR. 

243See Items 15 and 16 of Form SDR. More 

specifically, Form SDR requires an applicant to 

disclose the following information regarding its 

designated CCO, officers, directors, governors, and 

persons performing functions similar to any of the 

foregoing, and the members of all standing 

committees: (a) name; (b) title; (c) date of 

commencement and, if appropriate, termination of 

present term of position; (d) length of time such 

person has held the same position; (e) brief account 

of the business experience of such person over the 

last five years; (f) any other business affiliations in 

the securities industry or derivatives industry; and 

(g) details of: (1) any order of the Commission with 

respect to such person pursuant to Sections 

15(b)(4), 15(b)(6), 19(h)(2), or 19(h)(3) of the 

Exchange Act, (2) any conviction or injunction of 

a type described in Sections l5(b)(4)(B) or (C) of the 

Exchange Act within the past ten years, (3) any 

action of an SRO with respect to such person 

imposing a final disciplinary sanction pursuant to 

Exchange Act Sections 6(b)(6), l5A(b)(7), or 

17A(b)(3)(G), (4) any final action by an SRO with 

respect to such person constituting a denial, bar, 

prohibition, or limitation of membership, 

participation, or association with a member, or of 

access to services offered by such organization or 

a member thereof, and (5) any final action by 

another federal regulatory agency, including the 

CFTC, any state regulatory agency, or any foreign 

required to certify that all information 

contained in the application, including 

the required items and exhibits, is true, 

current, and complete.234 The 

Commission believes that this 

certification requirement will serve as 

an effective means to assure that the 

information filed on Form SDR with the 

Commission is reliable.235 The 

Commission notes that this certification 

is consistent with the certification 

provisions in the registration forms for 

SIPs, broker-dealers, and investment 

advisers (i.e., Forms SIP, BD, and 

ADV).236

If an applicant is a non-resident SDR, 

then the signer of Form SDR is also 

required to certify that the applicant 

can, as a matter of law, and will provide 

the Commission with prompt access to 

the applicant’s books and records and 

that the applicant can, as a matter of 

law, and will submit to onsite 

inspection and examination by the 

Commission.237 For purposes of the 

certification, Form SDR defines ‘‘nonresident security-based swap data 

repository’’ as (i) in the case of an 

individual, one who resides in or has 

his principal place of business in any 

place not in the United States; (ii) in the 

case of a corporation, one incorporated 

in or having its principal place of 

business in any place not in the United 

States; or (iii) in the case of a 

partnership or other unincorporated 

organization or association, one having 

its principal place of business in any 

place not in the United States.238

Certain foreign jurisdictions may have 

laws that complicate the ability of 

regulated persons such as SDRs located 

in their jurisdictions from sharing 

certain information, including personal 

information of individuals that the 

regulated persons come to possess from 

third persons (e.g., personal data 

relating to the identity of market 

participants or their customers), with 

the Commission.239 In order for the 

Commission to fulfill its oversight 

responsibilities with respect to 

registered SDRs, it is important that 

Commission representatives have 

prompt access to the SDRs’ books and 

records and have the ability to conduct 

onsite inspections and examinations.240

As noted above, one commenter was 

concerned that non-resident SDRs are 

subject to a stricter regime than resident 

SDRs.241 To the extent that the 

commenter’s concerns pertain to the 

certification requirement, the 

Commission notes that it continues to 

believe that if a non-resident SDR is 

registered with the Commission, the 

SDR’s certification is important to 

confirm that it has taken the necessary 

steps to be in the position to provide the 

Commission with prompt access to the 

SDR’s books and records and to be 

subject to onsite inspection and 

examination by the Commission. Failure 

to make this certification may be a basis 

for the Commission to institute 

proceedings to consider denying an 

application for registration. If a 

registered non-resident SDR becomes 

unable to provide this certification, then 

this may be a basis for the Commission 

to institute proceedings to consider 

revoking the SDR’s registration. 

Business Organization. Form SDR 

requires each applicant to provide as 

exhibits detailed information regarding 

its business organization, including 

information about (1) any person that 

owns 10 percent or more of the 

applicant’s stock or that, either directly 

or indirectly, through agreement or 

otherwise, in any other manner, may 

control or direct the applicant’s 

management or policies;242 (2) the 

business experience, qualifications, and 

disciplinary history of its designated 

CCO, officers, directors, governors, and 

persons performing functions similar to 

any of the foregoing, and the members 

of all standing committees;243 (3) its 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14461 

financial regulatory authority resulting in: (i) a 

finding that such person has made a false statement 

or omission, or has been dishonest, unfair, or 

unethical; (ii) a finding that such person has been 

involved in a violation of any securities-related 

regulations or statutes; (iii) a finding that such 

person has been a cause of a business having its 

authorization to do business denied, suspended, 

revoked, or restricted; (iv) an order entered, in the 

past ten years, against such person in connection 

with a securities-related activity; or (v) any 

disciplinary sanction, including a denial, 

suspension, or revocation of such person’s 

registration or license or otherwise, by order, a 

prevention from associating with a securitiesrelated or a restriction of such person’s activities. 

The Commission is correcting a typographical error 

in proposed Items 14(g)(4) and 15(g)(4). As 

proposed, the items stated ‘‘. . . such organization 

of a member thereof.’’ As adopted, Items 15(g)(4) 

and 16(g)(4) state ‘‘. . . such organization or a 

member thereof.’’ 

244See Item 17 of Form SDR. The Commission 

has made minor revisions to Form SDR from the 

proposal with regard to the disclosure of 

governance arrangements for the sake of clarity. 

Compare Item 16 of Form SDR, as proposed 

(requiring disclosure of the responsibilities ‘‘of each 

of the board and such committee’’ and the 

composition ‘‘of each board and such committee’’), 

with Item 17 of Form SDR, as adopted (requiring 

disclosure of the responsibilities and composition 

‘‘of the board and each such committee’’). 

245See Item 18 of Form SDR. 

246See Item 19 of Form SDR. 

247See Item 20 of Form SDR. For purposes of 

Form SDR, an ‘‘affiliate’’ of an SDR is defined as 

a person that, directly or indirectly, controls, is 

controlled by, or is under common control with the 

SDR. See also Rule 13n–4(a)(1); Rule 13n–9(a)(1). 

This definition of ‘‘affiliate’’ is designed to allow 

the Commission to collect comprehensive 

identifying information relating to an SDR. This 

definition is substantially similar to the definition 

of ‘‘affiliate’’ in Exchange Act Rule 12b–2. See 17 

CFR 240.12b–2. See also infra note 621 (defining 

‘‘control’’ (including the terms ‘‘controlled by’’ and 

‘‘under common control with’’)). The Commission 

notes that it received a comment letter after the 

Proposing Release through the Commission’s 

general solicitation for comments that addressed the 

definition of ‘‘affiliate’’ for all of Title VII. See letter 

from ABA Securities Association, American 

Council of Life Insurers, Financial Services 

Roundtable, Futures Industry Association, Institute 

of International Bankers, International Swaps and 

Derivatives Association and the Securities Industry 

and Financial Markets Association, available on the 

Commission’s Web site at http://www.sec.gov/

comments/df-title-vii/swap-data-repositories/swapdata-repositories.shtml (suggesting defining 

‘‘affiliate’’ for the purposes of Title VII rulemaking 

generally as ‘‘any group of entities that is under 

common control and that reports information or 

prepares its financial statements on a consolidated 

basis’’). The commenter focused on the effect of the 

definition in the context of inter-affiliate 

transactions, such as whether inter-affiliate 

transactions should be counted when determining 

if a person is required to register as an SBS dealer. 

Among other things, the commenter addressed the 

reporting of inter-affiliate transactions to SDRs. 

Because Form SDR and the SDR Rules do not 

pertain to what transactions must be reported to an 

SDR, the Commission believes that the letter is not 

relevant to Form SDR or the SDR Rules. 

Additionally, the Commission believes that it is 

important that an applicant for registration as an 

SDR provide information regarding all of its 

affiliates, regardless of whether the SDR’s and 

affiliates’ financial statements are prepared on a 

consolidated basis. Among other reasons, the 

Commission needs to know the identity of an SDR’s 

affiliates before it can determine whether the SDR 

has any material conflicts of interest based on the 

services provided by those affiliates or is providing 

favorable treatment to affiliates in accessing the 

SDR’s services or whether the SDR is complying 

with other rules and core principles, such as the 

core principle related to access to services and data. 

248See Item 21 of Form SDR. 

249See Item 22 of Form SDR. 

250See Item 23 of Form SDR. 

251Compare Items 14(f) and 15(f) of proposed 

Form SDR with Items 15(f) and 16(f) of Form SDR, 

as adopted. 

252See Item 24 of Form SDR. As proposed, this 

item referred to a ‘‘balance sheet’’ and a ‘‘statement 

of income and expenses’’ rather than a ‘‘statement 

of financial position’’ and ‘‘results of operations.’’ 

The Commission is making this change from the 

proposal for consistency with Rule 13n–11(f)(4). 

See Section VI.J.5 of this release discussing Rule 

13n–11(f). This revision is not intended to 

substantively change the requirements of this item. 

253See Item 25 of Form SDR. As proposed, this 

item referred to a ‘‘balance sheet’’ and a ‘‘statement 

of income and expenses’’ rather than a ‘‘statement 

of financial position’’ and ‘‘results of operations.’’ 

The Commission is making this change from the 

proposal for consistency with Rule 13n–11(f)(4). 

See Section VI.J.5 of this release discussing Rule 

13n–11(f). This revision is not intended to 

substantively change the requirements of this item. 

254See Item 26.a of Form SDR. 

255See Item 26.b of Form SDR. 

256See Item 26.c of Form SDR. 

257See Item 27 of Form SDR. 

258See Item 28 of Form SDR. 

259See Item 29 of Form SDR. 

260See Item 30 of Form SDR. 

governance arrangements;244 (4) the 

applicant’s constitution, articles of 

incorporation or association with all 

amendments to them, existing by-laws, 

rules, procedures, and instruments 

corresponding to them;245 (5) the 

applicant’s organizational structure;246

(6) its affiliates;247 (7) any material 

pending legal proceedings to which the 

applicant or its affiliate(s) is a party or 

to which any of its property is the 

subject;248 (8) the applicant’s material 

contracts with any SB SEF, clearing 

agency, central counterparty, and third 

party service provider; 249 and (9) the 

applicant’s policies and procedures to 

minimize conflicts of interest in its 

decision-making process and to resolve 

any such conflicts of interest.250

Obtaining this information will assist 

the Commission in, among other things, 

understanding an SDR’s overall 

business structure, governance 

arrangements, and operations, all of 

which will assist the Commission in its 

inspection and examination of the SDR 

and the Commission’s decision on 

whether to grant the SDR’s registration. 

The Commission is revising Form 

SDR from the proposal requiring 

disclosure of business affiliations in the 

‘‘derivatives industry’’ rather than the 

‘‘OTC derivatives industry’’ for an 

applicant’s designated CCO, officers, 

directors, governors, and persons 

performing functions similar to any of 

the foregoing, and the members of all 

standing committees 251 The 

Commission is making this revision to 

clarify that the disclosure covers 

derivatives traded on exchanges and SB 

SEFs as well as those traded over-thecounter. 

Financial Information. Each applicant 

is required to disclose as exhibits to 

Form SDR certain financial and related 

information, including (1) its statement 

of financial position, results of 

operations, statement of sources and 

application of revenues, and all notes or 

schedules thereto, as of the most recent 

fiscal year of the applicant, or, 

alternatively, a financial report, as 

discussed further in Section VI.J.5 of 

this release; 252 (2) a statement of 

financial position and results of 

operations for each affiliate of the 

applicant as of the end of the most 

recent fiscal year of each such affiliate, 

or, alternatively, identification of the 

most recently filed annual report on 

Form 10–K of the applicant’s affiliate, if 

available; 253 (3) a list of all dues, fees, 

and other charges imposed, or to be 

imposed, for the applicant’s services, as 

well as all discounts and rebates offered, 

or to be offered; 254 (4) a description of 

the basis and methods used in 

determining the level and structure of 

the applicant’s services as well as its 

dues, fees, other charges, discounts, or 

rebates; 255 and (5) a description of any 

differentiations in such dues, fees, other 

charges, discounts, and rebates.256 This 

information will assist the Commission 

in, among other things, its decision of 

whether to grant the SDR’s registration 

and in its evaluation of the financial 

resources available to the SDR to 

support its operations. 

Operational Capability. Form SDR 

requires each applicant to provide as 

exhibits information on its operational 

capability, including (1) its SDR and SIP 

functions and services;257 (2) the 

computer hardware that it uses to 

perform its SDR or SIP functions;258 (3) 

personnel qualifications for each 

category of professional, nonprofessional, and supervisory 

employees employed by the applicant or 

the division, subdivision, or other 

segregable entity within the 

applicant;259 (4) the applicant’s 

measures or procedures to provide for 

the security of any system employed to 

perform its SDR or SIP functions, 

including any physical and operational 

safeguards designed to prevent 

unauthorized access to the system;260

(5) any circumstances within the past 

year in which such security measures or 

safeguards failed to prevent any such 

unauthorized access to the system and 

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261See Item 30 of Form SDR. 

262See Item 30 of Form SDR. 

263See Item 31 of Form SDR. 

264See Item 32.a of Form SDR. 

265See Item 32.b of Form SDR. 

266Cross-Border Proposing Release, 78 FR at 

31042 n.719, supra note 3 (citing the Proposing 

Release, 75 FR at 77307 (‘‘The inability of an SDR 

to protect the accuracy and integrity of the data that 

it maintains or the inability of an SDR to make such 

data available to regulators, market participants, 

and others in a timely manner could have a 

significant negative impact on the [security-based 

swap] market. Failure to maintain privacy of such 

data could lead to market abuse and subsequent 

loss of liquidity.’’)). 

267 DTCC 2, supra note 19. 

268See Section VI.A.2 of this release discussing 

Rule 13n–1(c) (reviews by Commission staff of the 

SDR’s operational capacity and ability are 

important to determine whether the Commission 

should grant an SDR’s application for registration 

or revoke the registration of a registered SDR 

pursuant to Rule 13n–2(e)). 

269See Item 33.a of Form SDR. 

270See Item 33.b of Form SDR; see also infra note 

278 (discussing denials of access to services offered 

by SDRs). 

271See Item 33.c of Form SDR. The Commission 

is including this item from Form SIP to Form SDR 

for purposes of combining the two forms. See 

Section VI.A.1 of this release discussing Form SIP. 

272See Item 33.d of Form SDR. 

273See Item 34 of Form SDR. 

274See Item 35 of Form SDR. 

275See Item 36 of Form SDR. 

276See Item 37 of Form SDR. The Commission is 

correcting a typographical error in proposed Item 36 

of Form SDR. As proposed, the item stated ‘‘any 

person, including, but not limited to . . . third 

party service providers who request access. . . .’’ 

As adopted, Item 37 states ‘‘any person, including, 

but not limited to . . . third party service providers, 

who requests access. . . .’’ 

277See Item 38 of Form SDR. 278See Regulation SBSR Adopting Release, supra 

note 13 (discussing Rule 909, which requires a 

registered SDR to also register as a SIP); Proposing 

Release, 75 FR at 77311 n.33, supra note 2 (noting 

that if the Commission adopts proposed Rule 909 

of Regulation SBSR, then Exchange Act Section 

11A(b)(5) would govern denials of access to all 

SDRs’ services); see also 15 U.S.C. 78k–1(b)(5) (A 

registered SIP must promptly file notice with the 

Commission if it, directly or indirectly, prohibits or 

limits any person in respect of access to its services, 

which may be subject to review by the Commission. 

If the Commission finds that (a) such limitation or 

prohibition is not consistent with Exchange Act 

Section 11A and the rules and regulations 

thereunder and that such person has been 

discriminated against unfairly or (b) the prohibition 

or limitation imposes any burden on competition 

not necessary or appropriate, it may set aside the 

prohibition or limitation and require the SIP to 

permit such person access to its services.). The 

Commission has made certain changes to Form SDR 

from the proposal to accommodate SIP registration. 

See supra note 220. 

279See Item 39 of Form SDR. 

any measures taken to prevent a 

reoccurrence;261 (6) any measures used 

by the applicant to satisfy itself that the 

information received or disseminated by 

the system is accurate;262 (7) the 

applicant’s backup systems or 

subsystems that are designed to prevent 

interruptions in the performance of any 

SDR or SIP functions;263 (8) limitations 

on the applicant’s capacity to receive (or 

collect), process, store, or display (or 

disseminate for display or other use) its 

data and factors that account for such 

limitations;264 and (9) the priorities of 

assignment of capacity between 

functions of an SDR or SIP and any 

other uses and methods used or able to 

be used to divert capacity between such 

functions and other uses.265 As stated in 

the Cross-Border Proposing Release, 

SDRs themselves are subject to certain 

operational risks that may impede their 

ability to fulfill their roles.266 Obtaining 

information regarding an SDR’s 

operational capability will assist the 

Commission in determining, among 

other things, whether an SDR’s 

automated systems provide adequate 

levels of capacity, integrity, resiliency, 

availability, and security. 

As highlighted by one commenter, it 

is imperative that Form SDR includes 

‘‘information related to the SDR’s 

operating schedule, real-time 

processing, existence of multiple 

redundant infrastructures for continuity, 

strong information security controls, 

and robust reporting operations.’’ 267

The Commission believes that the 

operational capability information 

requested on Form SDR sufficiently 

addresses the commenter’s concern. In 

addition, Commission representatives 

may conduct inspections or 

examinations to assess a registered 

SDR’s ongoing operational capability 

and compliance with the federal 

securities laws and the rules and 

regulations thereunder.268

Access to Services and Data. Form 

SDR requires an applicant to provide as 

exhibits information regarding access to 

its services and data, including (1) the 

number of persons who presently 

subscribe, or who have notified the 

applicant of their intention to subscribe, 

to its services; 269 (2) instances in which 

the applicant has prohibited or limited 

any person with respect to access to 

services offered or data maintained by 

the applicant; 270 (3) for each service 

that involves the supply of information 

to a quotation board, ticker device, 

electronic information terminal, or other 

such device, the total number of devices 

to which information is, or will be 

supplied and any minimum and or 

maximum number of devices required 

or permitted by agreement or otherwise 

to be serviced by the applicant; 271 (4) 

the storage media of any service 

furnished in machine-readable form and 

the data elements of such service; 272 (5) 

copies of all contracts governing the 

terms by which persons may subscribe 

to the SDR services, SIP services, and 

any ancillary services provided by the 

applicant; 273 (6) any specifications, 

qualifications, or other criteria that 

limit, are interpreted to limit, or have 

the effect of limiting access to or use of 

any SDR or SIP services offered or data 

maintained by the applicant; 274 (7) any 

specifications, qualifications, or other 

criteria required of persons who supply 

SBS information to the applicant for 

collection, maintenance, processing, 

preparing for distribution, and 

publication by the applicant or of 

persons who seek to connect to or link 

with the applicant; 275 (8) any 

specifications, qualifications, or other 

criteria required of any person who 

requests access to data maintained by 

the applicant; 276 and (9) the applicant’s 

policies and procedures to review any 

prohibition or limitation of any person 

with respect to access to services offered 

or data maintained by the applicant and 

to grant such person access to such 

services or data if such person has been 

discriminated against unfairly.277

The information regarding access to 

services and data will assist the 

Commission in determining, among 

other things, whether an SDR can 

comply with Rule 13n–4(c)(1), which 

relates to the core principle for market 

access to services and data, as discussed 

further in Section VI.D.3.a of this 

release. With respect to Item 33 of Form 

SDR (requiring an SDR to provide 

information regarding access to services 

and data, including any denials of such 

access), the Commission further believes 

that, due to an SDR’s role as a central 

recordkeeping facility for SBSs, upon 

which the Commission and the public 

will rely for market-wide SBS data, the 

Commission should be informed of 

persons who have been granted access 

to an SDR’s services and data, as well 

as instances in which an SDR prohibits 

or limits access to its services.278 As 

part of the process to amend Form SDR 

from the proposal to accommodate SIP 

registration, discussed above, the 

Commission is adding Item 33(c) to 

Form SDR so that the Commission can 

obtain specific information regarding an 

SDR’s supply of information for public 

dissemination purposes. 

Other Policies and Procedures. Form 

SDR requires each applicant to attach as 

exhibits: (1) The applicant’s policies 

and procedures to protect the privacy of 

any and all SBS transaction information 

that the applicant receives from a 

market participant or any registered 

entity; 279 (2) a description of the 

applicant’s safeguards, policies, and 

procedures to prevent the 

misappropriation or misuse of (a) any 

confidential information received by the 

applicant, including, but not limited to, 

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280See Item 40 of Form SDR. 

281See Item 41 of Form SDR. 

282See Item 42 of Form SDR. 

283See Item 43 of Form SDR. 

284See Item 44 of Form SDR. 

285See Item 45 of Form SDR. 

286See Item 46 of Form SDR; Regulation SBSR 

Adopting Release, supra note 13 (Rule 907 

requiring SDRs to establish and maintain certain 

written policies and procedures). 

287 DTCC 3, supra note 19. 

288See Item 47 of Form SDR. 

289The Commission notes that an SDR that is also 

registered with the CFTC as a swap data repository 

is required under CFTC Rule 49.8 to either submit 

its rules and amendments thereto for approval by 

the CFTC or self-certify that the rulebook complies 

with the CFTC’s swap data repository rules and the 

CEA. See 17 CFR 49.8. The Dodd-Frank Act did not 

establish SDRs as self-regulatory organizations 

(‘‘SROs’’) (which, under the Exchange Act, are 

required to file their rules with the Commission) or 

create an express obligation for SDRs to file their 

rules with the Commission. As noted above, SDRs 

must provide certain policies and procedures on 

Form SDR. The Commission believes that this 

disclosure is sufficient to enable the Commission to 

determine whether an SDR’s policies and 

procedures are in compliance with the Exchange 

Act, including Section 13(n), and the rules and 

regulations thereunder. The Commission 

recognizes, however, that reviewing a rulebook that 

is voluntarily submitted to the Commission may 

assist the Commission in understanding other items 

in an applicant’s Form SDR. 

290See Item 48 of Form SDR. 

291ESMA, supra note 19. 

292See Rule 13n–7(b)(3) (requiring every SDR to, 

upon request of any representative of the 

Commission, promptly furnish requested 

documents to the representative). 

293See Exchange Act Section 13(n)(2), 15 U.S.C. 

78m(n)(2) (subjecting registered SDRs to inspection 

and examination by any representative of the 

Commission)). 

294The term ‘‘tag’’ (including the term ‘‘tagged’’) 

is being revised from the proposal to have the same 

meaning as set forth in Rule 11 of Regulation S–T 

(defining ‘‘tag’’ as ‘‘an identifier that highlights 

specific information to EDGAR that is in the format 

required by the EDGAR Filer Manual’’). See Rules 

13n–1(a)(2), 13n–2(a), and 13n–11(b)(9); see also 17 

CFR 232.11. The Commission is revising this term 

from the proposal to be consistent with all the other 

terms in the SDR Rules that cross-reference to the 

definitions set forth in Regulation S–T, where 

applicable. For example, the term ‘‘EDGAR Filer 

Manual’’ has the same meaning as set forth in Rule 

11 of Regulation S–T (defining ‘‘EDGAR Filer 

Manual’’ as ‘‘the current version of the manual 

prepared by the Commission setting out the 

technical format requirements for an electronic 

submission’’). See Rule 13n–11(b)(3); see also 17 

CFR 232.11. 

295See Rule 13n–1(b). 

296This electronic filing system for Form SDR 

will be through EDGAR, and thus, the electronic 

filing requirements of Regulation S–T will apply. 

See generally 17 CFR 232 (governing the electronic 

submission of documents filed with the 

Commission). The Commission is amending 

General Instruction 1 to Form SDR to clarify the 

applicability of Regulation S–T to Form SDR. To 

conform with how filings are presently made 

through EDGAR, the Commission has made several 

minor edits to Form SDR from the proposal. See, 

Continued 

trade data, position data, and any 

nonpublic personal information about a 

market participant or any of its 

customers; (b) material, nonpublic 

information; and/or (c) intellectual 

property by the applicant or any person 

associated with the applicant for their 

personal benefit or for the benefit of 

others; 280 (3) the applicant’s policies 

and procedures regarding its use of the 

SBS transaction information that it 

receives from a market participant, any 

registered entity, or any other person for 

non-commercial and/or commercial 

purposes; 281 (4) the applicant’s 

procedures and a description of its 

facilities for resolving disputes over the 

accuracy of the transaction data and 

positions that are recorded in the 

SDR; 282 (5) the applicant’s policies and 

procedures relating to its calculation of 

positions; 283 (6) the applicant’s policies 

and procedures to prevent any provision 

in a valid SBS from being invalidated or 

modified through the procedures or 

operations of the applicant; 284 and (7) a 

plan to ensure that the transaction data 

and position data that are recorded in 

the SDR continue to be maintained after 

the applicant withdraws from 

registration, which shall include 

procedures for transferring transaction 

data and position data to the 

Commission or its designee (including 

another registered SDR).285 This 

information will assist the Commission 

in determining, among other things, 

whether an SDR can comply with the 

requirements to establish, maintain, and 

enforce these seven policies and 

procedures, as discussed further in 

Sections VI.D, VI.E, VI.G, and VI.I of 

this release. In addition, Form SDR 

requires an applicant to attach as 

exhibits all of the policies and 

procedures set forth in Regulation 

SBSR.286

One commenter suggested that the 

Commission require an applicant to 

submit its ‘‘rulebook.’’ 287 The 

Commission does not believe that such 

a requirement is necessary, but is 

revising Form SDR from the proposal to 

provide that if an applicant has a 

rulebook, then it may attach its rulebook 

as an exhibit to the form,288 as a 

supplement to the policies and 

procedures required by Form SDR. The 

Commission believes that if an 

applicant has a rulebook, much of the 

information that would be contained in 

the rulebook likely would be filed as 

part of an SDR’s policies and 

procedures.289 To the extent that an 

applicant’s rulebook is broader, an 

applicant may submit its rulebook to the 

Commission if, for example, the 

applicant believes that it would be 

useful for the Commission to better 

understand the context of the 

applicant’s policies and procedures or 

how the policies and procedures relate 

to one another. 

Legal Opinion. Form SDR requires 

each non-resident SDR to attach as an 

exhibit an opinion of counsel that the 

SDR can, as a matter of law, provide the 

Commission with prompt access to the 

SDR’s books and records and that the 

SDR can, as a matter of law, submit to 

onsite inspection and examination by 

the Commission.290

As discussed above, one commenter 

suggested that the legal opinion 

requirement would subject non-resident 

SDRs to a stricter regulatory regime than 

resident SDRs.291 The Commission, 

however, continues to believe that nonresident SDRs that are registered, or 

seek to register, with the Commission 

should be required to provide the 

opinion of counsel. Each jurisdiction 

may have a different legal framework 

(e.g., privacy laws) that may limit or 

restrict the Commission’s ability to 

access information from an SDR. Rather 

than create unequal regulatory 

obligations, the legal opinion 

requirement equalizes the regulatory 

landscape for SDRs by addressing 

whether a non-resident SDR is able to 

comply with the requirements for it to 

provide the Commission with prompt 

access to the SDR’s books and 

records,292 and to submit to onsite 

inspection and examination by the 

Commission,293 similar to SDRs that 

reside in the United States. Failure to 

provide an opinion of counsel may be 

a basis for the Commission to institute 

proceedings to consider denying an 

application for registration. 

Electronic Filing. The Commission is 

revising Rule 13n–1(b) from the 

proposal to conform the rule with 

General Instruction 1 to Form SDR. As 

revised, Rule 13n–1(b) provides that in 

addition to an application for 

registration as an SDR, all amendments 

thereto must be filed electronically in a 

tagged 294 data format on Form SDR 

with the Commission in accordance 

with the instructions contained in the 

form.295 This modification to also 

require all amendments on Form SDR be 

filed electronically in a tagged data 

format is intended to conform with 

General Instruction 1 to Form SDR, 

which requires the form and exhibits 

thereto to be filed electronically in a 

tagged data format by an applicant for 

registration as an SDR and by an SDR 

amending its application for 

registration. 

The Commission anticipates 

developing an electronic filing system 

through which an SDR will be able to 

file and update Form SDR on or about 

the effective date of Rule 13n–1.296 If 

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14464 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

e.g., Instruction 10 of Form SDR (providing 

guidance on filing Form SDR as an amendment, 

other than an annual amendment); Item 3 of Form 

SDR (requesting mailing address, which includes 

state/country and mailing zip/postal code); Item 9 

of Form SDR (requesting information regarding an 

entity’s incorporation or organization); Item 13 of 

Form SDR (requesting date of signature in different 

format). 

297See Proposing Release, 75 FR at 77309 n.25, 

supra note 2 (noting that SDRs might be required 

to file Form SDR in paper until such time as an 

electronic filing system is operational and capable 

of receiving the form and the Commission may 

require each SDR to promptly re-file electronically 

Form SDR and any amendments to the form). 

298As discussed below, the Commission is 

adopting technical amendments to Exchange Act 

Rule 24b–2 to clarify that the confidential portion 

of electronic filings by SDRs must be filed 

electronically and to require SDRs to request 

confidential treatment electronically. The 

Commission is also adopting technical amendments 

to Rule 101 of Regulation S–T to provide that, 

except as otherwise provided, all filings by SDRs, 

including any information with respect to which 

confidential treatment is requested, must be filed 

electronically. 

299As part of the Commission’s longstanding 

efforts to increase transparency and the usefulness 

of information, the Commission has been 

implementing data tagging of information contained 

in electronic filings to improve the accuracy of 

financial information and facilitate its analysis. See 

Regulation S–T, 17 CFR 232; see also Securities Act 

Release No. 8891 (Feb. 6, 2008), 73 FR 10592 (Feb. 

27, 2008); Securities Act Release No. 9002 (Jan. 30, 

2009), 74 FR 6776 (Feb. 10, 2009); Securities Act 

Release No. 9006 (Feb. 11, 2009), 74 FR 7748 (Feb. 

19, 2009); Exchange Act Release No. 61050 (Nov. 

23, 2009), 74 FR 63832 (Dec. 4, 2009); Investment 

Company Release No. 29132 (Feb. 23, 2010), 75 FR 

10060 (Mar. 4, 2010); What is Interactive Data and 

Who’s Using It?, http://www.sec.gov/spotlight/xbrl/ 

what-is-idata.shtml (last updated March 15, 2010) 

(link to the Commission’s Office of Interactive 

Disclosure’s discussion of the benefits of interactive 

data). Data becomes machine-readable when it is 

labeled, or tagged, using a computer markup 

language that can be processed by software 

programs for analysis. Such computer markup 

languages use standard sets of definitions, or 

‘‘taxonomies,’’ that translate text-based information 

in Commission filings into structured data that can 

be retrieved, searched, and analyzed through 

automated means. Requiring the information to be 

tagged in a machine-readable format using a data 

standard that is freely available, consistent, and 

compatible with the tagged data formats already in 

use for Commission filings will enable the 

Commission to review and analyze more effectively 

Form SDR submissions. 

300 17 CFR 240.24b–2. 

301 17 CFR 232.101. 

302See, e.g., Rule 13n–2(b) (relating to withdrawal 

on Form SDR) and Rule 13n–11(d)(2) (relating to 

compliance reports); see also Rule 13n–11(f)(5) 

(relating to financial reports); General Instruction 1 

to Form SDR (requiring Form SDR and exhibits to 

be filed electronically in a tagged data format, 

including amendments filed under Rule 13n–1(d)). 

303Rule 24b–2(a) refers to ‘‘any registration 

statement, report, application, statement, 

correspondence, notice or other document’’ as ‘‘the 

material filed.’’ 

304See Sections VI.J.4 and VI.J.5 of this release 

discussing compliance reports and financial reports 

filed pursuant to Rules 13n–11(d) and (f). 

305See Rules 13–1(b); 13n–2(b); 13n–11(d)(2); see 

also Rule 13n–11(f)(5); General Instruction 1 to 

Form SDR. 

the Commission’s electronic filing 

system is unavailable at the time an 

applicant seeks to file its application for 

registration on Form SDR, the applicant 

may file the form, including any 

amendments thereto, in paper format 

with the Commission’s Division of 

Trading and Markets at the 

Commission’s principal office in 

Washington, DC. However, doing so 

does not relieve the SDR from 

compliance with the requirement in 

Rule 13n–1(b) to file Form SDR 

‘‘electronically in a tagged data format.’’ 

Therefore, when the Commission’s 

electronic filing system is available, the 

applicant should file electronically any 

initial and amended Form SDRs that 

had been filed previously in paper 

format.297 The Commission expects that 

the information filed will be made 

available on the Commission’s Web site, 

except in cases where confidential 

treatment is requested by an SDR and 

granted by the Commission.298 The 

Commission acknowledges that SDRs 

will likely incur additional costs and 

burdens, particularly in initial 

compliance, with the data tagging 

requirement, when compared with filing 

Form SDR in paper format. However, 

the Commission believes that such costs 

will be minimal and that this 

requirement will facilitate review and 

analysis of registration materials by 

Commission staff and, to the extent such 

materials are made public, the public. 

The Commission believes that the costs 

of completing Form SDR in tagged data 

format are justified by the benefits 

derived from the ability of investors, 

analysts, and Commission staff to be 

able to more effectively capture, review, 

and analyze the SDR registration 

materials if they are in tagged data 

format.299

Technical Amendments to Electronic 

Filing Requirements. The Commission is 

adopting technical amendments to 

Exchange Act Rule 24b–2 300 and Rule 

101 of Regulation S–T 301 to clarify that 

SDRs’ electronic filings pursuant to 

Exchange Act Section 13(n) and the 

rules and regulations thereunder 302

must include any information with 

respect to which confidential treatment 

is requested (‘‘confidential portion’’). 

Generally speaking, Exchange Act Rule 

24b–2 and Rule 101 of Regulation S–T 

require confidential treatment requests 

and the confidential portion to be 

submitted in paper format only. The 

Commission’s technical amendments 

provide an exception from Rule 24b–2’s 

and Rule 101’s paper-only filing 

requirements for all SDR filings. Under 

this exception, the confidential portion 

of all SDR filings must be filed in 

electronic format. 

The Commission is revising Rule 24b– 

2 in two ways. First, the Commission is 

revising Rule 24b–2(b) to provide an 

exception for persons providing 

materials pursuant to Rule 24b–2(h) 

from the general requirement to omit the 

confidential portion from ‘‘the material 

filed.’’ 303 Second, the Commission is 

adding Rule 24b–2(h) to provide that an 

SDR must not omit the confidential 

portion from the material filed in 

electronic format pursuant to Exchange 

Act Section 13(n) and the rules and 

regulations thereunder, and must 

request confidential treatment 

electronically in lieu of the procedures 

described in Rule 24b–2(b). 

The Commission is also revising Rule 

101 to add paragraph (a)(1)(xvii) to the 

list of mandated electronic submissions. 

Specifically, paragraph (a)(1)(xvii) adds 

to this list documents filed with the 

Commission pursuant to Exchange Act 

Section 13(n) and the rules and 

regulations thereunder, including Form 

SDR and reports filed pursuant to 

Exchange Act Rules 13n–11(d) and 

(f).304 The Commission is also revising 

Rule 101(c) to provide that except as 

otherwise specified in Rule 101(d), 

confidential treatment requests and the 

information with respect to which 

confidential treatment is requested must 

not be submitted in electronic format. 

The Commission is further adding Rule 

101(d) to provide as an exception to 

Rule 101(c)’s paper-only filing 

requirement all documents, including 

any information with respect to which 

confidential treatment is requested, filed 

pursuant to Exchange Act Section 13(n) 

and the rules and regulations 

thereunder. 

Electronic filing of all materials filed 

by SDRs, including the confidential 

portion, will reduce the burden on SDRs 

by not requiring a separate paper 

submission and facilitate the 

Commission’s review and analysis of 

the filings.305

2. Factors for Approval of Registration 

and Procedural Process for Review (Rule 

13n–1(c)) 

a. Proposed Rule 

Proposed Rule 13n–1(c) would 

establish the timeframe for Commission 

action on applications for registration as 

an SDR, as well as the Commission’s 

procedures for reviewing applications 

for registration. In particular, proposed 

Rule 13n–1(c) provided that, within 90 

days of the date of the filing of an 

application for registration on Form 

SDR (or within such longer period as to 

which the SDR consents), the 

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306See DTCC 2, supra note 19; ICE CB, supra note 

26. 307 DTCC 2, supra note 19 (‘‘DTCC is concerned 

that the SEC’s proposed implementation schedule 

for reporting to SDRs is heavily compressed and, 

when coupled with the temporary registration 

regime, may lead to compromised solutions, 

including operational and security compromises. 

. . . [P]otential SDRs are unlikely to be able to offer 

fully robust or efficient solutions for early 

registration, given that the final rules will be 

available relatively shortly before the effective date. 

DTCC recommends that appropriate due diligence 

is conducted with respect to the temporary 

registration process and that those diligence 

findings are either used to support transition of 

existing infrastructure or used for new entrants who 

can demonstrate that their infrastructure supports 

key operational capabilities, including 24/6 

operation, real-time processing, multiple 

redundancy, and robust information security 

controls.’’); see also DTCC 3, supra note 19 (‘‘SDRs 

must be able to demonstrate an infrastructure which 

supports critical operational capabilities. . . . 

Assessment of these core capabilities is a critical 

component of any registration process, including a 

temporary registration.’’). 

308See Section VI.A.3.c of this release discussing 

the Commission’s decision not to adopt the 

proposed temporary registration rule. 

309 DTCC 2, supra note 19 (requesting that the 

Commission combine Form SDR and Form SIP such 

that an SDR would register as an SDR and a SIP 

using only one form or permit either Form SDR or 

Form SIP to be the application for registration as 

both an SDR and an SIP); DTCC 3, supra note 19. 

310See Section VI.A.1 of this release discussing 

combining Form SDR and Form SIP. 

311 ICE CB, supra note 26 (suggesting that the 

Commission take into consideration the SDR’s 

provisional registration with the CFTC). 

312Rule 13n–1(c). 

313See Proposing Release, 75 FR at 77313, supra 

note 2. If a Form SDR is incomplete, then it may 

be deemed as not acceptable for filing. General 

Instruction 7 to Form SDR, as adopted, provides 

that ‘‘[a] form that is not prepared and executed in 

compliance with applicable requirements may be 

deemed as not acceptable for filing.’’ Further, the 

application must include information sufficient to 

allow the Commission to assess the applicant’s 

ability to comply with the federal securities laws 

and the rules and regulations thereunder. Form SDR 

consists of instructions, a list of questions, a 

signature page, and a list of exhibits that the 

Commission requires in order to be able to 

determine whether an applicant is able to comply 

with the federal securities laws and the rules and 

regulations thereunder. An application on Form 

SDR may not be considered complete unless the 

applicant has filed, at a minimum, responses to all 

the questions listed, the signature page, and 

exhibits as required in Form SDR, and any other 

materials the Commission may require, upon 

request, in order to assess whether an applicant is 

able to comply with the federal securities laws and 

the rules and regulations thereunder. If the 

application is not complete, then the application 

will not be deemed to have been filed for the 

Commission’s review. 

314 If, however, an SDR files an amendment to its 

application for registration after the Commission 

has already published notice of the filing of Form 

SDR and the Commission finds that the amendment 

renders the prior filing materially incomplete, then 

the 90-day period will reset from the time that the 

Commission deems the amended application to be 

complete for the Commission’s review. 

315See Regulation SBSR Adopting Release, supra 

note 13 (Rule 909). 

316See DTCC 2, supra note 19; DTCC 3, supra 

note 19. 

317See 15 U.S.C. 78k–1(b). 

318See Regulation SBSR Adopting Release, supra 

note 13 (Rule 909). 

319See 15 U.S.C. 78k–1(b)(3). 

320A publication of notice of the filing of an 

application for registration is required in the SIP 

context. 

321See Rule 13n–1(c)(2). 

322See Rule 13n–1(c)(2). For the reasons provided 

above, in conjunction with the revision from the 

proposal to the event that precedes the 90-day 

period, and for consistency within the rule, the 

Commission is also revising from the proposal the 

event that precedes the 180-day period for 

Continued 

Commission will either grant the 

registration by order or institute 

proceedings to determine whether 

registration should be denied. The 

proposed rule set forth the time period 

for such proceedings. The proposed rule 

also set forth the standard applicable to 

an application for registration as an 

SDR. 

b. Comments on the Proposed Rule 

Although the Commission did not 

receive any comments directly relating 

to this proposed rule, two commenters 

expressed their views on the SDR 

registration process generally.306

The first commenter recommended 

sufficient time for an appropriate level 

of due diligence with respect to 

applications for registration.307 While 

the commenter expressly referenced the 

proposed temporary registration rule, 

the Commission believes that the 

commenter’s concern regarding the 

operational capability of SDRs is 

applicable to any applicant for 

registration as an SDR.308 Additionally, 

the same commenter supported 

combining new Form SDR with Form 

SIP,309 which would necessitate a 

revision to Rule 13n–1(c), as described 

below.310

The second commenter requested the 

Commission’s expedited review of SDR 

registration.311

c. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n–1(c) 

as proposed, with minor modifications. 

First, the Commission is making minor 

revisions from the proposal relating to 

the event that begins the 90-day period 

for Commission review and action on 

the application for registration as an 

SDR. The final rule provides that within 

90 days of the date of the publication of 

notice of the filing of an application for 

registration (or within such longer 

period as to which the applicant 

consents), the Commission will either 

grant the registration by order or 

institute proceedings to determine 

whether registration should be granted 

or denied.312 The 90-day period will not 

begin to run until an SDR files a 

complete Form SDR with the 

Commission,313 and the Commission 

publishes notice of the filing of Form 

SDR to afford interested persons an 

opportunity to submit written 

comments concerning such 

application.314 As discussed above, in 

light of the Commission’s adoption of 

the requirement for a registered SDR to 

also register as a SIP in Regulation 

SBSR,315 the Commission has decided 

to consolidate Form SIP and Form SDR 

in order to make the registration process 

for SDRs more efficient; this approach 

has been endorsed by one 

commenter.316 The Commission’s 

revision of Rule 13n–1(c) relating to the 

publication of notice makes it 

procedurally consistent with the 

registration process applicable to SIPs 

under Exchange Act Section 11A(b) 317

and stems from the Commission’s 

requirement that a registered SDR 

register as a SIP 318 and the 

Commission’s revision of Form SDR to 

accommodate SIP registration. Exchange 

Act Section 11A(b)(3) provides that the 

Commission will, upon the filing of an 

application for registration as a SIP, 

publish notice of the filing and afford 

interested persons an opportunity to 

submit written data, views, and 

arguments concerning such application; 

within 90 days of the date of the 

publication of such notice (or within 

such longer period as to which the 

applicant consents), the Commission 

will by order grant such registration or 

institute proceedings to determine 

whether registration should be 

denied.319 The Commission has 

determined to adopt Rule 13n–1(c) with 

revised text from the proposal that 

conforms the event preceding the period 

for Commission action, with respect to 

applications for registration as an SDR, 

to the event set forth in Section 

11A(b)(3), with respect to applications 

for registration as a SIP.320

Second, the Commission is revising 

Rule 13n–1(c) from the proposal to 

clarify that the purpose of proceedings 

instituted pursuant to the rule is to 

determine whether an applicant’s 

registration as an SDR should be granted 

or denied, rather than only denied (as 

proposed).321 The Commission is 

further revising Rule 13n–1(c) from the 

proposal to provide that proceedings 

instituted pursuant to the rule will 

include notice of the issues under 

consideration (rather than grounds for 

denial under consideration, as 

proposed) and opportunity for hearing 

on the record and will be concluded 

within 180 days after the date of the 

publication of notice of the filing of the 

application for registration.322 These 

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14466 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

conclusion of Commission action on the application 

for registration as an SDR. In making this revision, 

the Commission is changing ‘‘not later than 180 

days’’ to ‘‘within 180 days’’ for consistency within 

the rule. 

323Proposed Rule 13n–1(c)(2) stated that the 

Commission may institute proceedings to determine 

whether registration should be ‘‘denied,’’ and that 

such proceedings include notice of the ‘‘grounds for 

denial,’’ but that at the conclusion of such 

proceedings, the Commission shall ‘‘grant or deny’’ 

registration. As adopted, the rule clarifies that the 

Commission may institute proceedings to determine 

whether registration should be ‘‘granted or denied’’ 

and that proceedings instituted pursuant to this rule 

must include notice of the ‘‘issues under 

consideration.’’ 

324Rule 13n–1(c)(2). 

325Rule 13n–1(c)(2). 

326Proposing Release, 75 FR at 77313, supra note 

2. In addition to the applicant’s registration on 

Form SDR, ‘‘[a]s part of the application process, 

each SDR shall provide additional information to 

any representative of the Commission upon 

request.’’ See Rule 13n–1(b). 

327See Proposing Release, 75 FR at 77313, supra 

note 2 (discussing Rule 13n–1(c) and noting that 

‘‘the registration provides a mechanism for an SDR 

to demonstrate that it can comply with the federal 

securities laws and the rules and regulations 

thereunder’’). 

328See ICE CB, supra note 26. 

329See Section V.C of this release discussing the 

Commission’s efforts designed to minimize 

interference with ongoing operations of existing 

SDRs during the implementation of the SDR Rules. 

330See Exchange Act Sections 11A(b)(3), 15(b), 

15E(a)(2), and 19(a), 15 U.S.C. 78k–1(b)(3), 78o(b), 

78o–7(a)(2), and 78s(a). 

331But see ICE CB, supra note 26 (suggesting that 

the Commission take into consideration the SDR’s 

provisional registration with the CFTC). 

332Rule 13n–1(c)(3). 

333 Id. 

334 DTCC 2, supra note 19. 

335 DTCC 3, supra note 19. 

336See Rule 13n–6 (requiring SDRs 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); Rule 

13n–1(c)(3) (discussing the standards for the 

Commission to grant registration of an SDR, 

including having the capacity to be able to assure 

the prompt, accurate, and reliable performance of 

its functions as an SDR, and comply with any 

applicable provision of the federal securities laws 

and the rules and regulations thereunder). 

337Proposing Release, 75 FR at 77313, supra note 

2. 

revisions from the proposal are intended 

to make the rule internally 

consistent.323

The Commission is adopting Rule 

13n–1(c) as proposed in all other 

respects. Rule 13n–1(c) provides that at 

the conclusion of proceedings instituted 

pursuant to the rule, the Commission, 

by order, will grant or deny such 

registration.324 The Commission may 

extend the time for conclusion of such 

proceedings for up to 90 days if it finds 

good cause for such extension and 

publishes its reasons for so finding or 

for such longer period as to which the 

SDR consents.325

As noted in the Proposing Release, the 

Commission believes that the 

timeframes for reviewing applications 

for registration as an SDR are 

appropriate to allow Commission staff 

sufficient time to ask questions and, as 

needed, to request amendments or 

changes by SDRs to address legal or 

regulatory concerns before the 

Commission takes final action on an 

application for registration.326 In 

addition, the registration process 

provides a mechanism for an SDR to 

demonstrate that it can comply with the 

federal securities laws and the rules and 

regulations thereunder.327 One 

commenter requested that the 

Commission provide for expedited 

review of the commenter’s application 

for registration as an SDR, in part 

because of its provisional registration 

with the CFTC as a swap data 

repository.328 It is unclear what the 

commenter means by ‘‘expedited 

review,’’ but the Commission believes 

that the procedures for reviewing 

applications for registration as an SDR 

that the Commission is adopting in this 

release provide reasonable timeframes 

for the Commission’s review of the 

applications and the Compliance Date 

for the SDR Rules will address the 

concerns of existing SDRs operating 

during the registration period.329

Moreover, these procedures are 

consistent with the procedures for 

reviewing applications of other 

registrants by the Commission (e.g., 

SIPs, broker-dealers, nationally 

recognized statistical ratings 

organizations, national securities 

exchanges, registered securities 

associations, and registered clearing 

agencies) although the timeframes for 

review vary.330 Additionally, the 

Commission notes that its review of an 

SDR’s application for registration is 

independent of the CFTC’s review of a 

swap data repository’s application for 

registration.331

The Commission will grant the 

registration of an SDR if the 

Commission finds that the SDR 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 

provision of the federal securities laws 

and the rules and regulations 

thereunder, and carry out its functions 

in a manner consistent with the 

purposes of Exchange Act Section 13(n) 

and the rules and regulations 

thereunder.332 The Commission will 

deny the registration of an SDR if the 

Commission does not make such a 

finding.333

One commenter indicated that 

applicants for registration as an SDR 

should be able to ‘‘demonstrate that 

their infrastructure supports key 

operational capabilities, including 24/6 

operation, real-time processing, 

multiple redundancy, and robust 

information security controls.’’ 334

Similarly, the same commenter stated 

that ‘‘SDRs must be able to demonstrate 

an infrastructure which supports critical 

operational capabilities’’ and 

‘‘[a]ssessment of these core capabilities 

is a critical component of any 

registration process.’’ 335 The 

Commission generally agrees with this 

commenter and believes that an SDR’s 

infrastructure and operational 

capabilities are important factors in 

determining whether to grant an SDR’s 

application for registration.336

In the Proposing Release, the 

Commission asked whether, in order to 

form a more complete and informed 

basis on which to determine whether to 

grant, deny, or revoke an SDR’s 

registration, it should adopt a 

requirement that an SDR file with the 

Commission, as a condition of 

registration or continued registration, a 

review relating to the SDR’s operational 

capacity and ability to meet its 

regulatory obligations.337 The 

Commission did not receive any 

comments directly on this issue, but 

upon further consideration, the 

Commission has determined not to 

require an SDR to file with the 

Commission a review of the SDR’s 

operational capacity and ability to meet 

its regulatory obligations because it is 

not clear that the benefits of such a 

requirement would justify the costs. 

However, in determining whether an 

applicant meets the criteria set forth in 

Rule 13n–1(c), the Commission will 

consider the application and any 

additional information obtained from 

the SDR, which may include 

information obtained in connection 

with an inspection or examination of 

the SDR. Additionally, in connection 

therewith, the Commission may 

consider, among other things, whether 

an applicant can demonstrate its 

operational capabilities and conduct its 

operations in compliance with its 

statutory and regulatory obligations. If 

an applicant (rather than its affiliate) is 

already registered with the Commission 

as, for example, a clearing agency, then 

Commission representatives may also 

take into account any recent 

examinations in its determination 

pursuant to Rule 13n–1(c)(3). 

The Commission will consider a 

registered SDR’s operational capacity 

and ability to meet its statutory and 

regulatory obligations to determine 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14467 

338Exchange Act Section 13(n)(2), 15 U.S.C. 

78m(n)(2). See also Section VI.D.2 of this release 

discussing Rule 13n–4(b)(1), which implements 

Exchange Act Section 13(n)(2). 

339See Section VI.B of this release discussing 

Rule 13n–2(e). 

340Certain unexpected events that raise 

compliance concerns with respect to one applicant 

but not another, such as deficiencies identified in 

connection with the Commission’s consideration of 

whether an applicant meets the criteria set forth in 

Rule 13n–1(c), may interfere with the Commission’s 

ability to process initial applications for registration 

within the same period of time. 

341See Regulation SBSR Adopting Release, supra 

note 13 (Rule 909). 

342Proposed Rule 13n–1(d). 343See DTCC 2, supra note 19; ICE CB, supra note 

26; see also DTCC 5, supra note 19. 344 ICE CB, supra note 26. 345 DTCC 5, supra note 19 (‘‘Further clarity on the 

standards and process that will be utilized to grant 

temporary registration will also provide applicants 

to register as [SDRs] with a better understanding of 

the Commission’s expectations with respect to their 

obligations and requirements prior to being granted 

full registration.’’). 

346 DTCC 2, supra note 19 (‘‘DTCC is concerned 

that the SEC’s proposed implementation schedule 

for reporting to SDRs is heavily compressed and, 

when coupled with the temporary registration 

regime, may lead to compromised solutions, 

including operational and security compromises 

. . . . [P]otential SDRs are unlikely to be able to 

offer fully robust or efficient solutions for early 

registration, given that the final rules will be 

available relatively shortly before the effective date. 

DTCC recommends that appropriate due diligence 

is conducted with respect to the temporary 

registration process and that those diligence 

findings are either used to support transition of 

existing infrastructure or used for new entrants who 

can demonstrate that their infrastructure supports 

key operational capabilities, including 24/6 

operation, real-time processing, multiple 

redundancy, and robust information security 

controls.’’); see also DTCC 3, supra note 19 (‘‘SDRs 

must be able to demonstrate an infrastructure which 

supports critical operational capabilities . . . . 

Assessment of these core capabilities is a critical 

component of any registration process, including a 

temporary registration.’’). 

347 DTCC 2, supra note 19; see also DTCC 5, supra 

note 19 (stating the same and ‘‘[w]hether done 

through a phasing-in of final [SDR] rules or the 

Commission’s prompt issuance of temporary 

registration conditioned on implementation of 

enhancements to comply more fully with specified 

provisions, the Commission should ensure the 

continuation of counterparty reporting and the 

ability of the entities currently performing the 

functions of an [SDR] to receive and maintain 

current trade information on an ongoing basis’’). 

348Proposing Release, 75 FR at 77314, supra note 

2; see also Dodd-Frank Act Section 774. 

349See Effective Date Order, 76 FR at 36306, 

supra note 9. 

350See Section V.C of this release discussing the 

Compliance Date. 

whether the SDR should continue to 

operate as such or whether the 

Commission should take steps to revoke 

the SDR’s registration. As provided in 

Exchange Act Section 13(n)(2), ‘‘[e]ach 

registered security-based swap data 

repository shall be subject to inspection 

and examination by any representative 

of the Commission.’’ 338 The results of 

such inspection and examination will 

be used to inform the Commission 

whether the SDR is complying with the 

federal securities laws and the rules and 

regulations thereunder. As discussed 

further below, under Rule 13n–2(e), if 

the Commission finds, on the record 

after notice and opportunity for hearing, 

that any registered SDR has, among 

other things, failed to comply with any 

provision of the federal securities laws 

and the rules and regulations 

thereunder, the Commission, by order, 

may revoke the SDR’s registration.339

In considering initial applications for 

registration on Form SDR filed 

contemporaneously with the 

Commission, the Commission intends to 

process such applications for multiple 

SDRs accepting SBS transaction data 

from the same asset classes within the 

same period of time so as to address 

competition concerns that could arise if 

such SDRs were granted registration at 

different times.340 Further, in light of 

the Commission’s adoption of the 

requirement in Regulation SBSR for a 

registered SDR to register as a SIP,341

the Commission is adopting Form SDR, 

which incorporates the requirements of 

Form SIP, as discussed in Section 

VI.A.1.c above. The Commission’s 

review of an applicant’s registration as 

an SDR on Form SDR will encompass 

review with respect to both SDR and SIP 

registration. The Commission 

contemplates that it will grant 

registrations to an applicant both as an 

SDR and as a SIP simultaneously. 

3. Temporary Registration (Rule 13n– 

1(d)) 

a. Proposed Rule 

As proposed, Rule 13n–1(d) provided 

a method for SDRs to register 

temporarily with the Commission. The 

proposed rule provided that, upon the 

request of an SDR, the Commission may 

grant temporary registration of the SDR 

that would expire on the earlier of: (1) 

The date that the Commission grants or 

denies (permanent) registration of the 

SDR, or (2) the date that the 

Commission rescinds the temporary 

registration of the SDR.342

b. Comments on the Proposed Rule 

Two commenters submitted 

comments relating to this proposed 

rule.343 One commenter recommended 

that the Commission establish clear 

standards and requirements for 

temporary registration.344 Similarly, 

another commenter recommended that 

‘‘the Commission establish clearly 

articulated standards and requirements 

for temporary registration so that 

existing trade repositories may quickly 

begin to provide similar transparency to 

the [SBS] markets that is currently 

provided to the rest of the swaps 

market, thus facilitating the 

Commission’s oversight of these 

markets.’’ 345 That same commenter also 

expressed concern about the temporary 

registration provision, particularly the 

cumulative effect of the short time frame 

afforded for registration and the 

possibility that a temporary registration 

regime ‘‘may lead to compromised 

solutions [at SDRs], including 

operational and security 

compromises.’’ 346 Additionally, the 

commenter urged the Commission to 

ensure that the registration process does 

not interfere with the ongoing operation 

of existing SDRs.347

c. Final Rule 

After considering the comments, the 

Commission has determined not to 

adopt proposed Rule 13n–1(d). As 

stated in the Proposing Release, the 

temporary registration provision would 

have enabled an SDR to comply with 

the Dodd-Frank Act upon its effective 

date (i.e., the later of 360 days after the 

date of its enactment or 60 days after 

publication of the final rule 

implementing Exchange Act Section 

13(n)) 348 regardless of any unexpected 

contingencies that may arise in 

connection with the filing of Form SDR. 

The proposed temporary registration 

would also have allowed the 

Commission to implement the 

registration requirements of the DoddFrank Act for SDRs while still giving the 

Commission sufficient time to review 

fully the application of an SDR after it 

becomes operational, but before granting 

a registration that is not limited in 

duration. 

These concerns were motivated 

primarily by the short timeframe 

between when the SDR Rules were first 

proposed and when registration would 

have been required (i.e., as of July 16, 

2011). However, the exemptive relief 

provided by the Commission, which 

was effective on June 15, 2011,349

addressed this primary purpose for 

temporary registration. Further, the 

Compliance Date for the SDR Rules 350

should provide sufficient time for SDRs 

to analyze and understand the final SDR 

Rules, to develop and test new systems 

required to comply with the Dodd-Frank 

Act’s provisions governing SDRs and 

the SDR Rules, to prepare and file Form 

SDR, to demonstrate their ability to 

meet the criteria for registration set forth 

in Rule 13n–1(c)(3), and to obtain 

registration with the Commission. 

Therefore, the Commission believes that 

it has addressed commenters’ concerns 

relating to interference with the ongoing 

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14468 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

351See, e.g., DTCC 2, supra note 19; DTCC 5, 

supra note 19. 

352The Commission notes that the Proposing 

Release, proposed Rule 13n–1(e), and General 

Instruction 6 to proposed Form SDR inadvertently 

referred to Item 44 instead of Item 46. See 

Proposing Release, 75 FR at 77314, 77315, and 

77374, supra note 2. However, the discussion in the 

Proposing Release made clear that the Commission 

expected a non-resident SDR to promptly amend its 

Form SDR after any changes in the legal and 

regulatory framework that would impact the SDR’s 

ability to provide the Commission with prompt 

access to the SDR’s books and records, and such 

amendment should include a revised opinion of 

counsel. See Proposing Release, 75 FR at 77314, 

supra note 2. This discussion was clearly referring 

to the requirements in proposed Item 46 (requiring 

opinion of counsel by non-resident SDRs), and not 

proposed Item 44 (requiring plan to ensure data is 

maintained after the applicant withdraws from 

registration). 

353Proposing Release, 75 FR at 77314, supra note 

2. 

354See Section VI.J of this release discussing the 

CCO requirements in Rule 13n–11. 

355See Rule 13n–1(d). 

356The General Instructions to Form SDR have 

been amended from the proposal to clarify what 

items and exhibits need to be included when filing 

an amendment. Additionally, the Commission is 

revising Form SDR from the proposal to include 

separate designations on the form for an annual 

amendment and an amendment other than an 

annual amendment, rather than a single designation 

that covers any amendment. The signature block to 

Form SDR has also been amended from the 

proposal to clarify that an SDR that files an 

amendment (other than an annual amendment) 

need only represent that all unamended 

information contained in Items 1 through 17, 26, 

and 48 remains true, current, and complete as filed, 

rather than all unamended items and exhibits to 

Form SDR. 

357See Exchange Act Rule 6a–2, 17 CFR 240.6a– 

2 (requiring national securities exchanges to amend 

some information on Form 1 within 10 days, and 

other information annually); Exchange Act Rule 

15b3–1, 17 CFR 240.15b3–1 (requiring brokerdealers to promptly amend applications for 

registration); Exchange Act Rules 17Ac2–1 and 

17Ac2–2, 17 CFR 240.17Ac2–1 and 240.17Ac2–2 

(requiring transfer agents to amend information on 

Form TA–1 within 60 days, and to file an annual 

report); Rule 609 of Regulation NMS, 17 CFR 

242.609, and Form SIP, 17 CFR 249.1001 (requiring 

SIPs to amend certain items on Form SIP promptly 

and also requiring an annual amendment). 

358As discussed above, the Commission is 

adopting technical amendments to Exchange Act 

Rule 24b–2 to clarify that the confidential portion 

of electronic filings by SDRs must be filed 

electronically and to require SDRs to request 

confidential treatment electronically. The 

Commission is also adopting technical amendments 

to Rule 101 of Regulation S–T to provide that, 

except as otherwise provided, all filings by SDRs, 

including any information with respect to which 

confidential treatment is requested, must be filed 

electronically. 

359See ESMA, supra note 19. 

360ESMA, supra note 19 (‘‘According to our 

reading, non-resident SDRs are actually subject to 

a stricter regime than the resident ones, as they 

need to provide a legal opinion certifying that they 

can provide the SEC with prompt access to their 

books and records and that they can be subject to 

onsite inspections and examinations by the SEC.’’). 

operation of existing SDRs.351 For these 

reasons, the Commission no longer 

believes that a temporary registration 

regime for SDRs is necessary or 

appropriate. 

4. Amendment on Form SDR (Proposed 

Rule 13n–1(e)/Final Rule 13n–1(d)) 

a. Proposed Rule 

As proposed, Rule 13n-1(e) would 

require an SDR to file promptly an 

amendment on Form SDR (‘‘interim 

amendment’’) if any information 

reported in Items 1 through 16, 25, and 

46 352 of Form SDR or in any 

amendment thereto is or becomes 

inaccurate for any reason. The 

Proposing Release indicated that an SDR 

would generally be required to file such 

an amendment within 30 days from the 

time such information becomes 

inaccurate.353 In addition, an SDR 

would be required to file an annual 

amendment on Form SDR within 60 

days after the end of its fiscal year. 

b. Comments on the Proposed Rule 

The Commission did not receive any 

comments relating to this proposed rule. 

c. Final Rule 

The Commission is adopting Rule 

13n–1(e) as proposed, redesignated as 

Rule 13n–1(d). Under Rule 13n–1(d), if 

any information reported in Items 1 

through 17, 26, and 48 of Form SDR 

(designated as Items 1 through 16, 25, 

and 46 in proposed Rule 13n–1(e)) or in 

any amendment thereto is or becomes 

inaccurate for any reason, whether 

before or after the registration has been 

granted, an SDR shall promptly file an 

amendment on Form SDR updating the 

information. An SDR should file an 

interim amendment as soon as 

practicable, and generally no later than 

30 days from the time such information 

becomes inaccurate in order for the 

filing to be viewed as ‘‘promptly’’ filed. 

For example, an SDR should file an 

amendment promptly after any change 

in the identity of its CCO or if the 

biographical information provided 

about its CCO changes (e.g., if the CCO 

becomes the subject of certain specified 

SRO actions).354

In addition to interim amendments, 

an SDR is required to file a 

comprehensive annual amendment on 

Form SDR, including all items subject to 

interim amendments, within 60 days 

after the end of its fiscal year.355 This 

annual amendment must be fully 

restated and complete, including all 

pages, answers to all items, together 

with exhibits.356 This annual 

amendment must also indicate which 

items have been amended since the last 

annual amendment, or if the SDR has 

not yet filed an annual amendment, 

since the SDR’s application for 

registration. Rule 13n–1(d) is consistent 

with the Commission’s requirements for 

other registrants (e.g., national securities 

exchanges, broker-dealers, transfer 

agents, SIPs) to file updated and annual 

amendments to registration forms with 

the Commission.357 The Commission 

believes that such amendments are 

important to obtain updated information 

on each SDR, which will assist the 

Commission in determining whether 

each SDR continues to be in compliance 

with the federal securities laws and the 

rules and regulations thereunder. 

Obtaining updated information will also 

assist Commission representatives in 

their inspection and examination of an 

SDR. The Commission may make filed 

amendments available on its Web site, 

except for information where 

confidential treatment is requested by 

the SDR358 and granted by the 

Commission. 

5. Service of Process and Non-Resident 

SDRs (Proposed Rules 13n–1(f) and 

13n–1(g)/Final Rules 13n–1(e) and 13n– 

1(f)) 

a. Proposed Rule 

As proposed, Rule 13n–1(f) would 

require each SDR to designate and 

authorize on Form SDR an agent in the 

United States, other than a Commission 

member, official, or employee, to accept 

any notice or service of process, 

pleadings, or other documents in any 

action or proceedings brought against 

the SDR to enforce the federal securities 

laws and the rules and regulations 

thereunder. Proposed Rule 13n–1(g) 

would require any non-resident SDR 

applying for registration to certify on 

Form SDR and provide an opinion of 

counsel that the SDR can, as a matter of 

law, provide the Commission with 

prompt access to the SDR’s books and 

records and that the SDR can, as a 

matter of law, submit to onsite 

inspection and examination by the 

Commission. 

b. Comments on the Proposed Rule 

The Commission did not receive any 

comments relating to proposed Rule 

13n–1(f). One commenter submitted a 

comment relating to proposed Rule 

13n–1(g).359 The commenter expressed 

concern that proposed Rule 13n–1(g) 

would subject non-resident SDRs to a 

stricter regime than that applicable to 

resident SDRs.360

c. Final Rule 

The Commission is adopting Rule 

13n–1(f) as proposed, redesignated as 

Rule 13n–1(e). Rule 13n–1(e) requires 

each SDR to designate and authorize on 

Form SDR an agent in the United States, 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14469 

361See Rule 13n–1(d) (requiring an SDR to 

promptly file an amendment on Form SDR updating 

information in Item 11 of Form SDR). 

362See Proposing Release, 75 FR at 77312, supra 

note 2 (asking whether ‘‘the representations that 

would be required to be made by the person who 

signs Form SDR [are] appropriate and sufficiently 

clear,’’ and whether ‘‘the Commission [should] 

require any additional or alternative 

representations’’). See also Exchange Act Section 

13(n)(2) and Rule 13n–4(b)(1) (both requiring 

registered SDRs to be subject to inspection and 

examination by any representative of the 

Commission) and Rule 13n–7(b) (requiring SDRs to 

keep and preserve books and records and promptly 

furnish them to any representative of the 

Commission upon request). 

363See also Section VI.D.2 of this release 

discussing inspection and examination by 

Commission representatives. 

364Exchange Act Section 18(a) provides, in part, 

that ‘‘[a]ny person who shall make or cause to be 

made any statement in any . . . report . . . which 

statement was at the time and in the light of the 

circumstances under which it was made false or 

misleading with respect to any material fact, shall 

be liable to any person (not knowing that such 

statement was false or misleading) who, in reliance 

upon such statement, shall have purchased or sold 

a security at a price which was affected by such 

statement, for damages caused by such reliance, 

unless the person sued shall prove that he acted in 

good faith and had no knowledge that such 

statement was false or misleading.’’ 15 U.S.C. 

78r(a). Exchange Act Section 32(a) provides, in part, 

that ‘‘[a]ny person who willfully and knowingly 

makes, or causes to be made, any statement in any 

. . . report . . . which statement was false or 

misleading with respect to any material fact, shall 

upon conviction be fined not more than $5,000,000, 

or imprisoned not more than 20 years, or both, 

except that when such person is a person other than 

a natural person, a fine not exceeding $25,000,000 

may be imposed.’’ 15 U.S.C. 78ff(a). 

365Proposed Rule 13n–2(b). 

366Proposed Rule 13n–2(b). 

other than a Commission member, 

official, or employee, to accept any 

notice or service of process, pleadings, 

or other documents in any action or 

proceedings brought against the SDR to 

enforce the federal securities laws and 

the rules and regulations thereunder. If 

an SDR appoints a different agent to 

accept such notice or service of process, 

then the SDR will be required to file 

promptly an amendment on Form SDR 

updating this information.361 The 

requirement applies equally to both 

SDRs within the United States and nonresident SDRs that are required to 

register with the Commission. Rule 

13n–1(e) is intended to conserve the 

Commission’s resources and to 

minimize any logistical obstacles (e.g., 

locating defendants or respondents 

within the United States or abroad) that 

the Commission may encounter when 

attempting to effect service. For 

instance, by requiring an SDR to 

designate an agent for service of process 

in the United States, and by prohibiting 

an SDR from designating a Commission 

member, official, or employee as its 

agent for service of process, the rule will 

reduce a significant resource burden on 

the Commission, including resources to 

locate agents of registrants overseas and 

keep track of their whereabouts. 

After considering the comment to 

proposed Rule 13n–1(g), the 

Commission is adopting Rule 13n–1(g) 

as proposed, redesignated as Rule 13n– 

1(f), with one modification. Rule 13n– 

1(f) requires any non-resident SDR 

applying for registration pursuant to this 

rule to certify on Form SDR that the 

SDR can, as a matter of law, and will 

provide the Commission with prompt 

access to the SDR’s books and records 

and can, as a matter of law, and will 

submit to onsite inspection and 

examination by the Commission. Rule 

13n–1(f) also requires any non-resident 

SDR applying for registration to provide 

an opinion of counsel that the SDR can, 

as a matter of law, provide the 

Commission with prompt access to the 

SDR’s books and records and can, as a 

matter of law, submit to onsite 

inspection and examination by the 

Commission. The final rule differs from 

the proposed rule in that, as proposed, 

a non-resident SDR would be required 

to certify that it ‘‘can, as a matter of 

law’’ provide prompt access to the 

SDR’s books and records and submit to 

onsite inspection and examination. As 

adopted, the rule requires the nonresident SDR to certify that it ‘‘can, as 

a matter of law, and will’’ do those 

things. This change from the proposal is 

intended to make clear to a non-resident 

SDR that it is making an affirmative 

commitment to comply with its 

obligation to provide the Commission 

with prompt access to the SDR’s books 

and records and submit to onsite 

inspection and examination.362

While the Commission acknowledges 

that the rule will impose an additional 

requirement on non-resident SDRs, for 

the reasons stated in Section VI.A.1.c 

above relating to Form SDR’s 

certification and legal opinion 

requirements, the Commission 

continues to believe that before granting 

registration to a non-resident SDR, it is 

appropriate to obtain a certification and 

opinion of counsel that such person is 

in a position to provide legally the 

Commission with prompt access to the 

SDR’s books and records and to be 

subject to onsite inspection and 

examination by the Commission.363

6. Definition of ‘‘Report’’ (Proposed Rule 

13n–1(h)/Final Rule 13n–1(g)) 

a. Proposed Rule 

Proposed Rule 13n–1(h) provided that 

‘‘[a]n application for registration or any 

amendment thereto that is filed 

pursuant to this [rule] shall be 

considered a ‘report’ filed with the 

Commission for purposes of [Exchange 

Act Sections 18(a) and 32(a)] and the 

rules and regulations thereunder and 

other applicable provisions of the 

United States Code and the rules and 

regulations thereunder.’’ 

b. Comments on the Proposed Rule 

The Commission did not receive any 

comments relating to this proposed rule. 

c. Final Rule 

The Commission is adopting Rule 

13n–1(h) as proposed, redesignated as 

Rule 13n–1(g). Rule 13n–1(g) provides 

that ‘‘[a]n application for registration or 

any amendment thereto that is filed 

pursuant to this [rule] shall be 

considered a ‘report’ filed with the 

Commission for purposes of [Exchange 

Act Sections 18(a) and 32(a)] and the 

rules and regulations thereunder and 

other applicable provisions of the 

United States Code and the rules and 

regulations thereunder.’’ Exchange Act 

Sections 18(a) and 32(a) set forth the 

potential liability for a person who 

makes, or causes to be made, any false 

or misleading statement in any ‘‘report’’ 

filed with the Commission (e.g., Form 

SDR).364 The Commission believes that 

subjecting a person to this potential 

liability will enhance the reliability and 

credibility of any ‘‘report’’ that is filed 

with the Commission pursuant to Rule 

13n–1 because the person will have 

incentive to take steps to verify the 

accuracy of the report in order to avoid 

liability. 

B. Withdrawal From Registration; 

Revocation and Cancellation (Rule 

13n–2) 

1. Proposed Rule 

Proposed Rule 13n–2 set forth a 

process for a person to withdraw its 

registration as an SDR and for the 

Commission to revoke, suspend, or 

cancel an SDR’s registration. With 

respect to proposed Rule 13n–2(b), a 

registered SDR would be required to 

withdraw from registration by filing a 

notice of withdrawal with the 

Commission. The proposed rule would 

require the SDR to designate on its 

notice of withdrawal a person 

associated with the SDR to serve as the 

custodian of the SDR’s books and 

records.365 Prior to filing a notice of 

withdrawal, an SDR would be required 

to file an amended Form SDR to update 

any inaccurate information.366 If there is 

no inaccurate information to update, 

then an SDR would include a 

confirmation to that effect in its notice 

of withdrawal. 

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14470 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

367 15 U.S.C. 78r(a), 78ff(a). 

368The Commission did not receive any 

comments on the definitions of ‘‘control’’ and 

‘‘person associated with a security-based swap data 

repository’’ in proposed Rule 13n–2(a), but is 

omitting these definitions in Rule 13n–2 because 

the Commission’s revision of the rule, as discussed 

in this section, no longer uses these terms. 

369The Commission is revising proposed Rule 

13n–2(a) to add the definition of ‘‘tag’’ (including 

the term tagged) to have the same meaning as set 

forth in Rule 11 of Regulation S–T (17 CFR 232.11). 

This definition is added in order to conform the 

requirements for filing Form SDR to withdraw 

registration with the requirements for filing Form 

SDR to register or amend registration pursuant to 

Rule 13n–1. 

370Exchange Act Section 11A(b)(4) states that ‘‘[a] 

registered securities information processor may, 

upon such terms and conditions as the Commission 

deems necessary or appropriate in the public 

interest or for the protection of investors, withdraw 

from registration by filing a written notice of 

withdrawal with the Commission.’’ 15 U.S.C. 78k– 

1(b)(4). A SIP that is dually-registered as an SDR 

may withdraw from registration by filing Form SDR, 

which the Commission would deem as a written 

notice of withdrawal under Exchange Act Section 

11A(b)(4). In addition, the Commission has 

modified the heading of this rule. As proposed, the 

heading of this rule was ‘‘Withdrawal from 

registration.’’ As adopted, the heading is 

‘‘Withdrawal from registration; revocation and 

cancellation.’’ This change in the heading provides 

a more accurate description of the subject of the 

rule. 

371Rule 13n–2(b). The Commission is amending 

Form SDR from the proposal to add new Item 12 

to implement the requirement in Rule 13n–2(b) for 

an SDR to designate a custodian of its books and 

records if it withdraws from registration. See new 

Item 12 to Form SDR and Section VI.A.1 of this 

release discussing Form SDR. The Commission has 

also made some conforming changes to proposed 

Form SDR and the General Instructions to make 

clear that the form may be used for withdrawal of 

registration. For example, General Instruction 1 

now indicates that Form SDR and exhibits thereto 

are to be filed electronically in a tagged data format 

in connection with withdrawing an SDR’s 

registration. See General Instruction 1 to Form SDR. 

372See Section VI.E.7 of this release discussing 

requirement that an SDR that ceases to do business 

preserve, maintain, and make accessible transaction 

data and historical positions. 

373See Section VI.G.3 of this release discussing 

requirement that an SDR that ceases to do business 

preserve, maintain, and make accessible certain 

records relating to its business. 

374See Rule 13n–2(b). The General Instructions to 

Form SDR have been amended from the proposal 

to clarify what items and exhibits need to be 

included when filing a withdrawal. See General 

Instruction 11 to Form SDR. 

375Proposed Rule 13n–2(b). 

376As discussed in Section VI.A.1.c of this 

release, the Commission is adopting technical 

amendments to Exchange Act Rule 24b–2 to clarify 

that the confidential portion of electronic filings by 

SDRs must be filed electronically and to require 

SDRs to request confidential treatment 

electronically. The Commission is also adopting 

technical amendments to Rule 101 of Regulation S– 

T to provide that, except as otherwise provided, all 

filings by SDRs, including any information with 

respect to which confidential treatment is 

requested, must be filed electronically. 

377See General Instruction 7 to Form SDR. 

378See Section VI.A.6 of this release discussing 

definition of ‘‘report.’’ 

379Rule 13n–2(e). 

Proposed Rule 13n–2(c) set forth the 

effective date of a notice of withdrawal 

from registration. Proposed Rule 13n– 

2(d) provided that a notice of 

withdrawal from registration that is 

filed pursuant to this section shall be 

considered a ‘‘report’’ filed with the 

Commission for purposes of Exchange 

Act Sections 18(a) and 32(a) and the 

rules and regulations thereunder and 

other applicable provisions of the 

United States Code and the rules and 

regulations thereunder.367 Proposed 

Rule 13n–2(e) set forth the basis for the 

Commission, by order, to revoke the 

registration of an SDR. Finally, 

proposed Rule 13n–2(f) provided that 

the Commission, by order, may cancel 

the registration of an SDR if it finds that 

the SDR is no longer in existence or has 

ceased to do business in the capacity 

specified in its application for 

registration. 

2. Comments on the Proposed Rule 

The Commission did not receive any 

comments relating to this proposed rule. 

3. Final Rule 

The Commission is adopting Rule 

13n–2 as proposed with a few 

modifications.368 The Commission is 

revising the proposed rule to eliminate 

the requirement for a registered SDR to 

file a separate notice of withdrawal with 

the Commission in order to streamline 

the withdrawal process and make it 

more efficient for SDRs and Commission 

staff. Instead, Rule 13n–2(b) permits a 

registered SDR to withdraw from 

registration by filing Form SDR 

electronically in a tagged data 

format; 369 when making such a filing, 

the SDR must indicate on Form SDR 

that it is filed for the purpose of 

withdrawing from registration.370 The 

Commission is also revising the 

proposed rule to give an SDR more 

flexibility in designating the custodian 

of the SDR’s books and records by 

requiring the SDR to designate a person 

to serve as the custodian of the SDR’s 

books and records; 371 the person does 

not necessarily need to be associated 

with an SDR, as proposed, and thus, the 

SDR has the option to designate an 

unaffiliated entity, such as another 

registered SDR, as the custodian. The 

purpose of this requirement is to ensure 

that an SDR’s books and records are 

maintained and available to the 

Commission and other regulators after 

the SDR withdraws from registration, 

and to assist the Commission in 

enforcing Rules 13n–5(b)(7) 372 and 

13n–7(c).373

When filing a Form SDR as a 

withdrawal from registration, the SDR 

should update any inaccurate 

information contained in its most 

recently filed Form SDR.374 This 

requirement is substantively the same as 

the proposal, which would require an 

SDR, prior to filing a notice of 

withdrawal, to file an amended Form 

SDR to update any inaccurate 

information.375 If there is no inaccurate 

information to update, then an SDR 

should include a confirmation to that 

effect when filing Form SDR. The 

Commission may make filed 

withdrawals available on its Web site, 

except for information where 

confidential treatment is requested by 

the SDR376 and granted by the 

Commission. 

Rule 13n–2(c) provides that a 

withdrawal from registration filed by an 

SDR on Form SDR shall become 

effective for all matters (except as 

provided in Rule 13n–2(c)) on the 60th 

day after the filing thereof with the 

Commission, within such longer period 

of time as to which such SDR consents 

or which the Commission, by order, 

may determine as necessary or 

appropriate in the public interest or for 

the protection of investors, or within 

such shorter period of time as the 

Commission may determine. A 

withdrawal from registration filed on 

Form SDR that is not prepared and 

executed in compliance with applicable 

requirements may be deemed as not 

acceptable for filing.377 Rule 13n–2(d) 

provides that a withdrawal from 

registration filed on Form SDR that is 

filed pursuant to this rule shall be 

considered a ‘‘report’’ filed with the 

Commission for purposes of Exchange 

Act Sections 18(a) and 32(a) and the 

rules and regulations thereunder and 

other applicable provisions of the 

United States Code and the rules and 

regulations thereunder.378

Under Rule 13n–2(e), if the 

Commission finds, on the record after 

notice and opportunity for hearing, that 

any registered SDR has obtained its 

registration by making any false and 

misleading statements with respect to 

any material fact or has violated or 

failed to comply with any provision of 

the federal securities laws and the rules 

and regulations thereunder, the 

Commission, by order, may revoke the 

registration. The rule further provides 

that pending final determination of 

whether any registration be revoked, the 

Commission, by order, may suspend 

such registration, if such suspension 

appears to the Commission, after notice 

and opportunity for hearing on the 

record, to be necessary or appropriate in 

the public interest or for the protection 

of investors.379 Finally, Rule 13n–2(f) 

provides that if the Commission finds 

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380Where an SDR anticipates that it will cease to 

exist or cease to do business as an SDR, the SDR 

may withdraw from registration by filing a 

withdrawal on Form SDR pursuant to Rule 13n– 

2(b). Regardless of whether the SDR withdraws 

from registration pursuant to Rule 13n–2(b), the 

Commission revokes the SDR’s registration 

pursuant to Rule 13n–2(e), or the Commission 

cancels the SDR’s registration pursuant to Rule 

13n–2(f), the SDR is obligated to comply with Rules 

13n–5(b)(7) and 13n–7(c), which are discussed in 

Sections VI.E.7 and VI.G.3 of this release, 

respectively. 

381Rule 13n–2 is similar to Exchange Act Rule 

15b6–1, 17 CFR 240.15b6–1, which relates to 

withdrawal from registration as a broker-dealer, and 

includes a provision similar to a provision in 

Exchange Act Section 15(b)(5), 15 U.S.C. 78o(b)(5) 

(stating that ‘‘[i]f the Commission finds that any 

registered broker or dealer is no longer in existence 

or has ceased to do business as a broker or dealer, 

the Commission, by order, shall cancel the 

registration of such broker or dealer’’). 

382See 17 CFR 240.15b1–3. 

383See Registration of Successors to BrokerDealers and Investment Advisers, Exchange Act 

Release No. 31661 (Dec. 28, 1992), 58 FR 7 (Jan. 4, 

1993). 

384As adopted, Rule 13n–2 differs from the 

proposal by requiring a ‘‘filing a withdrawal from 

registration on Form SDR’’ rather than ‘‘filing a 

notice of withdrawal.’’ The Commission is revising 

Rule 13n–3(a) from the proposal to track the 

language of Rule 13n–2. 

385As adopted, Rule 13n–1(c) differs from the 

proposal by starting the 90-day period from the 

publication of notice of the filing of Form SDR 

rather than from the filing of Form SDR. The 

Commission is revising Rule 13n–3(a) from the 

proposal to track more closely the language of Rule 

13n–1(c). As discussed in Section VI.A.2.c of this 

release, the Commission is revising Rule 13n–1(c) 

from the proposal to make it procedurally 

consistent with the registration process applicable 

to SIPs and the rule stems from the Commission’s 

requirement that a registered SDR register as a SIP 

and the Commission’s revision of Form SDR to 

accommodate SIP registration. 

that a registered SDR is no longer in 

existence or has ceased to do business 

in the capacity specified in its 

application for registration, the 

Commission, by order, may cancel the 

registration.380

The Commission believes that it is 

important to set forth a process for a 

person to withdraw its registration as an 

SDR and for the Commission to be able 

to revoke, suspend, or cancel an SDR’s 

registration, similar to the approach that 

it takes with some of its other 

registrants.381

C. Registration of Successor to 

Registered SDR (Rule 13n–3) 

1. Proposed Rule 

Proposed Rule 13n–3 would govern 

the registration of a successor to a 

registered SDR. Successor registration 

would be accomplished either by filing 

a new application on Form SDR or, in 

certain circumstances, by filing an 

amendment on Form SDR. 

2. Comments on the Proposed Rule 

The Commission did not receive any 

comments relating to this proposed rule. 

3. Final Rule 

The Commission is adopting Rule 

13n–3 as proposed, with minor 

revisions to track the language of Rules 

13n–1 and 13n–2 as adopted. Rule 13n– 

3 governs the registration of a successor 

to a registered SDR. Because this rule is 

substantially similar to Exchange Act 

Rule 15b1–3,382 which governs the 

registration of a successor to a registered 

broker-dealer, the same concepts that 

the Commission explained when it 

adopted amendments to Rule 15b1–3 

are applicable here.383

a. Succession by Application 

Rule 13n–3(a) provides that in the 

event that an SDR succeeds to and 

continues the business of an SDR 

registered pursuant to Exchange Act 

Section 13(n), the registration of the 

predecessor shall be deemed to remain 

effective as the registration of the 

successor if, within 30 days after such 

succession, the successor files an 

application for registration on Form 

SDR, and the predecessor files a 

withdrawal from registration on Form 

SDR with the Commission.384 A 

successor will not be permitted to ‘‘lock 

in’’ the 30-day window period by filing 

an application for registration that is 

incomplete in material respects. 

Rule 13n–3(a) further provides that 

the registration of the predecessor SDR 

shall cease to be effective 90 days after 

the date of the publication of notice of 

the filing of an application for 

registration on Form SDR by the 

successor SDR.385 In other words, the 

90-day period will not begin to run until 

a complete Form SDR has been filed by 

the successor with the Commission and 

the Commission publishes notice of the 

filing of Form SDR to afford interested 

persons an opportunity to submit 

written comments concerning such 

application. This 90-day period is 

consistent with the time period set forth 

in final Rule 13n–1, pursuant to which 

the Commission would have 90 days to 

grant registration or institute 

proceedings to determine if registration 

should be granted or denied. 

The following are examples of the 

types of successions that would be 

required to be completed by filing an 

application: (1) An acquisition, through 

which an unregistered person purchases 

or assumes substantially all of the assets 

and liabilities of an SDR and then 

operates the business of the SDR, (2) a 

consolidation of two or more registered 

SDRs, resulting in their conducting 

business through a new unregistered 

SDR, which assumes substantially all of 

the assets and liabilities of the 

predecessor SDRs, and (3) dual 

successions, through which one 

registered SDR subdivides its business 

into two or more new unregistered 

SDRs. 

b. Succession by Amendment 

Rule 13n–3(b) provides that 

notwithstanding Rule 13n–3(a), if an 

SDR succeeds to and continues the 

business of a registered predecessor 

SDR, and the succession is based solely 

on (1) a change in the predecessor’s date 

or state of incorporation, (2) form of 

organization, or (3) composition of a 

partnership, the successor may, within 

30 days after the succession, amend the 

registration of the predecessor SDR on 

Form SDR to reflect these changes. Such 

amendment shall be deemed an 

application for registration filed by the 

predecessor and adopted by the 

successor. In all three types of 

successions, the predecessor must cease 

operating as an SDR. The Commission 

believes that it is appropriate to allow 

a successor to file an amendment to the 

predecessor’s Form SDR in these three 

types of successions. 

c. Scope and Applicability of Rule 

13n–3 

The purpose of Rule 13n–3 is to 

enable a successor SDR to operate 

without an interruption of business by 

relying for a limited period of time on 

the registration of the predecessor SDR 

until the successor’s own registration 

becomes effective. The rule is intended 

to facilitate the legitimate transfer of 

business between two or more SDRs and 

to be used only if there is a direct and 

substantial business nexus between the 

predecessor and the successor SDR. The 

rule cannot be used when a registered 

SDR sells its registration, eliminates 

substantial liabilities, spins off 

personnel, or facilitates the transfer of 

the registration of a ‘‘shell’’ organization 

that does not conduct any business. No 

person will be permitted to rely on Rule 

13n–3 unless it is acquiring or assuming 

substantially all of the assets and 

liabilities of the predecessor’s SDR 

business. 

Rule 13n–3 does not apply to 

reorganizations that involve only 

registered SDRs. In those situations, the 

registered SDRs need not use the rule 

because they can continue to rely on 

their existing registrations. The rule also 

does not apply to situations in which 

the predecessor intends to continue to 

engage in SDR activities. Otherwise, 

confusion may result as to the identities 

and registration statuses of the parties. 

If a person acquires some or all of the 

shares of a registered SDR, or if one 

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386 In the case of the purchase of the business 

assets or assumption of the personnel of one 

registered SDR by another SDR, the purchasing SDR 

would file an amendment on Form SDR to reflect 

any changes in its operations, while the other SDR 

would either file a Form SDR to withdraw its 

registration or file an interim amendment on the 

form, depending on whether the SDR remains in the 

SDR business. 

387See Exchange Act Section 13(n)(3), 15 U.S.C. 

78m(n)(3), as added by Dodd-Frank Act Section 

763(i). The Dodd-Frank Act authorizes the 

Commission to establish additional requirements 

for SDRs by rule or regulation. Exchange Act 

Sections 13(n)(4)(B), 13(n)(7)(D), and 13(n)(9), 15 

U.S.C. 78m(n)(4)(B), 78m(n)(7)(D), and 78m(n)(9), as 

added by Dodd-Frank Act Section 763(i). 

388See DTCC 5, supra note 19. See also supra 

note 247 (discussing a general comment regarding 

the term ‘‘affiliate’’). 

389 DTCC 5, supra note 19. 390 DTCC 5, supra note 19. 391 DTCC 5, supra note 19. 392The Commission is also correcting a 

typographical error in the proposed rule. Proposed 

Rule 13n–4(a)(3)(ii) referred to the right to vote 25 

percent ‘‘of’’ more of a class of securities. See 

Proposing Release, 75 FR at 77367, supra note 2. 

As adopted, Rule 13n–4(a)(3)(ii) refers to the right 

to vote 25 percent ‘‘or’’ more of a class of securities. 

In addition, certain definitions are being 

renumbered due to the removal of the definition of 

‘‘end-user.’’ 

393See End-User Exception Proposing Release, 

supra note 15. 

394See Section VI.E.1 of this release discussing 

the definition of ‘‘transaction data’’ and Section 

VI.E.2 of this release discussing the definition of 

‘‘position.’’ 

395See Regulation SBSR Adopting Release, supra 

note 13 (Rules 901(f) and (g)). 

396See DTCC 5, supra note 19. 

397See DTCC 5, supra note 19 (suggesting that the 

Commission ‘‘allow time for an [SDR] to validate, 

process, and store the data received prior to 

populating the data to the environment that will be 

utilized to provide such direct electronic access to 

the Commission’’). 

398Exchange Act Section 13(n), 15 U.S.C. 78m(n). 

registered SDR purchases part or all of 

the business assets or assumes 

personnel of another registered SDR, 

then reliance on this rule would not be 

necessary.386

D. Enumerated Duties and Core 

Principles (Rule 13n–4) 

Dodd-Frank Act Section 763(i) 

requires an SDR to comply with the 

requirements and core principles 

described in Exchange Act Section 13(n) 

as well as any requirement that the 

Commission prescribes by rule or 

regulation in order to be registered and 

maintain registration as an SDR with the 

Commission.387 After considering 

comments, the Commission is adopting 

Rule 13n–4 as proposed, with 

modifications. 

The Commission is not adopting 

proposed Rules 13n–4(b)(9) and (10), 

which address relevant authorities’ 

access to SBS data maintained by SDRs. 

As discussed below, the Commission 

anticipates soliciting additional public 

comment regarding relevant authorities’ 

access to SBS data maintained by SDRs. 

1. Definitions (Rule 13n–4(a)) 

a. Proposed Rule 

Proposed Rule 13n–4(a) defined the 

following terms: ‘‘affiliate,’’ ‘‘board,’’ 

‘‘control,’’ ‘‘director,’’ ‘‘direct electronic 

access,’’ ‘‘end-user,’’ ‘‘market 

participant,’’ ‘‘nonaffiliated third party,’’ 

and ‘‘person associated with a securitybased swap data repository.’’ 

b. Comments on the Proposed Rule 

The Commission received one 

comment on the proposed definitions in 

the context of the SDR Rules.388

Specifically, one commenter believed 

that the Commission’s requirement in 

the definition of ‘‘direct electronic 

access’’ that data is ‘‘updated at the 

same time as the [SDR’s] data is 

updated’’ may pose ‘‘operational 

difficulties that do not outweigh the 

marginal benefits to the 

Commission.’’ 389 The commenter also 

believed that ‘‘[t]he Commission’s 

proposed definition provides for no 

latency between the moment when an 

[SDR’s] records are updated and when 

the systems used by the Commission (or 

its designee with direct electronic 

access) are updated.’’ 390 For these 

reasons, the commenter suggested that 

the Commission ‘‘allow time for an 

[SDR] to validate, process, and store the 

data received prior to populating the 

data to the environment that will be 

utilized to provide such direct 

electronic access to the 

Commission.’’ 391

c. Final Rule 

After considering the comment, the 

Commission is adopting Rule 13n–4(a) 

as proposed, with modifications related 

to the definition of ‘‘end-user.’’ 392

Specifically, the Commission is 

adopting Rule 13n–4(a) without the 

definition of ‘‘end-user.’’ As discussed 

above, the Commission proposed rules 

that would require SDRs to collect data 

related to monitoring the compliance 

and frequency of end-user clearing 

exemption claims.393 In anticipation 

that the Commission will consider final 

rules relating to end-users in a separate 

rulemaking, the Commission has 

decided not to adopt the proposed 

definition of ‘‘end-user’’ in this release. 

The Commission believes that it is 

better to address the issue of end-users 

more fully in that release than in this 

release. 

The Commission is adopting the 

definition of ‘‘direct electronic access’’ 

as proposed to mean ‘‘access, which 

shall be in a form and manner 

acceptable to the Commission, to data 

stored by [an SDR] in an electronic 

format and updated at the same time as 

the [SDR]’s data is updated so as to 

provide the Commission or any of its 

designees with the ability to query or 

analyze the data in the same manner 

that the [SDR] can query or analyze the 

data.’’ This includes access to all 

transaction data and positions, as 

defined in Rule 13n–5(a),394 and related 

identifying information, such as 

transaction IDs and time stamps.395

With respect to one commenter’s view 

that requiring SBS data to be updated at 

the same time as the data is updated at 

an SDR may pose ‘‘operational 

difficulties that do not outweigh the 

marginal benefits to the 

Commission,’’ 396 the Commission 

believes that its definition of ‘‘direct 

electronic access’’ is necessary for the 

Commission’s adequate oversight of the 

SBS market. The commenter asserted 

that the Commission’s definition of 

‘‘direct electronic access’’ ‘‘provides for 

no latency between the moment when 

an [SDR’s] records are updated and 

when the systems used by the 

Commission (or its designee with direct 

electronic access) are updated.’’ 397 The 

Commission understands that latency is 

inherent when updating systems, and 

that there may be some time lag between 

when the SDR receives and updates the 

data and when the updated data is 

available for the Commission to access. 

The Commission also understands that 

an SDR needs to check the data for 

errors and omissions and process the 

data before providing the data to the 

Commission or its designees. Otherwise, 

the Commission or its designees will not 

be able to query or analyze the data. 

Thus, by referencing to the 

Commission’s or its designees’ ability to 

query or analyze the data in the 

definition of ‘‘direct electronic access,’’ 

the Commission anticipates that there 

may be a lag time for SDRs to check and 

process the data before providing the 

data to the Commission or its designees. 

The Commission notes, however, that 

once an SDR checks and processes the 

data, the SDR is required to provide the 

Commission or its designees with the 

ability to access the checked and 

processed data at the same time as the 

checked and processed data is updated 

in the SDR’s records. 

2. Enumerated Duties (Rule 13n–4(b)) 

a. Proposed Rule 

Proposed Rule 13n–4(b) would 

incorporate an SDR’s duties that are 

enumerated in Exchange Act Sections 

13(n)(2), 13(n)(5), and 13(n)(6),398 which 

require each SDR to: (1) Subject itself to 

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399See supra note 201 (discussing Regulation 

SBSR, which prescribes the data elements that an 

SDR will be required to accept for each SBS in 

association with requirements under Dodd-Frank 

Act Section 763(i)). 400Exchange Act Section 13(m) pertains to the 

public availability of SBS data. See 15 U.S.C. 

78m(m). In a separate release relating to 

implementation of Dodd-Frank Act Section 763(i) 

(adding Exchange Act Section 13(m)), the 

Commission proposed rules that impose various 

duties on SDRs in connection with the reporting 

and public dissemination of SBS information. See 

Regulation SBSR Proposing Release, supra note 8; 

see also Cross-Border Proposing Release, 78 FR at 

31210–6, supra note 3 (re-proposing Regulation 

SBSR). The Commission is adopting those rules as 

part of Regulation SBSR. See Regulation SBSR 

Adopting Release, supra note 13. 

401See Barnard, supra note 19; Better Markets 1, 

supra note 19; DTCC 2, supra note 19; ESMA, supra 

note 19; MFA 1, supra note 19; US & Foreign Banks, 

supra note 24; see also DTCC 1*, supra note 20; 

DTCC 3, supra note 19; DTCC 5, supra note 19. In 

addition to these commenters, one commenter to 

the Temporary Rule Release suggested that the 

Commission affirmatively state that it intends to 

keep information furnished pursuant to the rules in 

that release confidential under the Freedom of 

Information Act (‘‘FOIA’’) or to seek a legislative 

solution. Deutsche Temp Rule, supra note 28. 

Although this comment does not explicitly 

reference to the SDR Rules, the Commission 

addresses this point in Section VI.D.2 of this release 

to the extent that the SDR Rules require SDRs to 

submit information to the Commission. 

402Better Markets 2, supra note 19 (urging the 

Commission to not dilute or weaken the [p]roposed 

[r]ules to accommodate concerns about 

international regulation of the SBS markets). 

403ESMA, supra note 19. 

404 DTCC 1*, supra note 20; Better Markets 1, 

supra note 19. Comments regarding direct 

electronic access in the context of substituted 

compliance are addressed in a separate release. See 

Regulation SBSR Adopting Release, supra note 13. 

405 DTCC 1*, supra note 20; Better Markets 1, 

supra note 19; see also DTCC 2, supra note 19 (‘‘The 

role of an aggregating SDR is significant in that it 

ensures regulators efficient, streamlined access to 

consolidated data, reducing the strain on limited 

agency resources.’’); DTCC 3, supra note 19 (‘‘When 

there are multiple SDRs in any particular asset 

class, the [Commission] should take such action as 

is necessary to eliminate any overstatements of 

open interest or other inaccuracies that may result 

from having broader market data published from 

separate SDRs.’’). 

406Proposing Release, 75 FR at 77318, supra note 

2. 

407Better Markets 1, supra note 19 (‘‘The fact that 

this market is in its ‘infancy’ is a unique 

opportunity for the Commission to guide its 

development in a way that protects the public 

interest, promotes competition, and prevents what 

has been the routine development of conflicts and 

predatory conduct.’’). 

408Barnard, supra note 19 (recommending that 

the Commission ‘‘provide additional details on the 

anticipated requirements in order to better manage 

the expectations of SDRs and wider market 

participants concerning their duties in this area’’). 

409 DTCC 2, supra note 19. 

410See Regulation SBSR Adopting Release, supra 

note 13; Regulation SBSR Proposed Amendments 

Release, supra note 13. 

411The Commission is revising its proposed rule 

by adding ‘‘any representative of’’ before ‘‘the 

Commission’’ to track more closely Exchange Act 

Section 13(n)(2), 15 U.S.C. 78m(n)(2) (‘‘Each 

registered security-based swap data repository shall 

be subject to inspection and examination by any 

representative of the Commission.’’). 

412The Commission addresses this enumerated 

duty in further detail in Regulation SBSR. See 

Regulation SBSR Adopting Release, supra note 13. 

inspection and examination by the 

Commission; (2) accept SBS data as 

prescribed by Regulation SBSR; 399 (3) 

confirm with both counterparties to the 

SBS the accuracy of the data that was 

submitted; (4) maintain the data as 

prescribed by the Commission; (5) 

provide direct electronic access to the 

Commission or any of its designees; (6) 

provide certain information as the 

Commission may require to comply 

with Exchange Act Section 13(m); 400 (7) 

at such time and in such manner as may 

be directed by the Commission, 

establish automated systems for 

monitoring, screening, and analyzing 

SBS data; (8) maintain the privacy of 

any and all SBS transaction information 

that the SDR receives from an SBS 

dealer, counterparty, or any registered 

entity; (9) on a confidential basis 

pursuant to Exchange Act Section 24 

and the rules and regulations 

thereunder, upon request, and after 

notifying the Commission of the request, 

make available all data obtained by the 

SDR to certain relevant authorities; (10) 

before sharing information with a 

relevant authority, obtain a written 

confidentiality agreement and obtain an 

agreement from the relevant authority to 

indemnify the SDR and the 

Commission; and (11) designate a CCO 

who must comply with specified duties. 

b. Comments on the Proposed Rule 

Six commenters submitted comments 

relating to various aspects of proposed 

Rule 13n–4(b).401 These comment letters 

are described in more detail below, 

other than those that relate solely to 

relevant authorities’ access to SBS data 

maintained by SDRs, which the 

Commission anticipates will be 

addressed separately. Generally 

speaking, one commenter believed that 

‘‘all of the substantive rule provisions 

proposed [as of July 22, 2013] must 

remain as strong as possible, 

irrespective of the Commission’s 

approach to its very limited jurisdiction 

over cross-border transactions or the 

CFTC’s approach to the implementation 

of Title VII.’’ 402

i. Inspection and Examination 

One commenter expressed concern 

regarding the potential cost to nonresident SDRs of complying with 

multiple regulatory regimes, including 

inspections and examinations by 

multiple regulators.403

ii. Direct Electronic Access 

As discussed in Section IV above, two 

commenters suggested that the 

Commission designate one SDR to 

receive SBS data from other SDRs, 

through direct electronic access, in 

order to provide the Commission and 

other regulators a consolidated location 

from which to access SBS data.404 Both 

commenters believed that such 

designation would ensure efficient 

consolidation of data.405

iii. Monitoring, Screening, and Analysis 

In the Proposing Release, the 

Commission proposed taking a 

measured approach and not requiring 

SDRs to establish automated systems for 

monitoring, screening, and analyzing 

SBS data at that time.406 One 

commenter disagreed with this 

proposal.407 Another commenter 

supported ‘‘the broad concept that an 

SDR should monitor, screen and analyze 

SBS data as input for the [Commission] 

to facilitate its oversight and monitoring 

responsibilities,’’ but believed that the 

proposed rule is too broad and ‘‘not 

clear enough on the level of detail 

required and on the level of 

responsibility imposed on SDRs.’’ 408 A 

third commenter suggested that 

monitoring, screening, and analysis 

should be performed centrally by an 

SDR for efficiency and that the data 

maintained by the SDR should then be 

made available to relevant 

authorities.409

iv. Other Enumerated Duties 

Comments on the other enumerated 

duties either are discussed later in this 

release or addressed in the Regulation 

SBSR Adopting Release or the 

Regulation SBSR Proposed 

Amendments Release.410 The 

Commission anticipates addressing 

comments regarding relevant 

authorities’ access to SBS data 

maintained by SDRs in a separate 

release when it solicits additional 

public comment regarding the issue. 

c. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n–4(b) 

as proposed, with modifications. 

Specifically, each SDR is required to: 

(1) subject itself to inspection and 

examination by any representative of 

the Commission; 411

(2) accept data as prescribed in 

Regulation SBSR412 for each SBS; 

(3) confirm, as prescribed in Rule 

13n–5, with both counterparties to the 

SBS the accuracy of the data that was 

submitted, as discussed further in 

Section VI.E.1 of this release; 

(4) maintain, as prescribed in Rule 

13n–5, the data described in Regulation 

SBSR in such form, in such manner, and 

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413The Commission addresses this enumerated 

duty in further detail in Regulation SBSR. See 

Regulation SBSR Adopting Release, supra note 13. 

414The Commission is revising proposed Rule 

13n–4(b)(11) by not including the phrase ‘‘who 

shall comply with the duties set forth in Exchange 

Act Rule 13n–11.’’ This revision is being made to 

clarify that an SDR is only required to designate a 

CCO. 

415Better Markets 2, supra note 19 (urging the 

Commission to not dilute or weaken the [p]roposed 

[r]ules to accommodate concerns about 

international regulation of the SBS markets). 

416See Section VIII of this release discussing 

economic analysis. 

417 In the Cross-Border Proposing Release, the 

Commission proposed interpretive guidance to 

specify how SDRs may comply with the notification 

requirement set forth in Exchange Act Section 

13(n)(5)(G) and proposed Rule 13n–4(b)(9). CrossBorder Proposing Release, 78 FR at 31046–31047, 

supra note 3. The Commission also specified how 

the Commission proposed to determine whether a 

relevant authority is appropriate for purposes of 

receiving SBS data from an SDR. Id. at 31047– 

31048. The Commission is not taking any action on 

these proposals at this time and anticipates 

addressing these issues in a separate release. 

418See 15 U.S.C. 78m(n)(5)(G) and 78m(n)(5)(H). 

419See Section V of this release discussing 

implementation of the SDR Rules. 

420See Exchange Act Section 13(n)(2), 15 U.S.C. 

78m(n)(2). 

421See ESMA, supra note 19. 

422See Cross-Border Proposing Release, 78 FR at 

31043, supra note 3 (discussing duplicative 

regulatory regimes for non-U.S. persons performing 

the functions of an SDR, which may include nonresident SDRs). 

423See also Regulation SBSR Adopting Release, 

supra note 13 (discussing substituted compliance); 

Exchange Act Rule 0–13, 17 CFR 240.0–13 (relating 

to procedures for filing applications for substituted 

compliance). 

424Proposing Release, 75 FR at 77318, supra note 

2. 

425See Rule 13n–4(a)(5) (defining ‘‘direct 

electronic access’’ to mean ‘‘access, which shall be 

in a form and manner acceptable to the 

Commission, to data stored by a security-based 

swap data repository in an electronic format and 

updated at the same time as the security-based 

swap data repository’s data is updated so as to 

provide the Commission or any of its designees 

with the ability to query or analyze the data in the 

same manner that the security-based swap data 

repository can query or analyze the data’’); see also 

Section VI.E.4 of this release discussing the 

requirement to maintain transaction data and 

positions in a place and format that is readily 

accessible to the Commission. 

for such period as provided therein and 

in the Exchange Act and the rules and 

regulations thereunder, as discussed 

further in Section VI.E of this release; 

(5) provide direct electronic access to 

the Commission (or any designee of the 

Commission, including another 

registered entity); 

(6) provide the information described 

in Regulation SBSR in such form and at 

such frequency as prescribed in 

Regulation SBSR to comply with 

requirements set forth in Exchange Act 

Section 13(m) and the rules and 

regulations thereunder; 413

(7) at such time and in such manner 

as may be directed by the Commission, 

establish automated systems for 

monitoring, screening, and analyzing 

SBS data; 

(8) maintain the privacy of any and all 

SBS transaction information that the 

SDR receives from an SBS dealer, 

counterparty, or any registered entity, as 

prescribed in Rule 13n–9 and as 

discussed further in Section VI.I.1 of 

this release; and 

(9) [Reserved] 

(10) [Reserved] 

(11) designate an individual to serve 

as a CCO, as discussed further in 

Section VI.J of this release.414

With respect to one commenter’s 

general recommendation that all of the 

Commission’s substantive rules ‘‘remain 

as strong as possible, irrespective of the 

Commission’s approach to its very 

limited jurisdiction over cross-border 

transactions or the CFTC’s approach to 

the implementation of Title VII,’’ 415 the 

Commission believes that the final SDR 

Rules are robust and reflect an 

appropriate approach to furthering the 

goals of the Dodd-Frank Act and 

minimizing an SDR’s cost of 

compliance.416

Because the Commission anticipates 

soliciting additional public comment 

regarding relevant authorities’ access to 

SBS data maintained by SDRs in a 

separate release, the Commission is not 

adopting proposed Rules 13n–4(b)(9) 

and (10) at this time and is marking 

those sections as ‘‘Reserved.’’ 417

However, SDRs will have to comply 

with all statutory requirements, 

including Exchange Act Sections 

13(n)(5)(G) and (H),418 when the current 

exemptive relief from the statutory 

requirements expires.419

i. Inspection and Examination 

Each registered SDR is statutorily 

required to be subject to inspection and 

examination by any representative of 

the Commission.420 With respect to one 

commenter’s concern regarding the 

potential cost to non-resident SDRs of 

complying with multiple regulatory 

regimes, including inspections and 

examinations by multiple regulators,421

the Commission appreciates this 

concern and has discussed this concern 

in the Cross-Border Proposing 

Release.422 To address the commenter’s 

broader concern of duplicative 

regulatory regimes, the Commission is 

adopting Rule 13n-12 to provide an 

exemption from specific SDR 

requirements in certain circumstances, 

as discussed in Section VI.K of this 

release.423

ii. Direct Electronic Access 

Each SDR should coordinate with the 

Commission to provide direct electronic 

access to the Commission or any of its 

designees. The form and manner that 

will be acceptable to the Commission 

for an SDR to provide direct electronic 

access may vary on a case-by-case basis 

and may change over time, depending 

on a number of factors. These factors 

could include the development of new 

types of SBSs or variations of existing 

SBSs that require additional data to 

accurately describe them. Additionally, 

the extent to which the Commission 

encounters difficulty in normalizing and 

aggregating SBS data across multiple 

registered SDRs would be a factor in 

considering the nature of the direct 

access provided by an SDR to the 

Commission. 

As contemplated in the Proposing 

Release, the Commission anticipates 

that an SDR may be able to satisfy its 

duty to provide direct electronic access 

to the Commission by providing, for 

example, (1) a direct streaming of the 

data maintained by the SDR to the 

Commission or any of its designees, (2) 

a user interface that provides the 

Commission or any of its designees with 

direct access to the data maintained by 

the SDR and that provides the 

Commission or any of its designees with 

the ability to query or analyze the data 

in the same manner that is available to 

the SDR, or (3) another mechanism that 

provides a mirror copy of the data 

maintained by the SDR, which is in an 

electronic form that is downloadable by 

the Commission or any of its designees 

and is in a format that provides the 

Commission or any of its designees with 

the ability to query or analyze the data 

in the same manner that is available to 

the SDR.424 The alternative ways to 

provide direct electronic access to the 

Commission are not intended to be 

mutually exclusive. 

Additionally, the rule provides that 

the data must be in a form and manner 

acceptable to the Commission.425 Since 

one of the primary purposes of an SDR 

is to facilitate regulatory oversight of the 

SBS market, a significant portion of the 

benefits of an SDR will not be realized 

if data stored at an SDR is provided to 

the Commission in a form or manner 

that cannot be easily utilized by the 

Commission. Furthermore, the form and 

manner with which an SDR provides 

the data to the Commission should not 

only permit the Commission to 

accurately analyze the data maintained 

by a single SDR, but also allow the 

Commission to aggregate and analyze 

data received from multiple SDRs. 

The Commission continues to 

consider whether it should require the 

data to be provided to the Commission 

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426Cf. Proposing Release, 75 FR at 77319 and 

77331, supra note 2 (asking questions about how 

direct electronic access could be provided, and 

asking whether the Commission should require 

information be kept in a particular format, such as 

FpML or another standard). 

427See DTCC 1*, supra note 20 (recommending 

that the Commission designate one SDR to receive, 

through direct electronic access, information from 

other SDRs to ensure efficient consolidation of 

data); Better Markets 1, supra note 19 

(recommending that ‘‘the Commission designate 

one SDR as the recipient of information of other 

SDRs, through direct electronic access to the SBS 

data at the other SDRs, in order to provide the 

Commission and relevant authorities with a 

consolidated location for SBS data’’). 

428See Deutsche Temp Rule, supra note 28. It is 

unclear what the commenter contemplates by its 

suggestion that the Commission seek a ‘‘legislative 

solution,’’ but the Commission notes that it does not 

intend to affirmatively seek any legislative action to 

protect further such information. The commenter is 

not precluded from doing so on its own initiative. 

429Pursuant to Commission rules, confidential 

treatment can be sought for information submitted 

to the Commission. See 17 CFR 200.83 (regarding 

confidential treatment procedures under FOIA). 

430See Better Markets 1, supra note 19. 

431See Proposing Release, 75 FR at 77318, supra 

note 2 (discussing reasons to take a measured 

approach with respect to requiring an SDR to 

establish automated systems for monitoring, 

screening, and analyzing SBS data). In a separate 

release, the Commission is adopting a rule requiring 

an SDR to provide the Commission, upon request, 

information or reports related to the timeliness, 

accuracy, and completeness of data reported to the 

SDR. See Regulation SBSR Adopting Release, supra 

note 13 (Rule 907(e)). In addition, the Commission 

proposed a rule that would require a counterparty 

to an SBS that invokes the end-user clearing 

exemption to deliver or cause to deliver certain 

information to a registered SDR, and, if adopted, 

then an SDR would be required to maintain this 

information in accordance with Rule 13n–5(b)(4). 

See End-User Exception Proposing Release, supra 

note 15. 

432See Barnard, supra note 19 (stating that the 

proposed rule regarding monitoring, screening, and 

analysis is too broad and ‘‘not clear enough on the 

level of detail required and on the level of 

responsibility imposed on SDRs’’). 

433The Commission may revisit these issues as 

the Commission becomes more familiar with the 

SBS market and consider requiring SDRs to 

monitor, screen, and analyze SBS data if, for 

example, it is difficult for the Commission to 

aggregate and analyze the data because SBS data is 

too fragmented among multiple SDRs or the data is 

maintained by multiple SDRs in different formats. 

434See DTCC 2, supra note 19. 

435See Exchange Act Section 13(n)(7), 15 U.S.C. 

78m(n)(7). 

436Although Exchange Act Section 13(n)(7)(A) 

refers to ‘‘swap data repository,’’ the Commission 

believes that the Congress intended it to refer to 

‘‘security-based swap data repository.’’ See 

generally Am. Petroleum Institute v. SEC, 714 F.3d 

1329, 1336–37 (D.C. Cir. 2013) (explaining that 

‘‘[t]he Dodd-Frank Act is an enormous and complex 

statute, and it contains’’ a number of ‘‘scrivener’s 

errors’’). 

437See Section VI.A.1.c of this release discussing 

the likelihood that most of the information that 

would be contained in a ‘‘rulebook’’ would be filed 

as part of an SDR’s policies and procedures that are 

attached to Form SDR. 

438See Exchange Act Section 13(n)(7)(A), 15 

U.S.C. 78m(n)(7)(A). 

439See Exchange Act Section 13(n)(7)(B), 15 

U.S.C. 78m(n)(7)(B). 

in a particular format.426 The 

Commission anticipates that it will 

propose for public comment detailed 

specifications of acceptable formats and 

taxonomies that would facilitate an 

accurate interpretation, aggregation, and 

analysis of SBS data by the Commission. 

The Commission intends to maximize 

the use of any applicable current 

industry standards for the description of 

SBS data, build upon such standards to 

accommodate any additional data fields 

as may be required, and develop such 

formats and taxonomies in a timeframe 

consistent with the implementation of 

SBS data reporting by SDRs. The 

Commission recognizes that as the SBS 

market develops, new or different data 

fields may be needed to accurately 

represent new types of SBSs, in which 

case the Commission may provide 

updated specifications of formats and 

taxonomies to reflect these new 

developments. Until such time as the 

Commission adopts specific formats and 

taxonomies, SDRs may provide direct 

electronic access to the Commission to 

data in the form in which the SDRs 

maintain such data. 

As stated in Section IV of this release 

with respect to commenters’ suggestions 

regarding consolidation of SBS data,427

the Commission does not believe that it 

is necessary to designate, at this time, an 

SDR or any registered entity to receive, 

through direct electronic access, SBS 

data maintained by other SDRs in order 

to aggregate the data. At this time, the 

Commission believes that it—rather 

than any particular registered entity—is 

in the best position to aggregate data 

across multiple registered SDRs. The 

Commission anticipates that its 

proposal on the formats and taxonomies 

for SBS data provided to the 

Commission pursuant to Rule 13n– 

4(b)(5) will facilitate its ability to carry 

out this function. The Commission may 

revisit this issue as the SBS market 

evolves. 

A commenter to the Temporary Rule 

Release suggested that the Commission 

affirmatively state that it intends to keep 

information furnished pursuant to the 

rules in that release confidential under 

FOIA or to seek a legislative solution.428

The Commission anticipates that it will 

keep reported data that it obtains from 

an SDR (via direct electronic access or 

any other means) confidential, subject to 

the provisions of applicable law.429

After considering the comments, the 

Commission is adopting Rule 13n4(b)(5) as proposed. 

iii. Monitoring, Screening, and Analysis 

Although the Commission is adopting 

Rule 13n–4(b)(7) as proposed, it is not, 

at this time, directing SDRs to establish 

any automated systems for monitoring, 

screening, and analyzing SBS data. One 

commenter urged the Commission to 

adopt a rule to require an SDR to 

establish automated systems for 

monitoring, screening, and analyzing 

SBS data,430 but the Commission 

continues to believe that it is better to 

take a measured approach in addressing 

this statutory requirement to minimize 

imposing costs on SDRs until the 

Commission is in a better position to 

determine what information it needs in 

addition to the information that it can 

obtain from SDRs through other rules 

applicable to SDRs, such as Rule 13n– 

4(b)(5).431 For the same reasons, the 

Commission is not, as another 

commenter suggested,432 providing 

additional details on what may be 

expected of SDRs in this area. The 

Commission, however, expects to 

consider further steps to implement this 

requirement as the SBS market develops 

and the Commission gains experience in 

regulating this market.433 Because the 

Commission is not requiring an SDR to 

monitor, screen, and analyze SBS data 

maintained by the SDR at this time, the 

Commission is also not taking one 

commenter’s suggestion to designate, at 

this time, an SDR to centrally monitor, 

screen, and analyze SBS data 

maintained by all SDRs.434 The 

Commission believes that it is 

premature to do so without better 

understanding what additional 

information would be useful to the 

Commission. After considering the 

comments, the Commission is adopting 

Rule 13n–4(b)(7) as proposed. 

3. Implementation of Core Principles 

(Rule 13n–4(c)) 

Each SDR is required, under Exchange 

Act Section 13(n)(7), to comply with 

core principles relating to (1) market 

access to services and data, (2) 

governance arrangements, and (3) 

conflicts of interest.435 Specifically, 

unless necessary or appropriate to 

achieve the purposes of the Exchange 

Act, an SDR436 is prohibited from 

adopting any rules 437 or taking any 

action that results in any unreasonable 

restraint of trade or imposing any 

material anticompetitive burden on the 

trading, clearing, or reporting of 

transactions.438 In addition, each SDR 

must establish governance arrangements 

that are transparent to fulfill public 

interest requirements and to support the 

objectives of the Federal Government, 

owners, and participants.439 Moreover, 

each SDR must establish and enforce 

rules to minimize conflicts of interest in 

the decision-making process of the SDR 

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440See Exchange Act Section 13(n)(7)(C), 15 

U.S.C. 78m(n)(7)(C). 

441See Exchange Act Section 13(n)(7)(A), 15 

U.S.C. 78m(n)(7)(A). 

442Proposed Rule 13n–4(c)(1). 

443Proposed Rule 13n–4(c)(1)(i). 

444Proposed Rule 13n–4(c)(1)(ii). 

445Proposed Rule 13n–4(c)(1)(iii). 

446Proposed Rule 13n–4(c)(1)(iv). 

447See Barnard, supra note 19; Better Markets 1, 

supra note 19; DTCC 2, supra note 19; MarkitServ, 

supra note 19; Tradeweb SBSR, supra note 27; 

Benchmark*, supra note 20; CDEU*, supra note 20; 

McLeish*, supra note 20; see also Better Markets 2, 

supra note 19; DTCC 5, supra note 19; DTCC CB, 

supra note 26. 

448Three comments submitted prior to the 

Proposing Release agreed with the Commission on 

the importance of market transparency. See 

McLeish*, supra note 20; CDEU*, supra note 20 

(supporting ‘‘efforts by Congress to improve 

transparency, accountability and stability’’); 

Benchmark*, supra note 20 (‘‘fully support[ing] 

regulatory efforts to increase transparency in the 

OTC markets’’); see also SIFMA*, supra note 20 

(indicating that increased price transparency will 

improve the application of models used in the 

computation of capital requirements for purposes of 

complying with Exchange Act Rule 15c3–1). For 

example, one commenter stressed the importance of 

requiring market transparency for all market 

participants without any exceptions. McLeish*, 

supra note 20 (believing that ‘‘there should be 

transparency for everyone’’ and there should be ‘‘no 

exceptions’’). Another commenter believed that 

market transparency will improve liquidity in the 

SBS market. Benchmark*, supra note 20. To the 

extent that these commenters are broadly 

supporting transparency, the Commission believes 

that Rule 13n–4(c)(1) reflects this broad support. 

449 DTCC 5, supra note 19 (stating that ‘‘the 

Commission correctly emphasizes that market 

participants offering potentially competing services 

should not be subject to anti-competitive practices, 

including product tying, overly restrictive terms of 

use, and anti-competitive price discrimination’’). 

With respect to this comment, the Commission 

notes that the rules adopted in this release apply 

to only SDRs. To the extent that the Commission 

adopts rules prohibiting other market participants 

from engaging in anti-competitive practices, those 

rules will be addressed in separate releases. 

450 DTCC CB, supra note 26. 

451 DTCC CB, supra note 26; see also Proposing 

Release, 75 FR at 77321, supra note 2; CPSS–IOSCO 

Trade Repository Report, supra note 48. 452Barnard, supra note 19. 

453Barnard, supra note 19. 

454Barnard, supra note 19. 

455 DTCC 2, supra note 19 (noting the success of 

a model that charges dealers for services on an atcost basis and that operates at no cost to the buyside and end-users); MarkitSERV, supra note 19. 

456MarkitSERV, supra note 19. 

457MarkitSERV, supra note 19. 

458MarkitSERV, supra note 19. 

459MarkitSERV, supra note 19. 

and to establish a process for resolving 

any such conflicts of interest.440 Rule 

13n–4(c) incorporates and implements 

these three core principles. 

a. First Core Principle: Market Access to 

Services and Data (Rule 13n–4(c)(1)) 

i. Proposed Rule 

Proposed Rule 13n–4(c)(1) would 

incorporate and implement the first core 

principle 441 by requiring SDRs, unless 

necessary or appropriate to achieve the 

purposes of the Exchange Act and the 

rules and regulations thereunder, to not 

(i) adopt any policies and procedures or 

take any action that results in an 

unreasonable restraint of trade; or (ii) 

impose any material anticompetitive 

burden on the trading, clearing, or 

reporting of transactions.442 Proposed 

Rule 13n–4(c)(1) would include four 

specific requirements. First, each SDR 

would be required to ensure that any 

dues, fees, or other charges it imposes, 

and any discounts or rebates it offers, 

are fair and reasonable and not 

unreasonably discriminatory; such dues, 

fees, other charges, discounts, or rebates 

would be required to apply consistently 

across all similarly-situated users of the 

SDR’s services.443 Second, each SDR 

would be required to permit market 

participants to access specific services 

offered by the SDR separately.444 Third, 

each SDR would be required 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 as well as fair, 

open, and not unreasonably 

discriminatory participation by market 

participants, market infrastructures, 

venues from which data can be 

submitted to the SDR, and third party 

service providers that seek to connect to 

or link with the SDR.445 Finally, each 

SDR would be required 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.446

ii. Comments on the Proposed Rule 

As discussed below, eight 

commenters submitted comments 

relating to this proposed rule,447 which 

were mixed.448 Generally speaking, one 

commenter supported ‘‘the 

Commission’s stated goals of protecting 

market participants and maintaining a 

fair, orderly, and efficient [SBS] market 

through the promotion of competition’’ 

and urged ‘‘the Commission to adopt 

rules that preserve a competitive 

marketplace and forbid [ ] anticompetitive practices by all [SBS] 

market participants.’’449 The commenter 

stated that ‘‘[i]n a global SB swap 

market, the anti-competitive practices of 

even a single market participant have 

potential ramifications for the entire 

marketplace.’’ 450

In suggesting that the Commission 

rely on CPSS–IOSCO’s 

recommendations such as the PFMI 

Report, the commenter cited, as an 

example, to the Commission’s 

concurrence, in the Proposing Release, 

with the CPSS–IOSCO Trade Repository 

Report’s recommendation that ‘‘[m]arket 

infrastructures and service providers 

that may or may not offer potentially 

competing services should not be 

subject to anticompetitive practices 

such as product tying, contracts with 

non-compete and/or exclusivity clauses, 

overly restrictive terms of use and anticompetitive price discrimination.’’ 451

(1) Rule 13n–4(c)(1)(i): Fair, Reasonable, 

and Not Unreasonably Discriminatory 

Dues, Fees, Other Charges, Discounts, 

and Rebates 

One commenter supported the 

requirements in proposed Rule 13n– 

4(c)(1)(i) because ‘‘they should 

encourage market participants to use 

SDRs’ services.’’ 452 The commenter 

believed that an SDR should charge 

different fee structures only if it relates 

to the SDR’s ‘‘differing costs of 

providing access or service to particular 

categories’’ and that ‘‘[a]nything else 

would be discrimination.’’ 453 The 

commenter suggested that ‘‘any 

preferential pricing such as volume 

discounts or reductions should be 

generally viewed as discriminatory’’ and 

believed that ‘‘[s]uch volume discounts 

or reductions tend to discriminate in 

favour of the large players.’’ 454

Two commenters believed that SDRs 

should be permitted to continue using 

the current ‘‘dealer pays’’ or ‘‘sell-side 

pays’’ model,455 or at least to continue 

using that model if it is acceptable by 

the SDRs’ market participants.456 One of 

the commenters expressed particular 

concern about the effect that the 

Commission’s proposed rule requiring 

nondiscriminatory pricing would have 

on the current ‘‘dealer pays’’ or ‘‘sellside pays’’ model.457 The commenter 

suggested that alternatively, the 

Commission’s proposed rule could be 

amended to permit: (a) Different fee 

structures for different classes of 

participants (e.g., sell-side and buy-side) 

to reflect the different cost of their usage 

of the SDR, or (b) payment of fees by 

only the reporting party.458 The 

commenter believed that this approach 

would be consistent with the 

Commission’s proposed ‘‘not 

unreasonably discriminatory’’ 

requirement because ‘‘SDRs would be 

prohibited from discriminating within 

each class, while participants in 

different classes may be charged 

different fees.’’ 459 The commenter 

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460MarkitSERV, supra note 19. 461 DTCC 2, supra note 19; MarkitSERV, supra 

note 19; see also DTCC CB, supra note 26 (not 

supporting anti-competitive price discrimination). 462 DTCC 2, supra note 19. 463 DTCC 2, supra note 19. 464 DTCC 4, supra note 19 (‘‘While market 

participants should be able to enjoy the economies 

of shared platforms . . . the allocations of platform 

operating costs between services cannot be 

arbitrary.’’). 465MarkitSERV, supra note 19. 466Better Markets 1, supra note 19. 

467Better Markets 1, supra note 19. 

468Tradeweb SBSR, supra note 27. 

469Tradeweb SBSR, supra note 27. 

470Tradeweb SB SEF, supra note 29. 

471Tradeweb SB SEF, supra note 29. 

472 DTCC 2, supra note 19; MarkitSERV, supra 

note 19 (‘‘[M]arket participants’ decisions to use or 

not use a given [SDR] or its affiliates’ [a]ncillary 

[s]ervices should rest entirely with the market 

participant[s]. These decisions should not be tied to 

any other service provided by a regulated entity or 

its affiliate . . . or [an SDR] and any related [third 

party service provider].’’); TriOptima, supra note 19 

(‘‘[I]t is important that market participants have the 

ability to access specific services offered by the 

[SDR] separately.’’); see also DTCC 3, supra note 19 

(noting that the Commission’s proposed rule 

requiring ‘‘each SDR to permit market participants 

to access specific services offered by the SDR 

separately’’ is consistent with the CPSS–IOSCO 

Trade Repository Report); DTCC CB, supra note 26 

(not supporting anti-competitive practices such as 

product tying). 

473MarkitSERV, supra note 19. 

474 DTCC 2, supra note 19 (‘‘Allowing bundling 

of obligations undertaken by third party service 

providers with an SDR will detract from the SDR’s 

utility function and jeopardize the value of SDRs to 

regulators and the market.’’); see also DTCC 4, supra 

note 19 (‘‘[N]o provider of trading or clearing 

services should be permitted to simply declare itself 

the SDR for trades it facilitates. . . . [A]side from 

being anti-competitive, this type of vertical 

bundling would also (a) reverse the principal-agent 

relationship . . . and (b) add a layer of unnecessary 

risk to the control processes that market 

participants may determine are needed.’’). 

475 DTCC 4, supra note 19. 

476 DTCC 2, supra note 19. 

477Barnard, supra note 19. 

478Barnard, supra note 19. 

479TriOptima, supra note 19. 

480TriOptima, supra note 19 (‘‘[W]e would 

encourage the SEC to clarify that [proposed Rule 

13n–4(c)(1)(ii)] should apply to all users of an 

[SDR], including third party service providers with 

Written Client Disclosure Consents seeking to 

access the [SDR] Information, and not just market 

Continued 

further believed that ‘‘any other literal 

interpretation of ‘non-discriminatory 

access’ would have the unintended 

consequence of significantly increasing 

the costs for buy-side participants and, 

by doing so, generally discouraging their 

use of [SDRs].’’ 460

The same two commenters further 

believed that an SDR’s fees for certain 

services should reflect the SDR’s costs 

of providing related services.461 One of 

these commenters believed, for 

example, that ‘‘if a reporting party uses 

a third party service provider for trade 

submission, which fulfils the SDR’s 

requirement to confirm the trade with 

both parties, this report would 

potentially be charged at a lower cost 

than a direct report to the SDR, 

requiring the SDR itself to confirm with 

the other party.’’ 462 The commenter 

further noted that since small ‘‘nonreporting counterparties will 

legitimately want to interact with SDRs, 

if only to verify what has been reported, 

SDRs should have the flexibility to 

facilitate such access by not charging, or 

charging only nominal amounts, for 

such interaction.’’ 463 In addition, the 

commenter suggested that the 

Commission clarify its rules to ‘‘prevent 

predatory or coercive pricing by 

providers engaged in any two or more 

trading, clearing or repository services’’ 

and to prohibit cross-subsidies between 

services.464 The other commenter 

suggested that SDRs should be 

permitted to charge different (i.e., 

higher) fees in order to recoup costs 

associated with ‘‘processing any highly 

non-standard, albeit eligible [(i.e., 

within the asset class for which the SDR 

accepts data)], SBS transactions.’’ 465

Another commenter believed that the 

Commission’s proposed rule, which 

refers to a standard of ‘‘fair and 

reasonable’’ and ‘‘not unreasonably 

discriminatory’’ and which requires 

consistent application across all 

similarly-situated users, is vague and 

suggested that the Commission 

‘‘establish fees, rates, or even formulas 

for determining rates.’’ 466 The 

commenter suggested that in order to 

prevent SDRs from taking ‘‘unfair 

advantage of the mandated use of their 

services,’’ particularly ‘‘in SBS markets 

where there is no effective competition, 

SDRs [should] be required to justify the 

reasonableness of price levels charged to 

both suppliers of data and recipients of 

data.’’ 467

One commenter to proposed 

Regulation SBSR suggested that SDRs 

should not be permitted to charge fees 

to third parties acting on behalf of 

counterparties for accepting SBS 

transaction information because such 

fees would increase the cost of using an 

SB SEF or other third party.468 The 

commenter believed that SDRs would 

likely charge the same third parties for 

subsequent use of SBS data maintained 

by the SDRs.469 In submitting comments 

to the Commission’s rulemaking 

regarding SB SEFs, the same commenter 

suggested that the Commission require 

SDRs to (i) make available any data they 

collect and may properly use for 

commercial purposes to all market 

participants, including SB SEFs and 

clearing agencies, on reasonable terms 

and pricing and on a non-discriminatory 

basis, and (ii) share, on commercially 

reasonable terms, revenue that SDRs 

generate from redistributing such data 

with parties providing the data to the 

SDRs (e.g., SB SEFs).470 The commenter 

believed that without these 

requirements, the Commission would be 

effectively taking away from market 

participants, including SB SEFs and 

clearing agencies, a potentially 

significant and valuable component of 

their potential market data revenue 

streams.471

(2) Rule 13n–4(c)(1)(ii): Offering 

Services Separately 

Three commenters supported the 

Commission’s proposed rule requiring 

SDRs to permit market participants to 

access services offered by SDRs 

separately.472 Specifically, one 

commenter agreed that SDRs’ fees 

should be transparent.473 As a corollary 

to this, one of the commenters suggested 

that third party service providers should 

be barred from bundling their services 

with an SDR’s services.474 Additionally, 

the same commenter believed that 

‘‘[a]ny provider offering trading[,] 

clearing or repository services for one 

asset class should not be permitted [to] 

bundl[e] or t[ie] when providing 

services for other asset classes.’’ 475 The 

commenter suggested, however, that 

SDRs should be permitted to offer two 

or more service options, including one 

that fulfills the minimum regulatory 

reporting requirements and a suite of 

other services to complement the 

mandatory reporting function.476

One commenter believed that SDRs 

should be able to offer ancillary 

services, whether bundled or not.477

The commenter, however, did not 

support the bundling of ancillary 

services with mandatory or regulatory 

services.478

Another commenter stated that the 

proposed rule went ‘‘a long way to 

address a third party’s (such as a service 

provider’s) non-discriminatory access 

rights to granular [SDR] Information,’’ 

and that such access is important so as 

to ‘‘not stifle innovation and the 

competition in the provision of posttrade processing services’’ and to 

‘‘uphold a fair, secure and efficient posttrade market.’’ 479 In the context of 

discussing proposed Rule 13n– 

4(c)(1)(ii), the commenter suggested 

that, to further these goals, the 

Commission should clarify that all 

‘‘users’’ of an SDR’s services, including 

unaffiliated third party service 

providers, and not only market 

participants that submit trade data, 

should be permitted to access each of 

the SDR’s services separately.480

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14478 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

participants who submit trade data. I.e., users of an 

[SDR] should have the right to access services 

provided by an [SDR] separately.’’). 

481 DTCC 2, supra note 19 (SDRs ‘‘should 

demonstrate strict impartiality in making data 

available to, or receiving data from, other providers, 

including affiliates of SDRs.’’); MarkitSERV, supra 

note 19; Better Markets 1, supra note 19; TriOptima, 

supra note 19; see also Better Markets 2, supra note 

19; DTCC CB, supra note 26 (not supporting anticompetitive practices such as contracts with noncompete and/or exclusivity clauses and overly 

restrictive terms of use). 

482 DTCC 2, supra note 19; see also DTCC 3, supra 

note 19 (recommending that SDRs ‘‘be able to 

accept trades in any manner consistent with the 

regulations, from any market participant’’ and 

‘‘have appropriate communications links, to the 

extent feasible, with all parties to its transactions’’); 

DTCC SBSR, supra note 27 (stating that SDRs ‘‘will 

need to support an appropriate set of connectivity 

methods; the Commission should not, however, 

require SDRs to support all connectivity methods, 

as the costs to do so would be prohibitive’’); see 

also TriOptima, supra note 19 (‘‘[I]t is clear that an 

[SDR] should provide [s]wap [p]articipants with 

access to their own trade data.’’). 

483 DTCC 3, supra note 19. 

484 DTCC 3, supra note 19; see also DTCC 2, supra 

note 19 (believing that open access to data by other 

service providers ‘‘is an important principle for 

allowing development of automation and efficient 

operational processing in the market, while 

preserving the parties’ control over confidential 

information’’). 

485MarkitSERV, supra note 19. 

486MarkitSERV, supra note 19. 

487TriOptima, supra note 19. 

488TriOptima, supra note 19 (emphasizing ‘‘the 

importance of enhanced non-discriminatory access 

rights to [SDR] Information for third party service 

providers in order to maintain competition and 

innovation within the post-trade area, especially 

where such third party service providers have been 

authorized to access [SDR] Information under 

Written Client Disclosure Consents’’ and stating 

that ‘‘[a]n explicit obligation for an [SDR] to provide 

such full and unrestricted access to [SDR] 

Information to a third party (service provider) is 

important in order to uphold a fair, secure and 

efficient post-trade market; an [SDR] should not 

restrict access to [SDR] Information on other 

grounds than integrity risks to the [SDR] 

Information’’). 

489TriOptima, supra note 19. 

490TriOptima, supra note 19 (‘‘We note that the 

third party service provider, for whom a Written 

Client Disclosure Consents is given, is actually 

exercising the Swap Participant’s right to access 

their own trade information which is held by the 

[SDR]. An [SDR] should be required to treat a third 

party service provider with a disclosure consent as 

acting as an ‘agent’ for the owner of the trade 

information and provide the third party service 

provider with the same type of access which the 

owner of such data is entitled to, subject to any 

restrictions set out in the disclosure consent.’’). 

491TriOptima, supra note 19. 

492TriOptima, supra note 19. 

493Better Markets 1, supra note 19; see also DTCC 

4, supra note 19 (suggesting that the Commission 

clarify its rules to prevent unfair or coercive linking 

or blocking of links between trading, clearing, or 

repository services). 

494Better Markets 2, supra note 19. 

495Better Markets 1, supra note 19. 

496Better Markets 1, supra note 19. 

497Better Markets 1, supra note 19. 

498See infra note 500 of the release discussing a 

modification to proposed Rule 13n–4(c)(1). 

499See Exchange Act Section 13(n)(7)(A), 15 

U.S.C. 78m(n)(7)(A). 

(3) Rule 13n–4(c)(1)(iii): Fair, Open, and 

Not Unreasonably Discriminatory 

Access 

Four commenters generally supported 

the Commission’s proposed rule 

regarding fair, open, and not 

unreasonably discriminatory access to 

services offered and data maintained by 

SDRs, but a few of these commenters 

also recommended additional 

requirements.481 One of these 

commenters noted that ‘‘all 

counterparties to trades reported to an 

SDR should, as a matter of principle, 

have access to all data relating to trades 

to which they are [counterparties]’’ and 

that ‘‘[t]his access should be made 

available to smaller, lower volume 

market participants, as necessary, 

through the reduction or waiver of 

certain fees.’’ 482 The same commenter 

also noted that ‘‘clearinghouses and [SB 

SEFs] should have the ability to report 

trades to SDRs . . . to satisfy their 

customers’ reporting preferences.’’ 483 In 

addition, the commenter supported 

‘‘open access to data by other service 

providers (based on the consent of the 

parties for that provider to receive the 

data) [because it] is critical to preserve 

the trading parties’ control over their 

own data.’’ 484

Another commenter who supported 

the rule indicated that SDRs should be 

able to condition access by specifying 

the methods and channels that must be 

used in order to connect to the SDR and 

setting certain minimum standards.485

This commenter also recommended that 

SDRs should be permitted to provide 

connectivity to third party service 

providers, without requiring any 

specific services from them as a 

condition to their gaining access to the 

SBS data.486

One commenter urged the 

Commission to ‘‘clarify in the final rule 

that [SDRs] shall provide third party 

service providers, who have been 

authorized to access information by the 

counterparties to the relevant trades 

under Written Client Disclosure 

Consents, with access to [SDR] 

Information.’’ 487 The commenter 

further stressed the importance of 

providing ‘‘full and unrestricted’’ access 

to SBS data to third party service 

providers, particularly those acting on 

behalf of SBS counterparties.488 The 

commenter objected to the lack of an 

‘‘obligation on the [SDR] to provide full 

and unrestricted access to [granular 

trade data] to a third party service 

provider’’ and suggested that ‘‘this 

obligation should apply where the 

counterparties to the relevant trades 

have provided [written consents and 

authorizations] to the [SDR] to disclose 

granular trading data to the third party 

service provider.’’ 489 The commenter 

noted that, when such third party 

service provider is acting pursuant to a 

written consent by an SBS counterparty, 

it is exercising that counterparty’s right 

to access its own trade information.490

The commenter ‘‘stress[ed] the 

importance that data access rights and 

requirements imposed on a third party 

(service provider) seeking to access 

[SDR] Information [ ] are applied 

equally to the [SDR] itself when 

providing ancillary services and to 

affiliated service providers within the 

same group as the [SDR].’’ 491 In this 

regard, the commenter believed that 

‘‘the [SDR] should not have discretion to 

offer advantages in respect of its own 

ancillary services or services offered by 

affiliated service providers vis-a`-vis 

other third party service providers.’’ 492

One commenter recommended that 

the Commission require that each SDR 

establish and maintain effective 

interoperability and interconnectivity 

with other SDRs, market infrastructures, 

and venues from which data can be 

submitted to the SDR.493 Additionally, 

the commenter suggested that market 

participants should have ‘‘equal and fair 

access to data on SBS transactions,’’ 494

and that the Commission’s rules 

‘‘establish stronger and more detailed 

standards against discriminatory access, 

and they should also establish 

regulatory oversight of access 

denials.’’ 495 The commenter further 

suggested that the Commission’s 

proposed rules set forth the ‘‘clearly 

stated objective criteria’’ and permit 

denial of access only on risk-based 

grounds, i.e., risks related to the security 

or functioning of the market.496

(4) Rule 13n–4(c)(1)(iv): Prohibited or 

Limited Access 

One commenter recommended that 

the Commission require an SDR ‘‘to 

promptly file a notice with the 

Commission if the SDR . . . prohibits or 

limits any person’s access to services 

offered or data maintained by the 

SDR.’’ 497

iii. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n– 

4(c)(1) as proposed, with one minor 

modification.498 Rule 13n–4(c)(1), 

which tracks the statutory language,499

provides that ‘‘[u]nless necessary or 

appropriate to achieve the purposes of 

the [Exchange] Act and the rules and 

regulations thereunder, the securitybased swap data repository shall not 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14479 

500The Commission is making a typographical 

modification to proposed Rule 13n–4(c)(1), which 

refers to ‘‘any policies and procedures.’’ As 

adopted, the rule refers to ‘‘any policies or 

procedures.’’ 

501See DTCC 5, supra note 19 (supporting ‘‘the 

Commission’s stated goals of protecting market 

participants and maintaining a fair, orderly, and 

efficient [SBS] market through the promotion of 

competition’’). 

502See DTCC 5, supra note 19 (urging ‘‘the 

Commission to adopt rules that preserve a 

competitive marketplace and forbid [ ] anticompetitive practices by all [SBS] market 

participants’’); see also DTCC CB, supra note 26 

(stating that ‘‘[i]n a global [SBS] market, the anticompetitive practices of even a single market 

participant have potential ramifications for the 

entire marketplace’’). 

503Proposing Release, 75 FR at 77321, supra note 

2; accord DTCC CB, supra note 26 (citing to the 

CPSS–IOSCO Trade Repository Report’s 

recommendation that market infrastructures and 

service providers should not be subject to 

anticompetitive practices). 

504Proposing Release, 75 FR at 77320, supra note 

2. 

505The Exchange Act applies a similar standard 

for other registrants. See, e.g., Exchange Act Section 

6(b)(4), 15 U.S.C. 78f(b)(4) (‘‘The rules of the 

exchange [shall] provide for the equitable allocation 

of reasonable dues, fees, and other charges among 

its members and issuers and other persons using its 

facilities.’’); Exchange Act Section 17A(b)(3)(D), 15 

U.S.C. 78q–1(b)(3)(D) (‘‘The rules of the clearing 

agency [shall] provide for the equitable allocation 

of reasonable dues, fees and other charges among 

its participants.’’); see also Exchange Act Sections 

11A(c)(1)(C) and (D), 15 U.S.C. 78k–1(c)(1)(C) and 

(D) (providing that the Commission may prescribe 

rules to assure that all SIPs may, ‘‘for purposes of 

distribution and publication, obtain on fair and 

reasonable terms such information’’ and to assure 

that ‘‘all other persons may obtain on terms which 

are not unreasonably discriminatory’’ the 

transaction information published or distributed by 

SIPs). 

506Proposing Release, 75 FR at 77320, supra note 

2. 

507See Regulation of Market Information Fees and 

Revenues, Exchange Act Release No. 42208 (Dec. 9, 

1999), 64 FR 70613, 70619 (Dec. 17, 1999). 

508See DTCC 2, supra note 19; MarkitSERV, 

supra note 19 (both believing that an SDR’s fees for 

services should be allowable if such fees reflect the 

SDR’s costs of providing such services). 

509See Proposing Release, 75 FR at 77320, supra 

note 2. 510See DTCC 2, supra note 19. 511See DTCC 2, supra note 19; MarkitSERV, 

supra note 19. 512See MarkitSERV, supra note 19. 513Better Markets 1, supra note 19. 

adopt any policies or procedures 500 or 

take any action that results in an 

unreasonable restraint of trade or 

impose any material anticompetitive 

burden on the trading, clearing, or 

reporting of transactions.’’ In 

implementing the first core principle, 

this rule is intended to protect investors 

and to maintain a fair, orderly, and 

efficient SBS market.501 The 

Commission believes that this rule will 

protect investors by, for example, 

fostering service transparency and 

promoting competition in the SBS 

market.502 Generally speaking, the 

Commission also believes that ‘‘[m]arket 

infrastructures and service providers 

that may or may not offer potentially 

competing services should not be 

subject to anti-competitive practices 

such as product tying, contracts with 

non-compete and/or exclusivity clauses, 

overly restrictive terms of use and anticompetitive price discrimination.’’ 503

As discussed in the Proposing Release 

and more fully below, when 

administering this rule, the Commission 

generally expects to apply the principles 

and procedures that it has developed in 

other areas in which it monitors 

analogous services, such as clearing 

agencies.504 To comply with the first 

core principle, an SDR is required to 

comply with four specific requirements. 

(1) Rule 13n–4(c)(1)(i): Fair, Reasonable, 

and Not Unreasonably Discriminatory 

Dues, Fees, Other Charges, Discounts, 

and Rebates 

Rule 13n–4(c)(1)(i) requires each 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.505 The 

rule also requires such dues, fees, other 

charges, discounts, or rebates to be 

applied consistently across all similarlysituated users of the SDR’s services, 

including, but not limited to, market 

participants, market infrastructures 

(including central counterparties), 

venues from which data can be 

submitted to the SDR (including 

exchanges, SB SEFs, electronic trading 

venues, and matching and confirmation 

platforms), and third party service 

providers. 

As discussed in the Proposing 

Release, the terms ‘‘fair’’ and 

‘‘reasonable’’ often need standards to 

guide their application in practice.506

One factor that the Commission has 

taken into consideration to evaluate the 

fairness and reasonableness of fees, 

particularly those of a monopolistic 

provider of a service, is the cost 

incurred to provide the service.507

Consistent with commenters’ views,508

the Commission believes that if an 

SDR’s fees for certain services reflect the 

SDR’s costs of providing those services, 

then the fees would generally be 

considered fair and reasonable. 

Based on the Commission’s 

experience with other registrants, the 

Commission will take a flexible 

approach to evaluate the fairness and 

reasonableness of an SDR’s fees and 

charges on a case-by-case basis. The 

Commission recognizes that there may 

be instances in which an SDR could 

charge different users different prices 

for the same or similar services. Such 

differences, however, cannot be 

unreasonably discriminatory. 

The Commission continues to believe 

that an SDR should make reasonable 

accommodations, including 

consideration of any cost burdens, on a 

non-reporting counterparty to an SBS in 

connection with the SDR following up 

on the accuracy of the SBS transaction 

data.509 Thus, the Commission agrees 

with one commenter’s view that an SDR 

may facilitate a non-reporting 

counterparty’s ability to verify the 

accuracy of a reported SBS transaction 

by not charging the counterparty or 

charging the counterparty only a 

nominal amount.510

With respect to commenters’ views on 

the current ‘‘dealer pays’’ or ‘‘sell-side 

pays’’ model,511 the Commission does 

not believe that such a model is 

unreasonably discriminatory per se. As 

such, the Commission believes that 

amending proposed Rule 13n–4(c)(1)(i) 

to explicitly permit different fee 

structures, as suggested by one 

commenter,512 is not necessary. 

Furthermore, Rule 13n–4(c)(1)(i) is not 

intended to prohibit an SDR from 

utilizing any one particular model, 

including a ‘‘dealer pays’’ or ‘‘sell-side 

pays’’ model, a model with different fee 

structures for different classes of 

participants, or a model where only the 

reporting party is required to pay an 

SDR’s fees, as long as there is a fair and 

reasonable basis for the fee structure 

and it is not unreasonably 

discriminatory. If, however, an SDR 

imposes dues, fees, or other charges to 

create intentionally a barrier to access 

the SDR without a legitimate basis, then 

those dues, fees, or charges may be 

considered unfair or unreasonable. 

The Commission disagrees with three 

comments received. The first 

commenter suggested that the 

Commission establish fees or rates, or 

dictate formulas by which fees or rates 

are determined.513 The Commission 

believes that in light of the various SDR 

business models and fee structures that 

may emerge, it is better to provide SDRs 

with the flexibility to establish their 

own fees or rates, provided that they are 

fair, reasonable, and not unreasonably 

discriminatory. The Commission is 

providing SDRs with such flexibility to 

promote competition among SDRs, 

thereby keeping the cost of SDRs’ 

services to a minimum. 

The second commenter believed that 

an SDR should charge different fee 

structures only if it relates to the SDR’s 

‘‘differing costs of providing access or 

service to particular categories’’ and that 

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514Barnard, supra note 19. 

515See Item 26 of Form SDR. 

516Tradeweb SB SEF, supra note 29. 

517See Regulation SBSR Adopting Release, supra 

note 13 (Rule 902 requiring SDRs to publicly 

disseminate certain SBS information). 

518See Section VI.D.3.a.iii(3) of this release 

discussing an SDR’s obligation to provide fair, 

open, and not unreasonably discriminatory access 

to others. 

519See DTCC 4, supra note 19. 

520Accord Exchange Act Section 17A(b)(3)(D), 15 

U.S.C. 78q–1(b)(3)(D) (requiring the rules of a 

clearing agency to provide for the equitable 

allocation of reasonable dues, fees, and other 

charges among its participants). 

521Tradeweb SBSR, supra note 27. 

522Tradeweb SB SEF, supra note 29. 

523 DTCC 4, supra note 19. 

524See DTCC 2, supra note 19 (suggesting that 

SDRs should be permitted to offer two or more 

service options, including one that fulfills the 

minimum regulatory reporting requirements and 

other services to complement the mandatory 

reporting function). But see DTCC 4, supra note 19 

(suggesting that bundling should not be permitted 

across asset classes). 

525See Barnard, supra note 19 (believing that 

SDRs should be able to offer ancillary services, 

whether bundled or not, but not supporting the 

bundling of ancillary services with mandatory or 

regulatory services). 

526See Exchange Act Section 13(n)(7)(A), 15 

U.S.C. 78m(n)(7)(A) (regarding the first SDR core 

principle). See also Section VIII discussing 

economic analysis. 

527See supra note 247 (defining ‘‘affiliate’’). 

528See Proposing Release, 75 FR at 77320–77321, 

supra note 2. 

529The Commission notes that under Exchange 

Act Section 20(b), 15 U.S.C. 78t(b), ‘‘[i]t shall be 

unlawful for any person, directly or indirectly, to 

do any act or thing which it would be unlawful for 

such person to do under the provisions of [the 

Exchange Act] or any rule or regulation thereunder 

through or by means of any other person.’’ 

530See TriOptima, supra note 19. 

‘‘any preferential pricing such as 

volume discounts or reductions should 

be generally viewed as 

discriminatory.’’514 Although an SDR’s 

costs in providing its services or access 

to SBS data maintained by the SDR may 

be a factor in evaluating the SDR’s fee 

structure, the Commission believes that 

it is not necessarily the only factor. 

There may be instances in which an 

SDR’s fees or discounts (including 

volume discounts) are fair, reasonable, 

and not unreasonably discriminatory, 

even if the fees or discounts are not 

related to the SDR’s costs in providing 

such services or access. In all instances, 

the SDR is responsible for 

demonstrating that its fees or discounts 

meet this regulatory standard.515 As 

stated above, the Commission expects to 

evaluate the fairness and reasonableness 

of an SDR’s fees and charges on a caseby-case basis. 

The third commenter suggested that 

the Commission require SDRs to make 

available any data they collect and may 

properly use for commercial purposes to 

all market participants on reasonable 

terms and pricing and on a non– 

discriminatory basis.516 Although the 

Commission agrees that fees imposed by 

SDRs should be ‘‘on reasonable terms 

and pricing and on a non– 

discriminatory basis,’’ the Commission 

notes that an SDR is not required to 

make SBS data available to all market 

participants, aside from SBS data that is 

publicly disseminated pursuant to 

Regulation SBSR.517 As discussed 

below, there may be limited instances in 

which an SDR denies access to a market 

participant.518

With respect to cross-subsidies, the 

Commission believes that it is not 

necessary, as one commenter 

suggested,519 to prohibit cross-subsidies 

between services provided by an SDR, 

but the Commission recognizes that 

there may be instances in which such 

cross-subsidies would violate Rule 13n– 

4(c)(1)(i). For example, cross-subsidies 

between an SDR’s services that result in 

fees that are arbitrary or have no 

relationship to the costs of providing the 

service on a discrete basis may not be 

consistent with Rule 13n–4(c)(1)(i). This 

is because an arbitrary fee structure 

could mean that fees are not being 

incurred consistently by similarlysituated users of the SDR’s services and 

because the Commission believes that, 

in certain instances, fee structures 

without some relationship to the costs 

of the SDR may not be fair and 

reasonable due to the differential impact 

such charges would have on market 

participants that may choose to use 

some, but not all, of the SDR’s or its 

affiliate’s services.520 Another 

commenter suggested that the 

Commission prohibit SDRs from 

charging fees to third parties acting on 

behalf of counterparties for accepting 

SBS transaction information.521 The 

commenter also suggested that the 

Commission require SDRs to share their 

revenue from redistributing data with 

parties providing the data to the 

SDRs.522 Consistent with the 

Commission’s approach with its other 

registrants, including exchanges and 

clearing agencies, the Commission does 

not believe that it is appropriate to 

dictate who an SDR can and cannot 

charge or with whom an SDR must 

share its revenue. 

One commenter suggested that the 

Commission extend the applicability of 

its rule to providers engaged in two or 

more of trading, clearing, or repository 

services to prevent predatory or coercive 

pricing by the providers.523 As with its 

other rules governing SDRs, the 

Commission’s rule implementing the 

first core principle generally applies 

only to SDR services. To the extent that 

the Commission decides that predatory 

or coercive pricing with respect to nonSDR services needs to be addressed, the 

Commission will take appropriate 

action. 

(2) Rule 13n–4(c)(1)(ii): Offering 

Services Separately 

Rule 13n–4(c)(1)(ii) requires each SDR 

to permit market participants to access 

specific services offered by the SDR 

separately. As one commenter 

suggested,524 an SDR may bundle its 

services, including any ancillary 

services, regardless of the asset class at 

issue, but this rule requires the SDR to 

also provide market participants with 

the option of using its services 

separately.525 The Commission believes 

that it is appropriate to adopt this rule 

as proposed to promote competition.526

If an SDR or its affiliate 527 provides 

an ancillary service, such as a matching 

and confirmation service, then the SDR 

is prohibited by Rule 13n–4(c)(1)(ii) 

from requiring a market participant to 

use and pay for that service as a 

condition of using the SDR’s data 

collection and maintenance services.528

In such an instance, the SDR is also 

prohibited from requiring a market 

participant that uses the SDR’s or 

affiliate’s ancillary service to use the 

SDR’s data collection and maintenance 

services. The Commission also believes 

that if an SDR enters into an oral or 

written agreement or arrangement with 

an affiliate or third party service 

provider that reflects a business plan in 

which the affiliate or third party service 

provider will require its customers to 

use the core services of that SDR, then 

the SDR would not be in compliance 

with Rule 13n–4(c)(1)(ii).529 In 

evaluating the fairness and 

reasonableness of fees that an SDR 

charges for bundled and unbundled 

services, the Commission will take into 

consideration, among other things, the 

SDR’s cost of making those services 

available on a bundled or unbundled 

basis, as the case may be, and a market 

participant’s proportional use of the 

SDR’s services. 

With regard to one commenter’s 

suggestion that all ‘‘users’’ of an SDR’s 

services, including unaffiliated third 

party service providers, should be 

permitted to access the SDR’s non-SDR 

services separately,530 the Commission 

agrees, as set forth in Rule 13n– 

4(c)(1)(ii), that market participants that 

use an SDR’s services should have 

access to specific services offered by the 

SDR, including any ancillary services, 

separately. The Commission believes 

that SDRs should consider giving third 

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531See Better Markets 1, supra note 19. 

532The Commission is not explicitly requiring 

SDRs to maintain effective interoperability and 

interconnectivity with other SDRs at this time, 

partly because such a requirement could hinder the 

developing infrastructure for SBS transactions. 

533See Better Markets 2, supra note 19. 

534See MarkitSERV, supra note 19. Related to this 

comment, another commenter suggested that market 

infrastructures such as clearing agencies and SB 

SEFs should generally have the ability to report SBS 

transactions to SDRs to satisfy their customers’ 

reporting preferences. See DTCC 3, supra note 19. 

As stated above, the Commission intends to adopt 

rules relating to clearing agencies and SB SEFs in 

separate releases. 

535See DTCC 2, supra note 19; see also DTCC 3, 

supra note 19 (noting that SDRs should be able to 

accept trades in any manner consistent with the 

regulations, from any market participant and have 

appropriate communication links, to the extent 

feasible, with all counterparties to SBS transactions 

reported to the SDR); DTCC SBSR, supra note 27 

(stating that SDRs ‘‘will need to support an 

appropriate set of connectivity methods’’). 

536See DTCC 2, supra note 19 (noting that in 

providing access to SBS data, SDRs should reduce 

or waive certain fees, as necessary, to smaller, lower 

volume market participants). 537See Rule 13n–4(c)(1)(i). 538See, e.g., DTCC 3, supra note 19 (supporting 

open access to SBS data maintained by an SDR by 

other service providers); Better Markets 1, supra 

note 19. 539See MarkitSERV, supra note 19. 540See TriOptima, supra note 19 (stating that 

non–discriminatory access is important so as to 

‘‘not stifle innovation and the competition in the 

provision of post-trade processing services’’). 

541Proposing Release, 75 FR at 77321, supra note 

2. 

542Better Markets 1, supra note 19. 

543Better Markets 1, supra note 19. 

544See TriOptima, supra note 19. 

party service providers acting as agents 

for such market participants the same 

rights as the market participants to 

access these services separately. 

However, Rule 13n–4(c)(1)(ii) does not 

require an SDR to afford the agent 

access to the SDR’s unbundled services 

outside of its agency capacity. 

(3) Rule 13n–4(c)(1)(iii): Fair, Open, and 

Not Unreasonably Discriminatory 

Access 

Rule 13n–4(c)(1)(iii) requires each 

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 as well 

as fair, open, and not unreasonably 

discriminatory participation by market 

participants, market infrastructures, 

venues from which data can be 

submitted to the SDR, and third party 

service providers that seek to connect to 

or link with the SDR. As with Rule 13n– 

4(c)(1)(i), the Commission will evaluate 

whether such access or participation is 

‘‘fair, open, and not unreasonably 

discriminatory’’ on a case-by-case basis. 

Although this rule does not explicitly 

require, as one commenter suggested,531

SDRs to establish and maintain effective 

interoperability and interconnectivity 

with other SDRs,532 market 

infrastructures, and venues from which 

data can be submitted, the rule is 

intended to encourage such 

interoperability and interconnectivity 

by requiring SDRs to establish criteria 

that would permit fair, open, and not 

unreasonably discriminatory 

participation by others, including those 

that seek to connect to or link with the 

SDR. 

The Commission agrees with most of 

the comments on this rule. One 

commenter suggested that market 

participants should have ‘‘equal and fair 

access to data on SBS transactions.’’ 533

The Commission agrees with the 

comment to the extent that the 

commenter equated ‘‘equal and fair 

access’’ with the ‘‘fair, reasonable and 

not unreasonably discriminatory’’ 

standard in the rule. However, the 

Commission notes that all market 

participants are not required to be 

treated the same way in all instances. 

For example, if a market participant 

fails to pay the SDR’s reasonable fees, 

then it may be ‘‘fair, reasonable and not 

unreasonably discriminatory’’ for an 

SDR to deny access to the market 

participant. 

The Commission agrees that an SDR 

should be able to condition access to 

SBS data that it maintains by specifying 

the methods and channels that must be 

used to connect to the SDR and by 

setting certain minimum standards,534

provided that such conditions are fair, 

open, and not unreasonably 

discriminatory. The Commission also 

agrees with one commenter’s view that 

an SDR should, to the extent feasible, 

provide each counterparty to an SBS 

transaction that is reported to an SDR 

with reasonable access to the data 

relating to that transaction.535 If an SDR 

provides such access to smaller, lower 

volume market participants at reduced 

or waived fees, as one commenter 

suggested,536 then the discount must be 

fair and reasonable and not 

unreasonably discriminatory.537 The 

Commission further agrees with 

commenters’ views that an SDR should 

provide connectivity to others, 

including third party service providers, 

clearinghouses, and SB SEFs,538 and, as 

one commenter suggested,539 if the SDR 

delegates the function of providing 

connectivity to another entity, that 

entity cannot require anyone to use the 

entity’s services as a condition to 

obtaining connectivity to the SDR. The 

Commission also agrees with another 

commenter that an SDR generally 

should impose similar data access rights 

and requirements on itself (and its 

affiliates) as those imposed on a third 

party acting as an agent on behalf of an 

SBS counterparty.540

As stated in the Proposing Release, 

the Commission is concerned, among 

other things, that an SDR, controlled or 

influenced by a market participant, may 

limit the level of access to the services 

offered or data maintained by the SDR 

as a means to impede competition from 

other market participants or third party 

service providers.541 The Commission 

believes that Rule 13n–4(c)(1)(iii) 

addresses this concern. 

One commenter recommended that 

the Commission permit SDRs to deny 

access only on risk-based grounds.542

Although the Commission concurs that 

an SDR should always consider the risks 

that an actual or prospective market 

participant may pose to the SDR, the 

Commission does not believe that it is 

appropriate to explicitly limit an SDR’s 

ability to deny access because there may 

be reasonable grounds for denial that 

may not be risk-related—e.g., a 

counterparty to an SBS fails to pay the 

SDR’s reasonable fees or a third party 

service provider breaches its contractual 

obligation to maintain the privacy of 

data received by the SDR. The same 

commenter suggested that the 

Commission should set forth ‘‘clearly 

stated objective criteria’’ with respect to 

fair access and denial of access in the 

final rule,543 but the Commission does 

not believe that it is necessary to do so. 

Under Rule 13n–4(c)(1)(iii), SDRs must 

establish appropriate criteria to govern 

access to their services and data as well 

as participation by those seeking to 

connect to or link with the SDR. 

The Commission does not believe that 

Rule 13n–1(c)(1)(iii) should require an 

SDR to provide ‘‘full and unrestricted’’ 

access to third party service providers 

acting pursuant to written 

authorizations from an SBS 

counterparty, as suggested by one 

commenter.544 While the Commission 

agrees with the commenter that such a 

third party service provider is exercising 

the SBS counterparty’s right to access 

data with respect to that counterparty’s 

trades, the Commission believes that 

requiring an SDR to provide ‘‘full and 

unrestricted’’ access (beyond that 

provided to the SBS counterparty acting 

directly) would appear to be 

inconsistent with the Exchange Act. 

Even if the service provider has received 

written authorization from one SBS 

counterparty, the SDR nonetheless 

would be required to protect the privacy 

and confidentiality of the other 

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545See Exchange Act Section 13(n)(5)(F), 15 

U.S.C. 78m(n)(5)(F), and Rule 13n–9 (requiring 

SDRs to maintain the privacy of SBS transaction 

information). 

546See TriOptima, supra note 19. 

547See TriOptima, supra note 19. 

548Proposing Release, 75 FR at 77321, supra note 

2. 

549The term ‘‘board’’ is defined as ‘‘the board of 

directors of the security-based swap data repository 

or a body performing a function similar to the board 

of directors of the security-based swap data 

repository.’’ See Rule 13n–4(a)(2); see also Rule 

13n–11(b)(1). 

550See Better Markets 1, supra note 19. 

551See Regulation SBSR Adopting Release, supra 

note 13. 

552 15 U.S.C. 78k–1(b)(5). 

553See Item 33 of Form SDR. 

554See Section VI.G of this release discussing 

Rule 13n–7. 

555See Exchange Act Section 13(n)(7)(B), 15 

U.S.C. 78m(n)(7)(B). 

556Proposed Rule 13n–4(c)(2). 

557Proposed Rule 13n–4(c)(2)(i). 

558Proposed Rule 13n–4(c)(2)(ii). 559Proposed Rule 13n–4(c)(2)(iii). 560Proposed Rule 13–4(c)(2)(iv). 561Proposing Release, 75 FR at 77323–77324, 

supra note 2. 562See Barnard, supra note 19; Better Markets 1, 

supra note 19; DTCC 2, supra note 19; Saul, supra 

note 19; see also Better Markets 2, supra note 19; 

DTCC 3, supra note 19. 

563Saul, supra note 19. 

564 DTCC 3, supra note 19. 

565 DTCC 2, supra note 19. 

566 DTCC 2, supra note 19 

567 DTCC 2, supra note 19. 

counterparty; 545 thus, the SDR need 

only provide the third party service 

provider with access to such data that 

the SBS counterparty that has 

authorized disclosure would be entitled 

to access. As noted by the commenter, 

such a third party service provider is 

acting as the SBS counterparty’s agent 

and should be entitled to the same level 

of access as provided to the SBS 

counterparty.546 The Commission agrees 

with the commenter regarding the 

importance of upholding ‘‘a fair, secure 

and efficient post-trade market’’ 547 and 

believes that the rule as adopted 

achieves this goal. 

(4) Rule 13n–4(c)(1)(iv): Prohibited or 

Limited Access 

Rule 13n–4(c)(1)(iv) requires each 

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. 

As stated in the Proposing Release, 

the Commission believes that, for any 

such policies and procedures to be 

reasonable, at a minimum, those at an 

SDR involved in the decision–making 

process of prohibiting or limiting a 

person’s access to the SDR’s services or 

data cannot be involved in the review of 

whether the prohibition or limitation 

was appropriate.548 Otherwise, the 

purpose of the review process would be 

undermined. Additionally, an SDR may 

wish to consider whether its internal 

review process should be done by the 

SDR’s board 549 or an executive 

committee. 

As discussed above, one commenter 

suggested that the Commission require 

an SDR to promptly file a notice with 

the Commission if the SDR prohibits or 

limits any person’s access to services 

offered or data maintained by the 

SDR.550 Rule 909 of Regulation SBSR, 

which the Commission is concurrently 

adopting in a separate release, requires 

each registered SDR to register as a SIP, 

and, as such, Exchange Act Section 

11A(b)(5) governs denials of access to 

services by an SDR.551 This section 

provides that ‘‘[i]f any registered 

securities information processor 

prohibits or limits any person in respect 

of access to services offered, directly or 

indirectly, by such securities 

information processor, the registered 

securities information processor shall 

promptly file notice thereof with the 

Commission.’’ 552 Accordingly, an SDR 

must promptly notify the Commission if 

it prohibits or limits access to any of its 

services to any person. In addition, the 

SDR is required to notify the 

Commission of any prohibition or 

limitation with respect to services 

offered or data maintained by the SDR 

in its annual amendment to its Form 

SDR, which will also enable the 

Commission to evaluate whether the 

prohibition or limitation is 

appropriate.553 Also, pursuant to Rule 

13n–7, records of the decision to 

prohibit or limit access are required to 

be maintained by the SDR, and the SDR 

must promptly furnish such records to 

any representative of the Commission 

upon request.554

b. Second Core Principle: Governance 

Arrangements (Rule 13n–4(c)(2)) 

i. Proposed Rule 

Proposed Rule 13n–4(c)(2) would 

incorporate and implement the second 

core principle 555 by requiring SDRs to 

establish governance arrangements that 

are transparent (i) to fulfill public 

interest requirements under the 

Exchange Act and the rules and 

regulations thereunder; (ii) to carry out 

functions consistent with the Exchange 

Act, the rules and regulations 

thereunder, and the purposes of the 

Exchange Act; and (iii) to support the 

objectives of the Federal Government, 

owners, and participants.556 The 

proposed rule would impose four 

specific requirements. First, an SDR 

would be required to establish 

governance arrangements that are well 

defined and include a clear 

organizational structure with effective 

internal controls.557 Second, an SDR’s 

governance arrangements would be 

required to provide for fair 

representation of market participants.558

Third, an SDR would be required to 

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.559 Finally, an SDR would be 

required to establish, maintain, and 

enforce written policies and procedures 

reasonably designed to ensure that the 

SDR’s senior management and each 

member of the board or committee that 

has the 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, to have a clear understanding 

of their responsibilities, and to exercise 

sound judgment about the SDR’s 

affairs.560

In the Proposing Release, the 

Commission solicited comments on 

whether to impose any additional 

requirements, including ownership or 

voting limitations on SDRs and persons 

associated with SDRs.561

ii. Comments on the Proposed Rule 

Four commenters submitted 

comments relating to this proposed 

rule.562 Comments on the proposal were 

mixed. As a general matter, one 

commenter stated that the role of the 

Commission is to ‘‘insure that the 

governing structure [of SDRs] is fair to 

all market participants.’’ 563

In suggesting that ‘‘ownership and 

voting limitations be eliminated in their 

entirety,’’ 564 another commenter noted 

that such limitations would be an 

imprecise tool to achieve the 

Commission’s policy goals regarding 

conflicts of interest.565 The commenter 

stated that instead, ‘‘[t]hese policy goals 

can best be met by structural governance 

requirements’’ such as governance by 

market participants.566 The commenter 

believed that ‘‘[i]n the specific case of 

an SDR, governance by market 

participants is appropriate, given that 

most potential conflicts of interest are 

dealt with directly in the Proposed Rule 

and will be overseen directly by the 

regulator.’’ 567 The commenter further 

believed that because the ‘‘SDR is not 

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568 DTCC 2, supra note 19 (An SDR’s conflicts of 

interest are ‘‘significantly different from other 

market infrastructures, where these infrastructures 

may have the ability to influence participation in 

a service (e.g. execution, clearing membership, 

portfolio compression), or completeness of product 

offering (where it is proposed that all trades in an 

asset class are accepted).’’). 

569 DTCC 2, supra note 19; see also DTCC 3, supra 

note 19 (‘‘[S]tructural governance requirements 

offer the best solution to reduce risk, increase 

transparency and promote market integrity within 

the financial system while avoiding the potential 

negative impact on capital, liquidity and mitigating 

systemic risk that could result from any ownership 

or voting limitations.’’). 

570 DTCC 2, supra note 19. 

571 DTCC 2, supra note 19. 

572 DTCC 2, supra note 19. 

573Better Markets 2, supra note 19. 

574Better Markets 1, supra note 19; see also Better 

Markets 2, supra note 19 (reiterating the importance 

of independent boards for SDR governance). 

575Better Markets 1, supra note 19. 

576Better Markets 1, supra note 19; see also Better 

Markets 2, supra note 19 (reiterating the importance 

of ownership and voting restrictions for SDRs 

governance). 

577Barnard, supra note 19. 

578The CFTC requires each swap data repository 

to establish, maintain, and enforce written policies 

or procedures to ensure that the nomination process 

for its board of directors, as well as the process for 

assigning members of the board of directors or other 

person to such committees, adequately incorporates 

an ‘‘Independent Perspective,’’ which is defined as 

‘‘a viewpoint that is impartial regarding 

competitive, commercial, or industry concerns and 

contemplates the effect of a decision on all 

constituencies involved.’’ See CFTC Rules 

49.2(a)(14) and 49.20(c)(1)(i)(B), 17 CFR 49.2(a)(14) 

and 49.20(c)(1)(i)(B); see also CFTC Part 45 

Adopting Release, 76 FR at 54563, supra note 37 

(discussing a swap data repository’s consideration 

of an Independent Perspective). 

579Barnard, supra note 19. 

580See infra accompanying text to note 586 of 

this release discussing a modification to proposed 

Rule 13n–4(c)(2). 

581Rule 13n–4(c)(2). 582Rule 13n–4(c)(2)(i). 583Rule 13n–4(c)(2)(ii). Accord Exchange Act 

Section 17A(b)(3)(C), 15 U.S.C. 78q-1(b)(3)(C) 

(requiring the rules of a clearing agency assure a fair 

representation of its shareholders (or members) and 

participants in the selection of its directors and 

administration of its affairs). The term ‘‘market 

participant’’ is defined as ‘‘(1) any person 

participating in the security-based swap market, 

including, but not limited to, security-based swap 

dealers, major security-based swap participants, 

and any other counterparties to a security-based 

swap transaction.’’ See Rule 13n–4(a)(6); see also 

Rule 13n–9(a)(3); Rule 13n–10(a). 

584Rule 13n–4(c)(2)(iii). 585Rule 13n–4(c)(2)(iv). 

defining the reporting party, timeliness 

or content for public dissemination, and 

similarly the SDR is not defining the 

reporting party, content or process for 

regulatory access . . . the SDR does not 

have significant influence over the 

inclusion or omission of information in 

the reporting process, nor does it control 

the output of the process.’’ 568 The 

commenter suggested that the 

Commission focus on ensuring open 

access and, to support such access, ‘‘the 

SDR needs governance that has 

independence from its affiliates and is 

representative of users who are the 

beneficiaries of choice in service 

providers.’’ 569 Along this line, the 

commenter believed that SDRs should 

assure that ‘‘dealings with affiliates . . . 

be subject to oversight by members of 

the SDR’s board of directors who are not 

engaged in the governance or oversight 

of either the affiliates or their 

competitors.’’ 570 The commenter also 

suggested that SDRs be ‘‘usergoverned,’’ including ‘‘a board of 

directors that is broadly representative 

of market participants and that 

incorporates voting safeguards designed 

to prevent non–regulatory uses of data 

of a particular class of market 

participants that are objectionable to 

that class.’’ 571 The commenter believed 

that ‘‘[i]ndependent perspectives can 

provide value to a board of directors, 

but those who do not directly 

participate in markets may not have 

sufficient, timely, and comprehensive 

expertise on those issues critical to the 

extraordinarily complex financial 

operations of SDRs.’’ 572

A third commenter recommended that 

‘‘meaningful corporate governance 

requirements apply to [SDRs].’’ 573 In 

this regard, the commenter 

recommended that the Commission’s 

rules relating to governance 

arrangements ‘‘be much more detailed 

and clear’’ and ‘‘require SDRs to 

establish boards and nominating 

committees that are composed of a 

majority of independent directors.’’ 574

The commenter believed that 

‘‘[i]ndependent boards are one of the 

most effective tools for ensuring that an 

SDR will abide by the letter and spirit 

of the enumerated duties and core 

principles set forth in the Dodd-Frank 

Act.’’ 575 The commenter also believed 

that as ‘‘important safeguards against 

the dominant influence of some market 

participants over others,’’ the 

Commission’s rules should impose both 

individual and aggregate limitations on 

ownership and voting (e.g., limit the 

aggregate ownership interest in an SDR 

by SDR participants and their related 

persons to 20%, prohibit SDR 

participants and their related persons 

from directly or indirectly exercising 

more than 20% of the voting power of 

any class of ownership interest in the 

SDR).576

Another commenter suggested that, 

with respect to ‘‘board membership 

requirements and ownership and voting 

limits, there should be a level playing 

field between at least SDRs and other 

swap entities.’’ 577 The commenter 

recommended that the Commission 

propose something similar to the 

CFTC’s ‘‘Independent Perspective’’ 578

by ‘‘requiring a registered SDR to have 

independent public directors on (i) its 

board of directors and (ii) any 

committee that has the authority to (A) 

act on behalf of the board of directors 

or (B) amend or constrain the action of 

the board of directors.’’ 579

iii. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n– 

4(c)(2) as proposed, with one minor 

modification.580 Under this rule, each 

SDR is required to establish governance 

arrangements that are transparent to 

fulfill public interest requirements 

under the Exchange Act and the rules 

and regulations thereunder; to carry out 

functions consistent with the Exchange 

Act, the rules and regulations 

thereunder, and the purpose of the 

Exchange Act; and to support the 

objectives of the Federal Government, 

owners, and participants.581 To comply 

with the second core principle, each 

SDR is required to comply with four 

specific requirements: (i) Establish 

governance arrangements that are well 

defined and include a clear 

organizational structure with effective 

internal controls; 582 (ii) establish 

governance arrangements that provide 

for fair representation of market 

participants; 583 (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; 584 and (iv) establish, 

maintain, and enforce written policies 

and procedures reasonably designed to 

ensure that the SDR’s senior 

management and each member of the 

board or committee that has the 

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.585

As proposed, Rule 13n–4(c)(2)(iv) 

would have required an SDR’s policies 

and procedures be reasonably designed 

to ensure that its senior management 

and each member of the board or 

committee that has the authority to act 

on behalf of the board to ‘‘possess 

requisite skills and expertise . . . to 

have a clear understanding of their 

responsibilities’’ and ‘‘possess requisite 

skills and expertise . . . to exercise 

sound judgment about the [SDR’s] 

affairs.’’ The Commission is revising the 

proposed rule by removing the word 

‘‘to’’ from the clauses above, to provide 

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14484 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

586Rule 13n–4(c)(2)(iv). 

587See Rule 13n–11(e) (requiring an SDR’s CCO 

to submit an annual compliance report to the board 

for its review prior to the filing of the report to with 

the Commission). 

588Accord Proposing Release, 75 FR at 77307, 

supra note 2 (‘‘The inability of an SDR to protect 

the accuracy and integrity of the data that it 

maintains or the inability of an SDR to make such 

data available to regulators, market participants, 

and others in a timely manner could have a 

significant negative impact on the SBS market. 

Failure to maintain privacy of such data could lead 

to market abuse and subsequent loss of liquidity.’’). 

589See DTCC 2, supra note 19. In discussing 

governance arrangements, the commenter seemed to 

imply that the Commission is responsible for 

directly overseeing an SDR’s conflicts of interest. To 

clarify, it is the SDR itself that is statutorily 

required to establish and enforce policies and 

procedures to minimize its conflicts of interest in 

its decision-making process. See Exchange Act 

Section 13(n)(7)(C), 15 U.S.C. 78m(n)(7)(C). 

590See DTCC 2, supra note 19. 

591One commenter suggested that the 

Commission propose something similar to the 

CFTC’s ‘‘Independent Perspective.’’ Barnard, supra 

note 19. The Commission believes that although 

Rule 13n–4(c)(2) is different from CFTC Rule 49.20 

in this area, both rules may achieve the same 

objective of broad representation on SDRs’ boards. 

Rule 13n–4(c)(2)(ii) requires SDRs to ‘‘[e]stablish 

governance arrangements that provide for fair 

representation of market participants,’’ and Rule 

13n–4(c)(2)(iii) requires SDRs to ‘‘[p]rovide 

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.’’ Instead of 

focusing on fair representation of market 

participants, CFTC Rule 49.20(c) requires a swap 

data repository to establish, maintain, and enforce 

written policies and procedures to ensure that its 

board and other committees adequately consider an 

‘‘Independent Perspective’’ in their decisionmaking process. See 17 CFR 49.20(c). Cf. DTCC 2, 

supra note 19 (stating that ‘‘[i]ndependent 

perspectives can provide value to a board of 

directors, but those who do not directly participate 

in markets may not have sufficient, timely, and 

comprehensive expertise on those issues critical to 

the extraordinarily complex financial operations of 

SDRs’’). 

592See Barnard, supra note 19; Better Markets 1, 

supra note 19; see also Better Markets 2, supra note 

19. 

593See, e.g., Rule 13n–4(c)(1) (implementing core 

principle relating to market access to SDRs’ services 

and data), as discussed in Section VI.D.3.a of this 

release; Rule 13n–4(c)(3) (implementing core 

principle relating to conflicts of interest), as 

discussed in Section VI.D.3.c of this release; and 

Rule 13n–5 (requiring an SDR to accept all SBSs in 

a given asset class if it accepts any SBS in that asset 

class), as discussed in Section VI.E of this release; 

see also Item 32 of Form SDR (requiring disclosure 

of instances in which an SDR has prohibited or 

limited a person with respect to access to the SDR’s 

services or data). As stated in Section VI.D.3.a.iii(4) 

of this release, the Commission is adopting Rule 

909 of Regulation SBSR, which requires each SDR 

to register as a SIP; as such, Exchange Act Section 

11A(b)(5) governs denials of access to all services 

of an SDR. See Regulation SBSR Adopting Release, 

supra note 13; Exchange Act Section 11A(b)(5), 15 

U.S.C. 78k–1(b)(5). 

594See Section VIII.D of this release (discussing 

SDRs’ costs of complying with the SDR Rules). 

595See DTCC 2, supra note 19 (recommending 

structural governance requirements instead of 

ownership and voting limitations); see also DTCC 

3, supra note 19 (supporting the mitigation of 

conflicts of interest through the imposition of 

structural governance requirements instead of 

ownership and voting limitations). 

that an SDR’s policies and procedures 

be reasonably designed to ensure that its 

senior management and each member of 

the board or committee that has the 

authority to act on behalf of the board 

is required to actually have a clear 

understanding of their responsibilities 

and exercise sound judgment about the 

SDR’s affairs, rather than simply possess 

the skills and expertise to do so.586

Without the revision from the proposal, 

the rule could have been misinterpreted 

to mean that an SDR’s management and 

each member of the board or committee 

that has the authority to act on behalf of 

the board need only possess the skills 

and expertise to have a clear 

understanding of their responsibilities. 

With respect to sound judgment, an SDR 

may want to include, in its policies and 

procedures, a requirement that its 

management and each member of the 

board or committee that has the 

authority to act on behalf of the board 

consider fairly all relevant information 

and views without undue influence 

from others, and provide advice and 

recommendations that are reasonable 

under the relevant facts and 

circumstances. 

Given an SDR’s unique and integral 

role in the SBS market, the Commission 

believes that it is particularly important 

that an SDR establish a governance 

arrangement that is well defined and 

include a clear organizational structure 

with effective internal controls. Because 

the board has a role in overseeing the 

SDR’s compliance with the SDR’s 

statutory and regulatory obligations,587

the Commission also believes that it is 

important that those who are managing 

and overseeing an SDR’s activities are 

qualified to do so. An SDR’s failure to 

comply with their obligations could 

affect, for example, the SDR’s 

operational efficiency, which could, in 

turn, impact the SBS market as a 

whole.588

The Commission believes that Rule 

13n–4(c)(2)’s requirement that SDRs 

establish governance arrangements that 

provide for fair representation of market 

participants is consistent with one 

commenter’s view that governance of 

SDRs by market participants is 

appropriate.589 With respect to one 

commenter’s recommendation that an 

SDR’s governance should be 

independent from its affiliates by, for 

example, ensuring that dealings with its 

affiliates are subject to oversight by 

members of the SDR’s board who are not 

engaged in the governance or oversight 

of either the affiliates or their 

competitors,590 the Commission 

believes that this is one effective way to 

comply with the rule and to minimize 

the SDR’s potential conflicts of interest, 

as discussed further in Section VI.D.3.c 

of this release. 

In establishing a governance 

arrangement that provides for fair 

representation of market participants, 

one way for an SDR to comply with 

Rule 13n–4(c)(2) is to provide market 

participants with the opportunity to 

participate in the process for 

nominating directors and with the right 

to petition for alternative candidates. 

These two requirements are interrelated. 

The Commission believes that if market 

participants have no say in an SDR’s 

governance process, then the market 

participants may not be fairly 

represented.591 The Commission notes, 

however, that having fair representation 

of market participants does not 

necessarily equate to requiring a fixed 

number or percentage of enumerated 

categories of market participants. 

Instead, the requirement is intended to 

promote a fair representation of the 

views and perspectives of market 

participants. 

The Commission considered whether 

an SDR’s potential and existing conflicts 

of interest would warrant prescriptive 

rules relating to governance (e.g., 

ownership or voting limitations, 

independent directors, nominating 

committees composed of a majority of 

independent directors), as two 

commenters suggested,592 but believes 

that the rules that are intended to 

minimize such conflicts and to help 

ensure that SDRs meet core principles 

are sufficient at this time.593 If the 

Commission were to impose additional 

governance requirements and 

limitations, SDRs would likely incur 

costs in addition to the costs already 

imposed by the SDR Rules.594 The 

Commission, however, does not believe 

that the additional costs are warranted 

at this time. Also, consistent with one 

comment,595 the Commission continues 

to believe that it is appropriate and costeffective to provide SDRs with 

flexibility in determining their 

ownership and governance structure. 

The Commission may, however, revisit 

the issue of whether to impose 

additional governance requirements and 

limitations as the SBS market evolves. 

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596See Exchange Act Section 13(n)(7)(C), 15 

U.S.C. 78m(n)(7)(C)). 

597Proposed Rule 13n–4(c)(3). 

598Proposed Rule 13n–4(c)(3)(i). 

599Proposed Rule 13n–4(c)(3)(ii). 

600Proposed Rule 13n–4(c)(3)(iii). 

601See Better Markets 1, supra note 19; DTCC 2, 

supra note 19; Markit, supra note 19; MarkitSERV, 

supra note 19; MFA 1, supra note 19; WMBAA 

SBSR, supra note 27; Tradeweb SB SEF, supra note 

29; see also DTCC SBSR, supra note 27. 

602Better Markets 1, supra note 19. 

603 DTCC 2, supra note 19 (discussing an SDR’s 

conflicts of interest identified by the Commission 

in the Proposing Release). 

604 DTCC 2, supra note 19. 

605 DTCC 2, supra note 19. 

606Proposing Release, 75 FR at 77324–77325, 

supra note 2. 

607See, e.g., Reval, Responses to the CFTC’s 

Questions on the SDR Requirements, available at 

http://www.cftc.gov/ucm/groups/public/@swaps/

documents/dfsubmission/dfsubmission9_100110- 

reval.pdf (stating that an SDR with any ownership 

or revenue sharing arrangements directly or 

indirectly with a dealer would be an obvious 

conflict of interest) (‘‘Reval CFTC Response 

Letter’’). 

608See, e.g., Warehouse Trust Company, Draft 

Response to CFTC re: CFTC Request for Information 

regarding SDR Governance, available at http://

www.cftc.gov/ucm/groups/public/@swaps/

documents/dfsubmission/dfsubmission9_100510- 

wt.pdf (stating that ‘‘ownership of an SDR could 

lead to access restrictions on non-owners’’) 

(‘‘Warehouse Trust CFTC Response Letter’’). 

609See Reval CFTC Response Letter, supra note 

607 (stating that preferential treatment in services 

provided by an SDR could also occur). 

610See Warehouse Trust CFTC Response Letter, 

supra note 608 (‘‘The issue of vertical bundling 

could arise where [SB SEFs and clearing agencies] 

have preferred access or servicing arrangements 

with SDRs primarily due to ownership overlaps.’’). 

611See Reval CFTC Response Letter, supra note 

607 (‘‘[T]here would always be an underlying 

conflict to ensure that the position information or 

client activity does not get into the hands of 

investors or business partners of the SDR who could 

benefit from that information.’’). 

612Warehouse Trust CFTC Response Letter, supra 

note 608; see also Reval CFTC Response Letter, 

supra note 607 (‘‘[I]f only one SDR is created for 

an asset class and that SDR is held by a market 

participant that could gain by having an edge on 

when the information is received, even if by a split 

second, it could have a trading edge.’’). 

613MarkitSERV, supra note 19 (‘‘[I]n the interest 

of ensuring minimal intrusion on commercial 

activity and optimal incentives for parties to 

support and encourage robust and accurate 

reporting, and the development of valuable 

commercial products . . . data provided to [SDRs] 

should only be used as permitted by the relevant 

market participants in agreements between them 

and the [SDR].’’); Markit, supra note 19 (stating that 

‘‘commercialization of data should only be done 

with the specific consent of the data owners’’); 

DTCC 2, supra note 19 (‘‘The principle of user 

control over the data for non-regulatory purposes 

must . . . be scrupulously maintained.’’); see also 

DTCC 3, supra note 19 (‘‘It is critical to preserve 

the trading parties’ control over their own data.’’). 

614WMBAA SBSR, supra note 27. 

615Markit, supra note 19. 

616MFA 1, supra note 19 (suggesting that the 

Commission adopt a rule similar to the CFTC’s 

proposed rule that would prohibit SDRs from using 

data for commercial purposes without express 

written consent); DTCC SBSR, supra note 27 (‘‘It is 

good public policy that the aggregating entity not 

itself use the data for commercial purposes, 

particularly where data is required to be reported 

to an aggregator serving a regulatory purpose, and 

make such data available to value added providers 

on a non-discriminatory basis, consistent with 

restrictions placed on the data by the data 

contributors themselves.’’); WMBAA SBSR, supra 

note 27 (‘‘Consistent with reporting practices in 

other markets, the reporting of SBS transaction 

information to a registered SDR should not bestow 

the SDR with the authority to use the SBS 

transaction data for any purpose other than those 

explicitly enumerated in the Commission’s 

regulations.’’). 

c. Third Core Principle: Rules and 

Procedures for Minimizing and 

Resolving Conflicts of Interest (Rule 

13n–4(c)(3)) 

i. Proposed Rule 

Proposed Rule 13n–4(c)(3) would 

incorporate the third core principle 596

by requiring each SDR to establish and 

enforce written policies and procedures 

reasonably designed to minimize 

conflicts of interest in the decision 

making process of the SDR, and 

establish a process for resolving any 

such conflicts of interest.597 The 

proposed rule provided general 

examples of conflicts of interest that 

should be considered by an SDR and 

would require each SDR to comply with 

the core principle by (i) establishing, 

maintaining, and enforcing 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; 598 (ii) 

recusing any person involved in a 

conflict of interest from the decisionmaking process for resolving such 

conflicts of interest; 599 and (iii) 

establishing, maintaining, and enforcing 

reasonable written policies and 

procedures regarding the SDR’s noncommercial and/or commercial use of 

the SBS transaction information that it 

receives from a market participant, any 

registered entity, or any other person.600

ii. Comments on the Proposed Rule 

Seven commenters submitted 

comments relating to this proposed 

rule.601 One commenter agreed that the 

Proposing Release ‘‘correctly highlights 

a number of the harmful practices that 

can thrive in an environment that does 

not adequately address conflicts of 

interest. . . .’’ 602 These practices are 

discussed further in Section VI.D.3.c.iii 

below. Another commenter 

acknowledged that ‘‘[t]he mandatory 

reporting regime [under the Dodd-Frank 

Act] creates an opportunity for [an] SDR 

to improperly commercialize the 

information it receives’’ and agreed with 

the Commission that ‘‘market access by 

service providers to an SDR could be a 

potential source for conflicts of 

interest.’’ 603 This commenter expressed 

the view, however, that because ‘‘[t]he 

reporting rules for SDRs are highly 

prescriptive, and the primary consumers 

of this data are regulators, [there is] 

limited room for conflicts involving 

regulatory or public data access.’’ 604

The commenter noted that ‘‘[i]t is 

important that regulators ensure that the 

public utility function of SDRs . . . is 

separated from potential commercial 

uses of the data.’’ 605

As noted in the Proposing Release, a 

few entities that presently provide or 

had anticipated providing trade 

repository services identified the 

following conflicts of interest that could 

arise at an SDR.606 First, owners of an 

SDR could have commercial incentives 

to exert undue influence to control the 

level of access to the services offered 

and data maintained by the SDR and to 

implement policies and procedures that 

would further their self-interests to the 

detriment of others.607 Specifically, 

owners of an SDR could exert their 

influence and control to prohibit or 

limit access to the services offered and 

data maintained by the SDR in order to 

impede competition.608 Second, an SDR 

could favor certain market participants 

over others with respect to the SDR’s 

services and pricing for such 

services.609 Third, an SDR could require 

that services be purchased on a 

‘‘bundled’’ basis.610 Finally, an SDR or 

a person associated with the SDR could 

misuse or misappropriate data reported 

to the SDR for financial gain.611 As one 

trade repository noted, ‘‘SDR data is 

extremely valuable and could be sold 

either stand alone or enhanced with 

other market data and analysis. The use 

of this data in this manner would 

present competitive problems’’ as well 

as conflicts of interest issues.612

Several commenters expressed their 

views on the ownership of SBS data 

maintained by SDRs. Specifically, three 

commenters believed that ownership of 

SBS data should remain with 

counterparties to the SBS unless 

specifically agreed by them.613 One 

commenter to proposed Regulation 

SBSR stated that ownership of SBS data 

should be retained by the reporting 

party (e.g., SB SEFs, counterparties to an 

SBS),614 whereas a commenter to the 

Proposing Release believed that data 

ownership does not transfer to an SB 

SEF or any other regulated entity.615

Three commenters, including two 

commenters to proposed Regulation 

SBSR, believed that SDRs and/or their 

affiliates should be prohibited from 

using SBS data for commercial 

purposes.616 One of those commenters 

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14486 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

617MFA 1, supra note 19; see also Tradeweb SB 

SEF, supra note 29 (supporting SDRs’ commercial 

use of data with limitations). 

618Tradeweb SB SEF, supra note 29 (believing 

that its recommendation will help ensure a robust 

and competitive market, as envisioned by the DoddFrank Act, and help limit the possibility of 

overreaching by SDRs due to their unique position 

in the data-reporting regime). 

619WMBAA SBSR, supra note 27. 

620Rule 13n–4(c)(3). 

621Rule 13n–4(a)(8) defines ‘‘person associated 

with a security-based swap data repository’’ as (i) 

any partner, officer, or director of such SDR (or any 

person occupying a similar status or performing 

similar functions), (ii) any person directly or 

indirectly controlling, controlled by, or under 

common control with such SDR, or (iii) any 

employee of such SDR. See also Rule 13n–9(a)(7). 

This definition draws from the definition of 

‘‘person associated with a broker or dealer’’ in the 

Exchange Act, and includes persons associated with 

an SDR whose functions are solely clerical or 

ministerial. See Exchange Act Section 3(a)(18), 15 

U.S.C. 78c(a)(18). Rule 13n–4(a)(3) defines 

‘‘control’’ (including the terms ‘‘controlled by’’ and 

‘‘under common control with’’) as ‘‘the possession, 

direct or indirect, of the power to direct or cause 

the direction of the management and policies of a 

person, whether through the ownership of voting 

securities, by contract, or otherwise.’’ Pursuant to 

Rule 13n–4(a)(3), ‘‘[a] person is presumed to control 

another person if the person: (i) Is a director, 

general partner, or officer exercising executive 

responsibility (or having similar status or 

functions); (ii) directly or indirectly has the right to 

vote 25 percent or more of a class of voting 

securities or has the power to sell or direct the sale 

of 25 percent or more of a class of voting securities; 

or (iii) in the case of a partnership, has the right 

to receive, upon dissolution, or has contributed, 25 

percent or more of the capital.’’ The Commission is 

correcting a typographical error in the proposed 

definition. Proposed Rule 13n–4(a)(3)(ii) referred to 

the right to vote 25 percent ‘‘of’’ more of a class of 

securities. See Proposing Release, 75 FR at 77367, 

supra note 2. As adopted, Rule 13n–4(a)(3)(ii) refers 

to the right to vote 25 percent ‘‘or’’ more of a class 

of securities. See also Rules 13n–9(a)(2) and 13n– 

11(b)(2). The definition of ‘‘control’’ incorporates 

the definition of ‘‘control’’ in Exchange Act Rule 

12b–2 and Form BD, the registration form for 

broker-dealers. See 17 CFR 240.12b–2 and Form BD, 

17 CFR 249.501. 

622The term ‘‘nonaffiliated third party’’ of an SDR 

is defined as any person except (1) the SDR, (2) an 

SDR’s affiliate, or (3) a person employed by an SDR 

and any entity that is not the SDR’s affiliate (and 

‘‘nonaffiliated third party’’ includes such entity that 

jointly employs the person). See Rule 13n–4(a)(7); 

see also Rule 13n–9(a)(4). This definition draws 

from the definition of ‘‘nonaffiliated third party’’ in 

§ 248.3 of Regulation S–P. See 17 CFR 248.3. 

623Proposing Release, 75 FR at 77325, supra note 

2. 

624See DTCC 2, supra note 19. 

625See Section VI.I.2 of this release discussing an 

SDR’s disclosure requirements. 

supported an SDR’s use of aggregated 

data for commercial use, such as 

marketing.617

One commenter to the SB SEF 

Proposing Release recommended that 

the Commission clarify in its final rules 

or adopting release that its rules are not 

intended to impose or imply any limit 

on the ability of market participants, 

including counterparties to SBS 

transactions, SB SEFs, and clearing 

agencies, to use and/or commercialize 

data that they create or receive in 

connection with the execution or 

reporting of SBS data.618 Similarly, one 

commenter to proposed Regulation 

SBSR suggested that the Commission 

require SDRs to adopt policies and 

procedures explicitly acknowledging 

that counterparties to SBS transactions 

and SB SEFs retain the ability to market 

and commercialize their own 

proprietary data.619

iii. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n– 

4(c)(3) as proposed. Under this rule, 

each SDR is required to establish and 

enforce written policies and procedures 

reasonably designed to minimize 

conflicts of interest in the decisionmaking process of the SDR and to 

establish a process for resolving any 

such conflicts of interest.620

Rule 13n–4(c)(3) provides general 

examples of conflicts of interest that 

should be considered by an SDR, 

including, but not limited to: (1) 

Conflicts between the commercial 

interests of an SDR and its statutory and 

regulatory responsibilities, (2) conflicts 

in connection with the commercial 

interests of certain market participants 

or linked market infrastructures, third 

party service providers, and others, (3) 

conflicts between, among, or with 

persons associated with the SDR,621

market participants, affiliates of the 

SDR, and nonaffiliated third parties,622

and (4) misuse of confidential 

information, material, nonpublic 

information, and/or intellectual 

property. These general examples are 

the same as those included in proposed 

Rule 13n–4(c)(3) with one modification. 

The proposed rule provided, as an 

example, ‘‘conflicts between the 

commercial interests of [an SDR] and its 

statutory responsibilities.’’ Upon further 

consideration, the Commission is 

revising this example, to include 

potential conflicts between an SDR’s 

commercial interests and its regulatory 

responsibilities. This revision is 

intended to clarify that an SDR’s 

commercial interests can conflict with 

not only its statutory responsibilities, 

but also its regulatory responsibilities, 

which may be more prescriptive than its 

statutory responsibilities. 

To comply with the third core 

principle, an SDR is required to comply 

with three specific requirements. First, 

Rule 13n–4(c)(3)(i) requires each SDR to 

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. The 

Commission continues to believe that 

requiring an SDR to conduct ongoing 

identification and mitigation of conflicts 

of interest is important because such 

conflicts can arise gradually over time 

or unexpectedly. Furthermore, a 

situation that is acceptable one day may 

present a conflict of interest the next. 

The Commission believes that in order 

to identify and address potential 

conflicts that may arise over time, an 

SDR’s procedures generally should 

provide a means for regular review of 

conflicts as they impact the SDR’s 

decision-making processes. Rather than 

imposing prescriptive requirements on 

SDRs regarding how to address 

conflicts, the Commission believes that 

SDRs should be provided the flexibility 

to determine how best to address and 

manage their conflicts. 

Second, Rule 13n–4(c)(3)(ii) requires 

an SDR to recuse any person involved 

in a conflict of interest from the 

decision-making process for resolving 

that conflict of interest. As stated in the 

Proposing Release, the Commission 

believes that such recusal is necessary 

to eliminate an apparent conflict of 

interest in an SDR’s decision-making 

process.623 Additionally, recusal will 

likely increase confidence in the SDR’s 

decision-making process and avoid an 

appearance of impropriety. 

Finally, Rule 13n–4(c)(3)(iii) requires 

an SDR to establish, maintain, and 

enforce reasonable written policies and 

procedures regarding the SDR’s noncommercial and/or commercial use of 

the SBS transaction information that it 

receives from a market participant, any 

registered entity, or any other person. 

The Commission recognizes that an SDR 

may have commercial incentives to 

operate as an SDR and agrees with one 

commenter’s view that the Dodd-Frank 

Act’s mandatory reporting regime 

creates an opportunity for an SDR to 

commercialize improperly the 

information that it receives.624 To the 

extent that an SDR uses data that it 

receives from others for commercial 

purposes, the Commission believes that 

such uses should be clearly defined and 

disclosed to market participants.625 If, 

for example, a market participant is 

considering waiving confidentiality of 

the data that it provides to an SDR, then, 

at the very least, such disclosure should 

provide the market participant with the 

information necessary to make a 

meaningful choice. One commenter 

suggested that an SDR should, as a way 

to minimize potential conflicts of 

interest, consider separating its utility 

function from its commercial use of the 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14487 

626 DTCC 2, supra note 19. 

627Proposing Release, 75 FR at 77324, supra 

note 2. 

628See Proposing Release, 75 FR at 77324, supra 

note 2 (citing to CPSS–IOSCO Trade Repository 

Report (noting the conflicts of interest ‘‘between the 

unique public role of the [SDR] and its own 

commercial interests particularly if the [SDR] offers 

services other than record keeping or between 

commercial interests relating to different 

participants and linked market infrastructures and 

service providers’’)). 

629See 15 U.S.C. 78m(m)(1)(G). Exchange Act 

Section 13(m)(1)(G) imposes a mandatory reporting 

requirement, which provides that ‘‘[e]ach securitybased swap (whether cleared or uncleared) shall be 

reported to a registered security-based swap data 

repository.’’ See also Exchange Act Section 

13A(a)(1), 15 U.S.C. 78m-1(a)(1) (‘‘Each securitybased swap that is not accepted for clearing by any 

clearing agency or derivatives clearing organization 

shall be reported to—(A) a security-based swap data 

repository . . ., or (B) in the case in which there 

is no security-based swap data repository that 

would accept the security-based swap, to the 

Commission . . . .’’). 

630See Markit, supra note 19 (stating that 

‘‘commercialization of data should only be done 

with the specific consent of the data owners’’); 

MarkitSERV, supra note 19 (stating that ‘‘data 

provided to [SDRs] should only be used as 

permitted by the relevant market participants in 

agreements between them and the [SDR]’’); MFA 1, 

supra note 19 (suggesting that the Commission 

adopt a rule similar to the CFTC’s proposed rule 

that would prohibit SDRs from using data for 

commercial purposes without express written 

consent); see also DTCC SBSR, supra note 27 

(suggesting that an SDR should not use data for 

commercial purposes); WMBAA SBSR, supra note 

27 (indicating that an SDR should not have the 

authority to use SBS transaction data ‘‘for any 

purpose other than those explicitly enumerated in 

the Commission’s regulations’’). See also CFTC 

Rule 49.17(g), 17 CFR 49.17(g) (‘‘Swap data 

accepted and maintained by the swap data 

repository generally may not be used for 

commercial or business purposes by the swap data 

repository or any of its affiliated entities’’; however, 

‘‘[t]he swap dealer, counterparty or any other 

registered entity that submits the swap data 

maintained by the registered swap data repository 

may permit the commercial or business use of the 

data by express written consent.’’). 

631Cf. SBSR Adopting Release, supra note 13 

(prohibiting public dissemination of ‘‘nonmandatory reports,’’ as defined in Regulation 

SBSR). 

632See DTCC 2, supra note 19; Markit, supra note 

19; MarkitSERV, supra note 19; MFA 1, supra note 

19; DTCC SBSR, supra note 27; WMBAA SBSR, 

supra note 27. 

633See, e.g., Rules 13n–4(c)(1)(i) (fair and 

reasonable fee requirements) and 13n–9 (privacy 

requirements). 

634See Tradeweb SB SEF, supra note 29. 

635See WMBAA SBSR, supra note 27. 

636 15 U.S.C. 78mm. 

637 15 U.S.C. 78m(n)(5)(H)(ii). 

638Cross-Border Proposing Release, 78 FR at 

31209, supra note 3. 

SBS transaction information that it 

receives.626 The Commission agrees that 

this could be a way to address potential 

conflicts of interest, but the Commission 

does not believe that it necessarily 

mitigates or eliminates conflicts in all 

circumstances. Thus, while SDRs may 

wish to consider this approach, the 

Commission is not requiring them to do 

so at this time. 

As discussed in the Proposing 

Release, the Commission believes that a 

small number of dealers could control 

an SDR, which may require SDR owners 

to balance competing interests.627

Owners of an SDR could derive greater 

revenues from their non-trade repository 

activities in the SBS market than they 

would from sharing in the profits of the 

SDR in which they hold a financial 

interest; consequently, the owners of an 

SDR may be conflicted in making 

decisions that would increase the SDR’s 

profitability, but decrease the 

profitability of their non-trade 

repository activities. In addition, there 

may be a tension between an SDR’s 

statutory or regulatory obligations (e.g., 

maintaining the privacy of data reported 

to the SDR) and its own commercial 

interests or those of its owners (e.g., 

using data reported to the SDR for 

commercial purposes).628

An SDR’s conflicts of interest that are 

not properly managed could limit the 

benefits of the SDR to the markets and 

regulators of SDRs as well as undermine 

the mandatory reporting requirement in 

Exchange Act Section 13(m)(1)(G), 

thereby impacting efficiency in the SBS 

market.629 If, for instance, a market 

participant loses confidence in a 

particular SDR because the SDR fails to 

minimize its conflicts of interest, then 

the market participant may report its 

SBS transactions to an alternative SDR, 

which could lead to data fragmentation. 

By requiring an SDR to take specific 

actions to minimize its conflicts of 

interest, the Commission believes that 

Rule 13n–4(c)(3), as adopted, addresses 

these concerns as well as the concerns 

expressed in comments received on the 

rule proposal. 

Several commenters expressed their 

views on whether an SDR should be 

permitted to use data for commercial 

purposes.630 For a number of reasons, 

the Commission continues to believe 

that it is not appropriate to adopt, at this 

time, a rule prohibiting an SDR and its 

affiliates from using for commercial 

purposes SBS data that the SDR 

maintains without obtaining express 

written consent from both 

counterparties to the SBS transaction or 

the reporting party. First, the 

Commission believes that such a 

prohibition may limit transparency by 

hindering an SDR’s ability to provide 

anonymized and aggregated reports to 

the public if the Commission does not 

specifically mandate an SDR to provide 

these reports to the public. Under the 

final rule, an SDR may provide these 

reports to the public, provided that it 

complies with the privacy requirements 

of Rule 13n–9, as discussed in Section 

VI.I.1 below.631 Second, a rule that 

prohibits an SDR from using SBS data 

for commercial purposes seems to 

presume that the market participants or 

reporting party owns the data. As 

evidenced by the comment letters 

received,632 the issue of who owns the 

data is not clear cut, particularly when 

value is added to it. Third, a general 

prohibition on an SDR’s commercial use 

of SBS data could hinder competition 

and the establishment of new SDRs. As 

stated in Section III.D of this release, the 

Commission does not support any 

particular business model; restricting an 

SDR’s commercial use of SBS data 

entirely, however, may be viewed as the 

Commission favoring one model over 

other models. Finally, the Commission 

believes that it is adopting adequate 

mechanisms to prevent or detect an 

SDR’s misuse of SBS data.633 If, 

however, such mechanisms prove to be 

inadequate, then the Commission may 

revisit this issue. 

At this time, the Commission believes 

that the core principles and statutory 

requirements applicable to SDRs under 

the Dodd-Frank Act can be 

appropriately addressed under the final 

SDR Rules, without the need for the 

Commission to take a position on 

ownership of SBS data. In response to 

one commenter’s request for 

clarification,634 the Commission notes 

that Rule 13n–4(c)(3) is not intended to 

impose or imply any limit on the ability 

of market participants, including 

counterparties to SBS transactions, SB 

SEFs, and clearing agencies, to use or 

commercialize data that they create or 

receive in connection with the 

execution or reporting of SBS data. The 

Commission, however, does not believe 

that it is necessary, as another 

commenter suggested,635 to require 

SDRs to adopt policies and procedures 

explicitly acknowledging that market 

participants retain the ability to market 

and commercialize their own 

proprietary data. 

4. Indemnification Exemption (Rule 

13n–4(d)) 

In the Cross-Border Proposing 

Release, the Commission proposed Rule 

13n–4(d), pursuant to its authority 

under Exchange Act Section 36,636 to 

provide a tailored exemption from the 

indemnification requirement set forth in 

Exchange Act Section 13(n)(5)(H)(ii) 637

and previously proposed Rule 13n– 

4(b)(10) thereunder.638 The Commission 

received a number of comments relating 

to the indemnification requirement and 

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639See DTCC 2, supra note 19; ESMA, supra note 

19; US & Foreign Banks, supra note 24; see also 

DTCC 1*, supra note 20; DTCC CB, supra note 26. 

640 15 U.S.C. 78m(n)(5)(H)(ii). 

641See Section V of this release discussing the 

implementation of the SDR Rules. 

642Rule 13n–5 is being promulgated under 

Exchange Act Sections 13(n)(4)(B), 13(n)(7)(D), and 

13(n)(9). See 15 U.S.C. 78m(n)(4)(B), 78m(n)(7)(D), 

and 78m(n)(9). Rule 13n–5(b) does not apply to SDR 

records other than transaction data and positions, 

as defined below. Records made or kept by an SDR, 

other than transaction data and positions, are 

governed by Rule 13n–7, as discussed in Section 

VI.G of this release. 

643Each definition in Rule 13n–5(a) is discussed 

alongside the substantive rule in which the 

definition is used. See Section VI.E.1 below 

discussing ‘‘asset class’’ and ‘‘transaction data’’; and 

Section VI.E.2 below discussing ‘‘position.’’ 

644 In a separate rulemaking implementing DoddFrank Act Sections 763(i) and 766(a) (adding 

Exchange Act Sections 13(m) and 13A(a)(1) 

respectively), the Commission is adopting rules 

requiring SBS transactions to be reported to a 

registered SDR. See Regulation SBSR Adopting 

Release, supra note 13 (Rules 901 and 902). In 

another separate proposal relating to 

implementation of Dodd-Frank Act Section 763(i) 

(adding Exchange Act Section 13(n)(5)(E)), the 

Commission proposed rules that would require 

SDRs to receive SBS transaction data that satisfies 

the notice requirement for parties that elect the enduser exception to mandatory clearing of SBSs in 

order to aid the Commission in its responsibility to 

prevent abuse of the end-user exception as provided 

for in Exchange Act Section 3C(g). See End-User 

Exception Proposing Release, supra note 15 (‘‘Using 

the centralized facilities of SDRs should also make 

it easier for the Commission to analyze how the 

end-user clearing exception is being used, monitor 

for potentially abusive practices, and take timely 

action to address abusive practices if they were to 

develop.’’). 

645Proposed Rule 13n–5(b)(1)(iii). 

646 In a separate release, the Commission is 

adopting rules prescribing the data elements that an 

SDR is required to accept for each SBS, in 

association with requirements under Dodd-Frank 

Act Section 763(i) (adding Exchange Act Section 

13(n)(4)(A), relating to standard setting and data 

identification). See Regulation SBSR Adopting 

Release, supra note 13 (Rule 901). 

647See DTCC 2, supra note 19; MarkitSERV, 

supra note 19; MFA 1, supra note 19; see also DTCC 

3, supra note 19; DTCC 4, supra note 19; DTCC 5, 

supra note 19. 

648MarkitSERV, supra note 19. 

649MarkitSERV, supra note 19. 

650 DTCC 2, supra note 19. 

651 DTCC 2, supra note 19. 

652 DTCC 2, supra note 19 (giving as an example 

a trade constructed based on the correlation 

between commodities and equities). 

653 DTCC 2, supra note 19. 

654MarkitSERV, supra note 19; DTCC 2, supra 

note 19; see also DTCC 3, supra note 19; DTCC 4, 

supra note 19. 

655MarkitSERV, supra note 19 (citation omitted). 

the proposed exemption.639 While the 

Commission continues to believe that an 

exemption from the indemnification 

requirement should be considered, the 

Commission also believes that the final 

resolution of this issue can benefit from 

further consideration and public 

comment. Accordingly, the Commission 

is not adopting proposed Rule 13n–4(d) 

at this time. The Commission 

anticipates soliciting additional public 

comment regarding the indemnification 

requirement and a proposed exemption. 

As discussed above, SDRs will have to 

comply with all statutory requirements, 

including the indemnification 

requirement set forth in Exchange Act 

Section 13(n)(5)(H)(ii),640 when the 

current exemptive relief from the 

statutory requirements expires.641

E. Data Collection and Maintenance 

(Rule 13n–5) 

The Commission proposed Exchange 

Act Rule 13n–5 to specify the data 

collection and maintenance 

requirements applicable to SDRs.642

After considering the comments 

received on this proposal, the 

Commission is adopting Rule 13n–5 as 

proposed, with certain modifications.643

1. Transaction Data (Rule 13n–5(b)(1)) 

a. Proposed Rule 

Proposed Rule 13n–5(b)(1)(i) would 

require every SDR to establish, 

maintain, and enforce written policies 

and procedures reasonably designed for 

the reporting of transaction data to the 

SDR, and would require the SDR to 

accept all transaction data that is 

reported to the SDR in accordance with 

such policies and procedures. Proposed 

Rule 13n–5(a)(1) defined ‘‘transaction 

data’’ to mean all the information 

reported to an SDR pursuant to the 

Exchange Act and the rules and 

regulations thereunder.644

Proposed Rule 13n–5(b)(1)(ii) would 

require an SDR, if it accepts any SBS in 

a given asset class, to accept all SBSs in 

that asset class that are reported to it in 

accordance with its policies and 

procedures required by paragraph (b)(1) 

of the proposed rule. Proposed Rule 

13n–5(a)(3) defined ‘‘asset class’’ as 

‘‘those security-based swaps in a 

particular broad category, including, but 

not limited to, credit derivatives, equity 

derivatives, and loan-based 

derivatives.’’ 

Proposed Rule 13n–5(b)(1)(iii) would 

require every SDR to establish, 

maintain, and enforce written policies 

and procedures reasonably designed to 

satisfy itself by reasonable means that 

the transaction data that has been 

submitted to the SDR is accurate. This 

proposed rule would also require every 

SDR to clearly identify the source for 

each trade side and the pairing method 

(if any) for each transaction in order to 

identify the level of quality of that 

transaction data.645

Proposed Rule 13n–5(b)(1)(iv) would 

require every SDR to promptly record 

the transaction data it receives.646

b. Comments on the Proposed Rule 

Three commenters submitted 

comments relating to this proposed 

rule.647 One commenter stated that an 

SDR should have ‘‘certain minimum 

data standards’’ with regard to the 

transaction data that it accepts, but that 

‘‘such standards should be able to 

accommodate a wide variety of SBS 

transactions submitted per asset 

class.’’ 648 The commenter also stated 

that ‘‘the regulations should be 

understood to permit [SDRs] to specify 

the methods and channels that 

participants need to use to connect to 

them, which will most commonly be 

provided in the form of the Application 

Programming Interfaces (APIs) and 

through setting of certain minimum 

standards.’’ 649

Another commenter recommended 

revising the definition of ‘‘asset class’’ 

from the proposal to eliminate ‘‘the 

distinction between loan-based and 

credit asset classes,’’ and noted that 

‘‘products like CDS on loans, while 

loan-based, are currently reported 

alongside other CDS products.’’ 650 The 

commenter believed that ‘‘[i]n general, 

equity and credit derivatives will be 

easy to classify, although it is possible 

that certain transactions could be mixed 

and more difficult to classify.’’ 651 The 

commenter stated that it considers it 

more likely to have classification 

difficulties between ‘‘a swap and an 

SBS, rather than between SBS asset 

classes.’’ 652 The commenter suggested 

that, in order to mitigate the problem of 

classification between asset classes, the 

Commission could combine ‘‘the loanbased asset class with credit derivatives, 

and [allow] an SBS to be reported to 

either the equity or credit SDR if there 

is any uncertainty of a product’s asset 

class.’’ 653

Two commenters agreed that SDRs 

should be required to support all trades 

in an asset class.654 One commenter 

stated that ‘‘[w]ithout specific 

requirements related to the range of 

products that can be reported to them, 

[SDRs] may be tempted to limit their 

operating costs by only accepting the 

more standardized categories of swaps 

[that] also tend to trade in high volumes. 

This would result in incomplete market 

coverage and an increased 

fragmentation of the reported data.’’ 655

Thus, the commenter recommended that 

the Commission require SDRs ‘‘to accept 

all trades in a given asset class as a 

means of ensuring broad coverage while 

guarding against fragmentation that 

could result from inadequate [SDR] 

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656MarkitSERV, supra note 19 (noting that ‘‘some 

level of data fragmentation will be unavoidable’’) 

(citation omitted). 

657 DTCC 2, supra note 19; see also DTCC 3, supra 

note 19 (recommending that any SDR ‘‘be able to 

receive and manage all swaps in any asset class for 

which it is registered in accordance with the 

requirements of the Commission’’ because such 

requirement is ‘‘critical . . . for assuring that the 

more complex and non-standard transactions, 

typically the higher risk creating transactions . . ., 

are appropriately registered in SDRs so accurate risk 

and market activity profiles can be maintained’’); 

DTCC 4, supra note 19 (stating that ‘‘no provider 

of trading or clearing services should be permitted 

to simply declare itself the SDR for trades it 

facilitates’’ and that it ‘‘strenuously objects’’ to 

allowing SDRs accept only those SBSs that are 

cleared). 

658See DTCC 2, supra note 19; MarkitSERV, 

supra note 19; MFA 1, supra note 19. 

659MFA 1, supra note 19. 

660MarkitSERV, supra note 19 (stating such an 

approach would motivate parties to ensure the 

accuracy of reported data because of the associated 

economic and legal consequences). 

661See Trade Acknowledgment Release, supra 

note 133. 

662MarkitSERV, supra note 19. 

663 DTCC 2, supra note 19. 

664 DTCC 5, supra note 19. 

665 DTCC 2, supra note 19. 

666The Commission is making one technical 

amendment to proposed Rule 13n–5(b)(1)(ii). As 

proposed, the rule referenced the ‘‘policies and 

procedures required by paragraph (b)(1) of this 

section.’’ As adopted, the rule references the 

‘‘policies and procedures required by paragraph 

(b)(1)(i) of this section.’’ Additionally, the 

Commission is renumbering the definition of 

‘‘transaction data’’ as Rule 13n–5(a)(3) in order to 

alphabetize the definitions in Rule 13n–5(a). The 

definition of ‘‘transaction data’’ is also being revised 

from the proposal, as discussed below. 

667The definition of ‘‘asset class’’ is also being 

renumbered as Rule 13n–5(a)(1) in order to 

alphabetize the definitions in Rule 13n–5(a). 

668Rule 13n–5(a)(3). As proposed, the definition 

of ‘‘transaction data’’ did not include the exception 

for information provided pursuant to Rule 906(b) of 

Regulation SBSR. See Regulation SBSR Adopting 

Release, supra note 13 (Rule 906(b) requiring a 

participant to provide information related to its 

ultimate parent(s) and affiliates). Because the 

information provided pursuant to Rule 906(b) is not 

tied to a particular SBS, the Commission believes 

that it does not make sense to tie the retention of 

the information to the expiration of an SBS. See 

Rule 13n–5(b)(4) (requiring an SDR to maintain 

transaction data ‘‘for not less than five years after 

the applicable [SBS] expires’’). By adding the 

exception to the definition of ‘‘transaction data,’’ 

the information that an SDR receives pursuant to 

Rule 906(b) will instead be required to be kept and 

preserved for not less than five years, pursuant to 

Rule 13n–7(b). 

669Proposing Release, 75 FR at 77327, supra note 

2. See Exchange Act Section 13(m)(1)(G), 15 U.S.C. 

78m(m)(1)(G), as added by Dodd-Frank Act Section 

763(i) (requiring ‘‘[e]ach security-based swap 

(whether cleared or uncleared)’’ to be reported to 

a registered SDR). 

670A definition of ‘‘life cycle event’’ is included 

in Regulation SBSR. See Regulation SBSR Adopting 

Release, supra note 13 (Rule 900). 

671 In a separate release relating to 

implementation of Dodd-Frank Act Section 763(i), 

the Commission is adopting additional rules 

requiring an SDR to have policies and procedures 

relating to the reporting of SBS data to the SDR. See 

Regulation SBSR Adopting Release, supra note 13 

(Rule 907); see also id. (Rule 901(h) requiring 

information to be reported to an SDR ‘‘in a format 

required by the registered [SDR]’’). 

672See Proposing Release, 75 FR at 77307 and 

77327, supra note 2 (‘‘SDRs are required to collect 

and maintain accurate SBS transaction data so that 

relevant authorities can access and analyze the data 

from secure, central locations to better monitor for 

systemic risk and potential market abuse’’ and ‘‘an 

SDR is useful only insofar as the data it retains is 

accurate’’); see also MFA 1, supra note 19 

(discussing the importance of SDRs maintaining 

accurate data). 

functionality.’’ 656 The other commenter 

stated that the ‘‘requirement for an SDR 

to support all trades in an asset class is 

. . . important to reduce the complexity 

for reporting parties,’’ and that the 

‘‘requirement discourages an SDR from 

only servicing high volume products 

within an asset class to maximize profit, 

and leaving more complex (and less 

frequently traded) transactions to be 

reported by reporting parties directly to 

the Commission.’’ 657

Three commenters addressed the 

SDR’s role with respect to verifying the 

accuracy of the transaction data 

submitted.658 One commenter fully 

supported the requirement that SDRs 

confirm with both counterparties the 

accuracy of the data submitted.659

Another commenter stated that ‘‘the 

Commission should encourage the use 

and reporting of trade data that has been 

confirmed or verified by both 

counterparties via an affirmation or a 

matching process,’’ 660 and that this 

should be ‘‘connected with’’ the 

Commission’s proposed requirement 

that SBS dealers and major SBS 

participants provide trade 

acknowledgments and verify those trade 

acknowledgments.661 This commenter 

suggested, however, that SDRs should 

be able to accept single-sided trades for 

real-time reporting purposes, and that 

any subsequently discovered 

discrepancies could be corrected after 

confirmation.662 The third commenter 

recommended that ‘‘SDRs should not 

have additional duties with respect to 

verifying the accuracy of [a] submission, 

as there is limited data available to the 

SDR. The SDR may carry out certain 

routine functions to identify trades 

which may indicate erroneous data (e.g. 

based on size), but in general, the 

primary responsibility for accuracy of 

reported information should remain 

with the reporting party.’’ 663 This 

commenter also recommended that the 

Commission determine that an SDR has 

satisfied its obligation where ‘‘(i) the 

[SBS] has been reported by a [SEF], 

clearing agency, designated contract 

market, or other regulated counterparty 

who has an independent obligation to 

maintain the accuracy of the transaction 

data; (ii) a confirmation has been 

submitted to the [SDR] to demonstrate 

that both counterparties have agreed to 

the accuracy of the swap information 

that was submitted to the [SDR]; or (iii) 

the [SBS] is deemed verified and the 

[SDR] has developed and implemented 

policies and procedures reasonably 

designed to provide the non-reporting 

side of the [SDR] with an opportunity to 

confirm the information submitted by 

the reporting side.’’ 664 This same 

commenter stated that SDRs should 

‘‘process transactions in real-time.’’ 665

c. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n– 

5(b)(1) and the definition of ‘‘transaction 

data’’ under Rule 13n–5(a)(3) as 

proposed, with modifications.666 The 

Commission is adopting the definition 

of ‘‘asset class’’ under Rule 13n–5(a)(1) 

as proposed, with one modification.667

Rule 13n–5(b)(1)(i) and the definition 

of ‘‘transaction data’’: Rule 13n– 

5(b)(1)(i) requires every 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 requires the SDR to accept all 

transaction data that is reported to the 

SDR in accordance with such policies 

and procedures. ‘‘Transaction data’’ is 

defined to mean all the information 

reported to an SDR pursuant to the 

Exchange Act and the rules and 

regulations thereunder, except for 

information provided pursuant to Rule 

906(b) of Regulation SBSR.668

As explained in the Proposing 

Release, a fundamental goal of Title VII 

is to have all SBSs reported to SDRs.669

Therefore, ‘‘transaction data’’ includes 

all information, including life cycle 

events, required to be reported to an 

SDR under Rule 901 of Regulation 

SBSR.670 Rule 13n–5(b)(1)(i) is intended 

to prevent SDRs from rejecting SBSs for 

arbitrary or anti-competitive reasons, 

minimize the number of SBSs that are 

not accepted by an SDR, and to the 

extent that an SDR’s policies and 

procedures make clear which SBSs the 

SDR will accept, make it easier for 

market participants and market 

infrastructures to determine whether 

there is an SDR that will accept a 

particular SBS.671

The Commission is revising the rule 

from the proposal to clarify that an 

SDR’s policies and procedures should 

be reasonably designed for the reporting 

of ‘‘complete and accurate’’ transaction 

data to the SDR.672 For example, an 

SDR’s policies and procedures may not 

be reasonable if they do not require 

reporting of all the data elements 

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673See MarkitSERV, supra note 19. 

674See MarkitSERV, supra note 19. 

675See Regulation SBSR Adopting Release, supra 

note 13 (Rule 907(a)(2) requiring a registered SDR 

to establish and maintain written policies and 

procedures that specify one or more acceptable data 

formats (each of which must be an open-source 

structured data format that is widely used by 

participants), connectivity requirements, and other 

protocols for submitting information). 

676See Section VI.D.2.c.ii of this release 

discussing Rule 13n–4(b)(5) (requiring SDRs to 

provide direct electronic access to the Commission 

or any designee); Section VI.E.4 of this release 

discussing Rule 13n–5(b)(4) (requiring every SDR to 

maintain transaction data in a format readily 

accessible and usable to the Commission); and 

Section VI.H of this release discussing Rule 13n– 

8 (requiring every SDR to promptly report 

information to the Commission in a form and 

manner acceptable to the Commission). 

677Proposing Release, 75 FR at 77327, supra 

note 2. 

678See DTCC 2, supra note 19; MarkitSERV, 

supra note 19; DTCC 3, supra note 19; DTCC 4, 

supra note 19. 

679See Exchange Act Section 13A(a)(1), 15 U.S.C. 

78m–1(a)(1) (requiring an uncleared SBS to be 

reported to the Commission if there is no SDR that 

would accept the SBS)); see also Regulation SBSR 

Adopting Release, supra note 13 (Rule 901(b) 

requiring SBSs to be reported to the Commission if 

there is no SDR that would accept the SBSs). 

680See also MarkitSERV, supra note 19 (stating 

that the requirement to accept all trades in an asset 

class is ‘‘a means of ensuring broad coverage while 

guarding against fragmentation’’). 

681See DTCC 2, supra note 19. 

682See DTCC 2, supra note 19 (stating that the 

requirement for an SDR to support all trades in an 

asset class ‘‘discourages an SDR from only servicing 

high volume products within an asset class to 

maximize profit, and leaving more complex (and 

less frequently traded) transactions to be reported 

by reporting parties directly to the Commission’’); 

MarkitSERV, supra note 19 (‘‘Without specific 

requirements related to the range of products that 

can be reported to them, [SDRs] may be tempted to 

limit their operating costs by only accepting the 

more standardized categories of swaps [that] also 

tend to trade in high volumes. This would result in 

incomplete market coverage and an increased 

fragmentation of the reported data.’’) (citation 

omitted). 

683See DTCC 4, supra note 19 (stating that ‘‘no 

provider of trading or clearing services should be 

permitted to simply declare itself the SDR for trades 

it facilitates’’). 

684See DTCC 4, supra note 19 (stating that it 

‘‘strenuously objects’’ to allowing SDRs to accept 

only those SBSs that are cleared). 

685Proposing Release, 75 FR at 77327, supra note 

2. An SDR is required to disclose to market 

participants its criteria for providing others with 

access to services offered and data maintained by 

the SDR pursuant to Rule 13n–10(b)(1), as 

discussed in Section VI.I.2 of this release. 

Therefore, market participants will be made aware 

of an SDR’s policies and procedures for reporting 

data. 

686To the extent that an SDR already has systems 

in place to accept and maintain SBSs in a particular 

asset class, the Commission believes that Rule 13n– 

5(b)(1)(ii) will not add a material incremental 

financial or regulatory burden to SDRs. See 

Proposing Release, 75 FR at 77327, supra note 2. 

687See DTCC 2, supra note 19. 

688 In a separate release relating to 

implementation of Dodd-Frank Act Section 763(i), 

the Commission is adopting the same definition of 

‘‘asset class.’’ See Regulation SBSR Adopting 

Release, supra note 13 (Rule 900). In addition, the 

Commission proposed rules relating to trade 

acknowledgments and verifications of SBSs, which 

proposed a definition of ‘‘asset class’’ that is the 

same as the definition of ‘‘asset class’’ in the 

Proposing Release, 75 FR at 77369, supra note 2, 

and therefore differs from the definition of ‘‘asset 

class’’ being adopted in this release. See Trade 

Acknowledgment Release, supra note 133. The 

Commission expects to consider conforming the 

proposed definition of ‘‘asset class’’ in the Trade 

Acknowledgment Release with the definition being 

adopted today at a later time. 

required under Regulation SBSR and 

that the data reported be accurate. 

The Commission agrees with one 

commenter’s view that an SDR’s 

policies and procedures should allow 

for the reporting of ‘‘a wide variety of 

SBS transactions.’’ 673 The Commission 

also agrees that SDRs should be allowed 

to ‘‘specify the methods and channels 

that participants need to use to connect 

to [SDRs],’’ 674 so long as such methods 

and channels are reasonable. Therefore, 

an SDR may reject SBS data that is 

reported in a manner that is inconsistent 

with its reasonable policies and 

procedures. 

In addition, to the extent that an 

SDR’s policies and procedures allow 

SBSs to be reported to it in more than 

one format,675 the SDR may need to 

reformat or translate the data to conform 

to any format and taxonomy that the 

Commission may adopt pursuant to 

Rule 13n–4(b)(5) in order to satisfy the 

requirement of providing direct 

electronic access to the Commission.676

For example, the SDR may need to 

reformat or translate terms of the 

transaction (e.g., scheduled termination 

dates, prices, or fixed or floating rate 

payments). The Commission notes that 

an SDR is not required to make persons 

who report SBSs to the SDR use any of 

the formats and taxonomies specified by 

the Commission. Rather, the SDR is only 

required to use such formats and 

taxonomies when providing the 

Commission with direct electronic 

access. 

Rule 13n–5(b)(1)(ii) and the definition 

of ‘‘asset class’’: Rule 13n–5(b)(1)(ii) 

requires an SDR, if it accepts any SBS 

in a particular asset class, to accept all 

SBSs in that asset class that are reported 

to it in accordance with its policies and 

procedures required by Rule 13n– 

5(b)(1)(i). As explained in the Proposing 

Release, this requirement is designed to 

maximize the number of SBSs that are 

accepted by an SDR.677 The comments 

that the Commission received on this 

rule endorsed it.678 The Commission 

believes that if certain SBSs are not 

accepted by any SDR and are reported 

to the Commission instead,679 the 

purpose of the Dodd-Frank Act to have 

centralized data on SBSs for regulators 

and others to access could be 

undermined.680 In addition, the 

Commission agrees with one commenter 

that this requirement will ‘‘reduce the 

complexity for reporting parties.’’ 681

The Commission also agrees with 

commenters’ views that without this 

requirement, SDRs may be tempted to 

limit their services to standardized, 

high-volume SBSs.682 Given these 

incentives, the requirement that an SDR 

accept all SBSs in a given asset class if 

it accepts any SBS in that asset class is 

meant to facilitate the aggregation of, 

and relevant authorities’ and market 

participants’ access to, SBS transaction 

data. This requirement prevents a 

provider of trading or clearing services 

to act as an SDR for only those SBSs that 

it trades or clears.683 This requirement 

also prevents an SDR from accepting 

only SBSs that have been cleared.684

As explained in the Proposing 

Release, an SDR is required to accept 

only those SBSs that are reported in 

accordance with the SDR’s policies and 

procedures required by Rule 13n– 

5(b)(1)(i).685 For example, an SDR’s 

policies and procedures could prescribe 

the necessary security and connectivity 

protocols that market participants and 

market infrastructures must have in 

place prior to transmitting transaction 

data to the SDR. The SDR is not 

required to accept transaction data from 

market participants and market 

infrastructures that do not comply with 

these protocols; otherwise the 

transmission of the transaction data 

could compromise the SDR’s automated 

systems.686

In response to the comment 

recommending amending the definition 

of ‘‘asset class’’ to remove the ‘‘the 

distinction between loan–based and 

credit asset classes,’’ 687 the Commission 

agrees that removing such distinction 

will make it easier for reporting parties 

when classifying a transaction. 

Therefore, the Commission is modifying 

from the proposal the definition of 

‘‘asset class’’ in Rule 13n–5(a)(1) to 

mean ‘‘those security-based swaps in a 

particular broad category, including, but 

not limited to, credit derivatives and 

equity derivatives.’’ 688

Where an SBS arguably could belong 

to more than one asset class, for 

example, if it has characteristics of both 

credit and equity derivatives, then an 

SDR serving either asset class should be 

able to accept that SBS without then 

being required to accept all SBSs in the 

other asset class—i.e., an SDR for the 

credit derivative asset class could accept 

such an SBS without then having to 

accept all equity SBSs, and an SDR for 

the equity derivative asset class could 

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689See DTCC 2, supra note 19. 

690See Further Definition of ‘‘Swap,’’ ‘‘SecurityBased Swap,’’ and ‘‘Security-Based Swap 

Agreement’’; Mixed Swaps; Security-Based Swap 

Agreement Recordkeeping, Exchange Act Release 

No. 67453 (July 18, 2012), 77 FR 48207 (Aug. 13, 

2012). 

691As proposed, Rule 13n–5(b)(1)(iii) would 

require the SDR’s policies and procedures to be 

‘‘reasonably designed to satisfy [the SDR] by 

reasonable means that the transaction data that has 

been submitted to the SDR is accurate.’’ In adopting 

Rule 13n–5(b)(1)(iii), the Commission is removing 

the phrase ‘‘by reasonable means’’ to make the rule 

text clearer. This revision is not intended to 

substantively change the meaning of the rule. 

692With regard to this requirement, proposed 

Rule 13n–5(b)(1)(iii) used the phrase ‘‘including 

clearly identifying.’’ In adopting Rule 13n– 

5(b)(1)(iii), the Commission is changing ‘‘including 

clearly identifying’’ to ‘‘clearly identifies’’ to make 

the rule text clearer. This revision is not intended 

to substantively change the meaning of the rule. 

693 15 U.S.C. 78m(n)(5)(B); see also Rule 13n– 

4(b)(3) (implementing same requirement). 

694Proposing Release, 75 FR at 77327, supra note 

2. Accord CPSS–IOSCO Trade Repository Report, 

supra note 48 (the primary public policy benefit of 

an SDR is facilitated by the integrity of the 

information maintained by an SDR). 

695See DTCC 2, supra note 19; see also DTCC 5, 

supra note 19 (recommending that SDRs be 

determined to have satisfied their obligation to 

confirm the accuracy of data under certain 

circumstances). 

696See, e.g., MarkitSERV, supra note 19 (noting 

that commenter provides confirmation and 

matching services for post-trade SBS transactions). 

697Rule 13n–4(b)(3) requires SDRs to ‘‘[c]onfirm, 

as prescribed in Rule 13n–5 (§ 240.13n–5), with 

both counterparties to the security-based swap the 

accuracy of the data that was submitted.’’ 

698Proposing Release, 75 FR at 77327–8, supra 

note 2. See, e.g., MarkitSERV, supra note 19 (The 

‘‘Commission should encourage the use and 

reporting of trade data that has been confirmed or 

verified by both counterparties via an affirmation or 

a matching process.’’). 

699Such records would have to be maintained 

pursuant to Rule 13n–7(b). See Section VI.G.2 of 

this release discussing SDR recordkeeping. 700See Proposing Release, 75 FR at 77328, supra 

note 2. 701The Commission believes that an SDR should 

consider making reasonable accommodations, 

including consideration of any cost burdens, for a 

non–reporting counterparty of an SBS transaction 

in connection with any follow-up by the SDR 

regarding the accuracy of the counterparty’s SBS 

transaction. These accommodations could, for 

example, include providing means for non– 

reporting counterparties to substantiate the 

accuracy of the transaction data without having to 

incur significant systems or technology costs. 

accept the SBS without then having to 

accept all credit SBSs. 

One commenter expressed concern 

about transactions that could be 

considered both swaps and SBSs, such 

as one constructed based on the 

correlation between commodities and 

equities.689 The Commission notes that 

it has adopted, jointly with the CFTC, 

regulations applicable to mixed 

swaps.690 The Commission believes that 

if an SDR accepts a mixed swap, then 

it should not be required to accept all 

SBSs in all asset classes to which the 

mixed swap belongs. For example, if a 

swap data repository that accepts 

commodity swaps accepts a mixed swap 

that is based on the value of both equity 

and commodity prices, then that swap 

data repository should not be required 

to accept all equity SBSs. 

Rule 13n–5(b)(1)(iii): Rule 13n– 

5(b)(1)(iii) requires every SDR to 

establish, maintain, and enforce written 

policies and procedures reasonably 

designed to satisfy itself that the 

transaction data that has been submitted 

to the SDR is complete and accurate.691

Rule 13n–5(b)(1)(iii) also requires every 

SDR to clearly identify the source for 

each trade side and the pairing method 

(if any) for each transaction in order to 

identify the level of quality of that 

transaction data.692 These requirements, 

which are intended to improve data 

accuracy, are based on the requirement 

in Exchange Act Section 13(n)(5)(B) that 

an SDR ‘‘confirm with both 

counterparties to the security-based 

swap the accuracy of the data that was 

submitted.’’ 693 As explained in the 

Proposing Release, the requirement is 

based on the premise that an SDR is 

useful only insofar as the data it retains 

is accurate.694 Unreliable SBS data does 

not enhance transparency. Requiring the 

SDR to take steps regarding the accuracy 

of the transaction data submitted to it, 

should help ensure that the data 

submitted to the SDR is accurate and 

agreed to by both counterparties. One 

commenter suggested that ‘‘SDRs should 

not have additional duties with respect 

to verifying the accuracy of 

submission.’’ 695 But because of the 

statutory requirement and the likelihood 

that the commenter’s approach would 

lead to less accurate information being 

provided to the Commission and the 

marketplace, the Commission is 

adopting Rule 13n–5(b)(1)(iii) largely as 

proposed. 

As proposed, the rule would require 

an SDR’s policies and procedures to 

address the accuracy of the transaction 

data. For purposes of clarification, the 

rule as adopted requires that an SDR’s 

policies and procedures address both 

the completeness and accuracy of the 

transaction data. For example, an SDR’s 

policies and procedures may not be 

reasonable if they allow data elements 

required under Regulation SBSR to be 

blank. 

The Commission understands that 

with respect to certain asset classes, 

third party service providers currently 

provide an electronic affirmation or 

matching process prior to the SBS data 

reaching an SDR.696 As explained in the 

Proposing Release, the Commission 

believes that an SDR can fulfill its 

responsibilities under Exchange Act 

Section 13(n)(5)(B), Rule 13n–4(b)(3),697

and this Rule 13n–5(b)(1)(iii) by 

developing reasonable policies and 

procedures that rely on confirmations 

completed by another entity, such as an 

SB SEF, clearing agency, or third party 

vendor, as long as such reliance is 

reasonable.698 In order for such policies 

and procedures establishing reliance on 

a third party to be reasonable, the SDR 

would need to oversee and supervise 

the performance of the third party 

confirmation provider. This could 

include having policies and procedures 

in place to monitor the third party 

confirmation provider’s compliance 

with the terms of any agreements and to 

assess the third party confirmation 

provider’s continued fitness and ability 

to perform the confirmations. It could 

also include having the SDR or an 

independent auditor inspect or test the 

performance of the third party 

confirmation provider, with the SDR 

retaining records of such inspections or 

tests.699

For example, if an SBS is traded on 

an SB SEF, that SB SEF could confirm 

the accuracy of the transaction data with 

both counterparties, and the SB SEF 

could then report the transaction data to 

an SDR.700 The SDR would not need to 

further substantiate the accuracy of the 

transaction data, as long as the SDR has 

a reasonable belief that the SB SEF 

performed an accurate confirmation. 

However, the SDR would not comply 

with Exchange Act Section 13(n)(5)(B), 

Rule 13n–4(b)(3), and this Rule 13n– 

5(b)(1)(iii) if the confirmation proves to 

be inaccurate and the SDR’s reliance on 

the SB SEF for providing accurate 

confirmations was unreasonable (e.g., 

the SDR ignored a pattern of 

inaccuracies or red flags). In certain 

circumstances, such as where an SBS is 

transacted by two commercial end-users 

and is not electronically traded or 

cleared, and is reported to an SDR by 

one of those end-users, there may not be 

any other entity upon which the SDR 

can reasonably rely to perform the 

confirmation. In such a case, the SDR 

would have to contact each of the 

counterparties to substantiate the 

accuracy of the transaction data.701

Similarly, it would not be reasonable 

for an SDR to rely on a trade 

acknowledgment provided by one 

counterparty to an SBS, without 

verifying that the other counterparty has 

agreed to the trade. However, if a party 

to an SBS timely delivers a trade 

acknowledgment to both the 

counterparty and the SDR (or a third 

party confirmation provider), and the 

counterparty promptly sends the 

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702Although the Commission proposed rules 

requiring SBS dealers and major SBS participants 

to provide trade acknowledgment and verification 

of SBS transactions, it has not adopted any such 

rules. See Trade Acknowledgment Release, supra 

note 133. The Commission may address in a later 

release whether the procedure described above 

would comply with any such rules. See 

MarkitSERV, supra note 19 (stating that ‘‘the 

environment envisaged by the SBS SDR Regulation 

would greatly benefit from being connected with 

the confirmation requirement (such as the verified 

trade acknowledgement record)’’). 

703Rule 13n–5(b)(1)(iii). 

704Proposing Release, 75 FR at 77328, supra 

note 2. 

705Proposing Release, 75 FR at 77328, supra note 

2. 

706See DTCC 2, supra note 19 (stating that SDRs 

should ‘‘process transactions in real-time’’). 

707See Proposing Release, 75 FR at 77329, supra 

note 2. 708See DTCC 2, supra note 19; Markit, supra note 

19; Ethics Metrics, supra note 19. 709 DTCC 2, supra note 19. 710Markit, supra note 19 (‘‘[W]e believe that the 

Commission should work to create a system where 

SBS SDRs play an important and even primary role 

not only in ensuring the accuracy of counterparties’ 

swap valuations, but also in performing 

independent valuations for the counterparties.’’). 

711Markit, supra note 19 (recognizing that an SDR 

performing ‘‘independent valuations may not be 

practical given the highly customized and bespoke 

nature of many swaps’’). 

712 DTCC 2, supra note 19. 

713 DTCC 2, supra note 19. 

714 DTCC 2, supra note 19. 

715Ethics Metrics, supra note 19; see also 

MarkitSERV, supra note 19 (describing valuations 

as a possible ancillary service of SDRs). 

716Position data is required to be provided by an 

SDR to certain entities pursuant to Exchange Act 

Section 13(n)(5)(G), 15 U.S.C. 78m(n)(5)(G). 

717As stated in the Proposing Release, for 

purposes of this definition, positions aggregated by 

long risk would be only for the aggregate notional 

amount of SBSs in which a market participant has 

long risk of the underlying instrument, index, or 

reference entity. Proposing Release, 75 FR at 77326 

n.102, supra note 2. Similarly, positions aggregated 

by short risk would be only for the aggregate 

notional amount of SBSs in which a market 

participant has short risk of the underlying 

instrument, index, or reference entity. For SBSs 

other than credit default swaps, a counterparty has 

long risk where the counterparty profits from an 

increase in the price of the underlying instrument 

or index, and a counterparty has short risk where 

the counterparty profits from a decrease in the price 

verification back to both the original 

party and the SDR (or a third party 

confirmation provider), then the SDR 

could use the trade acknowledgment 

and verification to fulfill its obligations 

under this rule.702

With regard to the requirement that an 

SDR ‘‘clearly identif[y] the source for 

each trade side and the pairing method 

(if any) for each transaction,’’ 703 the 

Commission notes that transaction data 

may vary in terms of reliability and such 

source and pairing method may affect 

the reliability of the transaction data. As 

explained in the Proposing Release, 

some transaction data may be affirmed 

by counterparties to an SBS, but not 

confirmed.704 Some transaction data 

may be confirmed informally by the 

back-offices of the counterparties, but 

the confirmation may not be considered 

authoritative. Other transaction data 

may go through an electronic 

confirmation process, which is 

considered authoritative by the 

counterparties. The Commission is 

adopting this requirement to enable 

relevant authorities to better determine 

the reliability of any particular 

transaction data maintained by an SDR. 

In order for an SDR’s policies and 

procedures for satisfying itself that the 

transaction data that has been submitted 

to the SDR is complete and accurate to 

be reasonable, the SDR could consider 

documenting the processes used by 

third parties to substantiate the accuracy 

of the transaction data. 

Rule 13n–5(b)(1)(iv): Rule 13n– 

5(b)(1)(iv) requires every SDR to 

promptly record the transaction data it 

receives. As explained in the Proposing 

Release, it is important that SDRs keep 

up-to-date records so that regulators and 

counterparties to SBSs will have access 

to accurate and current information.705

One commenter recommended that 

SDRs process transactions in ‘‘realtime.’’ 706 The commenter did not define 

‘‘real-time.’’ If, by ‘‘real-time,’’ the 

commenter means that SDRs should 

begin to record the transaction data as 

soon as it arrives, then the Commission 

believes that the rule’s requirement to 

‘‘promptly record the transaction data it 

receives’’ is consistent with the 

commenter’s recommendation. 

2. Positions (Rule 13n–5(b)(2)) 

a. Proposed Rule 

Proposed Rule 13n–5(b)(2) would 

require every SDR to establish, 

maintain, and enforce written policies 

and procedures reasonably designed to 

calculate positions for all persons with 

open SBSs for which the SDR maintains 

records. Proposed Rule 13n–5(a)(2) 

defined ‘‘position’’ as the gross and net 

notional amounts of open SBS 

transactions aggregated by one or more 

attributes, including, but not limited to, 

the (i) underlying instrument, index, or 

reference entity; (ii) counterparty; (iii) 

asset class; (iv) long risk of the 

underlying instrument, index, or 

reference entity; and (v) short risk of the 

underlying instrument, index, or 

reference entity. The Commission 

requested comment regarding whether it 

should require SDRs to calculate market 

values of each position at least daily and 

provide them to the Commission.707

b. Comments on the Proposed Rule 

Three commenters submitted 

comments relating to this proposed 

rule.708 One commenter expressed the 

view that ‘‘position data is most 

valuable when aggregated among all 

SDRs,’’ and therefore suggested that 

‘‘one SDR should be given the 

responsibility to aggregate and maintain 

the consolidated position data for 

regulatory purposes.’’ 709

None of the commenters believed that 

SDRs should be required to perform 

valuation calculations at this time. One 

commenter indicated, however, that 

providing valuations should be a longterm goal.710 In this commenter’s view, 

existing SDRs do not have the capability 

to provide valuations and they are not 

currently best situated to develop this 

capability; the short-term goal should be 

for SDRs to collect, and potentially 

report, valuations provided by the 

counterparties to an SBS and/or any 

relevant third party entities.711 Another 

commenter expressed the view that 

‘‘firms’’ should provide market values 

because they invest considerable 

resources in valuing trades and it would 

be difficult for an SDR to replicate these 

activities for all trades.712 The 

commenter stated that an ‘‘SDR could 

contract with a market valuation service 

to provide some values and this would 

provide some independent valuation, 

but this will not readily extend to 

illiquid or structured products.’’ 713 The 

commenter also stated that while markto-market values would be of some use 

to regulators, without collateral 

information ‘‘the values would not be 

useful in assessing counterparty risk 

exposures.’’ 714 A third commenter 

stated that valuation models for 

counterparty credit risks and systemic 

risk should include independent, third 

party data.715

c. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n– 

5(b)(2) and the definition of ‘‘position’’ 

under Rule 13n–5(a)(2) as proposed. 

Rule 13n–5(b)(2) requires every SDR to 

establish, maintain, and enforce written 

policies and procedures reasonably 

designed to calculate positions for all 

persons with open SBSs for which the 

SDR maintains records.716 Rule 13n– 

5(a)(2) defines ‘‘position’’ as the gross 

and net notional amounts of open SBS 

transactions aggregated by one or more 

attributes, including, but not limited to, 

the (i) underlying instrument, index, or 

reference entity; (ii) counterparty; (iii) 

asset class; (iv) long risk of the 

underlying instrument, index, or 

reference entity; and (v) short risk of the 

underlying instrument, index, or 

reference entity.717

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of the underlying instrument or index. For credit 

default swaps, a counterparty has long risk where 

the counterparty profits from a decrease in the price 

of the credit risk of the underlying index or 

reference entity, and a counterparty has short risk 

where the counterparty profits from an increase in 

the price of the credit risk of the underlying index 

or reference entity. As the market develops, the 

Commission may consider whether to require SDRs 

calculate positions in another manner and provide 

those positions to the Commission on a confidential 

basis. 

718Proposing Release, 75 FR at 77329, supra 

note 2. 719Proposing Release, 75 FR at 77329, supra 

note 2. 720Proposing Release, 75 FR at 77326, supra note 

2. The Commission notes that Dodd-Frank Act 

Section 763(h) adds Exchange Act Section 10B, 

which provides, among other things, for the 

establishment of position limits for any person that 

holds SBSs. See 15 U.S.C. 78j–2. Specifically, 

Exchange Act Section 10B(a) provides that ‘‘[a]s a 

means reasonably designed to prevent fraud and 

manipulation, the Commission shall, by rule or 

regulation, as necessary or appropriate in the public 

interest or for the protection of investors, establish 

limits (including related hedge exemption 

provisions) on the size of positions in any securitybased swap that may be held by any person.’’ Id. 

In addition, Exchange Act Section 10B(d) provides 

that the Commission may establish position 

reporting requirements for any person that effects 

transactions in SBSs, whether cleared or uncleared. 

Id. 

721 DTCC 2, supra note 19. 

722See Section VI.D.2.c.ii of this release 

discussing anticipated Commission proposal 

pursuant to Rule 13n–4(b)(5). 

723See Section IV of this release for further 

discussion of consolidating data in one SDR. 

724See DTCC 2, supra note 19; Markit, supra note 

19. 

725See DTCC 2, supra note 19. 

726See DTCC 2, supra note 19 (stating that 

valuations without collateral information would not 

be useful in assessing counterparty risk exposures). 

727See DTCC 2, supra note 19 (stating that 

independent market valuations services could not 

readily value illiquid or structured products). 

728See Regulation SBSR Adopting Release, supra 

note 13 (Rule 901). 

729See DTCC 2, supra note 19; MarkitSERV, 

supra note 19; see also DTCC 1*, supra note 20. 

730MarkitSERV, supra note 19. 

731MarkitSERV, supra note 19. 

732MarkitSERV, supra note 19. 

733 DTCC 2, supra note 19. In the Proposing 

Release, the Commission stated that the policies 

and procedures required by Rule 13n–5(b)(3) 

‘‘could include portfolio reconciliation.’’ Proposing 

Release, 75 FR at 77330, supra note 2. 

As explained in the Proposing 

Release, position information is 

important to regulators for risk, 

enforcement, and examination 

purposes.718 In addition, having a 

readily available source of position 

information can be useful to 

counterparties in evaluating their own 

risk. As explained in the Proposing 

Release, in order to meet its obligation 

to calculate positions, an SDR could 

require reporting parties to report the 

necessary events to calculate positions, 

or it could have a system that will 

monitor for and collect such 

information.719 In order for the 

positions to be calculated accurately, an 

SDR will need to promptly incorporate 

recently reported transaction data and 

collected unreported data. It is 

important that the SDR keep up-to-date 

records so that relevant authorities and 

parties to the SBS will have access to 

accurate and current information. In 

calculating positions, an SDR is only 

required to reflect SBS transactions 

reported to that SDR. 

As explained in the Proposing 

Release, the definition of ‘‘position’’ is 

designed to be sufficiently specific so 

that SDRs are aware of the types of 

position calculations that regulators 

may require an SDR to provide, while at 

the same time, provide enough 

flexibility to encompass the types of 

position calculations that regulators and 

the industry will find important as new 

types of SBSs are developed.720

While one commenter suggested that 

‘‘one SDR should be given the 

responsibility to aggregate and maintain 

the consolidated position data for 

regulatory purposes,’’ 721 the 

Commission is not mandating the 

aggregation of position data at one SDR. 

At this time, the Commission believes 

that it—rather than any particular 

registered entity—is in the best position 

to aggregate data across multiple 

registered SDRs. As described above, the 

Commission anticipates that it will 

propose for public comment detailed 

specifications of acceptable formats and 

taxonomies that will facilitate an 

accurate interpretation, aggregation, and 

analysis of SBS data by the 

Commission.722 The Commission may 

revisit this issue as the SBS market 

evolves.723

With regard to valuations, the 

Commission agrees with commenters 724

that SDRs are not necessarily in the best 

position to calculate market valuations 

at this time. While, as one commenter 

pointed out, an SDR could contract with 

a market valuation service to provide 

some values,725 it is not apparent how 

useful the valuation would be without 

collateral information,726 and a 

valuation service could not readily 

provide valuations for illiquid or 

structured products.727 Therefore, the 

Commission is not requiring SDRs to 

calculate market values of positions 

daily and to provide them to the 

Commission. The Commission notes 

that under Regulation SBSR, the 

counterparties are required to report to 

an SDR the ‘‘data elements included in 

the agreement between the 

counterparties that are necessary for a 

person to determine the market value of 

the transaction.’’ 728 Accordingly, if 

necessary, the Commission could 

calculate some market valuations either 

in–house or by hiring a third party 

market valuation service provider. As 

the market develops and SDRs develop 

and increase their capabilities, the 

Commission may revisit this issue. 

3. Maintain Accurate Data (Rule 13n– 

5(b)(3)) 

a. Proposed Rule 

Proposed Rule 13n–5(b)(3) would 

require every SDR to establish, 

maintain, and enforce written policies 

and procedures reasonably designed to 

ensure that the transaction data and 

positions that it maintains are accurate. 

b. Comments on the Proposed Rule 

Both commenters that submitted 

comments relating to this proposed rule 

agreed that SDRs serve an important 

role in collecting and maintaining 

accurate SBS data.729 One commenter 

stated that ‘‘[e]nsuring the accuracy and 

quality of [data reported to SDRs] will 

be critical for the Commission’s 

achievement of the regulatory goals of 

transparency, efficiency and systemic 

risk mitigation [and that] SDRs will play 

a pivotal role in ensuring the accuracy 

of [SBS] data both for public 

consumption and regulatory reporting 

purposes.’’ 730 The commenter further 

noted that ‘‘[t]he existence of a number 

of feedback loops and distribution 

channels through which data will flow 

will enable participants to identify, test 

and correct inaccuracies and errors.’’ 731

This commenter also indicated that the 

ability to ensure data accuracy would be 

influenced by the degree to which such 

data is utilized by industry participants 

in other processes. Therefore, that 

commenter stressed that ‘‘SDRs and 

their affiliates should be permitted to 

offer a range of ancillary services in 

addition to their core services of data 

acceptance and data storage.’’ 732

Another commenter stated that ‘‘the 

multiple bilateral reconciliations 

performed between the parties to a trade 

throughout the life of a trade (and often 

on an ad hoc basis or only following a 

dispute), could be replaced by one 

single reconciliation framework with a 

shared central record, increasing both 

[sic] operating efficiency as well as 

reducing operational risks. The 

Commission’s suggestion for portfolio 

reconciliation seems well aligned with 

this, and this would give the direct 

benefit of improved bilateral portfolio 

reconciliation processes between the 

parties.’’ 733 The commenter also stated 

that ‘‘[a]fter each recorded transaction is 

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734 DTCC 1*, supra note 20. 

735Proposing Release, 75 FR at 77307 and 77329– 

30, supra note 2. 

736Proposing Release, 75 FR at 77330, supra note 

2. 

737See MarkitSERV, supra note 19. 

738See DTCC 1*, supra note 20. 

739See Section III.C of this release discussing 

ancillary services. 

740See DTCC 2, supra note 19. 

741Proposing Release, 75 FR at 77330, supra note 

2 (stating that the policies and procedures required 

by proposed Rule 13n–5(b)(3) ‘‘could include 

portfolio reconciliation’’). 

742See Proposing Release, 75 FR at 77330, supra 

note 2. 

743Proposed Rule 13n–5(b)(4). 

744See DTCC 2, supra note 19; Better Markets 1, 

supra note 19; ISDA Temp Rule, supra note 28; 

Barnard, supra note 19; see also Better Markets 2, 

supra note 19. 

745See, e.g., DTCC 2, supra note 19. 

746See DTCC 2, supra note 19; Better Markets 1, 

supra note 19; ISDA Temp Rule, supra note 28. 

747 DTCC 2, supra note 19. 

748 DTCC 2, supra note 19. 

749 ISDA Temp Rule, supra note 28. 

750FpML is based on XML (eXtensible Markup 

Language), the standard meta-language for 

describing data shared between applications. 

751 ISDA Temp Rule, supra note 28. 

752Better Markets 1, supra note 19; see also Better 

Markets 2, supra note 19 (recommending reported 

data be subject to uniform formatting requirements). 

753Better Markets 1, supra note 19. 

754 DTCC SBSR, supra note 27. 

755Barnard, supra note 19. 

756Barnard, supra note 19. 

757Barnard, supra note 19. 

consummated, the SDR can maintain 

the validity of the data for that 

transaction by offering an asset servicing 

function.’’ 734

c. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n– 

5(b)(3) as proposed, with one 

modification. Rule 13n–5(b)(3) requires 

every 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. As 

explained in the Proposing Release, 

maintaining accurate records is an 

integral function of an SDR.735 As 

further explained in the Proposing 

Release, maintaining accurate records 

requires diligence on the part of an SDR 

because, among other things, SBSs can 

be amended, assigned, or terminated 

and positions change upon the 

occurrence of new events (such as 

corporate actions).736

As proposed, the rule would require 

an SDR’s policies and procedures to 

address the accuracy of the transaction 

data and positions. For purposes of 

clarification, the rule as adopted 

requires that an SDR’s policies and 

procedures address both the 

completeness and accuracy of the 

transaction data and positions. For 

example, an SDR’s policies and 

procedures may not be reasonable if 

they allow data elements required under 

Regulation SBSR to be blank. 

The Commission agrees with one 

commenter that the degree to which 

industry participants use the data will 

influence the accuracy of the data, and 

that the ability of participants to 

identify, test, and correct inaccuracies 

and errors should be encouraged.737 The 

Commission also agrees with another 

commenter that offering an asset 

servicing function may assist an SDR in 

maintaining the validity of transaction 

data and positions.738 Therefore, the 

Commission supports the provision by 

SDRs of voluntary ancillary services, 

such as asset servicing, that improve the 

quality of the SBS data in the SDRs.739

With regard to the comment 

acknowledging the value to portfolio 

reconciliation,740 while portfolio 

reconciliation is a voluntary ancillary 

service, the Commission believes, 

consistent with its position in the 

Proposing Release,741 that it is a method 

that an SDR can use to ensure 

reasonably the accuracy of the 

transaction data and positions that the 

SDR maintains. 

4. Data Retention (Rule 13n–5(b)(4)) 

a. Proposed Rule 

Proposed Rule 13n–5(b)(4) would 

require every SDR to maintain 

transaction data for not less than five 

years after the applicable SBS expires 

and historical positions for not less than 

five years. Alternatively, the 

Commission considered, but did not 

propose a rule, requiring every SDR to 

maintain transaction data for not less 

than five years after the applicable SBS 

expires or ten years after the applicable 

SBS is executed, whichever is greater, 

and historical positions for not less than 

five years.742 Under either alternative, 

SDRs would be required to maintain the 

transaction data and historical positions 

(i) in a place and format that is readily 

accessible to the Commission and other 

persons with authority to access or view 

such information; and (ii) in an 

electronic format that is non-rewriteable 

and non-erasable.743

b. Comments on the Proposed Rule 

Four commenters submitted 

comments relating to this proposed 

rule.744 The commenters generally 

agreed with the Commission’s proposal 

that SDRs should maintain SBS data for 

the life of the SBS contract and a 

reasonable time period thereafter.745

Commenters expressed various views on 

whether the Commission should require 

SBS data to be maintained in a 

particular format.746 One commenter 

stated that ‘‘[t]he Proposed Rule should 

require the retention of electronic 

records of transactions, including life 

cycle events. These should be 

maintained for the life of the contract in 

order to provide an audit trail to 

positions and for a reasonable retention 

period thereafter. An SDR’s records 

should be in an electronically readable 

format (where available) that allows for 

application and analysis.’’ 747 The 

commenter also stated that ‘‘certain 

aggregate data should be maintained 

beyond the maturity of contracts to 

provide public availability of time series 

data.’’ 748

One commenter to the Temporary 

Rule Release believed that the 

Commission should consider requiring 

SBS transaction data to be recorded and 

reported pursuant to a single electronic 

data standard because ‘‘[t]his will 

enable transactions to be reported in an 

efficient and timely manner in a form 

readily accessible to all concerned 

parties.’’ 749 The commenter 

recommended using Financial products 

Markup Language (FpML) 750 as that 

standard.751 Another commenter 

recommended that ‘‘the Commission 

require that all SDRs maintain [stored 

SBS data] in the same format.’’ 752 This 

commenter further recommended that 

‘‘the Commission specifically require 

the SDR to organize and index 

accurately the transaction data and 

positions so that the Commission and 

other users of such information are 

easily able to obtain the specific 

information that they require.’’ 753

Another commenter stated that a 

‘‘registered SDR should have flexibility 

to specify acceptable data formats, 

connectivity requirements and other 

protocols for submitting information. 

Market practice, including structure of 

confirmation messages and detail of 

economic fields, evolve over time, and 

the SDR should have the capability to 

adopt and set new formats.’’ 754

Another commenter recommended 

that data be ‘‘standardized and use a 

common terminology.’’ 755 The 

commenter also recommended that 

records at SDRs be kept indefinitely 

because the commenter believed that 

there is ‘‘no technological or practical 

reason for limiting the retention 

period.’’ 756 The commenter further 

recommended that ‘‘[a]ny original 

documents should be scanned.’’ 757

c. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n– 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14495 

758Proposing Release, 75 FR at 77330, supra note 

2. See also Exchange Act Rule 17a–1, 17 CFR 

240.17a–1 (requiring recordkeeping for national 

securities exchanges, national securities 

associations, clearing agencies, and the Municipal 

Securities Rulemaking Board); Exchange Act 

Section 3D(d)(9), 15 U.S.C. 78c–4(d)(9) (requiring 

recordkeeping for SB SEFs). 

759See Regulation SBSR Adopting Release, supra 

note 13 (Rules 901, 905, and 906(a)); see also DTCC 

2, supra note 19 (recommending requiring the 

retention of life cycle events). 

760See Regulation SBSR Adopting Release, supra 

note 13 (Rule 901(g) requiring a registered SDR to 

assign a transaction ID to each SBS, or establish or 

endorse a methodology for transaction IDs to be 

assigned by third parties). 

761See Regulation SBSR Adopting Release, supra 

note 13 (Rule 901(f) requiring a registered SDR to 

time stamp, to the second, its receipt of any 

information submitted to it pursuant to Rules 

901(c), (d), (e), or (i)). 

762See Exchange Act Rule 17a–1, 17 CFR 

240.17a–1 (requiring clearing agencies to retain 

records for five years). See also Exchange Act 

Section 13(n)(4)(C), 15 U.S.C. 78m(n)(4)(C) 

(requiring ‘‘standards prescribed by the 

Commission under this subsection [to] be 

comparable to the data standards imposed by the 

Commission on clearing agencies in connection 

with their clearing of security-based swaps’’). 

Clearing Agency Standards Release, 77 FR at 66243 

n.270, supra note 138 (‘‘Clearing agencies may 

destroy or otherwise dispose of records at the end 

of five years consistent with Exchange Act Rule 

17a–6.’’). 

763See Barnard, supra note 19. 

764See DTCC 2, supra note 19 (‘‘[E]lectronic 

records of transactions . . . should be maintained 

for the life of the contract . . . and for a reasonable 

retention period thereafter.’’). 

765 DTCC 2, supra note 19. 

766See Regulation SBSR Adopting Release, supra 

note 13 (Rule 902). 

767See Section VI.G.2 of this release. 

768Proposing Release, 75 FR at 77330, supra note 

2. 

769See DTCC 2, supra note 19 (recommending 

that an SDR’s records ‘‘be in an electronically 

readable format (where available) that allows for 

application and analysis’’). 

770Rule 13n–5(b)(4). The Commission notes that 

this change is consistent with other Commission 

rules. For example, Rule 605(a)(2) of Regulation 

NMS, 17 CFR 242.605(a)(2), requires reports be ‘‘in 

a uniform, readily accessible, and usable electronic 

form.’’ 

771See Better Markets 1, supra note 19 

(recommending that the Commission require all 

SDRs to maintain stored SBS data in the same 

format); ISDA Temp Rule, supra note 28 

(recommending that the Commission require SBS 

transaction data to be reported and recorded 

pursuant to a single electronic data standard, and 

using FpML as that standard); Barnard, supra note 

19 (recommending that data be ‘‘standardized and 

use a common terminology’’ and that original 

documents be scanned); see also Better Markets 2, 

supra note 19 (recommending that reported data be 

subject to uniform formatting requirements). 

5(b)(4) as proposed, with two 

modifications. Rule 13n–5(b)(4) requires 

every SDR to 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. 

Rule 13n–5(b)(4) also requires SDRs to 

maintain the transaction data and 

historical positions (i) 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 (ii) in an 

electronic format that is non-rewriteable 

and non-erasable. 

Time Period: As explained in the 

Proposing Release, a five-year retention 

period is the current requirement for the 

records of clearing agencies and other 

registered entities, and is the statutory 

requirement for SB SEFs.758 Because an 

SBS transaction creates obligations that 

continue for a specified period of time, 

the Commission believes that the 

transaction data should be maintained 

for the duration of the SBS, with the five 

years running after the SBS expires. 

This requirement applies to all 

transaction data, including life cycle 

events that are reported to an SDR 

pursuant to Regulation SBSR.759 The 

Commission believes that transaction 

data and position data that are older 

than their respective retention periods 

will not be materially useful to the 

Commission or other relevant 

authorities. 

There may be transaction-specific 

identifying information assigned or used 

by an SDR, such as a transaction ID 760

or a time stamp,761 that are not included 

in the definition of ‘‘transaction data.’’ 

This identifying information should also 

be maintained for the same time period 

as the transaction data because it is 

necessary to understanding the 

transaction data. Therefore, the 

Commission is revising the proposed 

rule to require SDRs to maintain 

‘‘related identifying information’’ for not 

less than five years after the applicable 

SBS expires. Positions are not tied to 

any particular SBS transaction; 

therefore, the Commission requires 

positions, as calculated pursuant to Rule 

13n–5(b)(2), to be maintained for five 

years, similar to the record retention 

requirement for clearing agencies.762

The Commission is not adopting the 

alternative time period that was set forth 

in the Proposing Release. No comments 

supported the alternative time period. 

The Commission is not adopting one 

commenter’s recommendation that data 

at SDRs be kept indefinitely 763 because 

the Commission believes that requiring 

transaction data to be maintained for not 

less than five years after the applicable 

SBS expires is more reasonable,764 and 

this approach is consistent with the 

record retention period for other 

Commission registrants and the 

statutory requirement for SB SEFs. 

One commenter stated that ‘‘certain 

aggregate data should be maintained 

beyond the maturity of contracts to 

provide public availability of time series 

data.’’ 765 Because the Commission is 

not requiring an SDR to provide the 

public with historic data (aggregated or 

otherwise) that it previously publicly 

disseminated, the Commission does not 

believe that it is appropriate to require 

SDRs to maintain aggregate data for 

public availability. However, SDRs may 

find it useful to maintain such data if 

they intend to provide the public with 

data sets beyond the public 

dissemination requirements of 

Regulation SBSR.766 To the extent that 

the Commission requires the creation of 

aggregate data, such as through reports 

requested pursuant to Rule 13n–8, the 

data will be for regulatory purposes. 

Any aggregation of data that is created 

by an SDR, either at the Commission’s 

direction or voluntarily, must be 

retained for five years pursuant to Rule 

13n–7(b).767

Format: As explained in the 

Proposing Release, the Commission 

believes that transaction data, including 

life cycle events, and positions should 

be maintained in a place and format that 

is readily accessible to the Commission 

and other persons with authority to 

access or view such information.768 This 

requirement is important to ensure that 

SDRs maintain the information in an 

organized and accessible manner so that 

users, including relevant authorities and 

counterparties, can easily obtain the 

data that would assist them in carrying 

out their appropriate functions. The 

Commission also believes that this 

requirement helps ensure that the 

information is maintained in a common 

and easily accessible language, such as 

a language commonly used in financial 

markets. The Commission agrees with 

one commenter’s recommendation that 

an SDR’s records should ‘‘be in an 

electronically readable format (where 

available) that allows for application 

and analysis,’’ 769 and therefore the 

Commission is modifying proposed 

Rule 13n–5(b)(4) to provide that the 

information must be in a format that is 

usable to (1) the Commission and (2) 

other persons with authority to access or 

view such information.770 The 

Commission believes that if the 

information is not in a usable format, 

then the Commission and others would 

not have the ability to analyze the 

information as needed. 

Despite comments to the contrary,771

the Commission is not establishing a 

specific, prescribed format in which an 

SDR must maintain transaction data and 

positions. The Commission expects that 

the ‘‘readily accessible and usable’’ 

requirement will be sufficient to cause 

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14496 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

772See DTCC SBSR, supra note 27 (stating that 

SDRs ‘‘should have flexibility to specify acceptable 

data formats, connectivity requirements and other 

protocols for submitting information,’’ and that 

SDRs ‘‘should have the capability to adopt and set 

new formats’’ as market practices evolve over time). 

773See Section VI.D.2.c.ii of this release 

discussing aggregation of data across multiple 

registered SDRs by the Commission. 

774See Section VI.D.2.c.ii of this release 

discussing Rule 13n–4(b)(5) (direct electronic 

access). 

775Rule 13n–5(b)(4). 

776See Exchange Act Rule 17a–4(f)(2)(ii)(A), 17 

CFR 240.17a–4(f)(2)(ii)(A). In Electronic Storage of 

Broker-Dealer Records, Exchange Act Release No. 

47806 (May 7, 2003), 68 FR 25281 (May 12, 2003), 

the Commission stated, among other things, that a 

broker-dealer would not violate Exchange Act Rule 

17a–4(f)(2)(ii)(A) ‘‘if it used an electronic storage 

system that prevents the overwriting, erasing or 

otherwise altering of a record during its required 

retention period through the use of integrated 

hardware and software control codes.’’ The 

Commission incorporates this interpretation into 

Rule 13n–5(b)(4). 

777Proposing Release, 75 FR at 77330, supra note 

2. 

778See Proposing Release, 75 FR at 77331, supra 

note 2 (asking whether the Commission should 

adopt a requirement that SDRs organize and index 

transaction data and positions ‘‘so that the 

Commission and other users of such information 

are easily able to obtain the specific information 

that they require’’); Better Markets 1, supra note 19. 779See Section VI.D.3.a of this release discussing 

Rule 13n–4(c)(1)(iii). 780 15 U.S.C. 78m(n)(5)(D). 781See Sections VI.D.1 and VI.D.2 of this release 

discussing Rules 13n–4(a)(5) and 13n–4(b)(5). Rule 

13n–4(b)(5) requires each SDR to provide direct 

electronic access to the Commission or its 

designees; ‘‘direct electronic access’’ is defined in 

Rule 13n–4(a)(5) to mean access, which shall be in 

a form and manner acceptable to the Commission, 

to data stored by an SDR in an electronic format and 

updated at the same time as the SDR’s data is 

updated so as to provide the Commission with the 

ability to query or analyze the data in the same 

manner that the SDR can query or analyze the data. 

782Although the Commission is not imposing an 

indexing requirement, SDRs are required under 

Regulation SBSR to utilize a transaction ID for each 

SBS. The transaction ID is designed to allow the 

Commission and other relevant persons to link 

related activity, such as life cycle events, to the 

original transaction. See Regulation SBSR Adopting 

Release, supra note 13 (Rule 901). 

783See Section VI.H of this release discussing 

Rule 13n–8. 

784See DTCC 2, supra note 19; MarkitSERV, 

supra note 19. 

785 DTCC 2, supra note 19 (supporting ‘‘the 

approach that records are not invalidated by the 

actions of the SDR’’); MarkitSERV, supra note 19. 

786 DTCC 2, supra note 19. 

787See Proposing Release, 75 FR at 77331, supra 

note 2. 

the format and content of transaction 

data and historical positions maintained 

by any individual SDR to be sufficiently 

robust and complete for relevant 

persons to fully, accurately, and 

consistently process the data. The 

Commission believes that SDRs, 

working with market participants, will 

be in a better position to upgrade 

formats and data elements as needed. 

Having the Commission establish a 

specific format could impede the timely 

collection of data on new types of 

transactions from the SDRs.772

However, in order to oversee the SBS 

market, it will be necessary for the 

Commission to aggregate and analyze 

data across different SDRs.773 As 

discussed above, the Commission 

anticipates that it will propose for 

public comment detailed specifications 

of acceptable formats and taxonomies 

for providing SBS data to the 

Commission in order to facilitate an 

accurate interpretation, aggregation, and 

analysis by the Commission of SBS data 

submitted to it by different SDRs.774

The requirement for transaction data 

and historical positions to be 

maintained in an electronic format that 

is non–rewriteable and non–erasable 775

is consistent with the record retention 

format applicable to electronic brokerdealer records.776 As explained in the 

Proposing Release, this requirement 

would prevent the maintained 

information from being modified or 

removed without detection.777

The Commission is not specifically 

requiring that SDRs organize and index 

the transaction data and positions that 

they collect and maintain.778 The 

Commission believes that the 

requirement in Rule 13n–5(b)(4) that 

each SDR must 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, 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’’ incorporates the 

requirement that the data must be 

organized in a way that allows the data 

to be readily obtained or accessed by the 

Commission and other appropriate 

persons—data is not readily accessible 

and usable if it is not organized in a way 

that allows the data to be obtained 

quickly and easily. Further, whether 

users of information maintained by an 

SDR, other than the Commission, are 

able to easily obtain such information is 

also addressed by Rule 13n–4(c)(1)(iii), 

which requires, among other things, 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 data 

maintained by the SDR.779

With respect to the Commission’s 

ability to obtain the specific information 

it requires, the Commission believes 

that several other statutory and 

regulatory requirements under the 

Exchange Act also address this issue. 

For example, the Commission will have 

direct electronic access to the 

transaction data and positions pursuant 

to Exchange Act Section 13(n)(5)(D) 780

and Rule 13n–4(b)(5).781 The 

Commission expects to be able to query 

and analyze the data as necessary 

without imposing an indexing 

requirement at this time.782 In addition, 

Rule 13n–8, discussed below, requires 

each SDR to promptly report to the 

Commission, in a form and manner 

acceptable to the Commission, such 

information as the Commission 

determines to be necessary or 

appropriate for the Commission to 

perform the duties of the Commission 

under the Exchange Act and the rules 

and regulations thereunder.783

5. Controls to Prevent Invalidation (Rule 

13n–5(b)(5)) 

a. Proposed Rule 

Proposed Rule 13n–5(b)(5) would 

require every SDR to establish, 

maintain, and enforce written policies 

and procedures reasonably designed to 

prevent any provision in a valid SBS 

from being invalidated or modified 

through the procedures or operations of 

the SDR. 

b. Comments on the Proposed Rule 

Two commenters submitted 

comments relating to this proposed 

rule.784 Both commenters seemed to 

agree with this proposal.785 One 

commenter stated that an SDR ‘‘should 

be able to offer life cycle event 

processing and asset servicing 

activities’’ that may lead to ‘‘an update 

or modification to the records in the 

SDR,’’ with the consent of both 

parties.786

c. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n– 

5(b)(5) as proposed. Rule 13n–5(b)(5) 

requires every SDR to establish, 

maintain, and enforce written policies 

and procedures reasonably designed to 

prevent any provision in a valid SBS 

from being invalidated or modified 

through the procedures or operations of 

the SDR. The terms of SBSs can be the 

result of negotiation between the 

counterparties, and the Commission 

believes that these terms should not be 

modified or invalidated without the full 

consent of the counterparties.787

The Commission agrees with one 

commenter’s view that an SDR should 

be able to offer life cycle event 

processing and asset servicing activities 

that may lead to an updating of the 

records in the SDR, with the consent of 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14497 

788See DTCC 2, supra note 19. 

789See Section VI.E.4 of this release discussing 

Rule 13n–5(b)(4). 

790The Commission believes that an SDR’s 

policies and procedures would not necessarily be 

reasonable if they authorize the SDR to ‘‘deem’’ a 

user to have effectively consented to the SDR’s 

changes if the user merely utilizes the SDR system 

after such change. At a minimum, the SDR should 

inform both parties of the change. The Commission 

notes that Rule 905 of Regulation SBSR establishes 

procedures for correcting errors in data reported to 

an SDR. See Regulation SBSR Adopting Release, 

supra note 13 (Rule 905). Additionally, as discussed 

in Section VI.E.6 of this release, Rule 13n–5(b)(6) 

requires SDRs 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. 

791 In a separate release, the Commission is 

adopting rules regarding the correction of errors in 

SBS information maintained by an SDR in 

association with requirements under Dodd-Frank 

Act Section 763(i). See Regulation SBSR Adopting 

Release, supra note 13 (Rules 905 and 907(a)(3)). 

792See DTCC 2, supra note 19; MFA 1, supra note 

19; see also MFA SBSR, supra note 27. 

793MFA 1, supra note 19; see also MFA SBSR, 

supra note 27. 

794MFA SBSR, supra note 27. 

795MFA SBSR, supra note 27. 

796 DTCC 2, supra note 19. 

797 DTCC 2, supra note 19. 

798 DTCC 2, supra note 19. 

799Proposing Release, 75 FR at 77331, supra note 

2. In some cases, the data maintained by the SDR 

may be considered by the counterparties to be the 

legal or authoritative record of the SBS. However, 

this is due to the consent of the counterparties. 

Simply reporting an SBS to an SDR does not affect 

the legal terms of the SBS. See Section III.A of this 

release discussing the service of maintaining legally 

binding records. 

800See DTCC 2, supra note 19. 

801See DTCC 2, supra note 19 

802See DTCC 2, supra note 19. 

both parties.788 In such a case, it is not 

the SDR that is modifying the SBS, but 

the parties to the SBS who are doing so 

(or the parties are submitting 

information regarding the SBS that 

relates to the terms of the original 

contract); the SDR is simply updating its 

records to reflect the changes to the SBS 

made by the parties to the SBS, or to 

reflect life cycle events that have 

occurred and the parties to the SBS 

agree should be reflected in the updated 

records of the SDR. However, whenever 

an SDR updates its records, it must 

retain the data as it existed prior to the 

update pursuant to Rule 13n–5(b)(4), 

which is discussed above.789

If the reporting party reports 

inconsistent data, such as where the 

reporting party reports that the SBS is 

a standard SBS, but also reports a non– 

standard provision, the SDR can correct 

the inconsistency if it gives appropriate 

notice to both parties.790 In formulating 

its policies and procedures required by 

Rule 13n–5(b)(5), an SDR may want to 

consider providing the parties with 

notice of the inconsistency as soon as 

practicable. 

6. Dispute Resolution Procedures (Rule 

13n–5(b)(6)) 

a. Proposed Rule 

Proposed Rule 13n–5(b)(6) would 

require every 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.791

b. Comments on the Proposed Rule 

Two commenters submitted 

comments relating to this proposed 

rule.792 One commenter supported this 

proposed rule, stating that it is a key 

step in the effort to have accurate data 

at the SDR.793 The commenter stated 

that a reporting party and a nonreporting party may disagree on the 

terms of a reported SBS transaction and 

the reporting party may refuse to correct 

the erroneously reported transaction 

information.794 The commenter urged 

the Commission to require the SDR to 

review promptly the disputed data with 

the parties.795 The other commenter 

stated that it believed that ‘‘an SDR 

should be in a position to identify 

disputes or unconfirmed data as part of 

its process to confirm the data with both 

parties. However, only the parties to a 

transaction can resolve any dispute as to 

the terms of the trade.’’ 796 Where a 

trade comes through a third party 

service provider that ‘‘act[s] directly as 

an affirmation, confirmation or 

verification platform and already 

utilizes dispute resolution workflows,’’ 

the commenter did ‘‘not support a 

Proposed Rule that would require that 

the SDR [build] processes to replicate 

these services.’’ 797 The commenter 

stated that ‘‘an SDR can make the 

quality of the data or disputed trades 

visible to a firm’s prudential regulator 

and this would act as an incentive to 

timely resolution.’’ 798

c. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n– 

5(b)(6) as proposed. Rule 13n–5(b)(6) 

requires every 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. As the 

Commission explained in the Proposing 

Release, the data maintained by an SDR 

will be used by relevant authorities and 

counterparties.799 Parties, therefore, 

should have the ability to dispute the 

accuracy of the data maintained by an 

SDR regarding their SBSs. SDRs 

providing the means to resolve disputes 

should enhance data quality and 

integrity. 

The Commission agrees with one 

commenter that only the parties to a 

dispute can resolve it,800 but the 

Commission believes that SDRs can 

provide processes to facilitate 

resolution, which would improve the 

quality and accuracy of SBS data. The 

Commission does not believe that this 

requirement mandates that an SDR 

replicate the services of third party 

service providers, such as providing 

matching platforms.801 Having both 

parties verify the SBS data through a 

third party service provider prior to 

submitting it to an SDR will ensure a 

great deal of accuracy in the data 

maintained by the SDR. However, there 

may be instances where disputes still 

occur, such as where a party disagrees 

with a position reflected in an SDR’s 

records, where one party realizes it 

mistakenly verified a transaction and 

the other party refuses to submit or 

verify a correction, or where a 

transaction has been amended, but one 

party refuses to report or verify the 

amendment. In such instances, the 

Commission believes that the SDR 

should provide a party with the ability 

to raise the dispute, and have some sort 

of process to resolve the dispute. As 

with the other SDR Rules, an SDR could 

rely on a third party service provider to 

perform the SDR’s obligation to provide 

a dispute resolution process. If it does 

so, in order for such a process to be 

‘‘reasonably designed,’’ the SDR would 

have to oversee and supervise the 

performance of the third party service 

provider. The Commission agrees with 

one commenter 802 that to the extent that 

Rule 13n–5(b)(6) makes disputes visible 

to regulators, the rule should incentivize 

parties to resolve them. In any event, the 

Commission believes that the rule will 

further increase the quality and 

accuracy of SBS data. 

7. Data Preservation After an SDR 

Ceases To Do Business (Rule 13n– 

5(b)(7)) 

a. Proposed Rule 

Proposed Rule 13n–5(b)(7) would 

require an SDR, if it ceases to do 

business, or ceases to be registered as an 

SDR, to continue to preserve, maintain, 

and make accessible the transaction data 

and historical positions required to be 

collected, maintained, and preserved by 

Rule 13n–5 in the manner required by 

the Exchange Act and the rules and 

regulations thereunder for the 

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14498 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

803As noted in the Proposing Release, this 

proposed requirement was based on Exchange Act 

Rule 17a–4(g), 17 CFR 240.17a–4(g), which applies 

to books and records of broker-dealers. Proposing 

Release, 75 FR at 77332 n.128, supra note 2. 

804Proposing Release, 75 FR at 77332, supra note 

2. 

805 In addition, Item 45 of Form SDR requires 

each SDR to attach as an exhibit to its Form SDR 

‘‘a plan to ensure that the transaction data and 

position data that are recorded in the applicant 

continue to be maintained after the applicant 

withdraws from registration as [an SDR], which 

shall include procedures for transferring the 

transaction data and position data to the 

Commission or its designee (including another 

registered [SDR]).’’ This item implements Rule 13n– 

5(b)(8). 

806Proposing Release, 75 FR at 77332, supra note 

2. 

807 15 U.S.C. 78m(n). 

808See Automated Systems of Self-Regulatory 

Organizations, Exchange Act Release No. 27445 

(Nov. 16, 1989), 54 FR 48703 (Nov. 24, 1989) (‘‘ARP 

I Release’’); Automated Systems of Self-Regulatory 

Organizations, Exchange Act Release No. 29185 

(May 9, 1991), 56 FR 22490 (May 15, 1991) (‘‘ARP 

II Release’’) (collectively, ‘‘ARP Policy 

Statements’’). 

809See ARP II Release, 56 FR at 22491 n.4, supra 

note 808 (stating that the Commission’s automated 

review policies are intended to ‘‘encompass SRO 

systems that disseminate transaction and quotation 

information’’); see also ARP I Release, 54 FR at 

48704, supra note 808 (discussing that ‘‘the SROs 

have developed and continue to enhance automated 

systems for the dissemination of transaction and 

quotation information’’). 

810See Regulation of Exchanges and Alternative 

Trading Systems, Exchange Act Release No. 40760 

(Dec. 8, 1998), 63 FR 70844 (Dec. 22, 1998) 

(adopting Rule 301(b)(6) of Regulation ATS, 17 CFR 

242.301(b)(6)). Rule 301(b)(6) has since been 

superseded in part by Regulation SCI, 17 CFR 

242.1000–1007. 

811See DTCC 2, supra note 19; Deutsche Temp 

Rule, supra note 28; ISDA, supra note 19; see also 

DTCC 3, supra note 19; DTCC 5, supra note 19. 

812See DTCC 2, supra note 19 (stating that 

business continuity provisions should include 

multiple redundant systems, supporting ‘‘the 

Commission in requiring robust operational 

capabilities of an SDR,’’ and stating that SDRs 

should ‘‘maintain multiple levels of operational 

redundancy’’); DTCC 3, supra note 19 

(recommending that SDRs ‘‘maintain multiple 

levels of operational redundancy and data 

security’’); DTCC 5, supra note 19 (recommending 

(1) granting an SDR flexibility to make contingency 

and disaster recovery plans part of a parent’s or 

affiliate’s disaster recovery operations, (2) revising 

proposed Rule 13n–6(b)(2) to require an external 

audit only once every five years when the SDR’s 

objective review is performed by an internal 

department rather than every year, and (3) revising 

proposed Rule 13n–6(b)(3) to be less prescriptive in 

its time frames and grant more flexibility to an SDR 

for reporting outages). 

813 DTCC 2, supra note 19. 

814 DTCC 2, supra note 19. 

815 DTCC 2, supra note 19. 

816 DTCC 2, supra note 19; see also DTCC 3, supra 

note 19 (recommending that ‘‘a failure to 

remainder of the period required by this 

rule.803

b. Comments on the Proposed Rule 

The Commission received no 

comments relating to this proposed rule. 

c. Final Rule 

The Commission is adopting Rule 

13n–5(b)(7) as proposed. Rule 13n– 

5(b)(7) requires an SDR, if it ceases to do 

business, or ceases to be registered 

pursuant to Exchange Act Section 13(n) 

and the rules and regulations 

thereunder, to continue to preserve, 

maintain, and make accessible the 

transaction data and historical positions 

required to be collected, maintained, 

and preserved by Rule 13n–5 in the 

manner required by the Exchange Act 

and the rules and regulations 

thereunder (including 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, in an electronic 

format that is non-rewriteable and nonerasable, and in a manner that protects 

confidentiality and accuracy) for the 

remainder of the period required by 

Rule 13n–5 (i.e., not less than five years 

after the applicable SBS expires for 

transaction data and not less than five 

years for historical positions). As the 

Commission explained in the Proposing 

Release, given the importance of the 

records maintained by an SDR to the 

functioning of the SBS market, an SDR 

ceasing to do business could cause 

serious disruptions in the market should 

the information it maintains becomes 

unavailable.804

8. Plan for Data Preservation (Rule 13n– 

5(b)(8)) 

a. Proposed Rule 

Proposed Rule 13n–5(b)(8) would 

require 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 

proposed Rule 13n–5(b)(7). 

b. Comments on the Proposed Rule 

The Commission received no 

comments relating to this proposed rule. 

c. Final Rule 

The Commission is adopting Rule 

13n–5(b)(8) as proposed. 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), which shall include 

procedures for transferring the 

transaction data and positions to the 

Commission or its designee (including 

another registered SDR).805 As the 

Commission explained in the Proposing 

Release, given the importance of the 

records maintained by an SDR to the 

functioning of the SBS market, if an 

SDR ceases to do business, the absence 

of a plan to transfer information could 

cause serious disruptions.806 The 

Commission expects that an SDR’s plan 

would establish procedures and 

mechanisms so that another entity 

would be in the position to maintain 

this information after the SDR ceases to 

do business or ceases to be registered 

pursuant to Exchange Act Section 

13(n) 807 and the rules and regulations 

thereunder. 

F. Automated Systems (Rule 13n–6) 

1. Proposed Rule 

The Commission proposed Exchange 

Act Rule 13n–6 to provide standards for 

SDRs with regard to their automated 

systems’ capacity, resiliency, and 

security. The proposed rule was 

designed to be comparable to the 

standards applicable to SROs, including 

exchanges and clearing agencies,808 and 

market information dissemination 

systems, pursuant to the Commission’s 

Automation Review Policy (‘‘ARP’’) 

program 809 and rules applicable to 

significant-volume alternative trading 

systems (‘‘ATSs’’).810

2. Comments on the Proposed Rule 

Three commenters submitted 

comments relating to proposed Rule 

13n–6.811 One commenter ‘‘support[ed] 

the Commission’s intent’’ behind the 

rule, but suggested several specific 

changes.812 The commenter also stated 

that it ‘‘has always placed a high 

priority on maintaining business 

resiliency,’’ including having ‘‘in place 

multiple fully staffed data and 

operations centers in diverse regions of 

the country, each capable of handling 

[the commenter’s] entire business.’’ 813

The commenter stated that it ‘‘performs 

both data center and operational failover 

tests every year’’ and ‘‘[d]atacenter 

recovery tests are performed at least six 

times a year in various configurations, 

and there are more than two dozen 

operational failover tests each year, 

ranging from a single department 

failover, to an operational recovery 

involving more than 400 staff.’’ 814 The 

commenter believed that ‘‘[t]hese 

capabilities are fundamental to any 

registration as an SDR.’’ 815 The 

commenter further stated that ‘‘[g]iven 

the importance of SDRs to the regulatory 

and systemic risk oversight of the 

financial markets and the important role 

they will play in providing market 

transparency, a lack of robust resiliency 

and redundancy in operations should 

disqualify an entity from registering as 

an SDR.’’ 816

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demonstrate robust resiliency, security and 

redundancy in operations should preclude an entity 

from registering as an SDR’’). 

817 Deutsche Temp Rule, supra note 28 (stating 

that the Commission should use its authority under 

Dodd-Frank Act Section 763 to ‘‘impose strict 

requirements on the handling, disclosure and use 

by the SDRs of identifying information and on the 

operational and technological measures that must 

be employed by SDRs to protect such information 

from disclosure (including by way of unauthorized 

access)’’). 

818 ISDA, supra note 19 (‘‘[T]here is a real need 

for [SDRs] to have robust policies, procedures and 

systems in place to address the information barrier 

and privacy issue.’’). 

819 ISDA, supra note 19. 

820Rule 13n–6 is being promulgated under 

Exchange Act Sections 13(n)(4)(B), 13(n)(7)(D), and 

13(n)(9). See 15 U.S.C. 78m(n)(4)(B), 78m(n)(7)(D), 

and 78m(n)(9). 

821Rule 13n–6 is similar to the first sentence in 

proposed Rule 13n–6(b)(1). As adopted, the words 

‘‘integrity’’ and ‘‘availability’’ have been added. The 

addition is consistent with, and captures concepts 

in, the rule as proposed, which implicitly addressed 

both integrity and availability. See Proposing 

Release, 75 FR at 77370, supra note 2 (proposing 

requirement that an SDR has policies and 

procedures that, at a minimum, (i) establish 

reasonable current and future capacity estimates; 

(ii) conduct periodic capacity stress tests of critical 

systems to determine such systems’ ability to 

process transactions in an accurate, timely, and 

efficient manner; (iii) develop and implement 

reasonable procedures to review and keep current 

its system development and testing methodology; 

(iv) review the vulnerability of its systems and data 

center computer operations to internal and external 

threats, physical hazards, and natural disasters; and 

(v) establish adequate contingency and disaster 

recovery plans). These edits also make Rule 13n– 

6 more consistent with Rule 1001(a)(1) of 

Regulation SCI, 17 CFR 242.1000(a)(1) (requiring 

each SCI entity to ‘‘establish, maintain, and enforce 

written policies and procedures reasonably 

designed to ensure that its SCI systems and, for 

purposes of security standards, indirect SCI 

systems, have levels of capacity, integrity, 

resiliency, availability, and security, adequate to 

maintain the SCI entity’s operational capability and 

promote the maintenance of fair and orderly 

markets’’). 

822 In addition, the Commission is not adopting 

proposed Rules 13n–6(a), (c), and (d) because they 

are not applicable without proposed Rules 13n– 

6(b)(2), (3), and (4). 

823See Regulation Systems Compliance and 

Integrity, Exchange Act Release No. 73639 (Nov. 19, 

2014), 79 FR 72252 (Dec. 5, 2014) (‘‘Regulation SCI 

Adopting Release’’). 

824See 17 CFR 242.600 (defining ‘‘NMS stock’’). 

825Regulation SCI Adopting Release, 79 FR at 

72363–4, supra note 823. 

826 In preparing their policies and procedures, 

SDRs may consider whether to incorporate aspects 

of Regulation SCI that may be appropriate for their 

particular implementation of Rule 13n–6, including 

where an SDR is related by virtue of its corporate 

structure to an entity subject to Regulation SCI. 

827Regulation SCI Adopting Release, 79 FR at 

72259, supra note 823. 828See Regulation SCI, 17 CFR 242.1000–1007. 

Rule 1000 of Regulation SCI defines ‘‘indirect SCI 

systems’’ as ‘‘any systems of, or operated by or on 

behalf of, an SCI entity that, if breached, would be 

reasonably likely to pose a security threat to SCI 

systems.’’ 

829Rule 13n–6. 

830See Regulation SBSR Adopting Release, supra 

note 13; see also ARP II Release, 56 FR at 22491 

n.4, supra note 808 (stating that ARP standards 

encompass ‘‘systems that disseminate transaction 

and quotation information’’). 

831See DTCC 2, supra note 19; Deutsche Temp 

Rule, supra note 28; ISDA, supra note 19. 

832See DTCC 2, supra note 19; DTCC 3, supra 

note 19; Deutsche Temp Rule, supra note 28. 

The second commenter suggested that 

the Commission ‘‘take all possible steps 

to ensure that identifying information is 

protected by SDRs and the 

[Commission].’’ 817 The third 

commenter believed that SDRs, among 

other entities, should ‘‘have proper 

safeguards and barriers in place in order 

to ensure the security of data, prevent 

cyber-crime and safeguard against 

inappropriate access,’’ and that such 

entities should ‘‘make the appropriate 

level of investment to design, 

implement and continually review their 

information barriers . . . in order to 

protect markets and market 

participants.’’ 818 The commenter also 

believed that ‘‘[i]t is equally important 

that regulators ensure that the viability 

and rigor of these information barriers . 

. . are reviewed and audited as they are 

at all other market participants.’’ 819

3. Final Rule 

After considering the comments 

received on this proposal, the 

Commission is not adopting the more 

specific requirements of proposed Rule 

13n–6(b)(1),820 but is instead adopting 

the core policies and procedures 

requirement. Thus, final Rule 13n–6 is 

consistent with, but is more general and 

flexible than, proposed Rule 13n–6. 

Final Rule 13n–6 provides in full that 

‘‘[e]very security-based swap data 

repository, with respect to those systems 

that support or are integrally related to 

the performance of its activities, shall 

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.’’ 821 The Commission is not 

adopting proposed Rules 13n–6(b)(2), 

(3), and (4).822

The Commission is not adopting Rule 

13n–6 as proposed because, after 

proposing Rule 13n–6, the Commission 

considered the need for an updated 

regulatory framework for certain 

systems of the U.S. securities trading 

markets and adopted Regulation 

Systems Compliance and Integrity 

(‘‘Regulation SCI’’).823 Regulation SCI 

supersedes the Commission’s ARP 

Policy Statements and Rule 301(b)(6) of 

Regulation ATS (with respect to 

significant-volume ATSs that trade NMS 

stocks 824 and non-NMS stocks), on 

which proposed Rule 13n–6 was largely 

based. The Regulation SCI Adopting 

Release includes a discussion of 

comment letters addressing the 

application of Regulation SCI to 

SDRs.825

In light of this development, the 

Commission believes that Rule 13n–6, 

as adopted, better sets an appropriate 

core framework for the policies and 

procedures of SDRs with respect to 

automated systems. While this 

framework responds to comments about 

the application of Regulation SCI to 

SDRs and is broadly consistent with 

Regulation SCI, Rule 13n–6 does not 

apply Regulation SCI and its specific 

obligations to SDRs.826 In adopting 

Regulation SCI, the Commission 

explained that it will ‘‘monitor and 

evaluate the implementation of 

Regulation SCI, the risks posed by the 

systems of other market participants, 

and the continued evolution of the 

securities markets, such that it may 

consider, in the future, extending the 

types of requirements in Regulation SCI 

to additional categories of market 

participants.’’ 827 Consistent with this 

approach and in recognition of the 

importance of SDRs as the primary 

repositories of SBS trade information, 

the Commission may consider the 

application of any features of Regulation 

SCI to SDRs in the future. In addition, 

to the extent that an SDR may share 

systems with an SCI entity (e.g., an 

affiliated clearing agency), such systems 

may meet the definition of ‘‘indirect SCI 

systems’’ of the SCI entity, as defined in 

Regulation SCI, and certain provisions 

of Regulation SCI may apply.828

Rule 13n–6 applies to ‘‘systems that 

support or are integrally related to the 

performance of [each SDR’s] 

activities.’’ 829 This includes automated 

systems that support or are integrally 

related to performing both core and 

ancillary services, including functions 

that may be required by Regulation 

SBSR, such as public dissemination of 

SBS information.830 To the extent that 

an SDR uses a third party service 

provider to perform the SDR’s functions, 

the SDR’s policies and procedures 

required by Rule 13n–6 continue to 

apply; an SDR cannot absolve itself of 

its responsibilities under this rule 

through the use of a third party service 

provider. 

The Commission believes that Rule 

13n–6 addresses commenters’ concerns 

about operational capabilities and 

protecting information.831 With respect 

to comments suggesting specific 

substantive requirements,832 the 

Commission believes that a more 

measured approach is to adopt a rule 

that requires SDRs to adopt policies and 

procedures reasonably designed to 

ensure that they have adequate levels of 

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833See DTCC 2, supra note 19; DTCC 3, supra 

note 19; Deutsche Temp Rule, supra note 28. 

834See DTCC 2, supra note 19. 

835See DTCC 2, supra note 19. 

836See DTCC 2, supra note 19; Deutsche Temp 

Rule, supra note 28 (commenting on the need for 

‘‘strict requirements . . . on the operational and 

technological measures . . . employed by SDRs to 

protect [reported data] from disclosure (including 

by way of unauthorized access)’’). 

837See DTCC 2, supra note 19; DTCC 3, supra 

note 19. 

838 DTCC 5, supra note 19. 

839 ISDA, supra note 19. 

840 ISDA, supra note 19. 

841See Proposing Release, 75 FR at 77337, supra 

note 2. 

842Proposing Release, 75 FR at 77337, supra note 

2. 

843See Exchange Act Section 13(n)(2), 15 U.S.C. 

78m(n)(2) (stating that ‘‘[e]ach registered securitybased swap data repository shall be subject to 

inspection and examination by any representative 

of the Commission’’); see also Rule 13n–4(b)(1) 

(implementing same requirement). 

844 17 CFR 240.17a–3(a)(21) and (22). 

845The Commission is making a technical 

modification to Rule 13n–7(b)(2) from the proposal. 

As proposed, the rule referred to ‘‘the staff of the 

Commission.’’ As adopted, the rule instead refers to 

‘‘representatives of the Commission’’ for 

consistency with other rules being adopted in this 

release. See Rule 13n–4(b)(1) and Rule 13n–7(b)(3) 

(both referring to ‘‘any representative of the 

Commission’’). 

846For purposes of Rule 13n–7(b)(3), the 

Commission interprets the term ‘‘promptly’’ to 

mean making reasonable efforts to produce records 

that are requested by Commission representatives 

during an examination without delay. The 

Commission believes that in many cases, an SDR 

could, and therefore will be required to, furnish 

records immediately or within a few hours of a 

request. The Commission expects that only in 

unusual circumstances would an SDR be permitted 

to delay furnishing records for more than 24 hours. 

Accord Registration of Municipal Advisors, 

Exchange Act Release No. 70462 (Sept. 20, 2013), 

78 FR 67468, 67578–67579 n.1347 (Nov. 12, 2013) 

(interpreting the term ‘‘prompt’’ in the context of 

Exchange Act Rule 15Ba1–8(d)). 

capacity, integrity, resiliency, 

availability, and security. Consistent 

with the comments,833 an SDR may 

want to consider, in developing its 

policies and procedures required by 

Rule 13n–6, whether to include the 

establishment and maintenance of 

multiple redundant systems and data 

and operations centers in diverse 

regions of the country,834 periodic data 

center and operational failover tests,835

robust operational capabilities,836 and 

multiple levels of operational 

redundancy and data security.837 The 

Commission also believes that an SDR’s 

policies and procedures required by 

Rule 13n–6 can be ‘‘a part of or 

consistent with a parent or affiliate 

entity’s disaster recovery 

operations.’’ 838 The Commission further 

believes that Rule 13n–6 is consistent 

with one commenter’s recommendation 

that SDRs should ‘‘have proper 

safeguards and barriers in place in order 

to ensure the security of data, prevent 

cyber-crime and safeguard against 

inappropriate access.’’ 839 Additionally, 

the Commission believes that to comply 

with Rule 13n–6, SDRs will likely need 

to ‘‘make the appropriate level of 

investment to design, implement and 

continually review their information 

barriers . . . in order to protect markets 

and market participants.’’ 840

G. SDR Recordkeeping (Rule 13n–7) 

The Commission proposed Rule 13n– 

7 to specify the books and records 

requirements applicable to SDRs. After 

receiving no comments on this proposal, 

the Commission is adopting Rule 13n– 

7 as proposed, with some technical 

modifications. 

1. Records To Be Made by SDRs (Rule 

13n–7(a)) 

a. Proposed Rule 

Proposed Rule 13n–7(a) would 

require every SDR to make and keep 

current certain books and records 

relating to its business. 

b. Comments on the Proposed Rule 

The Commission received no 

comments relating to this proposed rule. 

c. Final Rule 

The Commission is adopting Rule 

13n–7(a)(1) as proposed. Rule 13n– 

7(a)(1) requires every SDR to make and 

keep current ‘‘a record for each office 

listing, by name or title, each person at 

that office who, without delay, can 

explain the types of records the 

security-based swap data repository 

maintains at that office and the 

information contained in those 

records.’’ The Commission continues to 

believe that SDR recordkeeping 

practices may vary in ways ranging from 

format and presentation to the name of 

a record.841 Therefore, as explained in 

the Proposing Release, the Commission 

believes that each SDR must be able to 

promptly explain how it makes, keeps, 

and titles its records.842 To comply with 

this rule, an SDR may identify more 

than one person and list which records 

each person is able to explain. Because 

it may be burdensome for an SDR to 

keep this record current if it lists each 

person by name, an SDR may satisfy this 

requirement by recording the persons 

capable of explaining the SDR’s records 

by either name or title. 

The Commission is also adopting Rule 

13n–7(a)(2) as proposed. Rule 13n– 

7(a)(2) requires every SDR to make and 

keep current ‘‘a record listing each 

officer, manager, or person performing 

similar functions of the security-based 

swap data repository responsible for 

establishing policies and procedures 

that are reasonably designed to ensure 

compliance with the [Exchange] Act and 

the rules and regulations thereunder.’’ 

This rule is intended to assist securities 

regulators by identifying individuals 

responsible for designing an SDR’s 

compliance policies and procedures. 

The purpose of both Rules 13n–7(a)(1) 

and 13n–7(a)(2) is to assist the 

Commission in its inspection and 

examination function.843 These two 

requirements are based on Exchange Act 

Rules 17a–3(a)(21) and (22), 

respectively, which are applicable to 

broker-dealers.844 It is important for the 

Commission’s examiners to have the 

ability to find quickly what records are 

maintained in a particular office and 

who is responsible for establishing 

particular policies and procedures of an 

SDR. 

2. Records To Be Preserved by SDRs 

(Rule 13n–7(b)) 

a. Proposed Rule 

Proposed Rule 13n–7(b) would 

require every SDR to keep and preserve 

copies of its documents, keep such 

documents for a period of not less than 

five years, the first two in a place that 

is immediately available to Commission 

staff, and promptly furnish such 

documents to Commission staff upon 

request. 

b. Comments on the Proposed Rule 

The Commission received no 

comments relating to this proposed rule. 

c. Final Rule 

The Commission is adopting Rule 

13n–7(b) as proposed, with one 

technical modification. Rule 13n–7(b)(1) 

requires every SDR to ‘‘keep and 

preserve at least one copy of all 

documents, including all documents 

and policies and procedures required by 

the [Exchange] Act and the rules and 

regulations thereunder, correspondence, 

memoranda, papers, books, notices, 

accounts, and other such records as 

shall be made or received by it in the 

course of its business as such.’’ Rule 

13n–7(b)(2) requires every SDR to ‘‘keep 

all such documents for a period of not 

less than five years, the first two years 

in a place that is immediately available 

to representatives of the Commission for 

inspection and examination.’’ 845 Rule 

13n–7(b)(3) requires every SDR to, 

‘‘upon request of any representative of 

the Commission, promptly furnish 846 to 

the possession of such representative 

copies of any documents required to be 

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847 17 CFR 240.17a–1. 

848 15 U.S.C. 78m(n)(2); see also Rule 13n–4(b)(1) 

(implementing same requirement); Proposing 

Release, 75 FR at 77338, supra note 2. 

849This requirement is based on Exchange Act 

Rule 17a–4(g), 17 CFR 240.17a–4(g), which applies 

to books and records of broker-dealers. 

850The Commission is making a technical 

amendment to Rule 13n–7(c) from the proposal. As 

proposed, the rule referred to ‘‘records/data.’’ The 

rule being adopted refers to ‘‘records and data’’ for 

clarity. 

851 15 U.S.C. 78m(n)(2); see also Rule 13n–4(b)(1) 

(implementing same requirement). 

852See Section VI.E.8 of this release discussing 

Rule 13n–5(b)(8). 

853The Commission is making a technical 

modification to Rule 13n–7(d) from the proposal, 

changing ‘‘data’’ to ‘‘transaction data and 

positions.’’ This is to clarify that the data that Rule 

13n–7 does not apply to is limited to transaction 

data and positions, both of which are required to 

be maintained in accordance with Rule 13n–5(b)(4). 

Rule 13n–7 applies to other information that may 

be created pursuant to Rule 13n–5, but which is not 

required to be maintained pursuant to Rule 13n– 

5(b)(4). For example, in order to assure itself of 

compliance with Rule 13n–5(b)(1)(iv), an SDR 

could run tests to determine how long it takes for 

it to record transaction data that it receives. Data 

from such test would be required to be retained 

pursuant to Rule 13n–7, not Rule 13n–5(b)(4). The 

Commission clearly contemplated this distinction 

in the Proposing Release when it stated that Rule 

13n–7(d) was proposed to clarify that Rule 13n–7 

was designed to capture those records other than 

the data required to be maintained in accordance 

with proposed Rule 13n–5. See Proposing Release, 

75 FR at 77338, supra note 2. 

854Proposing Release, 75 FR at 77338, supra note 

2. 

855See DTCC 2, supra note 19; Barnard, supra 

note 19. In addition, one commenter to the 

Temporary Rule Release suggested that the 

Commission affirmatively state that it intends to 

keep information furnished to the Commission 

pursuant to the rules in that release, which could 

be information similar to that reported to the 

Commission under Rule 13n–8, confidential under 

FOIA or to seek a legislative solution. See Deutsche 

Temp Rule, supra note 28. 

856 DTCC 2, supra note 19. 

857Barnard, supra note 19. 

kept and preserved by it pursuant to 

paragraphs (a) and (b) of this [rule].’’ 

Rule 13n–7(b) is based on Exchange 

Act Rule 17a–1, which is the 

recordkeeping rule for national 

securities exchanges, national securities 

associations, registered clearing 

agencies, and the Municipal Securities 

Rulemaking Board.847 As explained in 

the Proposing Release, Rule 13n–7(b) is 

intended to set forth the recordkeeping 

obligation of SDRs and thereby facilitate 

implementation of the broad inspection 

authority given to the Commission in 

Exchange Act Section 13(n)(2).848 This 

rule includes all electronic documents 

and correspondence, such as data 

dictionaries, emails and instant 

messages, which should be furnished in 

their original electronic format. 

3. Recordkeeping After an SDR Ceases 

To Do Business (Rule 13n–7(c)) 

a. Proposed Rule 

Proposed Rule 13n–7(c) would 

require an SDR that ceases doing 

business, or ceases to be registered as an 

SDR, to continue to preserve, maintain, 

and make accessible the records/data 

required to be collected, maintained, 

and preserved by Rule 13n–7 in the 

manner required by this rule and for the 

remainder of the period required by this 

rule.849

b. Comments on the Proposed Rule 

The Commission received no 

comments relating to this proposed rule. 

c. Final Rule 

The Commission is adopting Rule 

13n–7(c) as proposed, with a technical 

modification. Rule 13n–7(c) requires an 

SDR that ceases doing business, or 

ceases to be registered pursuant to 

Exchange Act Section 13(n) and the 

rules and regulations thereunder, to 

continue to preserve, maintain, and 

make accessible the records and data 850

required to be collected, maintained, 

and preserved by Rule 13n–7 in the 

manner required by this rule and for the 

remainder of the period required by this 

rule. This requirement is intended to 

allow Commission representatives to 

perform effective inspections and 

examinations of an SDR pursuant to 

Exchange Act Section 13(n)(2).851 In 

addition, the Commission notes that, as 

discussed in Section VI.B of this release 

regarding Rule 13n–2, an SDR that 

ceases to exist or do business as an SDR 

is required to file a withdrawal from 

registration on Form SDR pursuant to 

Rule 13n–2(b) and designate on Item 12 

of Form SDR a custodian of books and 

records. 

An SDR may wish to consider 

establishing contingency plans so that 

another entity will be in the position to 

maintain the SDR’s records and data 

after the SDR ceases to do business. The 

Commission notes that the requirement 

in Rule 13n–5(b)(8) for an SDR to make 

and keep current a plan to ensure that 

the SDR’s transaction data and positions 

are maintained after it ceases doing 

business or ceases to be registered 852

does not expressly extend to a plan for 

maintaining all of the records and data 

required to be maintained pursuant to 

Rule 13n–7, but that plan could also 

include such records and data. 

4. Applicability (Rule 13n–7(d)) 

a. Proposed Rule 

Proposed Rule 13n–7(d) provided that 

Rule 13n–7 ‘‘does not apply to data 

collected and maintained pursuant to 

Rule 13n–5.’’ 

b. Comments on the Proposed Rule 

The Commission received no 

comments relating to this proposed rule. 

c. Final Rule 

The Commission is adopting Rule 

13n–7(d) as proposed, with a technical 

modification. Rule 13n–7(d) states that 

Rule 13n–7 ‘‘does not apply to 

transaction data and positions collected 

and maintained pursuant to Rule 13n– 

5 (§ 240.13n–5).’’ 853 As explained in the 

Proposing Release, the purpose of this 

rule is to clarify that the requirements 

in Rule 13n–7 are designed to capture 

those records of an SDR other than the 

transaction data, positions, and market 

data that would be required to be 

maintained in accordance with Rule 

13n–5, as discussed in Section VI.E of 

this release.854 The requirements of Rule 

13n–7 do apply to records that an SDR 

creates using the data required to be 

maintained in accordance with Rule 

13n–5, such as aggregate reports. 

H. Reports To Be Provided to the 

Commission (Rule 13n–8) 

The Commission proposed Rule 13n– 

8 to specify certain reports that an SDR 

would be required to provide to the 

Commission. After considering the two 

comments received on this proposal, the 

Commission is adopting Rule 13n–8 as 

proposed. 

1. Proposed Rule 

Proposed Rule 13n–8 would require 

every SDR to ‘‘promptly report to the 

Commission, in a form and manner 

acceptable to the Commission, such 

information as the Commission 

determines to be necessary or 

appropriate for the Commission to 

perform the duties of the Commission 

under the [Exchange] Act and the rules 

and regulations thereunder.’’ This 

proposed rule was designed to provide 

the Commission with the necessary 

information for it to fulfill its regulatory 

duties. 

2. Comments on the Proposed Rule 

Two commenters submitted 

comments relating to this proposed 

rule.855 One commenter stated that it 

‘‘currently makes information available 

directly to regulators, having created a 

web portal for access to scheduled 

reports, and providing extracts from [the 

trade repository’s] database based on 

parameters set by regulators . . . . 

Through this system, [the commenter] 

expects to be able to offer acceptable 

access to the Commission.’’ 856 The 

other commenter recommended that 

reports ‘‘be standardized and use a 

common terminology.’’ 857

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858One commenter describes its approach to 

addressing the proposed rule’s requirements. See 

DTCC 2, supra note 19. With respect to the 

commenter to the Temporary Rule Release 

suggesting that the Commission affirmatively state 

that it intends to keep information furnished 

pursuant to the rules in that release confidential 

under FOIA or to seek a legislative solution, the 

Commission anticipates that it will keep reported 

data that SDRs submit to the Commission (via Rule 

13n–8 or any other means) confidential, subject to 

the provisions of applicable law. See Deutsche 

Temp Rule, supra note 28. Pursuant to Commission 

rules, confidential treatment can be sought for 

information submitted to the Commission. See 17 

CFR 200.83 (regarding confidential treatment 

procedures under FOIA). The Commission does not 

intend to affirmatively seek any legislative action to 

protect further such information. The commenter is 

not precluded from doing so on its own initiative. 

859 In a separate release, the Commission is 

adopting a rule requiring an SDR to provide the 

Commission, upon request, information or reports 

related to the timeliness, accuracy, and 

completeness of data reported to the SDR. See 

Regulation SBSR Adopting Release, supra note 13 

(Rule 907(e)). 

860Proposing Release, 75 FR at 77339, supra note 

2. 

861See Section VI.D.2.c.ii of this release 

discussing anticipated Commission proposal 

pursuant to Rule 13n–4(b)(5). With regard to other 

types of reports, the Commission will seek to work 

with SDRs to develop the form and the manner for 

the SDRs to provide the Commission with the 

information it needs, while seeking to minimize the 

SDRs’ burdens. 862See Barnard, supra note 19. 863See Exchange Act Section 13(n)(5)(F), 15 

U.S.C. 78m(n)(5)(F). 864Proposed Rule 13n–9(b)(1). 865Proposed Rule 13n–9(b)(2). 866 Id. 

867See DTCC 2, supra note 19; MFA 1, supra note 

19; TriOptima, supra note 19; Deutsche Temp Rule, 

supra note 28; ISDA, supra note 19; see also DTCC 

5, supra note 19. 

868See DTCC 2, supra note 19; MFA 1, supra note 

19. The Commission received no comments on 

proposed Rule 13n–9(a), which set forth the 

definitions applicable to the rule, and is adopting 

each of them as proposed. See supra note 247 

(discussing a general comment regarding the term 

‘‘affiliate’’). 

869 DTCC 2, supra note 19; see also DTCC 5, supra 

note 19. 

870 DTCC 5, supra note 19. 

871 DTCC 5, supra note 19. 

872MFA 1, supra note 19. 

873MFA 1, supra note 19 (‘‘Specifically, we 

recommend adding to the information covered 

under [proposed Rule] 13n–9(b): (i) information 

related to transactions of a market participant, 

including the size and volume of such transactions; 

(ii) the identity of each market participant; and (iii) 

the details of any master agreement (to the extent 

provided) governing the relevant SBS.’’). 

3. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n–8 as 

proposed. Rule 13n–8 requires every 

SDR to ‘‘promptly report to the 

Commission, in a form and manner 

acceptable to the Commission, such 

information as the Commission 

determines to be necessary or 

appropriate for the Commission to 

perform the duties of the Commission 

under the [Exchange] Act and the rules 

and regulations thereunder.’’ This 

requirement provides flexibility to the 

Commission to obtain information on a 

case-by-case basis and in connection 

with fulfilling its examination 

function.858

Under Rule 13n–8, the Commission 

may request specific reports related to 

the final SDR Rules.859 For example, in 

the Proposing Release, the Commission 

stated that it may request a report on the 

number of complaints an SDR has 

received pertaining to data integrity.860

In addition, the Commission may 

request other reports in the future based 

upon, for example, developments in the 

SBS markets or a newly identified need 

for particular SBS information. The 

Commission expects that an SDR will be 

able to promptly report any information 

in its possession to the Commission 

pursuant to Rule 13n–8. If the report 

involves provision of SBS data, then the 

Commission could require an SDR to 

adhere to any formats and taxonomies 

required pursuant to Rule 13n– 

4(b)(5).861 This approach is consistent 

with one commenter’s recommendation 

that reports ‘‘be standardized and use 

common terminology.’’ 862

I. Privacy of SBS Transaction 

Information and Disclosure to Market 

Participants (Rules 13n–9 and 13n–10) 

1. Privacy Requirements (Rule 13n–9) 

Proposed Rule 13n–9 set forth 

requirements to implement an SDR’s 

statutory duty to ‘‘maintain the privacy 

of any and all security-based swap 

transaction information that the [SDR] 

receives from a security-based swap 

dealer, counterparty, or any other 

registered entity.’’ 863 After considering 

the comments received on the proposal, 

the Commission is adopting the rule as 

proposed. 

a. Proposed Rule 

Proposed Rule 13n–9 would require 

each 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 from 

an SBS dealer, counterparty, or any 

registered entity. Such policies and 

procedures would be required to 

include, but not be limited to, policies 

and procedures to protect the privacy of 

any and all SBS transaction information 

that the SDR shares with affiliates and 

nonaffiliated third parties.864 The 

proposed rule would also require each 

SDR to establish and maintain 

safeguards, policies, and procedures 

reasonably designed to prevent the 

misappropriation or misuse of (i) any 

confidential information received by the 

SDR; (ii) material, nonpublic 

information; and/or (iii) intellectual 

property, by the SDR or any person 

associated with the SDR for their 

personal benefit or the benefit of 

others.865 Such safeguards, policies, and 

procedures would be required to 

address, without limitation, (1) limiting 

access to such confidential information, 

material, nonpublic information, and 

intellectual property, (2) standards 

pertaining to the trading by persons 

associated with the SDR for their 

personal benefit or the benefit of others, 

and (3) adequate oversight to ensure 

compliance of this provision.866

b. Comments on the Proposed Rule 

Five commenters submitted 

comments relating to this proposed 

rule.867 Two of the commenters 

supported the proposal.868 One 

commenter ‘‘fully support[ed] the 

Commission’s efforts to protect the 

privacy of any and all SBS transaction 

information received by an SDR’’ and 

believed that ‘‘no communication of 

data (other than to, or as required by, 

applicable regulators) that could have 

the result of disclosing the actual 

positions or specific business or trading 

activity of a counterparty should be 

permitted without the consent of that 

counterparty.’’ 869 The commenter 

suggested that the definition of 

‘‘personally identifiable information’’ in 

proposed Rule 13n-9(a)(6) be limited to 

information that is not otherwise 

disclosed or made available to the 

public.870 In making its suggestion, the 

commenter stated that ‘‘[b]ecause much 

of the information utilized to on-board 

participants or to identify counterparties 

to an [SBS] will be publicly available 

through Web sites issuing legal entity 

identifiers or similar identifiers, this 

information should not be considered 

confidential simply because it is 

required by an [SDR].’’ 871

Another commenter also ‘‘agree[d] 

with the Commission’s concerns about 

privacy of SBS data’’ and ‘‘strongly 

support[ed] imposing privacy 

requirements on [SDRs].’’ 872

Specifically, the commenter supported 

the Commission’s proposed 

requirements related to policies and 

procedures reasonably designed to 

protect the privacy of SBS transaction 

information and noted that ‘‘such 

privacy protections will ensure that 

market participants utilize the services 

of registered [SDRs] with 

confidence.’’ 873 The commenter made a 

number of suggestions. First, the 

commenter suggested that the 

Commission add safeguards related to 

‘‘confidentiality of trading positions’’ to 

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874MFA 1, supra note 19. 

875MFA 1, supra note 19. 

876MFA 1, supra note 19. 

877MFA 1, supra note 19. 

878MFA 1, supra note 19. 

879TriOptima, supra note 19 (stating that 

‘‘establishment of clear rights and obligations 

governing access to [SDR] Information’’ is an 

important element in establishing ‘‘fair, secure and 

efficient market functioning for market 

participants,’’ and believing that it would ‘‘be 

appropriate and helpful to the market if the SEC can 

clarify in the final rule that [SDRs] shall provide 

third party service providers, who have been 

authorized to access information by the 

counterparties to the relevant trades under Written 

Client Disclosure Consents, with access to [SDR] 

Information’’). 

880TriOptima, supra note 19 (asking the 

Commission to ‘‘treat a third party service provider 

with a disclosure consent as acting as an ‘agent’ for 

the owner of the trade information and provide the 

third party service provider with the same type of 

access which the owner of such data is entitled to, 

subject to any restrictions set out in the disclosure 

consent’’). 

881 Deutsche Temp Rule, supra note 28. 

882 Deutsche Temp Rule, supra note 28. 

883 ISDA, supra note 19 (‘‘[T]here is a real need 

for [SDRs] to have robust policies, procedures and 

systems in place to address the information barrier 

and privacy issue.’’). 

884 ISDA, supra note 19. 

885See infra note 886 (discussing revised 

definition of ‘‘control’’) and note 890 (discussing 

revised definition of ‘‘nonpublic personal 

information’’). 

886See supra notes 247 and 621 (defining 

‘‘affiliate’’ and ‘‘control’’). The Commission is 

correcting a typographical error in the proposed 

definition of ‘‘control.’’ Proposed Rule 13n– 

9(a)(2)(ii) referred to the right to vote 25 percent 

‘‘of’’ more of a class of securities. See Proposing 

Release, 75 FR at 77371, supra note 2. As adopted, 

Rule 13n–9(a)(2)(ii) refers to the right to vote 25 

percent ‘‘or’’ more of a class of securities. See also 

Rule 13n–4(a)(3). 

887Rule 13n–9(b)(1); see also supra note 622 

(defining ‘‘nonaffiliated third party’’). 

888See Exchange Act Section 13(n)(5), 15 U.S.C. 

78m(n)(5). 

889See DTCC 2, supra note 19; MFA 1, supra note 

19 (noting that an SDR’s protection of the privacy 

of SBS transaction information ‘‘will ensure that 

market participants utilize the services of [a] 

registered [SDR] with confidence’’). 

890 In response to one commenter’s suggestion, 

the Commission is revising the definition of 

‘‘nonpublic personal information’’ from the 

proposal to mean (1) personally identifiable 

information that is not publicly available 

information and (2) any list, description, or other 

grouping of market participants (and publicly 

available information pertaining to them) that is 

derived using personally identifiable information 

that is not publicly available information. See Rule 

13n–9(a)(5); DTCC 5, supra note 19 (suggesting 

limiting the applicability of Rule 13n–9 to 

‘‘personally identifiable information’’ that is not 

otherwise disclosed or made available to the public 

‘‘[b]ecause much of the information utilized to on– 

board participants or to identify counterparties to 

an [SBS] will be publicly available through Web 

sites issuing legal entity identifiers or similar 

identifiers, this information should not be 

considered confidential simply because it is 

required by an [SDR]’’). This revision, which limits 

personally identifiable information to not publicly 

available information, is consistent with the 

definition of ‘‘nonpublic personal information’’ in 

Regulation SP, 17 CFR 248.3(t). The term 

‘‘personally identifiable information’’ is defined as 

any information (i) a market participant provides to 

an SDR to obtain service from the SDR, (ii) about 

a market participant resulting from any transaction 

involving a service between the SDR and the market 

participant, or (iii) the SDR obtains about a market 

participant in connection with providing a service 

to that market participant. See Rule 13n–9(a)(6). 

891See supra note 583 (defining ‘‘market 

participant’’). 

the Commission’s proposed rule 

because disclosure of position 

information could reveal market 

participants’ customized and 

proprietary investment strategies in 

which they invest heavily and ‘‘which 

form the foundation of their 

businesses.’’ 874 Second, the commenter 

suggested that the Commission expand 

its proposed rules to include a standard 

of care that would require SDRs to adopt 

policies and procedures to ensure that 

any confidential information received 

will be used solely for the purpose of 

fulfilling regulatory obligations.875

Third, the commenter suggested that the 

Commission require SDRs to adopt 

policies and procedures to limit access 

to confidential information to directors, 

officers, employees, agents, and 

representatives who need to know such 

information in order to fulfill regulatory 

obligations.876 The commenter noted 

that ‘‘[t]hose policies and procedures 

should also have a mechanism in place 

for all [SDR representatives] to be 

informed of, and required to follow, the 

[SDR’s] policies and procedures related 

to privacy of information received.’’ 877

The commenter believed that such 

persons should be liable for any breach 

of an SDR’s policies and procedures 

related to privacy of information.878

Another commenter suggested that 

‘‘where trading counterparties have 

given [written authorizations] in favor of 

a third party service provider to access 

their [SBS transaction information], 

there is no need to have the third party 

service provider observe the [SDR’s] 

privacy policies and procedures.’’ 879

The commenter stated that ‘‘if the 

counterparties to a trade authorize the 

third party service provider to use their 

information, an [SDR] should not be 

able to restrict or limit such use through 

privacy policies and procedures when 

the owners of the information have 

provided appropriate consents and 

authorizations.’’ 880

Consistent with the commenters 

supporting proposed Rule 13n–9, a 

commenter to the Temporary Rule 

Release stated that ‘‘market participants 

have legitimate interests in the 

protection of their confidential and 

identifying financial information.’’ 881 In 

this regard, the commenter suggested 

that the Commission ‘‘take all possible 

steps to ensure that identifying 

information is protected by SDRs and 

the [Commission]’’ and that the 

Commission use its statutory authority 

under Dodd-Frank Act Section 763 to 

‘‘impose strict requirements on the 

handling, disclosure and use by the 

SDRs of identifying information and on 

the operational and technological 

measures that must be employed by 

SDRs to protect such information from 

disclosure (including by way of 

unauthorized access).’’ 882

Another commenter believed that 

‘‘non–bank entities,’’ including SDRs, 

should ‘‘make the appropriate level of 

investment to design, implement and 

continually review their . . . data 

privacy policies and procedures in order 

to protect markets and market 

participants.’’ 883 The commenter also 

believed that ‘‘[i]t is equally important 

that regulators ensure that the viability 

and rigor of these . . . privacy policies 

are reviewed and audited as they are at 

all other market participants.’’ 884

c. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n–9 as 

proposed, with two minor 

modifications.885 Specifically, Rule 

13n–9(b)(1) requires each 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 from an SBS dealer, 

counterparty, or any registered entity. 

The rule further provides that such 

policies and procedures shall include, 

but are not limited to, policies and 

procedures to protect the privacy of any 

and all SBS transaction information that 

the SDR shares with affiliates 886 and 

nonaffiliated third parties.887 As 

mentioned above, the Exchange Act 888

requires, and commenters supported, 

the Commission’s imposition of privacy 

requirements on SDRs.889

Additionally, Rule 13n–9(b)(2) 

requires each SDR to establish and 

maintain safeguards, policies, and 

procedures reasonably designed to 

prevent the misappropriation or misuse, 

directly or indirectly, of: (1) Any 

confidential information received by the 

SDR, including, but not limited to, trade 

data, position data, and any nonpublic 

personal information 890 about a market 

participant 891 or any of its customers; 

(2) material, nonpublic information; 

and/or (3) intellectual property, such as 

trading strategies or portfolio positions, 

by the SDR or any person associated 

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892See supra note 621 (defining ‘‘person 

associated with a security-based swap data 

repository’’). 

893 Id. 

894See, e.g., Order Extending and Modifying 

Temporary Exemptions Under the Securities 

Exchange Act of 1934 in Connection with Request 

of ICE Trust U.S. LLC Related to Central Clearing 

of Credit Default Swaps and Request for Comment, 

Exchange Act Release No. 63387 (Nov. 29, 2010), 

75 FR 75502 (Dec. 3, 2010) (‘‘ICE Trust shall 

establish and maintain adequate safeguards and 

procedures to protect clearing members’ 

confidential trading information. Such safeguards 

and procedures shall include: (A) limiting access to 

the confidential trading information of clearing 

members to those employees of ICE Trust who are 

operating the system or responsible for its 

compliance with this exemption or any other 

applicable rules; and (B) establishing and 

maintaining standards controlling employees of ICE 

Trust trading for their own accounts. ICE Trust 

must establish and maintain adequate oversight 

procedures to ensure that the safeguards and 

procedures established pursuant to this condition 

are followed . . . .’’); Exchange Act Release No. 

61973 (Apr. 23, 2010), 75 FR 22656 (Apr. 29, 2010), 

and Exchange Act Release No. 63389 (Nov. 29, 

2010), 75 FR 75520 (Dec. 3, 2010) (temporary 

exemptions in connection with CDS clearing by ICE 

Clear Europe, Limited). See also Proposing Release, 

75 FR at 77339 n.171, supra note 2. 

895See 15 U.S.C. 78o(g); see also Exchange Act 

Section 15F(j)(5), 15 U.S.C. 78o-10(j)(5) (requiring 

SBS dealers and major SBS participants to 

‘‘establish structural and institutional safeguards to 

ensure that the activities of any person within the 

firm relating to research or analysis of the price or 

market for any security-based swap or acting in a 

role of providing clearing activities or making 

determinations as to accepting clearing customers 

are separated by appropriate informational 

partitions within the firm from the review, pressure, 

or oversight of persons whose involvement in 

pricing, trading, or clearing activities might 

potentially bias their judgment or supervision and 

contravene the [enumerated] core principles of 

open access and the business conduct standards’’). 

896See Proposing Release, 75 FR at 77339, supra 

note 2. 

897See Deutsche Temp Rule, supra note 28. 

898See Proposing Release, 75 FR at 77339, supra 

note 2. 

899See MFA 1, supra note 19. 

900See MFA 1, supra note 19. 

901See MFA 1, supra note 19. 

902See Proposing Release, 75 FR at 77339–77340, 

supra note 2. 

903Cf., e.g., Janney Montgomery Scott LLC, 

Exchange Act Release No. 64855, 2011 SEC LEXIS 

3166 (July 11, 2011) (finding, in a settled action, 

Exchange Act Section 15(g) violation where brokerdealer failed to monitor its proprietary trading and 

employee trading); Merrill Lynch, Pierce, Fenner & 

Smith, Inc., Exchange Act Release No. 59555, 2009 

SEC LEXIS 660 (Mar. 11, 2009) (finding, in a settled 

action, Exchange Act Section 15(f) [subsequently 

renumbered as Section 15(g)] violation where 

broker-dealer failed to limit or monitor traders’ 

access to the equity squawk box that broadcasts 

material, nonpublic information). 

904See Proposing Release, 75 FR at 77340, supra 

note 2. 

905The Commission notes that CFTC Rule 

49.17(e) permits a third party service provider to 

access swap data maintained by a swap data 

repository on the condition that both the swap data 

repository and the provider have strict 

confidentiality procedures that protect data and 

information from proper disclosure and that they 

execute a ‘‘confidentiality agreement.’’ See 17 CFR 

49.17(e). 

with the SDR892 for their personal 

benefit or the benefit of others. Such 

safeguards, policies, and procedures 

shall address, without limitation, (1) 

limiting access to such confidential 

information, material, nonpublic 

information, and intellectual property, 

(2) standards pertaining to the trading 

by persons associated with the SDR for 

their personal benefit or the benefit of 

others, and (3) adequate oversight to 

ensure compliance with Rule 13n– 

9(b)(2).893 As stated in the Proposing 

Release, Rule 13n–9(b)(2) incorporates 

current requirements regarding the 

treatment of proprietary information of 

clearing members, which are contained 

in exemptive orders issued to SBS 

clearing agencies,894 and draws from 

Exchange Act Section 15(g), which 

requires broker-dealers to establish, 

maintain, and enforce written policies 

and procedures reasonably designed to 

prevent the misuse of material, 

nonpublic information by such broker 

or dealer or any person associated with 

such broker or dealer.895

The Commission anticipates that as a 

central recordkeeper of SBS 

transactions, each SDR will receive 

proprietary and highly sensitive 

information, which could disclose, for 

instance, a market participant’s trade 

information, trading strategy, or 

nonpublic personal information.896 Rule 

13n–9 is designed to ensure that an SDR 

has reasonable safeguards, policies, and 

procedures in place to protect such 

information from being misappropriated 

or misused by the SDR or any person 

associated with the SDR. The 

Commission agrees with one 

commenter’s view that ‘‘market 

participants have legitimate interests in 

the protection of their confidential and 

identifying financial information,’’ and 

Rule 13n–9 sets forth requirements 

sufficient to protect such information 

from disclosure, as the commenter 

suggested.897

The Commission also believes that as 

part of an SDR’s responsibility to have 

adequate oversight to ensure 

compliance with Rule 13n–9, an SDR’s 

governance arrangements and 

organizational structure should have 

adequate internal controls to protect 

against misappropriation or misuse of a 

market participant’s trade information, 

trading strategy, or nonpublic personal 

information.898 For instance, an SDR 

could limit access to the proprietary and 

sensitive information by creating 

informational, technological, and 

physical barriers. Consistent with one 

commenter’s suggestion,899 an SDR 

could also limit access to the data that 

it maintains to only those officers, 

directors, employees, and agents who 

need to know the data to perform their 

job responsibilities, including 

responsibilities to fulfill the SDR’s 

regulatory obligations. An SDR may 

want to consider limiting such access to 

data only to the extent that such access 

is justified based on the particular job 

responsibilities of the officers, directors, 

employees, or agents. In preventing the 

misappropriation or misuse of 

confidential information, material, 

nonpublic information, and intellectual 

property pursuant to Rule 13n–9(b)(2), 

an SDR could have controls to prevent 

unauthorized or unintentional access to 

its data. An SDR may want to consider 

holding its officers, directors, 

employees, and agents contractually 

liable for a breach of its privacy policies 

and procedures, as suggested by one 

commenter.900 In order for an SDR to 

enforce effectively its written policies 

and procedures to protect the privacy of 

SBS transaction information, it is 

reasonable to expect that the SDR must, 

as one commenter noted,901 properly 

convey these policies and procedures to 

all those subject to its privacy 

requirements. 

Additionally, in establishing 

standards pertaining to the trading by 

persons associated with an SDR in 

accordance with Rule 13n–9(b)(2), the 

SDR should consider restricting the 

trading activities of individuals who 

have access to proprietary or sensitive 

information maintained by the SDR or 

implementing firm-wide restrictions on 

trading certain SBSs, as well as 

underlying or related investment 

instruments.902 Such restrictions could 

include, for example, a pre-trade 

clearance requirement. An SDR should 

also have systems in place to prevent 

and detect insider trading by the SDR or 

persons associated with the SDR. Such 

systems could include a mechanism to 

monitor such persons’ access to the 

SDR’s data, their trading activities, and 

their emails.903

The Commission believes that to the 

extent that an SDR or any person 

associated with the SDR shares 

information with the SDR’s affiliate or a 

nonaffiliated third party, the SDR’s 

policies and procedures pursuant to 

Rule 13n–9(b)(1) should be reasonably 

designed to protect the privacy of the 

information shared.904 One option that 

an SDR could choose to comply with 

this requirement would be to require the 

affiliate or nonaffiliated party to consent 

to being subject to the SDR’s privacy 

policies and procedures as a condition 

of receiving any sensitive information 

from the SDR.905

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906See ISDA, supra note 19. 907See DTCC 2, supra note 19 (‘‘[N]o 

communication of data (other than to, or as required 

by, applicable regulators) that could have the result 

of disclosing the actual positions or specific 

business or trading activity of a counterparty should 

be permitted without the consent of that 

counterparty.’’). 

908The Commission notes that CFTC Rule 

49.17(g) requires a swap data repository to obtain 

express written consent from the swap dealer, 

counterparty, or any other registered entity that 

submits the swap data maintained by the swap data 

repository before using that swap data for 

commercial or business purposes. See 17 CFR 

49.17(g). 909See MFA 1, supra note 19. 910See Rule 13n–9(a)(5). 

911See Rule 13n–9(a)(6). 

912See MFA 1, supra note 19 (recommending 

adding to proposed Rule 13n–9(b): (i) information 

related to transactions of a market participant 

(including a market participant’s trading positions), 

(ii) the identity of each market participant, and (iii) 

details of any master agreement governing the 

relevant SBS that are provided to an SDR). 

913See Regulation SBSR Adopting Release, supra 

note 13 (Rule 902). 

914See MFA 1, supra note 19. 

915See TriOptima, supra note 19 (stating that ‘‘if 

the counterparties to a trade authorize the third 

party service provider to use their information, an 

[SDR] should not be able to restrict or limit such 

use through privacy policies and procedures when 

the owners of the information have provided 

appropriate consents and authorizations’’). 

916See Section VI.D.3.a of this release discussing 

fair, open, and not unreasonably discriminatory 

access. 

917To the extent that a transaction is executed 

anonymously on an SB SEF or exchange, when the 

counterparties do not know each other’s identity or 

other reported information (e.g., the trader ID), the 

SDR’s policies and procedures under Rule 13n–9(b) 

must not allow either counterparty to access this 

information relating to the other counterparty. 

918 ISDA, supra note 19. 

919To the extent that the Commission addresses 

other market participants’ privacy policies and 

procedures, it will do so in separate releases 

pertaining specifically to those market participants. 

920See Item 39 of Form SDR. 

921Exchange Act Section 13(n)(2), 15 U.S.C. 

78m(n)(2) (stating that ‘‘[e]ach registered securitybased swap data repository shall be subject to 

inspection and examination by any representative 

of the Commission’’). 

922See Rules 13n–11(c)(2) and 13n–11(d)(1). 

Consistent with one commenter’s 

view, the Commission agrees that an 

SDR will likely need to make an 

appropriate level of investment to 

design, implement, and periodically 

review its privacy policies and 

procedures ‘‘in order to protect markets 

and market participants,’’ 906 but that an 

SDR should have some flexibility to 

develop reasonable policies and 

procedures to protect the privacy of the 

SBS transaction information that the 

SDR receives. One approach, as one 

commenter suggested,907 may be for an 

SDR’s policies and procedures to 

require consent of counterparties prior 

to communication of the SBS 

transaction information to an SDR’s 

affiliate or a nonaffiliated third party.908

An SDR may, however, develop other 

reasonable policies and procedures to 

protect the privacy of the SBS 

transaction information. 

With respect to one commenter’s 

suggestion that the Commission add 

safeguards related to ‘‘confidentiality of 

trading positions,’’ 909 the Commission 

believes that its final rule broadly covers 

such safeguards. Although not explicitly 

stated in Rule 13n–9, the Commission 

also believes that its definitions of 

‘‘nonpublic personal information’’ 910

and ‘‘personally identifiable 

information’’ 911 overlap significantly 

with the information that the 

commenter recommended the rule to 

explicitly cover.912 Certain information, 

however, will be subject to public 

dissemination under Regulation 

SBSR.913 The commenter further 

suggested that SDRs should be 

permitted to use confidential 

information solely to fulfill their 

regulatory obligations,914 but the 

Commission does not believe that it is 

necessary or appropriate to impose such 

a narrow restriction on SDRs. It could, 

for example, be in the public interest for 

SDRs to use transaction-specific 

confidential SBS data to generate 

aggregated reports for the public even 

though such reports are not mandated. 

However, any such reports must be 

sufficiently anonymized so that the 

trading positions or identities of market 

participants, or group of market 

participants, cannot be derived from the 

reports. 

One commenter suggested that a third 

party service provider should not be 

required to observe an SDR’s privacy 

policies and procedures if such third 

party service provider has received 

written authorization from an SBS 

counterparty to access its SBS 

transaction information.915 The 

Commission believes that an SDR’s 

obligation to provide fair, open, and not 

unreasonably discriminatory 

participation to third party service 

providers 916 would prohibit an SDR 

from unreasonably imposing its privacy 

policies and procedures on third party 

service providers. The Commission also 

believes that, generally, a third party 

service provider, acting as an agent for 

a counterparty, should be given the 

same rights to access SBS transaction 

information as the counterparty for 

which it is acting as an agent. To the 

extent that the counterparties to a 

transaction reach a confidentiality 

agreement between themselves limiting 

the information that can be provided to 

their agents, it is up to the parties to 

ensure that the authorizations they 

provide to the SDR are appropriately 

limited.917

With respect to one commenter’s view 

that regulators should ‘‘ensure that the 

viability and rigor of [an SDR’s] privacy 

policies are reviewed and audited as 

they are at all other market 

participants,’’ 918 the Commission 

contemplates that its review of an SDR’s 

privacy policies and procedures will be 

sufficient.919 As a general matter, the 

Commission will review an SDR’s 

privacy policies and procedures for 

compliance with the law in a manner 

similar to reviews of other registrants’ 

privacy policies and procedures. For 

example, an SDR is required to file, as 

exhibits to Form SDR, its policies and 

procedures to protect the privacy of any 

and all SBS transaction information that 

the SDR receives from a market 

participant or any registered entity.920

These policies and procedures are 

subject to the Commission’s review. As 

discussed in Section VI.A.2 of this 

release, the Commission will review an 

SDR’s application for registration on 

Form SDR in determining whether the 

SDR is able to comply with the federal 

securities laws and the rules and 

regulations thereunder. The 

Commission will also review an SDR’s 

comprehensive annual amendment on 

Form SDR in determining whether the 

SDR continues to be in compliance with 

the federal securities laws and the rules 

and regulations thereunder. 

Additionally, an SDR (including its 

privacy policies and procedures) are 

subject to inspection and examination 

by any representative of the 

Commission.921 In addition, an SDR’s 

CCO is required to review the 

compliance of its policies and 

procedures at least on an annual basis 

and include a description of such 

compliance as well as the SDR’s 

enforcement of its policies and 

procedures in the SDR’s annual 

compliance report that is filed with the 

Commission.922

2. Disclosure Requirements (Rule 13n– 

10) 

a. Proposed Rule 

Proposed Rule 13n–10 would require 

each SDR to provide a disclosure 

document to each market participant 

prior to accepting any SBS data from the 

market participant or upon the market 

participant’s request. The disclosure 

document would include specific 

information designed to enable a market 

participant to identify and evaluate the 

risks and costs associated with using the 

SDR’s services. 

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923See Barnard, supra note 19; DTCC 2, supra 

note 19. The Commission received no comments on 

proposed Rule 13n–10(a), which set forth the 

definition applicable to the rule, and is adopting it 

as proposed. 

924See Barnard, supra note 19. 

925 DTCC 2, supra note 19. 

926Rule 13n–10 is being promulgated under 

Exchange Act Sections 13(n)(3), 13(n)(7)(D)(i), and 

13(n)(9). See 15 U.S.C. 78m(n)(3), 78m(n)(7)(D)(i), 

and 78m(n)(9). 

927See supra note 583 (defining ‘‘market 

participant’’). 

928Rule 13n–10(b). 

929Proposing Release, 75 FR at 77340, supra note 

2. See also Barnard, supra note 19 (believing that 

the disclosure requirement in Rule 13n–10(b)(8) 

would formalize ‘‘the market practice and ensure 

that informed decisions were being made’’). 

930See Exchange Act Section 13(n)(6)(A), 15 

U.S.C. 78m(n)(6)(A). 

931Proposed Rule 13n–11(a). 

932See Better Markets 1, supra note 19; Barnard, 

supra note 19; see also Better Markets 3, supra note 

19. 

933Better Markets 1, supra note 19 (emphasis in 

the original); see also Better Markets 3 supra note 

19 (suggesting ‘‘[t]he vesting of authority in the 

independent board members to oversee the hiring, 

compensation, and termination of the CCO’’). 

934Better Markets 1, supra note 19. 

935Better Markets 3, supra note 19. 

936Better Markets 3, supra note 19. 

937Barnard, supra note 19 (‘‘[T]he CCO should 

have a single compliance role and no other 

competing role or responsibility that could create 

conflicts of interest or threaten [his] independence 

. . . .’’). 

938Barnard, supra note 19. 

939Barnard, supra note 19 (believing that the 

suggested amendment would help ensure the CCO’s 

b. Comments on the Proposed Rule 

Two commenters submitted 

comments relating to this proposed 

rule.923 One commenter agreed with 

proposed Rule 13n–10(b)(8), which 

would require disclosure of an SDR’s 

updated schedule of any dues; 

unbundled prices, rates, or other fees for 

all of its services, including any 

ancillary services; any discounts or 

rebates offered; and the criteria to 

benefit from such discounts or 

rebates.924 In supporting the 

Commission’s proposed rule, another 

commenter ‘‘recognize[d] the 

importance of providing market 

participants with disclosure documents 

outlining the SDR’s policies regarding 

member participant criteria and the 

safeguarding and privacy of data 

submitted to the SDR.’’ 925

c. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n–10 as 

proposed. The Commission is adopting 

the rule to enhance transparency in the 

SBS market, bolster market efficiency, 

promote standardization, and foster 

competition.926 Specifically, the rule 

provides that before accepting any SBS 

data from a market participant 927 or 

upon a market participant’s request, 

each SDR must furnish to the market 

participant a disclosure document that 

contains the following 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: (1) The SDR’s criteria for 

providing others with access to services 

offered and data maintained by the SDR, 

(2) the SDR’s criteria for those seeking 

to connect to or link with the SDR, (3) 

a description of the SDR’s policies and 

procedures regarding its safeguarding of 

data and operational reliability, as 

described in Rule 13n–6, (4) a 

description of the SDR’s policies and 

procedures reasonably designed to 

protect the privacy of any and all SBS 

transaction information that the SDR 

receives from an SBS dealer, 

counterparty, or any registered entity, as 

described in Rule 13n–9(b)(1), (5) a 

description of the SDR’s policies and 

procedures regarding its noncommercial and/or commercial use of 

the SBS transaction information that it 

receives from a market participant, any 

registered entity, or any other person, 

(6) a description of the SDR’s dispute 

resolution procedures involving market 

participants, as described in Rule 13n– 

5(b)(6), (7) a description of all the SDR’s 

services, including any ancillary 

services, (8) the SDR’s updated schedule 

of any dues; unbundled prices, rates, or 

other fees for all of its services, 

including any ancillary services; any 

discounts or rebates offered; and the 

criteria to benefit from such discounts 

or rebates, and (9) a description of the 

SDR’s governance arrangements.928

As stated in the Proposing Release, 

these disclosure requirements are 

intended to promote competition and 

foster transparency regarding SDRs’ 

services by enabling market participants 

to identify the range of services that 

each SDR offers and to evaluate the risks 

and costs associated with using such 

services.929 The Commission also 

believes that transparency regarding 

SDRs’ services is particularly important 

in light of the complexity of OTC 

derivatives products and their markets, 

and that greater service transparency 

could improve market participants’ 

confidence in an SDR and result in 

greater use of the SDR, which would 

ultimately increase market efficiency. 

J. Chief Compliance Officer of Each 

SDR; Compliance Reports and Financial 

Reports (Rule 13n–11) 

Proposed Rule 13n–11 set forth the 

requirements for an SDR’s CCO, annual 

compliance reports, and financial 

reports. The Commission is adopting the 

rule substantially as proposed with 

changes in response to comments. 

1. In General (Rule 13n–11(a)) 

a. Proposed Rule 

To implement the statutory 

requirement for each SDR to designate 

an individual to serve as a CCO,930 the 

Commission proposed Rule 13n–11(a), 

which would require each SDR to 

identify on Form SDR a person who has 

been designated by the board to serve as 

a CCO of the SDR. In addition, to 

promote the independence and 

effectiveness of the CCO, the proposed 

rule would require that the 

compensation and removal of the CCO 

be approved by a majority of the SDR’s 

board.931

b. Comments on the Proposed Rule 

Two commenters submitted 

comments relating to this proposed 

rule.932 Specifically, one commenter 

agreed that ‘‘[w]ith respect to 

compensation and termination of the 

CCO, the Proposed Rules appropriately 

assign authority over those matters to 

the board, rather than management,’’ but 

believed that ‘‘[t]he rules should go one 

step further and confer that authority 

upon the independent board 

members.’’ 933 Additionally, the 

commenter suggested that ‘‘the [SDR 

Rules] should preclude the General 

Counsel or a member of that office from 

serving as CCO, since those attorneys 

owe a duty of loyalty to the SDR itself 

that may not be compatible with the 

watchdog function of the CCO.’’ 934 The 

commenter also suggested 

‘‘[c]ompetency standards to ensure that 

CCOs have the background and skills 

necessary to fulfill their 

responsibilities.’’ 935 The commenter 

further suggested requiring a group of 

affiliated or controlled entities to 

appoint the CCO.936

Another commenter fully supported 

the intent of proposed Rule 13n–11, but 

also suggested that the Commission 

‘‘restrict the CCO from serving as the 

General Counsel or other attorney 

within the legal department of the 

SDR.’’ 937 The commenter stated that the 

CCO’s remuneration must be designed 

so as to avoid potential conflicts of 

interest with his compliance role.938

The commenter further suggested that 

the Commission amend the rule so that 

‘‘the authority and sole responsibility to 

appoint or remove the CCO, or to 

materially change its duties and 

responsibilities[ ] only vests with the 

independent public directors or 

‘Independent Perspective’ . . . and not 

the full board.’’ 939

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14507 

independence and possibly mitigate the 

Commission’s need to promulgate additional 

measures to adequately protect CCOs from undue 

influence or coercion). 

940See Barnard, supra note 19 (supporting the 

CCO’s compensation to be specifically designed to 

avoid potential conflicts of interest with the CCO’s 

compliance role). 

941The Commission is also revising the heading 

of Rule 13n–11 from the proposal to describe the 

scope of the rule more accurately. The proposed 

heading was ‘‘Designation of chief compliance 

officer of security-based swap data repository.’’ As 

revised, the heading is broader: ‘‘Chief compliance 

officer of security-based swap data repository; 

compliance reports and financial reports.’’ 

942Proposing Release, 75 FR at 77341, supra note 

2. 

943See Better Markets 1, supra note 19 

(discussing independent board members); Barnard, 

supra note 19 (discussing independent public 

directors); see also Better Markets 3, supra note 19. 

944To the extent that an SDR has independent 

board members or independent public directors, the 

SDR may want to consider requiring the 

appointment, removal, or compensation of the CCO 

be approved by the majority of independent board 

members or independent public directors in 

addition to the majority of the board. 

945See Rule 38a–1(a)(4)(i) under the Investment 

Company Act of 1940 (‘‘Investment Company Act’’), 

17 CFR 270.38a–1(a)(4)(i). The Commission also 

notes that CFTC Rule 49.22(c) requires the 

appointment, compensation, and removal of a CCO 

to be approved by either a swap data repository’s 

board or senior officer. See 17 CFR 49.22(c). 

946Better Markets 3, supra note 19. 

947See Exchange Act Section 13(n)(6)(A), 15 

U.S.C. 78m(n)(6)(A). 

948See Proposing Release, 75 FR at 77341, supra 

note 2. 

949See Exchange Act Section 13(n)(6)(B)(i), 15 

U.S.C. 78m(n)(6)(B)(i). 

950See Barnard, supra note 19 (suggesting that the 

Commission ‘‘restrict the CCO from serving as the 

General Counsel or other attorney within the legal 

department of the SDR’’); Better Markets 1, supra 

note 19 (suggesting that ‘‘the [SDR Rules] should 

preclude the General Counsel or a member of that 

office from serving as CCO, since those attorneys 

owe a duty of loyalty to the SDR itself that may not 

be compatible with the watchdog function of the 

CCO’’). 

951As discussed in Section VI.D.3.c of this 

release, Rule 13n–4(c)(3)(i) requires each SDR to 

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. 

952See Better Markets 3, supra note 19. 

953See Item 15 of Form SDR. 

954See Section VI.D.3.b of the release discussing 

Rule 13n–4(c)(2)(iv). 

c. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n–11(a) 

as proposed, with one modification. 

Rule 13n–11(a) requires that (1) each 

SDR identify on Form SDR a person 

who has been designated by the board 

to serve as a CCO of the SDR and (2) the 

compensation and removal of the CCO 

be approved by a majority of the SDR’s 

board.940 The Commission is revising 

the rule from the proposal to require the 

appointment of the CCO to be approved 

by the majority of the SDR’s board.941

In the Proposing Release, the 

Commission asked whether there are 

other measures that would further 

enhance a CCO’s independence and 

effectiveness that should be prescribed 

in a rule.942 Two commenters suggested 

that the Commission require the CCO’s 

appointment, removal, or compensation 

be approved by independent board 

members or ‘‘independent public 

directors.’’ 943 The Commission has 

determined not to adopt such a 

requirement at this time because, as 

discussed in Section VI.D.3.b.iii of this 

release, the Commission is not requiring 

SDRs to have independent directors.944

Based in part on these comments, 

however, the Commission believes that 

requiring the appointment of the CCO to 

be approved by a majority of the SDR’s 

board would be another measure to 

enhance the CCO’s independence and 

effectiveness. The Commission notes 

that the requirement that the 

appointment of the CCO must be 

approved by a majority of the SDR’s 

board is consistent with the requirement 

that the designation of CCOs at 

investment companies must be 

approved by the board of directors.945

One commenter suggested requiring a 

group of affiliated or controlled entities 

to appoint the CCO.946 The Commission 

believes that this suggestion contravenes 

an SDR’s statutory requirement to 

designate the CCO.947

The Commission is concerned that an 

SDR’s commercial interests might 

discourage its CCO from making 

forthright disclosure to the board or 

senior officer about any compliance 

failures.948 The Commission believes 

that to mitigate this potential conflict of 

interest, an SDR’s CCO should be 

independent from its management so as 

not to be conflicted in reporting or 

addressing any compliance failures. 

Accordingly, as discussed in Section 

VI.J.3 below, each CCO of an SDR is 

required to report directly to the board 

or its senior officer,949 but only the 

board is able to approve the CCO’s 

appointment, remove the CCO from his 

or her responsibilities, and approve the 

CCO’s compensation. 

Rule 13n–11(a) is intended to promote 

a CCO’s independence and 

effectiveness. The Commission is not 

extending the applicability of this rule 

to an SDR’s senior officer because the 

Commission believes that this may 

unnecessarily create conflicts of interest 

for the CCO, particularly if the CCO is 

subsequently responsible for reviewing 

the senior officer’s compliance with the 

Exchange Act and the rules and 

regulations thereunder. 

In promoting a CCO’s independence 

and effectiveness, the Commission does 

not believe that it is necessary to adopt, 

as two commenters suggested,950 a rule 

prohibiting a CCO from being a member 

of the SDR’s legal department or from 

serving as the SDR’s general counsel. To 

the extent that this poses a potential or 

existing conflict of interest, the 

Commission believes that an SDR’s 

written policies and procedures can be 

designed to adequately identify and 

mitigate any associated costs.951

With respect to one commenter’s 

suggestion that there should be 

‘‘[c]ompetency standards to ensure that 

CCOs have the background and skills 

necessary to fulfill their 

responsibilities,’’ 952 the Commission 

notes that while it is not requiring such 

standards, Form SDR requires an SDR to 

provide a brief account of the CCO’s 

prior business experience and business 

affiliations in the securities industry or 

derivatives industry.953 In addition, as 

discussed above, the Commission is 

adopting Rule 13n–4(c)(2)(iv) to require 

an SDR to establish, maintain, and 

enforce written policies and procedures 

reasonably designed to ensure that the 

SDR’s senior management and each 

member of the board or committee that 

has the 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.954 To the extent that a CCO is 

considered to be in senior management 

of an SDR, Rule 13n–4(c)(2)(iv) applies 

to the CCO, but even if the CCO is not 

in senior management, the Commission 

does not believe that it is necessary to 

prescribe competency standards for 

CCOs by rule, in part because it is most 

likely that an SDR already has business 

incentives to retain a competent CCO in 

light of the SDR’s exposure to liability 

if its CCO fails to comply with his or her 

statutory and regulatory responsibilities. 

Additionally, the Commission believes 

that an SDR will be in a better position 

to determine what its own requirements 

and specific needs are with respect to a 

CCO’s background and skills, both of 

which may change as the SBS market 

evolves. 

2. Definitions (Rule 13n–11(b)) 

a. Proposed Rule 

Proposed Rule 13n–11(b) defined the 

following terms: ‘‘affiliate,’’ ‘‘board,’’ 

‘‘director,’’ ‘‘EDGAR Filer Manual,’’ 

‘‘material change,’’ ‘‘material 

compliance matter,’’ and ‘‘tag.’’ 

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14508 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

955See Rules 13n–11(b)(4) and (b)(7). The terms 

‘‘Interactive Data Financial Report’’ and ‘‘official 

filing’’ are used in new Rule 407 of Regulation S– 

T, as discussed in Section VI.J.5.c of this release. 

956See Rule 13n–11(b)(9). 

957See Rule 13n–11(b)(8). The term ‘‘senior 

officer’’ is used in Rules 13n–1(c)(1) and (c)(3), as 

discussed in Section VI.J.3 of this release. This 

definition is consistent with the definition 

proposed in the CCO rules for SBS dealers, major 

SBS participants, and clearing agencies. See 

Business Conduct Standards for Security-Based 

Swap Dealers and Major Security-Based Swap 

Participants, Exchange Act Release No. 64766 (June 

29, 2011), 76 FR 42396 (July 18, 2011) (proposing 

Rule 15Fk–1(e)); Clearing Agency Standards for 

Operations and Governance, Exchange Act Release 

No. 64017 (Mar. 3, 2011), 76 FR 14472 (Mar. 16, 

2011) (proposing Rule 3Cj–1). 

958See Exchange Act Section 13(n)(6)(B), 15 

U.S.C. 78m(n)(6)(B). 

959See 15 U.S.C. 78m(n)(6). 

960See Better Markets 1, supra note 19; DTCC 2, 

supra note 19; see also Better Markets 2, supra note 

19; Better Markets 3, supra note 19. 

961See Better Markets 1, supra note 19. 

962See DTCC 2, supra note 19. 

963Better Markets 2, supra note 19; see also Better 

Markets 3, supra note 19 (‘‘Ensuring that market 

participants have CCOs with real authority and 

autonomy to police a firm from within is one of the 

most efficient and effective tools available to 

regulators.’’). 

964Better Markets 1, supra note 19. 

965Better Markets 1, supra note 19; see also Better 

Markets 3, supra note 19 (suggesting requirements 

that the CCO have direct access to the board and 

the CCO ‘‘meet quarterly with the Audit Committee 

(if there is one or non-management members of the 

[b]oard if there is not), in addition to annual 

meetings with the board and senior management’’). 966 DTCC 2, supra note 19. 967 DTCC 2, supra note 19. 968 DTCC 2, supra note 19. 969 DTCC 2, supra note 19. 970 DTCC 2, supra note 19. 971 DTCC 2, supra note 19. 972 DTCC 2, supra note 19. 

b. Comments on the Proposed Rule 

The Commission received no 

comments relating to the proposed 

definitions. 

c. Final Rule 

The Commission is adopting Rule 13n 

11(b) substantially as proposed, with 

several modifications. Specifically, the 

Commission is adopting the definitions 

of ‘‘board,’’ ‘‘director,’’ ‘‘EDGAR Filer 

Manual,’’ ‘‘material change,’’ and 

‘‘material compliance matter’’ as 

proposed. However, the Commission is 

not adopting the definition of ‘‘affiliate’’ 

because the term is not used in the final 

rule. To conform with adopted Rule 

13n–11(f), as discussed below, the 

Commission is adding the definitions of 

‘‘Interactive Data Financial Report’’ and 

‘‘official filing,’’ both of which have the 

same meaning as set forth in Rule 11 of 

Regulation S–T, which sets forth the 

standards for electronic filing with the 

Commission.955 For consistency, the 

Commission is revising the definition of 

‘‘tag’’ (including the term ‘‘tagged’’) 

from the proposal to have the same 

meaning as set forth in Rule 11 of 

Regulation S–T.956

Moreover, the Commission is 

adopting the definition of ‘‘senior 

officer’’ to mean ‘‘the chief executive 

officer or other equivalent officer.’’ 957

Proposed Rule 13n–11 referenced the 

‘‘chief executive officer’’ in lieu of the 

statutory references to the ‘‘senior 

officer.’’ 958 As adopted, Rule 13n–11 

tracks the statutory references to ‘‘senior 

officer’’ and defines ‘‘senior officer’’ to 

include an SDR’s CEO. 

3. Enumerated Duties of Chief 

Compliance Officer (Rule 13n–11(c)) 

a. Proposed Rule 

Proposed Rule 13n–11(c) incorporated 

the CCO’s duties that are set forth in 

Exchange Act Section 13(n)(6).959

Proposed Rule 13n–11(c) would require 

a CCO to (1) report directly to the board 

or to the SDR’s CEO, (2) review the 

SDR’s compliance with respect to its 

statutory and regulatory requirements 

and core principles, (3) in consultation 

with the board or the SDR’s CEO, 

resolve any conflicts of interest that may 

arise, (4) be responsible for 

administering each policy and 

procedure that is required to be 

established pursuant to Exchange Act 

Section 13 and the rules and regulations 

thereunder, (5) ensure compliance with 

the Exchange Act and the rules and 

regulations thereunder relating to SBSs, 

(6) establish procedures for the 

remediation of noncompliance issues 

identified by the CCO through certain 

specified means, and (7) establish and 

follow appropriate procedures for the 

handling, management response, 

remediation, retesting, and closing of 

noncompliance issues. 

b. Comments on the Proposed Rule 

Two commenters submitted 

comments relating to this proposed rule, 

expressing differing views.960 As 

discussed below, one commenter 

suggested a more prescriptive 

approach 961 while the other suggested a 

less prescriptive approach, but with 

certain clarifications.962

Specifically, one commenter 

suggested that the Commission 

‘‘establish a meaningful role for’’ an 

SDR’s CCO.963 The commenter believed 

that ‘‘the rules should preclude the 

[g]eneral [c]ounsel or a member of that 

office from serving as CCO, since those 

attorneys owe a duty of loyalty to the 

SDR itself that may not be compatible 

with the watchdog function of the 

CCO.’’ 964 The commenter also believed 

that ‘‘the CCO should have a direct 

reporting line to the independent board 

members and should be required to 

meet with those independent members 

at least quarterly’’ in order for 

‘‘independent members of the board to 

become effective partners with the CCO 

in promoting a culture of compliance 

within the SDR.’’ 965

The other commenter believed that as 

a general matter, ‘‘SDRs should have 

some flexibility to implement the 

required compliance procedures in 

ways consistent with their structure and 

business.’’ 966 The commenter ‘‘agree[d] 

with the Commission that a robust 

internal compliance function[, 

including a CCO,] plays an important 

role in facilitating an SDR’s monitoring 

of, and compliance with, the 

requirements of the Exchange Act (and 

rules thereunder) applicable to 

SDRs.’’ 967 The commenter also ‘‘fully 

support[ed] Commission efforts to 

require the highest standards of 

regulatory compliance at SDRs, and 

believe[d that] requiring each SDR to 

have a CCO is an effective way to ensure 

compliance.’’ 968

The commenter, however, believed 

that ‘‘some of the enumerated 

responsibilities of [a CCO] require 

clarification in order to avoid an overly 

broad reading of those duties.’’ 969

Specifically, the commenter suggested 

that the CCO’s responsibilities should 

not, for instance, ‘‘be read to encompass 

responsibilities beyond those 

traditionally understood to be part of a 

compliance function (i.e., those issues 

that can as a matter of competence, and 

typically would be, handled by a 

compliance department).’’ 970 The 

commenter further believed that ‘‘the 

CCO should be responsible for 

establishing relevant compliance 

procedures, and monitoring compliance 

with those procedures and other 

applicable legal requirements’’ and that 

‘‘the CCO should also participate in 

other aspects of the SDR’s activities that 

implicate compliance or regulatory 

issues.’’ 971 The commenter believed, 

however, that ‘‘the CCO cannot be, and 

should not be, required to be 

responsible for the overall operation of 

the SDR’s business.’’ 972 The commenter 

stated that the Commission ‘‘should 

recognize that oversight of certain 

aspects of SDR activities are principally 

(and, as a practical matter, need to be) 

within the purview of risk management 

and operations personnel. Although 

there may be a regulatory component to 

whether an SDR is meeting its 

operational readiness, service level or 

data security responsibilities for 

example, oversight of those aspects of 

the SDR business should remain with 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14509 

973 DTCC 2, supra note 19. 

974 DTCC 2, supra note 19. 

975 DTCC 2, supra note 19. 

976 DTCC 2, supra note 19. 

977 DTCC 2, supra note 19. 

978See 15 U.S.C. 78m(n)(6). 

979See supra note 549 (defining ‘‘board’’). 

980The Commission is amending proposed Rule 

13n–11(c)(1) by replacing ‘‘chief executive officer’’ 

with ‘‘senior officer’’ to track the language of 

Exchange Act Section 13(n)(6)(B)(i)), 15 U.S.C. 

78m(n)(6)(B)(i). 

981The Commission is amending proposed Rule 

13n–11(c)(3) by replacing ‘‘chief executive officer’’ 

with ‘‘senior officer’’ to track the language of 

Exchange Act Section 13(n)(6)(B)(i)), 15 U.S.C. 

78m(n)(6)(B)(i). 

982See Better Markets 2, supra note 19; see also 

Better Markets 3, supra note 19 (‘‘Ensuring that 

market participants have CCOs with real authority 

and autonomy to police a firm from within is one 

of the most efficient and effective tools available to 

regulators.’’). 

983See Better Markets 1, supra note 19. 

984See Better Markets 3, supra note 19. 

985See DTCC 2, supra note 19. 

986See DTCC 2, supra note 19. 

987Proposing Release, 75 FR at 77342, supra note 

2. 

988See DTCC 2, supra note 19 (stating that ‘‘the 

CCO cannot be, and should not be, required to be 

responsible for the overall operation of the SDR’s 

business.’’). 

the relevant business areas, subject of 

course to oversight by senior 

management and ultimately the board of 

directors. While a CCO may have an 

important role to play in overall 

oversight and remediation of any 

problems, the Commission’s rules 

should not be interpreted to impose on 

CCOs responsibility outside of their 

traditional core competencies.’’ 973

In suggesting that the Commission 

‘‘clarify what types of conflict of interest 

should be within the CCO’s purview,’’ 

the commenter noted that ‘‘[s]ome 

issues, such as permissibility of dealings 

with related parties or entities, are 

properly within the CCO’s functions. 

Other issues, such as restrictions on 

ownership and access, may be 

fundamental for the board of directors 

and senior management to address.’’ 974

Additionally, the commenter stated that 

to the extent that the Commission’s rule 

requires consultation with the board or 

senior management, ‘‘some materiality 

threshold would be appropriate, as not 

every potential conflict of interest that 

might be addressed by a CCO (or his or 

her subordinates) would need such 

consultation.’’ 975

The commenter further suggested that 

the Commission ‘‘clarify that the CCO’s 

specific responsibilities related to 

conflicts are limited to compliance with 

the provisions of Exchange Act Section 

13(n) and the final rules thereunder as 

they relate to the SBS operations of an 

SDR.’’ 976 The commenter believed that 

‘‘[t]he Commission should not mandate 

compliance responsibilities with respect 

to other regulatory requirements to 

which an SDR may be subject; those 

responsibilities should be specified by 

the regulator imposing the other 

requirements.’’ 977

c. Final Rule 

After considering the comments, the 

Commission is adopting Rule 13n–11(c) 

as proposed, with modifications. The 

final rule incorporates the duties of an 

SDR’s CCO that are set forth in 

Exchange Act Section 13(n)(6) 978 and 

imposes additional requirements. 

Specifically, each CCO is required to 

comply with the following 

requirements: (1) Report directly to the 

board 979 or to the SDR’s senior 

officer,980 (2) review the compliance of 

the SDR with respect to the 

requirements and core principles 

described in Exchange Act Section 13(n) 

and the rules and regulations 

thereunder, (3) in consultation with the 

board or the SDR’s senior officer,981 take 

reasonable steps to resolve any material 

conflicts of interest that may arise, (4) be 

responsible for administering each 

policy and procedure that is required to 

be established pursuant to Exchange Act 

Section 13 and the rules and regulations 

thereunder, (5) take reasonable steps to 

ensure compliance with the Exchange 

Act and the rules and regulations 

thereunder relating to SBSs, including 

each rule prescribed by the Commission 

under Exchange Act Section 13, (6) 

establish procedures for the remediation 

of noncompliance issues identified by 

the CCO through any (a) compliance 

office review, (b) look-back, (c) internal 

or external audit finding, (d) selfreported error, or (e) validated 

complaint, and (7) establish and follow 

appropriate procedures for the handling, 

management response, remediation, 

retesting, and closing of noncompliance 

issues. Consistent with one commenter’s 

suggestion, the Commission believes 

that Rule 13n–11(c) establishes a 

meaningful role for CCOs.982 However, 

because the Commission is not requiring 

SDRs to have independent directors, 

Rule 13n–11(c) does not, as the 

commenter suggested,983 require a CCO 

to report directly to independent 

directors or meet with independent 

directors at least quarterly. To provide 

CCOs with greater flexibility in fulfilling 

their duties, the Commission is also not 

requiring, as the commenter suggested, 

CCOs to ‘‘meet quarterly with the Audit 

Committee (if there is one or nonmanagement members of the [b]oard if 

there is not), in addition to annual 

meetings with the board and senior 

management.’’ 984 The Commission 

expects CCOs to meet with the board, 

the senior officer, and others, whenever 

necessary to fulfill their duties. 

The Commission agrees with one 

commenter that, in general, SDRs 

should have flexibility to implement the 

required compliance procedures in 

ways consistent with their structure and 

business.985 In response to a 

commenter’s request for clarification,986

the Commission notes that generally, an 

SDR’s CCO is not responsible for the 

SDR’s overall or day-to-day business 

operation, for example, with respect to 

risk management and operations; nor is 

the CCO responsible for the decisions 

and actions of every director, officer, 

and employee of the SDR. Instead, the 

CCO’s statutory and regulatory 

responsibilities generally entail, among 

other things, administering the SDR’s 

policies and procedures required under 

Exchange Act Section 13 and the rules 

and regulations thereunder, keeping the 

SDR’s board or senior officer apprised of 

significant compliance issues, advising 

the board or senior officer of needed 

changes in the SDR’s policies and 

procedures, generally overseeing 

compliance with the Exchange Act and 

the rules and regulations thereunder, as 

well as remediating noncompliance at 

the SDR. If, in the course of 

administering policies and procedures 

required under Exchange Act Section 13 

and the rules and regulations 

thereunder, the CCO believes that 

operations or risk management 

personnel are not in compliance with 

such policies and procedures or the 

Exchange Act and the rules and 

regulations thereunder relating to SBSs 

(e.g., with Rule 13n–9, which prohibits 

the misappropriation or misuse of 

material nonpublic information by 

employees), then the CCO is responsible 

for establishing and following 

procedures for the handling, 

management response, remediation, 

retesting, and closing of noncompliance 

issues. 

In the Proposing Release, the 

Commission stated that ‘‘a CCO should 

review, on an ongoing basis, the SDR’s 

service levels, costs, pricing, and 

operational reliability, with the view to 

preventing anticompetitive practices 

and discrimination, and encouraging 

innovation and the use of the SDR.’’ 987

With respect to one commenter’s 

remarks regarding the scope of the 

CCO’s responsibilities,988 the 

Commission continues to believe that 

the CCO’s administration of an SDR’s 

policies and procedures should include, 

among other things, a review of the 

SDR’s service levels, costs, pricing, and 

operational reliability and a 

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14510 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

989See Section VI.D.3.a of this release discussing 

an SDR’s obligation to ensure that its fees are fair 

and reasonable and not unreasonably 

discriminatory. 

990See DTCC 2, supra note 19 (stating that the 

Commission ‘‘should recognize that oversight of 

certain aspects of SDR activities are principally 

(and, as a practical matter, need to be) within the 

purview of risk management and operations 

personnel’’ and that ‘‘[a]lthough there may be a 

regulatory component to whether an SDR is meeting 

its operational readiness, service level or data 

security responsibilities for example, oversight of 

those aspects of the SDR business should remain 

with the relevant business areas, subject of course 

to oversight by senior management and ultimately 

the board of directors’’). 

991Proposing Release, 75 FR at 77341, supra note 

2. 

992See Rules 13n–11(c)(4) and (5). 

993See DTCC 2, supra note 19 (noting that some 

conflicts of interest are within a CCO’s purview 

while other issues (e.g., restrictions on ownership 

and access) may be fundamental for an SDR’s board 

or senior management to address and that a CCO 

would not need to consult with the board every 

potential conflict of interest that might be addressed 

by a CCO). 

994See Rule 13n–11(c)(3). 

995See DTCC 2, supra note 19. 

996See DTCC 2, supra note 19. 

997See Exchange Act Section 13(n)(6)(B)(v), 15 

U.S.C. 78m(n)(6)(B)(v), as added by Dodd-Frank Act 

Section 763(i) (requiring an SDR’s CCO to ‘‘ensure 

compliance with [the Exchange Act] (including 

regulations) relating to agreements, contracts, or 

transactions, including each rule prescribed by the 

Commission under [Section 13(n)]’’). 

998 15 U.S.C. 78j(b). 

999See 15 U.S.C. 78m(n)(6)(C)(i). 

1000See proposed Rule 13n–11(d)(2). 

1001See id.; see also 17 CFR 232.301. 

1002See DTCC 2, supra note 19; Better Markets 1, 

supra note 19; see also Better Markets 3, supra note 

19. 

1003 DTCC 2, supra note 19. 

1004 DTCC 2, supra note 19. 

determination that such service levels, 

costs, pricing, and operational reliability 

are reasonable.989 The Commission 

recognizes, however, that oversight of 

certain aspects of an SDR’s activities 

may overlap with or be within the 

purview of the SDR’s risk management 

and operations personnel or other 

business personnel.990 In that situation, 

the CCO may need to consult with 

business personnel to assess whether 

they have an appropriate justification 

for the reasonableness of such service 

levels, costs, pricing, and operational 

reliability. 

As the Commission also noted in the 

Proposing Release, an SDR is not 

required to hire an additional person to 

serve as its CCO.991 Instead, an SDR can 

designate an individual already 

employed with the SDR as its CCO. 

Given the critical role that a CCO is 

intended to play in ensuring an SDR’s 

compliance with the Exchange Act and 

the rules and regulations thereunder,992

the Commission believes that an SDR’s 

CCO should be competent and 

knowledgeable regarding the federal 

securities laws, should be empowered 

with full responsibility and authority to 

develop and enforce appropriate 

policies and procedures for the SDR, as 

necessary, and should be responsible for 

monitoring compliance with the SDR’s 

policies and procedures adopted 

pursuant to rules under the Exchange 

Act. However, the Commission will not 

substantively review a CCO’s 

competency, and is not requiring any 

particular level of competency or 

business experience for a CCO. 

To address a concern raised by one 

commenter,993 the Commission is 

revising Rule 13n–11(c)(3) from the 

proposal to clarify that the CCO must, 

in consultation with the board or the 

senior officer of the SDR, take 

reasonable steps to resolve any material 

conflicts of interest (as opposed to all 

conflicts of interest) that may arise.994

Recognizing that a CCO may not be in 

a position to resolve certain material 

conflicts of interest, as suggested by the 

commenter,995 the Commission is 

revising the rule from the proposal to 

specify that CCOs must take reasonable 

steps to resolve such conflicts, which is 

intended to clarify that CCOs are not 

required to actually resolve such 

conflicts. These conflicts of interest may 

include, for example, general conflicts 

of interest identified in the 

Commission’s Rule 13n–4(c)(3), as 

discussed in Section VI.D.3.c of this 

release. 

Recognizing that a CCO cannot 

guarantee an SDR’s statutory 

compliance, the Commission is also 

revising Rule 13n–11(c)(5) from the 

proposal to clarify that CCOs are not 

required to ensure compliance with the 

relevant Exchange Act provisions and 

the rules and regulations thereunder 

relating to SBSs, but rather to take 

reasonable steps to ensure such 

compliance. With respect to the 

comment that the CCO’s specific 

responsibilities related to conflicts 

should be limited to compliance with 

the provisions of Exchange Act Section 

13(n) and the final rules thereunder as 

they relate to the SBS operations of an 

SDR,996 the Commission notes that the 

CCO’s responsibilities go beyond the 

provisions of Exchange Act Section 

13(n), as required by the Dodd-Frank 

Act.997 For example, the CCO should 

take reasonable steps to ensure 

compliance with Exchange Act Section 

10(b)’s antifraud requirements.998

However, the CCO is required to take 

only reasonable steps to ensure 

compliance with relevant Exchange Act 

provisions and the rules and regulations 

thereunder ‘‘relating to’’ SBSs. 

4. Compliance Reports (Rules 13n–11(d) 

and 13n–11(e)) 

a. Proposed Rule 

An SDR’s CCO is required, under 

Exchange Act Section 13(n)(6)(C)(i), to 

annually prepare and sign a report that 

contains a description of the SDR’s 

compliance with respect to the 

Exchange Act and the rules and 

regulations thereunder and each policy 

and procedure of the SDR (including the 

SDR’s code of ethics and conflicts of 

interest policies).999 The Commission 

proposed Rule 13n–11(d)(1) to 

incorporate this requirement and to set 

forth minimum requirements for what 

must be included in each annual 

compliance report. 

Under proposed Rule 13n–11(d)(2), an 

SDR would be required to file with the 

Commission a financial report, as 

discussed further in Section VI.J.5 of 

this release, along with a compliance 

report, which must include a 

certification that, under penalty of law, 

the compliance report is accurate and 

complete.1000 The compliance report 

would also be required to be filed in a 

tagged data format in accordance with 

instructions contained in the EDGAR 

Filer Manual, as described in Rule 301 

of Regulation S–T.1001

In addition, proposed Rule 13n–11(e) 

would require a CCO to submit the 

annual compliance report to an SDR’s 

board for its review prior to the 

submission of the report to the 

Commission under proposed Rule 13n– 

11(d)(2). 

b. Comments on the Proposed Rule 

Two commenters submitted 

comments relating to this proposed 

rule.1002 One commenter believed that 

an annual compliance report ‘‘should be 

limited to compliance with the 

requirements of the Exchange Act and 

the policies and procedures of the SDR 

that relate to its activities as such with 

respect to SBSs (as opposed to policies 

and procedures that may address other 

regulatory requirements).’’ 1003

Additionally, the commenter did ‘‘not 

believe [that] it is appropriate to require 

the report to include a discussion of 

recommendations for material changes 

to the policies and procedures of the 

SDR as a result of the annual review (as 

well as the rationale for such 

recommendations and whether the 

policies or procedures will be modified 

as a result of such 

recommendations).’’ 1004 The 

commenter believed that ‘‘the inclusion 

of a description of any material changes 

to the SDR’s policies and procedures, 

and any material compliance matters 

identified both since the date of the 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14511 

1005 DTCC 2, supra note 19. 

1006 DTCC 2, supra note 19. 

1007Better Markets 1, supra note 19; see also 

Better Markets 3, supra note 19 (suggesting that the 

Commission require ‘‘the board to review and 

comment on, but not edit, the CCO’s annual report 

to the Commission’’). 

1008Better Markets 1, supra note 19. 

1009To conform with Rule 13n–11’s heading, as 

adopted, the Commission is revising the heading of 

paragraph (d) of the rule to specify that the 

paragraph pertains to ‘‘[c]ompliance reports’’ rather 

than ‘‘[a]nnual reports.’’ See supra note 941. 

1010See DTCC 2, supra note 19. 

1011See Exchange Act Section 13(n)(6)(C)(i), 15 

U.S.C. 78m(n)(6)(C)(i). 

1012The term ‘‘material change’’ is defined as a 

change that a CCO would reasonably need to know 

in order to oversee compliance of the SDR. See Rule 

13n–11(b)(5). 

1013The term ‘‘material compliance matter’’ is 

defined as any compliance matter that the board 

would reasonably need to know to oversee the 

compliance of the SDR and that involves, without 

limitation: (1) A violation of the federal securities 

laws by the SDR, its officers, directors, employees, 

or agents; (2) a violation of the policies and 

procedures of the SDR, by the SDR, its officers, 

directors, employees, or agents; or (3) a weakness 

in the design or implementation of the SDR’s 

policies and procedures. See Rule 13n–11(b)(6). 

1014See Investment Company Act Rule 38a– 

1(a)(4)(iii), 17 CFR 270.38a–1(a)(4)(iii). 

1015See DTCC 2, supra note 19. 

1016See DTCC 2, supra note 19 (stating that 

‘‘requiring the CCO to detail every recommendation 

(whether or not accepted) may chill open 

communication between the CCO and other SDR 

management’’). 

1017But see DTCC 2, supra note 19 (believing that 

it is not appropriate to require compliance reports 

to include a discussion of recommendations for 

material changes to an SDR’s policies and 

procedures). 

1018Rule 13n–11(d)(1)(iii). 

1019See DTCC 2, supra note 19. 

1020See Exchange Act Section 13(n)(6)(C)(i), 15 

U.S.C. 78m(n)(6)(C)(i). 

1021See Better Markets 1, supra note 19. 

preceding compliance report, provide 

comprehensive information,’’ and that 

‘‘requiring the CCO to detail every 

recommendation (whether or not 

accepted) may chill open 

communication between the CCO and 

other SDR management.’’ 1005 The 

commenter ‘‘firmly believe[d that] the 

annual report should be kept 

confidential by the Commission’’ and 

explained that ‘‘[g]iven the level of 

disclosure expected to be required . . . 

the report will likely contain 

confidential and proprietary business 

information.’’ 1006

The other commenter recommended 

that ‘‘the review and reporting should 

be more frequent, at least semiannually 

or quarterly,’’ and that ‘‘the rules should 

expressly prohibit the board of an SDR 

from requiring the CCO to make any 

changes to the compliance reports.’’ 1007

The commenter suggested that ‘‘[a]ny 

edits or supplements to the report 

sought by the board may be submitted 

to the Commission along with—but not 

as part of—the CCO’s report.’’ 1008

c. Final Rule 

After considering the comments, the 

Commission is adopting Rules 13n– 

11(d) and 13n–11(e) as proposed, each 

with two modifications.1009

Specifically, Rule 13n–11(d)(1) requires 

that an SDR’s CCO annually prepare and 

sign a report that contains a description 

of the SDR’s compliance with respect to 

the Exchange Act and the rules and 

regulations thereunder and each of the 

SDR’s policies and procedures 

(including the SDR’s code of ethics and 

conflicts of interest policies). One 

commenter suggested that the 

Commission limit the applicability of 

this rule to an SDR’s activities relating 

to SBSs, but did not provide a rationale 

for such a limit.1010 The Commission 

does not believe that there is a rationale 

for such a limit and has concluded that 

it is appropriate to adopt this rule, 

which essentially reiterates the statutory 

language.1011 In addition, compliance 

issues at an SDR that are not related to 

SBSs may impact the SDR as a whole, 

of which the Commission should be 

kept apprised. 

Additionally, Rule 13n–11(d)(1) 

requires each annual compliance report 

to contain, at a minimum, a description 

of: (1) The SDR’s enforcement of its 

policies and procedures, (2) any 

material changes 1012 to the policies and 

procedures since the date of the 

preceding compliance report, (3) any 

recommendation for material changes to 

the policies and procedures as a result 

of the annual review, the rationale for 

such recommendation, and whether 

such policies and procedures were or 

will be modified by the SDR to 

incorporate such recommendation, and 

(4) any material compliance matters 1013

identified since the date of the 

preceding compliance report. These 

minimum disclosure requirements are 

substantially similar to the 

Commission’s requirements for annual 

reports filed by CCOs of investment 

companies.1014 Further, these disclosure 

requirements will provide important 

information to Commission staff 

regarding any material compliance 

issues at an SDR and material changes 

or recommendations for material 

changes to the SDR’s policies and 

procedures. Among other things, such 

information will be useful to assist 

Commission staff in monitoring 

compliance by SDRs with the relevant 

provisions of the Exchange Act and the 

rules and regulations thereunder. Thus, 

the Commission believes that the 

minimum disclosure requirements are 

appropriate and disagrees with one 

commenter’s remark that it is not 

appropriate to require a compliance 

report to include a description of any 

recommendation for material changes to 

an SDR’s policies and procedures as a 

result of an annual review, the rationale 

for such recommendation, and whether 

such policies and procedures were or 

will be modified by the SDR to 

incorporate such recommendation.1015

To address a concern raised by the 

same commenter,1016 the Commission 

notes that it is not ‘‘requiring the CCO 

to detail every recommendation.’’ 1017

The rule is limited to 

‘‘recommendations for material 

changes.’’ 1018 The Commission believes 

that limiting the description required in 

an annual compliance report to 

recommendations for material changes 

to the SDR’s policies and procedures 

appropriately addresses the 

commenter’s concern. The Commission 

notes, however, that individual 

compliance matters may not be material 

when viewed in isolation, but may 

collectively suggest a material 

compliance matter. In addition, the 

Commission recognizes that this rule 

may ‘‘chill open communication 

between the CCO and other SDR 

management,’’ as one commenter 

suggested,1019 but the Commission 

believes that the usefulness of the 

information in an SDR’s annual 

compliance reports to the Commission, 

as discussed above, would justify any 

potential chilling of communications. 

Consistent with the relevant statutory 

provision,1020 the rule requires annual 

compliance reports. The Commission 

does not believe that it is necessary to 

require more frequent reports, as one 

commenter suggested, in order to assess 

an SDR’s financial stability.1021 CCOs, 

however, should consider the need for 

interim reviews of compliance at SDRs 

in response to significant compliance 

events, changes in business 

arrangements, and regulatory 

developments. For example, if there is 

an organizational restructuring of an 

SDR, then its CCO should consider 

evaluating whether its policies and 

procedures are adequate to guard 

against potential conflicts of interest. 

Additionally, if a new rule regarding 

SDRs is adopted by the Commission, 

then a CCO would need to take 

reasonable steps to ensure compliance 

with the rule, including reviewing the 

SDR’s policies and procedures. 

Under Rule 13n–11(d)(2), an SDR is 

required to file with the Commission a 

financial report along with the annual 

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14512 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1022The Commission is revising Rule 13n– 

11(d)(2) from the proposal to clarify that the 

certification must be made by the CCO and permit 

the certification to be based on the best of the CCO’s 

knowledge and reasonable belief. Accord General 

Rule of Practice 153(b)(1)(ii), 17 CFR 

201.153(b)(1)(ii) (requiring an attorney who signs a 

filing with the Commission to certify that ‘‘to the 

best of his or her knowledge, information, and 

belief, formed after reasonable inquiry, the filing is 

well grounded in fact and is warranted by existing 

law or a good faith argument for the extension, 

modification, or reversal of existing law’’). 

1023See supra note 294 (defining ‘‘tag’’ (including 

the term ‘‘tagged’’)). 

1024See supra note 294 (defining ‘‘EDGAR Filer 

Manual’’). 

1025Rule 13n–11(d)(2); see also 17 CFR 232.301. 

The information in each compliance report will be 

tagged using an appropriate machine-readable, 

tagged data format to enable the efficient analysis 

and review of the information contained in the 

report. 

1026The Commission is revising Rule 13n–11(e) 

from the proposal to refer to the ‘‘submission’’ of 

the annual compliance report ‘‘to’’ the Commission 

as the ‘‘filing’’ of the report ‘‘with’’ the Commission. 

The Commission believes that using the term 

‘‘filing’’ is more precise than the term ‘‘submission’’ 

in this context. 

1027Better Markets 1, supra note 19. 

1028Accord Better Markets 3, supra note 19 

(suggesting that the Commission require ‘‘the board 

to review and comment on, but not edit, the CCO’s 

annual report to the Commission’’). 

1029 DTCC 2, supra note 19. 

1030As discussed in Section VI.A.1.c of this 

release, the Commission is adopting technical 

amendments to Exchange Act Rule 24b–2 to clarify 

that the confidential portion of electronic filings by 

SDRs must be filed electronically and to require 

SDRs to request confidential treatment 

electronically. The Commission is also adopting 

technical amendments to Rule 101 of Regulation S– 

T to provide that, except as otherwise provided, all 

filings by SDRs, including any information with 

respect to which confidential treatment is 

requested, must be filed electronically. 

1031Proposed Rule 13n–11(f)(1). 

1032Proposed Rule 13n–11(f)(2). 

1033Proposed Rule 13n–11(f)(3). 

1034Proposed Rule 13n–11(f)(4). 

1035Proposed Rule 13n–11(f)(5); see also 17 CFR 

232.405 (imposing content, format, submission, and 

Web site posting requirements for an interactive 

data file, as defined in Rule 11 of Regulation S–T). 

1036See DTCC 5, supra note 19. 

1037 DTCC 5, supra note 19. 

1038 DTCC 5, supra note 19 (noting that ‘‘[u]nlike 

clearing agencies or other entities supervised by the 

Commission, an [SDR] does not have financial 

exposure to its users or participants that would 

justify the imposition of this requirement’’). 

1039 DTCC 5, supra note 19. 

1040To conform with the headings of Rule 13n– 

11 and paragraph (d) of the rule, as adopted, the 

Commission is revising the heading of paragraph (f) 

of the rule to refer to ‘‘financial reports’’ in a plural 

form. 

1041This is generally consistent with CFTC Rule 

49.25(f). See 17 CFR 49.25(f); DTCC 5, supra note 

compliance report, and the compliance 

report must include a certification by 

the CCO that, to the best of his or her 

knowledge and reasonable belief,1022

and under penalty of law, the 

compliance report is accurate and 

complete. The compliance report is also 

required to be filed in a tagged 1023 data 

format in accordance with instructions 

contained in the EDGAR Filer 

Manual,1024 as described in Rule 301 of 

Regulation S–T.1025

Rule 13n–11(e) requires a CCO to 

submit the annual compliance report to 

the board for its review prior to the 

filing of the report with the Commission 

under Rule 13n–11(d)(2).1026 Although 

the rule requires the compliance report 

to be submitted to the board once a year, 

a CCO should promptly bring serious 

compliance issues to the board’s 

attention rather than wait until an 

annual compliance report is prepared. 

One commenter suggested that the 

Commission permit an SDR’s board to 

submit edits or supplements to a CCO’s 

annual compliance report, but not as 

part of the report.1027 Rule 13n–11 does 

not prohibit a CCO from editing an 

annual compliance report to reflect the 

board’s comments because the 

Commission believes that the CCO and 

the board should be working toward the 

same compliance goals and that 

prohibiting the CCO from taking the 

board’s edits could create an adversarial 

atmosphere between them. As discussed 

above, however, an SDR could, pursuant 

to the conflicts of interest requirements 

set forth in Rule 13n–4(c)(3), consider 

prohibiting a board from requiring the 

CCO to make any changes to the 

report.1028

One commenter suggested that the 

Commission keep the annual 

compliance report confidential.1029 The 

Commission is not providing, by rule, 

that the annual compliance reports are 

automatically granted confidential 

treatment, but an SDR may seek 

confidential treatment pursuant to 

Exchange Act Rule 24b–2. This 

approach is consistent with how the 

Commission generally treats the filings 

that it receives from its regulated 

entities, including exchanges and 

clearing agencies. The Commission may 

make filed annual compliance reports 

available on its Web site, except for 

information where confidential 

treatment is requested by the SDR and 

granted by the Commission.1030

5. Financial Reports and Filing of 

Reports (Exchange Act Rules 13n–11(f) 

and (g)/Rules 11, 305, and 407 of 

Regulation S–T) 

a. Proposed Rule 

Proposed Rule 13n–11(f) set forth a 

number of requirements relating to an 

SDR’s financial report. First, the 

proposed rule would require each 

financial report to be a complete set of 

the SDR’s financial statements that are 

prepared in conformity with U.S. 

generally accepted accounting 

principles (‘‘GAAP’’) for the SDR’s most 

recent two fiscal years.1031 Second, the 

proposed rule would provide that each 

financial report shall be audited in 

accordance with the standards of the 

Public Company Accounting Oversight 

Board (‘‘PCAOB’’) by a registered public 

accounting firm that is qualified and 

independent in accordance with Rule 2– 

01 of Regulation S–X.1032 Third, each 

financial report would be required to 

include a report of the registered public 

accounting firm that complies with 

paragraphs (a) through (d) of Rule 2–02 

of Regulation S–X.1033 Fourth, if an 

SDR’s financial statements contain 

consolidated information of a subsidiary 

of the SDR, then the SDR’s financial 

statements must provide condensed 

financial information as prescribed by 

the Commission.1034 Fifth, an SDR’s 

financial reports would be required to 

be provided in XBRL consistent with 

Rules 405(a)(1), (a)(3), (b), (c), (d), and 

(e) of Regulation S–T.1035

Proposed Rule 13n–11(g) would 

further require that annual compliance 

reports and financial reports be filed 

within 60 days after the end of the fiscal 

year covered by such reports. 

b. Comments on the Proposed Rule 

The Commission received one 

comment relating to this proposed 

rule.1036 Specifically, one commenter 

suggested harmonizing Rule 13n–11(f) 

with the CFTC’s rule by eliminating 

proposed Rule 13n–11(f)(2)’s 

requirement that each financial report 

be audited in accordance with the 

PCAOB’s standards by a registered 

public accounting firm that is qualified 

and independent unless the SDR is 

under a separate obligation to provide 

financial statements.1037 The 

commenter believed that ‘‘[t]his 

requirement imposes an additional 

burden for an [SDR] and is not justified 

in relation to the risks that an [SDR] 

would pose to its members.’’ 1038 The 

commenter further suggested that the 

Commission ‘‘consider adopting the 

CFTC’s approach in its final [swap data 

repository] rules, which require [a swap 

data repository’s] financial statements 

be prepared in conformity with . . . 

GAAP.’’ 1039

c. Final Rules 

The Commission is adopting 

proposed Rules 13n–11(f) and (g) with 

modifications.1040 Specifically, Rule 

13n–11(f)(1) requires each financial 

report to be a complete set of the SDR’s 

financial statements that are prepared in 

conformity with U.S. GAAP for the 

SDR’s most recent two fiscal years.1041

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19 (suggesting that the Commission adopt the 

CFTC’s rule requiring a swap data repository’s 

financial statements to be prepared in conformity 

with GAAP). 1042The term ‘‘registered public accounting firm’’ 

is defined in Exchange Act Section 3(a)(59) to have 

the same meaning as in Section 2 of the SarbanesOxley Act of 2002. See 15 U.S.C. 78c(a)(59). Section 

2 of the Sarbanes-Oxley Act defines ‘‘registered 

public accounting firm’’ as a public accounting firm 

registered with the PCAOB in accordance with the 

Sarbanes-Oxley Act. 

1043Rule 13n–11(f)(2). 1044Rule 13n–11(f)(3). 1045Rule 13n–11(f)(4). 1046 Id. 1047 Id. 1048 Id. 1049See 17 CFR 210.12–04. 

1050 ‘‘Official filing’’ has the same meaning as set 

forth in Rule 11 of Regulation S–T. Rule 13n– 

11(b)(7). Specifically, Rule 11 of Regulation S–T 

defines ‘‘official filing’’ as ‘‘any filing that is 

received and accepted by the Commission, 

regardless of filing medium and exclusive of header 

information, tags and any other technical 

information required in an electronic filing; except 

that electronic identification of investment 

company type and inclusion of identifiers for series 

and class (or contract, in the case of separate 

accounts of insurance companies) as required by 

[R]ule 313 of Regulation S–T (§ 232.313) are 

deemed part of the official filing.’’ 

1051 ‘‘Interactive Data Financial Report’’ has the 

same meaning as set forth in Rule 11 of Regulation 

S–T. Rule 13n–11(b)(4). Specifically, the 

Commission is adding the definition of ‘‘Interactive 

Data Financial Report’’ in Rule 11 of Regulation S– 

T to mean ‘‘the machine-readable computer code 

that presents information in eXtensible Business 

Reporting Language (XBRL) electronic format 

pursuant to § 232.407.’’ This definition is 

substantially the same as the definition of 

‘‘Interactive Data File’’ in Rule 11 of Regulation S– 

T. However, Interactive Data Financial Reports are 

not considered Interactive Data Files for purposes 

of Rule 405 or for other rules and regulations that 

reference to Rule 405. 

1052See Rules 407(d) and (e) of Regulation S–T 

(requiring complete footnotes and schedules in 

financial statements to be block-text tagged). 

1053Rule 405(a)(2), on the other hand, applies to 

other electronic filers either required or permitted 

to submit an Interactive Data File. 

Rule 13n–11(f)(2) provides that each 

financial report must be audited in 

accordance with the PCAOB’s standards 

by a registered public accounting 

firm 1042 that is qualified and 

independent in accordance with Rule 2– 

01 of Regulation S–X.1043 Pursuant to 

Rule 13n–11(f)(3), each financial report 

is required to include a report of the 

registered public accounting firm that 

complies with paragraphs (a) through 

(d) of Rule 2–02 of Regulation S–X.1044

Rule 13n–11(f)(4) further provides 

that if an SDR’s financial statements 

contain consolidated information of a 

subsidiary of the SDR, then the SDR’s 

financial statements must provide 

condensed financial information, in a 

financial statement footnote, as to the 

financial position, changes in financial 

position and results of operations of the 

SDR, as of the same dates and for the 

same periods for which audited 

consolidated financial statements are 

required. Such financial information 

need not be presented in greater detail 

than is required for condensed 

statements by Rules 10–01(a)(2), (3), and 

(4) of Regulation S–X.1045 Detailed 

footnote disclosure that would normally 

be included with complete financial 

statements may be omitted with the 

exception of disclosures regarding 

material contingencies, long-term 

obligations, and guarantees.1046

Descriptions of significant provisions of 

the SDR’s long-term obligations, 

mandatory dividend or redemption 

requirements of redeemable stocks, and 

guarantees of the SDR shall be provided 

along with a five-year schedule of 

maturities of debt.1047 If the material 

contingencies, long-term obligations, 

redeemable stock requirements, and 

guarantees of the SDR have been 

separately disclosed in the consolidated 

statements, then they need not be 

repeated in this schedule.1048 Rule 13n– 

11(f)(4) is substantially similar to Rule 

12–04 of Regulation S–X, which 

pertains to condensed financial 

information of registrants.1049

The Commission is revising proposed 

Rule 13n–11(f)(5) to require an SDR’s 

financial reports to be provided as an 

official filing 1050 in accordance with the 

EDGAR Filer Manual and include, as 

part of the official filing, an Interactive 

Data Financial Report 1051 filed in 

accordance with new Rule 407 of 

Regulation S–T. Finally, Rule 13n–11(g) 

provides that annual compliance reports 

and financial reports filed pursuant to 

Rules 13n–11(d) and (f) are required to 

be filed within 60 days after the end of 

the fiscal year covered by such reports. 

Rule 407 of Regulation S–T 

In conjunction with Rule 13n–11(f)(5), 

the Commission is adopting new Rule 

407 of Regulation S–T, which stems 

from provisions in proposed Rule 13n– 

11(f). Rule 407 sets forth the 

requirements equivalent to those in 

Rules 405(a)(1) (except as to the 

requirement for Web site posting), (a)(2) 

(with modifications), (a)(3), (b), (c), 

(d)(1), and (e)(1) of Regulation S–T. 

With the exception of Rule 405(a)(2), 

these provisions were cross-referenced 

in proposed Rule 13n–11(f)(5). Thus, 

substantively, the requirements in new 

Rule 407 are the same as those proposed 

under proposed Rule 13n–11(f)(5), 

except as detailed below. The text of 

Rule 407 is also substantially the same 

as those provisions of Rule 405 that 

pertain to the content, format, and filing 

requirements of XBRL-formatted 

financial statements. Rule 407, however, 

applies to Interactive Data Financial 

Reports, whereas Rule 405 applies to 

Interactive Data Files. The Commission 

is adopting new Rule 407 to specify the 

content, format, and filing requirements 

for Interactive Data Financial Reports. 

Although substantially similar, there 

are several differences between the 

provisions of Rule 405 that proposed 

Rule 13n–11(f) cross-referenced and the 

provisions of Rule 405 that are included 

in new Rule 407. As a general matter, 

these differences relate to modifications 

from the proposal that address the 

unique aspects of SDRs and the 

applicability of certain filing 

requirements to them. 

Upon further consideration, the 

Commission is not adopting, in Rule 

407, several provisions that the 

Commission had initially proposed 

applying to SDRs’ financial reports. 

Rule 405(a)(1), which was crossreferenced in proposed Rule 13n– 

11(f)(5), requires compliance with the 

Web site posting requirements found 

elsewhere in Rule 405. As adopted, Rule 

407 does not have Web site posting 

requirements because the Commission 

believes that it is not necessary to 

impose such requirements on SDRs in 

this context. No commenters have 

suggested otherwise. Additionally, this 

is consistent with the SDR Rules not 

imposing any Web site posting 

requirements on any other filings by 

SDRs. Rule 407 also does not require an 

SDR to file its financial reports 

consistent with Rules 405(d)(2), (3), and 

(4), all of which require detailed tagging 

of footnotes in financial statements. 

Additionally, Rule 407 does not require 

an SDR to file its financial reports 

consistent with Rule 405(e)(2), which 

requires detailed tagging of financial 

statement schedules. The Commission 

believes that block-text tags of complete 

footnotes and schedules in an SDR’s 

financial reports 1052 will provide 

sufficient data structure for the 

Commission to assess and analyze 

effectively the SDR’s financial and 

operational condition. Thus, the 

Commission believes that it is not 

necessary to impose additional costs on 

SDRs to provide detailed tagged 

footnotes and schedules in SDRs’ 

financial reports. For these reasons, the 

Commission is not requiring SDRs to 

detail tag footnotes and schedules in 

their financial reports. 

In addition, the provisions of Rule 

405 that proposed Rule 13n–11(f) crossreferenced and the provisions of Rule 

405 that are included in new Rule 407 

differ in another way. New Rule 

407(a)(2) specifies that Rule 407 applies 

only to SDRs filing financial reports.1053

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1054See Rule 405 of Regulation S–T, 17 CFR 

232.405. 

1055The Commission is adding the definition of 

‘‘Related Official Financial Report Filing’’ in Rule 

11 of Regulation S–T to mean ‘‘the ASCII or HTML 

format part of the official filing with which an 

Interactive Data Financial Report appears as an 

exhibit.’’ 

1056The Commission’s proposed Rule 13n–11(f) 

stated that an SDR’s financial report must be 

provided in XBRL consistent with certain 

provisions in Rule 405. As adopted, Rule 407 is 

intended to clarify that it is only the exhibit to the 

filing of an SDR’s financial report that must be in 

XBRL. 

1057The Commission notes that Rule 305(a) of 

Regulation S–T does not apply to HTML 

documents. If a Related Official Financial Report 

Filing is filed in HTML format, then Rule 305(a) 

will not apply to that filing. 

1058As discussed in Section VI.A.1.c of this 

release, the Commission is adopting technical 

amendments to Exchange Act Rule 24b–2 to clarify 

that the confidential portion of electronic filings by 

SDRs must be filed electronically and to require 

SDRs to request confidential treatment 

electronically. The Commission is also adopting 

technical amendments to Rule 101 of Regulation S– 

T to provide that, except as otherwise provided, all 

filings by SDRs, including any information with 

respect to which confidential treatment is 

requested, must be filed electronically. 

1059See, e.g., Exchange Act Rule 17a–5(d), 17 CFR 

240.17a–5(d) (requiring broker-dealers to file 

annually audited financial statements); Article 3 of 

Regulation S–X, 17 CFR 210.3–01 et seq. (requiring 

certain financial statements to be audited by 

independent accountants). 

1060See, e.g., Exchange Act Rule 17a–5(a), 17 CFR 

240.17a–5(a) (requiring broker-dealers to file 

monthly and quarterly Financial and Operational 

Combined Uniform Single (FOCUS) reports); Article 

10–01(d) of Regulation S–X, 17 CFR 210.10–01(d) 

(requiring public companies to have their quarterly 

reports reviewed by independent public 

accountants). 

1061Proposing Release, 75 FR at 77343, supra 

note 2; see also Exchange Act Section 13(m)(1)(G), 

15 U.S.C. 78m(m)(1)(G). 

1062See DTCC 5, supra note 19. 

1063See Revision of the Commission’s Auditor 

Independence Requirements, Securities Act Release 

No. 7919 (Nov. 21, 2000), 65 FR 76008 (Dec. 5, 

2000) (discussing importance of auditor 

independence and audited financial statements). 

1064See CFTC Rule 49.25, 17 CFR 49.25; DTCC 

5, supra note 19 (suggesting that the Commission 

‘‘consider adopting the CFTC’s approach in its final 

[swap data repository] rules,’’ regarding financial 

statements). 

Specifically, new Rule 407(a)(2) states 

that an Interactive Data Financial Report 

must be filed only by an electronic filer 

that is required to file an Interactive 

Data Financial Report pursuant to Rule 

13n–11(f)(5) as an exhibit to a filing of 

an SDR’s financial report. Consistent 

with other documents required to be 

filed in a tagged data, or interactive, 

format,1054 an SDR’s financial report is 

required to be filed with the 

Commission in two formats. The first 

part of the official filing is the Related 

Official Financial Report Filing,1055

which is in ASCII or HTML format. The 

second part of the official filing, the 

Interactive Data Financial Report, is an 

exhibit to the filing, which is required 

to be in XBRL format.1056

In addition to adopting new Rule 407 

of Regulation S–T, the Commission is 

making a conforming amendment to 

Rule 305 of Regulation S–T to include 

Interactive Data Financial Reports 

among the list of filings to which Rule 

305(a) does not apply.1057 Rule 305(a) 

limits the number of characters and 

positions of tabular or columnar 

information of electronic filings with 

the Commission. By amending Rule 305, 

the Commission is treating Interactive 

Data Financial Reports in the same 

manner as it treats other XBRL filings in 

this context. 

As mentioned above, Rule 13n–11(g) 

provides that annual compliance reports 

and financial reports are required to be 

filed within 60 days after the end of the 

fiscal year covered by such reports. The 

Commission anticipates developing an 

electronic filing system through which 

an SDR will be able to file annual 

compliance reports and financial reports 

shortly after the effective date of Rule 

13n–11. The Commission anticipates 

that this electronic filing system will be 

through EDGAR and that it will be the 

same portal for SDRs to file Form SDR. 

If an SDR needs to file an annual 

compliance report and financial report 

prior to such time as the electronic 

filing system is available, then the SDR 

may file the reports in paper format 

with the Commission’s Division of 

Trading and Markets at the 

Commission’s principal office in 

Washington, DC. However, doing so 

does not relieve the SDR from 

compliance with the requirement in 

Rule 13n–11(d)(2) to file the annual 

compliance report ‘‘in a tagged data 

format in accordance with the 

instructions contained in the EDGAR 

Filer Manual,’’ or the requirement in 

Rule 13n–11(f)(5) to provide the 

financial report ‘‘as part of an official 

filing in accordance with the EDGAR 

Filer Manual.’’ Therefore, when the 

Commission’s electronic filing system is 

available, the SDR should file 

electronically any such reports that 

previously had been filed in paper 

format. 

The Commission is not providing, by 

rule, that the financial reports are 

automatically granted confidential 

treatment, but an SDR may seek 

confidential treatment of certain 

information pursuant to Exchange Act 

Rule 24b–2. As stated above, this 

approach is consistent with how the 

Commission generally treats the filings 

that it receives from its regulated 

entities, including exchanges. The 

Commission may make filed financial 

reports available on its Web site except 

for information where confidential 

treatment is requested by the SDR and 

granted by the Commission.1058

The Commission notes that with 

respect to its other filers, the 

Commission has required, at a 

minimum, the financial information 

discussed above 1059 and, in some 

instances, significantly more 

information.1060 Additionally, as 

discussed in the Proposing Release, the 

Commission believes that it is necessary 

to obtain an audited annual financial 

report from each registered SDR to 

understand the SDR’s financial and 

operational condition. It is particularly 

important for the Commission to have 

this understanding because SDRs are 

intended to play a pivotal role in 

improving the transparency and 

efficiency of the SBS market and 

because SBSs (whether cleared or 

uncleared) are required to be reported to 

a registered SDR.1061 In its role as 

central recordkeeper, an SDR serves an 

important role as a source of data for 

regulators to monitor exposures, risks, 

and compliance with the Exchange Act 

and for market participants to access 

position information. Among other 

things, the Commission will need to 

know whether an SDR has adequate 

financial resources to comply with its 

statutory obligations or is having 

financial difficulties. If an SDR 

ultimately ceases doing business, then it 

could create a significant disruption in 

the OTC derivatives market. 

With respect to one commenter’s 

suggested deletion of the auditing 

requirement in Rule 13n–11(f)(2), the 

Commission disagrees with the 

commenter’s view that the requirement 

imposes an additional burden for an 

SDR that is not justified in relation to 

the risks that an SDR would pose to its 

members.1062 The Commission believes 

that the audit requirement will serve as 

an effective means to assure the 

reliability of the information in an 

SDR’s financial report that is filed with 

the Commission. The Commission also 

believes that the filing of audited 

financial statements (as opposed to 

unaudited financial statements) is 

important because it would bolster 

market participants’ confidence in the 

SDR and provide greater credibility to 

the accuracy of the information that the 

SDR files with the Commission.1063 The 

Commission recognizes that because of 

the audit requirement in Rule 13n– 

11(f)(2), the rule may, in some instances, 

be more costly than the CFTC’s 

requirement of quarterly unaudited 

financial statements.1064 The 

Commission believes, however, that the 

additional burden, where it exists, is 

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1065Proposing Release, 75 FR at 77341, supra 

note 2. 1066Better Markets 1, supra note 19; see also 

Better Markets 3, supra note 19 (suggesting 

‘‘[e]xplicit prohibitions against attempts by officers, 

directors, or employees to coerce, mislead, or 

otherwise interfere with the CCO’’). 1067Exchange Act Section 36 authorizes the 

Commission to conditionally or unconditionally 

exempt any person, security, or transaction, or any 

class or classes of persons, securities, or 

transactions, from certain provisions of the 

Exchange Act or certain rules or regulations 

thereunder, by rule, regulation, or order, to the 

extent that such exemption is necessary or 

appropriate in the public interest, and is consistent 

with the protection of investors. 15 U.S.C. 78mm. 

1068 15 U.S.C. 78m(n). 

1069Cross-Border Proposing Release, 78 FR at 

31209, supra note 3. 

1070Proposed Rule 13n–12(a)(1) defines ‘‘nonU.S. person’’ to mean any person that is not a U.S. 

person. Proposed Rule 13n–12(a)(2) defines ‘‘U.S. 

person’’ by cross-reference to the definition of ‘‘U.S. 

person’’ in proposed Rule 3a71–3(a)(7). See CrossBorder Proposing Release, 78 FR at 31209, supra 

note 3. 

1071Proposed Rule 13n–12(b). 

1072See DTCC 2, supra note 19 (urging the 

Commission, in its regulation of SDRs, to aim for 

regulatory comity as it has already been agreed to 

by ODRF and other international bodies such as 

CPSS and IOSCO); Foreign Banks SBSR, supra note 

27 (recommending that the Commission work with 

foreign authorities to permit SDRs in all major 

jurisdictions to register with the appropriate 

regulators in each jurisdiction); see also Socie ́te ́

Ge ́ne ́rale SBSR, supra note 27 (suggesting that the 

Commission consider international comity and 

public policy goals of derivatives regulation to limit 

its regulation of swap business and requesting that 

the Commission coordinate with its foreign 

counterparts, especially those based in Europe, to 

work toward an MOU on the jurisdictional reach of 

the derivatives rules of the U.S./European Market 

Infrastructure Regulation); ISDA SIFMA SBSR, 

supra note 27 (‘‘The Commission should consult 

with foreign regulators before establishing the extraterritorial scope of the rules promulgated under 

Title VII.’’). See also DTCC CB, supra note 26 

(‘‘Given the global nature of OTC swaps and SB 

swaps markets, the United States should continue 

to promote an approach to the regulation of the 

swaps markets that adheres to international comity 

and mitigates the risk of regulatory arbitrage in 

market decisions. Regulations among jurisdictions 

must be coordinated in a manner that promotes 

competition, transparency, and protects the safety 

and soundness of these global markets. At the same 

time, the Commission should remain vigilant that 

the international framework is efficient and does 

not unfairly disadvantage or concentrate systemic 

risk in the United States.’’). 

1073 DTCC 2, supra note 19. 

1074 DTCC 2, supra note 19. 

1075See US & Foreign Banks, supra note 24; 

ESMA, supra note 19. 

1076ESMA, supra note 19. 

1077ESMA, supra note 19. 

1078ESMA, supra note 19 (noting that a similar 

regulatory regime is delineated in the ‘‘European 

Commission’s proposal for a Regulation on OTC 

Continued 

justified by the aforementioned benefits 

of requiring audited financial 

statements. 

6. Additional Rule Regarding Chief 

Compliance Officer (Rule 13n–11(h)) 

In the Proposing Release, the 

Commission asked whether it should 

prohibit any officers, directors, or 

employees of an SDR from, directly or 

indirectly, taking any action to coerce, 

manipulate, mislead, or fraudulently 

influence the SDR’s CCO in the 

performance of his responsibilities.1065

In response, one commenter 

recommended that the Commission 

adopt such a prohibition.1066 After 

considering the commenter’s 

recommendation, the Commission has 

decided to adopt Rule 13n–11(h), which 

states that ‘‘[n]o officer, director, or 

employee of a security-based swap data 

repository may directly or indirectly 

take any action to coerce, manipulate, 

mislead, or fraudulently influence the 

security-based swap data repository’s 

chief compliance officer in the 

performance of his or her duties under 

[Rule 13n–11].’’ This rule is intended to 

advance the goals of the statute’s 

requirements by preventing others at the 

SDR from seeking to improperly affect 

the SDR’s CCO in the performance of his 

or her responsibilities. This rule is also 

intended to promote the independence 

of an SDR’s CCO while maintaining the 

CCO’s effectiveness by mitigating the 

potential conflicts of interest between 

the CCO and the SDR’s officers, 

directors, and employees. 

K. Exemption From Requirements 

Governing SDRs for Certain Non-U.S. 

Persons (Rule 13n–12) 

1. Proposed Rule 

In the Cross-Border Proposing 

Release, the Commission proposed, 

pursuant to its authority under 

Exchange Act Section 36,1067 an 

exemption from Exchange Act Section 

13(n) 1068 and the rules and regulations 

thereunder (collectively, the ‘‘SDR 

Requirements’’) for non-U.S. persons 

that perform the functions of an SDR 

within the United States, subject to a 

condition.1069 Specifically, the 

Commission proposed Rule 13n–12 

(‘‘SDR Exemption’’), which provides: ‘‘A 

non-U.S. person 1070 that performs the 

functions of a security-based swap data 

repository within the United States shall 

be exempt from the registration and 

other requirements set forth in Section 

13(n) of the [Exchange] Act . . . and the 

rules and regulations thereunder, 

provided that each regulator with 

supervisory authority over such nonU.S. person has entered into a 

supervisory and enforcement 

memorandum of understanding or other 

arrangement with the Commission that 

addresses the confidentiality of data 

collected and maintained by such nonU.S. person, access by the Commission 

to such data, and any other matters 

determined by the Commission.’’ 1071

2. Comments on the Proposed Rule 

The Commission received several 

comment letters concerning the 

registration and regulation of SDRs in 

the cross-border context, most of which 

were submitted prior to the 

Commission’s proposal of Rule 13n–12. 

As a general matter, commenters 

suggested that the Commission should 

apply principles of international 

comity.1072

One commenter expressed concern 

that ‘‘the current asymmetry in the 

[proposed SDR Rules], when compared 

to existing international standards, will 

lead to fragmentation along regional 

lines and prohibit global services and 

global data provision, which will 

weaken the introduction of trade 

repositories as a financial markets 

reform measure.’’ 1073 The commenter 

stated that ‘‘because of the onerous 

standards imposed on SDRs compared 

to the regulatory framework of other 

competitive jurisdictions, the U.S. will 

be less attractive than other locations for 

the purpose of storing full global data 

where SDRs are actively looking to 

service the global regulatory 

community.’’ 1074

In addition, two commenters 

expressed concern about the potential 

impact of duplicative registration 

requirements imposed on SDRs.1075

Specifically, one of these commenters 

remarked that the Commission’s 

proposed rules governing SDRs ‘‘would 

seem to force a non-resident SDR to be 

subject to multiple regimes and to the 

jurisdiction of several authorities’’ and 

that the Proposing Release made no 

‘‘reference to equivalency of regulatory 

regimes or cooperation with the 

authorities of the country of 

establishment of the non-resident 

SDRs.’’ 1076 To address this concern, the 

commenter suggested that the 

Commission adopt a regime under 

which foreign SDRs would be deemed 

to comply with the SDR Requirements 

if the laws and regulations of the 

relevant foreign jurisdiction were 

equivalent to those of the Commission 

and an MOU has been entered into 

between the Commission and the 

relevant foreign authority.1077 The 

commenter noted that the recommended 

‘‘regime would have the following 

advantages: i) Facilitating cooperation 

among authorities from different 

jurisdictions; ii) ensuring the mutual 

recognition of [SDRs]; and iii) 

establishing convergent regulatory and 

supervisory regimes which is necessary 

in a global market such as the OTC 

derivatives one.’’ 1078

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derivatives, central counterparties and trade 

repositories’’). 

1079See US & Foreign Banks, supra note 24. 

1080Foreign Banks SBSR, supra note 27 (‘‘Crossregistration of SDRs is not only necessary given the 

global nature of the swaps market, it also reduces 

duplicative data reporting. Cross-registration would 

also facilitate the creation of uniform reporting 

rules and procedures that would enable easy 

comparison of transaction data from different 

jurisdictions. Cross-border information sharing and 

cross-registration, coupled with the new standard 

identification codes that will be required for 

reporting to SDRs, would provide regulators and 

market participants with a comprehensive picture, 

thus enabling more robust surveillance and 

supervision of the global swaps market.’’); BofA 

SBSR, supra note 27 (noting that the Commission 

can ensure that it retains access to data reported to 

foreign SDRs by establishing a regime for crossregistration of SDRs in multiple jurisdictions). 

1081See Section III.B of this release discussing 

persons performing the functions of an SDR within 

the United States that must register with the 

Commission. 

1082See Cross-Border Proposing Release, 78 FR at 

31042, supra note 3. See also Exchange Act Section 

13(n)(1), 15 U.S.C. 78m(n)(1) (requiring persons 

that, directly or indirectly, make use of the mails 

or any means or instrumentality of interstate 

commerce to perform the functions of an SDR, to 

register with the Commission). The Commission 

recognizes that some non-U.S. persons that perform 

the functions of an SDR may do so entirely outside 

the United States, and thus, are not required to 

register with the Commission. 

1083See DTCC 2, supra note 19; DTCC CB, supra 

note 26; Foreign Banks SBSR, supra note 27; 

Socie ́te ́ Ge ́ne ́rale SBSR, supra note 27; and ISDA 

SIFMA SBSR, supra note 27. 

1084See infra note 1086 (discussing technical 

revision) and infra note 1087 (discussing MOU 

requirement). 

1085See US & Foreign Banks, supra note 24; 

ESMA, supra note 19. 

1086Exchange Act Rule 13n–12(a)(1), as adopted, 

defines ‘‘non-U.S. person’’ to mean any person that 

is not a U.S. person. Exchange Act Rule 13n– 

12(a)(2) defines ‘‘U.S. person’’ by cross-reference to 

the definition of ‘‘U.S. person’’ in Exchange Act 

Rule 3a71–3(a)(4)(i), 17 CFR 240.3a71–3(a)(4)(i). See 

Cross-Border Adopting Release, 79 FR at 47371, 

supra note 11 (adopting Exchange Act Rule 3a71– 

3(a)(4)(i)). As proposed, Rule 13n–12(a)(2) crossreferenced to ‘‘§ 240.3a71–3(a)(7).’’ For consistency 

in how cross-references are formatted in the SDR 

Rules, the Commission is revising from the proposal 

the format of the cross-reference to ‘‘Rule 3a71– 

3(a)(4)(i) (§ 240.3a71–3(a)(4)(i)).’’ 

1087Upon further consideration, the Commission 

is revising the proposed rule to require an MOU 

rather than a more specific ‘‘supervisory and 

enforcement’’ MOU. Requiring an MOU provides 

the Commission with the flexibility to negotiate a 

broad range of terms, conditions, and circumstances 

under which information can be shared with other 

relevant authorities. 

1088See Cross-Border Proposing Release, 78 FR at 

31043, supra note 3. 

1089The Commission believes that the SDR 

Exemption addresses one commenter’s view that ‘‘a 

non-U.S. SDR should not be subject to U.S. 

registration so long as it collects and maintains 

information from outside the U.S.’’ See US & 

Foreign Banks, supra note 24; see also Section III.B 

of this release (discussing when SDRs that are nonU.S. persons must register with the Commission). 

The Commission notes, however, that a non-U.S. 

person that performs the functions of an SDR 

outside the United States may choose to register 

with the Commission as an SDR to enable that 

person to accept data from persons that are 

reporting an SBS pursuant to the reporting 

requirements of Title VII and Regulation SBSR. See 

Exchange Act Sections 13(m)(1)(G) and 13A(a)(1), 

15 U.S.C. 78m(m)(1)(G) and 78m–1(a)(1), as added 

by Dodd-Frank Act Sections 763(i) and 766(a); 

Regulation SBSR Adopting Release, supra note 13 

(Rule 901 requiring all SBSs to be reported to a 

registered SDR or, if no SDR will accept the SBSs, 

the Commission). This approach is consistent with 

commenters’ views supporting cross-registration of 

SDRs. See Foreign Banks SBSR, supra note 27 

(suggesting cross-registration of SDRs); BofA SBSR, 

supra note 27 (suggesting cross-registration of 

SDRs). The Commission may consider also granting, 

pursuant to its authority under Exchange Act 

Section 36, 15 U.S.C. 78mm, exemptions to such 

non-U.S. person that registers with the Commission 

from certain of the SDR Requirements on a case-bycase basis. In determining whether to grant such an 

exemption, the Commission may consider, among 

other things, whether there are overlapping 

requirements in the Exchange Act and applicable 

foreign law. 

1090See Cross-Border Proposing Release, 78 FR at 

31043, supra note 3. 

1091See Cross-Border Proposing Release, 78 FR at 

31043, supra note 3 (discussing Regulation SBSR 

and substituted compliance); see also Regulation 

SBSR Adopting Release, supra note 13 (adopting 

Rule 908(c) allowing for the possibility of 

substituted compliance). 

1092See US & Foreign Banks, supra note 24; 

ESMA, supra note 19. 

Recognizing that some SDRs would 

function solely outside of the United 

States and, therefore, would be 

regulated by an authority in another 

jurisdiction, commenters suggested 

possible approaches to the SDR 

registration regime. One commenter, for 

example, suggested that ‘‘a non-U.S. 

SDR should not be subject to U.S. 

registration so long as it collects and 

maintains information from outside the 

U.S., even if such information is 

collected from non-U.S. swap dealer or 

[major security-based swap participant] 

registrants.’’ 1079 Two commenters 

supported ‘‘cross-registration’’ of SDRs, 

whereby SDRs in all major jurisdictions 

may register with the appropriate 

regulators in each jurisdiction.1080

3. Final Rule 

As stated above,1081 the Commission 

believes that a non-U.S. person that 

performs the functions of an SDR within 

the United States is required to register 

with the Commission, absent an 

exemption.1082 After considering 

comments, including those urging the 

Commission to take into consideration 

the principles of international comity 

and mitigate the risk of regulatory 

arbitrage in market decisions,1083 the 

Commission is adopting Rule 13n–12 as 

proposed, with two modifications,1084

to provide an exemption from the SDR 

Requirements for certain non-U.S. 

persons. This rule is intended to 

provide legal certainty to market 

participants and to address commenters’ 

concerns regarding the potential for 

duplicative regulatory requirements.1085

Specifically, Rule 13n–12 states as 

follows: ‘‘A non-U.S. person 1086 that 

performs the functions of a securitybased swap data repository within the 

United States shall be exempt from the 

registration and other requirements set 

forth in section 13(n) of the [Exchange] 

Act . . . and the rules and regulations 

thereunder, provided that each regulator 

with supervisory authority over such 

non-U.S. person has entered into a 

memorandum of understanding 1087 or 

other arrangement with the Commission 

that addresses the confidentiality of data 

collected and maintained by such nonU.S. person, access by the Commission 

to such data, and any other matters 

determined by the Commission.’’ 

The Commission continues to believe 

that the SDR Exemption is necessary or 

appropriate in the public interest, and 

consistent with the protection of 

investors.1088 Because the reporting 

requirements of Title VII and Regulation 

SBSR can be satisfied only if an SBS 

transaction is reported to an SDR that is 

registered with the Commission,1089 the 

Commission continues to believe that 

the primary reason for a person subject 

to the reporting requirements of Title 

VII and Regulation SBSR to report an 

SBS transaction to an SDR that is not 

registered with the Commission would 

likely be to satisfy reporting obligations 

that it or its counterparty has under 

foreign law.1090 Such person would still 

be required to fulfill its reporting 

obligations under Title VII and 

Regulation SBSR by reporting its SBS 

transaction to an SDR that is registered 

with the Commission, absent other relief 

from the Commission,1091 even if the 

transaction were also reported to a nonU.S. person that is not registered with 

the Commission because it is relying on 

the SDR Exemption. The Commission 

believes that this approach to the SDR 

Requirements appropriately balances 

the Commission’s interest in having 

access to data about SBS transactions 

involving U.S. persons, while 

addressing commenters’ concerns 

regarding the potential for duplicative 

regulatory requirements 1092 as well as 

furthering the goals of the Dodd-Frank 

Act. 

The SDR Exemption includes a 

condition that each regulator with 

supervisory authority over the non-U.S. 

person that performs the functions of an 

SDR within the United States enters into 

an MOU or other arrangement with the 

Commission, as specified in Exchange 

Act Rule 13n–12(b). The Commission 

anticipates that in determining whether 

to enter into such an MOU or other 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14517 

1093The Commission contemplates that the 

relevant authority will keep requested data that is 

collected and maintained by such non-U.S. person 

confidential in a manner that is consistent with 

Exchange Act Section 24 and Rule 24c–1 

thereunder. See 15 U.S.C. 78x and 17 CFR 

240.24c–1. 

1094The Commission contemplates that the 

Commission’s access to data collected and 

maintained by such non-U.S. person will be in a 

manner that is consistent with Exchange Act 

Section 13(n)(5)(D) and Rule 13n–4(b)(5) 

thereunder. See Exchange Act Section 13(n)(5)(D), 

15 U.S.C. 78m(n)(5)(D). 

1095The Commission has entered numerous 

cooperative agreements with foreign authorities. 

See Cooperative Arrangements with Foreign 

Regulators, available at http://www.sec.gov/about/

offices/oia/oia_cooparrangements.shtml. Based on 

the Commission’s experience with negotiating 

MOUs and other agreements with foreign 

authorities, the Commission believes that the MOU 

or agreement described in Rule 13n–12(b) could, in 

many cases, be negotiated in a timely manner so 

that the exemption provided under Rule 13n–12(b) 

should be available before the registration of an 

SDR seeking to claim the exemption would 

otherwise be required. 

1096Accord Socie ́te ́ Ge ́ne ́rale SBSR, supra note 27 

(requesting that the Commission coordinate with its 

foreign counterparts, especially those based in 

Europe, to work toward an MOU on the 

jurisdictional reach of the derivatives rules of the 

U.S./European Market Infrastructure Regulation). 

1097See DTCC 2, supra note 19. 

1098Senior representatives of authorities with 

responsibility for regulation of OTC derivatives 

have met on a number of occasions to discuss 

international coordination of OTC derivatives 

regulations. See, e.g., Report of the OTC Derivatives 

Regulators Group (ODRG) on Cross-Border 

Implementation Issues (Mar. 31, 2014), available at 

http://www.cftc.gov/ucm/groups/public/@

internationalaffairs/documents/file/

odrgreport033114.pdf. 

1099As noted above, ‘‘SDR Rules’’ means, 

collectively, Rules 13n–1 to 13n–12. 

1100 44 U.S.C. 3501 et seq. 

1101See Proposing Release, 75 FR at 77354, supra 

note 2. 

1102One commenter emphasized that regulators 

should provide confidential treatment to the annual 

compliance reports that SDRs provide to the 

Commission. DTCC 2, supra note 19. Consistent 

with its treatment of filings that it receives from 

other registrants, the Commission is not providing, 

by rule, that annual compliance reports are 

automatically granted confidential treatment, but 

SDRs may request confidential treatment. See 

Section VI.J.4.c of this release. One commenter to 

the Temporary Rule Release emphasized the 

importance of the Commission protecting 

information furnished to it under the rules in that 

release. Deutsche Temp Rule, supra note 28. A 

second commenter reiterated that regulators should 

provide confidential treatment to SBS data 

provided by SDRs. ESMA, supra note 19. The 

Commission anticipates that it will keep reported 

data that SDRs submit to the Commission 

confidential, subject to the provisions of applicable 

law. Pursuant to Commission rules, confidential 

treatment can be sought for information submitted 

to the Commission. See 17 CFR 200.83 (regarding 

confidential treatment procedures under FOIA). 

1103See Section VIII.D.6.c of this release 

discussing economic alternatives to Rule 13n– 

11(f)(2). 1104 IIB CB, supra note 26. 1105 IIB CB, supra note 26. 1106See Section VII.D.1 of this release discussing 

the burdens associated with SDRs’ registration 

requirements. 1107The calculation of the burden on nonresident SDRs under Rule 13n–1(f) has been revised 

to correct a calculation error, which slightly reduces 

the burden hours incurred by non-resident SDRs. 

See infra note 1136 and the accompanying text. 

arrangement with a relevant authority, 

the Commission will consider whether 

the relevant authority can keep 

confidential requested data that is 

collected and maintained by the nonU.S. person that performs the functions 

of an SDR within the United States 1093

and whether the Commission will have 

access to data collected and maintained 

by such non-U.S. person.1094 The 

Commission anticipates that it will 

consider other matters, including, for 

example, whether the relevant authority 

agrees to provide the Commission with 

reciprocal assistance in securities 

matters within the Commission’s 

jurisdiction and whether an MOU or 

other arrangement would be in the 

public interest.1095 The Commission 

believes that, in lieu of requiring every 

non-U.S. person that performs the 

functions of an SDR within the United 

States to register with the Commission, 

the condition in the SDR Exemption is 

appropriate to address the 

Commission’s interest in having access 

to SBS data involving U.S. persons and 

U.S. market participants that is 

maintained by non-U.S. persons that 

perform the functions of an SDR within 

the United States and protecting the 

confidentiality of such SBS data 

involving U.S. persons and U.S. market 

participants.1096

With respect to one commenter’s 

concern about ‘‘the current asymmetry 

in the [proposed SDR Rules] when 

compared to existing international 

standards’’ and ‘‘onerous standards 

imposed on SDRs compared to 

regulatory framework of other 

competitive jurisdictions,’’ the 

Commission believes that the SDR 

Exemption is intended to encourage 

international cooperation, and thereby 

mitigate to some extent the concern of 

data fragmentation and regulatory 

arbitrage.1097 The commenter, which 

was submitted prior to the 

Commission’s proposal of Rule 13n–12, 

did not provide specific examples of 

international standards or regulatory 

frameworks for comparison with the 

SDR Rules, but, as discussed in Section 

I.D above, the Commission has taken 

into consideration recommendations by 

international bodies; Commission staff 

also has consulted and coordinated with 

foreign regulators through bilateral and 

multilaterial discussions.1098

VII. Paperwork Reduction Act 

Certain provisions of the SDR 

Rules1099 and Form SDR impose new 

‘‘collection of information’’ 

requirements within the meaning of the 

Paperwork Reduction Act of 1995 

(‘‘PRA’’).1100 In accordance with 44 

U.S.C. 3507 and 5 CFR 1320.11, the 

Commission submitted the provisions to 

the Office of Management and Budget 

(‘‘OMB’’) for review when it issued the 

Proposing Release. The title of the new 

collection of information is ‘‘Form SDR 

and Security-Based Swap Data 

Repository Registration, Duties, and 

Core Principles.’’ 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 OMB control number. 

OMB assigned control number 3235– 

0719 to the new collection of 

information. 

In the Proposing Release, the 

Commission solicited comment on the 

collection of information requirements 

and the accuracy of the Commission’s 

statements.1101 The Commission 

received three comments noting the 

importance of confidentiality.1102 The 

Commission received one comment 

generally discussing the burden of Rule 

13n–11(f)(2), which is discussed 

below.1103

The Commission also received one 

comment recommending that ‘‘the 

Commission should generally seek to 

avoid any divergence from the CFTC’s 

and international regulators’ 

frameworks that is likely to give rise to 

undue costs or burdens.’’1104 The 

commenter believed that ‘‘divergence is 

generally warranted only if the rule 

adopted by the Commission is more 

flexible than those adopted by others 

(and therefore would not preclude the 

voluntary adoption of consistent 

practices by market participants).’’1105

None of the commenters specifically 

addressed the burden estimates in the 

Proposing Release related to the 

collection of information. The 

Commission has, however, revised the 

burden associated with completing 

Form SDR to reflect some additional 

material incorporated from Form SIP to 

accommodate SDRs’ registration as SIPs 

and to reflect a revision to the 

disclosure of business affiliations.1106

The Commission has also made a 

change to correct a calculation error.1107

Other than these changes, the 

Commission’s estimates remain 

unchanged from the Proposing Release. 

A. Summary of Collection of 

Information 

1. Registration Requirements, Form 

SDR, and Withdrawal From Registration 

Rule 13n–1(b) requires an SDR to 

apply for registration with the 

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14518 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1108See Regulation SBSR Adopting Release, 

supra note 13. 

1109See also Rule 13n–4(a)(5) (defining ‘‘direct 

electronic access’’). 

1110The Commission is not requiring SDRs to 

monitor, screen, and analyze SBS data maintained 

by the SDR at this time. See Section VI.D.2.c.iii of 

this release. 

1111 ‘‘Transaction data’’ is defined in Rule 13n– 

5(a)(3). 1112 ‘‘Position’’ is defined in Rule 13n–5(a)(2). 

Commission by filing Form SDR 

electronically in tagged data format in 

accordance with the instructions 

contained on the form. Under Rule 13n– 

1(e), each SDR is required to both 

designate and authorize on Form SDR 

an agent in the United States, other than 

a Commission member, official, or 

employee, to accept notice or service of 

process, pleadings, or other documents 

in any action or proceedings brought 

against the SDR to enforce the federal 

securities laws and the rules and 

regulations thereunder. Rule 13n–1(f) 

requires a non-resident SDR to (i) certify 

on Form SDR that the SDR can, as a 

matter of law, and will provide the 

Commission with prompt access to the 

SDR’s books and records and can, as a 

matter of law, and will submit to onsite 

inspection and examination by the 

Commission and (ii) provide an opinion 

of counsel that the SDR can, as a matter 

of law, provide the Commission with 

prompt access to the SDR’s books and 

records and can, as a matter of law, 

submit to onsite inspection and 

examination by the Commission. Under 

Rule 13n–3(a), in the event that an SDR 

succeeds to and continues the business 

of a registered SDR, the successor SDR 

may file an application for registration 

on Form SDR (and the predecessor SDR 

is required to file a withdrawal from 

registration with the Commission) 

within 30 days after the succession in 

order for the registration of the 

predecessor to be deemed to remain 

effective as the registration of the 

successor. Also, under Rule 13n–11(a), 

an SDR is required to identify on Form 

SDR a person who has been designated 

by the board to serve as a CCO of the 

SDR. 

Rule 13n–1(d) requires SDRs to file an 

amendment on Form SDR annually as 

well as when any information provided 

in items 1 through 17, 26, and 48 on 

Form SDR is or becomes inaccurate for 

any reason. Under Rule 13n–3(b), if an 

SDR succeeds to and continues the 

business of a registered SDR and the 

succession is based solely on a change 

in the predecessor’s date or state of 

incorporation, form of organization, or 

composition of a partnership, the 

successor SDR is permitted, within 30 

days after the succession, to amend the 

registration of the predecessor SDR on 

Form SDR to reflect these changes. 

Rule 13n–2(b) permits a registered 

SDR to withdraw from registration by 

filing a withdrawal from registration on 

Form SDR electronically in a tagged 

data format. The SDR must designate on 

Form SDR a person to serve as 

custodian of its books and records. 

When filing a withdrawal from 

registration on Form SDR, the SDR must 

update any inaccurate information. 

2. SDR Duties, Data Collection and 

Maintenance, and Direct Electronic 

Access 

Rule 13n–4(b) sets out a number of 

duties for SDRs. Under Rules 13n– 

4(b)(2) and (4), SDRs are required to 

accept data as prescribed in Regulation 

SBSR1108 and maintain that data, as 

required in Rule 13n–5, for each SBS 

reported to the SDRs. SDRs are required, 

pursuant to Rule 13n–4(b)(5), to provide 

direct electronic access to the 

Commission or its designees.1109 SDRs 

are required, pursuant to Rule 13n– 

4(b)(6), to provide information in such 

form and at such frequency as required 

by Regulation SBSR. The Commission 

anticipates that it will propose for 

public comment detailed specifications 

of acceptable formats and taxonomies 

for the purposes of direct electronic 

access. Until such time as the 

Commission adopts any format or 

taxonomy, SDRs may provide direct 

electronic access to the Commission to 

data in the form in which SDRs 

maintain such data. 

SDRs have an obligation under Rule 

13n–4(b)(3) to confirm, as prescribed in 

Rule 13n–5, with both counterparties 

the accuracy of the information 

submitted to the SDRs. Under Rule 13n– 

4(b)(7), at such time and in such manner 

as may be directed by the Commission, 

an SDR is required to establish 

automated systems for monitoring, 

screening, and analyzing SBS data.1110

Rule 13n–5 establishes rules regarding 

SDR data collection and maintenance. 

Rule 13n–5(b)(1) requires every SDR to 

(1) establish, maintain, and enforce 

written policies and procedures 

reasonably designed for the reporting of 

complete and accurate transaction data 

to the SDR;1111 (2) accept all transaction 

data reported to it in accordance with 

those policies and procedures; (3) 

accept all data provided to it regarding 

all SBSs in an asset class if the SDR 

accepts data on any SBS in that 

particular asset class; and (4) establish, 

maintain, and enforce written policies 

and procedures reasonably designed to 

satisfy itself that the transaction data 

that has been submitted to the SDR is 

complete and accurate, and clearly 

identifies the source for each trade side, 

and the pairing method (if any) for each 

transaction in order to identify the level 

of quality of the transaction data. An 

SDR is also required under Rule 13n– 

5(b)(1)(iv) to promptly record 

transaction data it receives. 

In addition, Rule 13n–5(b) requires 

every SDR to establish, maintain, and 

enforce written policies and procedures 

reasonably designed: (1) to calculate 

positions 1112 for all persons with open 

SBSs for which the SDR maintains 

records; (2) to ensure that the 

transaction data and positions that it 

maintains are complete and accurate; 

and (3) to prevent any provision in a 

valid SBS from being invalidated or 

modified through the procedures or 

operations of the SDR. 

Rule 13n–5(b)(4) requires that every 

SDR maintain the 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. This data is 

required to be maintained in a place and 

format that is readily accessible and 

usable to the Commission and other 

persons with authority to access or view 

the information. SDRs must also 

maintain this data in an electronic 

format that is non–rewritable and non– 

erasable. Under Rule 13n–5(b)(7), the 

SDR’s obligation to preserve, maintain, 

and make accessible the transaction data 

and historical positions extends to the 

periods required under Rule 13n–5 even 

if the SDR ceases to do business or to 

be registered pursuant to Exchange Act 

Section 13(n). Rule 13n–5(b)(8) requires 

every 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), 

including procedures for transferring 

the transaction data and positions to the 

Commission or its designee (including 

another registered SDR). 

Rule 13n–6 establishes rules regarding 

SDR automated systems. Rule 13n–6 

requires that every SDR, with respect to 

those systems that support or are 

integrally related to the performance of 

its activities, 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. 

3. Recordkeeping 

Rule 13n–7 requires every SDR to 

make and keep records, in addition to 

those required under Rules 13n–4(b)(4) 

and 13n–5. Specifically, every SDR is 

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1113See, e.g., Rules 13n–4(b)(1) and 13n–7(b)(3). 1114See 17 CFR 232.301. 

1115See Section VI.J.5.c of this release discussing 

Rule 407 of Regulation S–T. 

required, under Rule 13n–7(a)(1), to 

make and keep current a record for each 

office listing, by name or title, each 

person at that office who, without delay, 

can explain the types of records the SDR 

maintains at that office and the 

information contained in those records. 

Every SDR is also required, under Rule 

13n–7(a)(2), to make and keep current a 

record listing each officer, manager, or 

person performing similar functions of 

the SDR responsible for establishing 

policies and procedures that are 

reasonably designed to ensure 

compliance with the Exchange Act and 

the rules and regulations thereunder. 

Rule 13n–7(b) requires every SDR to 

keep and preserve at least one copy of 

all documents made or received by it in 

the course of its business as such. These 

records are required to be kept for a 

period of not less than five years, the 

first two years in a place that is 

immediately available to representatives 

of the Commission for inspection and 

examination. Upon the request of any 

representative of the Commission, 

pursuant to Rule 13n–7(b)(3), an SDR is 

required to furnish promptly to such 

representative copies of any documents 

required to be kept and preserved by the 

SDR pursuant to Rules 13n–7(a) and (b). 

Under Rule 13n–7(c), the SDR’s 

recordkeeping obligation is extended to 

the periods required under Rule 13n–7 

even if the SDR ceases to do business or 

to be registered pursuant to Exchange 

Act Section 13(n). 

SDRs are also required to make 

available the books and records required 

by Rules 13n–1 through 13n–11 upon 

request by Commission representatives 

for inspection and examination.1113

4. Reports 

Under Rule 13n–8, SDRs are required 

to promptly report to the Commission, 

in a form and manner acceptable to the 

Commission, such information as the 

Commission determines necessary or 

appropriate for the Commission to 

perform its duties. 

5. Disclosure 

Rule 13n–10 describes disclosures 

that SDRs are required to provide to a 

market participant before accepting any 

SBS data from that market participant or 

upon a market participant’s request. The 

information required in the disclosure 

document includes: (1) the SDR’s 

criteria for providing others with access 

to services offered and data maintained 

by the SDR, (2) the SDR’s criteria for 

those seeking to connect to or link with 

the SDR, (3) a description of the SDR’s 

policies and procedures regarding its 

safeguarding of data and operational 

reliability, as described in Rule 13n–6, 

(4) a description of the SDR’s policies 

and procedures reasonably designed to 

protect the privacy of any and all SBS 

transaction information that the SDR 

receives from an SBS dealer, 

counterparty, or any registered entity, as 

described in Rule 13n–9(b)(1), (5) a 

description of the SDR’s policies and 

procedures regarding its non– 

commercial and/or commercial use of 

the SBS transaction information that it 

receives from a market participant, any 

registered entity, or any other person, 

(6) a description of the SDR’s dispute 

resolution procedures involving market 

participants, as described in Rule 13n– 

5(b)(6), (7) a description of all the SDR’s 

services, including any ancillary 

services, (8) the SDR’s updated schedule 

of any dues; unbundled prices, rates, or 

other fees for all of its services, 

including any ancillary services; any 

discounts or rebates offered; and the 

criteria to benefit from such discounts 

or rebates, and (9) a description of the 

SDR’s governance arrangements. 

6. Chief Compliance Officer; 

Compliance Reports and Financial 

Reports 

Rule 13n–4(b)(11) requires an SDR 

and Rule 13n–11(a) requires the board 

of an SDR to designate a CCO to perform 

the duties identified in Rule 13n–11. 

Under Rules 13n–11(c)(6) and (7), the 

CCO is responsible for, among other 

things, establishing procedures for the 

remediation of noncompliance issues 

identified by the CCO and establishing 

and following appropriate procedures 

for the handling, management response, 

remediation, retesting, and closing of 

noncompliance issues. 

The CCO is also required under Rules 

13n–11(d), (e), and (g) to prepare and 

submit annual compliance reports to the 

SDR’s board for review before they are 

filed with the Commission. The annual 

compliance reports must contain, at a 

minimum, a description of the SDR’s 

enforcement of its policies and 

procedures, any material changes to the 

policies and procedures since the date 

of the preceding compliance report, any 

recommendation for material changes to 

the policies and procedures, and any 

material compliance matters identified 

since the date of the preceding 

compliance report. The compliance 

reports must be filed in a tagged data 

format in accordance with the 

instructions contained in the EDGAR 

Filer Manual.1114

Rules 13n–11(f) and (g) require that 

financial reports be prepared and filed 

annually with the Commission. These 

financial reports must, among other 

things, be prepared in conformity with 

GAAP for the most recent two fiscal 

years of the SDR, audited by a registered 

public accounting firm that is qualified 

and independent in accordance with 

Rule 2–01 of Regulation S–X, and 

audited in accordance with standards of 

the Public Company Accounting 

Oversight Board. The financial reports 

must be provided as an official filing in 

accordance with the EDGAR Filer 

Manual and include, as part of the 

official filing, an Interactive Data 

Financial Report filed in accordance 

with Rule 407 of Regulation S–T.1115

7. Other Provisions Relevant to the 

Collection of Information 

Rule 13n–4(c)(1) sets forth the 

requirements for SDRs related to market 

access to services and data. Among 

other things, an SDR must: (1) 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, as well as fair, open, and not 

unreasonably discriminatory 

participation by market participants, 

market infrastructures, venues from 

which data can be submitted to the SDR, 

and third party service providers that 

seek to connect to or link with the SDR; 

and (2) establish, maintain, and enforce 

written policies and procedures 

reasonably designed to review any 

prohibition or limitation of any person 

with respect to services offered or data 

maintained by the SDR and to grant that 

person access to those services or data 

if the person has been discriminated 

against unfairly. 

Rule 13n–4(c)(2)(iv) requires each 

SDR to establish, maintain, and enforce 

written policies and procedures 

reasonably designed to ensure that the 

SDR’s senior management and each 

member of the board or committee that 

has the authority to act on behalf of the 

board possesses 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. 

Rule 13n–4(c)(3) sets forth the 

conflicts of interest controls required of 

SDRs. In particular, SDRs must establish 

and enforce written policies and 

procedures reasonably designed to 

minimize conflicts of interest, including 

establishing, maintaining, and enforcing 

written policies and procedures 

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14520 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1116See Sections VI.D.2.c, VI.E, and VI.F.3 of this 

release discussing Rules 13n–4(b), 13n–5, and 13n– 

6, respectively. 

1117See Section VI.G of this release discussing 

Rule 13n–7. 

1118See Section VI.H.3 of this release discussing 

Rule 13n–8. 

1119See Section VI.I.2.c of this release discussing 

Rule 13n–10. 1120See Section VI.J of this release discussing 

Rule 13n–11. 

reasonably designed to identify and 

mitigate potential and existing conflicts 

of interest in the SDR’s decision–making 

process on an ongoing basis and written 

policies and procedures regarding the 

SDR’s non–commercial and commercial 

use of the SBS transaction information 

that it receives. 

Rule 13n–5(b)(6) requires SDRs 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. 

Rules 13n–4(b)(8) and 13n–9 relate to 

the privacy requirements for SDRs. Rule 

13n–4(b)(8) requires SDRs to maintain 

the privacy of any and all SBS 

transaction information that the SDR 

receives from a SBS dealer, 

counterparty, or any registered entity as 

prescribed in Rule 13n–9. Rule 13n– 

9(b)(1) requires each 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 from any SBS dealer, 

counterparty, or any registered entity. 

Rule 13n–9(b)(2) requires each SDR to 

establish and maintain safeguards, 

policies, and procedures reasonably 

designed to prevent the 

misappropriation or misuse of any 

confidential information received by the 

SDR, material, nonpublic information, 

and/or intellectual property. At a 

minimum, these policies and 

procedures must address limiting access 

to such information and intellectual 

property, standards pertaining to the 

trading by persons associated with the 

SDR for their personal benefit or the 

benefit of others, and adequate 

oversight. 

B. Use of Information 

1. Registration Requirements, Form 

SDR, and Withdrawal From Registration 

As discussed above, Rules 13n–1 and 

13n–3 generally require SDRs to register 

on Form SDR and make amendments on 

Form SDR when specified information 

on the form becomes inaccurate, as well 

as annually. The information collected 

in Form SDR is used to enhance the 

ability of the Commission to monitor 

SDRs and oversee their compliance with 

the federal securities laws and the rules 

and regulations thereunder, as well as 

understand their operations and 

organizational structure. The 

information will also be used to make 

determinations of whether to grant or 

institute proceedings to determine 

whether registration should be granted 

or denied. 

As discussed above, Rule 13n–2 

generally permits a registered SDR to 

withdraw from registration by filing 

Form SDR electronically in a tagged 

data format, designating a custodian of 

its books and records, and updating any 

inaccurate information contained in its 

most recently filed Form SDR. The 

information collected from an SDR 

withdrawing from registration is used 

by the Commission to monitor and 

oversee SDRs by ensuring that the 

Commission has an accurate record of 

registered SDRs and access to an SDR’s 

books and records after the SDR 

withdraws from registration. 

Also, under Rule 13n–11(a), an SDR is 

required to identify on Form SDR a 

person who has been designated by the 

board to serve as a CCO of the SDR. This 

information will help the Commission 

identify SDRs’ CCOs. 

2. SDR Duties, Data Collection and 

Maintenance, and Direct Electronic 

Access 

As discussed above, Rules 13n–4(b), 

13n–5, and 13n–6 specify the duties of 

SDRs, require SDRs to collect and 

maintain specific data and provide that 

data to certain entities.1116 The 

information that is collected under these 

provisions will help ensure an orderly 

and transparent SBS market as well as 

provide the Commission and other 

relevant authorities with tools to help 

oversee this market. 

3. Recordkeeping 

As discussed above, Rule 13n–7 

requires an SDR to make and keep books 

and records relating to its business 

(except for the transaction data and 

positions collected and maintained 

pursuant to Rule 13n–5) for a prescribed 

period.1117 The information collected 

under these provisions is necessary for 

Commission representatives to inspect 

and examine an SDR and to facilitate 

the Commission’s efforts to evaluate the 

SDR’s compliance with the federal 

securities laws and the rules and 

regulations thereunder. 

4. Reports 

As discussed above, Rule 13n–8 

requires SDRs to provide certain reports 

to the Commission.1118 The Commission 

will use the information collected under 

this provision to assist in its oversight 

of SDRs, which will help ensure an 

orderly and transparent SBS market. 

5. Disclosure 

As discussed above, Rule 13n–10 

requires SDRs to provide certain 

specific disclosures to a market 

participant before accepting any data 

from that market participant or upon a 

market participant’s request.1119 These 

disclosures will help market 

participants understand the potential 

risks and costs associated with using an 

SDR’s services, as well as the 

protections and services available to 

them. 

6. Chief Compliance Officer; 

Compliance Reports and Financial 

Reports 

As discussed above, Rule 13n–11 

requires an SDR’s CCO to establish 

certain procedures relating to the 

remediation of noncompliance issues as 

well as prepare and sign an annual 

compliance report, which is filed with 

the Commission.1120 Rule 13n–11 also 

requires that a financial report be 

prepared and filed with the Commission 

as an official filing in accordance with 

the EDGAR Filer Manual and include, 

as part of the official filing, an 

Interactive Data Financial Report filed 

in accordance with Rule 407 of 

Regulation S–T. The information 

collected under this rule will help 

ensure compliance by SDRs with the 

federal securities laws and the rules and 

regulations thereunder as well as assist 

the Commission in overseeing SDRs. 

7. Other Provisions Relevant to the 

Collection of Information 

As discussed above, Rule 13n–4(c)(1) 

requires SDRs to comply with certain 

requirements relating to market access 

to services and data, including 

establishment of certain policies and 

procedures and clearly stated objective 

criteria. Rule 13n–4(c)(2)(iv) requires 

SDRs to establish, maintain, and enforce 

policies and procedures regarding the 

skills and expertise, understanding of 

responsibilities, and sound judgment of 

the SDRs’ senior management and 

members of the board or committee that 

has the authority to act on behalf of the 

board. Rule 13n–4(c)(3) requires SDRs to 

establish and enforce written conflicts 

of interest policies and procedures; to 

establish, maintain, and enforce written 

policies and procedures reasonably 

designed to identify and mitigate 

conflicts of interest on an ongoing basis; 

and to establish, maintain, and enforce 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14521 

1121See Section VI.I.1.c of this release discussing 

Rule 13n–9. 

1122See Section VI.K of this release discussing 

Rule 13n–12 (‘‘SDR Exemption’’). 

1123As noted above, ‘‘SDR Rules’’ means Rules 

13n–1 to 13n-12. 

1124See Section VII of this release discussing 

comments related to the collection of information. 

1125 In one minor respect, the calculation of the 

burden on non-resident SDRs under Rule 13n–1(f) 

has been revised to correct a calculation error, 

which slightly reduces the burden hours incurred 

by non-resident SDRs. See infra note 1136 and the 

accompanying text. 

1126See Sections VI.A and VI.C.3 of this release 

discussing Rule 13n–1(b) and Rule 13n–3(a), 

respectively. 

1127See Proposing Release, 75 FR at 77348, supra 

note 2. 

1128See Proposing Release, 75 FR at 77348, supra 

note 2. 

1129The Commission calculated in 2011 that 

Form SIP would take 400 hours to complete. See 

Submission for OMB Review; Comment Request, 76 

FR 30984 (May 27, 2011) (outlining the 

Commission’s most recent calculations regarding 

the PRA burdens for Form SIP) (‘‘SIP PRA Filing’’). 

While the requirements of Form SIP and Form SDR 

are not identical, the Commission believes that 

there is sufficient similarity for PRA purposes that 

the burden will be roughly equivalent. 

written policies and procedures 

regarding their noncommercial and 

commercial use of transaction 

information. Rule 13n–5(b)(6) requires 

SDRs to establish procedures and 

provide facilities reasonably designed to 

effectively resolve disputes regarding 

the accuracy of the transaction data and 

positions that are recorded in the SDRs. 

Rules 13n–4(b)(8) and 13n–9 require 

SDRs to establish, maintain, and enforce 

policies, procedures, and safeguards 

regarding privacy and misappropriation 

or misuse of certain information.1121

The information collected pursuant to 

these provisions will help ensure a 

transparent and orderly SBS market, 

protect market participants’ privacy, 

and facilitate Commission oversight of 

SDRs. 

C. Respondents 

1. Registration Requirements, Form 

SDR, and Withdrawal From Registration 

As discussed above, the registration 

requirements of Rules 13n–1, 13n–2, 

13n–3, 13n–11(a), and Form SDR apply 

to every U.S. person performing the 

functions of an SDR and every non–U.S. 

person performing the functions of an 

SDR within the United States, absent an 

exemption.1122 Commission staff is 

aware of seven persons that have, to 

date, filed applications for registration 

with the CFTC as swap data 

repositories, three of which have 

withdrawn their applications and four 

of which are provisionally registered 

with the CFTC. It is reasonable to 

estimate that a similar number of 

persons provisionally registered with 

the CFTC may seek to register with the 

Commission as SDRs. Therefore, the 

Commission continues to estimate, for 

PRA purposes, that ten persons may 

register with the Commission as SDRs. 

The Commission also continues to 

estimate, for PRA purposes, that three of 

the ten respondents may be non– 

resident SDRs subject to the additional 

requirements of Rule 13n–1(f). The 

Commission received no comments on 

its estimate of the number of non– 

resident SDRs and continues to believe 

that this estimate is reasonable. 

Although non–resident SDRs may be 

able to take advantage of the SDR 

Exemption, the Commission 

conservatively estimates for PRA 

purposes that none of the three would 

rely on the exemption. 

2. SDR Duties, Data Collection and 

Maintenance, and Direct Electronic 

Access 

The duties, data collection and 

maintenance, and direct electronic 

access requirements of Rules 13n–4(b), 

13n–5, and 13n–6 as a general matter, 

apply to all SDRs, absent an exemption. 

Thus, for these provisions, the 

Commission estimates that there will be 

10 respondents. 

3. Recordkeeping 

The recordkeeping requirements of 

Rule 13n–7 apply to all SDRs, absent an 

exemption. Thus, for this rule, the 

Commission estimates that there will be 

10 respondents. 

4. Reports 

The report requirement of Rule 13n– 

8 applies to all SDRs, absent an 

exemption. Thus, for this rule, the 

Commission estimates that there will be 

10 respondents. 

5. Disclosure 

The disclosure requirements of Rule 

13n–10 apply to all SDRs, absent an 

exemption. Thus, for this rule, the 

Commission estimates that there will be 

10 respondents. 

6. Chief Compliance Officer; 

Compliance Reports and Financial 

Reports 

The provisions regarding CCOs set 

forth in Rule 13n–11 apply to all SDRs, 

absent an exemption. Thus, for this rule, 

the Commission estimates that there 

will be 10 respondents. 

7. Other Provisions Relevant to the 

Collection of Information 

The remaining requirements of the 

SDR Rules 1123 relevant to the collection 

of information, specifically Rules 13n– 

4(c), 13n–5(b)(6), and 13n–4(b)(8) and 

13n–9, apply to all SDRs, absent an 

exemption. Thus, for these provisions, 

the Commission estimates that there 

will be 10 respondents. 

As stated above, no commenters 

addressed any of these estimates.1124

D. Total Annual Reporting and 

Recordkeeping Burden 

The Commission received no 

comments on any of the estimates 

provided in the Proposing Release. The 

Commission has, however, revised the 

burden associated with completing 

Form SDR to reflect some additional 

material incorporated from Form SIP to 

accommodate SDRs’ registration as SIPs 

and to reflect a revision to the 

disclosure of business affiliations. The 

Commission has also made a change to 

correct a calculation error.1125 Other 

than these changes, the Commission’s 

estimates remain unchanged from the 

Proposing Release. 

1. Registration Requirements, Form 

SDR, and Withdrawal From Registration 

Rule 13n–1(b) and Rule 13n–3(a) 

(which relates to successor SDRs as 

described above) require SDRs to apply 

for registration using Form SDR and file 

the form electronically in tagged data 

format with the Commission in 

accordance with the instructions to the 

form.1126 Further, Rule 13n–1(e) 

requires SDRs to designate an agent for 

service of process on Form SDR, and 

Rule 13n–11(a) requires SDRs to 

identify their CCOs on Form SDR. For 

purposes of the PRA, the Commission 

initially estimated that it would take an 

SDR approximately 400 hours to 

complete the initial Form SDR with the 

information required, including all 

exhibits to Form SDR.1127 The 

Commission based this estimate on the 

number of hours necessary to complete 

Form SIP because Form SDR was based 

on Form SIP and incorporated many of 

the provisions of Form SIP.1128 The 

Commission continues to estimate, 

based on Form SIP, that it will initially 

take an SDR 400 hours to complete the 

proposed portions of Form SDR with the 

information required, including all 

exhibits thereto,1129 and now estimates 

that it will take an SDR an additional 81 

hours to complete Form SDR to reflect 

the additional burden hours discussed 

below. 

As noted above, the Commission has 

revised Form SDR to incorporate certain 

provisions from Form SIP to allow SDRs 

to register as both SDRs and SIPs using 

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14522 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1130See Section VI.A.1.c of this release discussing 

Form SDR. See also supra note 220 discussing 

changes to proposed Form SDR to incorporate the 

additional information requested on Form SIP of 

applicants for registration as a SIP. 

1131See Regulation SBSR Proposing Release, 75 

FR at 75260, supra note 8 (‘‘Any entity that is 

required to complete proposed Form SDR also 

would have to complete Form SIP. Because of the 

substantial overlap in the forms, much of the 

burden for completing Form SIP would be 

subsumed in completing proposed Form SDR. 

Therefore, the Commission preliminarily estimates 

that, having completed a proposed Form SDR, an 

entity would need only one-quarter of the time to 

then complete Form SIP, or 100 hours (specifically, 

37.5 hours of legal compliance work and 62.5 hours 

of clerical compliance work).’’). 

1132See Section VI.A.1.c of this release discussing 

Form SDR. 

1133See Section VII.C.1 of this release discussing 

respondents to the registration requirements and 

Form SDR. 

1134The Commission derived its estimate from 

the following: (400 hours for the burden of Form 

SDR, as proposed) + (80 hours for the burden of 

responding to additional provisions incorporated 

from Form SIP) + (1 hour for the burden of 

responding to the revised disclosure of business 

affiliations) × 10 SDRs = 4810. 

1135See Proposing Release, 75 FR at 77348, supra 

note 2. 

1136Foreign Bank Exemption from the Insider 

Lending Prohibition of Exchange Act Section 13(k), 

Exchange Act Release No. 49616 (Apr. 26, 2004), 69 

FR 24016, 24022 (Apr. 30, 2004) (outlining the 

Commission’s calculations regarding the PRA 

burdens resulting from having to provide a legal 

opinion and additional disclosure required by 

Instruction 3 to Item 7.B to Form 20–F). The 

Commission calculates that the certification and 

opinion of counsel would result in an additional 

burden to non-resident SDRs of 3.25 hours, of 

which approximately 1 hour would be incurred by 

the non-resident SDRs themselves and 2.25 hours 

would be incurred by outside legal counsel, which 

would cost approximately $900 ($900 = 2.25 hours 

(portion of estimated burden incurred by outside 

legal counsel) × $400 (hourly rate for an outside 

attorney)). The Commission continues to estimate 

the hourly rate for an outside attorney at $400 per 

hour, based on industry sources. See Registration of 

Municipal Advisors, Exchange Act Release No. 

70462 (Sep. 20, 2013), 78 FR 67468, 67593 n.1538 

(Nov. 12, 2013) (estimating the cost of an outside 

attorney to be $400 per hour). In the Proposing 

Release, the Commission mistakenly estimated the 

burden to be 3 hours incurred by each non-resident 

SDR (in addition to $900 incurred by each SDR in 

connection with hiring outside legal counsel). 

Proposing Release, 75 FR at 77348, supra note 2. 

1137See Section VII.C.1 of this release discussing 

respondents to the registration requirements and 

Form SDR. The base burden of 4,000 hours includes 

resident and non-resident SDRs. The 3 hour and 

$2700 figures are the additional costs as a result of 

Rule 13n–1(f) for non-resident SDRs not already 

accounted for in the 4,000 hour figure. 

1138See Section VI.C.3 of this release discussing 

Rule 13n–3(b). 

1139When estimating the burden associated with 

Form SIP, the Commission did not separately 

estimate the burden associated with amendments 

on Form SIP because the Commission believed that 

the annual burden of Form SIP encompassed the 

burden of amending Form SIP. SIP PRA Filing, 76 

FR 30984, supra note 1129 (‘‘This annual reporting 

and recordkeeping burden does not include the 

burden hours or cost of amending a Form SIP 

because the Commission has already overstated the 

compliance burdens by assuming that the 

Commission will receive one initial registration 

pursuant to Rule 609 on Form SIP a year.’’) 

Although the Commission is basing its estimate of 

the burden of Form SDR on its estimate of the 

burden of Form SIP, the Commission is separately 

estimating the burden of amendments on Form 

SDR. 

1140When amendments to Form ADV were 

proposed in 2008, the Commission estimated the 

hour burden for amendments to be roughly 3% of 

the initial burden. Amendments to Form ADV, 

Investment Advisers Act Release No. 2711 (Mar. 3, 

2008), 73 FR 13958, 13979 (Mar. 14, 2008). In that 

proposal, the initial burden was calculated to be 

22.25 hours per respondent and 0.75 hours per 

respondent for amendments. The Commission 

believes that a similar ratio will apply to filers of 

Form SDR because filers of Form ADV, like filers 

of Form SDR, are required to file amendments 

annually as well as when certain information on 

Form ADV becomes inaccurate. See Form ADV: 

General Instructions, available at http://

www.sec.gov/about/forms/formadvinstructions.pdf. Thus, the Commission estimates 

that the annual burden of filing one amendment on 

Form SDR will be 3% of the 400 hour initial 

burden, or 12 hours. 

Form SDR.1130 The Commission 

believes that the burden of filing Form 

SDR should be adjusted to reflect these 

revisions. Because of the overlap 

between Form SDR and Form SIP, the 

Commission initially estimated that 

SDRs would need only one-quarter of 

the time to complete Form SIP, or 100 

hours, when registering with the 

Commission as SIPs separately on Form 

SIP.1131 The Commission believes that 

this estimate of the burden of an SDR to 

register as a SIP using Form SDR should 

be reduced to 80 hours because (1) SDRs 

will not have to process and file two 

separate forms; (2) SDRs will not have 

to provide duplicate information in two 

forms; and (3) SDRs will not have to 

prepare and file duplicate exhibits to 

two forms. The Commission believes 

that 80 hours represents a reasonable 

estimate of the additional burden hours 

that SDRs will incur in responding to 

the provisions incorporated from Form 

SIP into Form SDR. 

Moreover, as discussed above, the 

Commission is revising Form SDR from 

the proposal by requiring disclosure of 

business affiliations in the ‘‘derivatives 

industry’’ rather than the ‘‘OTC 

derivatives industry’’ for an applicant’s 

designated CCO, officers, directors, 

governors, and persons performing 

functions similar to any of the foregoing, 

and the members of all standing 

committees.1132 The Commission 

believes that SDRs will incur an 

additional burden in replying to this 

disclosure, which may require 

disclosure of more business affiliations 

than would have been disclosed under 

Form SDR, as proposed. The 

Commission believes that 1 hour 

represents a reasonable estimate of the 

additional burden hours that each SDR 

will incur in responding to the revised 

disclosure requirement. 

As noted above, the Commission 

estimates that 10 respondents will be 

subject to this burden.1133 Accordingly, 

the Commission estimates that the onetime initial registration burden for all 

SDRs is approximately 4810 burden 

hours.1134 The Commission believes 

that SDRs will, as a general matter, 

prepare Form SDR internally, except as 

otherwise discussed below. In the 

Proposing Release, the Commission 

solicited comments as to whether SDRs 

would outsource this requirement, but 

the Commission did not receive any 

comments in this regard.1135

Under Rule 13n–1(f), a non-resident 

SDR must (i) certify that the SDR can, 

as a matter of law, and will provide the 

Commission with prompt access to the 

SDR’s books and records and can, as a 

matter of law, and will submit to onsite 

inspection and examination by the 

Commission and (ii) provide an opinion 

of counsel that the SDR can, as a matter 

of law, provide the Commission with 

access to the books and records of such 

SDR and can, as a matter of law, submit 

to onsite inspection and examination by 

the Commission. This creates an 

additional burden for non-resident 

SDRs. The Commission estimates, based 

on similar requirements of Form 20–F, 

that this additional burden will add 1 

hour and $900 in outside legal costs per 

respondent.1136 As stated above, the 

Commission believes that there will be 

three respondents to this collection, for 

a total additional burden of 3 hours and 

$2,700 for non-resident SDRs to comply 

with Rule 13n–1(f).1137

SDRs are also required to amend Form 

SDR pursuant to Rule 13n–1(d) annually 

as well as when information in certain 

items is or becomes inaccurate. 

Amendments are also permitted in 

certain situations involving successor 

SDRs pursuant to Rule 13n–3(b).1138

The Commission believes that these 

amendments represent the ongoing 

annual burdens of Form SDR and Rules 

13n–1(d) and 13n–3(b).1139 The 

Commission estimates that the ongoing 

annualized burden for complying with 

these registration amendment 

requirements will be approximately 12 

burden hours for each SDR per 

amendment1140 and approximately 120 

burden hours for all SDRs per 

amendment. Rule 13n–1(d) requires one 

annual amendment on Form SDR as 

well as interim amendments on Form 

SDR when certain reported information 

therein is or becomes inaccurate or, 

under Rule 13n–3(b), in certain 

circumstances involving successor 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14523 

1141See Sections VI.A.4.c and VI.C.3 of this 

release discussing Rule 13n–1(d) and Rule 13n– 

3(b), respectively. 

1142Amendments to Form ADV, Investment 

Advisers Act Release No. 3060 (July 28, 2010), 75 

FR 49234, 49257 (Aug. 12, 2010). Although this 

information is based upon investment adviser 

statistics, the Commission believes that, for PRA 

purposes, the differences between investment 

advisers and SDRs are minimal. 

1143See Form ADV: General Instructions, 

available at http://www.sec.gov/about/forms/

formadv-instructions.pdf. 

1144The 36 hour figure is the result of the 

estimated burden hour per SDR per amendment 

(12) times the estimated number of amendments per 

year (3). The 360 hour figure is the result of the 

estimated burden per SDR (36) times the number of 

SDRs (10). 

1145See Sections VI.D.2.c, VI.E, and VI.F.3 of this 

release discussing Rules 13n–4(b)(2) and (4), 13n– 

5, and 13n–6, respectively. 1146This data is required to be maintained in a 

place and format that is readily accessible and 

usable to the Commission and other persons with 

authority to access or view the information and is 

also required to be maintained in an electronic 

format that is non-rewritable and non-erasable. 

1147Rule 13n–5(b)(7). 

1148Rule 13n–5(b)(8). 

1149This figure is the result of an estimated $400 

an hour cost for outside legal services (as discussed 

in supra note 1136) times 50 hours of outside legal 

consulting per policy and procedure, times 5 

policies and procedures. 

1150The 10,500 hour figure is the result of the 

number of hours per policy and procedure (210) 

times the number of policies and procedures 

required by these provisions (5), times the number 

of respondents (10). The $1,000,000 figure is the 

result of the outside dollar cost per respondent 

($100,000) times the number of respondents (10). 

1151Regulation NMS, Exchange Act Release No. 

51808 (June 9, 2005), 70 FR 37496, 37577 (June 29, 

2005) (‘‘Regulation NMS Adopting Release’’). The 

Commission based these estimates on those for nonSRO trading centers rather than for SRO trading 

centers because the Commission believes that, for 

PRA purposes, non-SRO trading centers’ burdens 

are more like those that SDRs will face under the 

SDR Rules. Like non-SRO trading centers, SDRs are 

not SROs and handle data regarding trades. 

1152The 3,000 hour figure is the result of the 

estimated average hourly burden to maintain each 

policy and procedure (60), times the total number 

of policies and procedures required under this 

requirement (5), times the total number of SDRs 

(10). 

SDRs, as discussed above.1141 When 

Form ADV was amended in 2010, the 

Commission estimated that there were 2 

amendments per year for that form.1142

The Commission believes that 2 

amendments will be a reasonable 

estimate for the number of amendments 

per year to correct inaccurate 

information or in situations involving 

successor SDRs because amendments on 

Form ADV, like amendments on Form 

SDR, are required annually as well as 

when certain information on Form ADV 

becomes inaccurate.1143 Thus, the 

Commission estimates that respondents 

will be required to file on average a total 

of 3 amendments per year, 2 

amendments plus the required annual 

amendment. Therefore, the Commission 

estimates that each respondent will 

have an average annual burden of 36 

hours for a total estimated average 

annual burden of 360 hours.1144 The 

Commission believes that SDRs will 

conduct this work internally. 

SDRs may withdraw from registration 

by filing a withdrawal from registration 

on Form SDR electronically in a tagged 

data format. An SDR withdrawing from 

registration must designate on Form 

SDR a person to serve as the custodian 

of the SDR’s books and records. An SDR 

must also update any inaccurate 

information. The Commission believes 

that an SDR’s withdrawal from 

registration on Form SDR will be 

substantially similar to its most recently 

filed Form SDR. The Form SDR being 

filed in this circumstance will therefore 

already be substantially complete and as 

a result, the burden will not be as great 

as the burden of filing an application for 

registration on Form SDR. Rather, the 

Commission believes that the burden of 

filing a withdrawal from registration on 

Form SDR will be akin to filing an 

amendment on Form SDR. Thus, the 

Commission estimates that the one-time 

burden of filing a Form SDR to 

withdraw from registration will be 

approximately 12 burden hours for each 

SDR and approximately 120 burden 

hours for all SDRs. 

2. SDR Duties, Data Collection and 

Maintenance, and Direct Electronic 

Access 

As discussed above, Rules 13n–4(b)(2) 

and (4), and 13n–5 require SDRs to 

accept and maintain data, including 

transaction data, received from third 

parties and to calculate and maintain 

positions.1145 Rule 13n–4(b)(5) requires 

SDRs to provide direct electronic access 

to the Commission or its designees. 

Rules 13n–4(b)(3) and 13n–5(b)(1)(iii) 

require SDRs to confirm the accuracy of 

the data submitted and to establish, 

maintain, and enforce written policies 

and procedures reasonably designed to 

satisfy themselves that the transaction 

data that has been submitted to the 

SDRs is complete and accurate. In 

addition, Rule 13n–5(b)(4) requires 

SDRs to maintain the 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.1146

This obligation would continue even if 

an SDR ceases to be registered or ceases 

doing business.1147 SDRs are required to 

make and keep current a plan to ensure 

compliance with this requirement.1148

The Commission estimates that the 

average one-time start-up burden per 

SDR of establishing systems compliant 

with all of the requirements described 

in this section, including the SBS data 

maintenance requirements of Rules 

13n–5(b)(4), (7), and (8), will be 42,000 

hours and $10 million in information 

technology costs. Based on the expected 

number of respondents, the Commission 

estimates a total start-up cost of 420,000 

hours and $100 million in information 

technology costs. The Commission 

further estimates that the average 

ongoing annual costs of these systems to 

be 25,200 hours and $6 million per 

respondent or a total of 252,000 hours 

and $60 million for a total ongoing 

annual burden. 

Each SDR is also required to establish, 

maintain, and enforce written policies 

and procedures, reasonably designed: 

(1) Under Rule 13n–5(b)(1), for the 

reporting of complete and accurate 

transaction data to the SDR and to 

satisfy itself that such information is 

complete and accurate; (2) under Rule 

13n–5(b)(2), to calculate positions for all 

persons with open SBSs for which the 

SDR maintains records; (3) under Rule 

13n–5(b)(3), to ensure transaction data 

and positions that the SDR maintains 

are complete and accurate; (4) under 

Rule 13n–5(b)(5), to prevent any 

provision in a valid SBS from being 

invalidated or modified through the 

procedures or operations of the SDR; 

and (5) under Rule 13n–6, with respect 

to those systems that support or are 

integrally related to the performance of 

the SDR’s activities, to ensure that those 

systems provide adequate levels of 

capacity, integrity, resiliency, 

availability, and security. While these 

policies and procedures will vary in 

exact cost, the Commission estimates 

that they will require an average of 210 

hours per respondent per policy and 

procedure to prepare and implement. 

The Commission further estimates that 

these policies and procedures will 

require a total of $100,000 for outside 

legal costs per SDR.1149 In sum, the 

Commission estimates the initial burden 

for all respondents to be 10,500 hours 

and $1,000,000 for outside legal 

costs.1150 The Commission based these 

estimates upon those estimates the 

Commission used with regards to 

establishing policies and procedures 

regarding Regulation NMS.1151 Once 

these policies and procedures are 

established, the Commission estimates 

that it will take, on average, 60 hours 

annually to maintain each of these 

policies and procedures per respondent, 

with a total estimated average annual 

burden of 3,000 hours for all 

respondents.1152 The Commission 

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14524 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1153See Section VI.F.3 of this release discussing 

Rule 13n–6. 

1154See supra note 1151 discussing Regulation 

NMS. 

1155See Section VI.F.3 of this release discussing 

Rule 13n–6. 

1156See Books and Records Requirements for 

Brokers and Dealers Under the Securities Exchange 

Act of 1934, Exchange Act Release No. 44992 (Oct. 

26, 2001), 66 FR 55818, 55836 (Nov. 2, 2001) 

(regarding the collection of information pursuant to 

Rules 17a–3(a)(21) and (22)). 

1157This obligation will continue even if an SDR 

withdraws from registration or ceases doing 

business. See Rule 13n–7(c). 

1158See Section VI.G.2.c of this release discussing 

Rule 13n–7(b). 

1159See Amendments to Rules for Nationally 

Recognized Statistical Rating Organizations, 

Exchange Act Release No. 59342 (Feb. 2, 2009), 74 

FR 6456, 6472 (Feb. 9, 2009). 

1160See Section VI.F.3 of this release discussing 

Rule 13n–6. 

1161See Section VI.I.2.c of this release discussing 

Rule 13n–10. 

1162See Amendments to Form ADV, Investment 

Advisers Act Release No. 3060 (July 28, 2010), 75 

FR 49234, 49255–49256 (Aug. 12, 2010) (finding 

that average initial annual burden associated with 

Form ADV for each medium-sized investment 

adviser, meaning an adviser with between 11 and 

1,000 employees, to be 97.5 hours). 

believes that SDRs will conduct this 

maintenance work internally. 

As discussed above, the Commission 

is not adopting the more specific 

requirements of proposed Rule 13n– 

6(b)(1), but is instead adopting the core 

policies and procedures 

requirement.1153 The Commission 

continues to believe, however, that the 

210 hour per respondent estimate for 

adopting policies and procedures is 

applicable because Rule 13n–6 

continues to require SDRs to adopt 

policies and procedures. The 

Commission believes that the 210 hour 

estimate is a reasonable estimate 

because the estimate is used in other 

contexts to estimate the burdens of 

creating policies and procedures and the 

Commission expects that the policies 

and procedures required by Rule 13n– 

6 would result in a comparable burden 

to SDRs.1154 Also as discussed above, 

the Commission is not adopting 

proposed Rules 13n–6(b)(3) and (4).1155

Thus, the Commission is no longer 

including the estimated burden of those 

proposed rules in the overall burdens 

discussed in this release. 

3. Recordkeeping 

Every SDR is required, under Rule 

13n–7(a)(1), to make and keep current a 

record for each office listing, by name or 

title, each person who, without delay, 

can explain the types of records the SDR 

maintains at that office. Also, under 

Rule 13n–7(a)(2), every SDR is required 

to make and keep current a record 

listing officers, managers, or persons 

performing similar functions with 

responsibility for establishing the 

policies and procedures of the SDR that 

are reasonably designed to ensure 

compliance with the Exchange Act and 

the rules and regulations thereunder. 

The Commission estimates that these 

records will create an initial burden, at 

a maximum, of 1 hour per respondent, 

for a total initial burden of 10 hours. 

The Commission estimates that the 

ongoing annual burden will be 0.17 

hours (10 minutes) per respondent to 

keep these records current and to store 

these documents based on the 

Commission’s estimates for similar 

requirements for broker-dealers.1156

This results in a total ongoing annual 

burden of 1.7 hours. The Commission 

believes that SDRs will conduct this 

work internally. 

Rule 13n–7(b) requires each SDR to 

keep and preserve at least one copy of 

all documents made or received by it in 

the course of its business as such, other 

than the transaction data and positions 

collected and maintained pursuant to 

Rule 13n–5. These records are required 

to be kept for a period of not less than 

five years, the first two years in a place 

that is immediately available to 

representatives of the Commission for 

inspection and examination.1157 Upon 

the request of any representative of the 

Commission, an SDR is required to 

furnish promptly documents required to 

be kept and preserved by it pursuant to 

Rules 13n–7(a) or (b) to such a 

representative. As discussed above, Rule 

13n–7(b) is intended to set forth the 

recordkeeping obligations of SDRs and 

thereby facilitate implementation of the 

inspection and examination of SDRs by 

representatives of the Commission.1158

Based on the Commission’s experience 

with recordkeeping costs and consistent 

with prior burden estimates for similar 

provisions,1159 the Commission 

estimates that this requirement will 

create an initial burden of 345 hours 

and $1800 in information technology 

costs per respondent, for a total initial 

burden of 3450 hours and $18,000 for 

all respondents. The Commission 

further estimates that the ongoing 

annual burden will be 279 hours per 

respondent and a total ongoing annual 

burden of 2790 hours for all 

respondents. 

4. Reports 

Under Rule 13n–8, SDRs are required 

to report promptly to the Commission, 

in a form and manner acceptable to the 

Commission, such information as the 

Commission determines necessary or 

appropriate for the Commission to 

perform the duties of the Commission. 

For PRA purposes only, the Commission 

estimates that it will request these 

reports a maximum of once per year, per 

respondent. For PRA purposes only, the 

Commission estimates that these reports 

will be limited to information that will 

have been already compiled under the 

SDR Rules and thus require only 1 hour 

per response to compile and transmit. 

Thus, the Commission estimates, for 

PRA purposes only, that the total annual 

burden for these reports to be 10 hours 

for all respondents. The Commission 

believes that SDRs will conduct this 

work internally. 

As discussed above, the Commission 

is not adopting proposed Rule 13n– 

6(b)(2).1160 Thus, the Commission is no 

longer including the estimated burden 

of that proposed rule in the overall 

burdens discussed in this release. 

5. Disclosure 

As discussed above, pursuant to Rule 

13n–10, SDRs are required to provide 

certain disclosures to certain market 

participants.1161 The Commission 

estimates that the average one-time 

start-up burden per SDR of preparing 

this disclosure document is 97.5 hours 

and $4,400 of external legal costs and 

$5,000 of external compliance 

consulting costs, resulting in a total 

initial burden of 975 hours and $94,000 

for all respondents. This estimate 

reflects the Commission’s experience 

with and burden estimates for similar 

disclosure document requirements 

applied to investment advisers with 

1000 or fewer employees and as a result 

of its discussions with market 

participants.1162 Because the 

Commission expects that SDRs will be 

able to provide this disclosure 

document electronically, the 

Commission expects that this 

requirement will result in an average 

annual burden, after the initial creation 

of the disclosure document, of 1 hour 

per respondent, with a total annual 

burden of 10 hours for all respondents. 

The Commission believes that SDRs will 

conduct this ongoing annual work 

internally. 

6. Chief Compliance Officer; 

Compliance Reports and Financial 

Reports 

Under Rules 13n–11(c)(6) and (7), an 

SDR’s CCO is responsible for, among 

other things, establishing procedures for 

the remediation of noncompliance 

issues identified by the CCO, and 

establishing and following appropriate 

procedures for the handling, 

management response, remediation, 

retesting, and closing of noncompliance 

issues. Based on the Commission’s 

estimates regarding Regulation 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14525 

1163See Regulation NMS Adopting Release, supra 

note 1151. 

1164The 420 hour figure is the result of the 

estimated average burden hours to create one policy 

and procedure (210) times the 2 policies and 

procedures required by these provisions. The 120 

hour figure is the result of the estimated average 

burden hours to administer one policy and 

procedure (60) times the 2 policies and procedures 

required by these provisions. The 4200 hour figure 

is the result of the estimated average burden hours 

per respondent to create these policies and 

procedures (420) times the number of SDRs (10). 

The 1200 hour figure is the result of the estimated 

average burden hours per respondent to maintain 

these policies and procedures (120) times the 

number of SDRs (10). 

1165 $400,000 figure is the result of an estimated 

$400 an hour cost for outside legal services (as 

discussed in supra note 1136) times 50 hours per 

policy and procedure, times 2 policies and 

procedures, times the number of SDRs (10). 

1166See Compliance Programs of Investment 

Companies and Investment Advisers, Investment 

Company Act Release No. 25925 (Feb. 5, 2003), 68 

FR 7038, 7047 (Feb. 11, 2003). 

1167 DTCC 5, supra note 19. 

1168 DTCC 5, supra note 19. 

1169 DTCC 5, supra note 19. 

1170See Section VIII.D.6.c of this release 

discussing economic alternatives to Rule 13n– 

11(f)(2). 

1171See 17 CFR 232.301. 

1172See Section VI.J.5.c of this release discussing 

Rule 407 of Regulation S–T. 

1173These numbers are based on 75% of the 210 

hour and $20,000 (50 hours of outside legal costs 

at $400 an hour) estimates to create one set of 

written policies and procedures under Regulation 

NMS for non-SRO trading centers. See Regulation 

NMS Adopting Release, supra note 1151. This is 

based on an estimate that this requirement will 

create 75% of the burden of creating written 

policies and procedures under Regulation NMS. 

The Commission believes that the 75% assumption 

is appropriate because the Commission believes 

that Rule 13n–4(c)(1)(iii) imposes a lesser burden 

than the written policies and procedures required 

by other SDR Rules because it requires only written 

criteria and not full policies and procedures. 

NMS,1163 it estimates that on average 

these two provisions will require 420 

hours to implement and 120 hours to 

administer per year per respondent, for 

a total burden of 4200 hours initially 

and, on average, 1200 hours annually 

for all respondents.1164 Also based on 

the estimates regarding Regulation 

NMS, the Commission estimates that 

SDRs will incur a total of $40,000 in 

initial outside legal costs to establish the 

required procedures as a result of this 

burden per respondent, for a total 

outside cost burden of $400,000 for all 

respondents.1165

A CCO is also required under Rules 

13n–11(d), (e), and (g) to prepare and 

submit annual compliance reports to the 

SDR’s board for review before the 

annual compliance reports are filed 

with the Commission. Based upon the 

Commission’s estimates for similar 

annual reviews by CCOs of investment 

companies,1166 the Commission 

estimates that these reports will require 

on average 5 hours per respondent per 

year. Thus, the Commission estimates a 

total annual burden of 50 hours for all 

respondents. The Commission believes 

that these costs will be internal costs. 

Rules 13n–11(f) and (g) require that 

financial reports be prepared and filed 

with the Commission as an official filing 

in accordance with the EDGAR Filer 

Manual and include, as part of the 

official filing, an Interactive Data 

Financial Report filed in accordance 

with Rule 407 of Regulation S–T. The 

Commission estimates, based on its 

experience with entities of similar size 

to the respondents to this collection, 

that preparing and filing the financial 

reports will generally require on average 

500 hours per respondent and cost 

$500,000 for independent public 

accounting services. Thus, the 

Commission estimates a total annual 

burden of 5000 hours and $5,000,000 for 

all respondents. 

One commenter suggested that ‘‘[i]n 

an attempt to harmonize final [SDR] 

rules with the CFTC’s final [swap data 

repository] rules, the Commission 

should consider removing Proposed 

Rule 240.13n–11(f)(2)’s requirement that 

each financial report filed with a 

compliance report is audited in 

accordance with the standards of the 

Public Company Accounting Oversight 

Board by a registered public accounting 

firm that is qualified and independent 

unless the [SDR] is under a separate 

obligation to provide financial 

statements.’’ 1167 The commenter 

believed that ‘‘[t]his requirement 

imposes an additional burden for an 

[SDR] and is not justified in relation to 

the risks that an [SDR] would pose to its 

members’’ and that ‘‘[u]nlike clearing 

agencies or other entities supervised by 

the Commission, an [SDR] does not have 

financial exposure to its users or 

participants that would justify the 

imposition of this requirement.’’ 1168

The commenter suggested that the 

Commission consider ‘‘adopting 

[instead] the CFTC’s approach in its 

final [swap data repository] rules, which 

require [a swap data repository’s] 

financial statements be prepared in 

conformity with generally accepted 

accounting principles. . . .’’ 1169

As discussed further below, although 

the Commission understands that SDRs 

will incur costs in hiring and retaining 

qualified public accounting firms, the 

Commission believes that obtaining 

audited financial reports from SDRs is 

important given the significant role the 

Commission believes that SDRs will 

play in the SBS market.1170 Given this 

significant role, the Commission 

believes that it is important to obtain 

audited financial reports from SDRs in 

order to determine whether or not they 

have sufficient financial resources to 

continue operations. While the 

Commission recognizes that Rule 13n– 

11(f)(2) may, in some cases, be more 

costly than the CFTC’s requirement of 

quarterly unaudited financial 

statements, the Commission believes 

that the additional burden, where it 

exists, is justified by the benefits of 

requiring audited financial statements. 

The compliance reports and financial 

reports filed with the Commission are 

required to be filed in a tagged data 

format. The compliance reports must be 

filed in a tagged data format in 

accordance with the instructions 

contained in the EDGAR Filer 

Manual,1171 and the financial reports 

must be provided as an official filing in 

accordance with the EDGAR Filer 

Manual and include, as part of the 

official filing, an Interactive Data 

Financial Report filed in accordance 

with Rule 407 of Regulation S–T.1172

These requirements will create an 

additional burden on respondents 

beyond the preparation of these reports. 

The Commission estimates, based on its 

experience with other tagged data 

initiatives, that these requirements will 

add a burden of an average of 54 hours 

and $22,772 in outside software and 

other costs per respondent per year, 

creating an estimated total annual 

burden of 540 hours and $227,720 for 

all respondents to tag the data for both 

the compliance reports and financial 

reports that are required under Rule 

13n–11. 

7. Other Provisions Relevant to the 

Collection of Information 

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 as well 

as fair, open, and not unreasonably 

discriminatory participation by market 

participants and others that seek to 

connect to or link with the SDRs. For 

PRA purposes only, the Commission 

believes that this should be a lesser 

burden than for written policies and 

procedures because such criteria may 

not need to be as detailed or intricate as 

written policies and procedures. Thus, 

the Commission estimates that this 

provision will require 157.5 hours to 

implement, with an associated outside 

legal cost of $15,000 per respondent.1173

This results in an estimate of an initial 

burden for this requirement for all 

respondents of 1575 hours and 

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14526 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1174These numbers are 75% of the 60 hour 

estimates of the ongoing burden regarding one set 

of written policies and procedures under Regulation 

NMS for non-SRO trading centers. See Regulation 

NMS Adopting Release, supra note 1151. This is 

based on an estimate that this requirement will 

create 75% of the ongoing burden of written 

policies and procedures under Regulation NMS. 

The Commission believes that the 75% assumption 

is appropriate because the Commission believes 

that Rule 13n–4(c)(1)(iii) imposes a lesser burden 

than the written policies and procedures required 

by other SDR Rules because it requires only written 

criteria and not full policies and procedures. 

1175See Regulation NMS Adopting Release, supra 

note 1151. These estimates are based on 100% of 

the 210 hour estimate to create one set of written 

policies and procedures and 100% of the 60 hour 

estimate of the ongoing burden regarding one set of 

written policies and procedures under Regulation 

NMS for non-SRO trading centers. The Commission 

believes that the 100% assumption is appropriate 

because Rule 13n–4(c)(1)(iv) requires written 

policies and procedures. 

1176This figure is the result of an estimated $400 

an hour cost for outside legal services (as discussed 

in supra note 1136) times 50 hours per policy and 

procedure, times 1 policy and procedure, times the 

number of SDRs (10). The Commission believes that 

SDRs will use outside counsel to initially create 

these policies and procedures because SDRs just 

beginning operations may not have sufficient inhouse legal staff. 

1177See Regulation NMS Adopting Release, supra 

note 1151. 

1178This figure is the result of an estimated $400 

an hour cost for outside legal services (as noted in 

supra note 1136) times 50 hours per policy and 

procedure, times 1 policy and procedure, times the 

number of SDRs (10). 

1179See Regulation NMS Adopting Release, supra 

note 1151. 

1180The 420 hour figure is the result of the 

estimated average burden hours to create one policy 

and procedure (210) times the 2 policies and 

procedures required by these provisions. The 120 

hour figure is the result of the estimated average 

burden hours to administer one policy and 

procedure (60) times the 2 policies and procedures 

required by these provisions. The 4200 hour figure 

is the result of the estimated average burden hours 

per respondent to create these policies and 

procedures (420) times the number of SDRs (10). 

The 1200 hour figure is the result of the estimated 

average burden hours per respondent to maintain 

these policies and procedures (120) times the 

number of SDRs (10). 

1181This $400,000 figure is the result of an 

estimated $400 an hour cost for outside legal 

services (as discussed in supra note 1136) times 50 

hours, times 2 policies and procedures, times the 

number of SDRs (10). 

1182This number is 150% of the 210 hour 

estimate to create one set of written policies and 

procedures under Regulation NMS for non-SRO 

trading centers. See Regulation NMS Adopting 

Release, supra note 1151. This is based on an 

estimate that Rule 13n–5(b)(6) will create 150% of 

the burden of creating written policies and 

procedures under Regulation NMS because, in 

addition to establishing procedures, SDRs will also 

be required to provide facilities reasonably 

designed to effectively resolve disputes over the 

accuracy of the transaction data and positions that 

are recorded in the SDR. 

1183This number is 150% of the estimate of 

outside legal costs (50 hours) to create one set of 

written policies and procedures under Regulation 

NMS for non-SRO trading centers, at an estimate of 

$400 per hour. See Regulation NMS Adopting 

Release, supra note 1151. This is based on an 

estimate that Rule 13n–5(b)(6) will create 150% of 

the burden of creating written policies and 

procedures under Regulation NMS because, in 

addition to establishing procedures, SDRs will also 

be required to provide facilities reasonably 

designed to effectively resolve disputes over the 

accuracy of the transaction data and positions that 

are recorded in the SDR. 

1184These numbers are based on 150% of the 60 

hour estimate of the ongoing burden regarding one 

set of written policies and procedures under 

Regulation NMS for non-SRO trading centers. See 

$150,000. The Commission estimates 

that the average annual burden will be 

45 hours per respondent, for a total 

estimated average annual burden of 450 

hours for all respondents.1174 The 

Commission believes that SDRs will 

conduct this work internally. 

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. Based on 

the Commission’s estimates regarding 

Regulation NMS,1175 it estimates that, 

on average, this provision will require 

210 hours to implement and 60 hours to 

administer per year per respondent, for 

a total burden of 2100 hours initially 

and 600 hours on average, annually. The 

Commission also estimates, based on 

this earlier estimate, that SDRs will 

incur a total of $20,000 in initial outside 

legal costs to establish the required 

policies and procedures as a result of 

this provision per respondent for a total 

outside cost burden of $200,000 for all 

respondents.1176

Rule 13n–4(c)(2)(iv) requires an SDR 

to establish, maintain, and enforce 

written policies and procedures 

reasonably designed to ensure that the 

SDR’s senior management and each 

member of the board or committee that 

has the 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, to have a clear understanding 

of their responsibilities, and to exercise 

sound judgment about the SDR’s affairs. 

Based on the Commission’s estimates 

regarding similar requirements in 

Regulation NMS,1177 it estimates that, 

on average, this provision will require 

210 hours to implement and 60 hours to 

administer per year per respondent, for 

a total burden of 2100 hours initially 

and 600 hours on average, annually. The 

Commission also estimates, based on 

this earlier estimate, that SDRs will 

initially incur a total of $20,000 in 

outside legal costs to establish the 

required policies and procedures as a 

result of this provision per respondent 

for a total outside cost burden of 

$200,000 for all respondents.1178 The 

Commission believes that SDRs will 

conduct the ongoing administration of 

this provision internally. 

Rule 13n–4(c)(3) addresses the 

conflict of interest requirements 

governing SDRs. In particular, each SDR 

is required to establish and enforce 

written policies and procedures 

reasonably designed to minimize 

conflicts of interest. This includes 

establishing, maintaining, and enforcing 

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. It also 

includes establishing, maintaining, and 

enforcing written policies and 

procedures regarding the SDR’s noncommercial and commercial use of the 

SBS transaction information that it 

receives. Based on the Commission’s 

estimates regarding Regulation 

NMS,1179 it estimates that on average 

these two requirements will require 420 

hours to implement and 120 hours to 

administer per year per respondent, for 

a total burden of 4200 hours initially 

and 1200 hours on average annually.1180

Also based on the Regulation NMS 

estimates regarding policies and 

procedures, the Commission estimates 

that SDRs will incur a total of $40,000 

in initial outside legal costs to establish 

the required policies and procedures as 

a result of this provision per respondent 

for a total outside cost burden of 

$400,000 for all respondents.1181

Rule 13n–5(b)(6) requires that every 

SDR 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. 

For PRA purposes only, the Commission 

believes that this is a greater burden 

than that for written policies and 

procedures alone because SDRs will 

also be required to provide facilities. 

Thus, the Commission estimates that 

Rule 13n–5(b)(6) will require 315 hours 

for each respondent to implement.1182

There will likely be a need for a 

respondent to consult with outside legal 

counsel, which the Commission 

estimates will cost $30,000 per 

respondent.1183 Thus, the Commission 

estimates a total initial burden for all 

respondents of 3150 hours and $300,000 

in outside costs. The Commission 

estimates the ongoing average annual 

burden of this requirement to be 90 

hours per respondent for a total of 900 

hours for the estimated total annual 

burden for all respondents.1184 The 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14527 

Regulation NMS Adopting Release, supra note 

1151. This is based on an estimate that Rule 13n– 

5(b)(6) will create 150% of the ongoing burden of 

written policies and procedures under Regulation 

NMS because, in addition to establishing 

procedures, SDRs will also be required to provide 

facilities reasonably designed to effectively resolve 

disputes over the accuracy of the transaction data 

and positions that are recorded in the SDR. 

1185See Regulation NMS Adopting Release, supra 

note 1151. 

1186The 420 hour figure is the result of the 

estimated average burden hours to create one policy 

and procedure (210) times the 2 policies and 

procedures required by these provisions. The 120 

hour figure is the result of the estimated average 

burden hours to administer one policy and 

procedure (60) times the 2 policies and procedures 

required by these provisions. The 4200 hour figure 

is the result of the estimated average burden hours 

per respondent to create these policies and 

procedures (420) times the number of SDRs (10). 

The 1200 hour figure is the result of the estimated 

average burden hours per respondent to maintain 

these policies and procedures (120) times the 

number of SDRs (10). 

1187See Regulation NMS Adopting Release, supra 

note 1151. 

1188This $400,000 figure is the result of an 

estimated $400 an hour cost for outside legal 

services (as discussed in supra note 1136) times 50 

hours per policy and procedure, times 2 policies 

and procedures, times the number of SDRs (10). 

1189See Regulation NMS Adopting Release, supra 

note 1151. 

1190See Regulation NMS Adopting Release, supra 

note 1151. 

1191This figure is the result of an estimated $400 

an hour cost for outside legal services (as discussed 

in supra note 1136) times 50 hours per policy and 

procedure, times 1 policy and procedure, times the 

number of SDRs (10). 

1192See Section VI.K of this release discussing the 

SDR Exemption. 

1193See Section VI.A.1.c of this release discussing 

Form SDR. 

1194See Section VI.A.4.c of this release discussing 

amendments on Form SDR. 

1195See Section VI.B.3 of this release discussing 

withdrawal from registration. 

1196 DTCC 2, supra note 19 (‘‘DTCC firmly 

believes [that] the annual [compliance] report 

should be kept confidential by the Commission’’ 

and explained that ‘‘[g]iven the level of disclosure 

expected to be required . . . the report will likely 

contain confidential and proprietary business 

information.’’). 

Commission believes that SDRs will 

conduct this ongoing work internally. 

Rules 13n–4(b)(8) and 13n–9 address 

privacy requirements for SDRs. Rule 

13n–4(b)(8) requires SDRs to maintain 

the privacy of any and all SBS 

transaction information that the SDR 

receives from a SBS dealer, 

counterparty, or any registered entity as 

prescribed in Rule 13n–9. Rule 13n– 

9(b)(1) requires each 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 from any SBS dealer, 

counterparty, or any registered entity. 

Based on the Commission’s estimates 

regarding Regulation NMS,1185 it 

estimates that, on average, these 

provisions will require 420 hours to 

implement and 120 hours to administer 

per year per respondent, for a total 

burden of 4200 hours initially and 1200 

hours on average, annually.1186 Also 

based on the Regulation NMS 

estimates,1187 the Commission estimates 

that SDRs will incur a total of $40,000 

in initial outside legal costs to establish 

the required policies and procedures as 

a result of these provisions per 

respondent for a total outside cost 

burden of $400,000 for all 

respondents.1188

Rule 13n–9(b)(2) requires each SDR to 

establish and maintain safeguards, 

policies, and procedures reasonably 

designed to prevent the 

misappropriation or misuse, directly or 

indirectly, of (1) any confidential 

information received by the SDR, (2) 

material, nonpublic information, and/or 

(3) intellectual property. At a minimum, 

these safeguards, policies and 

procedures must address limiting access 

to that information and intellectual 

property, standards pertaining to the 

trading by persons associated with the 

SDR for their personal benefit or the 

benefit of others, and adequate 

oversight. Based on the Commission’s 

estimates regarding Regulation 

NMS,1189 it estimates that on average 

this provision will require 210 hours to 

implement and 60 hours to administer 

per year per respondent, for a total 

burden of 2100 hours initially and 600 

hours on average, annually. Also based 

on the Regulation NMS estimates,1190

the Commission estimates that SDRs 

will incur a total of $20,000 in initial 

outside legal costs to establish the 

required policies and procedures as a 

result of this provision per respondent 

for a total outside cost burden of 

$200,000 for all respondents.1191

E. Collection of Information Is 

Mandatory 

1. Registration Requirements, Form 

SDR, and Withdrawal From Registration 

The collection of information relating 

to registration requirements, Form SDR, 

and withdrawal from registration is 

mandatory for all SDRs when registering 

with the Commission, amending their 

applications for registration, or 

withdrawing from registration. 

2. SDR Duties, Data Collection and 

Maintenance, and Direct Electronic 

Access 

The collection of information relating 

to SDR duties, data collection and 

maintenance, and direct electronic 

access is mandatory for all SDRs, absent 

an exemption.1192

3. Recordkeeping 

The collection of information relating 

to recordkeeping is mandatory for all 

SDRs, absent an exemption. 

4. Reports 

The collection of information relating 

to reports is mandatory for all SDRs, 

absent an exemption. 

5. Disclosure 

The collection of information relating 

to disclosure is mandatory for all SDRs, 

absent an exemption. 

6. Chief Compliance Officer; 

Compliance Reports and Financial 

Reports 

The collection of information relating 

to CCOs is mandatory for all SDRs, 

absent an exemption. 

7. Other Provisions Relevant to the 

Collection of Information 

The collection of information relating 

to other relevant provisions is 

mandatory for all SDRs, absent an 

exemption. 

F. Confidentiality 

As discussed above, the Commission 

expects that it will make any 

information filed on, or in an exhibit or 

attachment to, an application for 

registration on Form SDR available on 

its Web site, except in cases where 

confidential treatment is requested by 

the applicant and granted by the 

Commission.1193

As discussed above, the Commission 

may make any information filed on, or 

in an exhibit or attachment to, an 

amendment on Form SDR available on 

its Web site, except in cases where 

confidential treatment is requested by 

the applicant and granted by the 

Commission.1194

As discussed above, the Commission 

may make any information filed on, or 

in an exhibit or attachment to, 

withdrawals on Form SDR available on 

its Web site, except in cases where 

confidential treatment is requested by 

the applicant and granted by the 

Commission.1195

Pursuant to Rules 13n–11(d), (f), and 

(g), SDRs must file an annual 

compliance report and financial report 

with the Commission. One commenter 

believed that the Commission should 

keep the annual compliance report 

confidential.1196 As discussed above, 

the Commission is not providing, by 

rule, that the annual compliance reports 

and financial reports are automatically 

granted confidential treatment, but an 

SDR may seek confidential treatment 

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14528 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1197See Section VI.J.4.c of this release discussing 

compliance reports. 1198See Further Definition of ‘‘Swap,’’ ‘‘SecurityBased Swap,’’ and ‘‘Security-Based Swap 

Agreement’’; Mixed Swaps; Security-Based Swap 

Agreement Recordkeeping, Securities Act Release 

No. 9338 (July 18, 2012), 77 FR 48208, 48332 (Aug. 

13, 2012) (noting that ‘‘[t]he programmatic costs and 

benefits associated with substantive rules 

applicable to [SBSs] under Title VII are being 

addressed in more detail in connection with the 

applicable rulemakings implementing Title VII’’). 

1199See Section II.A of this release discussing 

limited information currently available to market 

participants. 

1200See Section II.B of this release. 

1201As described in the Cross-Border Proposing 

Release, the non-dealer market participants transact 

with four counterparties on average. Cross Border 

Proposing Release, 78 FR at 31126 n.1329, supra 

note 3. However, the largest market participants 

transact with as many as 50 counterparties, 

suggesting that dealers compete for business with 

these participants. 

1202See, e.g., Richard C. Green, Burton Hollifield, 

and Norman Schurhoff, Financial Intermediation 

and the Costs of Trading in an Opaque Market, 20 

Review of Financial Studies 275 (2007) (estimating 

that, prior to the introduction of transparency 

measures in the municipal bond market, dealers 

exercised substantial market power, but that market 

power decreases with the size of the trade). 

1203See Section II.A of this release. 

pursuant to Exchange Act Rule 24b– 

2.1197 The Commission may make filed 

annual compliance reports and financial 

reports available on its Web site, except 

in cases where confidential treatment is 

requested by the SDR and granted by the 

Commission. 

G. Retention Period of Recordkeeping 

Requirements 

Rule 13n–5(b)(4) requires that SDRs 

maintain the 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. This data is 

required to be maintained in a place and 

format that is readily accessible and 

usable to the Commission and other 

persons with authority to access or view 

the information and is also required to 

be maintained in an electronic format 

that is non-rewritable and non-erasable. 

Pursuant to Rule 13n–7(b), an SDR is 

required to preserve at least one copy of 

all documents as shall be made or 

received by it in the course of its 

business as such, including all records 

required under the Exchange Act and 

the rules and regulations thereunder, 

other than the transaction data and 

positions collected and maintained 

pursuant to Rule 13n–5. These records 

are required to be kept for a period of 

not less than five years, the first two 

years in a place that is immediately 

available to representatives of the 

Commission for inspection and 

examination. 

VIII. Economic Analysis 

A. Introduction 

The Commission has considered the 

economic implications of the SDR Rules 

and Form SDR as well as comments 

regarding the costs and benefits of the 

SDR Rules and Form SDR.1198 The 

Commission is sensitive to the 

economic consequences and effects of 

the SDR Rules and Form SDR, including 

their costs and benefits. In adopting the 

SDR Rules and Form SDR, the 

Commission has analyzed their costs 

and benefits, as set forth below, and has 

been mindful of the economic 

consequences of its policy choices. The 

SDR Rules and Form SDR fulfill the 

mandate of the Dodd-Frank Act that the 

Commission adopt rules governing the 

registration, duties, and core principles 

of SDRs. 

As discussed above, the SBS market 

developed as an opaque OTC market 

without centralized trading venues or 

dissemination of pre- or post-trade 

pricing and volume information.1199

SBS dealers, as intermediaries in SBS 

transactions, observe order flow and 

have access to pricing and volume 

information that is generally not 

available to other market participants. 

With such access, SBS dealers generally 

have an informational and competitive 

advantage over non-dealer 

counterparties, granting SBS dealers 

some degree of market power, which 

may enable them to extract economic 

rents in transactions with those 

counterparties. This informational 

advantage may result in increased 

transaction costs for less-informed 

counterparties relative to a market 

where all participants have competitive 

access to information. 

In addition to the advantages that an 

opaque SBS market may give to SBS 

dealers, the opacity of the SBS market 

as described above may also affect 

current participation levels in the SBS 

market.1200 Certain market participants, 

including speculative traders who rely 

on proprietary trading strategies, may 

wish to keep their trades anonymous 

and may prefer to operate in an opaque 

SBS market. Hedgers and other market 

participants that do not benefit from 

opacity, however, may be dissuaded 

from participating in the SBS market by 

higher transaction costs and their 

disadvantageous informational position. 

Opacity in the SBS market also limits 

the ability of market participants to form 

broad views of financial market 

conditions. In capital markets, pricing 

and volume information provide signals 

about liquidity and the quality of 

investments, including investments in 

reference entities underlying 

derivatives. In the SBS market, where 

pricing and volume information is not 

readily available, market participants 

may have difficulty assessing 

investment opportunities as well as the 

state of the broader market, or must 

form assessments with a narrower set of 

information than SBS dealers. In an 

opaque SBS market, difficulty in 

assessing investment opportunities and 

the state of the SBS market may inhibit 

participation in the SBS market. 

While opacity may generally confer a 

competitive advantage to SBS dealers 

who observe the largest share of order 

flow and limit participation in the SBS 

market, some features of the market and 

market participants may offset these 

effects. For example, large market 

participants that often transact with 

many SBS dealers are aware of the 

potential information asymmetries in 

the market. Furthermore, by virtue of 

their high trading volume, these 

participants may also observe a large 

share of the market, reducing the 

information advantage afforded to SBS 

dealers. SBS dealers may wish to 

compete for SBS business with the 

largest counterparties, and these 

participants may be able to obtain 

access to competitive pricing.1201

Nevertheless, the Commission generally 

expects that market participants with 

proprietary access to information—in 

the case of SBS markets, SBS dealers 

who observe order flow—can benefit 

from opacity and earn economic rents 

from their less-informed 

counterparties.1202

It is in this context that the 

Commission analyzes the economic 

effects of the SDR Rules and Form SDR. 

The Commission envisions that 

registered SDRs will become an 

essential part of the infrastructure of the 

SBS market. Persons that meet the 

definition of an SDR will be required by 

the SDR Rules to maintain policies and 

procedures relating to data accuracy and 

maintenance, and will be further 

required by Regulation SBSR to publicly 

disseminate transaction-level data, 

thereby promoting post-trade 

transparency in the SBS market. 

Transparency stemming from the SDR 

Rules and Regulation SBSR should 

reduce the informational advantage of 

SBS dealers and promote competition 

among SBS dealers and other market 

participants.1203 This could reduce 

implicit transaction costs and attract 

liquidity from those market participants 

that do not benefit from opacity, 

providing more opportunities for market 

participants with hedging needs to 

manage their risks and providing more 

opportunities for market participants to 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14529 

1204See Section VI.K of this release discussing 

Rule 13n–12. 

1205See US & Foreign Banks, supra note 24; IIB 

CB, supra note 26. 

1206See US & Foreign Banks, supra note 24. 

1207 IIB CB, supra note 26. 

1208 IIB CB, supra note 26. 

access liquidity. Similarly, public 

dissemination of SBS pricing and 

volume information by SDRs pursuant 

to Regulation SBSR may allow market 

participants to incorporate information 

from the SBS market into their 

assessments of SBS and non-SBS 

investment opportunities, thereby 

promoting price efficiency and efficient 

capital allocation. 

At the same time, increased quality 

and quantity of pricing and volume 

information and other information 

available to the Commission about the 

SBS market may enhance the 

Commission’s ability to respond to 

market developments. As discussed 

above, DTCC–TIW voluntarily provides 

to the Commission data on individual 

CDS transactions in accordance with an 

agreement between the DTCC–TIW and 

the ODRF. In conjunction with 

Regulation SBSR, the SDR Rules should 

assist the Commission in fulfilling its 

regulatory mandates and legal 

responsibilities such as detecting market 

manipulation, fraud, and other market 

abuses by providing it with greater 

access to SBS information than that 

provided under the voluntary reporting 

regime. In particular, without an SDR, 

data on SBS transactions could be 

dispersed and might not be readily 

available to the Commission and others. 

SDRs may be especially critical during 

times of market turmoil, both by giving 

the Commission information to monitor 

risk exposures taken by individual 

entities or to particular referenced 

entities, and by promoting stability 

through enhanced transparency. 

Additionally, more available data about 

the SBS market should give the 

Commission better insight into how 

regulations are affecting, or may affect, 

the SBS market, which may allow the 

Commission to better craft regulations to 

achieve desired goals, and therefore, 

increase regulatory effectiveness. 

In adopting the SDR Rules and Form 

SDR, the Commission has attempted to 

balance different goals. For example, 

data fragmentation resulting from 

multiple SDRs may make it more 

difficult for the Commission and to the 

extent that SBS data is made public, the 

public, to aggregate SBS data from 

multiple SDRs. The Commission could 

have resolved issues related to data 

fragmentation by designating one SDR 

as the recipient of the information from 

all other SDRs in order to provide the 

Commission with a consolidated 

location from which to access SBS data 

for regulatory monitoring and oversight 

purposes. Designating one SDR as the 

data consolidator, however, could 

discourage new market entrants, and 

interfere with competition. Designating 

one SDR as data consolidator may also 

impose an additional cost on market 

participants to cover the SDR’s cost for 

acting as the data consolidator. 

Similarly, the SDR Exemption,1204

which allows certain non-U.S. persons 

to perform the functions of an SDR 

within the United States without 

registering with the Commission, may 

reduce potentially duplicative 

registration and operating costs by 

allowing these persons to continue to 

receive data reported pursuant to the 

reporting requirements of a foreign 

jurisdiction. The SDR Exemption, 

however, also increases the risk of data 

fragmentation to the extent that 

reporting requirements differ across 

jurisdictions and relevant authorities 

have difficulty accessing data across 

jurisdictions. The Commission has 

attempted to balance the considerations 

of competition, data fragmentation, and 

avoidance of potentially duplicative 

registration and operating costs in 

adopting the SDR Rules. 

In assessing the economic impact of 

the SDR Rules and Form SDR, the 

Commission refers to the broader costs 

and benefits associated with the 

application of the rules and 

interpretations as ‘‘programmatic’’ costs 

and benefits. These include the costs 

and benefits of applying the substantive 

Title VII requirements to the reporting 

of transactions by market participants, 

as well as to the functions performed by 

market infrastructures, including SDRs, 

in the global SBS market. The 

Commission’s analysis also takes into 

consideration ‘‘assessment costs,’’ 

which arise from current and future 

market participants expending effort to 

determine whether they are subject to 

the SDR Rules. Current and future 

market participants could incur 

expenses in making this determination 

even if they ultimately are not subject to 

the SDR Rules. Finally, the 

Commission’s analysis considers 

‘‘compliance costs,’’ which are the costs 

that SDRs will incur in registering and 

complying with the SDR Rules. 

B. General Comments on the Costs and 

Benefits of the SDR Rules 

The Commission received two 

comments regarding the general costs 

and benefits of the SDR Rules.1205

One commenter offered general 

observations about the application of 

the SDR Rules to non-resident SDRs, 

maintaining that the costs of an 

extraterritorial application of U.S. law 

would be significant and not estimable 

beforehand, and that the Commission 

should consider comity and conflict 

with non-U.S. regulatory requirements 

when weighing the costs and benefits of 

the SDR Rules.1206 The Commission 

agrees that determining the costs and 

benefits of the application of the SDR 

Rules to non-resident SDRs is difficult; 

nevertheless, the Commission has 

analyzed the economic effects of the 

SDR Rules below. 

A second commenter recommended 

that ‘‘the Commission should generally 

seek to avoid any divergence from the 

CFTC’s and international regulators’ 

frameworks that is likely to give rise to 

undue costs or burdens.’’ 1207 The 

commenter believed that ‘‘divergence is 

generally warranted only if the rule 

adopted by the Commission is more 

flexible than those adopted by others 

(and therefore would not preclude the 

voluntary adoption of consistent 

practices by market participants).’’ 1208

The Commission acknowledges that 

there are concerns regarding divergent 

regulatory frameworks. The economic 

effects that could result from divergent 

regulatory frameworks, as well as other 

comments regarding the costs and 

benefits of specific rules, are discussed 

below. The Commission notes, however, 

that the SDR Rules are largely consistent 

with the CFTC’s rules. Furthermore, the 

Commission has consulted and 

coordinated with foreign regulators 

through bilateral and multilateral 

discussions and has taken these 

discussions into consideration in 

developing the SDR Rules and Form 

SDR. 

C. Consideration of Benefits, Costs, and 

the Effect on Efficiency, Competition, 

and Capital Formation 

The potential economic effects 

stemming from the SDR Rules can be 

grouped into several categories. In this 

section, the Commission first discusses 

assessment costs relating to the SDR 

Rules. The Commission then discusses 

the SDR Rules’ programmatic costs and 

benefits, highlighting broader and more 

comprehensive economic effects that 

result when the SDR Rules are 

considered as a part of other rules 

resulting from Title VII of the Dodd 

Frank Act. Next, the Commission 

discusses the effects of the SDR Rules 

on efficiency, competition, and capital 

formation. In the next section, the 

Commission discusses the compliance 

costs relating to certain of the SDR 

Rules. 

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14530 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1209At a minimum, the Commission estimates 

that the same persons who will register with the 

Commission as SDRs will make an assessment as 

to whether they fall within the statutory definition 

of an SDR. Therefore, the Commission estimates 

that at least 10 persons will make this assessment. 

See Section VII.C.1 of this release discussing the 

number of respondents to the registration 

requirements and Form SDR. 

1210This estimate is based on an estimated 40 

hours of in-house legal or compliance staff’s time 

to assess whether a person falls within the statutory 

definition of an SDR. The Commission estimates 

that a person will assign these responsibilities to an 

Attorney. Data from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1800-hour work-year and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits, 

and overhead, suggest that the cost of an Attorney 

is $380 per hour. Thus, the total one-time estimated 

dollar cost is $15,200 per person and $152,000 for 

all persons, calculated as follows: (Compliance 

Attorney at $380 per hour for 40 hours) × 10 

persons = $152,000. 

1211The Commission recognizes that some nonU.S. persons that perform the functions of an SDR 

may do so entirely outside the United States, and 

thus, may determine that they do not need to incur 

any assessment costs related to the Commission’s 

approach. 

1212The Commission provides a list of MOUs and 

other arrangements on its public Web site, which 

are available at this link: http://www.sec.gov/about/ 

offices/oia/oia_cooparrangements.shtml. 

1213This estimate is based on an estimated one 

hour of in-house legal or compliance staff’s time to 

confirm whether the Commission and each 

regulator with supervisory authority over such nonU.S. person have entered into an MOU or other 

arrangement. The Commission estimates that an 

SDR will assign these responsibilities to an 

Attorney. Thus, the total one-time estimated dollar 

cost is $380 per person, calculated as follows: 

(Attorney at $380 per hour for 1 hour) = $380. 

1214This total is based on the assumption that as 

many as 20 non-U.S. persons that perform the 

functions of an SDR would use in-house legal or 

compliance staff, specifically, an Attorney, to 

determine whether an applicable MOU or other 

arrangement is in place. Thus, the total one-time 

estimated dollar cost for all 20 non-U.S. persons is 

$7,600, calculated as follows: (Attorney at $380 per 

hour for 1 hour) × 20 non-U.S. persons = $7,600. 

1215See Section II.B of this release discussing 

data that is currently available to regulators and 

market participants. 

1216See Section VIII.C.3 of this release discussing 

the potential effects on competition, efficiency, and 

capital formation. 

1217See supra note 58. 

1. Assessment Costs 

The Commission believes that persons 

will incur assessment costs in 

determining whether they fall within 

the statutory definition of an SDR. The 

Commission believes that the statutory 

definition in Exchange Act Section 

3(a)(75) describes the core services or 

functions of an SDR. Whether a person 

falls within the statutory definition of 

an SDR is fact-specific. The Commission 

believes that at least 10 persons 1209 will 

make the assessment of whether they 

fall within the statutory definition of an 

SDR, which may result in a cost of 

$15,200 per person, for a total cost of 

$152,000 for all persons.1210

The Commission believes that certain 

non-U.S. persons may incur assessment 

costs in determining whether they can 

rely on the SDR Exemption. Under the 

Commission’s approach, certain nonU.S. persons that perform the functions 

of an SDR may incur certain assessment 

costs in determining whether they fall 

within the statutory definition of an 

SDR, and, if so, whether they perform 

the functions of an SDR within the 

United States. If so, they may incur 

certain assessment costs in determining 

whether they can rely on the SDR 

Exemption.1211

With respect to determining the 

availability of the SDR Exemption for a 

non-U.S. person performing the 

function of an SDR within the United 

States, the Commission believes that 

costs would arise from confirming 

whether the Commission and each 

regulator with supervisory authority 

over such non-U.S. person have entered 

into an MOU or other arrangement. The 

Commission believes that because this 

information generally should be readily 

available,1212 the cost involved in 

making such assessment should not 

exceed one hour of in-house legal or 

compliance staff’s time or $380 per 

person,1213 for an aggregate one-time 

cost of $7,600.1214

Assessment costs may also result from 

determining whether existing policies 

and procedures will satisfy the 

requirements of the SDR Rules. An SDR 

may have existing policies and 

procedures that it may use to comply 

with the SDR Rules. In order to use such 

policies and procedures to comply with 

the SDR Rules, the SDR will first have 

to assess whether the policies and 

procedures will result in compliance 

with the SDR Rules. 

2. Programmatic Costs and Benefits 

a. SDR Registration, Duties, and Core 

Principles 

Rules 13n–1 through 13n–3 and Form 

SDR establish the mechanism by which 

SDRs must register as such pursuant to 

Exchange Act Section 13(n), absent an 

exemption. Rules 13n–4 through 13n–10 

set forth the duties and core principles 

of SDRs. Rule 13n–11 sets forth the 

requirements for an SDR’s CCO, annual 

compliance reports, and financial 

reports. Finally, Rule 13n–12 provides 

an exemption from registration and 

other requirements in certain 

circumstances. 

The Commission believes that it and 

market participants will enjoy a number 

of programmatic benefits from the SDR 

Rules. For example, because the final 

SDR Rules require SDRs to register with 

and provide data to the Commission and 

require SDRs to take steps to facilitate 

accurate data collection and retention 

with respect to SBSs, the SDR Rules will 

increase the availability of SBS data 

relative to that in the existing voluntary 

disclosure system.1215 The data 

provided by SDRs will provide a 

window into SBS transactions and 

allow the Commission to oversee the 

SBS market beyond that which is 

currently available. Further, the SDR 

Rules requiring SDRs to provide 

information to market participants about 

the nature and costs of SDRs’ services 

are intended to provide transparency 

about the costs of reporting, thereby 

enabling market participants to make 

informed choices among competing 

SDRs. Finally, by requiring SDRs to 

register with the Commission, provide 

the Commission with access to their 

books and records, and submit to 

inspections and examinations by 

representatives of the Commission, the 

SDR Rules will allow the Commission to 

evaluate SDRs’ compliance with the 

Exchange Act and the rules and 

regulations thereunder. 

Persons that meet the definition of an 

SDR will also be required to comply 

with the public dissemination 

requirements of Regulation SBSR. 

Public dissemination is a core 

component of post-trade transparency in 

the SBS market. As discussed below, 

enhanced transparency should produce 

market-wide benefits in terms of a 

reduction in SBS dealers’ market power. 

Enhanced transparency could also lead 

to reduced trading costs if competitive 

access to information and reduced SBS 

dealers’ market power reduce the 

premium that SBS dealers are able to 

charge for intermediating SBS 

transactions.1216 Indeed, post-trade 

transparency has been shown to reduce 

implicit trading costs (i.e., the difference 

between the price at which a market 

participant can trade a security and the 

fundamental value of that security) in 

other securities markets. For example, 

post-trade transparency that followed 

the introduction of TRACE and trade 

reporting in the corporate bond market 

has been shown to lower implicit costs 

of trading corporate bonds.1217 While 

there are differences between SBSs and 

corporate bonds, there are similarities to 

how the markets are structured—both 

markets evolved as dealer-centric OTC 

markets with limited pre- or post-trade 

transparency. Thus, the Commission 

expects that some of the benefits that 

result from transparency in the 

corporate bond market may extend to 

SBS markets as well. 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14531 

1218See Proposing Release, 75 FR at 77307, supra 

note 2 (‘‘SDRs may be especially critical during 

times of market turmoil, both by giving relevant 

authorities information to help limit systemic risk 

and by promoting stability through enhanced 

transparency. By enhancing stability in the SBS 

market, SDRs may also indirectly enhance stability 

across markets, including equities and bond 

markets.’’). 

1219See Darrell Duffie, Ada Li, and Theo Lubke, 

Policy Perspectives of OTC Derivatives Market 

Infrastructure, Federal Reserve Bank of New York 

Staff Report No. 424 (Jan. 2010, as revised Mar. 

2010) (‘‘Transparency can have a calming influence 

on trading patterns at the onset of a potential 

financial crisis, and thus act as a source of market 

stability to a wider range of markets, including 

those for equities and bonds.’’). 

1220See Proposing Release, 75 FR at 77307, supra 

note 2 (‘‘The enhanced transparency provided by an 

SDR is important to help regulators and others 

monitor the build-up and concentration of risk 

exposures in the SBS market.’’); see also DTCC 1*, 

supra note 20 (‘‘A registered SDR should be able to 

provide (i) enforcement agents with necessary 

information on trading activity; (ii) regulatory 

agencies with counterparty-specific information 

about systemic risk based on trading activity; (iii) 

aggregate trade information for publication on 

market-wide activity; and (iv) a framework for realtime reporting from swap execution facilities and 

derivatives clearinghouses.’’). 

1221See Proposing Release, 75 FR at 77356, supra 

note 2; Cross-Border Proposing Release, 78 FR at 

31184, supra note 3. 

1222See Dodd-Frank Act, Public Law 111–203 at 

Preamble. 

1223See Section II.A of this release discussing 

broad economic considerations. 

1224See Proposing Release, 75 FR at 77354, supra 

note 2 (noting that ‘‘the proposed SDR rules will 

lead to a more robust, transparent environment for 

the market for SBSs’’); Cross-Border Proposing 

Release, 78 FR at 31183, supra note 3 (discussing 

programmatic benefits to requiring non-U.S. 

persons that perform the functions of an SDR 

within the United States to register with the 

Commission and to comply with the SDR 

Requirements). See also Dodd-Frank Act, Public 

Law 111–203 at Preamble. 

1225See Proposing Release, 75 FR at 77307, supra 

note 2 (noting that SDRs ‘‘are intended to play a key 

role in enhancing transparency in the SBS market’’ 

Continued 

Nevertheless, the extent to which 

trading cost reductions are realized 

could be mitigated by additional factors. 

Trade reporting, public dissemination, 

and providing direct electronic access 

are costly in terms of establishing and 

maintaining infrastructure necessary to 

report and store large volumes of tradelevel transaction data. SDRs may be able 

to pass the costs of complying with the 

SDR Rules and public dissemination 

requirements onto reporting parties— 

e.g., SBS dealers—who, in turn, may be 

able to pass costs on to their customers. 

Therefore, the infrastructure costs 

associated with transparency may 

partially offset the trade cost benefits 

that could accrue through the reduction 

in asymmetric information and SBS 

dealers’ market power. 

Enhanced transparency could 

produce additional market-wide 

benefits by promoting stability in the 

SBS market, particularly during periods 

of market turmoil,1218 and it should 

indirectly contribute to improved 

stability in related financial markets, 

including equity and bond markets.1219

In conjunction with Regulation SBSR, 

the SDR Rules should assist the 

Commission in fulfilling its regulatory 

mandates and legal responsibilities such 

as detecting market manipulation, fraud, 

and other market abuses by providing it 

with greater access to SBS 

information.1220 In particular, without 

an SDR, data on SBS transactions would 

be dispersed and would not be readily 

available to the Commission and others. 

SDRs may be especially critical during 

times of market turmoil, both by giving 

the Commission information to monitor 

risk exposures taken by individual 

entities or to particular referenced 

entities, and by promoting stability 

through enhanced transparency. 

Additionally, more available data about 

the SBS market should give the 

Commission a better idea of how 

regulations are affecting, or may affect, 

the SBS market, which may allow the 

Commission to better craft regulation to 

achieve desired goals, and therefore, 

increase regulatory effectiveness. 

The Commission believes that U.S. 

persons performing the functions of an 

SDR will play a key role in collecting 

and maintaining information regarding 

SBS transactions, and making available 

such information to the Commission 

and the public, all of which may affect 

the transparency of the SBS market 

within the United States.1221 Requiring 

such U.S. persons to comply with the 

SDR Requirements will help ensure that 

they maintain data and make it available 

in a manner that advances the benefits 

that the requirements are intended to 

produce. 

The information provided by SDRs to 

the Commission pursuant to the SDR 

Rules may assist it in advancing the 

goals of the Dodd-Frank Act. The DoddFrank Act was designed, among other 

things, to promote the financial stability 

of the United States by improving 

accountability and transparency in the 

financial system and the SDR Rules, 

which implement the statute, are a 

necessary and important component of 

implementing this goal.1222 As 

discussed above, an SBS transaction 

involves ongoing financial obligations 

between counterparties during the life 

of the transaction, which can typically 

span several years, and counterparties 

bear credit and market risk until the 

transaction is terminated or expires. 

Because large market participants may 

have ongoing obligations with many 

different counterparties, financial 

markets may be particularly vulnerable 

to instability resulting from the financial 

distress of a large market participant 

being transmitted to counterparties and 

others through connections in the SBS 

market. In extreme cases, the default of 

a large market participant could lead to 

financial distress among the 

counterparties to SBSs, which could 

introduce the potential for sequential 

counterparty failure and create 

uncertainty in the SBS market, thereby 

reducing the willingness of market 

participants to extend credit. A 

reduction in credit may result in 

liquidity and valuation difficulties that 

could spill over into the broader 

financial market. 

Thus, disruptions in the SBS market 

could potentially affect other parts of 

the financial system. Increasing the 

availability and reliability of 

information about the SBS market will 

improve the Commission’s ability to 

oversee and regulate this market. A 

more complete understanding of activity 

in the SBS market, including 

information on risk and connections 

between counterparties, should help the 

Commission assess the risk in these 

markets and evaluate appropriate 

regulatory responses to market 

developments. Appropriate and timely 

regulatory responses to market 

developments could enhance investor 

protection and confidence, which may 

encourage greater investor participation 

in the SBS market.1223

b. Registration Requirements in the 

Cross-Border Context 

The Commission believes that there 

are a number of programmatic benefits 

to requiring non-U.S. persons that 

perform the functions of an SDR within 

the United States to register with the 

Commission and to comply with the 

SDR Requirements. These requirements 

are intended to help ensure that all 

persons that perform the functions of an 

SDR within the United States function 

in a manner that will increase the 

transparency and further other goals of 

the Dodd-Frank Act.1224 The SDR 

Requirements, including requirements 

that SDRs register with the Commission, 

retain complete records of SBS 

transactions, maintain the integrity and 

confidentiality of those records, and 

disseminate appropriate information to 

the public are intended to help ensure 

that the data held by SDRs is reliable 

and that the SDRs provide information 

that contributes to the transparency of 

the SBS market while protecting the 

confidentiality of information provided 

by market participants.1225

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14532 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

and thus ‘‘it is important that SDRs are well-run and 

effectively regulated’’). 

1226See Proposing Release, 75 FR at 77307, supra 

note 2 (‘‘The inability of an SDR to protect the 

accuracy and integrity of the data that it maintains 

or the inability of an SDR to make such data 

available to regulators, market participants, and 

others in a timely manner could have a significant 

negative impact on the SBS market.’’). 

1227As of November 2014, there were several 

non-U.S. persons performing the functions of an 

SDR or intending to do so in the future. See OTC 

Derivatives Market Reforms Eighth Progress Report 

on Implementation, Financial Stability Board (Nov. 

2014), available at http://

www.financialstabilityboard.org/wp-content/

uploads/r_141107.pdf. The Commission, however, 

does not possess data regarding how many, if any, 

of these persons perform the functions of an SDR 

within the United States. 

1228See Regulation SBSR Adopting Release, 

supra note 13 (Rule 908(c) setting forth ‘‘substituted 

compliance’’ regime). 

1229The Commission also anticipates that nonU.S. persons that avail themselves of the SDR 

Exemption will be subject to the regulatory 

requirements of one or more foreign jurisdictions. 

The SDR Exemption will help ensure that such 

persons do not incur costs of compliance with 

duplicative regulatory regimes while also ensuring, 

through the condition that each regulator with 

supervisory authority enter into an MOU or other 

arrangement with the Commission, that they are 

subject to regulatory requirements that will prevent 

them from undermining the transparency and other 

purposes of the SDR Requirements by, for example, 

failing to protect the confidentiality of data relating 

to U.S. persons and other U.S. market participants. 

1230See Cross-Border Proposing Release, 78 FR at 

31184–31185, supra note 3 (discussing 

programmatic costs of SDRs registering with the 

Commission and complying with the SDR 

Requirements). 

1231As noted above, the data currently available 

to the Commission does not indicate how many 

non-U.S. persons performing the functions of an 

SDR perform such functions within the United 

States. See supra note 1227. However, even if 

persons with reporting obligations under Regulation 

SBSR report their transactions to a non-U.S. person 

that performs the functions of an SDR within the 

United States, but is exempt from registration, they 

will still be required to report transactions under 

Regulation SBSR to an SDR registered with the 

Commission, absent other exemptive relief from the 

Commission. See Regulation SBSR Adopting 

Release, supra note 13 (Rule 908(c) setting forth 

‘‘substituted compliance’’ regime). 

Non-U.S. persons performing the 

functions of an SDR within the United 

States also may affect the transparency 

of the SBS market within the United 

States, even if transactions involving 

U.S. persons or U.S. market participants 

are being reported to such non-U.S. 

persons in order to satisfy the reporting 

requirements of a foreign jurisdiction 

(and not those of Title VII). The 

Commission believes that, to the extent 

that non-U.S. persons are performing 

the functions of an SDR within the 

United States, they will likely receive 

data relating to transactions involving 

U.S. persons and other U.S. market 

participants. Ensuring that such data is 

maintained and made available in a 

manner consistent with the SDR 

Requirements would likely contribute to 

the transparency of the U.S. market and 

reduce potential confusion that may 

arise from discrepancies in transaction 

data due to, among other things, 

differences in the operational standards 

governing persons that perform the 

functions of an SDR in other 

jurisdictions (or the absence of such 

standards for any such persons that are 

not subject to any regulatory regime). 

Moreover, given the sensitivity of 

reported SBS data and the potential for 

market abuse and subsequent loss of 

liquidity in the event that a person 

performing the function of an SDR 

within the United States fails to 

maintain the privacy of such data,1226

the Commission believes that requiring 

non-U.S. persons that perform the 

functions of an SDR within the United 

States to register with the Commission 

will help ensure that data relating to 

transactions involving U.S. persons or 

U.S. market participants is handled in a 

manner consistent with the 

confidentiality protections applicable to 

such data, thereby reducing the risk of 

the loss or disclosure of proprietary or 

other sensitive data and of market abuse 

arising from the misuse of such data. 

As noted above, the Commission is 

adopting Exchange Act Rule 13n–12 to 

provide an exemption from the SDR 

Requirements for non-U.S. persons that 

perform the functions of an SDR within 

the United States, provided that each 

regulator with supervisory authority 

over any such non-U.S. person has 

entered into an MOU or other 

arrangement with the Commission that 

addresses the confidentiality of data 

collected and maintained by such nonU.S. person, access by the Commission 

to such data, and any other matters 

determined by the Commission. 

The Commission believes that this 

SDR Exemption will not significantly 

reduce the programmatic benefits 

associated with the SDR Requirements. 

Although the approach could 

potentially reduce the number of 

persons performing the functions of an 

SDR that are registered with the 

Commission,1227 the Commission 

believes that there will be little impact 

on reporting of transactions involving 

U.S. persons because data relating to 

transactions involving U.S. persons and 

U.S. market participants would still be 

required to be reported, pursuant to 

Regulation SBSR, to an SDR registered 

with the Commission and subject to all 

SDR Requirements, absent other 

exemptive relief from the 

Commission.1228 Moreover, the SDR 

Exemption may have the benefit of 

reducing the incentive for non-U.S. 

persons performing the functions of an 

SDR within the United States to 

restructure their operations to avoid 

registration with the Commission. 

Moreover, the SDR Exemption is 

conditioned on an MOU or other 

arrangement with each regulator with 

supervisory authority over the non-U.S. 

person that seeks to rely on the SDR 

Exemption. This MOU or arrangement 

will address the Commission’s interest 

in having access to SBS data involving 

U.S. persons and other U.S. market 

participants that is maintained by nonU.S. persons that perform the functions 

of an SDR within the United States and 

in protecting the confidentiality of such 

data. Further, Rule 13n–12 should not 

impair the integrity and accessibility of 

SBS data. The Commission, therefore, 

believes that exempting certain non-U.S. 

persons performing the functions of an 

SDR within the United States, subject to 

the condition described above, will 

likely not significantly affect the 

programmatic benefits that the SDR 

Requirements are intended to 

achieve.1229

Registering with the Commission and 

complying with the SDR Requirements 

will impose certain costs on an SDR.1230

The Commission believes that the SDR 

Exemption is likely to reduce the costs 

for certain non-U.S. persons performing 

the functions of an SDR within the 

United States without reducing the 

expected benefits of the SDR 

Requirements.1231 As discussed in 

Section VI.K.3 of this release, the 

Commission believes that such persons 

will likely be performing the functions 

of an SDR in order to permit persons to 

satisfy reporting requirements under 

foreign law. The exemption, if available, 

will allow these non-U.S. persons to 

continue to perform this function within 

the United States without incurring the 

costs of compliance with the SDR Rules; 

such non-U.S. persons may pass along 

their cost savings to U.S. market 

participants that report to the non-U.S. 

persons pursuant to the market 

participants’ reporting obligations under 

foreign law. Additionally, the 

exemption may reduce the incentive for 

non-U.S. persons performing the 

functions of an SDR within the United 

States to restructure their operations to 

avoid registration with the Commission. 

The Commission recognizes that 

conditioning the SDR Exemption may 

delay the availability of the SDR 

Exemption to certain non-U.S. persons. 

In some cases, the Commission may be 

unable to enter into an MOU or other 

arrangement with each regulator with 

supervisory authority over a non-U.S. 

person performing the functions of an 

SDR within the United States. The 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14533 

1232See Cross-Border Proposing Release, 78 FR at 

31185–31186, supra note 3 (discussing alternatives 

to proposed SDR Exemption). 

1233See Cross-Border Proposing Release, 78 FR at 

31185–31186, supra note 3. 

1234See Cross-Border Proposing Release, 78 FR at 

31185–31186, supra note 3. 

1235 Dodd-Frank Act, Public Law 111–203 at Title 

VII. 

1236 15 U.S.C. 78c(f). 

1237Exchange Act Section 23(a)(2), 15 U.S.C. 

78w(a)(2). 

1238Exchange Act Section 23(a)(2), 15 U.S.C. 

78w(a)(2). 

1239As discussed above, some commenters 

suggested limiting the number of SDRs to one per 

asset class. However, their suggestions concerning 

average total cost and data fragmentation extend to 

one SDR that serves the entire SBS market. See 

Section IV of this release discussing number of 

SDRs. 

1240See Section IV of this release discussing 

number of SDRs. 

resulting delay or unavailability of the 

SDR Exemption may lead some of these 

non-U.S. persons to exit the U.S. market 

by, for example, restructuring their 

business so that they perform the 

functions of an SDR entirely outside the 

United States, potentially resulting in 

business disruptions in the SBS market. 

Despite the potential business 

disruptions in the SBS market that 

could result from the delay or 

unavailability of the SDR Exemption, 

the Commission believes that 

conditioning the SDR Exemption on an 

MOU or other arrangement with each 

regulator with supervisory authority 

over the non-U.S. person that seeks to 

rely on the exemption is important 

because it will help ensure the 

Commission’s access to SBS data 

involving U.S. persons and other U.S. 

market participants that may be 

maintained by such non-U.S. person. 

Finally, in developing its approach to 

the application of the SDR 

Requirements to non-U.S. persons that 

perform the functions of an SDR within 

the United States, the Commission 

considered, as an alternative to Rule 

13n–12, requiring such non-U.S. 

persons to comply with the SDR 

Requirements, including registering 

with the Commission, as well as other 

requirements applicable to SDRs 

registered with the Commission.1232 In 

such a scenario, a non-U.S. person 

performing the functions of an SDR 

within the United States would be 

required to register as an SDR and incur 

the costs associated with the SDR 

Requirements, as well as other 

requirements applicable to SDRs 

registered with the Commission.1233 The 

Commission believes that the benefit of 

requiring all non-U.S. persons that 

perform the functions of an SDR within 

the United States to register with the 

Commission, even where similar 

objectives could be achieved through an 

exemption conditioned on an MOU or 

other arrangement with each regulatory 

authority with supervisory authority 

over such non-U.S. persons, would be 

marginal, particularly in light of the 

costs that such non-U.S. persons would 

incur in complying with the SDR 

Requirements, as well as other 

requirements applicable to SDRs 

registered with the Commission.1234

3. Consideration of Burden on 

Competition and Promotion of 

Efficiency, Competition, and Capital 

Formation 

In developing its approach to the 

registration, duties, and implementation 

of the core principles of SDRs, the 

Commission has focused on meeting the 

goals of Title VII, including promoting 

financial stability and transparency in 

the United States financial system.1235

The Commission has also considered 

the effects of its policy choices on 

competition, efficiency, and capital 

formation as mandated under Exchange 

Act Section 3(f).1236 That section 

requires the Commission, whenever it 

engages in rulemaking pursuant to the 

Exchange Act and is required to 

consider or determine whether an action 

is necessary or appropriate in the public 

interest, to consider, in addition to the 

protection of investors, whether the 

action will promote efficiency, 

competition, and capital formation. In 

addition, Exchange Act Section 23(a)(2) 

requires the Commission, when making 

rules under the Exchange Act, to 

consider the impact such rules would 

have on competition.1237 Section 

23(a)(2) also prohibits the Commission 

from adopting any rule that would 

impose a burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Exchange Act.1238

In Section II of this release, the 

Commission described the baseline used 

to evaluate the economic impact of the 

SDR Rules, including the impact on 

efficiency, competition, and capital 

formation. In particular, the 

Commission noted that the current SBS 

market is characterized by information 

asymmetries that confer a competitive 

advantage on SBS dealers relative to 

their non-dealer counterparties who 

may be less informed. The Commission 

also noted that the opacity of the SBS 

market may lead to certain inefficiencies 

in the market relative to a transparent 

market, including higher transaction 

costs and wider spreads. Finally, the 

Commission noted that some of the 

effects described below, such as the 

effects on capital formation, are 

measured relative to a world without 

public dissemination requirements. 

That is, in evaluating the effect of the 

SDR Rules on capital formation, the 

Commission discusses how the final 

SDR Rules may enhance or diminish 

capital formation relative to the current 

opaque SBS market environment. 

a. Potential Effects on Efficiency 

Two important economic 

characteristics of SDRs are the high 

fixed costs and increasing economies of 

scale. Compliance with the SDR Rules 

necessitates large investments in 

information technology infrastructure, 

including storage infrastructure and 

technology for electronic reporting and 

access to data, which results in high 

fixed costs for SDRs. The Commission 

believes, however, that once the 

infrastructure for operating as an SDR 

and compliance with the SDR Rules is 

in place, the SDR’s costs of accepting 

transactions are minimal. Consequently, 

an SDR exhibits increasing economies of 

scale in that the average total cost to the 

SDR per transaction reported, which 

includes fixed costs, diminishes with 

the increase in volume of trades 

reported as high fixed costs are spread 

over a larger number of trades. 

As a result, viewed in terms of 

minimizing the average SDR-related cost 

per transaction, it may be efficient to 

limit the total number of SDRs to one 

per asset class. In such a case, the SDR 

chosen for each asset class would 

receive reports of all transactions in that 

asset class, reducing inefficient 

duplication of fixed costs and 

potentially giving that SDR a large 

number of transactions over which the 

SDR could spread its high fixed costs. 

Furthermore, limiting the number of 

SDRs to one per asset class would 

reduce the potential difficulties that 

may arise when consolidating and 

aggregating data from multiple 

SDRs.1239 While such a limitation 

would resolve many of the challenges 

involved in aggregating SBS data, the 

Commission is not limiting the number 

of SDRs.1240 There are competitive 

benefits to having multiple SDRs, as 

discussed below. Furthermore, the 

existence of multiple SDRs may reduce 

operational risks, such as the risk that 

a catastrophic event or the failure of an 

SDR leaves no registered SDR to which 

transactions can be reported, impeding 

the functioning of the SBS market. 

Nevertheless, the Commission 

believes that multiple SDRs may result 

in certain inefficiencies relative to a 

market with a single SDR per asset class, 

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14534 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1241See Sections II.A and IV of this release. 

1242 15 U.S.C. 78m(n). 

1243See Section VI.K of this release discussing the 

SDR Exemption. 

1244 Informational or price efficiency refers to the 

degree to which asset prices reflect available 

information about the value of the asset. See, e.g., 

Eugene Fama, Efficient Capital Market II, 46(5) 

Journal of Finance 1575 (1991). 

1245See Section II.A of this release. 

1246See Section II.B of this release. 

1247See Section VIII.D.1.b of the release 

discussing cost of certification and opinion of 

counsel. 

1248See IIB CB, supra note 26. 

as explained above.1241 In particular, 

the potential reporting of transaction 

data to multiple SDRs may create a need 

to aggregate that data by the 

Commission and other interested 

parties. If aggregation of data is made 

difficult because identifiers or data field 

definitions used by different SDRs are 

not compatible, then the cost and time 

required by the Commission or any 

other interested party to aggregate the 

data would increase, and the 

Commission’s oversight of the SBS 

market would be less efficient. The 

complications associated with 

aggregation could be particularly costly 

when aggregation is required across the 

same asset class and related transactions 

reside in different SDRs. 

On the other hand, by allowing the 

creation of multiple SDRs, Exchange Act 

Section 13(n) 1242 and the SDR Rules 

may result in positive effects for market 

participants. Competition among SDRs 

may lead to better services and may 

reduce the costs of those services for 

market participants. As discussed 

above, there are currently four swap 

data repositories for equity or credit 

swaps that are provisionally registered 

with the CFTC and that may choose to 

register with the Commission as SDRs. 

While some swap data repositories may 

ultimately choose not to register and 

operate as an SDR, either because of 

regulatory requirements that govern 

SDRs or for other reasons, the 

Commission is not limiting the number 

of SDRs per asset class. 

Furthermore, the Commission 

believes that the SDR Exemption may 

have positive effects on operational 

efficiency for SDRs, in terms of cost 

savings relative to a scenario where the 

SDR Exemption does not exist. The 

Commission believes that the exemption 

will allow certain non-U.S. persons to 

continue to receive data reported 

pursuant to the reporting requirements 

of a foreign jurisdiction without 

registering with the Commission as an 

SDR, subject to a condition that helps 

ensure that the privacy of the data and 

the Commission’s access to the data is 

maintained. The SDR Exemption may 

also reduce the incentives for SDRs to 

restructure their operations to avoid 

triggering registration requirements, 

thereby reducing potentially negative 

effects on efficiency.1243 In particular, 

some persons may restructure solely for 

the purposes of avoiding registration; in 

such restructurings, persons expend 

resources that could potentially be put 

to more productive uses. 

Viewed in the context of the broader 

transparency goals of Title VII, the SDR 

Rules may provide additional 

informational (or price) efficiency 

benefits in terms of asset valuation.1244

That is, by improving the flow of 

information about SBSs and the 

reference entities underlying SBSs, the 

SDR Rules may result in a market where 

prices of SBSs and their underlying 

reference entities more accurately reflect 

their fundamental value. The SDR 

Rules, together with the reporting and 

public dissemination requirements of 

Regulation SBSR, should also promote 

the process by which market 

participants seek the best available 

price. Increased availability of 

information may lead to a reduction in 

the spread between the price at which 

market participants can enter into an 

SBS and the fundamental value of that 

SBS (referred to as implicit trading costs 

in this release).1245 Real-time 

transaction pricing and volume 

information provide signals to market 

participants about the value of their 

investments. Market participants may 

use these signals to update their 

assessment of the value of an 

investment opportunity. In contrast to 

an opaque market, information revealed 

through trades that are reported and 

publicly disseminated allows market 

participants to make more-informed 

assessments of asset valuations, 

promoting informational efficiency. 

This should be true for the underlying 

assets or reference entities as well. That 

is, information from SBS transactions 

provides signals not only about SBS 

valuation, but also about the value of 

reference assets underlying SBSs. 

b. Potential Effects on Competition 

The Commission believes that by 

allowing multiple SDRs to provide data 

collection, maintenance, and 

recordkeeping services, the SDR Rules 

should promote competition among 

SDRs. The Commission notes that, in an 

analogous setting, there are currently 

four swap data repositories 

provisionally registered with the CFTC, 

suggesting that multiple SDRs 

competing in the SBS market is a likely 

outcome.1246 Increased competition may 

lower costs for users of SDR services. 

The Commission believes that 

because the SDR Rules do not preclude 

an SDR from registering with the 

Commission and other foreign relevant 

authorities, non-resident SDRs generally 

can take steps to comply with both their 

home country requirements and the 

SDR Rules, and therefore can register 

with the Commission. The Commission 

recognizes that a non-resident SDR will 

incur additional burdens in making the 

certification or providing the opinion of 

counsel required by Exchange Act Rule 

13n–1(f), and that these burdens may 

place non-resident SDRs at a 

competitive disadvantage relative to 

resident SDRs.1247 The Commission 

believes that by subjecting non-resident 

SDRs to the same requirements as 

resident SDRs in all other respects—e.g., 

requiring all SDRs to provide prompt 

access to books and records and submit 

to onsite inspection and examination— 

the SDR Rules do not give a significant 

competitive advantage to either resident 

or non-resident SDRs. As a result, the 

Commission believes that the SDR Rules 

should promote competition among 

SDRs both domestically and 

internationally. 

The Commission recognizes that there 

may be competitive effects due to the 

jurisdictional divide between the CFTC 

and the Commission with respect to 

swaps and SBSs. Swap data repositories 

that are registered only with the CFTC 

may compete against SDRs that are 

registered only with the Commission, 

and vice versa, for acceptance of mixed 

swaps. As noted by commenters, 

divergent regulatory frameworks could 

lead to ‘‘undue costs or burdens’’ for 

SDRs and SBS market participants.1248

To the extent that the SDR Rules contain 

provisions that are more burdensome 

than the CFTC’s rules, the SDR Rules 

could hinder (1) an SDR registered with 

only the Commission from competing 

against a swap data repository registered 

with only the CFTC for acceptance of 

mixed swaps, and (2) an SDR registered 

with both the Commission and the 

CFTC from competing against a swap 

data repository registered with only the 

CFTC for acceptance of CFTC-regulated 

swaps. On the other hand, if the SDR 

Rules are less burdensome than the 

CFTC’s rules, then an SDR registered 

with only the Commission may enjoy a 

competitive advantage relative to (1) a 

swap data repository registered with 

only the CFTC for acceptance of mixed 

swaps, and (2) an SDR registered with 

both the Commission and the CFTC for 

acceptance of SBSs. 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14535 

1249See Section I.D of this release. 

1250See DTCC 2, supra note 19 (stating that ‘‘[t]he 

Commission’s proposed required practices are 

generally consistent with those of’’ the commenter’s 

trade repository). 

1251See Section II.A of this release. 

1252See Martin D.D. Evans and Richard K. Lyons, 

Exchange Rate Fundamentals and Order Flow, 

NBER Working Paper No. 13151 (June 2007), 

available at: http://128.97.165.17/media/files/

evans_lyons.pdf (finding evidence, based on data 

regarding end-user currency trades, that transaction 

flows forecast future macroeconomic variables such 

as output growth, money growth, and inflation). 

1253See Section II.A of this release discussing 

transparency in the SBS market. 

1254See Philip Bond, Alex Edmans, and Itay 

Goldstein, The Real Effects of Financial Markets, 4 

Annual Review of Financial Economics 339 (2012) 

(reviewing the theoretical literature on the feedback 

between financial market prices and the real 

economy). 

1255See Section VIII.C.3.a of this release 

discussing the effect of competition between SDRs 

on the prices of SDR services. 

As stated above, the Commission 

believes that the SDR Rules and the 

CFTC’s final rules governing swap data 

repositories’ registration, duties, and 

core principles are largely 

consistent.1249 Indeed, the Commission 

believes that, on the whole, the SDR 

Rules are substantially similar to those 

adopted by the CFTC for swaps, and 

that any differences are not significant 

enough to reduce the ability of SECregistered SDRs to compete against 

CFTC-registered swap data repositories 

for acceptance of mixed swaps.1250

Thus, the Commission does not believe 

that the SDR Rules, as a result of the 

jurisdictional divide between the 

Commission and the CFTC, will 

negatively affect competition in the 

market for acceptance of mixed swaps. 

Finally, in addition to affecting 

competition among SDRs, the SDR 

Rules have implications for competition 

among market participants. As 

discussed above, by observing order 

flow, SBS dealers may have access to 

information not available to the broader 

market, and therefore may enjoy a 

competitive advantage over their nondealer counterparties.1251 Because price 

and volume information (revealed to 

SBS dealers through their observation of 

order flow) contains signals about the 

value of investment opportunities, SBS 

dealers are able to use private 

information about order flow to derive 

more-informed assessments of current 

market values, allowing them to extract 

economic rents from less-informed 

counterparties.1252 Impartial access to 

pricing and volume information should 

allow market participants to derive 

more-informed assessments of asset 

valuations, reducing SBS dealers’ 

market power over other market 

participants. Additionally, price 

transparency should also promote 

competition among SBS dealers. The 

Commission expects that, as in other 

securities markets, quoted bids and 

offers should form and adjust according 

to reported, executed trades. 

c. Potential Effects on Capital Formation 

The Commission believes that 

compliance with the SDR Rules will 

promote data collection, maintenance, 

and recordkeeping. In conjunction with 

Regulation SBSR, including its public 

dissemination requirements, the SDR 

Rules will likely have a positive effect 

on transparency in credit markets by 

increasing information about the SBS 

market. In particular, the definition of 

an SDR, which identifies persons that 

may be required to register with the 

Commission and thereby required to 

comply with the public dissemination 

requirements of Regulation SBSR, and 

the data accuracy and maintenance 

requirements in the SDR Rules, should 

have a positive effect by making 

comprehensive, accurate information 

available to all market participants. The 

increased availability of information 

should enable persons that rely on the 

SBS market to meet their hedging 

objectives to make better decisions 

about capital formation in general, 

which may positively affect capital 

formation in the broader capital market. 

In particular, improved transparency in 

the SBS market should improve the 

quality and quantity of price 

information available in the SBS market, 

so that SBS prices more accurately 

reflect fundamental value and risk. 

Improved insight into the relationship 

between price and risk could attract 

hedgers and other market participants 

that do not benefit from opacity, 

improving liquidity and increasing 

opportunities for market participants to 

diversify and share risks through trading 

SBS.1253

Similarly, the Commission expects 

increased transparency in the SBS 

market to benefit the broader economy. 

Similar to the derivatives markets 

providing signals about the valuation of 

underlying reference entities, 

transparent SBS prices provide signals 

about the quality of a reference entity’s 

business investment opportunities. 

Because market prices incorporate 

information about the value of 

underlying investment opportunities, 

market participants can use their 

observations of price and volume to 

derive assessments of the profitability of 

a reference entity’s business and 

investment opportunities. Furthermore, 

business owners and managers can use 

information gleaned from the SBS 

market—both positive and negative—to 

make more-informed investment 

decisions in physical assets and capital 

goods, as opposed to investment in 

financial assets, thereby promoting 

efficient resource allocation and capital 

formation in the real economy. Finally, 

transparent SBS prices may also make it 

easier for firms to obtain new financing 

for business opportunities, by providing 

information and reducing uncertainty 

about the value and profitability of a 

firm’s investments.1254

The SDR Rules are intended to help 

the Commission perform its oversight 

functions in a more effective manner. 

For example, a more complete picture of 

the SBS market, including information 

on risk exposures and asset valuations, 

should allow the Commission to better 

assess risk in the SBS market and 

evaluate the effectiveness of the 

Commission’s regulation of the SBS 

market. Appropriate and timely 

regulatory responses to market 

developments could enhance investor 

protection, and could encourage greater 

participation in the SBS market, thereby 

improving risk-sharing opportunities 

and efficient capital allocation. In 

addition, the SBS data provided by 

SDRs to the Commission should help it 

advance the goals of the Dodd-Frank 

Act, thereby promoting stability in the 

overall capital markets. Increased 

overall stability in the capital markets 

could promote investor participation, 

thereby increasing liquidity and capital 

formation. 

Finally, to the extent that the SDR 

Rules promote competition among 

SDRs, as discussed above, the SDR 

Rules may lower costs for users of SDR 

services.1255 Decreased costs may 

promote capital formation by increasing 

the amount of capital available for 

investment by users of SDR services. 

D. Costs and Benefits of Specific Rules 

1. Registration Requirements, Form 

SDR, and Withdrawal From Registration 

Rule 13n–1 and Form SDR describe 

the information that a person must file 

to register as an SDR and also provide 

for interim amendments and required 

annual amendments that must be filed 

within 60 days after the end of each 

fiscal year of the SDR and that these 

filings must be in a tagged data format. 

Each non-resident SDR is required to (i) 

certify on Form SDR that the SDR can, 

as a matter of law, and will provide the 

Commission with prompt access to the 

SDR’s books and records and can, as a 

matter of law, and will submit to onsite 

inspection and examination by the 

Commission and (ii) provide an opinion 

of counsel that the SDR can, as a matter 

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14536 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1256See Sections VI.B of this release discussing 

Rule 13n–2. 

1257See Sections VI.C of this release discussing 

Rule 13n–3. 

1258See 15 U.S.C. 78m(n). 

1259See Regulation S–T, 17 CFR 232; see also 

Electronic Filing and Revision of Form D, Securities 

Act Release No. 8891 (Feb. 6, 2008), 73 FR 10592 

(Feb. 27, 2008); Interactive Data to Improve 

Financial Reporting, Securities Act Release No. 

9002 (Jan. 30, 2009), 74 FR 6776 (Feb. 10, 2009); 

Interactive Data for Mutual Fund Risk/Return 

Summary, Securities Act Release No. 9006 (Feb. 11, 

2009), 74 FR 7748 (Feb. 19, 2009); Amendments to 

Rules for National Recognized Statistical Rating 

Organizations, Exchange Act Release No. 61050 

(Nov. 23, 2009), 74 FR 63832 (Dec. 4, 2009); Money 

Market Fund Reform, Investment Company Release 

No. 29132 (Feb. 23, 2010), 75 FR 10060 (Mar. 4, 

2010). 

1260See Proposing Release, 75 FR at 77355, supra 

note 2. 

1261See Section VII.D.1 of this release discussing 

the cost of SDR registration. 

1262The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Attorney and a Compliance Clerk. Data from 

SIFMA’s Management & Professional Earnings in 

the Securities Industry 2013, modified by 

Commission staff to account for an 1800-hour workyear and multiplied by 5.35 to account for bonuses, 

firm size, employee benefits, and overhead, suggest 

that the cost of a Compliance Clerk is $64 per hour. 

Thus, the total one-time estimated dollar cost of 

complying with the initial registration-related 

requirements is $79,384 per SDR and $793,840 for 

all SDRs, calculated as follows: (Compliance 

Attorney at $334 per hour for 180 hours) + 

(Compliance Clerk at $64 per hour for 301 hours) 

× (10 registrants) = $793,840. 

1263The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Attorney and a Compliance Clerk. Thus, the total 

estimated dollar cost of complying with the ongoing 

registration-related requirements is $5,544 per year 

per SDR and $55,440 per year for all SDRs, 

calculated as follows: (Compliance Attorney at $334 

per hour for 12 hours) + (Compliance Clerk at $64 

per hour for 24 hours) × (10 registrants) = $55,440. 

1264See Section VII.D.1 of this release discussing 

the cost of filing Form SDR to withdraw from 

registration. 

1265The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Attorney. Thus, the total estimated dollar cost of 

complying with the requirements related to 

withdrawal from registration is $4,008 per year per 

SDR and $4,008 per year for all SDRs, calculated 

as follows: (Compliance Attorney at $334 per hour 

for 12 hours) × (1 SDR withdrawing) = $4,008. 

1266See Section VII.D.1 of this release discussing 

the cost of non-resident SDRs’ certification on Form 

SDR and opinion of counsel. 

1267See Section VII.C.1 of this release discussing 

the number of non-resident SDRs. 

1268The Commission estimates that an SDR will 

assign these responsibilities to an Attorney. Data 

from SIFMA’s Management & Professional Earnings 

in the Securities Industry 2013, modified by 

Commission staff to account for an 1800-hour workyear and multiplied by 5.35 to account for bonuses, 

firm size, employee benefits, and overhead, suggest 

that the cost of an Attorney is $380 per hour. Thus, 

the total estimated dollar cost of complying with 

the requirements of Rule 13n–1(f) is $1,280 per year 

per SDR and $3,840 per year for all SDRs, 

calculated as follows: ($900 for outside legal 

services + (Attorney at $380 per hour for 1 hour)) 

× (3 non-resident registrants) = $3,840. 

of law, provide the Commission with 

access to the books and records of such 

SDR and can, as a matter of law, submit 

to onsite inspection and examination by 

the Commission. Rule 13n–2 sets forth 

the process by which a registered SDR 

would withdraw its registration or have 

its registration revoked or cancelled.1256

Rule 13n–3 sets forth the registration 

process for a successor to a registered 

SDR.1257 These rules and Form SDR are 

adopted pursuant to the Commission’s 

rulemaking authority under Exchange 

Act Section 13(n).1258

a. Benefits 

The rules and Form SDR described in 

this section provide for the registration 

of SDRs, withdrawal from registration, 

revocation and cancellation of the 

registration, and successor registration 

of SDRs. Congress enacted the new 

registration requirements as part of the 

Dodd-Frank Act in order to increase the 

transparency in the SBS market. The 

registration process will further the 

Dodd-Frank Act’s goals by assisting the 

Commission in overseeing and 

regulating the SBS market. The 

requirement that a non-resident SDR (i) 

certify that the SDR can, as a matter of 

law, and will provide the Commission 

with prompt access to the SDR’s books 

and records and can, as a matter of law, 

and will submit to onsite inspection and 

examination by the Commission and (ii) 

provide an opinion of counsel that it 

can, as a matter of law, provide the 

Commission with access to the SDR’s 

books and records and can, as a matter 

of law, submit to inspection and 

examination will allow the Commission 

to evaluate an SDR’s ability to meet the 

requirements for registration and to 

conduct ongoing oversight. 

The information required to be 

provided in Form SDR is necessary to 

enable the Commission to assess 

whether an applicant has the capacity to 

perform the duties of an SDR and to 

comply with the duties, core principles, 

and other requirements imposed on 

SDRs pursuant to Exchange Act Section 

13(n) and the rules and regulations 

thereunder. 

The requirement that SDRs file Form 

SDR in a tagged data format will 

facilitate review and analysis of 

registration materials by Commission 

staff and, to the extent such materials 

are made public, the public This 

requirement is consistent with the 

Commission’s longstanding efforts to 

increase transparency and the 

usefulness of information by requiring 

the data tagging of information 

contained in electronic filings in order 

to improve the accuracy of submitted 

information, including financial 

information, and facilitate its 

analysis.1259

The Commission solicited comments 

on the benefits associated with the 

registration-related rules and Form 

SDR.1260 The Commission did not 

receive any comments specifically 

addressing these benefits. 

b. Costs 

The Commission anticipates that the 

primary costs to SDRs from the 

registration-related rules and Form SDR 

result from the requirement to complete 

Form SDR and any amendments thereto. 

As discussed above, the Commission 

estimates that the average initial 

paperwork cost of SDR registration will 

be 481 hours per SDR and the average 

ongoing paperwork cost of interim and 

annual updated Form SDR will be 36 

hours for each registered SDR.1261

Assuming a maximum of ten SDRs, the 

aggregate one-time estimated dollar cost 

will be $793,840 1262 and the aggregate 

ongoing estimated dollar cost per year 

will be $55,440 1263 to comply with the 

rule. 

As discussed above, the Commission 

estimates that the average initial 

paperwork cost of filing a Form SDR to 

withdraw from registration will be 12 

hours per SDR.1264 Assuming that, at 

most, one SDR per year would 

withdraw, the aggregate one-time 

estimated dollar cost will be $4,008 1265

to comply with the rule. 

As discussed above, the Commission 

estimates that the average initial 

paperwork cost for each non-resident 

SDR to (i) certify on Form SDR that the 

SDR can, as a matter of law, and will 

provide the Commission with prompt 

access to the SDR’s books and records 

and can, as a matter of law, and will 

submit to onsite inspection and 

examination by the Commission and (ii) 

provide an opinion of counsel that the 

SDR can, as a matter of law, provide the 

Commission with prompt access to the 

SDR’s books and records can, as a 

matter of law, and submit to onsite 

inspection and examination will be 1 

hour and $900 per SDR.1266 Assuming 

a maximum of three non-resident 

SDRs,1267 the aggregate one-time 

estimated dollar cost will be $3,840.1268

The Commission believes that the 

costs of filing Form SDR in a tagged data 

format beyond the costs of collecting the 

required information, will be minimal. 

The Commission does not believe that 

these costs will be significant, as largescale changes will likely not be 

necessary for most modern data 

management systems to output 

structured data files, particularly for 

widely used file formats such as XML. 

XML is a widely used file format, and 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14537 

1269See Proposing Release, 75 FR at 77355, supra 

note 2. 

1270See Proposing Release, 75 FR at 77355, supra 

note 2. 

1271ESMA, supra note 19. 

1272Although one commenter expressed concern 

that non-resident SDRs would be subject to a 

stricter regulatory regime because of the 

certification and opinion of counsel requirements, 

the commenter did not comment specifically on the 

Commission’s estimates of the costs of providing 

such an opinion. See ESMA, supra note 19. 

1273See DTCC 3, supra note 19. 

1274See Section VI.A.1.c of this release discussing 

rulebooks. 

1275See DTCC 2, supra note 19; see also DTCC 

3, supra note 19 (suggesting adopting a joint 

registration form with the CFTC that would include 

SIP registration). 

1276See Section VI.A.1.c of this release discussing 

Form SDR. 

1277See DTCC 3, supra note 19. 

1278See Section VI.A.1.c of this release discussing 

Form SDR. 

1279See ICE CB, supra note 26. 

1280See Proposing Release, 75 FR at 77314, supra 

note 2. 

1281See Effective Date Order, 76 FR at 36306, 

supra note 9. 

1282See Section V.C of this release discussing the 

Compliance Date. 

1283See Section VI.A.3 of this release discussing 

temporary registration. 

based on the Commission’s 

understanding of current practices, it is 

likely that most reporting persons and 

third party service providers have 

systems in place to accommodate the 

use of XML. 

The Commission solicited comment 

on the estimated costs associated with 

the registration-related rules and Form 

SDR.1269 The Commission specifically 

requested comment on the estimated 

number of respondents that would be 

filing Form SDR and the initial costs 

associated with completing the 

registration form and the ongoing 

annual costs of completing the required 

amendments.1270

One commenter expressed concern 

about non-resident SDRs being subject 

to a stricter regime than resident SDRs 

because of the non-resident SDRs’ 

obligation to provide a certification and 

opinion of counsel under Rule 13n– 

1(f).1271 The Commission acknowledges 

that non-resident SDRs may incur costs 

in providing the certification and 

opinion of counsel. The Commission 

believes, however, that these costs may 

be avoided to the extent that nonresident SDRs are able to take advantage 

of the SDR Exemption. 

The Commission did not receive any 

other comments on the estimated costs 

associated with the registration-related 

rules and Form SDR.1272

c. Alternatives 

Following one commenter’s 

suggestion, the Commission considered 

requiring an SDR applicant to submit its 

rulebook 1273 with its initial Form SDR. 

As discussed above, the Commission 

has not adopted this approach because 

an SDR is already required to provide 

policies and procedures on Form SDR, 

and the Commission believes that most 

of the information that would be 

contained in a rulebook would be filed 

as part of an SDR’s policies and 

procedures.1274 If an SDR’s rulebook is 

broader than its policies and 

procedures, however, an SDR may 

submit its rulebook to the Commission 

to assist the Commission in better 

understanding the context of the SDR’s 

policies and procedures or how the 

policies and procedures relate to one 

another. 

In accordance with one commenter’s 

suggestion,1275 the Commission 

amended Form SDR to accommodate 

SIP registration, as discussed above.1276

The Commission considered requiring 

persons to register as an SDR and SIP on 

two separate forms, but determined not 

to do so because the costs to SDRs to 

make multiple filings of separate Form 

SDR and Form SIP would not provide 

any measureable benefits to the 

Commission. 

The Commission considered, in 

accordance with one commenter’s 

suggestion,1277 adopting a joint form 

with the CFTC for SDR and swap data 

repository registration. As discussed 

above, the Commission believes that it 

is necessary to maintain separate 

registration so that each agency’s form 

remains tailored to the particular needs 

of that agency.1278 For example, the 

Commission is revising Form SDR to 

accommodate SIP registration, while the 

CFTC’s form accommodates only swap 

data repository registration. Moreover, 

adopting a joint form may impose costs 

and cause uncertainty for dual 

registrants because the CFTC would be 

required to amend its form, which it has 

already adopted, at a time when the 

industry is still in the implementation 

phase and some swap data repositories 

are already provisionally registered with 

the CFTC. Finally, because the CFTC’s 

registration form for swap data 

repositories is substantially similar to 

the Commission’s Form SDR, the 

Commission does not anticipate that 

filing with each commission separately 

will entail a significant cost for a dual 

registrant. The Commission is sensitive 

to the potential costs imposed by 

duplicative forms, but believes that 

these costs are justified by the need of 

having a form specifically tailored to the 

SDR registration scheme. 

The Commission considered the 

request of one commenter, which is 

provisionally registered with the CFTC 

as a swap data repository, for expedited 

review of the commenter’s application 

for registration as an SDR.1279 Although 

it is not clear what the commenter 

means by ‘‘expedited review,’’ the 

Commission believes that it is necessary 

to conduct a review of an SDR’s 

application for registration independent 

of the CFTC’s review of a swap data 

repository’s application for registration. 

Moreover, the Commission believes that 

the procedures for reviewing 

applications for registration as an SDR 

that the Commission is adopting in this 

release provide reasonable timeframes 

for the Commission’s review of the 

applications. These procedures are 

consistent with how the Commission 

reviews the applications of other 

registrants, such as SIPs and registered 

clearing agencies. The Commission 

believes that each SDR applicant, 

including an applicant who is 

provisionally registered with the CFTC, 

needs to demonstrate that it 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 

provision of the federal securities laws 

and the rules and regulations 

thereunder, and carry out its functions 

in a manner consistent with the 

purposes of Exchange Act Section 13(n) 

and the rules and regulations 

thereunder. 

Finally, the Commission considered 

providing a method for temporary 

registration, as proposed.1280 As 

discussed above, the Commission 

believes that the exemptive relief 

provided by the Commission in the 

Effective Date Order, which was 

effective on June 15, 2011, addressed 

the primary purpose for temporary 

registration.1281 The Commission also 

believes that the Compliance Date for 

the SDR Rules1282 should provide 

sufficient time for SDRs to analyze and 

understand the final SDR Rules, to 

develop and test new systems required 

to comply with the Dodd-Frank Act’s 

provisions governing SDRs and the SDR 

Rules, to prepare and file Form SDR, to 

demonstrate their ability to meet the 

criteria for registration set forth in Rule 

13n–1(c)(3), and to obtain registration 

with the Commission.1283 For these 

reasons, the Commission no longer 

believes that a temporary registration 

regime for SDRs is necessary or 

appropriate. 

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14538 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1284See Sections VI.D.2.c, VI.E, and VI.F.3 of this 

release discussing Rules 13n–4(b)(2) and (4), 13n– 

5, and 13n–6, respectively. 

1285See also Exchange Act Section 13(n)(5)(D)(i), 

15 U.S.C. 78m(n)(5)(D)(i) (requiring an SDR to 

provide direct electronic access to the Commission 

or any of its designees). 

1286See Section VI.E of this release discussing 

Rule 13n–5. 

1287See Section VI.F.3 of this release discussing 

Rule 13n–6. 

1288 15 U.S.C. 78m(n)(4)(B). 

1289See Regulation SBSR Adopting Release, 

supra note 13. 

1290See Section VI.D.2.c.ii of this release 

discussing direct electronic access. 

1291See Proposing Release, 75 FR at 77357, supra 

note 2. 

2. SDR Duties, Data Collection and 

Maintenance, and Direct Electronic 

Access 

Rules 13n–4(b)(2)–(7), 13n–5, and 

13n–6 include various requirements 

relating to SDRs’ information 

technology systems. Rules 13n–4(b)(2)– 

(7), 13n–5, and 13n–6 set forth the 

duties of an SDR, including an SDR’s 

collection, maintenance, and analysis of 

transaction data and other records.1284

Under Rules 13n–4(b)(2) and (4), an 

SDR is required to accept data as 

prescribed in Regulation SBSR and 

maintain transaction data and related 

identifying information as required by 

Rule 13n–5(b)(4). Rule 13n–4(b)(5) 

states that each SDR must provide direct 

electronic access to the Commission or 

any of its designees.1285

Rule 13n–5 establishes requirements 

for data collection and maintenance.1286

Rule 13n–5(b) requires, among other 

things, an SDR to promptly record 

transaction data and to establish, 

maintain, and enforce written policies 

and procedures reasonably designed (1) 

for reporting complete and accurate 

transaction data to the SDR; (2) to satisfy 

itself that the transaction data submitted 

to it is complete and accurate; (3) to 

calculate positions for all persons with 

open SBSs for which the SDR maintains 

records; (4) to ensure that the 

transaction data and positions that it 

maintains are complete and accurate; 

and (5) to prevent any provision in a 

valid SBS from being invalidated or 

modified through the procedures or 

operations of the SDR. Rule 13n–5(b)(4) 

establishes requirements related to the 

formats in which and time periods for 

which an SDR must maintain 

transaction data, related identifying 

information, and positions. Rule 13n– 

5(b)(7) requires an SDR that ceases 

doing business, or ceases to be 

registered pursuant to Exchange Act 

Section 13(n), to preserve, maintain, and 

make accessible the transaction data and 

historical positions for the remainder of 

the time period required by Rule 13n– 

5. 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). 

Rule 13n–6 requires SDRs, with 

respect to those systems that support or 

are integrally related to the performance 

of their activities, establish, maintain, 

and enforce written policies and 

procedures reasonably designed to 

ensure that their systems provide 

adequate levels of capacity, integrity, 

resiliency, availability, and security.1287

a. Benefits 

The rules discussed in this section 

will enhance the Commission’s ability 

to oversee the SBS market beyond that 

in the current voluntary reporting 

system. The Commission’s ability to 

oversee the SBS market and benefits of 

SDRs to the market depend on the 

accuracy and reliability of the data 

maintained by SDRs. Exchange Act 

Section 13(n)(4)(B) specifically instructs 

the Commission to ‘‘prescribe data 

collection and maintenance standards 

for’’ SDRs.1288 The rules related to an 

SDR’s information technology and 

related policies and procedures are 

designed to facilitate accurate data 

collection and retention with respect to 

SBSs in order to promote transparency 

with respect to the SBS market. 

The ability of the Commission to 

oversee the SBS market and detect 

fraudulent activity depends on the 

Commission having access to accurate 

current and historical market data. In 

particular, the direct electronic access 

requirement described in Rule 13n– 

4(b)(5) will permit the Commission to 

carry out these responsibilities in a 

more effective and more efficient 

manner. The requirement that each SDR 

make and keep current a plan to ensure 

that SBS data recorded in such SDR 

continues to be maintained is essential 

to ensure that the Commission will 

continue to have access to and the 

ability to analyze SBS data in the event 

that the SDR ceases to do business. 

The requirements in the rules 

discussed in this section are likely to 

create benefits that will follow from 

providing the Commission with access 

to SBS market information. Pursuant to 

the rules discussed in this section, in 

conjunction with Regulation SBSR,1289

SDRs will receive and maintain 

systemically important SBS transaction 

data from multiple market participants. 

This data will increase transparency 

about activity in the SBS market. In 

addition, this data will enhance the 

ability of the Commission to respond to 

market developments. 

Benefits also may accrue from the 

Commission’s ability to use SBS data in 

order to oversee the SBS market for 

illegal conduct. For example, data 

collected by SDRs will enhance the 

Commission’s ability to detect and deter 

fraudulent and manipulative activity 

and other trading abuses in connection 

with the SBS market, conduct 

inspections and examinations to 

evaluate the financial responsibility and 

soundness of market participants, and 

verify compliance with the statutory 

requirements and duties of SDRs. This 

data may also help the Commission 

identify fraudulent or other predatory 

market activity. Increasing market 

participants’ confidence that the 

likelihood of illegal or fraudulent 

activity is low and that the likelihood 

that they will suffer economic loss from 

such illegal or fraudulent activity is low 

will reduce the prices at which they are 

willing to use SBS to hedge market risks 

to which they are exposed, which 

should, in turn, encourage participation 

in the SBS market. 

The richness of data collected by 

SDRs also may facilitate market 

analysis. For example, the Commission 

may review market activity through the 

study of SBS transactions, which may 

help assess the effectiveness of the 

Commission’s regulation of the SBS 

market. Such reviews can inform the 

Commission on the need for 

modifications to these and other rules as 

the market evolves. 

The Commission recognizes that these 

benefits may be reduced to the extent 

that SBS market data is fragmented 

across multiple SDRs. Fragmentation of 

SBS market data may impose costs on 

any user of this data associated with 

consolidating, reconciling, and 

aggregating that data. As discussed 

above, the Commission believes that the 

form and manner with which an SDR 

provides the data to the Commission 

should not only permit the Commission 

to accurately analyze the data 

maintained by a single SDR, but also 

allow the Commission to aggregate and 

analyze data received from multiple 

SDRs.1290

SDRs also may create economic 

benefits for market participants by 

providing non-core services, such as 

facilitating the reporting of life cycle 

events, asset servicing, or payment 

calculations. These activities may be 

less costly to perform when SBS market 

data is centrally located and accessible. 

The Commission solicited comment 

on the benefits related to Rules 13n– 

4(b)(2)–(7), 13n–5, and 13n–6.1291 The 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14539 

1292See Proposing Release, 75 FR at 77357, supra 

note 2. 

1293See Section VII.D.2 of this release discussing 

the costs of creating SDR information technology 

systems. 

1294The Commission estimates that an SDR will 

assign these responsibilities to an Attorney, a 

Compliance Manager, a Programmer Analyst, and a 

Senior Business Analyst. Data from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1800-hour work-year and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead, suggest that the 

cost of a Compliance Manager is $283 per hour, a 

Programmer Analyst is $220 per hour, and a Senior 

Business Analyst is $251 per hour. Thus, the total 

initial estimated dollar cost will be $21,081,000 per 

SDR and $210,810,000 for all SDRs, calculated as 

follows: ($10,000,000 for information technology 

systems + (Attorney at $380 per hour for 7,000 

hours) + (Compliance Manager at $283 per hour for 

8,000 hours) + (Programmer Analyst at $220 per 

hour for 20,000 hours) + (Senior Business Analyst 

at $251 per hour for 7,000 hours)) × 10 registrants 

= $210,810,000. 

1295The Commission estimates that an SDR will 

assign these responsibilities to an Attorney, a 

Compliance Manager, a Programmer Analyst, and a 

Senior Business Analyst. Thus, the total ongoing 

estimated dollar cost will be $12,648,600 per SDR 

and $126,486,000 for all SDRs, calculated as 

follows: ($6,000,000 for information technology 

systems + (Attorney at $380 per hour for 4,200 

hours) + (Compliance Manager at $283 per hour for 

4,800 hours) + (Programmer Analyst at $220 per 

hour for 12,000 hours) + (Senior Business Analyst 

at $251 per hour for 4,200 hours)) × 10 registrants 

= $126,486,000. 

1296See SDR Proposing Release, 75 FR at 77357, 

supra note 2. Indeed, the Commission notes that 

one commenter, which currently operates a trade 

repository, stated that ‘‘[t]he Commission’s 

proposed required practices are generally consistent 

with those of’’ the commenter’s trade repository. 

DTCC 2, supra note 19. 

1297See Section VII.D.2 of this release discussing 

the costs of developing policies and procedures 

necessary to comply with Rules 13n–5(b)(1), (2), (3), 

and (5) and 13n–6. 

1298The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Manager, an Attorney, a Senior Systems Analyst, 

and an Operations Specialist. Data from SIFMA’s 

Management & Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1800-hour work-year and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead, suggest that the 

cost of a Senior Systems Analyst is $260 per hour 

and the cost of an Operation Specialist is $125 per 

hour. Thus, the total initial estimated dollar cost 

will be $418,530 per SDR and $4,185,300 for all 

SDRs, calculated as follows: ($100,000 for outside 

legal services + (Compliance Manager at $283 per 

hour for 385 hours) + (Attorney at $380 per hour 

for 435 hours) + (Senior Systems Analyst at $260 

per hour for 115 hours) + (Operations Specialist at 

$125 per hour for 115 hours)) × 10 registrants = 

$4,185,300. 

1299The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Manager and an Attorney. Thus, the total ongoing 

estimated dollar cost will be $96,540 per SDR and 

$965,400 for all SDRs, calculated as follows: 

((Compliance Manager at $283 per hour for 180 

hours) + (Attorney at $380 per hour for 120 hours)) 

× 10 registrants = $965,400. 

1300Cf. DTCC 2, supra note 19 (stating that ‘‘[t]he 

Commission’s proposed required practices are 

generally consistent with those of’’ the commenter’s 

trade repository). 

1301See Section VII.D.2 of this release discussing 

the costs of Rules 13n–4(b)(2)–(7), 13n–5, and 13n– 

6. 

Commission specifically requested 

comment on whether any additional 

benefits would accrue if the 

Commission imposed further, more 

specific technology-related 

requirements.1292 The Commission 

received no comments on the estimated 

benefits of the rules discussed in this 

section. 

b. Costs 

The Commission anticipates that the 

primary costs to SDRs, particularly 

those that are not already registered 

with the CFTC or operating as trade 

repositories, are from the rules 

described in this section that relate to 

the cost of developing and maintaining 

systems to collect and store SBS 

transaction data. SDRs also need to 

develop, maintain, and enforce 

compliance with related policies and 

procedures and provide applicable 

training. Changes in the cost of 

developing and maintaining such 

systems are likely to be passed on to 

market participants; similarly, 

compliance costs incurred by SDRs are 

likely to be passed on to market 

participants. 

As discussed above, the Commission 

estimates that the cost associated with 

creating SDR information technology 

systems will be 42,000 hours and 

$10,000,000 for each SDR and the 

average ongoing paperwork cost will be 

25,200 hours and $6,000,000 per year 

for each SDR.1293 Assuming a maximum 

of ten SDRs, the aggregate one-time 

estimated dollar cost will be 

$210,810,0001294 and the aggregate 

ongoing estimated dollar cost per year 

will be $126,486,0001295 to comply with 

the rules. Based on Commission staff’s 

conversations with industry 

representatives, the Commission 

estimates that the cost imposed on SDRs 

to provide direct electronic access to the 

Commission should be minimal as SDRs 

likely have or will establish comparable 

electronic access mechanisms to enable 

market participants to provide data to 

SDRs and review transactions to which 

such participants are parties.1296

As discussed above, the Commission 

estimates that the average initial 

paperwork cost associated with 

developing policies and procedures 

necessary to comply with Rules 13n– 

5(b)(1), (2), (3), and (5) and 13n–6 will 

be 1,050 hours and $100,000 for each 

SDR and the average ongoing paperwork 

cost will be 300 hours per year for each 

SDR.1297 Assuming a maximum of ten 

SDRs, the aggregate one-time estimated 

dollar cost will be $4,185,3001298 and 

the aggregate ongoing estimated dollar 

cost per year will be $965,4001299 to 

comply with the rules. 

The Commission believes that 

existing SDRs may have already 

developed and implemented 

information technology systems and 

related policies and procedures.1300

Such persons are currently not subject 

to regulation by the Commission, and 

therefore, may need to enhance their 

information technology systems and 

related policies and procedures to 

comply with the SDR Rules. Thus, such 

persons may experience costs in 

enhancing their information technology 

systems and related policies and 

procedures to comply with the SDR 

Rules. Moreover, because the costs 

discussed above represent the costs of 

creating information technology systems 

and related policies and procedures 

without any existing information 

technology systems or policies and 

procedures in place, existing SDRs that 

already have information technology 

systems and related policies and 

procedures may experience initial costs 

lower than those estimated above. The 

Commission believes that after such 

persons bring their technology systems 

and related policies and procedures into 

compliance with the SDR Rules, 

however, the ongoing annual costs for 

such persons will likely be consistent 

with the estimates provided above.1301

Multiple SDRs may register with the 

Commission, potentially within the 

same asset class, with each SDR 

collecting data from a subset of market 

participants. While multiple SDRs per 

asset class will allow for market 

competition to decide how data is 

collected, it may hinder market-wide 

data aggregation due to coordination 

costs, particularly if market participants 

adopt incompatible reporting standards 

and practices. The SDR Rules do not 

specify a particular reporting format or 

structure, which may create the 

possibility that persons reporting to 

SDRs or other market participants 

accessing SBS data, will have to 

accommodate different data standards 

and develop different systems to 

accommodate each. This may result in 

increased costs for reporting persons 

and users of SBS data. 

Furthermore, the costs associated 

with aggregating data across multiple 

SDRs by the Commission and other 

users of such data will increase to the 

extent that SDRs choose to use different 

identifying information for transactions, 

counterparties, and products. Data 

aggregation costs also could accrue to 

the extent that there is variation in the 

quality of data maintained across SDRs. 

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14540 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1302See Proposing Release, 75 FR at 77358, supra 

note 2. 1303See Proposing Release, 75 FR at 77358, supra 

note 2. 1304See DTCC 1*, supra note 20; Better Markets 

1, supra note 19; see also FINRA SBSR, supra note 

27 (urging the Commission to mandate the 

consolidation of disseminated SBS data to the 

public). 1305 DTCC 1*, supra note 20; see also Better 

Markets 1, supra note 19 (making similar 

comments); DTCC 2, supra note 19 (‘‘The role of an 

aggregating SDR is significant in that it ensures 

regulators efficient, streamlined access to 

consolidated data, reducing the strain on limited 

agency resources.’’). 

1306 DTCC 1*, supra note 20. 

1307 DTCC 3, supra note 19. 

1308See Better Markets 1, supra note 19. 

Similarly, another commenter suggested that the 

Commission ‘‘provide additional details on the 

anticipated requirements in order to better manage 

the expectations of SDRs and wider market 

participants concerning their duties in this area.’’ 

Barnard, supra note 19. 

1309See Better Markets 1, supra note 19; ISDA 

Temp Rule, supra note 28; Barnard, supra note 19. 

1310See Section VI.E.4.c of this release discussing 

Rule 13n–5(b)(4). 

1311As discussed above, when an SDR is deciding 

the format in which it will maintain transaction 

data and positions, it may want to consider whether 

it will need to reformat or translate the data to 

reflect any formats and taxonomies that the 

Commission may adopt pursuant to Exchange Act 

Section 13(n)(5)(D) and Rule 13n–4(b)(5). See 

Section VI.E.4.c of this release. 

Each SDR has discretion over how to 

implement its policies and procedures 

in the recording of reportable data, and 

variations in quality may result. Since 

aggregated data used for surveillance 

and risk monitoring requires that the 

underlying components are provided 

with the same level of accuracy, 

variations in the quality of data could be 

costly if subsequent interpretations of 

analysis based on the data suffer from 

issues of integrity. To the extent that 

market competition among SDRs 

impacts profit margins and the level of 

resources devoted to collecting and 

maintaining transaction data, there is an 

increased likelihood of variations in the 

quality of reported data, which could 

make the aggregation of data across 

multiple SDRs more difficult. 

In the Proposing Release the 

Commission solicited comment on the 

costs related to Rules 13n–4(b)(2)–(7), 

13n–5, and 13n–6.1302 The Commission 

specifically requested comment on the 

initial and ongoing costs associated with 

establishing and maintaining the 

technology systems and related policies 

and procedures; additional costs to 

creating an SDR that the Commission 

should consider; alternatives that the 

Commission should consider; whether 

the estimates accurately reflect the cost 

of storing data in a convenient and 

usable electronic format for the required 

retention period; and a description and, 

to the extent practicable, quantification 

of the costs associated with any 

comments that are submitted.1303 The 

Commission received no comments on 

the estimated costs of the rules 

discussed in this section. 

c. Alternatives 

Commenters suggested that an SDR’s 

duties should include reporting SBS 

data to a single SDR that would 

consolidate the data.1304 Specifically, 

one commenter recommended that the 

Commission ‘‘designate one SDR as the 

recipient of the information of the other 

SDRs to ensure the efficient 

consolidation of data.’’1305 The 

commenter further stated that the 

designated SDR would need to have 

‘‘the organization and governance 

structure that is consistent with being a 

financial market utility serving a vital 

function to the entire marketplace.’’1306

The Commission recognizes, as asserted 

by the commenter, that fragmentation of 

data among SDRs would ‘‘leave to 

regulators the time consuming, 

complicated and expensive task of 

rebuilding complex data aggregation 

and reporting mechanisms.’’1307 If the 

Commission were to designate one SDR 

as the data consolidator, however, such 

an action could be deemed as the 

Commission’s endorsement of one 

regulated person over another, 

discourage new market entrants, and 

interfere with competition, resulting in 

a perceived government-sponsored 

monopoly. In addition, such a 

requirement would likely impose an 

additional cost on market participants to 

cover the SDR’s cost for acting as the 

data consolidator. The Commission does 

not believe that, at this time, the 

benefits of such a requirement, in terms 

of saving other SDRs the costs of having 

to make data available to the 

Commission and saving the costs of 

consolidating the data itself, would be 

substantial enough to justify this 

potential negative effect on competition 

among SDRs. The Commission, 

however, may revisit this issue if, for 

example, there is data fragmentation 

among SDRs that is creating substantial 

difficulties for relevant authorities to get 

a complete and accurate view of the 

market. 

The Commission considered 

directing, under Rule 13n–4(b)(7), all 

SDRs to establish automated systems for 

monitoring, screening, and analyzing 

SBS data, a position urged by one 

commenter.1308 The Commission 

believes that mandating automated 

systems for monitoring, screening, and 

analyzing SBS data at this time would 

impose an additional cost on SDRs. The 

Commission believes that it should 

avoid imposing the cost of automated 

systems on SDRs until the Commission 

can better determine what information it 

needs through such automated systems 

in addition to the information that it can 

obtain from SDRs through other rules 

applicable to SDRs, such as Rule 13n– 

4(b)(5). 

The Commission considered requiring 

every SDR to maintain transaction data 

and related identifying information for 

not less than five years after the 

applicable SBS expires or ten years after 

the applicable SBS is executed, 

whichever is greater, as an alternative to 

the time period in Rule 13n–5(b)(4) (for 

not less than five years after the 

applicable SBS expires). The 

Commission understands, however, that 

the alternative time period does not fit 

current industry practices and therefore 

would be costly to implement. The fiveyear period is consistent with the record 

retention period for other Commission 

registrants and the statutory 

requirement for SB SEFs. 

The Commission also considered, as 

an alternative to Rule 13n–5(b)(4)(i), 

prescribing a particular data format in 

which an SDR must maintain 

transaction data and positions, as 

suggested by three commenters.1309 The 

Commission believes that SDRs should 

have the flexibility to choose their own 

data format, based on what works best 

in practice.1310 The Commission is also 

concerned that a format that it mandates 

would eventually become outdated, 

necessitating either a rule change to 

keep pace with technological innovation 

or a requirement that SDRs use outdated 

technology. Market participants may 

incur the increased costs of converting 

their transaction data to a format that is 

no longer an industry standard. 

Although the Commission recognizes 

that a commonly-mandated format for 

all SBS data has the potential to 

facilitate aggregation of data across 

different SDRs, the Commission believes 

that not imposing a particular format 

saves SDRs the costs associated with 

using and implementing one data format 

chosen by the Commission. The 

Commission believes that SDRs, 

working with market participants, will 

be in the best position to choose and 

upgrade formats as needed.1311 For 

these reasons, the Commission does not 

believe that mandating a particular 

format in which an SDR must maintain 

transaction data, related identifying 

information, and positions is, at this 

time, an appropriate alternative to the 

flexible approach of Rule 13n–5(b)(4)(i) 

and the lower compliance costs. 

Finally, the Commission considered, 

as suggested by one commenter, 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14541 

1312See Barnard, supra note 19. 

1313Barnard, supra note 19. 

1314See Section VI.G of this release discussing 

Rule 13n–7. 

1315See Proposing Release, 75 FR at 77358, supra 

note 2. 

1316See Section VII.D.3 of this release discussing 

the cost associated with Rule 13n–7. 

1317The Commission estimates that an SDR will 

assign these responsibilities primarily to a 

Compliance Manager as well as a Senior Systems 

Analyst. Thus, the total initial estimated dollar cost 

will be $98,660 per SDR and $986,600 for all SDRs, 

calculated as follows: ($1,800 in information 

technology costs + (Compliance Manager at $283 

per hour for 300 hours) + (Senior Systems Analyst 

at $260 per hour for 46 hours)) × 10 registrants = 

$986,600. 

1318The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Manager. Thus, the total ongoing estimated dollar 

cost will be $79,005.11 per SDR and $790,051.10 for 

all SDRs, calculated as follows: (Compliance 

Manager at $283 per hour for 279.17 hours) × 10 

registrants = $790,051.10. 

1319Cf. DTCC 2, supra note 19 (stating that ‘‘[t]he 

Commission’s proposed required practices are 

generally consistent with those of’’ the commenter’s 

trade repository). 

1320See Proposing Release, 75 FR at 77359, supra 

note 2. 

1321See Proposing Release, 75 FR at 77359, supra 

note 2. 

1322See Section VI.H.3 of this release discussing 

Rule 13n–8. 

requiring SDRs to keep records of data 

indefinitely.1312 This commenter 

asserted that there was ‘‘no 

technological or practical reason for 

limiting the retention period,’’ 1313 but 

the Commission believes that given the 

volume of data and transactions SDRs 

may handle, prohibiting SDRs from ever 

eliminating records may result in SDRs 

retaining a large volume of records for 

which there may be little or no use. 

Having to maintain records secure and 

accessible for an indefinite period of 

time may impose significant costs to 

SDRs, particularly as storage and access 

technology evolves. Because the 

Commission believes that requiring 

transaction data to be maintained for not 

less than five years after the applicable 

SBS expires is more reasonable, and 

because that approach is consistent with 

the record retention period for other 

Commission registrants and the 

statutory requirement for SB SEFs, the 

Commission does not believe that risks 

and costs that could come with 

imposing an unlimited time period for 

retention are justified. Accordingly, the 

Commission is not adopting the 

alternative suggested by the commenter. 

3. Recordkeeping 

Rule 13n–7 requires an SDR to make 

and keep certain records relating to its 

business and retain a copy of records 

made or received by the SDR in the 

course of its business for a period of not 

less than five years, the first two years 

in a place that is immediately available 

to representatives of the Commission for 

inspection and examination. The rule 

also requires an SDR that ceases doing 

business or ceases to be registered as an 

SDR to preserve, maintain, and make 

accessible the records required to be 

collected, maintained, and preserved 

pursuant to the rule for the remainder 

of the time period required by Rule 

13n–7.1314

a. Benefits 

Rule 13n–7 is designed to further the 

Dodd-Frank Act’s goals by enhancing 

the Commission’s ability to oversee 

SDRs, which are critical components of 

the new regulatory scheme governing 

SBSs. The rule will assist the 

Commission in determining whether an 

SDR is complying with the federal 

securities laws and the rules and 

regulations thereunder. In addition, the 

recordkeeping requirements contained 

in the rule will permit the Commission 

to evaluate the financial responsibility 

and soundness of SDRs. 

To the extent that the rule 

standardizes the business recordkeeping 

practices of SDRs, the Commission will 

be better able to perform efficient, 

targeted inspections and examinations 

with an increased likelihood of 

identifying improper conduct. To the 

extent that standardized recordkeeping 

requirements will allow the 

Commission to perform more efficient, 

targeted inspections and examinations, 

SDRs may incur less costs in responding 

to targeted inspections and 

examinations (as opposed to inspections 

and examinations that are broader in 

scope). In addition, both the 

Commission and SDRs should benefit 

from standardized recordkeeping 

requirements to the extent that uniform 

records will enable the Commission and 

SDRs to know what records the SDRs 

are required to maintain. 

The Commission solicited comment 

on the benefits related to Rule 13n– 

7.1315 The Commission did not receive 

any comments on the benefits related to 

Rule 13n–7. 

b. Costs 

As discussed above, the Commission 

estimates that the average initial 

paperwork cost associated with making, 

keeping and preserving certain records 

and developing and maintaining 

information technology systems to 

ensure compliance with the 

recordkeeping requirements will be 346 

hours and $1,800 for each SDR and the 

average ongoing paperwork cost 

associated with compliance with the 

recordkeeping requirements will be 

279.17 hours per year for each SDR.1316

Assuming a maximum of ten SDRs, the 

aggregate one-time estimated dollar cost 

will be $986,600 1317 and the aggregate 

ongoing estimated dollar cost per year 

will be $790,051.10 1318 to comply with 

Rule 13n–7. 

The Commission believes that 

existing SDRs may already maintain 

business records as part of their day-today operations.1319 Such persons are 

currently not subject to regulation by 

the Commission, and therefore, may 

need to enhance their maintenance of 

business records to comply with Rule 

13n–7. Thus, such persons may 

experience costs in enhancing their 

recordkeeping to comply with Rule 

13n–7. Moreover, because the costs 

discussed above represent the costs of 

establishing a recordkeeping system 

without any existing recordkeeping 

system in place, existing SDRs that 

already have a recordkeeping system 

may experience initial costs lower than 

those estimated above. The Commission 

believes that after such persons bring 

their recordkeeping into compliance 

with Rule 13n–7, however, the ongoing 

annual costs for such persons will likely 

be consistent with the estimates 

provided above. 

The Commission solicited comment 

on the costs related to Rule 13n–7.1320

The Commission specifically requested 

comment on the initial and ongoing 

costs associated with establishing and 

maintaining the recordkeeping systems 

and related policies and procedures, 

including whether currently-operating 

SDRs would incur different 

recordkeeping costs.1321 The 

Commission did not receive any 

comments on the costs related to Rule 

13n–7. 

4. Reports 

Rule 13n–8 requires SDRs to report 

promptly to the Commission, in a form 

and manner acceptable to the 

Commission, such information as the 

Commission determines necessary or 

appropriate for the Commission to 

perform its duties.1322

a. Benefits 

Title VII establishes a regulatory 

framework for the OTC derivatives 

market that depends on the 

Commission’s access to information 

regarding the current and historical 

operation of the SBS market to verify 

compliance with the statute and to 

provide for effective monitoring for 

market abuse. In addition, specific 

provisions of Title VII require routine, 

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14542 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1323See Proposing Release, 75 FR at 77359, supra 

note 2. 

1324The Commission understands that some 

existing trade repositories may have dedicated 

personnel who are responsible for responding to 

and providing ad hoc report requests from relevant 

authorities, including the Commission. To the 

extent that Rule 13n–8 may result in more 

automated reporting, the need for such dedicated 

personnel resources may be reduced. 

1325See Section VIII.D.2.b of this release. 

1326See Section VII.D.4 of this release discussing 

the cost associated with Rule 13n–8. 

1327The Commission estimates that an SDR will 

assign these responsibilities to a Senior Business 

Analyst. Thus, the total ongoing estimated dollar 

cost will be $251 per SDR and $2,510 for all SDRs, 

calculated as follows: (Senior Business Analyst at 

$251 per hour for 1 hour) × 10 registrants = $2,510. 

1328See Proposing Release, 75 FR at 77360, supra 

note 2. 

1329See Proposing Release, 75 FR at 77360, supra 

note 2. 

1330See Section VI.I.2 of this release discussing 

Rule 13n–10. 

1331See Proposing Release, 75 FR at 77360, supra 

note 2. 

1332See Section VII.D.5 of this release discussing 

the cost associated with Rule 13n–10. 

1333The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Manager and a Compliance Clerk. Thus, the total 

initial estimated dollar cost will be $26,316.25 per 

SDR and $263,162.5 for all SDRs, calculated as 

follows: ($4,400 for external legal costs + $5,000 for 

external compliance consulting costs + (Compliance 

Manager at $283 per hour for 48.75 hours) + 

(Compliance Clerk at $64 per hour for 48.75 hours)) 

× 10 registrants = $263,162.5. 

1334The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Manager and a Compliance Clerk. Thus, the total 

ongoing estimated dollar cost will be $173.5 per 

SDR and $1,735 for all SDRs, calculated as follows: 

((Compliance Manager at $283 per hour for 0.5 

hours) + (Compliance Clerk at $64 per hour for 0.5 

hours)) × 10 registrants = $1,735. 

1335See Proposing Release, 75 FR at 77360, supra 

note 2. 

1336See Proposing Release, 75 FR at 77360, supra 

note 2. 

targeted monitoring of certain types of 

events. Access to such information will 

enable the Commission to oversee the 

SBS market, which is critical to the 

continued integrity of the markets, and 

detect and deter fraudulent and 

manipulative activity and other trading 

abuses in connection with the 

derivatives markets. 

The Commission solicited comment 

on the benefits related to the 

requirements contained in Rule 13n– 

8.1323 The Commission did not receive 

any comments on the benefits related to 

the requirements contained in Rule 

13n–8. 

b. Costs 

The Commission anticipates that the 

initial costs to SDRs from Rule 13n–8 

relate to the cost of developing and 

maintaining systems to respond to 

requests for information and provide the 

necessary reports and establishing 

related policies and procedures. In 

addition, SDRs will need to employ staff 

to maintain systems to provide the 

requested reports as well as to respond 

to ad hoc requests that cannot be 

satisfied using such systems.1324 The 

information technology costs associated 

with this rule are included in the overall 

information technology costs discussed 

above.1325

Furthermore, as discussed above, the 

Commission estimates that SDRs will 

incur costs in compiling the information 

requested under Rule 13n–8, which the 

Commission estimates will be limited to 

information already compiled under the 

SDR Rules, and thus, require only 1 

hour per response to compile and 

transmit per year for each SDR.1326

Assuming a maximum of ten SDRs, the 

aggregate ongoing estimated dollar cost 

per year will be $2,510 to comply with 

the rule.1327

The Commission solicited comment 

on the costs related to Rule 13n–8.1328

The Commission specifically requested 

comment on the initial and ongoing 

costs associated with establishing and 

providing the reports required under the 

rule.1329 The Commission did not 

receive any comments on the estimated 

costs related to this rule. 

5. Disclosure 

Under Rule 13n–10, before accepting 

any SBS data from a market participant 

or upon the market participant’s 

request, each SDR is required to furnish 

to the market participant a disclosure 

document containing certain 

information that reasonably will enable 

the market participant to identify and 

evaluate the risks and costs associated 

with using the services of the SDR.1330

An SDR’s disclosure document must 

include the SDR’s criteria for providing 

others with access to services offered 

and data maintained by the SDR; the 

SDR’s criteria for those seeking to 

connect to or link with the SDR; a 

description of the SDR’s policies and 

procedures regarding safeguarding of 

data and operational reliability; a 

description of the SDR’s policies and 

procedures reasonably designed to 

protect the privacy of SBS transaction 

information; a description of the SDR’s 

policies and procedures regarding its 

non-commercial and/or commercial use 

of SBS transaction information; a 

description of the SDR’s dispute 

resolution procedures; a description of 

all of the SDR’s services, including 

ancillary services; the SDR’s updated 

schedule of dues, unbundled prices, 

rates, or other fees for all of its services, 

and any discounts or rebates; and a 

description of the SDR’s governance 

arrangements. 

a. Benefits 

Rule 13n–10 is intended to provide 

certain information regarding an SDR to 

market participants prior to their 

entering into an agreement to provide 

SBS data to the SDR. To the extent that 

multiple SDRs accept data for the same 

asset class, the disclosure document 

should enable market participants to 

make an informed choice among SDRs. 

The disclosure document is necessary to 

inform market participants of the nature 

of the services provided by the SDR and 

the conditions and obligations that are 

imposed on market participants in order 

for them to report data to the SDR. 

Rule 13n–10 is designed to further the 

Dodd-Frank Act’s goals by providing 

market participants with applicable 

information regarding the operation of 

SDRs. The Commission solicited 

comment,1331 but did not receive any 

comments on the benefits related to this 

rule. 

b. Costs 

The Commission anticipates that the 

primary costs to SDRs to complying 

with Rule 13n–10 relate to the 

development and dissemination of the 

disclosure document. As discussed 

above, the Commission estimates that 

the average initial paperwork cost 

associated with developing the 

disclosure document and related 

policies and procedures will be 97.5 

hours and $9,400 for each SDR and the 

average ongoing paperwork cost will be 

1 hour per year for each SDR.1332

Assuming a maximum of ten registered 

SDRs, the aggregate one-time estimated 

dollar cost will be $263,162.5 1333 and 

the aggregate ongoing estimated dollar 

cost per year will be $1,735 1334 to 

comply with the rule. 

The Commission solicited comment 

on the costs related to Rule 13n–10.1335

The Commission specifically requested 

comment on the initial and ongoing 

costs associated with drafting, 

reviewing, and providing the required 

disclosure document.1336 The 

Commission did not receive any 

comments on the costs related to this 

rule. 

6. Chief Compliance Officer and 

Compliance Functions; Compliance 

Reports and Financial Reports 

Rules 13n–4(b)(11) and 13n–11 and 

the amendments to Regulation S–T 

require each registered SDR to identify 

on Form SDR a person who has been 

designated by the board to serve as CCO 

whose duties include preparing an 

annual compliance report, which will 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14543 

1337See Section VI.J of this release discussing 

Rule 13n–11. 

1338See Section VI.J.3.c of this release discussing 

the duties of CCOs. 

1339See Section VI.J.6 of this release discussing 

the prohibition of undue influence on CCOs. 

1340See 17 CFR 232.301. 

1341See Section VI.J.5.c of this release discussing 

Rule 407 of Regulation S–T. 

1342See Exchange Act Section 13(n)(6), 15 U.S.C. 

78m(n)(6). 

1343See DTCC 2, supra note 19 (agreeing with the 

Commission that ‘‘a robust internal compliance 

function plays an important role in facilitating an 

SDR’s monitoring of, and compliance with, the 

requirements of the Exchange Act (and rules 

thereunder) applicable to SDRs’’). 

1344See Proposing Release, 75 FR at 77361, supra 

note 2. 

1345See Proposing Release, 75 FR at 77361, supra 

note 2. 

1346See Section VII.D.6 of this release discussing 

the costs of Rule 13n–11. 

1347 Data from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by Commission staff to account for 

an 1800-hour work-year and multiplied by 5.35 to 

account for bonuses, firm size, employee benefits, 

and overhead, suggest that the cost of a CCO is $485 

per hour. Thus, the total ongoing estimated dollar 

cost will be $873,000 per SDR and $8,730,000 for 

all SDRs, calculated as follows: (CCO at $485 per 

hour for 1800 hours) × 10 registrants = $8,730,000. 

1348The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Attorney. Thus, the total initial estimated dollar 

cost will be $180,280 per SDR and $1,802,800 for 

all SDRs, calculated as follows: ($40,000 for outside 

legal services + (Compliance Attorney at $334 per 

hour for 420 hours)) × 10 registrants = $1,802,800. 

1349The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Continued 

be filed with the Commission along 

with a financial report.1337 The CCO’s 

appointment must be approved by the 

majority of the SDR’s board and the 

CCO must report directly to the senior 

officer of the SDR or the board. As 

discussed above, the CCO is responsible 

for, among other things, establishing 

procedures for the remediation of 

noncompliance issues identified by the 

CCO and establishing and following 

appropriate procedures for the handling, 

management response, remediation, 

retesting, and closing of noncompliance 

issues.1338 No officer, director, or 

employee may directly or indirectly take 

any action to coerce, manipulate, 

mislead, or fraudulently influence the 

CCO in the performance of his or her 

duties under Rule 13n–11.1339 The CCO 

is required to prepare and sign an 

annual compliance report and submit 

the report to the board for its review 

prior to the report being filed with the 

Commission. Finally, the annual 

compliance report must be filed along 

with the financial report, which must be 

prepared pursuant to Rule 13n–11(f) 

and filed with the Commission. The 

compliance report must be filed in a 

tagged data format in accordance with 

the instructions contained in the 

EDGAR Filer Manual,1340 and the 

financial report must be provided as an 

official filing in accordance with the 

EDGAR Filer Manual and include, as 

part of the official filing, an Interactive 

Data Financial Report filed in 

accordance with Rule 407 of Regulation 

S–T.1341

a. Benefits 

Rules 13n–4(b)(11) and 13n–11 are 

designed to help ensure that SDRs 

comply with the federal securities laws, 

including Exchange Act Section 13(n), 

and the rules and regulations 

thereunder. Although existing SDRs 

may already have CCOs in place, the 

rules will make this standard practice 

for all registered SDRs, as mandated by 

the Exchange Act.1342

As a result of Rules 13n–4(b)(11) and 

13n–11, the Commission believes that 

data and other records maintained by 

each SDR are more likely to be accurate 

and reliable. The Commission believes 

that strong internal compliance 

programs lower the likelihood of noncompliance with securities rules and 

regulations.1343 The designation of a 

CCO, who will, among other things, take 

reasonable steps to ensure compliance 

with the rules and regulations 

thereunder relating to SBSs, including 

each rule prescribed by the 

Commission, will help ensure that each 

SDR complies with the Exchange Act 

and the rules and regulations 

thereunder. The prohibition against an 

SDR’s officer, director, or employee 

from directly or indirectly taking any 

action to coerce, manipulate, mislead, or 

fraudulently influence its CCO increases 

the probability that the CCO’s actions 

are based on accurate information and 

the compliance reports reflect the 

independent judgment of the CCO; 

however, these prohibitions may also 

cause some SDRs or SDR officers, 

directors and employees to implement 

additional controls in their interactions 

with the CCO, potentially limiting the 

scope or timeliness of the information 

made available to the CCO. To the 

extent that compliance with the 

Exchange Act and the rules and 

regulations thereunder results in more 

accurate data being maintained, 

publicly disseminated, and reported to 

the Commission, the ability of the 

Commission to rely on the SBS data will 

improve. Finally, strong compliance 

programs may help reduce noncompliance with the SDR Rules by 

SDRs; non-compliance with, for 

example, the privacy requirements 

(Rules 13n–4(b)(8) and 13n–9), have the 

potential of negatively impacting 

confidence in the overall SBS market. 

Rule 13n–11(f) requires SDRs to file 

annual audited financial reports to the 

Commission. This rule will enhance the 

Commission’s oversight of SDRs by 

facilitating the Commission’s evaluation 

of an SDR’s financial and managerial 

resources. The financial reports will 

also assist the Commission in assessing 

potential conflicts of interests of a 

financial nature arising from the 

operation of an SDR. 

Benefits will also accrue from 

requiring SDRs to file financial reports 

in an interactive data format. This 

requirement will enable the 

Commission and, to the extent that the 

data is made public, the public to 

analyze the reported information more 

quickly, more accurately, and at a lower 

cost. In particular, the tagged data will 

make it easier to aggregate information 

collected from SDRs and compare across 

SDRs and over time, which the 

Commission believes is important to 

perform its regulatory mandate and legal 

responsibilities. 

The Commission solicited comment 

on the benefits related to Rules 13n– 

4(b)(11) and 13n–11.1344 The 

Commission specifically requested 

comment on the benefits that would 

accrue from designating a CCO who 

would be responsible for preparing and 

signing an annual compliance report 

and reporting annually to the board and 

on the benefits associated with the 

financial reports.1345 The Commission 

did not receive any comments on the 

benefits of these rules. 

b. Costs 

The establishment of a designated 

CCO and compliance with the 

accompanying responsibilities of a CCO 

will impose certain costs on SDRs. As 

discussed above, the Commission 

estimates that the average initial 

paperwork cost associated with 

establishing procedures for the 

remediation of noncompliance issues 

identified by the CCO and establishing 

and following appropriate procedures 

for the handling, management response, 

remediation, retesting, and closing of 

noncompliance issues will be 420 hours 

and $40,000 for each SDR and the 

average ongoing paperwork cost will be 

120 hours for each SDR.1346 In addition, 

each SDR is required to retain a CCO in 

order to comply with the SDR Rules, at 

an annual cost of $873,000.1347

Assuming a maximum of ten SDRs, the 

aggregate initial estimated dollar cost 

per year will be $1,802,000 1348 and the 

aggregate ongoing estimated dollar cost 

per year will be $9,130,800 1349 to 

comply with the rules. 

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14544 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

Attorney. Thus, the total ongoing estimated dollar 

cost will be $913,080 per SDR and $9,130,800 for 

all SDRs, calculated as follows: ($873,000 for a CCO 

+ (Compliance Attorney at $334 per hour for 120 

hours)) × 10 registrants = $9,130,800. 1350See Section VII.D.6 of this release discussing 

the costs of Rule 13n–11. 1351The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Attorney. Thus, the total ongoing estimated dollar 

cost will be $1,670 per SDR and $16,700 for all 

SDRs, calculated as follows: (Compliance Attorney 

at $334 per hour for 5 hours) × 10 registrants = 

$16,700. 1352See Section VII.D.6 of this release discussing 

the costs of Rule 13n–11. 1353The Commission estimates that an SDR will 

assign these responsibilities to a Senior Accountant. 

Data from SIFMA’s Management & Professional 

Earnings in the Securities Industry 2013, modified 

by Commission staff to account for an 1800-hour 

work-year and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead, suggest that the cost of a Senior 

Accountant is $198 per hour. Thus, the total 

ongoing estimated dollar cost will be $599,000 per 

SDR and $5,990,000 for all SDRs, calculated as 

follows: ($500,000 for independent public 

accounting services + (Senior Accountant at $198 

per hour for 500 hours)) × 10 registrants = 

$5,990,000. 

1354See Section VII.D.6 of this release discussing 

the costs of Rule 13n–11. 1355The Commission estimates that an SDR will 

assign these responsibilities to a Senior Systems 

Analyst. Thus, the total ongoing estimated dollar 

cost will be $36,812 per SDR and $368,120 for all 

SDRs, calculated as follows: ($22,772 for 

information technology services + (Senior Systems 

Analyst at $260 per hour for 54 hours)) × 10 

registrants = $368,120. 

1356Cf. DTCC 2, supra note 19 (stating that it ‘‘has 

an established compliance infrastructure for its 

businesses . . . which includes processes for 

establishing and implementing required compliance 

policies and procedures and overseeing adherence 

to those procedures and a mechanism for reporting, 

tracking, remediating and closing compliance issues 

whether self-identified or identified through 

internal or external examinations’’ and that ‘‘[t]he 

Commission’s proposed required practices are 

generally consistent with those of’’ the commenter’s 

trade repository). 

1357See Proposing Release, 75 FR at 77362, supra 

note 2. 

1358See Proposing Release, 75 FR at 77362, supra 

note 2. 

1359 DTCC 2, supra note 19. 

1360See Better Markets 1, supra note 19 

(recommending that the CCO’s compensation and 

termination be approved by independent board 

members of an SDR). Similarly, one commenter 

suggested that only public independent directors or 

directors with an ‘‘Independent Perspective,’’ and 

not the full board, have ‘‘the authority and sole 

responsibility to appoint or remove the CCO, or to 

materially change its duties and responsibilities.’’ 

Barnard, supra note 19. 

As discussed above, the Commission 

estimates that the average ongoing 

paperwork cost associated with 

preparing and submitting annual 

compliance reports to the SDR’s board 

pursuant to Rules 13n–11(d) and (e) will 

be 5 hours.1350 Assuming a maximum of 

ten SDRs, the aggregate ongoing 

estimated dollar cost per year will be 

$16,700 to comply with the rules.1351

As discussed above, the Commission 

estimates that the average ongoing 

paperwork cost associated with 

preparing and filing financial reports 

pursuant to Rule 13n–11(f) and (g) and 

the amendments to Regulation S–T will 

be 500 hours and $500,000 for each 

registered SDR.1352 Assuming a 

maximum of ten SDRs, the aggregate 

ongoing estimated dollar cost per year 

will be $5,990,000 to comply with the 

rules.1353

As discussed above, the Commission 

estimates that the average ongoing 

paperwork cost associated with filing 

annual compliance and financial reports 

with the Commission in a tagged data 

format pursuant to Rules 13n–11(d), (f), 

and (g), and in accordance with the 

amendments to Regulation S–T, will be 

54 hours and $22,772 for each registered 

SDR.1354 Assuming a maximum of ten 

SDRs, the aggregate ongoing estimated 

dollar cost per year will be $368,120 to 

comply with the rules.1355

The Commission believes that 

existing SDRs may already maintain 

compliance programs that are overseen 

by a CCO or an individual who 

effectively serves as a CCO.1356 In 

addition, CCOs may prepare compliance 

reports presented to senior management 

and/or the SDRs’ boards as part of their 

current business practice. SDRs are 

currently not subject to regulation by 

the Commission, and therefore, may 

need to enhance their compliance 

programs and compliance reports to 

comply with Rules 13n–4(b)(11) and 

13n–11. Thus, SDRs may experience 

costs in enhancing their compliance 

programs and compliance reports to 

comply with Rules 13n–4(b)(11) and 

13n–11. Moreover, because the costs 

discussed above represent the costs of 

complying with Rules 13n–4(b)(11) and 

13n–11 without any existing 

compliance programs in place that are 

overseen by a CCO or an individual who 

effectively serves as a CCO, existing 

SDRs that already maintain such 

compliance programs may experience 

initial costs lower than those estimated 

above. However, even if an SDR has an 

existing compliance program overseen 

by a CCO, it is possible that officers, 

directors, and employees concerned 

about the prohibition in Rule 13n–11(h) 

(prohibiting officers, directors, and 

employees of an SDR from directly or 

indirectly taking any action to coerce, 

manipulate, mislead, or fraudulently 

influence the CCO) may want expanded 

liability insurance coverage. In 

response, an SDR may seek to acquire 

additional insurance coverage. The 

Commission acknowledges that it is 

possible, therefore, that Rule 13n–11(h) 

may result in liability insurance rates 

that are above what they would have 

been in the absence of the rule. The 

Commission is unable to estimate these 

costs given that it lacks specific 

information regarding current insurance 

costs for SDRs, the amount of the 

demand that there will be for increased 

coverage, and thereby the potential 

increases associated with the rule. The 

Commission believes that after SDRs 

bring their compliance programs and 

compliance reports into compliance 

with Rules 13n–4(b)(11) and 13n–11, 

however, the ongoing annual costs for 

SDRs will likely be consistent with the 

estimates provided above. 

The Commission solicited comment 

on these estimates related to Rules 13n– 

4(b)(11) and 13n–11.1357 The 

Commission specifically requested 

comment on the initial and ongoing 

costs associated with designating a CCO 

and the costs associated with any 

personnel who may be necessary to 

support the CCO and create the annual 

compliance and financial reports.1358

One commenter stated that it is difficult 

to assess the incremental costs to SDRs 

of implementing Rule 13n–11 regarding 

designation of a CCO and that even with 

an established compliance 

infrastructure, the commenter believed 

that ‘‘it is likely that the new 

requirements of Rule 13n–11 will entail 

additional costs, potentially including 

additional personnel and systems’’ and 

the ‘‘compliance responsibilities in an 

SDR will evolve (and likely increase) as 

the scope of transactions reported to 

that SDR increase, which may also 

result in additional incremental 

costs.’’ 1359 The Commission agrees with 

the commenter’s views; nevertheless the 

Commission has attempted to quantify 

the costs of compliance with the rule, as 

discussed above. 

c. Alternatives 

The Commission considered requiring 

that the compensation, appointment, 

and termination of a CCO be approved 

by a majority of independent board 

members of an SDR, a position urged by 

two commenters.1360 As discussed 

above, the Commission believes that the 

rules that are intended to minimize an 

SDR’s potential and existing conflicts of 

interest and to help ensure that SDRs 

meet core principles are sufficient at 

this time. Consequently, the 

Commission does not believe that 

requiring SDRs to have independent 

directors, and imposing the associated 

costs on SDRs, is warranted at this time. 

For these same reasons, the Commission 

does not believe that approval of a 

CCO’s compensation, appointment, and 

termination by a majority of 

independent directors will provide 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14545 

1361See Better Markets 1, supra note 19. 

1362See Section VI.D.3.b.iii of this release 

discussing prescriptive governance requirements 

and limitations. 

1363See Better Markets 1, supra note 19; Barnard, 

supra note 19. 

1364See Section VI.J.1.c of this release discussing 

Rule 13n–11(a). 

1365See DTCC 2, supra note 19. 

1366See DTCC 5, supra note 19. 

1367See CFTC Rule 49.25, 17 CFR 49.25. 

1368See Better Markets 3, supra note 19. 

1369See Section VI.J.1.c of this release discussing 

Rule 13n–11(a). 

1370See Section VIII.D.2 of this release discussing 

the cost and benefits associated with the policies 

and procedures that SDRs must develop and 

maintain with respect to their information systems. 

1371See Section VI.I.1 of this release discussing 

Rule 13n–9. 

1372See Section VI.D.3 of this release discussing 

Rule 13n–4(c). 

1373See Section VI.E.6 of this release discussing 

Rule 13n–5(b)(6). 

substantially greater benefits than 

having a majority of the board approve 

compensation, appointment, and 

termination. 

Similarly, the Commission considered 

requiring CCOs to report directly to 

independent directors, as suggested by 

one commenter.1361 For the reasons 

stated above, the Commission does not 

believe that requiring independent 

directors, and therefore requiring CCOs 

to report to independent directors, is 

warranted at this time.1362

The Commission considered whether 

it should prohibit a CCO from being the 

general counsel of an SDR or a member 

of the SDR’s legal department, as 

suggested by two commenters.1363 The 

Commission is not adopting this 

prohibition because, as discussed above, 

the Commission believes that any 

potential conflicts of interest can be 

adequately addressed by the SDR’s 

conflicts of interest policies and 

procedures, which are required to be 

established under Rule 13n–4(c)(3).1364

The Commission believes that SDRs 

should have flexibility in appointing 

their CCOs and that these conflicts of 

interest provisions are sufficient to 

mitigate any risks from not adopting the 

prohibition suggested by the 

commenter. Further, the Commission 

believes that imposing such a 

prohibition could impose additional 

costs on SDRs by requiring that they 

employ two different persons as general 

counsel and CCO, each position with its 

own compensation. 

The Commission considered reducing 

the amount of information required on 

the annual compliance report. For 

example, the Commission could have 

not required any discussion of 

recommendations for material changes 

to policies and procedures, as suggested 

by one commenter.1365 The Commission 

believes, however, that the benefits of 

obtaining all of the information required 

by Rule 13n–11(d) justify any burdens 

associated with providing such 

information on the annual compliance 

report. The information will assist 

Commission staff in assessing an SDR’s 

compliance with the federal securities 

laws and the rules and regulations 

thereunder, and information about 

recommendations for material changes 

to an SDR’s policies and procedures 

may alert the staff to material 

compliance issues at an SDR. Moreover, 

only recommendations for material 

changes will have to be described, 

which will impose a lesser burden than 

requiring disclosure of every 

recommendation. 

The Commission considered, as 

suggested by one commenter,1366

harmonizing with the CFTC’s 

approach 1367 and not adopting Rule 

13n–11(f)(2)’s requirement that each 

financial report be audited in 

accordance with the PCAOB’s standards 

by a registered public accounting firm 

that is qualified and independent. 

Although the Commission understands 

that SDRs will incur costs in hiring and 

retaining qualified public accounting 

firms, the Commission believes that 

obtaining audited financial reports from 

SDRs is important given the significant 

role the Commission believes that SDRs 

will play in the SBS market. The 

Commission believes that SDRs will 

provide transparency to, and increase 

the efficiency of, the SBS market. The 

Commission believes that SDRs will 

also be an important source of market 

data for regulators. Given the critical 

nature of their role in the marketplace, 

the Commission believes that it is 

important to obtain audited financial 

reports from SDRs in order to determine 

whether or not they have sufficient 

financial resources to continue 

operations. While the Commission 

recognizes that Rule 13n–11(f)(2) may, 

in some cases, be more costly than the 

CFTC’s requirement of quarterly 

unaudited financial statements, the 

Commission believes that the additional 

burden, where it exists, is justified by 

the benefits of requiring audited 

financial reports. 

Finally, the Commission considered 

one commenter’s suggestion that there 

should be ‘‘[c]ompetency standards to 

ensure that CCOs have the background 

and skills necessary to fulfill their 

responsibilities.’’ 1368 The Commission 

believes that, as discussed above, such 

standards do not need to be adopted by 

rule, but rather that SDRs should have 

flexibility in determining what 

standards their CCOs should meet.1369

The Commission believes that SDRs are 

in the best position to judge the 

competency of their CCOs and select 

them accordingly. 

7. Other Policies and Procedures 

Relating to an SDR’s Business 

The SDR Rules require SDRs to 

develop and maintain various policies 

and procedures.1370 Rules 13n–4(b)(8) 

and 13n–9 require each SDR to comply 

with certain requirements pertaining to 

the privacy of SBS transaction 

information.1371 Rule 13n–4(c) requires 

each SDR to comply with certain core 

principles pertaining to market access to 

services and data, governance 

arrangements, and conflicts of interest, 

including developing policies and 

procedures related to these core 

principles.1372 Rule 13n–5(b)(6) requires 

SDRs to establish procedures and 

provide facilities to effectively resolve 

disputes.1373

a. Benefits 

The privacy requirements set forth in 

Rules 13n–4(b)(8) and 13n–9 are 

intended to safeguard transaction 

information provided to SDRs by market 

participants. These privacy 

requirements make it less likely that the 

transaction information that market 

participants are required to report will 

expose their trading strategies or 

unhedged positions, which could 

subject them to predatory trading. 

Rule 13n–4(c)(1), which relates to 

market access to services and data, 

requires that SDRs impose fair, 

reasonable, and consistently applied 

fees and maintain objective access and 

participation criteria. This rule is 

designed to help ensure that SDRs do 

not engage in anticompetitive behavior 

and assuming that the SDR Rules 

promote competition among SDRs, that 

the cost of an SDR’s core and ancillary 

services that are passed on to market 

participants are competitive. 

Furthermore, the Commission believes 

that by requiring each SDR to permit 

market participants to access specific 

services offered by the SDR separately, 

Rule 13n–4(c)(1)(ii) may promote 

efficiency to the extent that it saves 

market participants from having to 

purchase ancillary services that they do 

not want and will not use as a condition 

to using an SDR’s data collection and 

maintenance services. Rule 13n– 

4(c)(1)(ii) may also promote efficiency 

and lower costs to the extent that it 

promotes competition among SDRs and 

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14546 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1374See Exchange Act Section 13(n)(5)(B), 15 

U.S.C. 78m(n)(5)(B) (requiring an SDR to confirm, 

as prescribed in Rule 13n–5, with both 

counterparties to the SBS the accuracy of the data 

that was submitted); Exchange Act Section 

13(n)(5)(C), 15 U.S.C. 78m(n)(5)(C) (requiring SDRs 

to maintain SBS data). 

1375See Proposing Release, 75 FR at 77363, supra 

note 2. 

1376MFA 1, supra note 19; see also MFA SBSR, 

supra note 27. 

1377See Section VII.D.7 of this release discussing 

costs of Rules 13n–4(c)(1)(iii) and (iv). 

1378The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Manager, an Attorney, a Senior Systems Analyst, 

and an Operations Specialist. Thus, the total initial 

estimated dollar cost will be $146,555 per SDR and 

$1,465,550 for all SDRs, calculated as follows: 

($35,000 for outside legal services + (Compliance 

Manager at $283 per hour for 135 hours) + 

(Attorney at $380 per hour for 152.5 hours) + 

(Senior Systems Analyst at $260 per hour for 40 

hours) + (Operations Specialist at $125 per hour for 

40 hours)) × 10 registrants = $1,465,550. 

1379The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Manager, an Attorney, a Senior Systems Analyst, 

and an Operations Specialist. Thus, the total 

ongoing estimated dollar cost will be $32,089 per 

SDR and $320,890 for all SDRs, calculated as 

follows: ((Compliance Manager at $283 per hour for 

38 hours) + (Attorney at $380 per hour for 45 hours) 

+ (Senior Systems Analyst at $260 per hour for 11 

hours) + (Operations Specialist at $125 per hour for 

11 hours)) × 10 registrants = $320,890. 

1380See Section VII.D.7 of this release discussing 

costs of Rule 13n–4(c)(2)(iv). 

1381The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Attorney. Thus, the total initial estimated dollar 

cost will be $90,140 per SDR and $901,400 for all 

SDRs, calculated as follows: ($20,000 for outside 

legal services + (Compliance Attorney at $334 per 

hour for 210 hours)) × 10 registrants = $901,400. 

1382The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Attorney. Thus, the total ongoing estimated dollar 

cost will be $20,040 per SDR and $200,400 for all 

SDRs, calculated as follows: (Compliance Attorney 

at $334 per hour for 60 hours) × 10 registrants = 

$200,400. 

1383See Section VII.D.7 of this release discussing 

costs of Rule 13n–4(c)(3). 

1384The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Attorney. Thus, the total initial estimated dollar 

cost will be $180,280 per SDR and $1,802,800 for 

all SDRs, calculated as follows: ($40,000 for outside 

legal services + (Compliance Attorney at $334 per 

hour for 420 hours)) × 10 registrants = $1,802,800. 

1385The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Attorney. Thus, the total ongoing estimated dollar 

cost will be $40,080 per SDR and $400,800 for all 

SDRs, calculated as follows: (Compliance Attorney 

at $334 per hour for 120 hours) × 10 registrants = 

$400,800. 

among SDRs and third party service 

providers offering ancillary services. 

The governance requirements in Rule 

13n–4(c)(2) are designed to reduce 

conflicts of interest in the management 

of SDRs. In addition, by requiring fair 

representation of market participants on 

the board with the opportunity to 

participate in the process for 

nominating directors and the right to 

petition for alternative candidates, the 

rule will help reduce the likelihood that 

an incumbent market participant will 

exert undue influence on the board. 

While the above requirements are 

designed to prevent and constrain 

potential conflicts of interest, Rule 13n– 

4(c)(3) directly addresses conflicts of 

interest through targeted policies and 

procedures and an obligation to 

establish a process for resolving 

conflicts of interest. This rule will help 

mitigate the possibility that SDRs’ 

business practices and internal 

structures might disadvantage a 

particular group of market participants. 

The requirement in Rule 13n–5(b)(6) 

is designed to help ensure that SDRs 

maintain accurate records relating to 

SBSs.1374 In addition to helping to 

ensure the accuracy of data maintained 

by SDRs, the requirement will provide 

a facility through which market 

participants could correct inaccuracies 

in SBS data regarding transactions to 

which they are a party. 

Collectively, the rules described in 

this section will help ensure that SDRs 

operate consistently with the objectives 

set forth in the Exchange Act by 

providing fair, open, and not 

unreasonably discriminatory access to 

market participants without taking 

advantage of the SDRs’ access to 

transaction data that market participants 

are required to report to the SDRs. 

The Commission solicited comment 

on the benefits related to Rules 13n– 

4(c), 13n–5(b)(6), 13n–4(b)(8), and 13n– 

9.1375 Other than one commenter noting 

that Rule 13n–5(b)(6) is a key step in the 

effort to have accurate data at SDRs,1376

the Commission did not receive any 

comments on the estimated benefits of 

these rules. 

b. Costs 

The Commission anticipates that the 

costs to SDRs from Rules 13n–4(c), 13n– 

5(b)(6), 13n–4(b)(8), and 13n–9 will 

derive primarily from the costs of 

establishing, maintaining, and enforcing 

the required policies and procedures. 

The governance requirements in Rule 

13n–4(c)(2) could impose costs resulting 

from educating senior management and 

each director about SBS trading and 

reporting and the new regulatory 

structure that will govern SBSs, which 

could slow management or board 

processes at least initially. Existing 

SDRs may experience lower costs, 

however, to the extent that they have 

already educated senior management 

and each director about SBS trading and 

reporting and the new regulatory 

structure that will govern SBSs. 

The requirement in Rule 13n–5(b)(6) 

will also impose costs on SDRs because 

SDRs are required to establish 

procedures and provide facilities 

through which market participants can 

challenge the accuracy of the 

transaction data and positions recorded 

in the SDRs. 

Rule 13n–4(c)(1)(ii) may also impose 

costs on SDRs by requiring SDRs to offer 

services separately. If SDRs would 

otherwise bundle their ancillary 

services with their data collection and 

maintenance services, or vice versa, 

then the requirement that they offer 

services separately may impose costs on 

SDRs. These costs include the cost of 

building the infrastructure to offer 

services separately, the potential losses 

of economies of scope in providing 

bundled services, and lost revenue from 

fees for services that market participants 

would otherwise be required to 

purchase. Similarly, the rule may 

impose costs on third party service 

providers that would be prevented from 

bundling their services with the services 

of an SDR. 

As discussed above, the Commission 

estimates that the average initial 

paperwork cost associated with Rule 

13n–4(c)(1) will be 367.5 hours and 

$35,000 and the average ongoing cost 

will be 105 hours per year for each 

SDR.1377 Assuming a maximum of ten 

SDRs, the aggregate one-time estimated 

dollar cost will be $1,465,550 1378 and 

the aggregate ongoing estimated dollar 

cost per year will be $320,890 1379 to 

comply with the rule. 

As discussed above, the Commission 

estimates that the average initial 

paperwork cost associated with Rule 

13n–4(c)(2) will be 210 hours and 

$20,000 for each SDR and the average 

ongoing paperwork cost will be 60 

hours per year for each SDR.1380

Assuming a maximum of ten SDRs, the 

aggregate one-time estimated dollar cost 

will be $901,400 1381 and the aggregate 

ongoing estimated dollar cost per year 

will be $200,400 1382 to comply with the 

rule. 

As discussed above, the Commission 

estimates that the average initial 

paperwork cost associated with Rule 

13n–4(c)(3) will be 420 hours and 

$40,000 for each SDR and the average 

ongoing paperwork cost will be 120 

hours per year for each SDR.1383

Assuming a maximum of ten SDRs, the 

aggregate one-time estimated dollar cost 

will be $1,802,800 1384 and the aggregate 

ongoing estimated dollar cost per year 

will be $400,800 1385 to comply with the 

rule. 

As discussed above, the Commission 

estimates that the average initial 

paperwork cost associated with Rule 

13n–5(b)(6) will be 315 hours and 

$30,000 for each SDR and the average 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14547 

1386See Section VII.D.7 of this release discussing 

costs of Rule 13n–5(b)(6). 

1387The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Attorney. Thus, the total initial estimated dollar 

cost will be $135,210 per SDR and $1,352,100 for 

all SDRs, calculated as follows: ($30,000 for outside 

legal services + (Compliance Attorney at $334 per 

hour for 315 hours)) × 10 registrants = $1,352,100. 

1388The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Attorney. Thus, the total initial estimated dollar 

cost will be $30,060 per SDR and $300,600 for all 

SDRs, calculated as follows: (Compliance Attorney 

at $334 per hour for 90 hours) × 10 registrants = 

$300,600. 

1389See Section VII.D.7 of this release discussing 

costs of Rules 13n–4(b)(8), 13n–9(b)(1), and 13n– 

9(b)(2). 

1390The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Attorney. Thus, the total initial estimated dollar 

cost will be $270,420 per SDR and $2,704,200 for 

all SDRs, calculated as follows: ($60,000 for outside 

legal services + (Compliance Attorney at $334 per 

hour for 630 hours)) × 10 registrants = $2,704,200. 

1391The Commission estimates that an SDR will 

assign these responsibilities to a Compliance 

Attorney. Thus, the total ongoing estimated dollar 

cost will be $60,120 per SDR and $601,200 for all 

SDRs, calculated as follows: (Compliance Attorney 

at $334 per hour for 180 hours) × 10 registrants = 

$601,200. 

1392See Proposing Release 75 FR at 77364, supra 

note 2. 

1393See Proposing Release 75 FR at 77364, supra 

note 2. 

1394MarkitSERV, supra note 19. 

1395See Section VI.D.3.a.iii(1) of this release 

discussing Rule 13n–4(c)(1)(i). 

1396Tradeweb SBSR, supra note 27. 

1397See MFA 1, supra note 19. 

1398See Sections VI.D.2.c and VI.I.1.c of this 

release discussing Rules 13n–4(b)(8) and 13n–9, 

respectively. 

1399See Barnard, supra note 19; Better Markets 1, 

supra note 19; see also Better Markets 2, supra note 

19. 

1400See Sections VI.D.3.b.iii and VI.D.3.c.iii of 

this release discussing Rules 13n–4(c)(2) and 13n– 

4(c)(3), respectively. 

ongoing paperwork cost will be 90 

hours per year for each SDR.1386

Assuming a maximum of ten SDRs, the 

aggregate one-time estimated dollar cost 

will be $1,352,100 1387 and the aggregate 

ongoing estimated dollar cost per year 

will be $300,600 1388 to comply with the 

rule. 

As discussed above, the Commission 

estimates that the average initial 

paperwork cost associated with Rules 

13n–4(b)(8) and 13n–9 will be 630 hours 

and $60,000 for each SDR and the 

average ongoing paperwork cost will be 

180 hours per year for each SDR.1389

Assuming a maximum of ten SDRs, the 

aggregate one-time estimated dollar cost 

will be $2,704,200 1390 and the aggregate 

ongoing estimated dollar cost per year 

will be $601,200 1391 to comply with the 

rules. 

The Commission solicited comment 

on the costs related to Rules 13n–4(c), 

13n–5(b)(6), 13n–4(b)(8), and 13n–9.1392

The Commission specifically requested 

comment on the initial and ongoing 

costs associated with establishing and 

maintaining the policies and procedures 

required by the rules, particularly as the 

costs apply to persons currently 

operating as SDRs.1393 One commenter 

believed that an interpretation of Rule 

13n–4(c)(1)(i) that prohibits the use of 

the ‘‘dealer pays’’ or ‘‘sell-side pays’’ 

model ‘‘would have the unintended 

consequence of significantly increasing 

the costs for buy-side participants 

. . . .’’ 1394 Because, as discussed 

above, Rule 13n–4(c)(1)(i) is not 

intended to prohibit an SDR from 

utilizing any one particular model, 

including a ‘‘dealer pays’’ or ‘‘sell-side 

pays’’ model, the Commission does not 

believe that the rule will necessarily 

increase costs for buy-side participants, 

as stated by the commenter.1395 The 

Commission further believes that if 

there is significant demand by buy-side 

participants with reporting 

responsibility for a ‘‘dealer pays’’ 

model, then an SDR is likely to provide 

such a service. 

A commenter to proposed Regulation 

SBSR suggested that SDRs should not be 

permitted to charge fees to third parties 

acting on behalf of counterparties for 

accepting SBS transaction information, 

as such fees would increase the cost of 

using an SB SEF or other third party.1396

Although the Commission agrees that an 

SB SEF or other third party could pass 

along fees charged by SDRs, the 

Commission does not believe that it is 

appropriate to determine who an SDR 

can charge for its services. Rather, the 

Commission believes that SDRs should 

have flexibility in determining how and 

whom to charge for their services, and 

that any costs associated with such 

flexibility are justified by the benefits of 

allowing SDRs to develop sustainable 

business models in an open, 

competitive environment. 

The Commission believes that 

existing SDRs may already have in place 

policies and procedures similar to the 

policies and procedures required by 

Rules 13n–4(c), 13n–5(b)(6), 13n– 

4(b)(8), and 13n–9. Such persons are 

currently not subject to regulation by 

the Commission, and therefore, may 

need to enhance their policies and 

procedures to comply with Rules 13n– 

4(c), 13n–5(b)(6), 13n–4(b)(8), and 13n– 

9. Thus, such persons may experience 

costs in enhancing their policies and 

procedures to comply with Rules 13n– 

4(c), 13n–5(b)(6), 13n–4(b)(8), and 13n– 

9. Moreover, because the costs 

discussed above represent the costs of 

creating policies and procedures 

without any existing policies and 

procedures in place, existing SDRs that 

already have policies and procedures 

may experience initial costs lower than 

those estimated above. The Commission 

believes that after such persons bring 

their policies and procedures into 

compliance with Rules 13n–4(c), 13n– 

5(b)(6), 13n–4(b)(8), and 13n–9, 

however, the ongoing annual costs for 

such persons will likely be consistent 

with the estimates provided above. 

c. Alternatives 

As suggested by a commenter, the 

Commission considered (1) adding 

safeguards specifically related to 

confidentiality of trading positions and 

(2) requiring SDRs to adopt policies and 

procedures to limit access to 

confidential information to directors, 

officers, employees, agents, and 

representatives who need to know such 

information in order to fulfill their 

regulatory obligations.1397 As discussed 

above, the Commission believes that 

Rules 13n–4(b)(8) and 13n–9, as 

adopted, are broad enough to cover 

information about trading positions, so 

no specific requirement regarding 

confidentiality of trading positions is 

necessary.1398 The Commission also 

believes that the rules are broad enough 

to allow SDRs, if they choose, to adopt 

policies and procedures to limit access 

to confidential information to directors, 

officers, employees, agents, and 

representatives who need to know such 

information in order to fulfill their 

regulatory obligations. The Commission 

believes that the adoption of the specific 

policies that were suggested by the 

commenter would prevent an SDR’s 

management from finding the most cost 

effective method of meeting the privacy 

requirements in these rules. 

The Commission considered, as an 

alternative to Rules 13n–4(c)(2) and (3), 

adopting, as suggested by two 

commenters, prescriptive rules relating 

to governance (e.g., ownership or voting 

limitations, independent directors, 

nominating committees composed of a 

majority of independent directors).1399

As discussed above, the Commission 

believes that rules that are intended to 

minimize an SDR’s potential and 

existing conflicts of interest and to help 

ensure that an SDR meets its core 

principles are sufficient and that 

prescriptive governance requirements 

are not warranted at this time.1400 If the 

Commission were to impose additional 

governance requirements and 

limitations, SDRs would likely incur 

costs in addition to the costs already 

imposed by the SDR Rules, which do 

not seem to be warranted at this time. 

For these reasons, the Commission is 

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14548 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

1401See DTCC 2, supra note 19. 

1402See Section VI.E.6.c of this release discussing 

Rule 13n–5(b)(6). 

1403See MFA 1, supra note 19; DTCC SBSR, 

supra note 27; WMBAA SBSR, supra note 27. 

1404See Section VI.D.3.c.iii of this release 

discussing Rule 13n–4(c)(3). 

1405See Section VI.D.3.c.iii of this release 

discussing Rule 13n–4(c)(3). 

1406The Commission derived its estimate from 

the following: ($801,688 ($793,840 + $3,840 + 

$4,008) for Registration Requirements and Form 

SDR) + ($214,995,300 ($210,810,000 + $4,185,300) 

for SDR Duties, Data Collection and Maintenance, 

and Direct Electronic Access) + ($986,600 for 

Recordkeeping) + ($263,162.50 for Disclosure) + 

($1,802,800 for Chief Compliance Officer and 

Compliance Functions) + ($8,226,050 ($1,465,550 + 

$901,400 + $1,802,800 + $1,352,100 + 2,704,200) for 

Other Policies and Procedures Relating to an SDR’s 

Business) = $227,075,600.50. 

1407The Commission derived its estimate from 

the following: ($55,440 for Registration 

Requirements and Form SDR) + ($127,451,400 

($126,486,000 + $965,400) for SDR Duties, Data 

Collection and Maintenance, and Direct Electronic 

Access) + ($790,051.10 for Recordkeeping) + 

($2,510 for Reports) + ($1,735 for Disclosure) + 

($15,505,620 ($9,130,800 + $16,700 + $5,990,000 + 

$368,120) for Chief Compliance Officer and 

Compliance Functions) + ($1,823,890 ($320,890 + 

$200,400 + $400,800 + $300,600 + $601,200) for 

Other Policies and Procedures Relating to an SDR’s 

Business) = $145,630,646.10. 

1408The Commission derived its estimate from 

the following: ($380 for one hour of an Attorney’s 

time per person) × (20 non-U.S. persons that 

perform the functions of an SDR using in-house 

legal counsel to determine whether an applicable 

MOU or arrangement is in place). 

1409See Section I.D of this release. 

1410 5 U.S.C. 601 et seq. 

1411 5 U.S.C. 603(a). 

1412 5 U.S.C. 551 et seq. 

1413Although Section 601(b) of the RFA defines 

the term ‘‘small entity,’’ the statute permits agencies 

to formulate their own definitions. The Commission 

has adopted definitions for the term small entity for 

the purposes of Commission rulemaking in 

accordance with the RFA. Those definitions, as 

relevant to this rulemaking, are set forth in 

Rule 0–10, 17 CFR 240.0–10. See Final Definitions 

of ‘‘Small Business’’ and ‘‘Small Organization’’ for 

Purposes of the Regulatory Flexibility Act, 

Exchange Act Release No. 18451 (Jan. 28, 1982), 47 

FR 5215 (Feb. 4, 1982). 

1414See 5 U.S.C. 605(b). 

1415 17 CFR 240.0–10. 

1416Proposing Release, 75 FR at 77365, supra 

note 2. 

not adopting the alternative to Rules 

13n–4(c)(2) and (3) of more prescriptive 

governance arrangements. 

The Commission considered whether 

the resolution of disputes should be left 

primarily to the SBS counterparties and 

third party service providers, which one 

commenter suggested.1401 The 

Commission believes that the benefits of 

a dispute resolution procedure in Rule 

13n–5(b)(6) justify the possible issues 

cited by the commenter, such as 

duplication of services already provided 

by third party service providers. As 

discussed above, there may be instances 

where a third party service provider 

cannot resolve a dispute, and, in those 

situations, the cost of dispute resolution 

through the SDR will be necessary to 

maintain the accuracy and quality of the 

SBS data.1402 The value of the SBS data 

depends on its accuracy and quality. 

The Commission also considered 

prohibiting the commercial use of SBS 

data by SDRs unless the parties to the 

SBS provide written consent. Three 

commenters, including two commenters 

to proposed Regulation SBSR, also 

suggested that SDRs be prohibited from 

using SBS data for commercial 

purposes.1403 As discussed above, the 

Commission believes that limiting the 

commercial use of SBS data would 

potentially limit the business models 

that SDRs may develop, thereby 

reducing competition.1404 Decreased 

competition may result in higher costs 

for SDR services. Limiting the 

commercial use of SBS data would 

reduce SDRs’ potential revenue streams, 

reducing the profitability and stability 

of SDRs. Further, as discussed above, 

such a limitation may decrease 

transparency by preventing an SDR from 

releasing to the public anonymized, 

aggregated reports of SBS data.1405

Finally, the Commission believes that 

the SDR Rules, including Rules 13n– 

4(c)(3) and 13n–9, are sufficient to 

reduce conflicts of interest and protect 

the privacy of SBS data. For these 

reasons, the Commission is not adopting 

the alternative of limiting the 

commercial use of SBS data. 

8. Total Costs 

Based on the analyses described 

above, the Commission estimates that 

Rules 13n–1 through 13n–11 and Form 

SDR will impose on registered SDRs an 

aggregate total initial one-time estimated 

dollar cost of $227,075,600.50.1406 The 

Commission further estimates that Rules 

13n–1 through 13n–11 and Form SDR 

will impose on registered SDRs a total 

ongoing annualized aggregate dollar cost 

of $145,630,646.10.1407 Finally, the 

Commission estimates that certain nonU.S. persons may incur an aggregate 

total initial one-time estimated dollar 

cost of approximately $7,600 1408 in 

determining the availability of the SDR 

Exemption (i.e., Rule 13n–12). 

Existing SDRs may experience costs 

lower than these estimates. Such 

persons may have in place existing 

technology systems, policies and 

procedures, personnel, and compliance 

regimes that they can use to comply 

with the SDR Rules. Because the 

estimates discussed above represent the 

costs of compliance starting from 

scratch, an existing SDR will most likely 

experience costs lower than these 

estimates. 

Similarly, if such a person is 

registered with the CFTC as a swap data 

repository, the person’s costs of 

complying with the SDR Rules will 

most likely be lower than the estimates 

provided above because the person may 

be able to use its existing policies, 

procedures, and operations to comply 

with the SDR Rules. As stated above, the 

Commission believes that on the whole, 

the SDR Rules are largely consistent 

with the rules adopted by the CFTC for 

swap data repositories.1409

Consequently, a person registered with 

the CFTC as a swap data repository may 

be able to use its existing policies, 

procedures, and operations to comply 

with the SDR Rules and may not need 

to create policies, procedures, and 

operations from scratch. 

IX. Regulatory Flexibility Act 

Certification 

The Regulatory Flexibility Act 

(‘‘RFA’’) 1410 requires Federal agencies, 

in promulgating rules, to consider the 

impact of those rules on small entities. 

Section 603(a) 1411 of the Administrative 

Procedure Act,1412 as amended by the 

RFA, generally requires the Commission 

to undertake a regulatory flexibility 

analysis of all proposed rules, or 

proposed rule amendments, to 

determine the impact of such 

rulemaking on ‘‘small entities.’’ 1413

Section 605(b) of the RFA states that 

this requirement does not apply to any 

final rule that an agency certifies will 

not ‘‘have a significant economic impact 

on a substantial number of small 

entities.’’ 1414

For purposes of Commission 

rulemaking in connection with the RFA, 

a small entity includes: (1) An issuer or 

a person, other than an investment 

company, that, on the last day of its 

most recent fiscal year, had total assets 

of $5 million or less and (2) a brokerdealer with total capital (net worth plus 

subordinated liabilities) of less than 

$500,000 on the date in the prior fiscal 

year as of which its audited financial 

statements were prepared pursuant to 

Exchange Act Rule 17a–5(d), or, if not 

required to file such statements, a 

broker-dealer with total capital (net 

worth plus subordinated liabilities) of 

less than $500,000 on the last business 

day of the preceding fiscal year (or in 

the time that it has been in business, if 

shorter); and is not affiliated with any 

person (other than a natural person) that 

is not a small entity.1415

In the Proposing Release, the 

Commission stated that it did not 

believe that any persons that would 

register as SDRs would be considered 

small entities.1416 The Commission 

stated that it believed that most, if not 

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Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 14549 

1417See Proposing Release, 75 FR at 77365, supra 

note 2. 

1418 15 U.S.C. 78w(a). 

1419 15 U.S.C. 78w(a). 

all, SDRs would be part of large 

business entities with assets in excess of 

$5 million and total capital in excess of 

$500,000. As a result, the Commission 

certified that the proposed rules would 

not have a significant impact on a 

substantial number of small entities and 

requested comments on this 

certification. 

The Commission did not receive any 

comments that specifically addressed 

whether Rules 13n–1 through 13n–12 

and Form SDR would have a significant 

economic impact on small entities. 

Therefore, the Commission continues to 

believe that Rules 13n–1 through 13n– 

12 and Form SDR will not have a 

significant economic impact on a 

substantial number of small entities.1417

Accordingly, the Commission hereby 

certifies that, pursuant to 5 U.S.C. 

605(b), Rules 13n–1 through 13n–12, 

Form SDR will not have a significant 

economic impact on a substantial 

number of small entities. 

X. Statutory Authority 

Pursuant to the Exchange Act, and 

particularly Sections 13(n) and 23(a) 

thereof, 15 U.S.C. 78m(n) and 78w(a), 

the Commission is adopting new Rules 

13n–1 to 13n–12, which govern SDRs 

and a new form for registration as an 

SDR. Additionally, the Commission is 

adopting new Rule 407 and 

amendments to Regulation S–T under 

authority set forth in Exchange Act 

Section 23(a).1418 The Commission is 

also adopting amendments to Exchange 

Act Rule 24b–2 under authority set forth 

in Exchange Act Section 23(a).1419 All 

the new rules and amendments are 

adopted under Chapter II of Title 17 of 

the Code of Federal Regulations in the 

manner set forth below. 

List of Subjects 

17 CFR Part 232 

Reporting and recordkeeping 

requirements. 

17 CFR Parts 240 and 249 

Confidential business information, 

Reporting and recordkeeping 

requirements, Securities. 

In accordance with the foregoing, 

Title 17, Chapter II of the Code of 

Federal Regulations is amended as 

follows: 

PART 232—REGULATION S–T— 

GENERAL RULES AND REGULATIONS 

FOR ELECTRONIC FILINGS 

■ 1. The authority citation for part 232 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 

77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m, 78n, 

78o(d), 78w(a), 78ll, 80a–6(c), 80a–8, 80a–29, 

80a–30, 80a–37, and 7201 et seq.; and 18 

U.S.C. 1350. 

* * * * * 

■ 2. Section 232.11 is amended by 

adding the definitions of ‘‘Interactive 

Data Financial Report’’ and ‘‘Related 

Official Financial Report Filing’’ in 

alphabetical order to read as follows: 

§ 232.11 Definition of terms used in part 

232. 

* * * * * 

Interactive Data Financial Report. The 

term Interactive Data Financial Report 

means the machine-readable computer 

code that presents information in 

eXtensible Business Reporting Language 

(XBRL) electronic format pursuant to 

§ 232.407. 

* * * * * 

Related Official Financial Report 

Filing. The term Related Official 

Financial Report Filing means the ASCII 

or HTML format part of the official 

filing with which an Interactive Data 

Financial Report appears as an exhibit. 

* * * * * 

■ 3. Section 232.101 is amended by: 

■ a. Removing, in paragraph (a)(1)(xv), 

the word ‘‘and’’ after the semicolon; 

■ b. In paragraph (a)(1)(xvi), removing 

the period and adding in its place a 

semicolon, and adding the word ‘‘and’’ 

after the semicolon; 

■ c. Adding paragraph (a)(1)(xvii); 

■ d. Revising paragraph (c) introductory 

text; and 

■ e. Adding paragraph (d). 

The additions and revision read as 

follows: 

§ 232.101 Mandated electronic 

submissions and exceptions. 

(a) * * * 

(1) * * * 

(xvii) Documents filed with the 

Commission pursuant to section 13(n) of 

the Exchange Act (15 U.S.C. 78m(n)) 

and the rules and regulations 

thereunder, including Form SDR (17 

CFR 249.1500) and reports filed 

pursuant to Rules 13n–11(d) and (f) (17 

CFR 240.13n–11(d) and (f)) under the 

Exchange Act. 

* * * * * 

(c) Documents to be submitted in 

paper only. Except as otherwise 

specified in paragraph (d) of this 

section, the following shall not be 

submitted in electronic format: 

* * * * * 

(d) All documents, including any 

information with respect to which 

confidential treatment is requested, filed 

pursuant to section 13(n) of the 

Exchange Act (15 U.S.C. 78m(n)) and 

the rules and regulations thereunder 

shall be filed in electronic format. 

■ 4. Section 232.305 is amended by 

revising paragraph (b) to read as follows: 

§ 232.305 Number of characters per line; 

tabular and columnar information. 

* * * * * 

(b) Paragraph (a) of this section does 

not apply to HTML documents, 

Interactive Data Files (§ 232.11), 

Interactive Data Financial Reports 

(§ 232.11) or XBRL-Related Documents 

(§ 232.11). 

■ 5. Section 232.407 is added to read as 

follows: 

§ 232.407 Interactive data financial report 

filings. 

Section 407 of Regulation S–T 

(§ 232.407) applies to electronic filers 

that file Interactive Data Financial 

Reports (§ 232.11) as required by Rule 

13n–11(f)(5) (§ 240.13n–11(f)(5) of this 

chapter). Section 407 imposes content, 

format, and filing requirements for 

Interactive Data Financial Reports, but 

does not change the substantive content 

requirements for the financial and other 

disclosures in the Related Official 

Financial Report Filing (§ 232.11). Rule 

13n–11(f)(5) specifies the circumstances 

under which an Interactive Data 

Financial Report must be filed as an 

exhibit. 

(a) Content, format, and filing 

requirements—General. Interactive Data 

Financial Reports must: 

(1) Comply with the content, format, 

and filing requirements of this section; 

(2) Be filed only by an electronic filer 

that is required to file an Interactive 

Data Financial Report pursuant to Rule 

13n–11(f)(5) (§ 240.13n–11(f)(5) of this 

chapter) as an exhibit to a filing; and 

(3) Be filed in accordance with the 

EDGAR Filer Manual and Rules 13n– 

11(f)(5) and (g) (§ 240.13n–11(f)(5) and 

(g) of this chapter). 

(b) Content—categories of information 

presented. An Interactive Data Financial 

Report must consist of only a complete 

set of information for all periods 

required to be presented in the 

corresponding data in the Related 

Official Financial Report Filing, no 

more and no less, for the following 

categories, as applicable: 

(1) The complete set of the electronic 

filer’s financial statements (which 

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includes the face of the financial 

statements and all footnotes); and 

(2) All schedules set forth in Article 

12 of Regulation S–X (§§ 210.12–01 

through 210.12–29 of this chapter) 

related to the electronic filer’s financial 

statements. 

Note to paragraph (b): It is not permissible 

for the Interactive Data Financial Report to 

present only partial face financial statements, 

such as by excluding comparative financial 

information for prior periods. 

(c) Format—Generally. An Interactive 

Data Financial Report must comply with 

the following requirements, except as 

modified by paragraph (d) or (e) of this 

section, as applicable, with respect to 

the corresponding data in the Related 

Official Financial Report Filing 

consisting of footnotes to financial 

statements or financial statement 

schedules as set forth in Article 12 of 

Regulation S–X (§§ 210.12–01 through 

210.12–29 of this chapter): 

(1) Data elements and labels—(i) 

Element accuracy. Each data element 

(i.e., all text, line item names, monetary 

values, percentages, numbers, dates and 

other labels) contained in the Interactive 

Data Financial Report reflects the same 

information in the corresponding data 

in the Related Official Financial Report 

Filing; 

(ii) Element specificity. No data 

element contained in the corresponding 

data in the Related Official Financial 

Report Filing is changed, deleted or 

summarized in the Interactive Data 

Financial Report; 

(iii) Standard and special labels and 

elements. Each data element contained 

in the Interactive Data Financial Report 

is matched with an appropriate tag from 

the most recent version of the standard 

list of tags specified by the EDGAR Filer 

Manual. A tag is appropriate only when 

its standard definition, standard label, 

and other attributes as and to the extent 

identified in the list of tags match the 

information to be tagged, except that: 

(A) Labels. An electronic filer must 

create and use a new special label to 

modify a tag’s existing standard label 

when that tag is an appropriate tag in all 

other respects (i.e., in order to use a tag 

from the standard list of tags only its 

label needs to be changed); and 

(B) Elements. An electronic filer must 

create and use a new special element if 

and only if an appropriate tag does not 

exist in the standard list of tags for 

reasons other than or in addition to an 

inappropriate standard label; and 

(2) Additional mark-up related 

content. The Interactive Data Financial 

Report contains any additional mark-up 

related content (e.g., the eXtensible 

Business Reporting Language tags 

themselves, identification of the core 

XML documents used and other 

technology-related content) not found in 

the corresponding data in the Related 

Official Financial Report Filing that is 

necessary to comply with the EDGAR 

Filer Manual requirements. 

(d) Format—Footnotes—Generally. 

The part of the Interactive Data 

Financial Report for which the 

corresponding data in the Related 

Official Financial Report Filing consists 

of footnotes to financial statements must 

comply with the requirements of 

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

as modified by this paragraph (d). Each 

complete footnote must be block-text 

tagged. 

(e) Format—Schedules—Generally. 

The part of the Interactive Data 

Financial Report for which the 

corresponding data in the Related 

Official Financial Report Filing consists 

of financial statement schedules as set 

forth in Article 12 of Regulation S–X 

(§§ 210.12–01 through 210.12–29 of this 

chapter) must comply with the 

requirements of paragraphs (c)(1) and 

(2) of this section, as modified by this 

paragraph (e). Each complete schedule 

must be block-text tagged. 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 6. The general authority citation for 

Part 240 is revised to read as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f, 

78g, 78i, 78j, 78j–1, 78k, 78k–1, 78l, 78m, 

78n, 78n–1, 78o, 78o–4, 78o–10, 78p, 78q, 

78q–1, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 

80a–20, 80a–23, 80a–29, 80a–37, 80b–3, 80b– 

4, 80b–11, 7201 et seq., and 8302; 7 U.S.C. 

2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 

1350; and Pub. L. 111–203, 939A, 124 Stat. 

1376 (2010), unless otherwise noted. 

* * * * * 

■ 7. Sections 240.13n–1 through 240– 

13n–12 are added to read as follows: 

Sec. 

240.13n–1 Registration of security-based 

swap data repository. 

240.13n–2 Withdrawal from registration; 

revocation and cancellation. 

240.13n–3 Registration of successor to 

registered security-based swap data 

repository. 

240.13n–4 Duties and core principles of 

security-based swap data repository. 

240.13n–5 Data collection and 

maintenance. 

240.13n–6 Automated systems. 

240.13n–7 Recordkeeping of security-based 

swap data repository. 

240.13n–8 Reports to be provided to the 

Commission. 

240.13n–9 Privacy requirements of 

security-based swap data repository. 

240.13n–10 Disclosure requirements of 

security-based swap data repository. 

240.13n–11 Chief compliance officer of 

security-based swap data repository; 

compliance reports and financial reports. 

240.13n–12 Exemption from requirements 

governing security-based swap data 

repositories for certain non-U.S. persons. 

§ 240.13n–1 Registration of security-based 

swap data repository. 

(a) Definitions. For purposes of this 

section — 

(1) Non-resident security-based swap 

data repository means: 

(i) In the case of an individual, one 

who resides in or has his principal place 

of business in any place not in the 

United States; 

(ii) In the case of a corporation, one 

incorporated in or having its principal 

place of business in any place not in the 

United States; or 

(iii) In the case of a partnership or 

other unincorporated organization or 

association, one having its principal 

place of business in any place not in the 

United States. 

(2) Tag (including the term tagged) 

has the same meaning as set forth in 

Rule 11 of Regulation S–T (17 CFR 

232.11). 

(b) An application for the registration 

of a security-based swap data repository 

and all amendments thereto shall be 

filed electronically in a tagged data 

format on Form SDR (17 CFR 249.1500) 

with the Commission in accordance 

with the instructions contained therein. 

As part of the application process, each 

security-based swap data repository 

shall provide additional information to 

any representative of the Commission 

upon request. 

(c) Within 90 days of the date of the 

publication of notice of the filing of 

such application (or within such longer 

period as to which the applicant 

consents), the Commission shall – 

(1) By order grant registration; or 

(2) Institute proceedings to determine 

whether registration should be granted 

or denied. Such proceedings shall 

include notice of the issues under 

consideration and opportunity for 

hearing on the record and shall be 

concluded within 180 days of the date 

of the publication of notice of the filing 

of the application for registration under 

paragraph (b) of this section. At the 

conclusion of such proceedings, the 

Commission, by order, shall grant or 

deny such registration. The Commission 

may extend the time for conclusion of 

such proceedings for up to 90 days if it 

finds good cause for such extension and 

publishes its reasons for so finding or 

for such longer period as to which the 

applicant consents. 

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(3) The Commission shall grant the 

registration of a security-based swap 

data repository if the Commission finds 

that such security-based swap data 

repository is so organized, and has the 

capacity, to be able to assure the 

prompt, accurate, and reliable 

performance of its functions as a 

security-based swap data repository, 

comply with any applicable provision of 

the federal 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 

Act (15 U.S.C. 78m(n)) and the rules and 

regulations thereunder. The 

Commission shall deny the registration 

of a security-based swap data repository 

if it does not make any such finding. 

(d) If any information reported in 

items 1 through 17, 26, and 48 of Form 

SDR (17 CFR 249.1500) or in any 

amendment thereto is or becomes 

inaccurate for any reason, whether 

before or after the registration has been 

granted, the security-based swap data 

repository shall promptly file an 

amendment on Form SDR updating 

such information. In addition, the 

security-based swap data repository 

shall annually file an amendment on 

Form SDR within 60 days after the end 

of each fiscal year of such securitybased swap data repository. 

(e) Each security-based swap data 

repository shall designate and authorize 

on Form SDR an agent in the United 

States, other than a Commission 

member, official, or employee, who 

shall accept any notice or service of 

process, pleadings, or other documents 

in any action or proceedings brought 

against the security-based swap data 

repository to enforce the federal 

securities laws and the rules and 

regulations thereunder. 

(f) Any non-resident security-based 

swap data repository applying for 

registration pursuant to this section 

shall: 

(1) Certify on Form SDR that the 

security-based swap data repository can, 

as a matter of law, and will provide the 

Commission with prompt access to the 

books and records of such securitybased swap data repository and can, as 

a matter of law, and will submit to 

onsite inspection and examination by 

the Commission, and 

(2) Provide an opinion of counsel that 

the security-based swap data repository 

can, as a matter of law, provide the 

Commission with prompt access to the 

books and records of such securitybased swap data repository and can, as 

a matter of law, submit to onsite 

inspection and examination by the 

Commission. 

(g) An application for registration or 

any amendment thereto that is filed 

pursuant to this section shall be 

considered a ‘‘report’’ filed with the 

Commission for purposes of sections 

18(a) and 32(a) of the Act (15 U.S.C. 

78r(a) and 78ff(a)) and the rules and 

regulations thereunder and other 

applicable provisions of the United 

States Code and the rules and 

regulations thereunder. 

§ 240.13n–2 Withdrawal from registration; 

revocation and cancellation. 

(a) Definition. For purposes of this 

section, tag (including the term tagged) 

has the same meaning as set forth in 

Rule 11 of Regulation S–T (17 CFR 

232.11). 

(b) A registered security-based swap 

data repository may withdraw from 

registration by filing a withdrawal from 

registration on Form SDR (17 CFR 

249.1500) electronically in a tagged data 

format. The security-based swap data 

repository shall designate on Form SDR 

a person to serve as the custodian of the 

security-based swap data repository’s 

books and records. When filing a 

withdrawal from registration on Form 

SDR, a security-based swap data 

repository shall update any inaccurate 

information. 

(c) A withdrawal from registration 

filed by a security-based swap data 

repository shall become effective for all 

matters (except as provided in this 

paragraph (c)) on the 60th day after the 

filing thereof with the Commission, 

within such longer period of time as to 

which such security-based swap data 

repository consents or which the 

Commission, by order, may determine 

as necessary or appropriate in the public 

interest or for the protection of 

investors, or within such shorter period 

of time as the Commission may 

determine. 

(d) A withdrawal from registration 

that is filed pursuant to this section 

shall be considered a ‘‘report’’ filed with 

the Commission for purposes of sections 

18(a) and 32(a) of the Act (15 U.S.C. 

78r(a) and 78ff(a)) and the rules and 

regulations thereunder and other 

applicable provisions of the United 

States Code and the rules and 

regulations thereunder. 

(e) If the Commission finds, on the 

record after notice and opportunity for 

hearing, that any registered securitybased swap data repository has obtained 

its registration by making any false and 

misleading statements with respect to 

any material fact or has violated or 

failed to comply with any provision of 

the federal securities laws and the rules 

and regulations thereunder, the 

Commission, by order, may revoke the 

registration. Pending final 

determination of whether any 

registration shall be revoked, the 

Commission, by order, may suspend 

such registration, if such suspension 

appears to the Commission, after notice 

and opportunity for hearing on the 

record, to be necessary or appropriate in 

the public interest or for the protection 

of investors. 

(f) If the Commission finds that a 

registered security-based swap data 

repository is no longer in existence or 

has ceased to do business in the 

capacity specified in its application for 

registration, the Commission, by order, 

may cancel the registration. 

§ 240.13n–3 Registration of successor to 

registered security-based swap data 

repository. 

(a) In the event that a security-based 

swap data repository succeeds to and 

continues the business of a securitybased swap data repository registered 

pursuant to section 13(n) of the Act (15 

U.S.C. 78m(n)), the registration of the 

predecessor shall be deemed to remain 

effective as the registration of the 

successor if, within 30 days after such 

succession, the successor files an 

application for registration on Form 

SDR (17 CFR 249.1500), and the 

predecessor files a withdrawal from 

registration on Form SDR; provided, 

however, that the registration of the 

predecessor security-based swap data 

repository shall cease to be effective 90 

days after the publication of notice of 

the filing of the application for 

registration on Form SDR filed by the 

successor security-based swap data 

repository. 

(b) Notwithstanding paragraph (a) of 

this section, if a security-based swap 

data repository succeeds to and 

continues the business of a registered 

predecessor security-based swap data 

repository, and the succession is based 

solely on a change in the predecessor’s 

date or state of incorporation, form of 

organization, or composition of a 

partnership, the successor may, within 

30 days after the succession, amend the 

registration of the predecessor securitybased swap data repository on Form 

SDR (17 CFR 249.1500) to reflect these 

changes. This amendment shall be 

deemed an application for registration 

filed by the predecessor and adopted by 

the successor. 

§ 240.13n–4 Duties and core principles of 

security-based swap data repository. 

(a) Definitions. For purposes of this 

section— 

(1) Affiliate of a security-based swap 

data repository means a person that, 

directly or indirectly, controls, is 

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controlled by, or is under common 

control with the security-based swap 

data repository. 

(2) Board means the board of directors 

of the security-based swap data 

repository or a body performing a 

function similar to the board of directors 

of the security-based swap data 

repository. 

(3) Control (including the terms 

controlled by and under common 

control with) means the possession, 

direct or indirect, of the power to direct 

or cause the direction of the 

management and policies of a person, 

whether through the ownership of 

voting securities, by contract, or 

otherwise. A person is presumed to 

control another person if the person: 

(i) Is a director, general partner, or 

officer exercising executive 

responsibility (or having similar status 

or functions); 

(ii) Directly or indirectly has the right 

to vote 25 percent or more of a class of 

voting securities or has the power to sell 

or direct the sale of 25 percent or more 

of a class of voting securities; or 

(iii) In the case of a partnership, has 

the right to receive, upon dissolution, or 

has contributed, 25 percent or more of 

the capital. 

(4) Director means any member of the 

board. 

(5) Direct electronic access means 

access, which shall be in a form and 

manner acceptable to the Commission, 

to data stored by a security-based swap 

data repository in an electronic format 

and updated at the same time as the 

security-based swap data repository’s 

data is updated so as to provide the 

Commission or any of its designees with 

the ability to query or analyze the data 

in the same manner that the securitybased swap data repository can query or 

analyze the data. 

(6) Market participant means any 

person participating in the securitybased swap market, including, but not 

limited to, security-based swap dealers, 

major security-based swap participants, 

and any other counterparties to a 

security-based swap transaction. 

(7) Nonaffiliated third party of a 

security-based swap data repository 

means any person except: 

(i) The security-based swap data 

repository; 

(ii) Any affiliate of the security-based 

swap data repository; or 

(iii) A person employed by a securitybased swap data repository and any 

entity that is not the security-based 

swap data repository’s affiliate (and 

‘‘nonaffiliated third party’’ includes 

such entity that jointly employs the 

person). 

(8) Person associated with a securitybased swap data repository means: 

(i) Any partner, officer, or director of 

such security-based swap data 

repository (or any person occupying a 

similar status or performing similar 

functions); 

(ii) Any person directly or indirectly 

controlling, controlled by, or under 

common control with such securitybased swap data repository; or 

(iii) Any employee of such securitybased swap data repository. 

(b) Duties. To be registered, and 

maintain registration, as a securitybased swap data repository, a securitybased swap data repository shall: 

(1) Subject itself to inspection and 

examination by any representative of 

the Commission; 

(2) Accept data as prescribed in 

Regulation SBSR (17 CFR 242.900 

through 242.909) for each security-based 

swap; 

(3) Confirm, as prescribed in Rule 

13n–5 (§ 240.13n–5), with both 

counterparties to the security-based 

swap the accuracy of the data that was 

submitted; 

(4) Maintain, as prescribed in Rule 

13n–5, the data described in Regulation 

SBSR in such form, in such manner, and 

for such period as provided therein and 

in the Act and the rules and regulations 

thereunder; 

(5) Provide direct electronic access to 

the Commission (or any designee of the 

Commission, including another 

registered entity); 

(6) Provide the information described 

in Regulation SBSR in such form and at 

such frequency as prescribed in 

Regulation SBSR to comply with the 

public reporting requirements set forth 

in section 13(m) of the Act (15 U.S.C. 

78m(m)) and the rules and regulations 

thereunder; 

(7) At such time and in such manner 

as may be directed by the Commission, 

establish automated systems for 

monitoring, screening, and analyzing 

security-based swap data; 

(8) Maintain the privacy of any and all 

security-based swap transaction 

information that the security-based 

swap data repository receives from a 

security-based swap dealer, 

counterparty, or any registered entity as 

prescribed in Rule 13n–9 (§ 240.13n–9); 

and 

(9) [Reserved] 

(10) [Reserved] 

(11) Designate an individual to serve 

as a chief compliance officer. 

(c) Compliance with core principles. 

A security-based swap data repository 

shall comply with the core principles as 

described in this paragraph. 

(1) Market access to services and data. 

Unless necessary or appropriate to 

achieve the purposes of the Act and the 

rules and regulations thereunder, the 

security-based swap data repository 

shall not adopt any policies or 

procedures or take any action that 

results in an unreasonable restraint of 

trade or impose any material 

anticompetitive burden on the trading, 

clearing, or reporting of transactions. To 

comply with this core principle, each 

security-based swap data repository 

shall: 

(i) Ensure that any dues, fees, or other 

charges imposed by, and any discounts 

or rebates offered by, a security-based 

swap data repository are fair and 

reasonable and not unreasonably 

discriminatory. Such dues, fees, other 

charges, discounts, or rebates shall be 

applied consistently across all similarlysituated users of such security-based 

swap data repository’s services, 

including, but not limited to, market 

participants, market infrastructures 

(including central counterparties), 

venues from which data can be 

submitted to the security-based swap 

data repository (including exchanges, 

security-based swap execution facilities, 

electronic trading venues, and matching 

and confirmation platforms), and third 

party service providers; 

(ii) Permit market participants to 

access specific services offered by the 

security-based swap data repository 

separately; 

(iii) 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 securitybased swap data repository as well as 

fair, open, and not unreasonably 

discriminatory participation by market 

participants, market infrastructures, 

venues from which data can be 

submitted to the security-based swap 

data repository, and third party service 

providers that seek to connect to or link 

with the security-based swap data 

repository; and 

(iv) 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 security-based swap 

data repository and to grant such person 

access to such services or data if such 

person has been discriminated against 

unfairly. 

(2) Governance arrangements. Each 

security-based swap data repository 

shall establish governance arrangements 

that are transparent to fulfill public 

interest requirements under the Act and 

the rules and regulations thereunder; to 

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carry out functions consistent with the 

Act, the rules and regulations 

thereunder, and the purposes of the Act; 

and to support the objectives of the 

Federal Government, owners, and 

participants. To comply with this core 

principle, each security-based swap data 

repository shall: 

(i) Establish governance arrangements 

that are well defined and 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 the 

security-based swap data repository’s 

senior management and each member of 

the board or committee that has the 

authority to act on behalf of the board 

possess requisite skills and expertise to 

fulfill their responsibilities in the 

management and governance of the 

security-based swap data repository, 

have a clear understanding of their 

responsibilities, and exercise sound 

judgment about the security-based swap 

data repository’s affairs. 

(3) Conflicts of interest. Each securitybased swap data repository shall 

establish and enforce written policies 

and procedures reasonably designed to 

minimize conflicts of interest in the 

decision-making process of the securitybased swap data repository and 

establish a process for resolving any 

such conflicts of interest. Such conflicts 

of interest include, but are not limited 

to: conflicts between the commercial 

interests of a security-based swap data 

repository and its statutory and 

regulatory responsibilities; conflicts in 

connection with the commercial 

interests of certain market participants 

or linked market infrastructures, third 

party service providers, and others; 

conflicts between, among, or with 

persons associated with the securitybased swap data repository, market 

participants, affiliates of the securitybased swap data repository, and 

nonaffiliated third parties; and misuse 

of confidential information, material, 

nonpublic information, and/or 

intellectual property. To comply with 

this core principle, each security-based 

swap data repository shall: 

(i) Establish, maintain, and enforce 

written policies and procedures 

reasonably designed to identify and 

mitigate potential and existing conflicts 

of interest in the security-based swap 

data repository’s decision-making 

process on an ongoing basis; 

(ii) With respect to the decisionmaking 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 

reasonable written policies and 

procedures regarding the security-based 

swap data repository’s non-commercial 

and/or commercial use of the securitybased swap transaction information that 

it receives from a market participant, 

any registered entity, or any other 

person. 

Note to § 240.13n–4: This rule is not 

intended to limit, or restrict, the applicability 

of other provisions of the federal securities 

laws, including, but not limited to, section 

13(m) of the Act (15 U.S.C. 78m(m)) and the 

rules and regulations thereunder. 

§ 240.13n–5 Data collection and 

maintenance. 

(a) Definitions. For purposes of this 

section— 

(1) Asset class means those securitybased swaps in a particular broad 

category, including, but not limited to, 

credit derivatives and equity 

derivatives. 

(2) Position means the gross and net 

notional amounts of open security-based 

swap transactions aggregated by one or 

more attributes, including, but not 

limited to, the: 

(i) Underlying instrument, index, or 

reference entity; 

(ii) Counterparty; 

(iii) Asset class; 

(iv) Long risk of the underlying 

instrument, index, or reference entity; 

and 

(v) Short risk of the underlying 

instrument, index, or reference entity. 

(3) Transaction data means all 

information reported to a security-based 

swap data repository pursuant to the 

Act and the rules and regulations 

thereunder, except for information 

provided pursuant to Rule 906(b) of 

Regulation SBSR (17 CFR 242.906(b)). 

(b) Requirements. Every securitybased swap data repository registered 

with the Commission shall comply with 

the following data collection and data 

maintenance standards: 

(1) Transaction data. (i) Every 

security-based swap data repository 

shall establish, maintain, and enforce 

written policies and procedures 

reasonably designed for the reporting of 

complete and accurate transaction data 

to the security-based swap data 

repository and shall accept all 

transaction data that is reported in 

accordance with such policies and 

procedures. 

(ii) If a security-based swap data 

repository accepts any security-based 

swap in a particular asset class, the 

security-based swap data repository 

shall accept all security-based swaps in 

that asset class that are reported to it in 

accordance with its policies and 

procedures required by paragraph 

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

(iii) Every security-based swap data 

repository shall establish, maintain, and 

enforce written policies and procedures 

reasonably designed to satisfy itself that 

the transaction data that has been 

submitted to the security-based swap 

data repository is complete and 

accurate, and clearly identifies the 

source for each trade side and the 

pairing method (if any) for each 

transaction in order to identify the level 

of quality of the transaction data. 

(iv) Every security-based swap data 

repository shall promptly record the 

transaction data it receives. 

(2) Positions. Every security-based 

swap data repository shall establish, 

maintain, and enforce written policies 

and procedures reasonably designed to 

calculate positions for all persons with 

open security-based swaps for which 

the security-based swap data repository 

maintains records. 

(3) Every security-based swap data 

repository shall 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. 

(4) Every security-based swap data 

repository shall maintain transaction 

data and related identifying information 

for not less than five years after the 

applicable security-based swap expires 

and historical positions for not less than 

five years: 

(i) 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 

(ii) In an electronic format that is nonrewriteable and non-erasable. 

(5) Every security-based swap data 

repository shall establish, maintain, and 

enforce written policies and procedures 

reasonably designed to prevent any 

provision in a valid security-based swap 

from being invalidated or modified 

through the procedures or operations of 

the security-based swap data repository. 

(6) Every security-based swap data 

repository shall 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 

security-based swap data repository. 

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(7) If a security-based swap data 

repository ceases doing business, or 

ceases to be registered pursuant to 

section 13(n) of the Act (15 U.S.C. 

78m(n)) and the rules and regulations 

thereunder, it 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 

Act and the rules and regulations 

thereunder and for the remainder of the 

period required by this section. 

(8) Every security-based swap data 

repository shall make and keep current 

a plan to ensure that the transaction 

data and positions that are recorded in 

the security-based swap data repository 

continue to be maintained in 

accordance with Rule 13n–5(b)(7) 

(§ 240.13n–5(b)(7)), which shall include 

procedures for transferring the 

transaction data and positions to the 

Commission or its designee (including 

another registered security-based swap 

data repository). 

§ 240.13n–6 Automated systems. 

Every security-based swap data 

repository, with respect to those systems 

that support or are integrally related to 

the performance of its activities, shall 

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. 

§ 240.13n–7 Recordkeeping of securitybased swap data repository. 

(a) Every security-based swap data 

repository shall make and keep current 

the following books and records relating 

to its business: 

(1) A record for each office listing, by 

name or title, each person at that office 

who, without delay, can explain the 

types of records the security-based swap 

data repository maintains at that office 

and the information contained in those 

records; and 

(2) A record listing each officer, 

manager, or person performing similar 

functions of the security-based swap 

data repository responsible for 

establishing policies and procedures 

that are reasonably designed to ensure 

compliance with the Act and the rules 

and regulations thereunder. 

(b) Recordkeeping rule for securitybased swap data repositories. (1) Every 

security-based swap data repository 

shall keep and preserve at least one 

copy of all documents, including all 

documents and policies and procedures 

required by the Act and the rules and 

regulations thereunder, correspondence, 

memoranda, papers, books, notices, 

accounts, and other such records as 

shall be made or received by it in the 

course of its business as such. 

(2) Every security-based swap data 

repository shall keep all such 

documents for a period of not less than 

five years, the first two years in a place 

that is immediately available to 

representatives of the Commission for 

inspection and examination. 

(3) Every security-based swap data 

repository shall, upon request of any 

representative of the Commission, 

promptly furnish to the possession of 

such representative copies of any 

documents required to be kept and 

preserved by it pursuant to paragraphs 

(a) and (b) of this section. 

(c) If a security-based swap data 

repository ceases doing business, or 

ceases to be registered pursuant to 

section 13(n) of the Act (15 U.S.C. 

78m(n)) and the rules and regulations 

thereunder, it must continue to 

preserve, maintain, and make accessible 

the records and data required to be 

collected, maintained and preserved by 

this section in the manner required by 

this section and for the remainder of the 

period required by this section. 

(d) This section does not apply to 

transaction data and positions collected 

and maintained pursuant to Rule 13n– 

5 (§ 240.13n–5). 

§ 240.13n–8 Reports to be provided to the 

Commission. 

Every security-based swap data 

repository shall promptly report to the 

Commission, in a form and manner 

acceptable to the Commission, such 

information as the Commission 

determines to be necessary or 

appropriate for the Commission to 

perform the duties of the Commission 

under the Act and the rules and 

regulations thereunder. 

§ 240.13n–9 Privacy requirements of 

security-based swap data repository. 

(a) Definitions. For purposes of this 

section— 

(1) Affiliate of a security-based swap 

data repository means a person that, 

directly or indirectly, controls, is 

controlled by, or is under common 

control with the security-based swap 

data repository. 

(2) Control (including the terms 

controlled by and under common 

control with) means the possession, 

direct or indirect, of the power to direct 

or cause the direction of the 

management and policies of a person, 

whether through the ownership of 

voting securities, by contract, or 

otherwise. A person is presumed to 

control another person if the person: 

(i) Is a director, general partner, or 

officer exercising executive 

responsibility (or having similar status 

or functions); 

(ii) Directly or indirectly has the right 

to vote 25 percent or more of a class of 

voting securities or has the power to sell 

or direct the sale of 25 percent or more 

of a class of voting securities; or 

(iii) In the case of a partnership, has 

the right to receive, upon dissolution, or 

has contributed, 25 percent or more of 

the capital. 

(3) Market participant means any 

person participating in the securitybased swap market, including, but not 

limited to, security-based swap dealers, 

major security-based swap participants, 

and any other counterparties to a 

security-based swap transaction. 

(4) Nonaffiliated third party of a 

security-based swap data repository 

means any person except: 

(i) The security-based swap data 

repository; 

(ii) The security-based swap data 

repository’s affiliate; or 

(iii) A person employed by a securitybased swap data repository and any 

entity that is not the security-based 

swap data repository’s affiliate (and 

nonaffiliated third party includes such 

entity that jointly employs the person). 

(5) Nonpublic personal information 

means: 

(i) Personally identifiable information 

that is not publicly available 

information; and 

(ii) Any list, description, or other 

grouping of market participants (and 

publicly available information 

pertaining to them) that is derived using 

personally identifiable information that 

is not publicly available information. 

(6) Personally identifiable information 

means any information: 

(i) A market participant provides to a 

security-based swap data repository to 

obtain service from the security-based 

swap data repository; 

(ii) About a market participant 

resulting from any transaction involving 

a service between the security-based 

swap data repository and the market 

participant; or 

(iii) The security-based swap data 

repository obtains about a market 

participant in connection with 

providing a service to that market 

participant. 

(7) Person associated with a securitybased swap data repository means: 

(i) Any partner, officer, or director of 

such security-based swap data 

repository (or any person occupying a 

similar status or performing similar 

functions); 

(ii) Any person directly or indirectly 

controlling, controlled by, or under 

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common control with such securitybased swap data repository; or 

(iii) Any employee of such securitybased swap data repository. 

(b) Each security-based swap data 

repository shall: 

(1) Establish, maintain, and enforce 

written policies and procedures 

reasonably designed to protect the 

privacy of any and all security-based 

swap transaction information that the 

security-based swap data repository 

receives from a security-based swap 

dealer, counterparty, or any registered 

entity. Such policies and procedures 

shall include, but are not limited to, 

policies and procedures to protect the 

privacy of any and all security-based 

swap transaction information that the 

security-based swap data repository 

shares with affiliates and nonaffiliated 

third parties; and 

(2) Establish and maintain safeguards, 

policies, and procedures reasonably 

designed to prevent the 

misappropriation or misuse, directly or 

indirectly, of: 

(i) Any confidential information 

received by the security-based swap 

data repository, including, but not 

limited to, trade data, position data, and 

any nonpublic personal information 

about a market participant or any of its 

customers; 

(ii) Material, nonpublic information; 

and/or 

(iii) Intellectual property, such as 

trading strategies or portfolio positions, 

by the security-based swap data 

repository or any person associated with 

the security-based swap data repository 

for their personal benefit or the benefit 

of others. Such safeguards, policies, and 

procedures shall address, without 

limitation: 

(A) Limiting access to such 

confidential information, material, 

nonpublic information, and intellectual 

property; 

(B) Standards pertaining to the trading 

by persons associated with the securitybased swap data repository for their 

personal benefit or the benefit of others; 

and 

(C) Adequate oversight to ensure 

compliance with this subparagraph. 

§ 240.13n–10 Disclosure requirements of 

security-based swap data repository. 

(a) Definition. For purposes of this 

section, market participant means any 

person participating in the over-thecounter derivatives market, including, 

but not limited to, security-based swap 

dealers, major security-based swap 

participants, and any other 

counterparties to a security-based swap 

transaction. 

(b) Before accepting any securitybased swap data from a market 

participant or upon a market 

participant’s request, a security-based 

swap data repository shall furnish to the 

market participant a disclosure 

document that contains the following 

written information, which must 

reasonably enable the market 

participant to identify and evaluate 

accurately the risks and costs associated 

with using the services of the securitybased swap data repository: 

(1) The security-based swap data 

repository’s criteria for providing others 

with access to services offered and data 

maintained by the security-based swap 

data repository; 

(2) The security-based swap data 

repository’s criteria for those seeking to 

connect to or link with the securitybased swap data repository; 

(3) A description of the security-based 

swap data repository’s policies and 

procedures regarding its safeguarding of 

data and operational reliability, as 

described in Rule 13n–6 (§ 240.13n–6); 

(4) A description of the security-based 

swap data repository’s policies and 

procedures reasonably designed to 

protect the privacy of any and all 

security-based swap transaction 

information that the security-based 

swap data repository receives from a 

security-based swap dealer, 

counterparty, or any registered entity, as 

described in Rule 13n–9(b)(1) 

(§ 240.13n–9(b)(1)); 

(5) A description of the security-based 

swap data repository’s policies and 

procedures regarding its noncommercial and/or commercial use of 

the security-based swap transaction 

information that it receives from a 

market participant, any registered 

entity, or any other person; 

(6) A description of the security-based 

swap data repository’s dispute 

resolution procedures involving market 

participants, as described in Rule 13n– 

5(b)(6) (§ 240.13n–5(b)(6)); 

(7) A description of all the securitybased swap data repository’s services, 

including any ancillary services; 

(8) The security-based swap data 

repository’s updated schedule of any 

dues; unbundled prices, rates, or other 

fees for all of its services, including any 

ancillary services; any discounts or 

rebates offered; and the criteria to 

benefit from such discounts or rebates; 

and 

(9) A description of the security-based 

swap data repository’s governance 

arrangements. 

§ 240.13n–11 Chief compliance officer of 

security-based swap data repository; 

compliance reports and financial reports. 

(a) In general. Each security-based 

swap data repository shall identify on 

Form SDR (17 CFR 249.1500) a person 

who has been designated by the board 

to serve as a chief compliance officer of 

the security-based swap data repository. 

The compensation, appointment, and 

removal of the chief compliance officer 

shall require the approval of a majority 

of the security-based swap data 

repository’s board. 

(b) Definitions. For purposes of this 

section— 

(1) Board means the board of directors 

of the security-based swap data 

repository or a body performing a 

function similar to the board of directors 

of the security-based swap data 

repository. 

(2) Director means any member of the 

board. 

(3) EDGAR Filer Manual has the same 

meaning as set forth in Rule 11 of 

Regulation S–T (17 CFR 232.11). 

(4) Interactive Data Financial Report 

has the same meaning as set forth in 

Rule 11 of Regulation S–T (17 CFR 

232.11). 

(5) Material change means a change 

that a chief compliance officer would 

reasonably need to know in order to 

oversee compliance of the securitybased swap data repository. 

(6) Material compliance matter means 

any compliance matter that the board 

would reasonably need to know to 

oversee the compliance of the securitybased swap data repository and that 

involves, without limitation: 

(i) A violation of the federal securities 

laws by the security-based swap data 

repository, its officers, directors, 

employees, or agents; 

(ii) A violation of the policies and 

procedures of the security-based swap 

data repository by the security-based 

swap data repository, its officers, 

directors, employees, or agents; or 

(iii) A weakness in the design or 

implementation of the policies and 

procedures of the security-based swap 

data repository. 

(7) Official filing has the same 

meaning as set forth in Rule 11 of 

Regulation S–T (17 CFR 232.11). 

(8) Senior officer means the chief 

executive officer or other equivalent 

officer. 

(9) Tag (including the term tagged) 

has the same meaning as set forth in 

Rule 11 of Regulation S–T (17 CFR 

232.11). 

(c) Duties. Each chief compliance 

officer of a security-based swap data 

repository shall: 

(1) Report directly to the board or to 

the senior officer of the security-based 

swap data repository; 

(2) Review the compliance of the 

security-based swap data repository 

with respect to the requirements and 

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core principles described in section 

13(n) of the Act (15 U.S.C. 78m(n)) and 

the rules and regulations thereunder; 

(3) In consultation with the board or 

the senior officer of the security-based 

swap data repository, take reasonable 

steps to resolve any material conflicts of 

interest that may arise; 

(4) Be responsible for administering 

each policy and procedure that is 

required to be established pursuant to 

section 13 of the Act (15 U.S.C. 78m) 

and the rules and regulations 

thereunder; 

(5) Take reasonable steps to ensure 

compliance with the Act and the rules 

and regulations thereunder relating to 

security-based swaps, including each 

rule prescribed by the Commission 

under section 13 of the Act (15 U.S.C. 

78m); 

(6) Establish procedures for the 

remediation of noncompliance issues 

identified by the chief compliance 

officer through any— 

(i) Compliance office review; 

(ii) Look-back; 

(iii) Internal or external audit finding; 

(iv) Self-reported error; or 

(v) Validated complaint; and 

(7) Establish and follow appropriate 

procedures for the handling, 

management response, remediation, 

retesting, and closing of noncompliance 

issues. 

(d) Compliance reports—(1) In 

general. The chief compliance officer 

shall annually prepare and sign a report 

that contains a description of the 

compliance of the security-based swap 

data repository with respect to the Act 

and the rules and regulations 

thereunder and each policy and 

procedure of the security-based swap 

data repository (including the code of 

ethics and conflicts of interest policies 

of the security-based swap data 

repository). Each compliance report 

shall also contain, at a minimum, a 

description of: 

(i) The security-based swap data 

repository’s enforcement of its policies 

and procedures; 

(ii) Any material changes to the 

policies and procedures since the date 

of the preceding compliance report; 

(iii) Any recommendation for material 

changes to the policies and procedures 

as a result of the annual review, the 

rationale for such recommendation, and 

whether such policies and procedures 

were or will be modified by the 

security-based swap data repository to 

incorporate such recommendation; and 

(iv) Any material compliance matters 

identified since the date of the 

preceding compliance report. 

(2) Requirements. A financial report 

of the security-based swap data 

repository shall be filed with the 

Commission as described in paragraph 

(g) of this section and shall accompany 

a compliance report as described in 

paragraph (d)(1) of this section. The 

compliance report shall include a 

certification by the chief compliance 

officer that, to the best of his or her 

knowledge and reasonable belief, and 

under penalty of law, the compliance 

report is accurate and complete. The 

compliance report shall also be filed in 

a tagged data format in accordance with 

the instructions contained in the 

EDGAR Filer Manual, as described in 

Rule 301 of Regulation S–T (17 CFR 

232.301). 

(e) The chief compliance officer shall 

submit the annual compliance report to 

the board for its review prior to the 

filing of the report with the 

Commission. 

(f) Financial reports. Each financial 

report filed with a compliance report 

shall: 

(1) Be a complete set of financial 

statements of the security-based swap 

data repository that are prepared in 

accordance with U.S. generally accepted 

accounting principles for the most 

recent two fiscal years of the securitybased swap data repository; 

(2) Be audited in accordance with the 

standards of the Public Company 

Accounting Oversight Board by a 

registered public accounting firm that is 

qualified and independent in 

accordance with Rule 2–01 of 

Regulation S–X (17 CFR 210.2–01); 

(3) Include a report of the registered 

public accounting firm that complies 

with paragraphs (a) through (d) of Rule 

2–02 of Regulation S–X (17 CFR 210.2– 

02); 

(4) If the security-based swap data 

repository’s financial statements contain 

consolidated information of a subsidiary 

of the security-based swap data 

repository, provide condensed financial 

information, in a financial statement 

footnote, as to the financial position, 

changes in financial position and results 

of operations of the security-based swap 

data repository, as of the same dates and 

for the same periods for which audited 

consolidated financial statements are 

required. Such financial information 

need not be presented in greater detail 

than is required for condensed 

statements by Rules 10–01(a)(2), (3), and 

(4) of Regulation S–X (17 CFR 210.10– 

01). Detailed footnote disclosure that 

would normally be included with 

complete financial statements may be 

omitted with the exception of 

disclosures regarding material 

contingencies, long-term obligations, 

and guarantees. Descriptions of 

significant provisions of the securitybased swap data repository’s long-term 

obligations, mandatory dividend or 

redemption requirements of redeemable 

stocks, and guarantees of the securitybased swap data repository shall be 

provided along with a five-year 

schedule of maturities of debt. If the 

material contingencies, long-term 

obligations, redeemable stock 

requirements, and guarantees of the 

security-based swap data repository 

have been separately disclosed in the 

consolidated statements, then they need 

not be repeated in this schedule; and 

(5) Be provided as an official filing in 

accordance with the EDGAR Filer 

Manual and include, as part of the 

official filing, an Interactive Data 

Financial Report filed in accordance 

with Rule 407 of Regulation S–T (17 

CFR 232.407). 

(g) Reports filed pursuant to 

paragraphs (d) and (f) of this section 

shall be filed within 60 days after the 

end of the fiscal year covered by such 

reports. 

(h) No officer, director, or employee of 

a security-based swap data repository 

may directly or indirectly take any 

action to coerce, manipulate, mislead, or 

fraudulently influence the securitybased swap data repository’s chief 

compliance officer in the performance 

of his or her duties under this section. 

§ 240.13n–12 Exemption from 

requirements governing security-based 

swap data repositories for certain non-U.S. 

persons. 

(a) Definitions. For purposes of this 

section— 

(1) Non-U.S. person means a person 

that is not a U.S. person. 

(2) U.S. person shall have the same 

meaning as set forth in Rule 3a71– 

3(a)(4)(i) (§ 240.3a71–3(a)(4)(i)). 

(b) A non-U.S. person that performs 

the functions of a security-based swap 

data repository within the United States 

shall be exempt from the registration 

and other requirements set forth in 

section 13(n) of the Act (15 U.S.C. 

78m(n)), and the rules and regulations 

thereunder, provided that each regulator 

with supervisory authority over such 

non-U.S. person has entered into a 

memorandum of understanding or other 

arrangement with the Commission that 

addresses the confidentiality of data 

collected and maintained by such nonU.S. person, access by the Commission 

to such data, and any other matters 

determined by the Commission. 

■ 8. Section 240.24b–2 is amended by: 

■ a. In the first sentence of paragraph 

(b), removing ‘‘paragraph (g)’’ and 

adding in its place ‘‘paragraphs (g) and 

(h)’’; and 

■ b. Adding paragraph (h). 

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The addition reads as follows: 

§ 240.24b–2 Nondisclosure of information 

filed with the Commission and with any 

exchange. 

* * * * * 

(h) A security-based swap data 

repository shall not omit the 

confidential portion from the material 

filed in electronic format pursuant to 

section 13(n) of the Act (15 U.S.C. 

78m(n)) and the rules and regulations 

thereunder. In lieu of the procedures 

described in paragraph (b) of this 

section, a security-based swap data 

repository shall request confidential 

treatment electronically for any material 

filed in electronic format pursuant to 

section 13(n) of the Act (15 U.S.C. 

78m(n)) and the rules and regulations 

thereunder. 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 9. The authority citation for Part 249 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; 12 U.S.C. 5461 et seq.; and 18 U.S.C. 

1350, unless otherwise noted. 

* * * * * 

■ 10. Subpart P consisting of § 249.1500 

is added to read as follows: 

Subpart P—Forms for Registration of 

Security-Based Swap Data 

Repositories 

§ 249.1500 Form SDR, for application for 

registration as a security-based swap data 

repository, amendments thereto, or 

withdrawal from registration. 

Note: The text of Form SDR does not, and the 

amendments will not, appear in the Code of 

Federal Regulations.] 

The form shall be used for registration 

as a security-based swap data 

repository, and for the amendments to 

and withdrawal from such registration 

pursuant to section 13(n) of the 

Exchange Act (15 U.S.C. 78m(n)). 

UNITED STATES 

SECURITIES AND EXCHANGE 

COMMISSION 

Washington, DC 20549 

FORM SDR 

APPLICATION OR AMENDMENT TO 

APPLICATION FOR REGISTRATION 

OR WITHDRAWAL FROM 

REGISTRATION AS SECURITY-BASED 

SWAP DATA REPOSITORY UNDER 

THE SECURITIES EXCHANGE ACT OF 

1934 

GENERAL INSTRUCTIONS FOR 

PREPARING AND FILING FORM SDR 

1. Form SDR and exhibits thereto are 

to be filed electronically in a tagged data 

format through EDGAR with the 

Securities and Exchange Commission by 

an applicant for registration as a 

security-based swap data repository, by 

a registered security-based swap data 

repository amending its application for 

registration, or by a registered securitybased swap data repository withdrawing 

its registration, pursuant to Section 

13(n) of the Securities Exchange Act of 

1934 (‘‘Exchange Act’’) and Rules 13n– 

1 and 13n–2 thereunder. The electronic 

filing requirements of Regulation S–T 

will apply to all such filings. 

2. With respect to an applicant for 

registration as a security-based swap 

data repository, Form SDR also 

constitutes an application for 

registration as a securities information 

processor. An amendment or 

withdrawal on Form SDR also 

constitutes an amendment or 

withdrawal of securities information 

processor registration pursuant to 

Section 11A of the Exchange Act and 

the rules and regulations thereunder. 

Applicants for registration as a 

securities information processor not 

seeking to become dually-registered as a 

security-based swap data repository and 

a securities information processor, or 

registered securities information 

processors that are not dually-registered 

as a security-based swap data repository 

and a securities information processor, 

should continue to file on Form SIP. 

3. Upon the filing of an application 

for registration, the Commission will 

publish notice of the filing and afford 

interested persons an opportunity to 

submit written data, views, and 

arguments. No application for 

registration shall be effective unless the 

Commission, by order, grants such 

registration. 

4. Individuals’ names shall be given 

in full (last name, first name, middle 

name). 

5. Form SDR shall be signed by a 

person who is duly authorized to act on 

behalf of the security-based swap data 

repository. 

6. If Form SDR is being filed as an 

application for registration, all 

applicable items must be answered in 

full. If any item is not applicable, 

indicate by ‘‘none’’ or ‘‘N/A’’ as 

appropriate. 

7. Disclosure of the information 

specified on this form is mandatory 

prior to processing of an application for 

registration as a security-based swap 

data repository and a securities 

information processor. The information 

will be used for the principal purpose 

of determining whether the Commission 

should grant or deny registration to an 

applicant. Except in cases where 

confidential treatment is requested by 

the applicant and granted by the 

Commission pursuant to the Freedom of 

Information Act and the rules of the 

Commission thereunder, information 

supplied on this form may be made 

available on the Commission’s Web site, 

will be included routinely in the public 

files of the Commission, and will be 

available for inspection by any 

interested person. A form that is not 

prepared and executed in compliance 

with applicable requirements may be 

deemed as not acceptable for filing. 

Acceptance of this form, however, shall 

not constitute any finding that it has 

been filed as required or that the 

information submitted is true, current, 

or complete. Intentional misstatements 

or omissions of fact constitute federal 

criminal violations (see 18 U.S.C. 1001 

and 15 U.S.C. 78ff(a)). 

8. Rule 13n–1(d) under the Exchange 

Act requires a security-based swap data 

repository to amend promptly Form 

SDR if any information contained in 

items 1 through 17, 26, and 48 of this 

application, or any amendment thereto, 

is or becomes inaccurate for any reason. 

Rule 13n–1(d) under the Exchange Act 

also requires a security-based swap data 

repository to file annually an 

amendment on Form SDR within 60 

days after the end of each fiscal year of 

such security-based swap data 

repository. Rule 13n–2 under the 

Exchange Act requires a security-based 

swap data repository that seeks to 

withdraw from registration to file such 

withdrawal on Form SDR. 

9. For the purposes of this form, the 

term ‘‘applicant’’ includes any applicant 

for registration as a security-based swap 

data repository or any registered 

security-based swap data repository that 

is amending Form SDR or withdrawing 

its registration as a security-based swap 

data repository. In addition, the term 

‘‘applicant’’ includes any applicant for 

registration as a securities information 

processor. 

10. Applicants filing Form SDR as an 

amendment (other than an annual 

amendment) need to update any 

information contained in items 1 

through 17, 26, and 48 that has become 

inaccurate since the security-based 

swap data repository’s last filing of 

Form SDR. An applicant submitting an 

amendment (other than an annual 

amendment) represents that all 

unamended information contained in 

items 1 through 17, 26, and 48 remains 

true, current, and complete as filed. 

11. Applicants filing a withdrawal 

need to update any items or exhibits 

that are being amended since the 

security-based swap data repository’s 

last filing of Form SDR. An applicant 

submitting a withdrawal represents that 

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all unamended items and exhibits 

remain true, current, and complete as 

filed. 

12. Applicants filing an annual 

amendment must file a complete form, 

including all pages, answers to all items, 

together with all exhibits. Applicants 

filing an annual amendment must 

indicate which items have been 

amended since the last annual 

amendment, or, if the security-based 

swap data repository has not yet filed an 

annual amendment, since the securitybased swap data repository’s application 

for registration. 

DEFINITIONS: Unless the context 

requires otherwise, all terms used in 

this form have the same meaning as in 

the Exchange Act, as amended, and in 

the rules and regulations of the 

Commission thereunder. 

This collection of information will be 

reviewed by the Office of Management 

and Budget in accordance with the 

clearance requirements of 44 U.S.C. 

3507. 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. The Commission 

estimates that the average burden to 

respond to Form SDR will be between 

12 and 482 hours depending upon the 

purpose for which the form is being 

filed. Any member of the public may 

direct to the Commission any comments 

concerning the accuracy of this burden 

estimate and any suggestions for 

reducing this burden. It is mandatory 

that a security-based swap data 

repository file all notifications, updates, 

and reports required by Rules 13n–1 

and 13n–2 using Form SDR. 

UNITED STATES 

SECURITIES AND EXCHANGE 

COMMISSION 

Washington, DC 20549 

FORM SDR 

APPLICATION OR AMENDMENT TO 

APPLICATION FOR REGISTRATION 

OR WITHDRAWAL FROM 

REGISTRATION AS SECURITYBASED SWAP DATA REPOSITORY 

UNDER THE SECURITIES EXCHANGE 

ACT OF 1934 

lllllllllllllllllll

(Exact Name of Applicant as Specified 

in Charter) 

lllllllllllllllllll

(Address of Principal Executive Offices) 

If this is an APPLICATION for 

registration, complete this form in full 

and check here b 

If this is an AMENDMENT to an 

application, or to an effective 

registration (other than an annual 

amendment), list all items that are 

amended and check here b 

lllllllllllllllllll

lllllllllllllllllll

lllllllllllllllllll

If this is an ANNUAL AMENDMENT 

to an application, or to an effective 

registration, complete this form in full, 

list all items that are amended since 

the last annual amendment, and check 

here b 

lllllllllllllllllll

lllllllllllllllllll

lllllllllllllllllll

If this is a WITHDRAWAL from 

registration, list all items that are 

amended and check here b 

lllllllllllllllllll

lllllllllllllllllll

lllllllllllllllllll

Or check here to confirm that there is 

no inaccurate information to update b 

GENERAL INFORMATION 

1. Name under which business is conducted, if different than name specified 

herein: lllllllllllllll

lllllllllllllllllll

2. If name of business is amended, state 

previous business name: lllllll

lllllllllllllllllll

3. Mailing address: lllllllll

lllllllllllllllllll

(Number and Street) 

lllllllllllllllllll

(City) (State/Country) (Mailing 

Zip/Postal Code) 

4. List of principal office(s) and 

address(es) where security-based swap 

data repository and securities 

information processor activities are 

conducted: 

Office 

lllllllllllllllllll

lllllllllllllllllll

lllllllllllllllllll

lllllllllllllllllll

Address 

lllllllllllllllllll

lllllllllllllllllll

lllllllllllllllllll

lllllllllllllllllll

5. If the applicant is a successor 

(within the definition of Rule 12b–2 

under the Exchange Act) to a previously 

registered security-based swap data 

repository, please complete the 

following: 

a. Date of succession: lllllll

b. Full name and address of 

predecessor security-based swap data 

repository: 

lllllllllllllllllll

(Name) 

lllllllllllllllllll

(Number and Street) 

lllllllllllllllllll

(City) (State/Country) (Mailing 

Zip/Postal Code) 

lllllllllllllllllll

c. Predecessor’s CIK lllllllll

6. List all asset classes of securitybased swaps for which the applicant is 

collecting and maintaining data or for 

which it proposes to collect and 

maintain data. 

lllllllllllllllllll

lllllllllllllllllll

7. Furnish a description of the function(s) that the applicant performs or 

proposes to perform. llllllll

lllllllllllllllllll

lllllllllllllllllll

lllllllllllllllllll

8. Applicant is a: 

b Corporation 

b Partnership 

b Other Form of Organization 

(Specify) llllllllllll

9. If the applicant is a corporation or 

other form of organization (besides a 

partnership): 

a. Date of incorporation or 

organization 

lllllllllllllllllll

b. Place of incorporation or state/

country of organization 

lllllllllllllllllll

10. If the applicant is a partnership: 

a. Date of filing of partnership agreement llllllllllllllll

b. Place where partnership agreement 

was filed llllllllllllll

11. Applicant understands and 

consents that any notice or service of 

process, pleadings, or other documents 

in connection with any action or 

proceeding against the applicant may be 

effectuated by certified mail to the 

officer specified or person named below 

at the U.S. address given. Such officer 

or person cannot be a Commission 

member, official, or employee. 

lllllllllllllllllll

(Name of Person or, if Applicant is a 

Corporation, Title of Officer) 

lllllllllllllllllll

(Name of Applicant or Applicable 

Entity) 

lllllllllllllllllll

(Number and Street) 

lllllllllllllllllll

(City) (State) (Zip Code) 

lllllllllllllllllll

(Area Code) (Telephone Number) 

12. If this is a withdrawal from 

registration, furnish: 

a. Name(s) and address(es) of the 

person(s) who has or will have custody 

or possession of the books and records 

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that the applicant maintained in 

connection with its performance of 

security-based swap data repository and 

securities information processor 

functions. 

lllllllllllllllllll

(Name of Person) 

lllllllllllllllllll

(Number and Street) 

lllllllllllllllllll

(City) (State/Country) (Mailing 

Zip/Postal Code) 

lllllllllllllllllll

(Area Code) (Telephone Number) 

b. If different from above, provide 

address(es) where such books and 

records will be located. 

lllllllllllllllllll

(Number and Street) 

lllllllllllllllllll

(City) (State/Country) (Mailing 

Zip/Postal Code) 

13. SIGNATURE: Applicant has duly 

caused this application, amendment, or 

withdrawal to be signed on its behalf by 

the undersigned, hereunto duly 

authorized, on this date:llllll. 

Applicant and the undersigned hereby 

represent that all information contained 

herein is true, current, and complete. 

Intentional misstatements or omissions 

of fact constitute federal criminal 

violations (see 18 U.S.C. 1001 and 15 

U.S.C. 78ff(a)). It is understood that all 

required items and exhibits are 

considered integral parts of this form 

and that the submission of any 

amendment or withdrawal represents 

that all unamended items and exhibits 

remain true, current, and complete as 

previously filed and that the submission 

of any amendment (other than an 

annual amendment) represents that all 

unamended information contained in 

items 1 through 17, 26, and 48 remains 

true, current, and complete as filed. If 

the applicant is a non-resident securitybased swap data repository, the 

applicant and the undersigned further 

represent that the applicant can, as a 

matter of law, and will provide the 

Commission with prompt access to the 

applicant’s books and records and that 

the applicant can, as a matter of law, 

and will submit to an onsite inspection 

and examination by the Commission. 

For purposes of this certification, ‘‘nonresident security-based swap data 

repository’’ means (i) in the case of an 

individual, one who resides in or has 

his principal place of business in any 

place not in the United States; (ii) in the 

case of a corporation, one incorporated 

in or having its principal place of 

business in any place not in the United 

States; or (iii) in the case of a 

partnership or other unincorporated 

organization or association, one having 

its principal place of business in any 

place not in the United States. 

lllllllllllllllllll

(Name of Applicant) 

lllllllllllllllllll

(Signature of General Partner, Managing 

Agent, or Principal Officer) 

lllllllllllllllllll

(Title) 

EXHIBITS—BUSINESS 

ORGANIZATION 

14. List as Exhibit A any person as 

defined in Section 3(a)(9) of the 

Exchange Act that owns 10 percent or 

more of the applicant’s stock or that, 

either directly or indirectly, through 

agreement or otherwise, in any other 

manner, may control or direct the 

management or policies of the 

applicant. State in Exhibit A the full 

name and address of each such person 

and attach a copy of the agreement or, 

if there is none written, describe the 

agreement or basis upon which such 

person exercises or may exercise such 

control or direction. 

15. Attach as Exhibit B the following 

information about the chief compliance 

officer who has been appointed by the 

board of directors of the applicant or a 

person or group performing a function 

similar to such board of directors: 

a. Name 

b. Title 

c. Date of commencement and, if 

appropriate, termination of present term 

of position 

d. Length of time the chief 

compliance officer has held the same 

position 

e. Brief account of the business 

experience of the chief compliance 

officer over the last five years 

f. Any other business affiliations in 

the securities industry or derivatives 

industry 

g. Details of: 

(1) any order of the Commission with 

respect to such person pursuant to 

Sections 15(b)(4), 15(b)(6), 19(h)(2), or 

19(h)(3) of the Exchange Act; 

(2) any conviction or injunction of a 

type described in Sections 15(b)(4)(B) or 

(C) of the Exchange Act within the past 

ten years; 

(3) any action of a self-regulatory 

organization with respect to such person 

imposing a final disciplinary sanction 

pursuant to Sections 6(b)(6), l5A(b)(7), 

or 17A(b)(3)(G) of the Exchange Act; 

(4) any final action by a selfregulatory organization with respect to 

such person constituting a denial, bar, 

prohibition, or limitation of 

membership, participation, or 

association with a member, or of access 

to services offered by such organization 

or a member thereof; and 

(5) any final action by another federal 

regulatory agency, including the 

Commodity Futures Trading 

Commission, any state regulatory 

agency, or any foreign financial 

regulatory authority resulting in: 

i. a finding that such person has made 

a false statement or omission, or has 

been dishonest, unfair, or unethical; 

ii. a finding that such person has been 

involved in a violation of any securitiesrelated regulations or statutes; 

iii. a finding that such person has 

been a cause of a business having its 

authorization to do business denied, 

suspended, revoked, or restricted; 

iv. an order entered, in the past ten 

years, against such person in connection 

with a securities-related activity; or 

v. any disciplinary sanction, 

including a denial, suspension, or 

revocation of such person’s registration 

or license or otherwise, by order, a 

prevention from associating with a 

securities-related business or a 

restriction of such person’s activities. 

16. Attach as Exhibit C a list of the 

officers, directors, governors, and 

persons performing similar functions, 

and the members of all standing 

committees grouped by committee of 

the applicant or of the entity identified 

in item 19 that performs the securitybased swap data repository and 

securities information processor 

activities of the applicant, indicating for 

each: 

a. Name 

b. Title 

c. Dates of commencement and, if 

appropriate, termination of present term 

of office or position 

d. Length of time each present officer, 

director, governor, persons performing 

similar functions, or member of a 

standing committee has held the same 

office or position 

e. Brief account of the business 

experience of each officer, director, 

governor, persons performing similar 

functions, or member of a standing 

committee over the last five years 

f. Any other business affiliations in 

the securities industry or derivatives 

industry 

g. Details of: 

(1) any order of the Commission with 

respect to such person pursuant to 

Sections 15(b)(4), 15(b)(6), 19(h)(2), or 

19(h)(3) of the Exchange Act; 

(2) any conviction or injunction of a 

type described in Sections 15(b)(4)(B) or 

(C) of the Exchange Act within the past 

ten years; 

(3) any action of a self-regulatory 

organization with respect to such person 

imposing a final disciplinary sanction 

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14560 Federal Register / Vol. 80, No. 53 / Thursday, March 19, 2015 / Rules and Regulations 

pursuant to Sections 6(b)(6), l5A(b)(7), 

or 17A(b)(3)(G) of the Exchange Act; 

(4) any final action by a selfregulatory organization with respect to 

such person constituting a denial, bar, 

prohibition, or limitation of 

membership, participation, or 

association with a member, or of access 

to services offered by such organization 

or a member thereof; and 

(5) any final action by another federal 

regulatory agency, including the 

Commodity Futures Trading 

Commission, any state regulatory 

agency, or any foreign financial 

regulatory authority resulting in: 

i. a finding that such person has made 

a false statement or omission, or has 

been dishonest, unfair, or unethical; 

ii. a finding that such person has been 

involved in a violation of any securitiesrelated regulations or statutes; 

iii. a finding that such person has 

been a cause of a business having its 

authorization to do business denied, 

suspended, revoked, or restricted; 

iv. an order entered, in the past ten 

years, against such person in connection 

with a securities-related activity; or 

v. any disciplinary sanction, 

including a denial, suspension, or 

revocation of such person’s registration 

or license or otherwise, by order, a 

prevention from associating with a 

securities-related business or a 

restriction of such person’s activities. 

17. Attach as Exhibit D a copy of 

documents relating to the governance 

arrangements of the applicant, 

including, but not limited to, the 

nomination and selection process of the 

members on the applicant’s board of 

directors, a person or group performing 

a function similar to a board of directors 

(collectively, ‘‘board’’), or any 

committee that has the authority to act 

on behalf of the board; the 

responsibilities of the board and each 

such committee; the composition of the 

board and each such committee; and the 

applicant’s policies and procedures 

reasonably designed to ensure that the 

applicant’s senior management and each 

member of the board or such committee 

possess requisite skills and expertise to 

fulfill their responsibilities in the 

management and governance of the 

applicant, to have a clear understanding 

of their responsibilities, and to exercise 

sound judgment about the applicant’s 

affairs. 

18. Attach as Exhibit E a copy of the 

constitution, articles of incorporation or 

association with all amendments 

thereto, existing by-laws, rules, 

procedures, and instruments 

corresponding thereto, of the applicant. 

19. Attach as Exhibit F a narrative 

and/or graphic description of the 

organizational structure of the 

applicant. Note: If the security-based 

swap data repository or securities 

information processor activities of the 

applicant are conducted primarily by a 

division, subdivision, or other 

segregable entity within the applicant’s 

corporation or organization, describe the 

relationship of such entity within the 

overall organizational structure and 

attach as Exhibit F the description that 

applies to the segregable entity. 

20. Attach as Exhibit G a list of all 

affiliates of the applicant and indicate 

the general nature of the affiliation. For 

purposes of this application, an 

‘‘affiliate’’ of an applicant means a 

person that, directly or indirectly, 

controls, is controlled by, or is under 

common control with the applicant. 

21. Attach as Exhibit H a brief 

description of any material pending 

legal proceeding(s), other than ordinary 

and routine litigation incidental to the 

business, to which the applicant or any 

of its affiliates is a party or to which any 

of its property is the subject. Include the 

name of the court or agency in which 

the proceeding(s) are pending, the 

date(s) instituted, the principal parties 

to the proceeding, a description of the 

factual basis alleged to underlie the 

proceeding(s), and the relief sought. 

Include similar information as to any 

such proceeding(s) known to be 

contemplated by any governmental 

agencies. 

22. Attach as Exhibit I copies of all 

material contracts with any securitybased swap execution facility, clearing 

agency, central counterparty, or third 

party service provider. To the extent 

that form contracts are used by the 

applicant, submit a sample of each type 

of form contract used. In addition, 

include a list of security-based swap 

execution facilities, clearing agencies, 

central counterparties, and third party 

service providers with whom the 

applicant has entered into material 

contracts. 

23. Attach as Exhibit J procedures 

implemented by the applicant to 

minimize conflicts of interest in the 

decision-making process of the 

applicant and to resolve any such 

conflicts of interest. 

EXHIBITS—FINANCIAL 

INFORMATION 

24. Attach as Exhibit K a statement of 

financial position, results of operations, 

statement of sources and application of 

revenues and all notes or schedules 

thereto, as of the most recent fiscal year 

of the applicant. If statements certified 

by an independent public accountant 

are available, such statements shall be 

submitted as Exhibit K. Alternatively, a 

financial report, as described in Rule 

13n–11(f) under the Exchange Act, may 

be filed as Exhibit K. 

25. Attach as Exhibit L a statement of 

financial position and results of 

operations for each affiliate of the 

applicant as of the end of the most 

recent fiscal year of each such affiliate. 

Alternatively, identify, if available, the 

most recently filed annual report on 

Form 10–K under the Exchange Act for 

any such affiliate as Exhibit L. 

26. Attach as Exhibit M the following: 

a. A complete list of all dues, fees, 

and other charges imposed, or to be 

imposed, as well as all discounts or 

rebates offered, or to be offered, by or on 

behalf of the applicant for its services, 

including the security-based swap data 

repository’s services, securities 

information processor’s services, and 

any ancillary services, and identify the 

service(s) provided for each such due, 

fee, other charge, discount, or rebate; 

b. A description of the basis and 

methods used in determining at least 

annually the level and structure of the 

services as well as the dues, fees, other 

charges, discounts, or rebates listed in 

paragraph a of this item; and 

c. If the applicant differentiates, or 

proposes to differentiate, among its 

customers, or classes of customers in the 

amount of any dues, fees, or other 

charges imposed or any discount or 

rebate offered for the same or similar 

services, then state and indicate the 

amount of each differential. In addition, 

identify and describe any differences in 

the cost of providing such services, and 

any other factors, that account for such 

differences. 

EXHIBITS—OPERATIONAL 

CAPABILITY 

27. Attach as Exhibit N a narrative 

description, or the functional 

specifications, of each service or 

function listed in item 7 and performed 

as a security-based swap data repository 

or securities information processor. 

Include a description of all procedures 

utilized for the collection and 

maintenance of information or records 

with respect to transactions or positions 

in, or the terms and conditions of, 

security-based swaps entered into by 

market participants. 

28. Attach as Exhibit O a list of all 

computer hardware utilized by the 

applicant to perform the security-based 

swap data repository or securities 

information processor functions listed 

in item 7, indicating: 

a. Name of manufacturer and 

manufacturer’s equipment identification 

number; 

b. Whether such hardware is 

purchased or leased (If leased, state 

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from whom leased, duration of lease, 

and any provisions for purchase or 

renewal); and 

c. Where such equipment (exclusive 

of terminals and other access devices) is 

physically located. 

29. Attach as Exhibit P a description 

of the personnel qualifications for each 

category of professional, nonprofessional, and supervisory 

employees employed by the applicant or 

the division, subdivision, or other 

segregable entity within the applicant as 

described in item 19. 

30. Attach as Exhibit Q a description 

of the measures or procedures 

implemented by the applicant to 

provide for the security of any system 

employed to perform the functions of 

the security-based swap data repository 

or securities information processor. 

Include a general description of any 

physical and operational safeguards 

designed to prevent unauthorized access 

(whether by input or retrieval) to the 

system. Describe any circumstances 

within the past year in which the 

described security measures or 

safeguards failed to prevent any such 

unauthorized access to the system and 

any measures taken to prevent a 

reoccurrence. Describe any measures 

used by the applicant to satisfy itself 

that the information received or 

disseminated by the system is accurate. 

31. Where security-based swap data 

repository or securities information 

processor functions are performed by 

automated facilities or systems, attach 

as Exhibit R a description of all backup 

systems or subsystems that are designed 

to prevent interruptions in the 

performance of any such function as a 

result of technical malfunctions or 

otherwise in the system itself, in any 

permitted input or output system 

connection, or as a result of any 

independent source. 

32. Attach as Exhibit S the following: 

a. For each of the security-based swap 

data repository or securities information 

processor functions described in item 7: 

(1) quantify in appropriate units of 

measure the limits on the applicant’s 

capacity to receive (or collect), process, 

store, or display (or disseminate for 

display or other use) the data elements 

included within each function (e.g., 

number of inquiries from remote 

terminals); and 

(2) identify the factors (mechanical, 

electronic, or other) that account for the 

current limitations reported in answer 

to (1) on the applicant’s capacity to 

receive (or collect), process, store, or 

display (or disseminate for display or 

other use) the data elements included 

within each function. 

b. If the applicant is able to employ, 

or presently employs, its system(s) for 

any use other than for performing the 

functions of a security-based swap data 

repository or securities information 

processor, state the priorities of 

assignment of capacity between such 

functions and such other uses, and state 

the methods used or able to be used to 

divert capacity between such functions 

and other uses. 

EXHIBITS—ACCESS TO SERVICES 

AND DATA 

33. Attach as Exhibit T the following: 

a. State the number of persons who 

subscribe, or who have notified the 

applicant of their intention to subscribe, 

to the applicant’s services. 

b. For each instance during the past 

year in which any person has been 

prohibited or limited with respect to 

access to services offered or data 

maintained by the applicant, indicate 

the name of each such person and the 

reason for the prohibition or limitation. 

c. For each of such services that 

involves the supply of information to a 

quotation board, ticker device, 

electronic information terminal, or other 

such device, state the total number of 

devices to which information is, or will 

be supplied (‘‘serviced’’) and any 

minimum and or maximum number of 

devices required or permitted by 

agreement or otherwise to be serviced 

by the applicant. In addition, define the 

data elements for each service. 

d. For each service that is furnished 

in machine-readable form, state the 

storage media of any service furnished 

and define the data elements of such 

service. 

34. Attach as Exhibit U copies of all 

contracts governing the terms by which 

persons may subscribe to the securitybased swap data repository services, 

securities information processor 

services, and any ancillary services 

provided by the applicant. To the extent 

that form contracts are used by the 

applicant, submit a sample of each type 

of form contract used. 

35. Attach as Exhibit V a description 

of any specifications, qualifications, or 

other criteria that limit, are interpreted 

to limit, or have the effect of limiting 

access to or use of any security-based 

swap data repository or securities 

information processor services offered 

or data maintained by the applicant and 

state the reasons for imposing such 

specifications, qualifications, or other 

criteria. 

36. Attach as Exhibit W any 

specifications, qualifications, or other 

criteria required of persons who supply 

security-based swap information to the 

applicant for collection, maintenance, 

processing, preparing for distribution, 

and publication by the applicant or of 

persons who seek to connect to or link 

with the applicant. 

37. Attach as Exhibit X any 

specifications, qualifications, or other 

criteria required of any person, 

including, but not limited to, regulators, 

market participants, market 

infrastructures, venues from which data 

could be submitted to the applicant, and 

third party service providers, who 

requests access to data maintained by 

the applicant. 

38. Attach as Exhibit Y policies and 

procedures implemented by the 

applicant to review any prohibition or 

limitation of any person with respect to 

access to services offered or data 

maintained by the applicant and to 

grant such person access to such 

services or data if such person has been 

discriminated against unfairly. 

EXHIBITS—OTHER POLICIES AND 

PROCEDURES 

39. Attach as Exhibit Z policies and 

procedures implemented by the 

applicant to protect the privacy of any 

and all security-based swap transaction 

information that the applicant receives 

from a market participant or any 

registered entity. 

40. Attach as Exhibit AA a description 

of safeguards, policies, and procedures 

implemented by the applicant to 

prevent the misappropriation or misuse 

of (a) any confidential information 

received by the applicant, including, but 

not limited to, trade data, position data, 

and any nonpublic personal information 

about a market participant or any of its 

customers; (b) material, nonpublic 

information; and/or (c) intellectual 

property by applicant or any person 

associated with the applicant for their 

personal benefit or the benefit of others. 

41. Attach as Exhibit BB policies and 

procedures implemented by the 

applicant regarding its use of the 

security-based swap transaction 

information that it receives from a 

market participant, any registered 

entity, or any person for noncommercial and/or commercial 

purposes. 

42. Attach as Exhibit CC procedures 

and a description of facilities of the 

applicant for effectively resolving 

disputes over the accuracy of the 

transaction data and positions that are 

recorded in the security-based swap 

data repository. 

43. Attach as Exhibit DD policies and 

procedures relating to the applicant’s 

calculation of positions. 

44. Attach as Exhibit EE policies and 

procedures implemented by the 

applicant to prevent any provision in a 

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valid security-based swap from being 

invalidated or modified through the 

procedures or operations of the 

applicant. 

45. Attach as Exhibit FF a plan to 

ensure that the transaction data and 

position data that are recorded in the 

applicant continue to be maintained 

after the applicant withdraws from 

registration as a security-based swap 

data repository, which shall include 

procedures for transferring the 

transaction data and position data to the 

Commission or its designee (including 

another registered security-based swap 

data repository). 

46. Attach as Exhibit GG all of the 

policies and procedures required under 

Regulation SBSR. 

47. If the applicant has a rulebook, 

then the applicant may attach the 

rulebook as Exhibit HH. 

EXHIBIT—LEGAL OPINION 

48. If the applicant is a non-resident 

security-based swap data repository, 

then attach as Exhibit II an opinion of 

counsel that the security-based swap 

data repository can, as a matter of law, 

provide the Commission with prompt 

access to the books and records of such 

security-based swap data repository and 

that the security-based swap data 

repository can, as a matter of law, 

submit to onsite inspection and 

examination by the Commission. 

By the Commission. 

Dated: February 11, 2015. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–03127 Filed 3–18–15; 8:45 am] 

BILLING CODE 8011–01–P 

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